U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 19,
1999
CHIEF CONSOLIDATED MINING COMPANY
(Exact name of Registrant as Specified in Its Charter)
Arizona
(State or other jurisdiction of incorporation or organization)
87-0122295
(I.R.S. Employer ID. No.)
500 Fifth Avenue, Suite 1021, New York, NY 10110-1099
(Address of Principal Executive Offices)
212-354-4044
(Issuer's Telephone Number, Including Area Code)
Item 5. Other Events
Registrant entered into a stock purchase agreement dated as of
November 19, 1999, annexed hereto as Exhibit (c) (i) with
Dimeling, Schreiber & Park, (DS&P), a private investment
partnership that makes equity investments in a broad range of
middle market companies. The Stock Purchase Agreement provides
for the sale of 3,500,000 shares of a convertible common stock
for $7,000,000 payable at the time of sale. The shares will be
convertible into registrant's existing common stock on a one
share for one share basis. DS&P has the right under the Stock
Purchase Agreement to purchase an additional 5,000,000 shares of
convertible common stock for $10,000,000 payable at the time of
such sale. DS&P will determine whether or not to exercise this
right based upon the progress of exploration and development of
the Holmansville area located in the Tintic Mining District of
Utah. DS&P's right to purchase the additional 5,000,000 shares
expires December 31, 2002. Details of the rights and preferences
of the convertible common stock issue and various other aspects
of the transaction will be contained in a proxy statement to be
mailed to shareholders of registrant in December 1999 for a
meeting of shareholders to be held on December 29, 1999, at which
time shareholder approval of amendments to the Articles of
Incorporation and the stock purchase transaction will be sought.
Directors will also be elected at the meeting.
Item 7. Financial Statements and Exhibits
(c) The exhibits shall be furnished in accordance with the
provisions of Item 601 of Regulation S-K.
(i) Stock Purchase Agreement ("Stock Purchase Agreement")
dated as of November 19, 1999 between Chief Consolidated Mining
Company and Dimeling, Schreiber & Park.
(ii) Registration Rights Agreement dated as of November 19,
1999 between Chief Consolidated Mining Company and Dimeling,
Schreiber & Park, constituting Exhibit A to the Stock Purchase
Agreement.
(iii) Form of Warrant issued to Dimeling, Schreiber & Park
by Chief Consolidated Mining Company dated as of November 19,
1999, constituting Exhibit B to the Stock Purchase Agreement.
(iv) News Release issued by registrant November 23, 1999
announcing Stock Purchase Agreement between registrant and DS&P
referred at Item 5 above.
(v) Second News Release issued by registrant November 23,
1999 announcing further details of Stock Purchase Agreement with
DS&P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CHIEF CONSOLIDATED MINING COMPANY
(Registrant)
November 30, 1999 /s/LEONARD WEITZ
(Signature and Title)
Leonard Weitz
President, Chairman of the Board of
Directors, and
Principal Executive Officer
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995:
This Form 8-K contains statements which are not historical
facts, 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 failure of
registrant's shareholders to approve the proposed transaction
described herein, the net proceeds from the sale of stock to be
received by registrant if the transaction is approved by the
shareholders are not sufficient for registrant 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,
registrant is unable to initiate profitable mining activities at
the Trixie Mine and/or mining from the Homansville area is not
commercially feasible. Refer to the Company's Form 10-QSB and 10-
KSB reports filed with the Securities and Exchange Commission.
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CHIEF CONSOLIDATED MINING COMPANY
AND
DIMELING, SCHREIBER & PARK
TABLE OF CONTENTS
Section
Page(s)
1. DEFINITIONS 3
2. TRANSACTIONS AND CLOSING 7
2.1 Sale and Purchase of the Convertible Common Stock7
2.2 Description of Tranches 7
2.3 Assignment of Right to Purchase Shares 8
2.4 Registration Rights 8
2.5 Warrant. 8
2.6 Certificates 9
2.7 Conditions of Closing 9
(a) Tranche A Closing Conditions 9
(b) Tranche B Closing Conditions 10
2.8 Failure to Meet or Waiver of Closing Conditions 11
(a) Tranche B Closing Conditions 11
(b) Redemption of Tranche A Stock 11
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 12
3.1 Capitalization 12
3.2 Consents, Authorizations and Binding Effect 12
3.3 Organization and Standing 13
3.4 Equity Investments; Subsidiaries 13
3.5 Financial Statements 13
3.6 Accounts Receivable and Accounts Payable 14
3.7 Assets 15
3.8 Patents, Trademarks and Copyrights, etc 15
3.9 Litigation 15
3.10 Taxes 16
3.11 Contracts and Commitments 17
3.12 Compliance with Law; Permits and Authorizations;
Environmental and Safety Matters 18
3.13 Use of Proceeds 20
3.14 No Consent or Approval Required 20
3.15 Brokers 20
3.16 Employee Benefit Plans 20
3.17 Disclosure 22
3.18 Books and Records 23
3.19 Investment Company 23
3.20 Registration Rights 23
3.21 Insurance 23
3.22 Employees 23
3.23 Real Estate 23
4. COVENANTS OF THE COMPANY 25
4.1 Shareholder Approval 25
4.2 Dividends and Directors 25
4.3 Conduct of the Business 26
4.4 Full Access 26
4.5 Preemptive Rights 26
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR 27
5.1 Organization, Standing, etc 27
5.2 Acts and Proceedings; Enforceability of Agreements 27
5.3 No Brokers or Finders 27
5.4 Restricted Securities 27
5.5 Investment Intent 28
5.6 Sophisticated Investor 28
6. INDEMNIFICATION 28
6.1 Indemnification 28
6.2 Certain Procedures 29
6.3 Survival of Representations and Warranties 29
6.4 Limitations to Assertion of Indemnity Claims for
Breach of Representations and Warranties 30
7. MISCELLANEOUS 30
7.1 Expenses 30
7.2 Public Announcements 30
7.3 Descriptive Headings 30
7.4 Notices 30
7.5 Counterparts 31
7.6 Governing Law 31
7.7 Waivers and Amendments 32
7.8 Entire Agreement 32
7.9 Specific Performance, Remedies 32
7.10 Severability 32
7.11 Interpretation 32
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of November 19, 1999
(this "Agreement"), is by and between Chief Consolidated Mining
Company, an Arizona corporation, the common stock of which is
publicly traded (the "Company"), and Dimeling, Schreiber & Park,
a Pennsylvania general partnership (the "Investor").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of owning,
developing and managing precious metal mining properties;
WHEREAS, the Company desires to raise capital for use in the
funding of operations of the Company's Trixie Property and the
initial exploration and development of the Homansville Property,
and the Investor desires to provide such funding subject to the
conditions set forth herein;
WHEREAS, the Company desires to offer and sell to the
Investor up to a total of 8,500,000 shares ("Shares") of the
Company's Convertible Common Stock, par value $0.50 per share
("Convertible Common Stock"), and the Investor wishes to acquire
all or part of such Shares in accordance with the terms and
subject to the conditions set forth in this Agreement; provided,
however, that the Investor's purchase of such Shares of the
Convertible Common Stock shall be made in two (2) installments,
with the first installment of 3,500,000 shares (the "Tranche A
Stock") being purchased for Seven Million Dollars ($7,000,000),
and the second installment of 5,000,000 shares (the "Tranche B
Stock") being purchased for a total of Ten Million Dollars
($10,000,000);
WHEREAS, the Tranche A Stock will be purchased and sold at
the Tranche A Closing upon the satisfaction of the Tranche A
Closing Conditions, and the Tranche B Stock will be purchased and
sold at the Tranche B Closing upon the satisfaction of the
Tranche B Closing Conditions;
WHEREAS, the Company desires to issue and the Investor
desires to accept the Warrant to purchase additional Convertible
Common Stock upon the terms and conditions set forth herein; and
WHEREAS, certain capitalized terms used herein have the
meanings set forth in Section 1 hereof.
NOW, THEREFORE, in consideration of the mutual promises and
subject to the terms and conditions set forth herein, the Company
and the Investor, intending to be legally bound, hereby agree as
follows:
DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Article I:
"Affiliate" of any particular Person means any other
Person which directly or indirectly controls, is controlled by,
or is under common control with such other Person, where
"control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a Person whether through the ownership of voting
securities, by contract or otherwise. Notwithstanding the
foregoing, and except as otherwise provided by the Securities act
or other applicable law, in no event shall the Company or any of
its Affiliates be deemed an Affiliate of the Investor or any of
the Investor's Affiliates, nor shall the Investor or any of its
Affiliates be deemed an Affiliate of the Company or any of its
Affiliates.
"Amendment" - as defined in Section 2.7
"Assignees" - as defined in Section 2.3.
"Benefit Plans" - as defined in Section 3.16.
"Business Day" - any day other than a Saturday, Sunday,
public holiday under the laws of Arizona.
"Convertible Common Stock" - as defined in the
Recitals.
"Closing" - as defined in Section 6.3.
"Closing Date" - the date and time of which the Closing
actually takes place.
"Common Stock" - as defined in Section 3.1.
"Company" - as defined in the Recitals of this
Agreement.
"Defined Benefit Plan - as defined in Section 3.16.
"Designations" - as defined in Section 2.7.
"Environmental Lien" - any lien, whether recorded or
unrecorded, in favor of any governmental entity, relating
to the liability of the Company arising under any
Environmental Law.
"Environmental Law" - any legal requirement, whether
now existing or subsequently enacted or amended, relating
to (a) pollution or protection of the environment,
including natural resources, (b) exposure of Persons,
including but not limited to employees, to Hazardous
Materials, (c) protection of the public health or welfare
from the effects of products, by-products, wastes,
emissions, discharges, migration, or releases of Hazardous
Materials or (d) regulation of the manufacture,
formulation, packaging, labeling, distribution,
generation, transportation, handling, treatment, storage
or disposal. Without limitation, "Environmental Law"
shall also include (a) any Governmental Authorization
issued pursuant to any Environmental Law and the terms and
conditions thereof and (b) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42
U.S.C. 9601 et seq., the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. 6901 et
seq., the Clean Water Act, 33 U.S.C. 1251 et seq., Clean
Air Act, as amended, 42 U.S.C. 7401 et seq., Toxic
Substances Control Act, 15 U.S.C. 2601 et seq.,
Hazardous Materials Transportation Act, 49 U.S.C. 5101,
et seq., Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. 651 et seq., Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. 11001 et seq.,
Safe Drinking Water Act, as amended, 42 U.S.C. 300(f)
et seq., and any similar or implementing state law, and
all amendments, rules, regulations and guidance documents
promulgated thereunder.
"ERISA" - the Employee Retirement Income Security Act
of 1974 or any successor law, as amended, and regulations
and rules issued pursuant to that Act or any successor
law.
"Hazardous Activity" - the distribution, generation,
handling, importing, management, manufacturing,
processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous
Materials in, on, under, about, or from the Properties or
any part thereof into the environment, and any other act,
business, operation, or thing that increases the danger,
or risk of danger, or poses an unreasonable risk of harm
to persons or property on or off the Properties, or that
may affect the value of the Properties.
"Hazardous Materials" - any waste or other substance
that is listed, defined, designated, or classified as, or
otherwise determined to be, hazardous, radioactive, or
toxic or a pollutant or a contaminant under or pursuant to
any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor,
asbestos or asbestos-containing materials, radon and urea-
formaldehyde.
"Homansville Property" - 2,800 acres in East Tintic
Mining District of Utah: 2,500 of such acres are owned by
Tintic Utah Metals LLC, in which the Company holds 75%
limited liability company interest. 300 of such acres are
owned by Central Standard Consolidated Mining Company, in
which the Company owns 23% of the outstanding shares.
"Indemnified Persons"--as defined in Section 10.2.
"IRC"--the Internal Revenue Code of 1986 or any
successor law, as amended, and regulations issued by the IRS
pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the
United States Department of the Treasury.
"Knowledge" - A Person shall be deemed to have
"Knowledge" of a particular fact or other matter if such
Person or, if such Person is not an individual, any
individual who is serving, or who has at any time served, as
a director, officer, partner, executor, or trustee of such
Person or an employee with primary responsibility in
connection with a particular subject matter (or in any
similar capacity) (i) has, or at any time had, knowledge of
such fact or other matter or (ii) could be expected to
discover or otherwise become aware of such fact or other
matter in the course of conducting a reasonably
comprehensive investigation concerning the existence of such
fact or other matter.
"Latest Balance Sheet" - The Balance Sheet set forth in
the Company's Form 10-QSB as filed for the period ended
September 30, 1999.
"Liens" - mortgages, liens, security interests,
pledges, charges or other encumbrances of any kind.
"Material Adverse Effect" - the occurrence or existence
of a material adverse effect on the business, results of
operations, financial condition, assets, liabilities or
prospects of the Company taken as a whole.
"Multi-Employer Plan" - has the meaning given in
Section 3.16.
"Occupational Safety and Health Law" - any legal
requirement designed to provide safe and healthful working
conditions and to reduce occupational safety and health
hazards, and any program, whether governmental or private
(including those promulgated or sponsored by industry
associations and insurance companies), designed to provide
safe and healthful working conditions.
"Other Agreements" - has the meaning given in Section
3.2.
"PBGC" -the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Person" - any individual, corporation (including any
non-profit corporation), general or limited partnership,
limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or
Governmental Body.
"Permitted Liens" - tax materialmen's or like liens for
obligations not yet due and payable or which are being
contested by the Company in good faith.
"Plan" - has the meaning given in ERISA 3(3).
"Plan Sponsor" - has the meaning given in ERISA
3(16)(B).
"Preferred Stock" - as defined in Section 3.1.
"Property" - the Trixie Mine Property and the
Homansville Property and any other property in which the
Company has an interest as disclosed in its SEC filings.
"Purchase Price" - $2.00 per share of Convertible
Common Stock.
"Registration Rights Agreement" - as defined in Section
2.4.
"Release" - any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping, or
other releasing into the environment, whether intentional or
unintentional.
"Representative" - with respect to a particular Person,
any director, officer, employee, agent, consultant, advisor,
or other representative of such Person, including legal
counsel, accountants, and financial advisors.
"Securities Act" - the Securities Act of 1933 or any
successor law, as amended, and regulations and rules issued
pursuant to that Act or any successor law.
"Securities Exchange Act" - the Securities Exchange Act
of 1934 or any successor law, as amended, and regulations
and rules issued pursuant to that Act or any successor law.
"SEC" - Securities and Exchange Commission.
"Tax" or "Taxes" - federal, state, county, local,
foreign or other income, gross receipts, ad valorem,
franchise, profits, sales or use, transfer, registration,
excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or
other withholding, employment, social security, severance,
stamp, occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and
interest attributable thereto) whether disputed or not.
"Tax Return" - returns, declarations, reports, claims
for refund, information returns or other documents
(including any related or supporting schedules, statements
or information) filed or required to be filed in connection
with the determination, assessment or collection of Taxes of
any party or the administration of any laws, regulations or
administrative requirements related to any Taxes.
"Threatened" - a claim, proceeding, dispute, action, or
other matter will be deemed to have been "Threatened" if any
demand or statement has been made (orally or in writing) or
any notice has been given (orally or in writing), or if any
other event has occurred or any other circumstances exist,
that would lead a prudent Person to conclude that such a
claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"Tranche A Stock" - as defined in the Recitals.
"Tranche B Stock" - as defined in Recitals.
"Tranche A Closing Conditions" - as defined in Section
2.7.
"Tranche B Closing Conditions" - as defined in Section
2.7.
"Tranche A Closing " - as defined in Section 2.2.
"Tranche B Closing " - as defined in Section 2.2.
"Tranche A Purchase Price" - as defined in Section 2.2.
"Tranche B Purchase Price" - as defined in Section 2.2.
"Trixie Property" - the gold and silver mine located in
the East Tintic Mining District of Utah. The Property is
owned by Chief Gold Mines, Inc., a wholly owned subsidiary
of the Company.
"Warrant" - as defined in Section 2.5.
2. TRANSACTIONS AND CLOSING.
2.1. Sale and Purchase of the Convertible Common Stock.
(a) Subject to the terms hereof and the satisfaction of the
Tranche A Closing Conditions, the Company shall sell to the
Investor, and the Investor shall purchase from the Company, at
the Tranche A Closing, the Tranche A Stock.
(b) Subject to the terms hereof and the satisfaction of the
Tranche B Closing Conditions, the Company shall sell to the
Investor, and the Investor shall purchase from the Company, at
the Tranche B Closing, the Tranche B Stock.
2.2. Description of Tranches.
(a) Subject to satisfaction of the Tranche A Closing Conditions,
the closing of the purchase and sale of the Tranche A Stock (the
"Tranche A Closing") will take place at the offices of the
Investor's counsel, Reed Smith Shaw & McClay LLP, 2500 One
Liberty Place, Philadelphia, PA 19103 at 10:00 A.M. (local
time), on December 30, 1999. At the Tranche A Closing, the
Company will sell, issue and deliver to the Investor, and the
Investor will purchase and accept from the Company, the Tranche A
Stock at a purchase price of $2.00 per share for a total Purchase
Price of Seven Million Dollars ($7,000,000) (the "Tranche A
Purchase Price").
(b) Subject to satisfaction of the Tranche B Closing Conditions,
the closing of the purchase and sale of the Tranche B Stock (the
"Tranche B Closing") will take place at the offices of the
Investor's counsel, Reed Smith Shaw & McClay LLP, 2500 One
Liberty Place, Philadelphia, PA 19103 at 10:00 A.M. (local
time), on a date designated by the Investor as otherwise mutually
agreed upon by the parties. At the Tranche B Closing, the
Company will sell, issue and deliver to the Investor, and the
Investor will purchase and accept from the Company, the Tranche B
Stock at a purchase price of $2.00 per share for a total Purchase
Price of Ten Million Dollars ($10,000,000) (the "Tranche B
Purchase Price").
All funds paid hereunder shall be paid by wire transfer of
immediately available funds to a bank account to be
specified by the Company.
2.3. Assignment of Right to Purchase Shares. The Investor
may assign its rights to purchase Shares hereunder, in whole or
in part, to one or more other Persons designated by the Investor
("Assignees"); provided that if such Assignee is not an Affiliate
of Investor or any partner of Investor or its Affiliates, no such
assignment shall be made without the consent of the Company,
which consent shall not be unreasonably withheld and which shall
be deemed granted if the Company has not refused in writing to
consent within fifteen (15) days of receipt of Investor's notice
to Company of a proposed assignment; and provided further that
(i) no such assignment shall affect the obligations of the
Investor to the Company under this Agreement, and (ii) each
Assignee shall have executed and delivered to the Company a
certificate making the representations and warranties made by the
Investor in Sections 4.3 through 4.6 of this Agreement, and
representations and warranties comparable to those set forth in
Sections 4.1 and 4.2 of this Agreement (as appropriate for each
Assignee's form of organization or individual status). In the
event that the Investor makes any such assignment to an Assignee,
all references contained herein to the "Investor" shall include
such Assignees (subject to clause (i) of the foregoing proviso),
the Investor shall be entitled to act on behalf of such Assignees
for all purposes of this Agreement, and any notice given by the
Company to the Investor shall be deemed given to such Assignees.
2.4. Registration Rights. The Company shall grant to the
Investor registration rights appurtenant to the Convertible
Common Stock upon conversion thereof. Such rights shall be
exercisable by the Investor three (3) times upon demand and an
unlimited number of times as piggyback rights upon the public
offering of other securities of the Company. Such rights are
more fully described in and are subject to the provisions of the
Registration Rights Agreement in the form of Exhibit A hereto
("Registration Rights Agreement").
