<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.) *
CHIEF CONSOLIDATED MINING COMPANY
(Name of Issuer)
CONVERTIBLE COMMON STOCK, $0.50 par value
(Title of Class of Securities)
168628 10 5
(CUSIP Number)
Lori L. Lasher, Esq.
Reed Smith Shaw & McClay LLP, 2500 One Liberty Place, Philadelphia, PA 19103
(215) 851-8136
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
December 30, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-l(b)(3) or (4), check the following box. | |
Check the following box if a fee is being paid with the statement |X|. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-l(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
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CUSIP NO. 168628 10 5 Page 1 OF 7 Pages
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1 NAME OF REPORTING PERSON DIMELING, SCHREIBER & PARK
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 23-2460636
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(D) OR 2(E) [ ]
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6 CITIZENSHIP OR PLACE OF ORIGINATION
Commonwealth of Pennsylvania
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NUMBER OF 7 SOLE VOTING POWER
SHARES 3,500,000 shares of Convertible Common Stock
BENEFICIALLY OWNED BY ---------------------------------------------------------
EACH 8 SHARED VOTING POWER
REPORTING None.
PERSON ---------------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
3,500,000 shares of Convertible Common Stock
---------------------------------------------------------
10 SHARED DISPOSITIVE POWER
None.
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11 AGGREGATED AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,500,000 shares of Convertible Common Stock
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
100% of Convertible Common Stock
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14 TYPE OF REPORTING PERSON
PN
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<PAGE> 3
SCHEDULE 13D
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CUSIP NO. 168628 10 5 Page 2 OF 7 Pages
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Item 1. Security and Issuer.
This Schedule 13D report relates to the Convertible Common
Stock, par value $0.50 per share of Chief Consolidated Mining
Company (the "Issuer"). The principal executive offices of the
Issuer are located at 500 Fifth Avenue, Suite 1021, New York, New
York 10110-1099.
Item 2. Identity and Background.
(a) This statement is filed by Dimeling, Schreiber & Park, a
Pennsylvania general partnership ("DS&P").
(b) The principal address of DS&P is 1629 Locust Street,
Philadelphia, Pennsylvania, 19103.
(c) DS&P's principal business is the acquisition of, or
investment in, various portfolio companies.
(d) DS&P has not been convicted in a criminal proceeding
during the last five years.
(e) DS&P has not been a party, during the last five years, to
any civil proceeding or a judicial administrative body of
competent jurisdiction which resulted in its being subjected to a
judgment, decree or final order enjoining future violations of,
or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The funds for the acquisition of the Issuer's Convertible
Common Stock by DS&P were provided by Dimeling, Schreiber & Park
Reorganization Fund II., L.P., a Delaware limited partnership of
which DS&P is the general partner. The amount of funds concerned
in the acquisition of such securities as of the date of this
report, totals approximately $7,000,000.00.
<PAGE> 4
SCHEDULE 13D
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CUSIP NO. 168628 10 5 Page 3 OF 7 Pages
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Item 4. Purpose of Transaction.
The shares of Convertible Common Stock of the Issuer were
acquired by DS&P for investment purposes.
a. DS&P has the right to acquire in the future 5,000,000
additional shares of Issuer's Convertible Common Stock for
approximately $10,000,000.00, upon the satisfaction of certain
terms and conditions as outlined in the certain Stock Purchase
Agreement entered into by and between Issuer and DS&P, dated as
of November 19, 1999 (the "Stock Purchase Agreement").