2.5. Warrant. Simultaneously with the Tranche A Closing and
as additional consideration for the purchase of Shares hereunder,
the Company shall issue to the Investor a warrant, in the form of
Exhibit B hereto, to purchase that number of shares of
Convertible Common Stock, which would cause, after taking into
account the conversion of such purchased shares plus the
conversion of the Convertible Common Stock held by the Investor
immediately prior to the exercise of such Warrant, the Investor
to hold 68% of the then issued and outstanding common stock of
the Company ("Warrant"). Such Warrant shall be exercisable after
the Tranche B Closing at a price of $2.25 per share by the
Investor upon the sale, merger, consolidation, or other business
combination of the Company, or upon the effective date of a
registration statement of the Company's Common Stock in a public
offering under the Securities Act.
2.6. Certificates. At each of the Tranche A and Tranche B
closings, the Company shall deliver one or more certificates
evidencing the appropriate number of shares of Convertible Common
Stock being purchased at such Closing and bearing the following
legend:
The shares evidenced by this certificate are not
registered under the Securities Act of 1933, as
amended, including the rules and regulations
promulgated thereunder ("Securities Act"), and
these shares may not be transferred, sold,
assigned or otherwise conveyed unless they are
registered under the Securities Act or, in the
opinion of counsel for the Company, an exemption
from such registration is available.
Upon the request of the Investor and upon delivery to
the Company of the legended certificates accompanied
by an opinion of counsel to the Company that such
legend is no longer required, the Company will issue
to the Investor unlegended share certificates in
exchange for those delivered by the Investor.
2.7. Conditions of Closing.
(a) Tranche A Closing Conditions. The obligations of the
Investor to consummate the Tranche A Closing shall be subject to
the satisfaction (or waiver by the Investor) of each of the
following conditions (the "Tranche A Closing Conditions"):
(i) Articles of Amendment and Restatement of Articles of
Incorporation. The Company shall have caused the amendment and
restatement of its Articles of Incorporation, including, among
other things, provision for the authorization and issuance of the
Convertible Common Stock ("Designations") in the form set forth
as Exhibit C hereto (the "Amendment"), to have been duly
authorized, adopted, executed, acknowledged by all necessary
corporate action, including, without limitation, the requisite
vote of its stockholders at a meeting duly called for such
purpose, and such amendment shall have been filed with the
Arizona Corporation Commission.
(ii) Registration Rights Agreement. The Company and the Investor
shall have executed and delivered the Registration Rights
Agreement.
(iii) Representations, Warranties and Covenants. All
representations and warranties of the Company and the Investor
contained in this Agreement, the Registration Rights Agreement,
the Warrant and all other agreements between the Company and the
Investor and any certificates, schedules and exhibits delivered
in connection therewith shall be true in all material respects as
of the Tranche A Closing and the Company and the Investor shall
have performed in all material respects each its covenants
contained herein or therein to be performed prior to such date.
(iv) Opinion of Counsel. The Company shall have delivered to the
Investor the opinions of Mariscal, Weeks, McIntyre & Friedlander,
P.A., Arizona counsel to the Company, and Howard Weitz, P.C. to
the Company, each dated as of the Tranche A Closing, in the form
to be reasonably agreed upon by the parties.
(v) Secretary's Certificate. The Company shall have delivered
to the Investor a certificate of the Secretary or an Assistant
Secretary of the Company substantially in the form of Exhibit D.
(vi) No Legal Prohibitions. Neither the Company nor the Investor
shall be subject, as of the Tranche A Closing, to any injunction
or other legal prohibition against consummation of the
transactions contemplated by this Agreement.
(vii) No Pending Litigation. There shall be no suit, action,
proceeding or investigation pending by or before any court or
governmental authority which either (1) seeks to prohibit or
restrain, or seeks material damages or penalties in respect of,
the transactions contemplated herein, or (2) is reasonably
likely, if determined adversely to the Company or the Investor,
to impose or result in liabilities, costs, damages or losses to
the Company or the Investor of more than $25,000.
(b) Tranche B Closing Conditions. The obligations of the
Investor to consummate the Tranche B Closing shall be subject to
the satisfaction (or waiver by the Investor) of each of the
following conditions (the "Tranche B Closing Conditions"):
(i) Satisfaction of Tranche A Closing Conditions. Each of
Tranche A's Closing Conditions shall have been satisfied, and the
Tranche A Closing shall have been consummated.
(ii) Determination Regarding Homansville Property. The Investor
shall have determined, in its sole discretion, based upon
documentation provided by the Company, that the Homansville
Property is a commercially viable mining project.
(iii) Representations, Warranties and Covenants. All
representations and warranties of the Company and the Investor
contained in this Agreement, the Registration Rights Agreement,
the Warrant and all other agreements between the Company and the
Investor and any certificates, schedules and exhibits delivered
in connection therewith shall be true in all material respects as
of the Tranche B Closing (except for changes therein (x) in the
ordinary course of business which do not have a Material Adverse
Effect or (y) as approved by the Investor and the Board of
Directors of the Company after the date of the Tranche A
Closing), and the Company and the Investor shall have performed
in all material respects each of its covenants contained herein
or therein to be performed prior to such date.
(iv) Closing Certificate. The Company shall have delivered to
the Investor a certificate, executed by the President of the
Company, certifying that all representations and warranties of
the Company contained in this Agreement, the Registration Rights
Agreement, the Warrants and all other agreements between the
Company and the Investor and any certificates, schedules and
exhibits delivered in connection are true in all material
respects as of the Tranche B Closing (except for changes therein
(x) permitted or contemplated by this Agreement, or (y) as
approved by the Investor and the Board of Directors of the
Company after the date of the Tranche B Closing) and that the
Company has performed in all material respects each of its
covenants contained herein or therein to be performed prior to
such date.
(v) No Legal Prohibitions. Neither the Company nor the Investor
shall be subject, as of the Tranche B Closing, to any injunction
or other legal prohibition against consummation of the
transactions contemplated by this Agreement.
(vi) No Pending Litigation. There shall be no suit, action,
proceeding or investigation pending by or before any court or
governmental authority which either (1) seeks to prohibit or
restrain, or seeks material damages or penalties in respect of,
the transactions contemplated herein, or (2) is reasonably
likely, if determined adversely to the Company or the Investor,
to impose or result in liabilities, costs, damages or losses to
the Company or the Investor of more than $25,000.
2.8. Failure to Meet or Waiver of Closing Conditions.
(a) Tranche B Closing Conditions. If the closing conditions for
the Tranche B Closing are not satisfied by the Company or the
Investor prior to December 31, 2002, the Investor's right to
purchase the Tranche B Stock shall terminate.
(b) Redemption of Tranche A Stock. In the event the Tranche B
Closing has not occurred on or before December 31, 2002 and the
Investor's right to purchase the Tranche B Stock has terminated,
the Investor shall have the right to sell all or part of the
Tranche A Stock to the Company, and the Company shall be required
to purchase such shares at a purchase price equal to $2.00 per
share. Such Shares shall be purchased by the Company in an
amount not to exceed (except at the option of the Company) the
lesser of 50% of Excess Cash Flow or 20% of the originally issued
Tranche A Stock per year commencing December 1, 2003 and
continuing until all such Shares have been repurchased at the
earliest possible date; provided, however, the Company shall not
be obligated to purchase any Convertible Common Stock issued to
the Investor in the form of distributions or dividends on the
originally issued Tranche A Stock or any share of Common Stock
into which the Tranche A Stock was converted. For purposes of
this Section 2.8, "Excess Cash Flow" of the Company means
earnings before interest, taxes, depreciation, depletion, and
amortization, less capital expenditures, less principal payments
on outstanding indebtedness.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Investor as
follows:
3.1. Capitalization. The authorized capital stock of the
Company as of the date hereof prior to the filing of the
Amendment authorizing the creation of the Convertible Common
Stock to be sold hereunder, consists of (a) 1,500,000 shares of
preferred stock, par value $.50 per share (the "Preferred
Stock"), and (b) 20,000,000 shares of common stock, par value
$.50 per share (the "Common Stock"). As of the date hereof (and
prior to the consummation of the transactions contemplated
hereby), there are 5,168 shares of Preferred Stock and 7,954,601
shares of Common Stock outstanding. All outstanding shares of
Preferred Stock and Common Stock have been duly authorized and
are validly issued, fully paid and nonassessable, and no
liability attaches to the ownership thereof. As of the date
hereof, 16,441 shares of the Company's Common Stock are held in
Treasury. The Company has outstanding an offer to holders of all
shares of the Preferred Stock to exchange their shares for Common
Stock on a share for share basis. Other than as set forth on
Schedule 3.1 hereto and as otherwise provided herein, there are
no subscription, warrant, option, convertible security or other
rights (contingent or otherwise) to purchase or otherwise acquire
any of the shares of the capital stock of the Company, and there
are no commitments by the Company to issue shares, subscriptions,
warrants, options, convertible securities or other such rights.
Except as set forth on Schedule 3.1 hereto and as otherwise
provided herein, the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its
capital stock or any interest therein or to pay any dividend or
make any other distribution in respect thereof. Except as set
forth in such Schedule or the Amendment, there are no voting
trusts or agreements, preemptive rights or, to the knowledge of
the Company, any proxies relating to any securities of the
Company (whether or not the Company is a party thereto). All of
the outstanding shares of the capital stock of the Company were
issued in compliance with all applicable federal and state
securities laws.
3.2. Consents, Authorizations and Binding Effect. Except as
required for the Amendment and as otherwise specifically set
forth herein, no consent, approval, authorization or waiver of,
and no notice to, any Person whatsoever is necessary or required
for the Company's execution, delivery and performance of this
Agreement, the Warrant, the Registration Rights Agreement, and
any other instrument delivered in connection herewith or
therewith ("Other Agreements"). This Agreement and Other
Agreements have been or will be duly executed and delivered by
the Company and, subject to the approval of its shareholders,
will constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their
respective terms. The execution, delivery and performance of
this Agreement and Other Agreements will not (a) conflict with,
result in the breach of or constitute a default under any
agreement, restriction or other instrument to which the Company
is a party or by which the Company may be bound or affected, or
(b) constitute a violation of any statute, ordinance, judgment,
order, decree, regulation or rule of any court, governmental
authority or arbitrator relating to the Company. The Shares and
the Convertible Common Stock underlying the Warrant, upon
approval by the Company's shareholders and the filing of the
Amendment, will be duly authorized and, when issued in accordance
with this Agreement or the Warrant, will be (1) validly issued,
fully paid and nonassessable, and (2) free and clear of all
liens, charges, restrictions, claims and encumbrances. Prior to
the Tranche A Closing, the shares of Common Stock issuable upon
conversion of the Convertible Common Stock will be duly and
validly reserved for issuance upon conversion of the Convertible
Common Stock purchased by the Investor, and the shares of
Convertible Common Stock to be issued upon exercise of the
Warrant will be duly and validly reserved for issuance upon
exercise of the Warrant, and such shares, when so issued, will be
duly authorized, validly issued, fully paid and nonassessable and
will be free and clear of all liens, charges, restrictions,
claims and encumbrances. The issuance, sale and delivery of the
Shares and the Convertible Common Stock to be issued pursuant to
the Warrant are not subject to any preemptive right, right of
first refusal or other right in favor of any Person.
3.3. Organization and Standing. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. The Company
is duly qualified and in good standing as a foreign corporation
in all states in which the nature of its business requires it to
be so qualified, except where the failure to be so qualified
would not result in a Material Adverse Effect. The Company has
heretofore delivered to the Investor complete and correct copies
of the Company's Articles of Incorporation, as amended, and the
By-Laws, as amended and in effect on the date hereof.
3.4. Equity Investments; Subsidiaries. Except as set forth
on Schedule 3.4, the Company does not own, directly or
indirectly, any capital stock or other equity interest, in any
corporation, association, trust, partnership, joint venture or
other business entity. True, correct and complete copies of all
documents reflecting investments or ownership by the Company in
any subsidiaries have been made available to Investor for
inspection at the Company's offices in New York, New York.
3.5. Financial Statements. True and complete copies of (i)
the Company's Annual Report on Form 10-K for the fiscal years
ended December 31, 1997 and December 31, 1998, (ii) Company's
Proxy Statements dated November 16, 1998 and, (iii) Company's
Quarterly Reports on Form 10-QSB for the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999, (items (i)
through (iii) collectively referred to herein as the "Exchange
Act Filings") have been delivered to Investor. The Exchange Act
Filings, as of their respective filing dates, did not contain any
untrue statements of a material fact or omit to state any
material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were
made, not misleading. Except as disclosed to the Investor in
writing, in materials filed by the Company pursuant to the
Securities Act or the Securities Exchange Act, or set forth in
press releases that have been made public by the Company
(including, but not limited to, those from time to time posted at
or available through Nasdaq's website at http://www.nasdaq.com),
there has been no Material Adverse Effect since September 30,
1999. Except as set forth on Schedule 3.5, since the date of the
Latest Balance Sheet, the Company has conducted its business only
in the ordinary course of business consistent with past custom
and practice, and has incurred no liabilities or obligations
whatsoever other than in the ordinary course of business
consistent with past custom and practice. Without limitation of
the foregoing and except as set forth on Schedule 3.5 since the
Latest Balance Sheet Date, the Company has not:
(a) voluntarily or involuntarily sold, transferred, abandoned,
surrendered, subjected to a Lien or otherwise disposed of any
assets or property rights except in the ordinary course of
business consistent with past custom or practice;
(b) changed any accounting principles, methods or practices
utilized by it or changed any of its depreciation rates or
amortization policies or rates;
(c) made any capital expenditure in excess of $100,000 except in
the ordinary course of business.
(d) made any loan or advance to any party other than a wholly-
owned subsidiary other than loans in the aggregate amount of
$482,500 to Tintic Utah Metals, LLC, in which the Company owns a
75% interest;
(e) issued, redeemed or purchased any stock, bond or corporate
security or declared or made any payment or distribution on or
with respect to its capital stock;
(f) incurred debt, liabilities, or obligations of any nature
whether accrued, absolute, contingent, direct, indirect,
perfected or otherwise and whether due or to become due except
current liabilities incurred and liabilities under contracts
entered into in the ordinary course of business consistent with
past custom and practice;
(g) increased the compensation payable to any of its officers,
employees or agents except in the ordinary course consistent with
past practice; or
(h) entered into any other material transaction, or committed to
any of the foregoing, not otherwise disclosed herein.
3.6. Accounts Receivable and Accounts Payable. The accounts
payable, accrued expenses and accounts receivable of the Company
reflected on the Latest Balance Sheet, and all accounts payable,
accrued expenses and accounts receivable of the Company arising
since the date thereof, arose from bona fide transactions in the
ordinary course of business and are, to the best knowledge of the
Company, collectible in full, subject to the allowance for
uncollectible accounts set forth on the Latest Balance Sheet.
3.7. Assets Except as set forth in Schedule 3.7 hereto, the
Company has good and marketable title to, or a valid leasehold
interest in, the properties and assets used by it, located on its
Properties, free and clear of all Liens, except for Permitted
Liens, and except for properties and assets disposed of in the
ordinary course of business since the date of the Latest Balance
Sheet. The Company owns, or has a valid leasehold interest in,
all assets necessary for the conduct of its business as presently
conducted, including, without limitation, the Trixie Property and
the Homansville Property.
3.8. Patents, Trademarks and Copyrights, etc. Except as set
forth on Schedule 3.8 attached hereto, the Company owns, or is
licensed or otherwise authorized to use, all patents, trademarks,
trade names, copyrights, technology, know-how, processes and
other intellectual property used by the Company in the conduct of
its business as presently and as proposed to be conducted.
Schedule 3.8 attached hereto contains a complete list of (a) all
patents owned and all trademarks, trade names, service marks and
copyrights owned or used by the Company, all applications
therefor and all licenses and other agreements relating thereto,
and (b) all agreements relating to technology, know-how,
processes and other intellectual property which the Company is
licensed or authorized to use by others. To the best knowledge
of the Company, no claims have been asserted by any person (i) to
the effect that any activities of the Company infringe on any
patents or (ii) that oppose the use of any such trademarks, trade
names, copyrights, technology, know-how, processes or other
intellectual property or (iii) that challenge or question the
validity or effectiveness of any such license or agreement. To
the best knowledge of the Company, the Company's activities and
the Company's use of such patents, trademarks, trade names,
copyrights, technology, know-how, processes or other intellectual
property do not infringe on the rights of any Person. All
filings with governmental entities for the maintenance of and
enforcement of the Company's patents, trademarks, trade names,
service marks and copyrights have been made on a timely basis,
except as set forth in Schedule 3.8.
3.9. Litigation. Except as set forth on Schedule 3.9
attached hereto, there is no action, suit, claim, proceeding or
governmental investigation now pending or, to the Knowledge of
the Company, Threatened against or affecting the Company, nor, to
the Knowledge of the Company, does there exist any valid basis
therefor. None of the matters disclosed on Schedule 3.9 is
expected to have a Material Adverse Effect. Except as set forth
on Schedule 3.9, neither the Company nor its business is bound or
materially affected by any judgment, order, writ, injunction or
decree of any court or governmental authority. The Company is
not in violation or default of any judgment, order, writ,
injunction or decree of any court or governmental authority.
3.10.
Taxes.
(a) Except as set forth on Schedule 3.10, the Company has filed
all Tax Returns which it is required to file under applicable
laws and regulations; all such filed Tax Returns are complete and
correct in all material respects and have been prepared in
compliance with all applicable laws and regulations in all
material respects, and all Taxes shown thereon as being due and
owing have been paid; the Company has paid all Taxes due and
owing by it for which no Tax Return is required, and has withheld
and paid over to the appropriate taxing authority all Taxes which
it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third party; the Company
has not waived any statute of limitations with respect to any
Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency; the accrual for Taxes on the Latest
Balance Sheet is adequate to pay all outstanding Tax liabilities
of the Company for all periods ending prior to and including such
Latest Balance Sheet date and the assessment of any additional
Taxes for periods for which Tax Returns have been filed by the
Company and does not exceed the recorded liability therefor on
the Latest Balance Sheet (excluding any amount recorded which is
attributable solely to timing differences between book and Tax
income); since the date of the Latest Balance Sheet, the Company
has not incurred any liability for Taxes other than in the
ordinary course of business; no foreign, Federal, state or local
Tax audits or administrative or judicial proceedings are pending
or being conducted with respect to the Company; and no
information related to Tax matters has been requested by any
foreign, Federal, state or local taxing authority and no written
notice indicating an intent to open an audit or other review has
been received by the Company from any foreign, Federal, state or
local taxing authority; and there are no material unresolved
questions or claims concerning the Company's Tax liability.
(b) The Company has not made an election under IRC 341(f). The
Company is not liable for any Taxes of another Person (i) under
Treas. Reg. 1.1502-6 (or comparable provisions of state, local
or foreign law), (ii) as a transferee or successor, (iii) by
contract or indemnity or (iv) otherwise. The Company is not a
party to any Tax sharing agreement. The Company has disclosed on
its Federal income Tax Returns any position taken for which
substantial authority (within the meaning of IRC
6662(d)(2)(B)(i)) did not exist at the time the return was
filed. The Company has not made any payments, is not obligated
to make payments, and is not party to any agreement that could
obligate it to make any payments, that would not be deductible
under IRC 280G.
(c) Except as set forth on Schedule 3.10, the Company is not,
and has never been, a member of any Affiliated Group as defined
in IRC 1504 (or any similar group under state, local or foreign
law) that has filed a consolidated return for Federal, state,
local or foreign income Tax purposes.
3.11. Contracts and Commitments.
(a) Except as expressly contemplated by this Agreement or as set
forth in Schedule 3.11 hereto, the Company is not a party to or
bound by any written or oral:
(i) management agreement or other contract relating to the
Company's management or operation of any property, other than
agreements involving the payment of less than $50,000 per year
which are not otherwise material to the Company's business;
(ii) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis or contract relating to loans to officers, directors
or Affiliates of the Company;
(iii) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or
other compensation to employees or any other employee benefit
plan or arrangement, or any collective bargaining agreement or
any other contract with any labor union, or severance agreements,
programs, policies or arrangements;
(iv) contract under which the Company has advanced or loaned to
any other Person amounts in the aggregate exceeding $50,000;
(v) agreement or indenture relating to borrowed money or other
indebtedness or the mortgaging, pledging or otherwise placing a
Lien on any material asset or material group of assets of the
Company;
(vi) guarantee of any obligation, or power of attorney granted to
any Person;
(vii) lease or agreement under which the Company is lessee of
or holds or operates any property, real or personal, owned by any
other party, except for any lease of personal property under
which the aggregate annual rental payments do not exceed $50,000;
(viii) lease or agreement under which the Company is lessor of
or permits any third party to hold or operate any property, real
or personal, owned or controlled by the Company;
(ix) contract or group of related contracts with the same party
or group of affiliated parties the performance of which involves
consideration in excess of $50,000 during any 12-month period;
(x) assignment, license, indemnification or agreement with
respect to any intangible property;
(xi) agreement under which it has granted any person any
registration rights (including, without limitation, demand and
piggyback registration rights);
(xii) contract or agreement prohibiting it from freely
engaging in any business or competing anywhere in the world; or
(xiii) any other agreement which is material to its operations
and business as presently proposed to be conducted.
(b) All the contracts, agreements and instruments set forth in
Schedule 3.11 hereto are valid, binding and enforceable in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and to general
principles of equity (whether considered in a proceeding in
equity or at law). The Company is not in default under any such
contract, agreement or instrument, nor has the Company received
any claim of default under any such contract, agreement or
instrument, in each case which defaults could, in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
No event has occurred which with the passage of time or the
giving of notice or both would result in a default, breach or
event of noncompliance by the Company under any such contract,
agreement or instrument which defaults, breaches or events of
noncompliance could, in the aggregate, reasonably be expected to
result in a Material Adverse Effect. The Company has no present
expectation or intention of not fully performing in all material
respects all such obligations, and the Company does not have
knowledge of any breach or anticipated breach by the other
parties to any such contract, agreement, instrument or commitment
which breaches could, in the aggregate, reasonably be expected to
result in a Material Adverse Effect.
(c) The Company has delivered to the Investor's counsel a true
and correct copy of each of the written instruments, plans,
contracts and agreements and an accurate description of each of
the oral arrangements, contracts and agreements which are
referred to in Schedule 3.11 hereto, together with all
amendments, waivers or other changes thereto.
3.12. Compliance with Law; Permits and Authorizations;
Environmental and Safety Matters.
(a) The Company has complied in all material respects with all
applicable federal, state, local or foreign laws, regulations,
ordinances and rulings (including common law), including, without
limitation, all applicable requirements under the Securities Act
and the Securities Exchange Act and Occupational Safety and
Health Law. Set forth in Schedule 3.12 attached hereto is a
complete and accurate list of all material licenses, permits and
authorizations issued by governmental authorities which are held,
or applied for, by the Company or by any Person which it manages,
including all governmental authorizations necessary to operate
the properties which the Company currently operates. Such
licenses, permits and authorizations are all the licenses,
permits and authorizations required for the conduct of the
Company's business as presently conducted and as proposed to be
conducted, and such licenses, permits and authorizations are in
full force and effect and no violations are or have been recorded
in respect thereof, nor is there any proceeding pending or, to
the best knowledge of the Company, threatened, to limit or revoke
the same.
(b) Except as set forth in Schedule 3.12 hereto:
(i) The Company has complied in all material respects with and
is currently in compliance in all material respects with all
Environmental Laws, and the Company has not received any oral or
written notice, report, order, or information regarding any
material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) for any contribution toward the
performance of corrective, investigatory or remedial obligations
or any assessment of damages to or restoration of natural
resources, arising under Environmental Law which relate to the
Company, any of its properties or facilities, or any property to
which any waste generated, or any substance used, by the Company
or any predecessor to the Company has been transported for
treatment, storage, or disposal.
(ii) Without limiting the generality of the foregoing, the
Company has obtained and complied in all material respects with,
and is currently in compliance in all material respects with, all
permits, licenses and other authorizations that are required
pursuant to any Environmental Law for the occupancy of its
Properties or facilities or the operation of its business. A
list of the permits, licenses and other authorizations issued to
the Company pursuant to Environmental Law (if any) is set forth
on Schedule 3.12 hereto.
(iii) Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement shall impose any
obligations on the Company for site investigation or cleanup, or
notification to or consent of any governmental agencies or third
parties under any Environmental Law (including, without
limitation, any so-called "transaction-triggered" or "responsible
property transfer" laws and regulations).
(iv) The Company has not engaged in any Hazardous Activity or
treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled or Released any substance
(including, without limitation, any Hazardous Materials or waste)
or owned, occupied or operated any facility or property, so as to
give rise to material liabilities of the Company for response
costs, natural resource damages or attorneys fees pursuant to
CERCLA or any other Environmental Law.
(v) To the Knowledge of the Company, none of the following
exists at any property or facility owned, occupied or operated by
the Company:
(1) underground storage tanks or surface impoundments;
(2) any friable or damaged asbestos-containing materials; or
(3) materials or equipment containing polychlorinated biphenyls.
(vi) The Company has not expressly assumed, undertaken or
indemnified any Person for, or to its Knowledge by operation of
law assumed or undertaken, any liability or corrective,
investigatory or remedial obligation of any other Person relating
to any Environmental Law.
(vii) No Environmental Lien has attached to any property
owned, leased or operated by the Company which could reasonably
be expected to result in a Material Adverse Effect.
3.13. Use of Proceeds. The net proceeds received by the
Company from the sale of the Convertible Common Stock shall be
used by the Company to fund the operations of the Trixie
Property, including the rehabilitation of the concentrating mill
to process Trixie and Homansville ore, and to fund the initial
exploration and development of the Homansville Property to the
extent necessary in the opinion of Investor the Company's Board
of Directors determine the viability of such property; provided,
however, that to the extent the Company has expended general
working capital for the purposes set forth in the preceding
clause during the 24-month period immediately preceding the date
of the Tranche A Closing, the Company may apply a portion of the
proceeds equal to such expenditures to general working capital
purposes; and provided further, that the Company shall place the
proceeds in investments approved by Investor during any period
between receipt and application to such uses.
3.14. No Consent or Approval Required. Neither (a) the
registration of the Convertible Common Stock under the Securities
Act (assuming the accuracy of the Investor's representations and
warranties set forth in Sections 4.4 through 4.6), (b) the
consent of any Person, nor (c) except for the filing of the
Amendment and approvals required under state securities or blue
sky laws, if any (all of which, if applicable, have been or will
be obtained prior to the Tranche A Closing or Tranche B Closing
as appropriate), the authorization, consent, approval or other
order of any governmental agency or body, is required for the
valid authorization, execution and delivery by the Company of
this Agreement, or for the valid authorization, issuance, sale
and delivery of the Convertible Common Stock to Investor.
3.15. Brokers. No person or firm has, or will have, any
right, interest or valid claim against the Company or the
Investor, for any commission, fee or other compensation as a
finder or broker or in any similar capacity as a result of any
act or omission by the Company or anyone acting on behalf of the
Company in connection with any transaction contemplated by this
Agreement other than Clarence Otto McGowan.
3.16. Employee Benefit Plans. Except as set forth in
Schedule 3.16 attached hereto, the Company does not maintain or
sponsor, nor is it required to make contributions to, any
pension, profit-sharing, savings, bonus, incentive or deferred
compensation, severance pay, medical, life insurance, welfare or
other employee benefit plan. Except as set forth in Schedule
3.16 attached hereto, all pension, profit-sharing, savings,
bonus, incentive or deferred compensation, severance pay,
medical, life insurance, welfare or other employee benefit plans
within the meaning of Section 3(3) of ERISA, in which the
Company's employees participate (such plans and related trusts,
insurance and annuity contracts, funding media and related
agreements and arrangements, other than any "multiemployer plan"
(within the meaning of Section 3(37) of ERISA), being hereinafter
referred to as the "Benefit Plans" and any such multiemployer
plans being hereinafter referred to as the "Multiemployer Plans")
comply with all applicable requirements of the Department of
Labor and the IRS, and with all other applicable law, except
where the violation of or non-compliance with such requirements
or laws, singly or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, and the Company has
not taken or failed to take any action with respect to the
Benefit Plans or Multiemployer Plans which might create any
liability on the part of the Company, except where any such
action or failure to act, singly or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Each
"fiduciary" (within the meaning of Section 3(21)(A) of ERISA) as
to each Benefit Plan and as to each Multiemployer Plan has
complied with the requirements of ERISA and all other applicable
laws in respect of each such Plan, except where the violation of
or non-compliance with such requirements or laws, singly or in
the aggregate, could not reasonably be expected to have a
Material Adverse Effect. The Company has furnished to the
Investor copies of all existing Benefit Plans and Multiemployer
Plans and all financial statements, actuarial reports and annual
reports and returns filed with the IRS with respect to such
Benefit Plans and Multiemployer Plans, if any. Such financial
statements and actuarial reports and annual reports and returns
are true and correct in all material respects, and none of the
actuarial assumptions underlying such documents have changed
since the respective dates thereof. In addition:
(a) Each Benefit Plan intended to be qualified under IRC Section
401(a) has received a favorable determination letter from the IRS
as to its qualification thereunder;
(b) No Benefit Plan which is a "defined benefit plan" (within
the meaning of Section 3(35) of ERISA) (hereinafter referred to
as the "Defined Benefit Plans") or Multiemployer Plan has
incurred an "accumulated funding deficiency" (within the meaning
of IRC Section 412(a)), whether or not waived;
(c) No "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Defined Benefit Plan or
any Multiemployer Plan;
(d) The Company has not withdrawn (partially or totally within
the meaning of ERISA) from any Benefit Plan or any Multiemployer
Plan and neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated herein will
result in the withdrawal (partially or totally within the meaning
of ERISA) from any Benefit Plan or any Multiemployer Plan, or in
any withdrawal or other liability of any nature to the Company
under any Benefit Plan or any Multiemployer Plan;
(e) No "prohibited transaction" (within the meaning of Section
406 of ERISA or IRC Section 4975(c)) has occurred with respect to
any Benefit Plan or any Multiemployer Plan;
(f) No provision of any Benefit Plan or of any agreement, and no
act or omission of the Company, in any way limits, impairs,
modifies or otherwise affects the right of the Company
unilaterally to amend or terminate any Benefit Plan subject to
the requirements of applicable law;
(g) Except as set forth on Schedule 3.16 attached hereto, there
are no contributions which are or hereafter will be required to
have been made to trusts in connection with any Benefit Plan that
would constitute a "defined contribution plan" (within the
meaning of Section 3(34) of ERISA), with respect to services
rendered by the Company's employees prior to the date of the
Tranche A Closing;
(h) Other than claims in the ordinary course for benefits with
respect to the Benefit Plans or Multiemployer Plans, there are no
actions, suits or claims (including claims for income Taxes,
interest, penalties, fines or excise Taxes with respect thereto)
pending with respect to any Benefit Plan or any Multiemployer
Plan, or, to the knowledge of the Company, any circumstances
which might give rise to any such action, suit or claim
(including claims for income Taxes, interest, penalties, fines or
excise Taxes with respect thereto);
(i) All material reports, returns and similar documents with
respect to the Benefit Plans required to be filed with any
governmental agency have so been filed in a timely fashion;
(j) The Company has not incurred any liability to the PBGC
(except for required premium payments). No notice of termination
has been filed by the plan administrator (pursuant to Section
4041 of ERISA) or issued by the PBGC (pursuant to Section 4042 of
ERISA) with respect to any Benefit Plan subject to ERISA. There
has been no termination of any Defined Benefit Plan or any
related trust by the Company; and
(k) The Company does not have any obligation to provide health
or other welfare benefits to former, retired or terminated
employees of the Company, except as specifically required under
IRC Section 4980B. The Company has substantially complied with
the notice and continuation requirements of IRC Section 4980B and
the regulations thereunder.
3.17. Disclosure. Neither this Agreement nor any other
document, certificate or written statement furnished to the
Investor by or on behalf of the Company in connection with the
transactions contemplated hereby contains any untrue statement of
a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not
misleading. There is no fact known to the Company which
materially adversely affects or could reasonably be expected to
have a Material Adverse Effect which has not been set forth in
this Agreement or in the other documents, certificates or
statements furnished to the Investor by or on behalf of the
Company pursuant hereto.
3.18. Books and Records. The books and records of the
Company are in all material respects complete and correct, have
been maintained in accordance with good business practices and
accurately reflect the basis for the financial position and
results of operations of the Company set forth in the financial
statements. All of such books and records have been made
available for inspection by the Investor and its representatives.
3.19. Investment Company. The Company is not an "investment
company" within the meaning of the Investment Company Act of
1940, as amended, and will not, as a result of the transactions
contemplated hereby, become an "investment company."
3.20. Registration Rights. Except as set forth in the
Registration Rights Agreement, the Company is not under any
contractual obligation to register any of its currently
outstanding securities or any of its securities that may
hereafter be issued.
3.21. Insurance. Schedule 3.21 contains a description of
each insurance policy maintained by the Company with respect to
its properties, assets and businesses, and each such policy is in
full force and effect as of the Tranche A Closing. The Company
is not in default in any material respect with respect to its
obligations under any insurance policy maintained by it, and the
Company has not been denied insurance coverage. Except as set
forth on Schedule 3.21 hereto, the Company does not have any self-
insurance or co-insurance programs, and the reserves set forth on
the Latest Balance Sheet are adequate to cover all anticipated
liabilities with respect to any such self-insurance or co-
insurance programs.
3.22. Employees. The Company has no knowledge that any
executive or key employee of the Company or any group of
employees of the Company has any plans to terminate employment
with the Company. The Company has complied in all material
respects with all laws relating to the employment of labor
(including, without limitation, provisions thereof relating to
wages, hours, equal opportunity, collective bargaining and the
payment of social security and other Taxes), and the Company has
no knowledge that it has any material labor relations problems
(including, without limitation, any union organization
activities, threatened or actual strikes or work stoppages or
material grievances). Neither the Company nor any of its
employees are subject to any noncompete, nondisclosure,
confidentiality, employment, consulting or similar agreements
relating to, affecting or in conflict with the present or
currently proposed business activities of the Company, except for
any employment agreements and with the Company.
3.23. Real Estate. Schedule 3.23 lists and describes briefly
all real property owned, leased or subleased to the Company and
all other real property which is used in the business of the
Company and not owned by the Company (the "Real Property"). The
Company has made available to the Investor or its representatives
correct and complete copies of the deeds, leases and subleases
relating to the property listed on Schedule 3.23.
(a) With respect to each of the Leases, and except as set forth
on the attached Schedule 3.23,
(i) each such Lease is valid, binding and enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting
the rights of creditors generally and to general principles of
equity (whether considered in a proceeding in equity or at law),
and each such Lease will continue to be valid, binding and
enforceable (subject to the foregoing exceptions) and in full
force and effect on identical terms immediately following the
Tranche A Closing;
(ii) the Company is not in default under or in breach of such
Leases, nor has the Company received any claim of default or
breach under such Leases, in each case which defaults and
breaches could, in the aggregate, reasonably be expected to
result in a Material Adverse Effect;
(iii) no event has occurred which with the passage of time or
the giving of notice or both would result in a default, breach or
event of noncompliance by the Company under any such Lease which
defaults, breaches or events of noncompliance could, in the
aggregate, reasonably be expected to result in a Material Adverse
Effect;
(iv) the Company does not have a present expectation or intention
of not fully performing in all material respects all of its
obligations pursuant to the Leases, and the Company has no
Knowledge of any breach or anticipated breach by the other
parties to any such Lease which breaches could in the aggregate
reasonably be expected to result in a Material Adverse Effect;
(v) there are no material disputes, oral agreements, or
forbearance programs in effect as to such Lease;
(vi) such Lease has not been modified in any respect, except to
the extent that such modifications are disclosed by the documents
delivered to the Investor; and
(vii) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in such
Lease.
(b) The Company has good and marketable title to all the real
property reflected as owned in the books and records of the
Company. Except as set forth in Schedule 3.23, all real property
owned by the Company is free and clear of all Liens and is not
subject to any rights of way, building use restrictions,
exceptions, variances, reservations, or limitation of any nature
except, with respect to all such Property,
(i) Mortgages or security interests securing specified
liabilities or obligations, with respect to which no default (or
event that, with notice or lapse of time or both, would
constitute a default) exists,
(ii) Liens for current Taxes not yet due, and
(iii) Minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or
impairs the use of the property subject thereto, or impairs the
operations of the Company, and zoning laws and other land use
restrictions that do not impair the present or anticipated use of
the Property subject thereto. All buildings, plants, and
structures owned by the Company lie wholly within the boundaries
of real property owned by the Company and do not encroach upon
the property of, or otherwise conflict with the property rights
of, any other Person.
4. COVENANTS OF THE COMPANY
4.1. Shareholder Approval. The Company shall use its best
efforts to obtain the requisite vote of shareholders for the
approval of the Amendment.
4.2. Dividends and Directors. The Company hereby covenants
to the Investor as follows:
(a) So long as any Convertible Common Stock is outstanding:
(i) an 8% dividend is payable thereon;
(ii) until the earlier of the Tranche B Closing or December 31,
2002, the Company will not declare any dividends other than the
8% dividend on the Convertible Common Stock;
(iii) the Company shall issue no Convertible Common Stock
other than pursuant to this Agreement, the Warrant and as
dividends on the Convertible Common Stock issued pursuant to this
Agreement and the Warrant without the consent of Investor;
(iv) the 8% dividend is payable to the Investor in Convertible
Common Stock for the periods ending December 31, 2000 and 2001 as
a simple dividend and for all periods after the earlier of
December 31, 2002 or the Tranche B Closing as a cumulative
dividend, provided, however, that such cumulative dividends shall
accrue on a daily basis, based on actual days elapsed since
payment of the most recent dividend and provided further that no
dividends are payable if the Investor owns 68% or more of the
equity of the Company.
(b) The Board of Directors shall consist of seven persons and
the Investor shall have the right to appoint four directors;
provided, however, that such right shall terminate upon
redemption of all of the Tranche A Stock required to be redeemed
under Section 2.8, if applicable, or when the Investor ceases to
own more than 10% of the outstanding Common Stock on a fully
diluted basis.
4.3. Conduct of the Business. Between the date hereof and
the Tranche A Closing the Company shall conduct its business only
in the ordinary course of business consistent with past custom
and practice, and shall incur no liabilities or obligations
whatsoever other than in the ordinary course of business
consistent with past custom and practice. The Company will use
its best efforts to preserve its business and shall maintain
insurance disclosed on Schedule 3.21 in full force and effect.
4.4. Full Access. The Investor and its Representatives
shall have full access during normal business hours to the books,
records, assets and personnel of the Company to conduct such
examination and investigation of the Company and its business as
the Investor reasonably deems necessary. The Company will
provide promptly to Investor copies of all documents provided to
the Securities and Exchange Commission and its other
shareholders.