In conjunction with the acquisition of Issuer's
Convertible Common Stock, DS&P was granted a warrant to purchase
additional shares of Issuer's Common Stock, pursuant to that
certain Warrant Agreement entered into by and between Issuer and
DS&P, dated as of November 19, 1999 (the "Warrant"). Upon the
exercise of the Warrant, and assuming the acquisition of the
5,000,000 shares of Convertible Common Stock referenced herein
and the conversion of all Convertible Common Stock held by DS&P
into Common Stock, DS&P would hold 68% of Issuer's outstanding
Common Stock, on a fully diluted basis.
b. DS&P has no plans or proposals which would result in an
extraordinary corporate transaction.
c. DS&P has no plans or proposals which would result in a sale
or transfer of a material amount of Issuer's assets or any of its
subsidiaries.
d. The Issuer's articles of incorporation were amended to
provide for a maximum of seven, and a minimum of three,
directors. Three of DS&P's principals, Christopher A. Arnold,
Richard R. Schreiber and William R. Dimeling, were elected to
Issuer's board of directors on December 30, 1999. DS&P has no
plans to make any additional changes to Issuer's board of
directors.
e. Thirty million (30,000,000) shares of Convertible Common
Stock were authorized by an amendment to the Issuer's articles of
incorporation, each share entitled to one vote per share of
Common Stock into which such Convertible Common Stock can be
converted. Each share of Convertible Common Stock is convertible
into one fully paid and non-assessable share of Common Stock of
Issuer, subject to certain anti-dilution provisions. Issuer's
articles of incorporation were also amended to authorize the
issuance of that number of shares of Common Stock necessary to
accommodate conversion of Issuer's Convertible Common Stock.
<PAGE> 5
SCHEDULE 13D
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CUSIP NO. 168628 10 5 Page 4 OF 7 Pages
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It is possible that the Issuer's articles of incorporation may
have to be amended in the future to increase the Issuer's
authorized Common Stock to meet its dividend and other
obligations under the Stock Purchase Agreement and the Warrant.
In addition, Issuer's articles of incorporation were
amended authorizing:
i. an eight annual percent (8%) dividend on the
Convertible Common Stock, payable annually in
additional shares of Convertible Common Stock;
provided however that at such time as DS&P owns
68% of the Issuer's Common Stock, no further
dividends will be paid on Convertible Common
Stock,
ii. a prohibition on the issuance of any dividends
until the earlier of: (x) a minimum of 8,500,000
shares of Convertible Common Stock is issued and
outstanding; or (y) December 31, 2002,
iii. cumulative dividends on Convertible Common
Stock,
iv. the right of holders of Common Stock to receive
dividends and distributions when, as and if
declared by Issuer's board of directors for that
purpose so long as equivalent dividends and
distributions are made to the holders of
Convertible Common Stock, and dividends in the
form of Convertible Common Stock are paid only
to holders of Convertible Common Stock.
The Issuer's articles of incorporation were also amended to
provide that upon any liquidation, dissolution or winding up of
Issuer, no distribution shall be made to the holders of the
Common Stock of Issuer unless first, the holders of the Issuer's
Preferred Stock shall have received an aggregate amount equal to
$0.50 per share of Preferred Stock then held, and then the
holders of the Issuer's Convertible Common Stock shall have
received an aggregate amount equal to $2.00 per share of
Convertible Common Stock then held, plus an amount equal to all
declared but unpaid dividends thereon (dividend policy referenced
in Item 4(e) hereof).
In the event the assets to be distributed to the holders of
Convertible Common Stock are insufficient to permit the payment
to holders of the full preferential amount aforesaid, then all
the assets of Issuer to be distributed to the holders of the
Convertible Common Stock shall be distributed on a pro rata basis
in accordance with their respective holdings of Convertible
Common Stock.
The rights of the holders of the Convertible Common Stock to
the liquidation preference are subordinate only to the rights of
the holders of Issuer's outstanding Preferred Stock to receive an
aggregate amount of $0.50 per share upon the liquidation,
dissolution or winding up of Issuer.
<PAGE> 6
SCHEDULE 13D
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CUSIP NO. 168628 10 5 Page 5 OF 7 Pages
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In the event that assets of Issuer remain after distribution
to holders of Preferred Stock and the holders of the Convertible
Common Stock to the extent of their respective preferences, the
holders of each class of stock shall be entitled to distribution
of such assets on a pro rata basis in accordance with their
holdings.
f. DS&P has no plans or proposals which would result in a
material change in issuer's present business or corporate
structure.
g. DS&P has no plans or proposals which would result in
changes in Issuer's corporate charter, bylaws or instruments
corresponding thereto, other than those described in this Item 4.
h. DS&P has no plans or proposals which would result in the
de-listing of a class of Issuer's securities from a national
securities exchange or which would result in such securities
ceasing to be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association.
i. DS&P has no plans or proposals which would result in a
class of Issuer's equity securities becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Act.
j. DS&P has no plans or proposals which would result in any
action similar to those enumerated in this Item 4.