4.5. Preemptive Rights. For so long as Investor or any of
its Affiliates owns not less than 10% of the Common Stock of the
Company, assuming conversion of the Convertible Common Stock,
that it acquires pursuant to this Agreement, Investors and its
Affiliates shall have the right to purchase any New Securities
that the Company may hereafter from time to time propose to sell
and issue (whether or not presently authorized) for cash,
including, shares from the treasury of the Company, in the ratio
that the number of Shares Investor or its Affiliates holds on a
fully diluted basis at the time of issue bears to the total
number of shares then outstanding on a fully diluted basis. The
purchase price for such New Securities shall be the price at
which such New Securities are proposed to be issued. The Company
shall give Investor written notice of a proposed issuance of New
Securities (a "Proposed Issuance") at least 30 days prior to the
date of the Proposed Issuance. Such notice shall set forth the
terms and conditions of the Proposed Issuance. The rights
granted pursuant to this Section shall be deemed waived by
Investor if it or its Affiliates do not exercise such right in
whole or in part by written notice to the Company and pay for the
New Securities as to which Investor or its Affiliates exercised
such rights within 30 days of receipt of notice of the Proposed
Issuance. "New Securities" shall mean any shares of common stock
or other equity securities of the Company, whether now authorized
or not, and any rights, options or warrants to purchase such
shares or other equity securities of any type whatsoever that are
or may become convertible into said shares of common stock or
other equity securities; provided, however, that "New Securities"
does not include (i) any securities to be issued in connection
with an underwritten public offering pursuant to a registration
statement filed with the Securities and Exchange Commission, (ii)
any securities to be issued in connection with a merger, an
acquisition of stock or assets, consolidation or other type of
business combination so long as such transaction is an
arms-length transaction, (iii) any securities issuable upon
conversion or exercise of convertible securities, options or
warrants currently outstanding or issued in connection herewith
or shall be issued in compliance with the terms of this
Section 4.4, (iv) securities to be issued to employees pursuant
to a plan approved by the Board of Directors, (v) securities
issued in connection with any pro rata stock split or stock
dividend of the Company, and (vi) any bona fide equity kicker
which may be issued to any person principally providing debt
financing to the Company in an arms-length transaction and any
securities which may be issued upon exercise or conversion of the
same.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby represents and warrants to the Company as
follows:
5.1. Organization, Standing, etc. The Investor will hold
the Convertible Common Stock as the general partner of Dimeling,
Schreiber & Park Reorganization Fund II, L.P. ("Fund"), a limited
partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware, and the Fund has all
requisite partnership power and authority to own its properties
and to carry on its business as now conducted.
5.2. Acts and Proceedings; Enforceability of Agreements.
The Investor has all requisite power and authority to enter into
this Agreement and to perform its obligations hereunder and
thereunder. All action on the part of the Investor necessary for
the authorization, execution and delivery of this Agreement and
the Registration Rights Agreement by the Investor, and the
performance of all obligations of the Investor hereunder and
thereunder, has been taken. This Agreement has been duly
executed and delivered by authorized officers of the Investor and
constitutes a valid and binding obligation of the Investor,
enforceable against the Investor in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors
generally and to general principles of equity (whether considered
in a proceeding in equity or at law). When the Registration
Rights Agreement shall have been executed and delivered by the
Investor and the other parties thereto, the Registration Rights
Agreement shall be duly authorized, executed and delivered by the
Investor, and shall constitute a valid and binding obligation of
the Investor, enforceable against the Investor in accordance with
its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the rights of
creditors generally and to general principles of equity (whether
considered in a proceeding in equity or at law).
5.3. No Brokers or Finders. No person, firm or entity has
or will have, as a result of any act or omission of the Investor,
any right, interest or valid claim against the Company or the
Investor for any commission, fee or other compensation as a
finder or broker in connection with the transactions contemplated
by this Agreement other than Clarence Otto McGowan.
5.4. Restricted Securities. The Investor understands that
none of the Shares have been registered under the Securities Act,
or registered or qualified under any state securities laws, and
that the Investor may not transfer the Shares in a manner
inconsistent with their status as restricted securities, subject
to registration pursuant to the Registration Rights Agreement.
5.5. Investment Intent. The Shares are being purchased for
the Fund's own account and not with a view to, or for resale in
connection with, any distribution or public offering thereof
within the meaning of the Securities Act. The Investor
understands that the Shares have not been registered under the
Securities Act by reason of their contemplated issuance in
transactions exempt from the registration and prospectus delivery
requirements of the Securities Act pursuant to Section 4(2)
thereof, that certificates representing the Shares shall bear a
restrictive legend (which legend shall be removed by the Company
at the request of the Investor when appropriate) and that the
reliance of the Company and others upon this exemption is
predicated in part upon this representation and warranty by the
Investor. The Investor was not formed for the specific purpose
of purchasing the Shares.
5.6. Sophisticated Investor. The Investor has such
knowledge and experience in financial and business matters and in
investments of this type that it is capable of evaluating the
merits and risks of its investment in the Shares and of making an
informed investment decision. The Investor is capable of bearing
the economic risk inherent in ownership of the Shares and
retaining the Shares for an indefinite period. The Investor has
been given the opportunity to ask questions of, and receive and
evaluate answers and information from, the Company concerning the
Company and the terms and conditions of its investment in the
Shares, and has been provided with, or had access to, such
documents and other information as it deems necessary or useful
in its evaluation of the merits and risks of an investment in the
Shares.
6. INDEMNIFICATION.
6.1. Indemnification.
(a) From and after the date hereof, but subject to the
conditions and limitations hereinafter set forth, the Company
shall indemnify and save harmless the Investor from and against
any and all loss, cost, damage or expense (including court costs
and reasonable attorneys' fees) whatsoever (i) asserted against
or incurred by Investor resulting from or arising out of any
breach of any representation, warranty, certification or covenant
of the Company contained in this Agreement or made in any
certificate or agreement of the Company delivered pursuant
hereto, or (ii) incurred by the Company as a result of any of the
Shares not having been issued in compliance with all applicable
state and federal securities laws (so long as the Investor's
representations and warranties contained in Sections 5.4 through
5.6 have not been breached).
(b) From and after the date hereof, but subject to the
conditions and limitations hereinafter set forth, the Investor
shall indemnify and save harmless the Company from and against
any and all loss, cost, damage or expense (including court costs
and reasonable attorneys' fees) whatsoever asserted against or
incurred by the Company resulting from or arising out of any
breach of any representation, warranty, certification or covenant
of the Investor contained in this Agreement or made in any
certificate or agreement of the Investor delivered pursuant
hereto.
(c) For purposes of this Section 6.1, any qualification of
representation or warranty by reference to the materiality of
matters stated therein and any limitation of such representations
and warranties to the extent of the "Knowledge of" or as "known
to" the maker thereof (or like qualifications) shall be
disregarded in determining any breach thereof.
6.2. Certain Procedures. In the event that the Investor or
the Company (as applicable, the "Claimant") desires to make a
claim against the other party to this Agreement (the
"Indemnitor") under this Section 6, the Claimant shall give
prompt written notice to the Indemnitor of any actions, suits,
proceedings, and demands at any time instituted or made against
Claimant (or, with respect to clause (ii) of Section 6.1(a),
against the Company), and of any loss, cost, damage or expenses
incurred by Claimant (or the Company) and for which the Claimant
claims a right to indemnification hereunder; provided, however,
that the Claimant's failure to promptly give such notice shall
not affect the obligations of an Indemnitor under this Section 6
except to the extent that any defense or counterclaim otherwise
available to Indemnitor shall have been prejudiced or the
Indemnitor's obligations shall otherwise have been increased as a
consequence of such failure. The Claimant shall, at the time of
giving such notice, if the Indemnitor shall agree in writing that
it would have responsibility to indemnify under this Section 6,
give the Indemnitor full authority to defend, adjust, compromise
or settle the action, suit, proceeding or demand on which such
notice is based, in the name of the Claimant or otherwise as the
Indemnitor shall elect unless, (a) there is a conflict or
potential conflict of interest between the Claimant and the
Indemnitor in such action, suit or proceeding, as advised by
Claimant's counsel, or (b) in the reasonable judgment of
Claimant, an adverse determination of such action, suit or
proceeding could be materially detrimental to the Claimant's
reputation or future business prospects. In the event of any
claims under Section 6 hereof for indemnification, the Claimant
shall advise the Indemnitor in writing of the amount and
circumstances surrounding said claim. Notwithstanding the
foregoing, the Company shall promptly notify the Investor of any
claim made against the Company alleging that any Shares were not
issued in compliance with all applicable federal or state
securities laws.
6.3. Survival of Representations and Warranties. The
representations and warranties and covenants made by the parties
in this Agreement or in any certificate delivered pursuant hereto
shall survive the Tranche A Closing and/or the Tranche B Closing
(each a "Closing" and, collectively, the "Closings") (i) with
respect to those representations and warranties set forth in
paragraphs 3.1, 3.3, 3.13 and 3.20, without limit as to time,
(ii) with respect to the representations, warranties set forth in
paragraphs 3.10 and 3.12(b), until the expiration of the
applicable statute of limitations, (iii) with respect to all
other representations and warranties for a period of three years
after the applicable Closing, and (iv) with respect to the
covenants set forth in Section 4 shall survive so long as any
Convertible Common Stock or Warrants are outstanding. Any claim
made on the basis of any alleged breach of such representations
and warranties must be identified to the party against whom such
claim is asserted before the expiration of the survival period
(if any) applicable thereto, as set forth in the preceding
sentence.
6.4. Limitations to Assertion of Indemnity Claims for Breach
of Representations and Warranties. Notwithstanding anything in
paragraph 6.1 to the contrary, no Claimant shall be entitled to
indemnification hereunder with respect to any claim pursuant to
subparagraphs 6.1(a)(i) or 6.1(b) for breach of any
representation or warranty made as of a Closing contained in this
Agreement or in any certificate delivered at such Closing
pursuant to this Agreement unless notice of such claim shall have
been given pursuant to paragraph 6.2 before the expiration of the
survival period applicable to such representation and warranty
(if any) set forth in paragraph 6.3.
7. MISCELLANEOUS.
7.1. Expenses. Upon each of the Tranche A and Tranche B
Closings, the Company shall pay the expenses incurred by it and
the Investor, including, without limitation, the cost of Arizona
counsel, any costs of filing under the Hart Scott Rodino Act, and
any broker's fees, in connection with the negotiation, execution,
delivery and performance of this Agreement and the other
Agreements incurred, as to the Tranche A Closing, prior to and
including the date thereof, and as to the Tranche B Closing,
during the period between the Tranche A Closing through the date
of the Tranche B Closing. If the Tranche A Closing does not
occur, Investor will bear its own costs, and the Company will be
responsible for its own costs including, without limitation, the
costs of Arizona counsel and any Hart Scott Rodino Act fees;
provided however, if the Tranche A Closing does not occur because
the Company has breached its obligations hereunder, the Company
will reimburse Investor for all fees, costs and expenses incurred
by the Investor in connection with the negotiations, execution,
delivery and performance of this Agreement and the Other
Agreements.
7.2. Public Announcements. Unless required by law, any
public announcement or similar publicity with respect to this
Agreement or the transaction contemplated herein will be issued,
if at all, at such time and in such manner as the Company and
Investor mutually shall determine.
7.3. Descriptive Headings. The descriptive headings of this
Agreement are for convenience only and shall not control or
affect the meaning or construction of any provision of this
Agreement.
7.4. Notices. All notices and other communications
hereunder or in connection herewith shall be deemed to have been
duly given if they are in writing and: (a) sent by telecopy, with
receipt confirmed, provided that a copy is mailed by certified
mail, return receipt requested; (b) delivered personally or by a
nationally recognized overnight courier service; or (c) sent by
registered or certified mail, return receipt requested and first-
class postage prepaid, to the following:
if to the Company: Chief Consolidated Mining Company
Executive Offices
500 Fifth Avenue
Suite 1021
New York, NY 10010-1099
Attention: Leonard Weitz,
President
Facsimile: (212) 354-4412
with a copy to: Howard Weitz, P.C.
51 East 42nd Street
New York, New York 10017
Attention: Howard Weitz, Esq.
Facsimile: (212) 661-4314
if to the Investor: Dimeling, Schreiber & Park.
1629 Locust Street
Philadelphia, PA 191033
Attention: Richard R. Schreiber
Facsimile: (215) 546-9160
with a copy to: Reed Smith Shaw & McClay LLP
2500 One Liberty Plaza
Philadelphia, PA 19103
Attention: Lori L. Lasher, Esq.
Facsimile: (215) 851-1420
Notices shall be deemed given: (a) when sent, if by
telecopy; (b) when received, if delivered personally or by
overnight courier service; and (c) three (3) Business Days
after deposit with the United States Postal Service, if
sent by registered or certified mail as specified herein.
Any party desiring to change the address or telecopy
number to which notices are to be sent shall send such a
notice to the other party in accordance with this Section.
7.5. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other party.
7.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania without regard for principles of conflicts of laws.
Each party hereby irrevocably submits to the exclusive
jurisdiction and venue of the Courts of the Commonwealth of
Pennsylvania and the County of Philadelphia and/or the United
States District Court for the Eastern District of Pennsylvania,
and appellate courts from any thereof, in connection with any
action, suit or other proceeding arising out of or relating to
this Agreement and, with respect to any such action, suit or
other proceeding, waives any objection which such party may have
at any time to the laying of venue of any such action, suit or
proceeding and any objection which such party may have that any
such action, suit or proceeding brought in any such court has
been brought in an inconvenient forum, and each such party
further waives personal service of any summons, complaint or
other process and agrees that service thereof may be made by
certified or registered mail directed to such party at its
respective address set forth herein, or by such other means as
may be appropriate pursuant to applicable law.
7.7. Waivers and Amendments. Any term or provision of this
Agreement may be waived at any time by the party that is entitled
to the benefits thereof, and any term or provision of this
Agreement may be amended or supplemented at any time by the
mutual consent of the parties, except that any waiver of any term
or condition, or any amendment or supplementation of this
Agreement, must be in writing. A waiver of any breach or failure
to enforce any of the terms or conditions of this Agreement shall
not in any way affect, limit or waive a party's rights thereunder
at any time to enforce strict compliance thereafter with every
term or condition of this Agreement.
7.8. Entire Agreement. This Agreement (including documents
and instruments referred to herein) constitutes the entire
agreement, and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any
of them, with respect to the subject matter hereof.
7.9. Specific Performance, Remedies. The parties hereto
agree that, in the event that any of the provisions of this
Agreement required to be performed after the Closing or the
termination of this Agreement, as the case may be, are not
performed in accordance with their specific terms or are
otherwise breached, the non-breaching party would be irreparably
damaged thereby and that monetary damages would not provide an
adequate remedy in such event. Accordingly, in addition to any
other remedy to which the non-breaching party may be entitled at
law or in equity, such party shall be entitled to specific
performance and injunctive relief to prevent breaches of the
provisions of this Agreement, and specifically to enforce such
terms and provisions in any action instituted in any court of the
United States or any state thereof having subject matter
jurisdiction thereof.
7.10. Severability In the event that any one or more of the
provisions contained in this Agreement shall be declared invalid,
void or unenforceable, the remainder of the provisions of this
Agreement shall remain in full force and effect.
7.11. Interpretation. The parties acknowledge that each
party and its counsel have reviewed and revised this Agreement
and that consequently any rule of construction to the effect that
any ambiguities are to be resolved against the drafting party is
not applicable in the interpretation of this Agreement or any
exhibits hereto.
IN WITNESS WHEREOF, the Investor and the Company have
executed and delivered this Agreement by the duly authorized
officers all as of the date first written above.
CHIEF CONSOLIDATED MINING
COMPANY
By
Its:
DIMELING, SCHREIBER & PARK
By:
Name:_________________
Title:__________________
THIS WARRANT AND ANY SHARES OF CONVERTIBLE COMMON STOCK ISSUABLE
UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND NEITHER THIS WARRANT
NOR ANY SUCH SHARES MAY BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.
THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT ARE
SUBJECT TO A STOCK PURCHASE AGREEMENT DATED AS OF NOVEMBER 19,
1999 ("THE STOCK PURCHASE AGREEMENT") AND A REGISTRATION RIGHTS
AGREEMENT DATED AS OF NOVEMBER 19, 1999 ("REGISTRATION RIGHTS
AGREEMENT"), AMONG THE ISSUER OF SUCH SECURITIES (THE "COMPANY")
AND THE INITIAL HOLDER.
WARRANT
To Purchase Convertible Common Stock of
CHIEF CONSOLIDATED MINING COMPANY
an Arizona corporation
THIS IS TO CERTIFY that DIMELING, SCHREIBER & PARK, a
Pennsylvania general partnership ("DSP") or its registered and
permitted assigns, is entitled upon the due exercise hereof at
any time during the Exercise Period (as hereinafter defined)
and/or in connection with the occurrence of an Exercise Event (as
hereinafter defined), to purchase that number of shares of
Convertible Common Stock of CHIEF CONSOLIDATED MINING COMPANY
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 stock dividends issued thereon,
68% of the Common Stock on a fully diluted basis (assuming
conversion of all Convertible Common Stock into Common Stock and
exercise of all Stock Purchase Rights and conversion of all
Convertible Securities) of CHIEF CONSOLIDATED MINING COMPANY, an
Arizona corporation, at the Exercise Price (as hereinafter
defined) (such Exercise Price hereunder being subject to
adjustment as provided herein), and to exercise the other rights,
powers and privileges hereinafter provided, all on the terms and
subject to the conditions hereinafter set forth.
ARTICLE I
DEFINITIONS
The terms defined in this ARTICLE I, whenever used in this
Warrant, shall have the respective meanings hereinafter
specified.
"Affiliate" of any Person means a Person which directly or
indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company. The
term "control," as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise.
"Assignment" means the form of Assignment appearing at the end of
this Warrant.
"Commission" means the Securities and Exchange Commission or any
other Federal agency from time to time administering the
Securities Act.
"Common Stock" means the common stock of the Company, par value
$.50 per share, into which the Convertible Common Stock of the
Company is convertible.
"Convertible Common Stock" means the Convertible Common Stock of
the Company, par value $.50 per share, which is convertible into
Common Stock of the Company on a share for share basis.
"Company" means CHIEF CONSOLIDATED MINING COMPANY, an Arizona
corporation, and any successor corporation.
"Convertible Securities" means evidences of indebtedness, shares
of stock or other securities which are convertible into or
exchangeable for, with or without payment of additional
consideration, additional shares of Common Stock or Convertible
Common Stock, either immediately or upon the arrival of a
specified date or the happening of a specified event.
"Current Market Price" in the case of Common Stock or other
publicly traded security, means the average of the daily closing
prices for the 30 consecutive trading days commencing 45 trading
days before the day in question. The closing price for each day
shall be (i) the average of the closing high bid and low asked
quotations of any such security in the over-the-counter market as
shown by the National Association of Securities Dealers, Inc.
Automated Quotation System, or any similar system of automated
dissemination of quotations of securities prices then in common
use, if so quoted, as reported by any member firm of the Pacific
Stock Exchange selected by the Company, or (ii) if not quoted as
described in clause (i), the average of the high bid and low
asked quotations for any such security as reported by the
National Quotation Bureau Incorporated or any similar successor
organization, as reported by any member firm of the [Pacific
Stock Exchange] selected by the Company, or (iii) if any such
security is listed or admitted for trading on any national
securities exchange, the last sale price of any such security,
regular way, or the average of the closing bid and asked prices
thereof if no such sale occurred, in each case as officially
reported on the principal securities exchange on which any such
security is listed. If any such security is quoted on a national
securities or central market system in lieu of a market or
quotation system described above, the closing price shall be
determined in the manner set forth in clause (i) of the preceding
sentence if bid and asked quotations are reported but actual
transactions are not, and in the manner set forth in clause (iii)
of the preceding sentence if actual transactions are reported.