Item 5. Interest in Securities of the Issuer.
a. DS&P presently owns the 3,500,000 shares of Issuer's
Convertible Common Stock described above. The 3,500,000 shares of
Convertible Common Stock represent 100% of the currently
outstanding class of Issuer's Convertible Common Stock.
Three principals of DS&P, Messrs. Arnold, Schreiber and
Dimeling, each own 200 shares of Issuer's Common Stock. These 600
shares represent 0.008% of Issuer's currently outstanding Common
Stock.
DS&P has the right to acquire 5,000,000 additional shares
of Issuer's Convertible Common Stock pursuant to the terms of the
Stock Purchase Agreement, contingent upon the conditions
contained therein. Assuming satisfaction of those terms and
conditions, upon the acquisition of those additional shares of
Issuer's Convertible Common Stock and/or upon exercise of the
Warrant, DS&P would continue to hold 100% of the outstanding
class of Issuer's Convertible Common Stock.
DS&P also holds the Warrant which entitles DS&P to
purchase, upon satisfaction of certain terms and conditions, that
number of additional shares of Issuer's Common Stock which would
place DS&P's holdings of Issuer at 68% of Issuer's outstanding
Common Stock, on a fully diluted basis, assuming DS&P's
acquisition of the 5,000,000 additional shares of Convertible
Common Stock referenced herein and the conversion of all
Convertible Common Stock held by DS&P into Common Stock.
<PAGE> 7
SCHEDULE 13D
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CUSIP NO. 168628 10 5 Page 6 OF 7 Pages
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b. DS&P has the sole power to vote or to direct the vote of
the 3,500,000 shares of Convertible Common Stock referred to in
Item 5(a) above, and has the sole power to dispose or direct the
disposition of such shares.
Each of Messrs. Arnold, Schreiber and Dimeling has the sole
power to vote or to direct the vote of his 200 shares of Common
Stock referred to in Item 5(a) above, and has the sole power to
dispose or direct the disposition of such shares.
Upon exercise of the Warrant, DS&P will have the sole power to
vote or to direct the vote of the shares of Common Stock referred
to in Item 5(a) above, and will have the sole power to dispose or
direct the disposition of such shares. Additionally, upon
acquisition, DS&P will have the sole power to vote or to direct
the vote of the 5,000,000 shares of Convertible Common Stock
referred to in Item 5(a) above, and will have the sole power to
dispose or direct the disposition of such shares.
c. During the past sixty days, the only transaction involving
Issuer's Convertible Common Stock was DS&P's acquisition of the
3,500,000 shares of Issuer's Convertible Common Stock described
above. Transactions by each of Messrs. Arnold, Schreiber &
Dimeling within the past sixty days involving Issuer's Common
Stock:
<TABLE>
<CAPTION>
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DATE CLASS OF SHARES AMOUNT OF SHARES PRICE PER SHARE
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<S> <C> <C> <C>
November 16, 1999 Common Stock 200 $3.125
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</TABLE>
d. No other person is known to DS&P to have the right to
receive, or the power to direct the receipt of dividends from, or
the proceeds from the sale of, the 3,500,000 shares of Issuer's
Convertible Common Stock described above.
e. Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relations
with Respect to the Securities of the Issuer
DS&P and the Issuer are parties to the following contracts,
relating to the Issuer's securities:
a. Stock Purchase Agreement. The Stock Purchase Agreement
outlines terms and conditions whereby DS&P purchased 3,500,000
shares of Issuer's Convertible Common Stock for approximately
<PAGE> 8
SCHEDULE 13D
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CUSIP NO. 168628 10 5 Page 7 OF 7 Pages
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$7,000,000.00. This contract required Issuer to amend its
articles of incorporation as detailed above in Item 4. Upon
satisfaction of certain other terms and conditions, DS&P has the
right to purchase an additional 5,000,000 shares of Issuer's
Convertible Common Stock for approximately $10,000,000.00 in the
future.
b. Warrant. As outlined above, the Warrant allows DS&P,
assuming that it purchases a total of 8,500,000 shares of
Issuer's Convertible Common Stock, to purchase enough Common
Stock of Issuer as so to own 68% of Issuer's outstanding Common
Stock on a fully diluted basis.
c. Registration Rights Agreement. Pursuant to the certain
Registration Rights Agreement by and between DS&P and Issuer
dated November 19, 1999 (the "Registration Rights Agreement"),
DS&P is given three demand registration rights and one piggyback
registration right for its holdings of Issuer's Convertible
Common Stock (assuming conversion into Issuer's Common Stock).
Item 7. Materials to be Filed as Exhibits
a. Issuer's Amended and Restated Articles of
Incorporation, dated December 30, 1999.
b. Stock Purchase Agreement.
c. Warrant.
d. Registration Rights Agreement.
<PAGE> 9
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in the
Statement is true, correct and complete.
DATED: January 7, 2000.
DIMELING, SCHREIBER & PARK
By: \s\ Richard R. Schreiber
---------------------------
Name: Richard R. Schreiber
---------------------------
Title: Partner
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<PAGE> 1
RESTATED
ARTICLES OF INCORPORATION
OF
CHIEF CONSOLIDATED MINING COMPANY
ARTICLE I.
The name of this Corporation shall be and is the Chief Consolidated
Mining Corporation.
ARTICLE II.
(a) The name and address of this Corporation's statutory agent in the
State of Arizona is Corporation Service Company, 3636 North Central Avenue,
Phoenix, Arizona 85012. The principal place of business of this Corporation
outside the state of Arizona is 500 Fifth Avenue, Suite 1021, New York, New York
10110-1099.
(b) The name and address of each person who is serving as a director of
this Corporation until a successor is elected and qualified is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Christopher A. Arnold 1629 Locust Street, Philadelphia, PA 19103
Thomas Bruderman 1573 Bronson Road, Fairfield, CT 06430
William R. Dimeling 1629 Locust Street, Philadelphia, PA 19103
Paul Hines 12 Flying Cloud Road, Stamford, CT 06902
Robert E. Poll 225 West 86th Street, New York, NY 10024
Richard R. Schreiber 1629 Locust Street, Philadelphia, PA 19103
Leonard Weitz 500 Fifth Avenue, New York, NY 10110
</TABLE>
ARTICLE III.
This Corporation is organized for the purpose of carrying on and
transacting a mining business and shall have the following powers and rights as
incidental to such business:
(a) To explore for minerals, metals and ores of all kinds in any state,
territory or country.
(b) To purchase or otherwise acquire, hold, manage, operate, sell or
otherwise dispose of any mineral lands or the products thereof in any state,
territory or country.
(c) To explore, develop, operate or work any and all mines or mineral
lands acquired by said Corporation, or in which said Corporation may have any
interest whatsoever, in any State, territory or country, and to acquire and
dispose of in any manner whatsoever all machinery, supplies, and materials
necessary or convenient for use in connection therewith.
<PAGE> 2
(d) To purchase and sell, or otherwise acquire or dispose of, stocks,
bonds, notes, or obligations in any other form, of any Corporation organized for
mining purposes under the laws of Arizona or any other territory, state of
country, including stock, bonds, notes or other obligations of this Corporation.
(e) To purchase or sell, or otherwise acquire or dispose of,
pipe-lines, tracks, water rights, roads, tramways, canals, ditches, telephone or
telegraph lines, railroads or any other form of property, and to use, enjoy and
operate the same in any manner whatsoever, incidental to or in connection with
the carrying on of the mining business of this Corporation.