"Event of Default" means (a) the breach of any warranty in any
material respect, or the inaccuracy in any material respect of
any representation, made by the Company herein, or (b) the
failure by the Company to comply in any material respect with any
covenant contained herein.
"Exercise Event" means any of the following events: (a) any Value
Event, (b) any partial or complete liquidation of the Company,
and (c) any merger, consolidation, recapitalization or
reorganization of the Company, or a sale of all or substantially
all of its assets (other than an event already covered by clause
(a)).
"Exercise Event Notice" has the meaning set forth in Section
2.1(c).
"Exercise Period" means the period commencing on the date
immediately following the later of (a) the Tranche B Closing and
(b) the earlier of (i) the date on which an Exercise Event
occurs, (ii) the date on which an Exercise Event Notice is
delivered, or (iii) December 31, 2004.
"Exercise Price" means $2.25 per share of Convertible Common
Stock.
"Fair Value" means in the case of the Company's publicly traded
securities, the Current Market Price at the close of business on
the date of determination of fair value. In the case of the fair
value of the appropriate security which is not publicly traded,
and property, assets, or business of an entity, it means the fair
value as determined by an opinion of an independent investment
banking firm or firms in accordance with the following procedure:
In the case of any event which gives rise to a requirement to
determine "Fair Value" pursuant to the provisions hereof, whether
in connection with an adjustment to the Exercise Price or
otherwise, the Company shall be responsible for initiating the
process by which Fair Value shall be determined as promptly as
practicable following such event, and if the procedures
contemplated in connection with obtaining such opinion have not
been complied with fully, then any such determination of Fair
Value for any purpose of this Warrant (and any such resulting
adjustment to the Exercise Price) shall be deemed to be
preliminary and subject to adjustment pending full compliance
with such procedures. The Company and the holder of this Warrant
shall retain (and be responsible for all related fees and
expenses of) a separate independent investment banking firm
(which firm, in either case, may be the independent investment
banking firm regularly retained by the Company of such holder);
provided, that the holder may, at its option, elect to rely on
the firm retained by the Company in lieu of retaining its own
firm. Such firms shall determine the fair value of the security,
property, assets, business or entity, as the case may be, in
question and deliver their opinion in writing to the Company and
to such holder. If such firms cannot jointly make such
determination (or in the event that the holder has elected to
rely upon the firm retained by the Company and disagrees with the
determination made by such firm), then, unless otherwise directed
by agreement of the Company and such holder, such firms (or
firm), in their (or its) sole discretion, shall choose another
independent investment banking firm of the Company or such
holder, which firm shall make such determination and render such
an opinion. In either case the determination so made shall be
conclusive and binding on the Company and such holder. The fees
and expenses of any such determination made by the independent
investment banking firm selected by such independent banking
firms (or firm) shall be borne by the Company.
"Initial Holder" means DIMELING, SCHREIBER & PARK, a Pennsylvania
general partnership, as general partner of Dimeling Schreiber &
Park Reorganization Fund II, L.P., a Delaware limited
partnership.
"Notice of Exercise" means the form of Notice of Exercise
appearing at the end of this Warrant.
"Opinion of Counsel" means the opinion of counsel experienced in
Securities Act and blue sky regulatory matters, chosen by the
holder of this Warrant and reasonably satisfactory to the
Company, which counsel may be counsel to such holder.
"Other Securities" means any stock and other securities of the
Company (other than Common Stock, Convertible Common Stock,
Convertible Securities or Stock Purchase Rights) or any other
Person which shall become subject to issue or sale upon the
conversion or exchange of any stock or other securities of the
Company.
"Permitted Transfer" has the meaning set forth in Article V.
"Person" means any unincorporated organization, association,
corporation, limited liability company, individual, sole
proprietorship, partnership, joint venture, trust institution,
entity, party or government (including
any instrumentality, division, agency, body or department
thereof).
"Rights Offering" has the meaning set forth in Section 4.2.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor Federal statute and the rules and regulations of
the Commission promulgated thereunder, all as the same shall be
in effect from time to time.
"Stock Purchase Rights" means any warrants (other than the
Warrant), options or other rights to subscribe for, purchase or
otherwise acquire any shares of Convertible Common Stock, Common
Stock or any Convertible Securities.
"Subsidiary" means any corporation or association (a) more than
50% (by number of votes) of the Voting Stock of which is at the
time owned by the Company or by one or more Subsidiaries or by
the Company and one or more Subsidiaries, or any other business
entity in which the Company or one or more Subsidiaries or the
Company and one or more Subsidiaries owns more than a 50%
interest either in the profits or capital of such business entity
or (b) whose net earnings, or portions thereof, are consolidated
with the net earnings of the Company and are recorded on the
books of the Company for financial reporting purposes in
accordance with generally accepted accounting principles.
"Tranche B Closing" shall have the meaning ascribed to such term
in the Stock Purchase Agreement.
"Value Event" means any of the following events: (a) any merger
or consolidation of the Company with or into any corporation that
is not an Affiliate of the Company where the stockholders of the
Company would own less than 50% of the outstanding convertible
common stock or common stock of the survivor after the merger,
(b) any sale or disposition of all or substantially all the
assets of the Company to a Person other than an Affiliate of the
Company, (c) any public offering by the Company of Convertible
Common Stock or Common Stock, or (d) any sale or other
disposition by the Company or an Affiliate of the Company of
shares of Convertible Common Stock or Common Stock constituting
(on a cumulative basis) more than 50% of the number of shares of
Convertible Common Stock or Common Stock then outstanding (other
than to an Affiliate of the Company or any of the existing
stockholders of the Company).
"Voting Stock" means securities of any class or series of a
corporation or association the holders of which are entitled to
participate in the election of majority of the directors or
persons performing similar functions of such corporation or
association.
"Warrant" means this warrant issued to the Initial Holder and all
warrants issued upon the partial exercise, transfer or division
of or in substitution for any such Warrant.
Whenever used in this Warrant, any noun or pronoun shall be
deemed to include both the singular and plural and to cover all
genders, and the words "herein", "hereof", and "hereunder" and
words of similar import shall refer to this instrument as a
whole, including any amendments hereto.
ARTICLE II
EXERCISE OF WARRANT
2.1 Right to Exercise; Notice.
(a) In General. On the terms and subject to the
conditions of this ARTICLE II, the holder hereof shall have the
right, at its option, to exercise this Warrant in whole or in
part, but only one time during the Exercise Period.
(b) Exercise During Exercise Period. This Warrant may
be exercised by the Holder hereof at any time during the Exercise
Period by delivery to the Company of a Notice of Exercise duly
executed by such holder, specifying the number of shares of
Convertible Common Stock to be purchased.
(c) Exercise in Connection With an Exercise Event. At
least 45 days prior to the earlier of (i) the effective date of
any Exercise Event or (ii) any record date of holders of Common
Stock or Convertible Common Stock for the purpose of approving or
participating in any such Exercise Event, the Company shall give
the holder of this Warrant written notice thereof (an "Exercise
Event Notice") setting forth all material information relating to
the proposed Exercise Event. The holder shall then have the right
to exercise this Warrant at any time following receipt of such
Exercise Event Notice and the earlier of such effective date or
such record date.
2.2 Manner of Exercise; Issuance of Convertible Common
Stock. To exercise this Warrant, the holder hereof shall (i)
deliver to the Company (a) a Notice of Exercise specifying the
number of shares of Convertible Common Stock to be purchased, (b)
an amount equal to the aggregate Exercise Price for all shares of
Convertible Common Stock as to which this Warrant is then being
exercised and (c) this Warrant, or (ii) in connection with the
exercise of this Warrant without the payment of the Exercise
Price, deliver to the Company (a) a duly executed Notice of
Exercise specifying the number of shares of Convertible Common
Stock for which this Warrant is being exercised and the number of
shares of Convertible Common Stock deliverable by the Company
upon such exercise, and (b) this Warrant. At the option of the
holder hereof, payment of the Exercise Price shall be made by (a)
wire transfer of funds to an account in a bank located in the
United States designated by the Company for such purpose, (b)
certified or official bank check payable to the order of the
Company and drawn on a member of the New York Clearing House, (c)
surrender of an appropriate number of shares of Convertible
Common Stock to be issued under this Warrant, or (d) by any
combination of such methods.
Upon receipt of the required deliveries, the Company
shall, as promptly as practicable, and in any event within five
days thereafter, cause to be issued and delivered to the holder
hereof (or its nominee) or, subject to ARTICLE V, the transferee
designated in the Notice of Exercise, a certificate or certifi
cates representing shares of Convertible Common Stock equal in
the aggregate to the number of shares of Convertible Common Stock
specified in the Notice of Exercise (but not exceeding the
maximum number of shares issuable upon exercise of this Warrant).
Such certificates shall be registered in the name of the holder
hereof (or its nominee) or in the name of such transferee, as the
case may be.
2.3 Effectiveness of Exercise. Unless otherwise requested
by the holder hereof, this Warrant shall be deemed to have been
exercised and such certificate or certificates representing
shares of Convertible Common Stock shall be deemed to have been
issued, and the holder or transferee so designated in the Notice
of Exercise shall be deemed to have become a holder of record of
such shares for all purposes, as of the close of business on the
date the Notice of Exercise, together with payment of the
Exercise Price and this Warrant, is received by the Company.
2.4 Fractional Shares. The Company shall not issue
fractional shares of Convertible Common Stock or scrip
representing fractional shares of Convertible Common Stock upon
any exercise of this Warrant. As to any fractional share of
Convertible Common Stock which the holder hereof would otherwise
be entitled to purchase from the Company upon such exercise, the
Company shall purchase from the holder such fractional share at a
price equal to an amount calculated by multiplying such
fractional share (calculated to the nearest .001 of a share) by
the Fair Value determined without regard to whether this Warrant
or any Warrant Shares are then subject to repurchase hereunder)
calculated as of the date of the Notice of Exercise. Payment of
such amount shall be made at the time of delivery of any
certificate or certificates deliverable upon such exercise in
cash or by check payable to the order of the holder hereof or,
subject to ARTICLE V, the transferee designated in the Notice of
Exercise, as the case may be.
2.5 Continued Validity. A holder of shares of Convertible
Common Stock issued upon exercise of this Warrant shall continue
to be entitled to all rights under the Stock Purchase Agreement
and the Registration Rights Agreement.
ARTICLE III
REGISTRATION, TRANSFER AND EXCHANGE
3.1 Maintenance of Registration Books. The Company shall
keep at its principal office, which is currently at 500 Fifth
Ave., Suite 1021, New York, NY 10110, a register in which,
subject to such reasonable regulations as it may prescribe, the
Company shall provide for the registration, transfer and exchange
of this Warrant. The Company shall not at any time except upon
the dissolution, liquidation or winding up of the Company, close
such register so as to result in preventing or delaying the
exercise or transfer of this Warrant.
3.2 Transfer and Exchange. Upon surrender for registration
or transfer of this Warrant at such office, the Company shall
execute and deliver, subject to ARTICLE V, in the name of the
designated transferee(s) in a Permitted Transfer (as defined in
ARTICLE V), one or more new Warrants representing the right to
purchase a like aggregate number of shares of Convertible Common
Stock. In the event of a Permitted Transfer, and at the option
of the holder hereof, this Warrant may be exchanged for other
Warrants representing the right to purchase a like aggregate
number of shares of Convertible Common Stock upon surrender of
this Warrant at such office. Whenever this Warrant is so
surrendered for exchange, the Company shall execute and deliver
the Warrants which the holder making the exchange is entitled to
receive.
Every Warrant presented or surrendered for registration
of transfer or exchange shall be accompanied by an Assignment
duly executed by the holder thereof or its attorney duly
authorized in writing.
All Warrants issued upon any registration of transfer
or exchange of Warrants shall be the valid obligations of the
Company, evidencing the same rights, and entitled to the same
benefits, as the Warrants surrendered upon such registration of
transfer or exchange.
3.3 Replacement. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and (a) in the case of any such loss,
theft or destruction upon delivery of indemnity reasonably satis
factory to the Company in form and amount or (b) in the case of
any such mutilation, upon surrender of such Warrant for cancella
tion at the principal office of the Company, the Company, at its
expense, will execute and deliver, in lieu thereof, a new
Warrant.
3.4 Ownership. The Company and any agent of the Company may
treat the Person in whose name this Warrant is registered on the
register kept at the principal office of the Company as the owner
and holder thereof for all purposes, notwithstanding any notice
to the contrary, except that, if and when this Warrant is
properly assigned in blank, the Company may (but shall not be
obligated to) treat bearer thereof as the owner of this Warrant
for all purposes, notwithstanding any notice to the contrary.
This Warrant, if properly assigned, may be exercised by a new
holder without first having a new Warrant issued.
ARTICLE IV
ANTIDILUTION PROVISIONS
4.1 Adjustment of Exercise Price. The Exercise Price
shall be subject to adjustment from time to time as hereinafter
set forth. For purposes of subsections (b) (c) and (d) below,
the date on which the Exercise Price per share shall be computed
shall be the earlier of (A) the date on which the Company shall
enter into a firm contract for the issuance of the additional
Common Stock, Convertible Common Stock, Stock Purchase Rights or
Convertible Securities, as appropriate to such subsection
("Additional Securities"), or (B) the date of the actual issuance
of such Additional Securities. The date as of which the Fair
Value shall be computed shall be the last day of the most recent
period for which financial statements have been filed with the
Commission prior to the earlier of the dates determined pursuant
to (A) and (B) above.
(a) Stock Dividends, Subdivisions and Combinations. In
the event that the Company shall:
(i) declare a dividend upon, or make any
distribution in respect of, any of its Common Stock or
Convertible Common Stock, payable in Common Stock, Convertible
Common Stock, Convertible Securities or Stock Purchase Rights, or
(ii) subdivide its outstanding shares of Common
Stock or Convertible Common Stock into a larger number of shares,
or
(iii) combine its outstanding shares of Common
Stock or Convertible Common stock into a smaller number of
shares,
then the Exercise Price shall be adjusted to that price
determined by multiplying the Exercise Price per share
immediately prior to such event by a fraction (A) the numerator
of which shall be the total number of outstanding shares of
Common Stock of the Company immediately prior to such event on a
fully diluted basis (assuming conversion of all Convertible
Common Stock into Common Stock and exercise of all Stock Purchase
Rights and conversion of all Convertible Securities), and (B) the
denominator of which shall be the total number of outstanding
shares of Common Stock of the Company immediately after such
event on a fully diluted basis (assuming conversion of all
Convertible Common Stock into Common Stock and exercise of all
Stock Purchase Rights and conversion of all Convertible
Securities). The provisions of this Subsection (a) shall not
apply to any additional shares of Convertible Common Stock which
are distributed solely to holders of Convertible Common Stock
pursuant to the 8% stock dividend required under the Company's
articles of incorporation ("Articles of Incorporation").
(b) Issuance of Additional Shares of Common Stock. In
case the Company shall issue or sell any shares of Common Stock
for a consideration less than the then Fair Value per share, the
Exercise Price upon each such issuance or sale shall be adjusted
by:
multiplying the then existing Exercise Price by a fraction the
numerator of which is (A) the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
on a fully diluted basis (assuming conversion of all Convertible
Common Stock into Common Stock and exercise of all Stock Purchase
Rights and conversion of all Convertible Securities) multiplied
by the Fair Value per share of Common Stock immediately prior to
such issue or sale on a fully diluted basis (assuming conversion
of all Convertible Common Stock into Common Stock and exercise of
all Stock Purchase Rights and conversion of all Convertible
Securities) plus (2) the consideration received by the Company
upon such issue or sale, divided by (B) the total number of
shares of Common Stock outstanding immediately after such issue
or sale on a fully diluted basis (assuming conversion of all
Convertible Common Stock into Common Stock and exercise of all
Stock Purchase Rights and conversion of all Convertible
Securities) and the denominator of which shall be the Fair Value
per share of Common Stock immediately prior to such issue or
sale.
The provisions of this Subsection (b) shall not apply
to any additional shares of Convertible Common Stock which are
distributed solely to holders of Convertible Common Stock
pursuant to the 8% stock dividend required under the Articles of
Incorporation or any additional shares of Common Stock or
Convertible Common Stock which are distributed as a result of a
subdivision for which an adjustment is provided for under
Subsection (a) of this Section 4.1. No adjustment of the
Exercise Price shall be made under this Subsection upon the
issuance of any additional shares of Common Stock or Convertible
Common Stock which are issued pursuant to the exercise of any
Stock Purchase Rights or pursuant to the conversion or exchange
of any Convertible Securities to the extent that such adjustment
shall previously have been made upon the issuance of such Stock
Purchase Rights or Convertible Securities pursuant to Subsection
(a) (c) or (d) of this Section 4.1.
(c) Issuance of Stock Purchase Rights. In case the
Company shall issue or sell any Stock Purchase Rights and the
consideration per share for which additional shares of Common
Stock may at any time thereafter be issuable upon exercise
thereof (or, in the case of Stock Purchase Rights exercisable for
the purchase of Convertible Securities, upon the subsequent
conversion or exchange of such Convertible Securities) shall be
less than the then Fair Value per share, the Exercise Price shall
be adjusted as provided in subsection (b) of this Section 4.1 on
the basis that (i) the maximum number of additional shares of
Common Stock issuable upon exercise of such Stock Purchase Rights
(or upon conversion or exchange of such Convertible Securities
following such exercise) shall be deemed to have been issued as
of the date of the determination of the Fair Value, as
hereinafter provided, and (ii) the aggregate consideration
received for such additional shares of Common Stock shall be
deemed to be the minimum consideration received and receivable by
the Company in connection with the issuance and exercise of such
Stock Purchase Rights (or upon conversion or exchange of such
Convertible Securities).
(d) Issuance of Convertible Securities. In case the
Company shall issue or sell any Convertible Securities and the
consideration per share for which additional shares of Common
Stock may at any time thereafter be issuable pursuant to the
terms of such Convertible Securities shall be less than the Fair
Value per share, the Exercise Price shall be adjusted as provided
in Subsection (b) of this Section 4.1 on the basis that (i) the
maximum number of additional shares of Common Stock necessary to
effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date for
the determination of the Fair Value, as hereinafter provided, and
(ii) the aggregate consideration received for such additional
shares of Common Stock shall be deemed to be equal to the minimum
consideration received and receivable by the Company in
connection with the issuance and exercise of such Convertible
Securities. No adjustment of the Exercise Price shall be made
under this Subsection upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any Stock
Purchase Rights, if an adjustment shall previously have been made
upon the issuance of such Stock Purchase Rights pursuant to
Subsection (c) of this Section 4.1.
(e) Minimum Adjustment. In the event any adjustment of
the Exercise Price pursuant to this Section 4.1 shall result in
an adjustment of less than $0.01 per share of Convertible Common
Stock, no such adjustment shall be made, but any such lesser
adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which together
with any adjustments so carried forward, shall amount to $0.01 or
more per share of Convertible Common Stock; provided, however,
that upon any adjustment of the Exercise Price resulting from (i)
the declaration of a dividend upon, or the making of any
distribution in respect of, any stock of the Company payable in
Common Stock or Convertible Securities or (ii) the
reclassification by subdivision, combination or otherwise, of the
Common Stock into a greater or smaller number of shares, the
foregoing figure of $0.01 per share (or such figure last
adjusted) shall be proportionately adjusted and provided, further
upon the exercise of this Warrant, the Company shall make all
necessary adjustments (to the nearest 0.001 of a cent) not
theretofore made to the Exercise Price up to and including the
date upon which this Warrant is exercised.
(f) Readjustment of Exercise Price. In the event (i)
the purchase price payable for any Stock Purchase Rights or
Convertible Securities referred to in Subsection (c) or (d)
above, (ii) the additional consideration, if any, payable upon
exercise of such Stock Purchase Rights or upon the conversion or
exchange of such Convertible Securities or (iii) the rate at
which any Convertible Securities above are convertible into or
exchangeable for additional shares of Common Stock shall change,
the Exercise Price in effect at the time of such event shall
forthwith be readjusted to the Exercise Price which would have
been in effect at such time had such Stock Purchase Rights or
Convertible Securities provided for such changed purchase price,
additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold. On the expiration
of any such Stock Purchase Rights not exercised or of any such
right to convert or exchange under such Convertible Securities
not exercised, the Exercise Price then in effect hereunder shall
forthwith be increased to the Exercise Price which would have
been in effect at the time of such expiration or termination had
such Stock Purchase Rights or Convertible Securities never been
issued. No readjustment of the Exercise Price pursuant to this
Subsection (f) shall have the effect of increasing the Exercise
Price by an amount in excess of the adjustment originally made to
the Exercise Price in respect of the issue, sale or grant of the
applicable Stock Purchase Rights or Convertible Securities.
(g) Reorganization, Reclassification or
Recapitalization of Company. In case of any capital
reorganization or reclassification or recapitalization of the
capital stock of the Company (other than in the cases referred to
in Subsection (a) of this Section 4.1), or in case of the
consolidation or merger of the Company with or into another
corporation, or in case of the sale or transfer of the property
of the Company as an entirety or substantially as an entirety,
there shall thereafter be deliverable upon the exercise of this
Warrant or any portion thereof (in lieu of or in addition to the
number of shares of Convertible Common Stock theretofore
deliverable, as appropriate) the number of shares of stock or
other securities or property to which the holder of the number of
shares of Convertible Common Stock which would otherwise have
been deliverable upon the exercise of this Warrant or any portion
thereof at the time would have been entitled upon such capital
reorganization or reclassification of capital stock,
consolidation, merger or sale, and at the same aggregate Exercise
Price.
(h) Dilution in Case of Other Securities. In case any
Other Securities shall be
issued or sold or shall become subject to issuance or sale upon
the conversion or exchange of any stock (or other securities) of
the Company (or any issuer of Other Securities or any other
Person referred to in Subsection (g)) or becomes subject to
subscription, purchase or other acquisition pursuant to any
options or rights issued or granted by the Company (or by any
such other issuer or Person) for a consideration such as to
dilute, within the standards established in the other provisions
of this ARTICLE IV, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and
readjustments provided for in this ARTICLE IV with respect to the
Exercise Price shall be made as nearly as possible in the manner
so provided and applied to determine the amount of Other
Securities from time to time receivable upon the exercise of this
Warrant, so as to protect the holders of the Warrant against the
effect of such dilution.
(i) Other Dilutive Events. In case any event shall
occur as to which the other provisions of this ARTICLE IV are not
strictly applicable but the failure to make any adjustment would
not fairly protect the purchase rights represented by this
Warrant in accordance with the
intent and principles hereof, then, in each such case, the
Company shall appoint a firm of independent public accountants of
recognized national standing (which may be the regular auditors
of the Company), which shall give their opinion as to the
adjustment, if any, on a basis consistent with the intent and
principles established in this Article IV, necessary to preserve,
without dilution, the purchase rights represented by this
Warrant. Upon receipt of such opinion, the Company will promptly
mail a copy thereof to the holder of this Warrant and shall make
the adjustments described therein.
(j) Determination of Consideration. For purposes of
this ARTICLE IV, the consideration received or receivable by the
Company for the issuance, sale, grant or assumption of additional
shares of Common Stock, Stock Purchase Rights or Convertible
Securities, irrespective of the accounting treatment of such
consideration, shall be valued as follows:
(1) Cash Payment. In the case of cash, the net amount
received by the Company after deduction of any underwriting
commissions or similar concessions paid or allowed by the
Company.
(2) Securities or Other Property. The Fair Value of
such consideration as of the date immediately preceding the
issuance, sale or grant in question.
(3) Allocation Related to Common Stock, Stock Purchase
Rights and Convertible Securities. In the event additional
shares of Common Stock, Stock Purchase Rights or Convertible
Securities are issued or sold together with other securities or
other assets of the Company for a consideration which covers
both, the consideration received (computed as provided in (1) and
(2) above) shall be allocable to such additional shares, rights,
or securities, as determined in good faith by the Board of
Directors of the Company.
(4) Dividends in Securities. In case the Company shall
declare a dividend or make any other distribution upon any
capital stock of the Company (other than the 8% dividend on the
Convertible Common Stock) payable in Common Stock, Convertible
Securities or Stock Purchase Rights, such Common Stock,
Convertible Securities or Stock Purchase Rights, as the case may
be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(5) Stock Purchase Rights and Convertible Securities.
The consideration for which shares of Common Stock shall be
deemed to be issued upon the issuance of any Stock Purchase
Rights or Convertible Securities shall be determined by dividing
(i) the total consideration, if any, received or receivable by
the Company as consideration for the granting of such Stock
Purchase Rights or the issuance of such Convertible Securities,
plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of such Stock Purchase
Rights, or, in the case of such Convertible Securities, the
minimum aggregate amount of additional consideration, if any,
payable upon the conversion or exchange thereof, in each case
after deducting any underwriting commissions or similar
concessions paid or allowed by the Company; by (ii) the maximum
number of shares of Common Stock issuable upon the exercise of
such Stock Purchase Rights or upon the conversion or exchange of
all such Convertible Securities.
(6) Merger, Consolidation or Sale of Assets. In case
any shares of Common Stock or Convertible Securities or any Stock
Purchase Rights shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the
Fair Value of such portion of the assets and business of the non-
surviving corporation as shall be attributable to such Common
Stock, Convertible Securities or Stock Purchase Rights, as the
case may be. In the event of any merger or consolidation of the
Company in which the Company is not the surviving corporation or
in the event of any sale of all or substantially all of the
assets of the Company for stock or other securities of any
corporation, the Company shall be deemed to have issued a number
of shares of its Common Stock for stock or securities of the
other corporation computed on the basis of the actual exchange
ratio on which the transaction was predicated and for a
consideration equal to the Fair Value on the date of such
transaction of such stock or securities of the other corporation,
and if any such calculation results in adjustment of the Exercise
Price, the determination of the number of shares of Convertible
Common Stock issuable upon exercise of this Warrant immediately
prior to such merger, consolidation or sale, for the purposes of
Subsection (g) above, shall be made after giving effect to such
adjustment of the Exercise Price.
(k) Record Date. In case the Company shall take a
record of the holders of the Common Stock or Convertible Common
Stock for the purpose of entitling them (i) to receive a dividend
or other distribution payable in Common Stock, Convertible
Securities or Stock Purchase Rights (other than the regular 8%
dividend payable on the Convertible Common Stock) or (ii) to
subscribe for or purchase Common Stock, Convertible Securities or
Stock Purchase Rights, then all references in this ARTICLE IV to
the date of the issue or sale of the shares of Common Stock,
Convertible Securities or Stock Purchase Rights deemed to have
been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be, shall
be deemed to be references to such record date.
(l) Shares Outstanding. The number of shares of capital
stock deemed to be outstanding at any given time shall not
include (i) shares of capital stock in the treasury of the
Company or any wholly-owned subsidiary and (ii) except where
shares are described on a "fully diluted basis," any of the
Convertible Common Stock for which this Warrant is exercisable.
(m) Maximum Exercise Price. At no time shall the
Exercise Price per share of Convertible Common Stock exceed the
amount set forth in the first paragraph of the Preamble of this
Warrant except as provided in Subsection (a) or (g) of this
Section 4.1.
(n) Application. Except as otherwise provided herein,
all Subsections of this Section 4.1 are intended to operate
independently of one another, but without duplication. If an
event occurs that requires the application of more than one
Subsection, all applicable Subsections shall be given independent
effect; provided, however, that no adjustment shall be made which
duplicates an adjustment already made pursuant to some other
section of this Article IV.
(o) No Adjustments under Certain Circumstances.
Anything herein to the contrary notwithstanding, the Company
shall not be required to make any adjustment of the Exercise
Price in the case of:
(i) the issuance of shares of Convertible Common
Stock upon the exercise in whole or in part of this Warrant;
(ii) the issuance of shares of Convertible Common
Stock pursuant to the Stock Purchase Agreement; or
(iii) the issuance of options or shares of Common
Stock to employees or directors pursuant to an employment
agreement, a stock option agreement or a plan approved by the
Board of Directors of the Company.
4.2 Rights Offering. In the event the Company shall
effect an offering of securities pro rata among its stockholders
("Rights Offering"), the holder hereof shall be entitled, at its
option, to elect to participate in each and every such offering
as if this Warrant had been exercised and the holder were, at the
time of any such rights offering, then a holder of that number of
shares of Convertible Common Stock to which such holder is then
entitled on the exercise hereof.
4.3 Certificates and Notices.
(a) Adjustments to Exercise Price. Upon any
adjustment under this ARTICLE IV of the Exercise Price, a
certificate, signed (i) by the President or a Vice President and
by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company, or (ii) by any independent
firm of certified public accountants of recognized national
standing selected by, and at the expense of, the Company and
which can be the Company's outside auditing firm, setting forth
in reasonable detail the events requiring the adjustment and the
method by which such adjustment was calculated, shall be mailed
to the holder of this Warrant specifying the adjusted Exercise
Price.
(b) Extraordinary Corporate Events. In case the
Company after the date hereof shall propose to (i) pay any divi
dend payable in stock to the holders of shares of Common Stock or
Convertible Common Stock or to make any other distribution to the
holders of shares of Common Stock or Convertible Common Stock,
other than the 8% stock dividend required under the Articles of
Incorporation, (ii) make a Rights Offering, or (iii) effect any
reclassification of the Common Stock or Convertible Common Stock
(other than a reclassification involving merely the subdivision
or combination of outstanding shares of Common Stock or
Convertible Common Stock), or any capital reorganization or any
consolidation or merger (other than a merger in which no distribu
tion of securities or other property is to be made to holders of
shares of Common Stock or Convertible Common Stock)
("Reorganization") or any sale, transfer or other disposition of
its property, assets and business as an entirety or substantially
as an entirety ("Sale"), or the liquidation, dissolution or
winding up ("Liquidation") of the Company, then, in each such
case, the Company shall mail to the holder of this Warrant notice
of such proposed action, which shall specify (x) the date on
which the stock transfer books of the Company shall close, or a
record shall be taken, for determining the holders of Common
Stock or Convertible Common Stock entitled to receive such stock
dividends or other distribution or such rights or options, or (y)
the date on which such reclassification, Reorganization, Sale, or
Liquidation shall take place or commence, as the case may be, and
(z) the date as of which it is expected that holders of Common
Stock or Convertible Common Stock of record shall be entitled to
receive securities or other property deliverable upon such
action, if any such date is to be fixed. Such notice shall be
mailed, in the case of any action covered by clause (i) or (ii)
above, at least 10 days prior to the record date for determining
holders of Common Stock or Convertible Common Stock for purposes
of receiving such payment or offer, or in the case of any action
covered by clause (iii) above, at least 30 days prior to the date
upon which such action takes place and 20 days prior to any
record date to determine holders of Common Stock or Convertible
Common Stock entitled to receive such securities or other
property.
(c) Effect of Failure. Failure to file any certificate
or notice or to mail any notice, or any defect in any certificate
or notice pursuant to this Section 4.3 shall not affect the
legality or validity of the adjustment of the Exercise Price or
the number of shares purchasable upon exercise of this Warrant,
or any transaction giving rise thereto.
ARTICLE V
RESTRICTIONS ON TRANSFER
5.1 Permitted Transfers. This Warrant shall be
transferable (a) to an Affiliate of the holder hereof, (b) to a
successor to the holder hereof as a result of a business
combination or sale of all or substantially all of the assets of,
the holder hereof, (c) to any other person on 15 days prior
written notice to the Company, unless the Company during the 15
day notice period withholds in writing its consent to such
transfer, such consent shall not be unreasonably withheld; and
provided, further, that any transfer must comply with applicable
Federal and state blue sky laws, in the reasonable opinion of
counsel to the holder. For purposes of this warrant, "Permitted
Transfers" shall be transfers allowable under (a), (b) and (c)
above. The transferee of a Permitted Transfer shall be herein
referred to as a "Permitted Transferee".
5.2 Securities Act Compliance; Legend. The condition
contained in the following section of this ARTICLE V is intended
to ensure compliance with the Securities Act in respect of the
transfer of this Warrant.
Each Warrant shall bear a legend in substantially the
following form:
"This Warrant and any shares of Convertible Common
Stock issuable upon the exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended, and
neither this Warrant nor any such shares may be transferred in
the absence of such registration or the opinion of counsel that
an exemption therefrom is available under such Act."
5.3 Termination of Legend. The legend referred to in
Section 5.2 above shall no longer be required when the Company
receives an opinion of counsel that such legend is no longer
required in order to ensure compliance with the Securities Act.
In which event, the Company shall, or shall instruct its transfer
agent and registrar to, issue new certificates in the name of the
holder, removing the legend which is no longer required.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the
Initial Holder and each subsequent holder of this Warrant that as
of the date hereof:
6.1 Organization and Capitalization of the Company.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Arizona. The
authorized capital of the Company consists of 1,500,000
authorized shares of Preferred Stock, 20,000,00 shares of Common
Stock and, upon the filing of the Company's Restated Articles of
Incorporation, 30,000,000 authorized shares of Convertible Common
Stock, each class having a par value of $.50 per share. As of
the date hereof, there are 11,168 shares of Preferred Stock and
7,954,601 shares of Common Stock outstanding and as of the
Effective Date hereof, 3,500,000 shares of Convertible Common
Stock will be outstanding. No unissued shares of Common Stock or
Convertible Common Stock are reserved for any purpose other than
for issuance upon the exercise of this Warrant, issuance pursuant
to the terms of the Stock Purchase Agreement, issuance of the
Common Stock upon conversion of the Convertible Common Stock to
be issued under the Stock Purchase Agreement and this Warrant and
on dividends to be issued on the Convertible Common Stock.
Except for previously approved non-qualified stock options
described in the Stock Purchase Agreement, the Company has not
issued or agreed to issue any stock purchase rights, other than
pursuant to this Warrant, or Convertible Securities, and there
are no preemptive rights in effect with respect to the issuance
of any shares of Convertible Common Stock. All the outstanding
shares of the Company's capital stock have been validly issued
without violation of any preemptive or similar rights and are
fully paid and nonassessable.
6.2 Authority. The Company has full corporate power
and authority to execute and deliver this Warrant and to perform
all of its obligations hereunder, and the execution, delivery and
performance hereof have been duly authorized by all necessary
corporate action on its part. This Warrant has been duly
executed on behalf of the Company and constitutes the legal,
valid and binding obligation of the Company enforceable in
accordance with its terms.
6.3 No Legal Bar. Neither the execution, delivery or
performance of this Warrant will (a) conflict with or result in a
violation of the articles of incorporation or Bylaws of the
Company, (b) conflict with or result in a violation of any law,
statute, regulation, order or decree applicable to the Company or
any Affiliate, (c) require any consent or authorization or filing
with, or other act by or in respect of, any governmental
authority, or (d) result in a breach of, constitute a default
under or constitute an event creating rights of acceleration,
termination or cancellation under any mortgage, lease, contract,
franchise, instrument or other agreement to which the Company is
a party or by which it is bound, other than applicable
restrictions contained in any of such documents relating to
indebtedness of the Company.
ARTICLE VII
FINANCIAL AND BUSINESS INFORMATION
7.1 Information. The Company shall deliver to the
holder hereof copies of all documents filed by it with the
Commission concurrently with delivery of such documents to the
holders of its publicly traded securities.
ARTICLE VIII
VARIOUS COVENANTS OF THE COMPANY
8.1 No Impairment or Amendment. The Company shall not
by any action including, without limitation, amending its
Articles of Incorporation, any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate to protect the rights
of the holder hereof against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase
the par value of any shares of Convertible Common Stock issuable
upon the exercise of this Warrant above the amount payable
therefor upon such exercise, (b) take all such action as may be
necessary or appropriate in order that the Company may validly
issue fully paid and nonassessable shares of Convertible Common
Stock upon the exercise of this Warrant, (c) obtain all such
authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant, and
(d) not undertake any reverse stock split, combination,
reorganization or other reclassification of the capital stock
which would have the effect of reducing the Exercise Price below
the par value of the Convertible Common Stock.
Upon the request of the holder hereof the Company will
at any time during the period this Warrant is outstanding
acknowledge in writing, in form satisfactory to such holder, the
continued validity of this Warrant and the Company's obligations
hereunder.
8.2 Reservation of Common Stock. The Company will at
all times reserve and keep available, solely for issuance, sale
and delivery upon the exercise of this Warrant a number of shares
of Convertible Common Stock equal to the number of shares of
Convertible Common Stock issuable upon the exercise of this
Warrant. All such shares of Convertible Common Stock shall be
duly authorized and, when issued upon exercise of this Warrant,
shall be validly issued and fully paid and non-assessable with no
liability on the part of the holders thereof.
8.3 Availability of Information. The Company will
cooperate with the holder hereof in supplying such information as
may be reasonably necessary for such holder to complete and file
any information reporting forms presently or hereafter required
by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of this Warrant.
8.4 Indemnification. If the Company fails to make when
due any payments provided for in this Warrant, the Company shall
pay to the holder hereof (a) interest at the rate of [10-12%] per
annum on any amounts due and owing to such holder and (b) such
further amounts as shall be sufficient to cover any reasonable
costs and expenses including, but not limited to, reasonable
attorneys' fees and expenses incurred by such holder in
collecting any amounts due hereunder.
The Company shall indemnify, save and hold harmless the
holder hereof from and against any and all liability, loss, cost,
damage, reasonable attorneys' and accountants' fees and expenses,
court costs and all other out-of-pocket expenses (excluding
consequential damages) incurred in connection with or arising
from an Event of Default.
8.5 Certain Expenses. The Company shall pay all
expenses in connection with, and all taxes and other governmental
charges that may be imposed in respect of, the issue, sale and
delivery of the Warrant, provided however that the Company shall
not be required to pay any income or similar taxes assessed on
the holder hereof or a Permitted Transferee by virtue of this
Section 8.5.
ARTICLE IX
MISCELLANEOUS
9.1 Nonwaiver. No course of dealing or any delay or
failure to exercise any right, power or remedy hereunder on the
part of the holder hereof shall operate as a waiver of or
otherwise prejudice such holder's rights, powers or remedies.
9.2 Holder Not a Stockholder. Prior to the exercise of
this Warrant as hereinbefore provided, the holder hereof shall
not be entitled to any of the rights of a stockholder of the
Company, unless the holder is already a stockholder of the
Company.
9.3 Notices. Any notice, demand or delivery to be made
pursuant to the provisions of this Warrant shall be sufficiently
given or made if sent by first class mail, postage prepaid,
addressed to (a) the holder of this Warrant at its last known
address appearing on the books of the Company maintained for such
purpose or (b) the Company at its principal office at 500 Fifth
Ave., Suite 1021, New York, NY 10110, Attention: President. The
holder of this Warrant and the Company may each designate a
different address by notice to the other pursuant to this Section
9.3.
9.4 Remedies. The Company stipulates that the remedies
at law of the holder of this Warrant in the event of any default
or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant are not and will
not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or
otherwise.
9.5 Successors and Assigns. This Warrant and the
rights evidenced hereby shall inure to the benefit of and be
binding upon the successors and assigns of the Company, and the
holder hereof to the extent provided herein for a Permitted
Transfer, and shall be enforceable by any such holder.
9.6 Modification and Severability. If, in any action
before any court or agency legally empowered to enforce any
provision contained herein, any provision hereof is found to be
unenforceable, then such provision shall be deemed modified to
the extent necessary to make it enforceable by such court or
agency. If any such provision is not durable as set forth in the
preceding sentence, the unenforceability of such provision shall
not affect the other provisions of this Agreement, but this
Agreement shall be construed as if such unenforceable provision
had never been contained herein.
9.7 Integration. This Warrant replaces all prior
agreements, supersedes all prior negotiations and constitutes the
entire agreement of the parties with respect to the transactions
contemplated herein.
9.8 Amendment. This Warrant may not be modified or
amended except by written agreement of the Company and the holder
hereof.
9.9 Headings. The headings of the Articles and
Sections of this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this
Warrant.
9.10 Governing Law. This Warrant shall be governed by
the laws of the Commonwealth of Pennsylvania without regard for
principles of conflicts of laws. The Company hereby irrevocably
submits to the exclusive jurisdiction and venue of the Courts of
the Commonwealth of Pennsylvania and the County of Philadelphia
and/or the United States District Court for the Eastern District
of Pennsylvania, and appellate courts from any thereof, in
connection with any action, suit or other proceeding arising out
of or relating to this Warrant and, with respect to any such
action, suit or other proceeding, waives any objection which the
Company may have at any time to the laying of venue of any such
action, suit or proceeding and any objection which the Company
may have that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum, and the
Company further waives personal service of any summons, complaint
or other process and agrees that service thereof may be made by
certified or registered mail directed to the Company at its
address set forth herein, or by such other means as may be
appropriate pursuant to applicable law.
9.11 Effective Date. This Warrant shall become
effective upon the date of the Tranche A Closing, as defined in
the Stock Purchase Agreement. In the event that the Stock
Purchase Agreement is terminated prior to the Tranche A Closing,
this Warrant shall become null and void.
Dated as of November 19, 1999
CHIEF CONSOLIDATED MINING COMPANY
By:
Name: Leonard Weitz
Title: President
NOTICE OF EXERCISE FORM
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered holder of the within Warrant
irrevocably exercises the within Warrant for and purchases ____
shares of Convertible Common Stock of CHIEF CONSOLIDATED MINING
COMPANY and herewith makes payment therefor in the amount of $
, all at the price and on the terms and conditions specified in
the within Warrant, and requests that a certificate (or _____
certificates in denominations of shares) for the shares
of Convertible Common Stock of CHIEF CONSOLIDATED MINING COMPANY
hereby purchased be issued in the name of and delivered to
(choose one) (a) the undersigned or (b) , whose
address is .
Dated: _______________, ____ __________________________________
Name of Registered Holder
By:_______________________________
Title if applicable:___________________
NOTICE: The signature to this Notice of Exercise must
correspond with the name as written upon the face of the within
Warrant in every particular, without alteration or enlargement or
any change whatever.
ASSIGNMENT FORM
(To be executed only upon the assignment
of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the
within Warrant hereby sells, assigns and transfers unto
, whose address is
________________________________ all of the rights of the
undersigned under the within Warrant, with respect to [
shares or ___%] of Convertible Common Stock of CHIEF CONSOLIDATED
MINING COMPANY (the "Company") and, if such shares of Convertible
Common Stock shall not include all the shares of Convertible
Common Stock issuable as provided in the within Warrant, that a
new Warrant of like tenor for the number of shares of Convertible
Common Stock of the Company not being transferred hereunder be
issued in the name of and delivered to the undersigned, and does
hereby irrevocably constitute and appoint
Attorney to register such transfer on the books of the Company
maintained for the purpose, with full power of substitution in
the premises.
Dated: _______________, ____ __________________________________
Name of Registered Holder
By:_______________________________
Title if applicable:___________________
NOTICE: The signature to this Assignment must correspond with
the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatever.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of November 19, 1999
by and between Chief Consolidated Mining Company, an Arizona
corporation (the "Company"), and Dimeling Schreiber & Park, a
Pennsylvania general partnership ("Investor").
R E C I T A L S:
WHEREAS, the Company and Investor are parties to that
certain Stock Purchase Agreement, dated as of November 19, 1999
(the "Stock Purchase Agreement"), pursuant to which the Company
has agreed to sell to Investor, and Investor has agreed to
purchase, certain amounts of Convertible Common Stock par value
$.50 per share ("Convertible Common Stock") of the Company;
WHEREAS, the Company has issued a warrant to the Investor,
dated as of November 19, 1999, which warrant is exercisable for
the shares of Convertible Common Stock specified therein
("Warrant");
WHEREAS, the Company's Convertible Common Stock is
convertible into the Company's Common Stock par value $.50 per
share ("Common Stock") on a share for share basis; and
WHEREAS, the Company wishes to grant to Investor
registration rights in its Common Stock, exercisable upon
Investor's conversion of its Convertible Common Stock.
NOW, THEREFORE, for and in consideration of the foregoing,
the mutual covenants and agreements contained herein and for
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Definitions and Usage.
A. Definitions. The terms defined in this Section,
wherever used in this Agreement, shall, unless the context
otherwise requires, have the respective meanings hereinafter
specified.
"Affiliate" shall be defined by reference to the Stock
Purchase Agreement definition of "Affiliate".
"Agreement" shall mean this Registration Rights Agreement.
"Commission" shall mean the United States Securities and
Exchange Commission.
"Company" shall mean Chief Consolidated Mining Company, an
Arizona corporation, and any successor corporation by merger,
consolidation or otherwise and any parent corporation resulting
from the merger or consolidation of the Company with or into a
subsidiary of another corporation.
"Demand Registration Request" shall mean a written notice
from Investor requesting that the Company file a Registration
Statement with respect to a Public Offering pursuant to Section
2.A in which Investor advises the Company as to the number of
shares of Common Stock that Investor wishes to include in the
applicable Registration and in which Investor agrees to (i) the
specified method of distribution, (ii), in the case of an
underwritten Public Offering, the designated managing
underwriter, and (iii) agrees to provide to the Company all such
information as may be required by the Company pursuant to Section
6 herein.
"Effective Period" shall mean such period as shall be
required under the provisions of the Securities Act and the
Securities Act Rules for delivery of a prospectus meeting the
requirements of Section 10(a) of the Securities Act to any Person
purchasing Common Stock in connection with a Public Offering;
provided, however, that such period shall not include any
delivery requirement with respect to the distribution by an
underwriter of its unsold allotment relating to an underwritten
Public Offering.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, as the same shall be in effect at the date of
any determination to be made hereunder.
"Exchange Act Rules" shall mean the rules and regulations
promulgated by the Commission under the Exchange Act, as the same
shall be in effect at the date of any determination to be made
hereunder.
"Investor" shall include Dimeling, Schreiber & Park, a
Pennsylvania general partnership ("DSP") or any assignee of
shares of Convertible Common Stock or Common Stock theretofore
held by DSP and permitted under Section 16(a) hereof (other than
any assignee who acquires such shares of Common Stock pursuant to
a Public Offering); provided, however, that any such assignee has
agreed to be bound by the provisions of this Agreement in
accordance with Section 16 herein.
"Notice of Intent to File" shall mean written notice from
the Company to the Investor of the Company's intent to file a
Registration Statement in accordance with Section 2 or 3 herein.
"Person" shall mean an individual, a corporation, a
partnership, a trust, an unincorporated organization or a
government or any agency or political subdivision thereof.
"Piggy Back Registration Request" shall mean a written
notice given by Investor pursuant to the provisions of Section
3.B herein, in which Investor advises the Company as to the
number of shares of Common Stock that Investor wishes to include
in the applicable Registration and in which Investor agrees to
(i) the specified method of distribution, (ii) in the case of an
underwritten Public Offering, the designated managing
underwriter, and (iii) provides to the Company all such
information as may be required by the Company pursuant to Section
6 herein.
"Registrable Shares" shall mean shares of Common Stock
owned of record by the Investor, into which (i) shares of
Convertible Common Stock owned of record by the Investor or (ii)
shares of Convertible Common Stock underlying the Warrant owned
by the Investor are convertible, and as to which such Investor
has the right to request Registration pursuant to the provisions
of Sections 2 or 3.
"Registration" shall mean the registration under the
registration provisions of the Securities Act of the offering,
sale and delivery of shares of Common Stock.
"Registration Expenses" shall mean the expenses associated
with the preparation and filing of any registration statement
pursuant to Section 2 or 3 herein and any sale covered thereby
(including the reasonable fees and expenses of legal counsel to
Investor, fees related to blue sky qualifications and filing fees
in respect of the National Association of Securities Dealers,
Inc.), but excluding underwriting discounts or commissions in
respect of shares of Common Stock to be sold by Investor.
"Registration Period" shall mean the period of time from the
decision of the Company to prepare and file a Registration
Statement to and including the effective date of such
Registration Statement.
"Registration Statement" shall mean a registration statement
filed on Form S-1, S-2, S-3, SB-1, SB-2, or 10-SB (or any
successor form) under the registration provisions of the
Securities Act and the Securities Act Rules.
"Securities Act" shall mean the Securities Act of 1933, as
amended, as the same shall be in effect at the date of any
determination to be made hereunder.
"Securities Act Rules" shall mean the rules and regulations
promulgated by the Commission pursuant to the Securities Act, as
the same shall be in effect at the date of any determination to
be made hereunder.
B. Rules of Construction. Unless the context
otherwise requires, as used in this Agreement: (a) a term has
the meaning ascribed to it; (b) "or" is not exclusive; (c)
"including" means "including without limitation;" (d) words in
the singular include the plural; (e) words in the plural include
the singular; (f) words applicable to one gender shall be
construed to apply to each gender; (g) the terms "hereof,"
"herein," "hereby," "hereto" and derivative or similar words
refer to this entire Agreement; and (h) the term "Section" shall
refer to the specified Section of this Agreement.
Section 2. Demand Registration Rights.
A. Demand Registration Request. At any time, but not more
than a total of three times during the period the Investor holds
Registrable Shares or Convertible Common Stock or the Warrant,
the Investor has the right, to deliver a Demand Registration
Request to the Company.
.
B. Required Registration Obligation. Upon receipt of a
Demand Registration Request made pursuant to Section 2.A, the
Company shall, subject to the provisions of Section 4, deliver to
Investor a Notice of Intent to File and prepare as promptly as
practicable and file a Registration Statement with respect to the
distribution in accordance with the applicable method of
distribution of the Registrable Shares to be included therein,
and the Company shall use its best efforts to cause the
Registration Statement to become effective under the Securities
Act in accordance with the Securities Act Rules.
Section 3. "Piggy Back" Registration Rights.
A. Notice of Intent to File. If the Company at any time
proposes to file a Registration Statement (other than for a
distribution for the account of Investor) under the Securities
Act relating to an underwritten Public Offering of Common Stock
that would permit the inclusion therein of shares of Common Stock
to be distributed in accordance with the method of distribution
contemplated by such Registration Statement, the Company shall
give to the Investor a Notice of Intent to File promptly after a
determination has been made by the Company to prepare and file
such Registration Statement, but in any event not less than 90
days before the filing with the Commission of such Registration
Statement, which notice shall set forth the intended method of
distribution (including the name of the managing underwriter) of
and the amount and class of the securities proposed to be
registered. The Notice of Intent to File shall include an offer
to include in such filing, subject to the other provisions of
this Agreement, such amount of Registrable Shares as an Investor
may request.
B. Piggy Back Registration Request. If an Investor
wishes to have Registrable Shares registered pursuant to this
Section, it shall advise the Company by giving a Piggy Back
Registration Request within 60 days after the date of receipt of
the Notice of Intent to File setting forth the amount of
Registrable Shares for which Registration is requested.
C. Registration Obligation. Subject to the provisions of
Section 4, the Company shall include all Registrable Shares
specified in the Piggy Back Registration Request.
D. Underwriting Agreement. Any obligation of the Company
to include Registrable Shares of Investor in a Registration
Statement prepared and filed pursuant to this Section shall be
conditioned upon the agreement of an Investor to enter into an
underwriting agreement with the Company, other security holders,
if any, and the managing underwriter of the distribution, if
applicable.
Section 4. Conditions to Registration Obligations.
A. Suspension or Termination of Obligations. The
Company's obligations herein to prepare and file a Registration
Statement and to seek its effectiveness shall be subject to the
following provisions:
i. The Company shall be required to file no more than
an aggregate of three (3) Registration Statements pursuant
to Demand Registration Requests granted in Section 2 hereof.
ii. The Company's obligations to prepare, file and
seek effectiveness of a Registration Statement in response
to a Demand Registration Request under Section 2 or Piggy
Back Registration Request under Section 3 shall be
suspended:
(a) in any case, during the period from the time
that it receives a Demand Registration Request from
Investor under Section 2 or it gives a Notice of Intent
to File under Section 3, until 90 days (or such shorter
period as to which the managing underwriter, if any, of
the distribution to which the such Registration
Statement relates shall consent in writing) have lapsed
following the effective date of such Registration
Statement under the Securities Act; provided, however,
that (x) such Notice of Intent to File is given prior
to the time of receipt by the Company of a Demand
Registration Request by the Investor and (y) that the
Company shall use its best efforts to cause such
Registration Statement to be declared effective as
promptly as practicable; and provided further that the
obligation to file a Registration Statement on behalf
of the Investor shall be reinstated if the Company does
not file such Registration Statement within 30 days
after giving the Notice of Intent to File or 60 days
after receipt of a Demand Registration Request;
(b) in any case, if at the time of receipt by
the Company of a Demand Registration Request, the
Company has material inside information as to which it
believes it has a valid business purpose in refraining
from disclosing publicly for the time being and that
current public disclosure of such information would
have a material adverse effect on the Company, for a
period commencing with the date of receipt of the
Demand Registration Request and ending on the earlier
of (x) 60 days after such receipt of the Registration
Request; (y) the public announcement of such material
inside information; or (z) the date on which the
Company gives the Investor who issued the Demand
Registration Request a notice that suspension of its
obligation is no longer required; provided, however,
that the same material inside information shall not
constitute a basis for continuation of this suspension
period.
B. Inclusion of Registerable Shares. A Registration
Statement filed pursuant to a Demand Registration Request herein
shall first include all Registrable Shares requested to be
included by the Investor and, only after such inclusion, may
include Common Stock being sold for the account of the Company or
any other security holders. Any Common Stock to be offered on
behalf of the Company or such other security holders will be
included in such Registration Statement only to the extent that,
in the reasonable opinion of the managing underwriter for an
Underwritten Public Offering of Registrable Shares on behalf of
Investor, such inclusion will not materially adversely affect the
distribution of Registrable Shares on behalf of an Investor.
C. Reduction of Piggy Back Shares. If in the event
of a Piggy Back Registration Request, the managing underwriter of
the proposed distribution shall advise the Company in writing
that, in the reasonable opinion of such managing underwriter, the
inclusion in the Registration Statement of the aggregate number
of shares of Common Stock requested by Investor to be included in
the distribution would materially adversely affect such
distribution, then the Company shall so advise the Investor and
the number of such shares of Common Stock included in the
Registration Statement shall be reduced to the number acceptable
to such managing underwriter.
D. Right to Select Underwriter. The Investor shall
have the right to select an underwriter for an underwritten
public offering of Registrable Shares made in response to a
Demand Registration Request.
E. Right to Withdraw. For purposes of this Section,
if a requested Registration Statement is filed, and the Company
otherwise complies with its obligations hereunder, and
i. the Registration Statement is withdrawn with the
consent of the Investor as a result of a delay in the
offering requested by the Company, then no requested
Registration Statement shall be deemed to have been filed;
or
ii. the Investor ceases to prosecute the Registration
actively and in good faith for a period of sixty days or
more, the Company shall have the right to withdraw the
Registration Statement without the consent of the Investor
and the requested Registration Statement shall be deemed to
have been filed.
Section 5. Registration Procedures. If the Company is
required by the provisions of Section 2 or 3 to effect the
Registration of any of the Registrable Shares, the Company shall,
as expeditiously as possible:
A. Prepare and file with the Commission a Registration
Statement with respect to such shares of Common Stock and use its
best efforts to cause such Registration Statement to become and
remain effective, and to ensure compliance of the prospectus
contained therein with Section 10(a) of the Securities Act for
the Effective Period.
B. Prepare and file with the Commission during the
Registration Period such amendments and supplements to such
Registration Statement and the prospectus used in connection
therewith as may be necessary to permit such Registration
Statement to become effective in accordance with the Securities
Act and the Securities Act Rules and to ensure that such
Registration Statement and the prospectus used in connection
therewith comply with the disclosure standards of Sections 10 and
11 of the Securities Act and comply with the standards of Section
10(b) of the Exchange Act in each case during the Effective
Period.
C. Furnish Investor (i) such number of copies of such
Registration Statement and of each amendment and supplement
thereto (in each case including all exhibits), such number of
copies of the prospectus included in such Registration Statement
(including each preliminary prospectus, summary prospectus and
prospectus supplement), in conformity with the requirements of
the Securities Act, and such other documents, as Investor may
reasonably require in order to facilitate the offering, sale and
delivery or other disposition of the Registrable Shares owned by
Investor and (ii), during the Registration Period and the
Effective Period, copies of any written correspondence or
memoranda relating to oral communications in each case with the
Commission and copies of any request by the Commission for any
amendment of or supplement to the Registration Statement or the
prospectus included therein or for additional information.
D. Use its best efforts to register or qualify the Common
Stock covered by such Registration Statement under the securities
or blue sky laws of such jurisdictions as the managing
underwriter of such distribution may reasonably request
(excluding, however, any jurisdiction in which the filing would
subject the Company to additional tax liability and any
jurisdiction in which the Company would thereby be required to
execute a general consent to service of process) and use all
reasonable efforts to do such other acts and things as may be
required to enable Investor to consummate the public sale or
other disposition in such jurisdictions of the Registrable Shares
owned by Investor.
E. Make available to Investor an earnings statement
covering the period of at least 12 months, but not more than 18
months, beginning with the first month after the effective date
of the Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
F. Notify Investor immediately if the Company shall become
aware at any time during the Effective Period that the prospectus
included in the Registration Statement, as such prospectus may be
amended or supplemented, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances then
existing, and at the request of the Investor to prepare promptly
and to furnish to Investor such number of copies of an amended or
supplemental prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable
Shares, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading in the light of the circumstances then
existing.
G. Enter into such agreements (including an underwriting
agreement) in customary form and containing customary provisions
relating to legal opinions and accountants' letters,
representations and warranties and mutual indemnification and
contribution between the Company and the underwriters for the
Investor and use all reasonable efforts to take such other
actions as Investor may reasonably request in order to expedite
or facilitate the disposition of such Registrable Shares.
H. Make available for inspection by Investor, by any
underwriter participating in any distribution to be effected
pursuant to such Registration Statement and by any attorney,
accountant or other agent retained by the Investor or any such
underwriter all pertinent financial and other records, pertinent
corporate documents and properties of the Company and cause all
of the Company's officers, directors and employees to supply all
such information requested by Investor, such underwriter,
attorney, accountant or agent, as is reasonably needed in
connection with such Registration.
Section 6. Expenses; Limitations on Registration. The
Registration Expenses relating to any Registration effected by
the Company pursuant to this Agreement shall be for the account
of the Company.
For purposes of this Section, the Company shall be obligated
to pay the fees and expenses of only one law firm representing
the Investor.
Section 7. Investor Information. Investor shall
provide all information reasonably requested by the Company for
inclusion in any Registration Statement to be filed hereunder.
The actual provision of such information shall be a condition
precedent to the obligation of the Company to take any action
pursuant to this Agreement in respect of the Registration of
Registrable Shares of an Investor.
Section 8. Indemnification.
A. In connection with the Registration of any Registrable
Shares under the Securities Act pursuant to this Agreement, the
Company agrees to indemnify and hold harmless Investor, its
partners, directors, officers and employees, and each other
Person, if any, who controls Investor within the meaning of
Section 15 of the Securities Act, against any losses, claims,
damages or liabilities, joint or several, to which such Investor
or any such partner, director, officer, employee or controlling
Person may become subject under the Securities Act or any other
statute or at common law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement or any alleged untrue
statement of a material fact contained in the Registration
Statement or the prospectus included therein at the time the
Registration Statement is declared effective or any omission or
alleged omission of a material fact required to be stated therein
or necessary in order to make the statements therein not
misleading or (ii) any untrue statement of a material fact or
alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus, the
prospectus included therein or any amendment or supplement
thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary in order to make the
statements concerning the Company therein, in the light of the
circumstances under which they were made, not misleading and
shall reimburse Investor and each such partner, director,
officer, employee and controlling Person for any legal or other
expenses reasonably incurred by an Investor or such partner,
director, officer employee or controlling Person in connection
with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, preliminary
prospectus, prospectus, or amendment or supplement in reliance
upon and in conformity with written information furnished by or
on behalf of Investor to the Company expressly for use therein;
and provided, further, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission in any preliminary prospectus if such untrue statement
or alleged untrue statement or omission or alleged omission was
corrected in the final prospectus included in the Registration
Statement at the time it became effective and Investor, in the
case of a Distribution Public Offering, or the managing
underwriter, in the case of an Underwritten Public Offering,
failed to provide the final prospectus as required by the
Securities Act and the Securities Act Rules. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of Investor or any such partner, director,
officer, employee or controlling Person, and shall survive the
transfer of such securities by Investor.
B. Investor agrees to indemnify and hold harmless the
Company, its directors, officers and employees, each other
Person, if any, who controls the Company against any losses,
claims, damages or liabilities, joint or several, to which the
Company, any such director, officer or employee, any such
controlling Person may become subject under the Securities Act or
any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or any
alleged untrue statement of a material fact contained in the
Registration Statement or the prospectus included therein at the
time the Registration Statement is declared effective or any
omission or alleged omission of a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading or (ii) any untrue statement of a material
fact or alleged untrue statement of a material fact contained in
the Registration Statement, any preliminary prospectus, the
prospectus included therein or any amendment or supplement
thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary in order to make the
statements concerning the Company therein, in the light of the
circumstances under which they were made, not misleading, in each
case to the extent, but only to the extent, that such alleged
untrue statement or alleged omission was made in such
Registration Statement, preliminary prospectus, prospectus,
amendment or supplement in reliance upon and in conformity with
written information furnished by or on behalf of Investor to the
Company expressly for use therein, and shall reimburse the
Company or such director, officer, employee or other Person for
any legal or any other expenses reasonably incurred in connection
with investigating or defending any such loss, claim, damage,
liability or action.
C. Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or
proceeding involving a claim referred to in Subsections (A) and
(B) of this Section, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action;
provided, that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying
party of its obligation under this Subsection C to the extent the
indemnifying party is not materially prejudiced by such failure.
In case any such action is brought against an indemnified party,
the indemnified party shall permit the indemnifying party to
assume the defense of such action or proceeding, provided that
counsel for the indemnifying party, who shall conduct the defense
of such action or proceeding, shall be approved by the
indemnified party (whose approval shall not be unreasonably
withheld) and the indemnified party may participate in such
defense (in which case, such participation shall be at such
indemnified party's expense, unless in such indemnified party's
reasonable judgment a conflict of interest between such
indemnified party and the indemnifying party shall exist in
respect of such claim, in which event the indemnifying party
shall pay the reasonable fees and expense of separate counsel for
the indemnified party). No indemnifying party shall consent to
entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation. The
indemnifying party shall not, in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for
the fees and expenses of more than one separate firm for all
indemnified parties. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written
consent.
D. Indemnification similar to that specified in the
preceding Subsections of this Section shall be given by the
Company and Investor (with such modifications as shall be
appropriate) with respect to liability related to any required
registration or other qualification of Registrable Shares under
any Federal or state law or regulation of governmental authority
other than the Securities Act.
E. If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party
under Subsection (A) or (B) above, then the indemnifying party
shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or
liabilities referred to in Subsection (A) or (B) above, in such
proportion as is appropriate to reflect the relative fault of the
Company, on the one hand, and an Investor, on the other, in
connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities, as well as any other
relevant equity considerations. The relative fault shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company or Investor and the parties'
relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The
Company and Investor agree that it would not be just and
equitable if contributions pursuant to this Subsection (E) were
to be determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the first sentence of this
Subsection (E). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to
in the first sentence of this Subsection (E) shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending
any action or claim (which shall be limited as provided in
Subsection (C) above if the indemnifying party has assumed the
defense of any such action in accordance with the provisions
thereof) which is the subject of this Subsection (E).
Notwithstanding the provisions of this Subsection (E), in respect
of any loss, claim, damage or liability based upon any untrue or
alleged untrue statement of a material fact or omission or
alleged omission to state a material fact which relates to
information other than information supplied by Investor, Investor
shall not be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Shares
offered by it and distributed to the public exceeds the amount of
any damages which an Investor has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
Promptly after receipt by an indemnified party under this
Subsection (E) of notice of the commencement of any action
against such party in respect of which a claim for contribution
may be made against an indemnifying party under this Subsection
(E), such indemnified party shall notify the indemnifying party
in writing of the commencement thereof if the notice specified in
Subsection (C) above has not been given with respect to such
action; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any
indemnified party under this Subsection (E) to the extent such
omission is not prejudicial.
Section 9. Public Availability of Information. The
Company shall comply with all public information reporting
requirements of the Commission, to the extent required from time
to time to enable Investor to sell Registrable Shares without
Registration under the Securities Act within the limitation of
the exemptions provided by (i) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission.
Upon the request of Investor, the Company will deliver to
Investor a written statement as to whether it has complied with
such requirements.
Section 10. Supplying Information. The Company shall
cooperate with Investor in supplying such information as may be
necessary for Investor to complete and file any information
reporting forms presently or hereafter required by the Commission
as a condition to the availability of an exemption from the
Securities Act for the sale of any Registrable Shares.
Section 11. Specific Performance. Each party hereto
acknowledges and agrees that each other party hereto would be
irreparably harmed and would have no adequate remedy of law if
any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
Accordingly, it is agreed that, in addition to any other remedies
by law or in equity which may be available, the parties hereto
shall be entitled to obtain preliminary and permanent injunctive
relief with respect to any breach or threatened breach of, or
otherwise obtain specific performance of the covenants and other
agreements contained in this Agreement.
Section 12. Representations and Warranties of the
Company. The Company represents and warrants to Investor that,
as of the date of this Agreement, (a) the Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Arizona and has the corporate
power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this
Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company and no
other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or any of the transactions
contemplated hereby, and (c) this Agreement has been duly
executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, is enforceable against the
Company in accordance with its terms, subject to applicable
bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance and similar laws affecting creditors' rights generally
from time to time and to general principles of equity, and except
as the enforceability thereof may be limited by considerations of
public policy.
Section 13. Representations and Warranties of Investor.
Investor represents and warrants to the Company that, as of the
date of this Agreement, (a) it is a general partnership duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and has the organizational
power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this
Agreement by Investor and the consummation by Investor of the
transactions contemplated hereby have been duly authorized by all
necessary organizational action on the part of Investor and no
other organizational proceedings on the part of Investor are
necessary to authorize this Agreement or any of the transactions
contemplated hereby, and (c) this Agreement has been duly
executed and delivered by Investor and constitutes a valid and
binding obligation of Investor and, assuming that this Agreement
constitutes a valid and binding obligation of the Company, is
enforceable against Investor in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance and similar laws affecting
creditors' rights generally from time to time and to general
principles of equity, and except as the enforceability thereof
may be limited by considerations of public policy.
Section 14. Expiration. This Agreement and the rights,
benefits, duties and obligations hereunder of the parties hereto
and their successors and permitted assigns shall expire and be of
no further force or effect on the date Investor no longer holds
any Registrable Shares.
Section 15. Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally or transmitted by telex, telegram
or facsimile transmission or mailed by registered or certified
mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to the Company, to:
Chief Consolidated Mining Company
Executive Offices
500 Fifth Avenue, Suite 1021
New York, New York 10010-1099
Attention: Leonard Weitz
Facsimile: (212) 354-4044
with a copy to:
Howard F. Weitz, P.C.
51 East 42nd Street
New York, NY 10017
Attention: Howard F. Weitz, Esq.
Facsimile No.: (212) 661-4314
(b) if to Investor, to:
Dimeling, Schreiber & Park
1629 Locust Street
Philadelphia, PA 19103
Attention: Richard R. Schreiber
Facsimile No.: (215) 546-9160
with a copy to:
Reed Smith Shaw & McClay LLP
2500 One Liberty Place
Philadelphia, PA 19103
Attention: Lori L. Lasher, Esq.
Facsimile No.: (215) 851-1420
Section 16. Benefit and Assignment.
(a) The terms and conditions of this Agreement shall
inure to the benefit of and be binding on the parties hereto
and their respective successors and permitted assigns;
provided, however, that, except as otherwise provided in
this Section 16, this Agreement shall not be assignable by
any party hereto except by operation of law or with the
prior express written consent of the other parties hereto.
Nothing in this Agreement, express or implied, is intended
to confer upon any party, other than the parties hereto,
their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by
reason of this Agreement. A permitted assignee of Investor
is an Affiliate of Investor or any partner of Investor or
its Affiliates; or an assignee to which the Company has
consented, which consent shall not be unreasonably withheld
and which shall be deemed granted if the Company has not
refused in writing to consent within fifteen (15) days of
receipt of Investor's notice to the Company of a proposed
assignment.
(b) If Investor shall transfer and assign shares of
Common Stock to any Person in accordance with Section 16(a)
otherwise than in Public Offering, Investor (or any Person
who shall be a transferee or assignee pursuant to subsection
(a)), as the case may be, may assign such portion of its
rights and benefits under this Agreement as is necessary to
permit such transferee to act in the stead of Investor
hereunder; provided, however, that such Person shall agree
in writing to be bound by the duties and obligations of
Investor hereunder.
Section 17. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania without regard for principles of
conflicts of laws. Each party hereby irrevocably submits to the
exclusive jurisdiction and venue of the Courts of the
Commonwealth of Pennsylvania and the County of Philadelphia
and/or the United States District Court for the Eastern District
of Pennsylvania, and appellate courts from any thereof, in
connection with any action, suit or other proceeding arising out
of or relating to this Agreement and, with respect to any such
action, suit or other proceeding, waives any objection which such
party may have at any time to the laying of venue of any such
action, suit or proceeding and any objection which such party may
have that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum, and each such
party further waives personal service of any summons, complaint
or other process and agrees that service thereof may be made by
certified or registered mail directed to such party at its
respective address set forth herein, or by such other means as
may be appropriate pursuant to applicable law.
Section 18. Counterparts. This Agreement may be executed
in any number of counterparts, which together shall constitute a
single agreement.
Section 19. Effective Date. This Agreement shall become
effective upon the date of the Tranche A Closing, as defined in
the Stock Purchase Agreement. In the event that the Stock
Purchase Agreement is terminated prior to the Tranche A Closing,
this Agreement shall become null and void.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their officers thereunto duly
authorized on the date first above written.
CHIEF CONSOLIDATED MINING DIMELING, SCHREIBER & PARK
COMPANY
By: By:
Name: Name:
Title: Title:
SCHEDULE 3.1
Capitalization.
Outstanding options to purchase Chief Consolidated Mining
Company common stock:
*Director's options (3) @ $7 per share, expiring 08\08\06
180,000 shares
*Director's options (3) @ $3.50 per share, expiring 09\9\04
180,000 shares
Executive Director, Tintic Metals LLC-option @$4.88 per
share,
Expiring 03\02\06 20,000
shares
Mining Manager, Chief's properties-option @$3.50 per share,
Expiring 08\08\06 20,000
shares
Consultant's option (arising from services at $7 per share,
expiring 12\31\99) 10,000
shares
410,000 shares
*Non-qualified stock options previously approved by shareholders
of the Company
SCHEDULE 3.4
Equity Investments; Subsidiaries.
Name of Company Percentage of Ownership
Tintic Utah Metals LLC 75.0%
Chief Gold Mines, Inc. 100%
Eagle & Bluebell Mining Company 99.0%
American Star Mining Company 87.6%
Eureka Mines 63.8%
East Crown Point Mining Company 61.5%
Central Standard Consolidated Mines 22.7%
SCHEDULE 3.5
Financial Statements
None
SCHEDULE 3.7
Assets
None
SCHEDULE 3.8
Patents, Trademarks and Copyrights, etc.
None
SCHEDULE 3.9
Litigation
None
SCHEDULE 3.10
Taxes
None
SCHEDULE 3.11
Contracts and Commitments.
(i) Leonard Weitz, President & Chairman, - written
employment agreement, as described in current Securities and
Exchange Filings, expiring August 31, 2001 - Salary $175,000
per year.
Leonard Weitz, also owes a remaining balance of $45,000
principal on November 7, 1995 on a loan of $50,000 made to
him. Proceeds of that loan were applied to Leonard Weitz's
exercise of qualified stock option plan. The total amount
of the purchase was $100,000. Interest has been currently
paid at the prime interest rate. Due date of the loan as
extended is December 31, 2000.
Paul Spor, Executive Director - Tintic Utah Metals LLC -
oral agreement for salary of $110,000 per year.
Adren Underwood, employed by Company as Manager-Utah
Properties - oral agreement for salary of $50,000 per year.
Adren Underwood, also owes a remaining balance of $35,420 on
a $37,500 no interest loan arising from his exercise of
qualified stock options in November, 1995. Due date of the
loan as extended is December 31, 2000.
(iii) See schedule under 3.1 relating to stock options.
SCHEDULE 3.12
Compliance with Law; Permits and Authorizations; Environmental
and Safety Matters.
None
SCHEDULE 3.16
Employee Benefit Plans
None
SCHEDULE 3.21
Insurance
(coverage includes Chief Consolidated Mining Company, Chief Gold
Mines, Inc. and Tintic Utah Metals LLC)
Chubb Commercial Umbrella:
Commercial General Liability: with Chubb Custom Insurance
Company -
$1 million each occurrence
$2 million aggregate
Expires 02\01\00
Automobile Liability: with American States Insurance Company
of Texas -
$1 million liability, $300,000 uninsured motorists, $1
million combined single limit
Expires 02\01\00
Employers Liability: with Utah State Fund
$100,000 each accident, $500,000 each policy, $100,000 each
employee
Expires 02\01\00
Directors, Officers and Corporate Insurance Liability
Policy: (D&O Gold) with National Union Fire Insurance
Company of PA (AIC Company)
Liability limit $1 million
Expires 11\04\00
SCHEDULE 3.23
Real Estate
The Company is the owner of, or has a vested interest in,
approximately 14,500 acres of patented mining ground in the
Tintic Mining District, Juab and Utah Counties and approximately
two hundred acres of unpatented mining claims in the same area.
The Company, through its wholly owned subsidiary, Chief Gold
Mines, Inc. is the owner of an additional 2,554 acres of patented
mining properties, located in the East Tintic Mining District.
Included in the Company's properties is approximately 8,500 acres
of its patented ground and 200 acres of unpatented mining claims
owned by Tintic Utah Metals LLC, a 75% owned subsidiary of the
Company. Not included in Company's patented ground holdings are
320 acres owned by Central Standard Consolidated Mines in which
the Company has a 22.7% ownership interest. Title to patented
mining ground is land owned in fee and vested in the owner
thereof; unpatented mining claims are possessory rights to land
owned by the U.S. Government and are subject to annual rental
payments and other conditions as to validity.
NEWS RELEASE
CHIEF CONSOLIDATED MINING COMPANY (NASDAQ-CFCM)
FOR RELEASE NOVEMBER 23, 1999
NEW YORK, NY
Chief Consolidated Announces Sale of Shares, subject to
Shareholders Approval
Chief Consolidated Mining Company announced today that it has
entered into a Stock Purchase Agreement with Dimeling, Schreiber
& Park (DS&P), a private investment partnership that makes equity
investments in a broad range of middle market companies. Chief's
announcement stated that the stock purchase agreement provides
for the purchase by DS&P of shares of a new issue of Chief
convertible common stock. The transaction is subject to the
approval of Chief's shareholders which will be sought at a
shareholders meeting to be held on December 29, 1999.
If the shareholders approve the transaction, the net proceeds
from the initial investment by DS&P of $7 million will be used
primarily to fund the operations of Chief's Trixie Mine,
including rehabilitation of the concentrating mill, and to fund
the initial development of the Holmansville area.
A spokesperson for Chief stated that details of the various
aspects of the transaction, including DS&P's right to designate
several directors to be elected at the December 29, 1999 meeting
and other important matters will be contained in a proxy
statement to be mailed to Chief shareholders prior to the
meeting.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995:
This News Release contains statements which are not historical
facts, 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 failure of
the shareholders to approve the proposed transaction described
herein, the net proceeds from the sale of stock to be received by
Chief if the transaction is approved by the shareholders 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. Refer to the Company's Form 10-QSB and 10-KSB reports
filed with the Securities and Exchange Commission.
CONTACT:
LEONARD WEITZ
CHIEF CONSOLIDATED MINING COMPANY
212-354-4044
NEWS RELEASE
CHIEF CONSOLIDATED MINING COMPANY (NASDAQ-CFCM)
FOR RELEASE NOVEMBER 23, 1999
Chief Consolidated Announces Further Details Regarding Sale of
Shares
Chief Consolidated Mining announced further details regarding a
Stock Purchase Agreement with Dimeling, Schreiber & Park (DS&P)
that had first been announced earlier today. The agreement calls
for the sale of 3,500,000 shares of a convertible common stock
for $7,000,000 payable at the time of sale. The shares will be
convertible into the Company's existing common stock on a one
share for one share basis. DS&P has the right under the
agreement to purchase an additional 5,000,000 shares of
convertible common stock for $10,000,000 payable at the time of
such sale. DS&P will determine whether or not to exercise this
right based upon the progress of exploration and development of
the Holmansville area located in the Tintic Mining District of
Utah. DS&P's right to purchase the additional 5,000,000 shares
expires December 31, 2002. A spokesperson for Chief stated that
further details of the various aspects of the transaction will be
contained in a proxy statement for the meeting of shareholders to
be held on December 29, 1999, at which time shareholder approval
of the transaction will be sought.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995:
This News Release contains statements which are not historical
facts, 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 failure of
the shareholders to approve the proposed transaction described
herein, the net proceeds from the sale of stock to be received by
Chief if the transaction is approved by the shareholders 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. Refer to the Company's Form 10-QSB and 10-KSB reports
filed with the Securities and Exchange Commission.
CONTACT:
LEONARD WEITZ
CHIEF CONSOLIDATED MINING COMPANY
212-354-4044