(f) To transact any business usually or properly incidental or
collateral or to allied with mining, including the power and right to mine or
otherwise produce, refine, reduce, manufacture, acquire, sell, or otherwise
dispose of, deal in, ores, limerock or any other raw materials, or any products
or by-products derived from such ores, limerock or any raw materials; to
acquire, own, hold, sell, or otherwise dispose of, letters patent or patent
rights deemed useful in connection with the business of the Corporation; to
acquire, hold, use, operate, sell, and dispose of, all property, real and
personal, necessary or proper to aid the Corporation in transacting any of its
business; and to have and exercise the power and right or eminent domain for the
acquisition of any real property, or the right to use same, in Arizona or any
other state within the United States of America.
(g) ADDITIONAL POWERS:
(1) To engage in business in all its forms and branches.
(2) To purchase, or otherwise, acquire, own, hold, lease, sell,
exchange, assign, transfer, mortgage, pledge or otherwise dispose of, to
guarantee, and to invest, trade and deal in and with personal property of every
class and description.
(3) To purchase, or otherwise acquire, own, hold, lease, sell,
exchange, assign, transfer, mortgage or otherwise dispose of, and to invest,
trade and deal in and with real property, and any and all interests therein.
(4) To enter into any kind of contract or agreement, cooperative or
profit-sharing plan with its officers or employees that the Corporation may deem
advantageous or expedient or otherwise to reward or pay such persons for their
services as the directors may deem fit.
(5) To build houses or other buildings of every kind and character,
either for sale of lease or on contract or otherwise; to lay out, subdivide,
resubdivide and plat tracts of land and sell same, either by such subdivision or
resubdivision; and to improve lands laid out, subdivide or resubdivide, grade,
oil and improve streets, alleys, parks and other places, and sidewalk, curb, and
otherwise improve the same, and construct and maintain and operate sewers and
any and all other conveniences and matters in connection therewith.
(6) To purchase, lease or otherwise acquire, in whole or in part, the
business, goodwill,
<PAGE> 3
rights, franchises and property of every kind, and to undertake the whole or any
part of the assets or liabilities, of any person, firm, association or
corporation engaged in or authorized to conduct any business similar to any
business authorized to be conducted by this Corporation, or owning property
necessary or suitable for its purposes, and to pay for the same in cash, in the
stock or bonds of this company, or otherwise; to hold or in any manner dispose
of the whole or any part of the business or property so acquired, and to
exercise all the powers necessary or incidental to the conduct of such business.
(7) To lend money and to negotiate and make loans, either on its own
account or as agent or broker for others.
(8) To borrow money, to issue bonds, debentures, notes and other
obligations of this Corporation from time to time, for any of the objects or
purposes of this Corporation, and to mortgage, pledge, hypothecate, and/or
convey in trust, any or all of its property to secure the payment thereof.
(9) To discount and negotiate promissory notes, drafts, bills of
exchange, and other evidences of debt, and to collect for others money dues them
on notes, checks, drafts, bills of exchange, commercial paper and other evidence
of indebtedness.
(10) To enter into, make, perform and carry out contracts of every kind
and for any lawful purpose, without limit as to amount, with any person, firm,
association, corporation, municipality, state, or government, or any
subdivision, district or department thereof.
(11) To acquire, and pay for in cash, shares of stock, bonds or notes
of this Corporation, or otherwise, the assets including the goodwill of any
person, firm, association or corporation, and to undertake or assume the whole
or any part of the obligations or liabilities thereof.
(12) To engage in and conduct any and all kinds of manufacturing
businesses.
(13) To do any and all such other acts, things, business or businesses
in any manner connected with or necessary, incidental, convenient or auxiliary
to any of the objects hereinbefore enumerated, or calculated, directly or
indirectly, to promote the interest of the Corporation; and in carrying on its
purposes, or for the purpose of attaining or furthering any of its business, to
do any and all acts and things, and to exercise any and all other powers, which
a copartner or natural person could do or exercise, and which now or hereafter
may be authorized by law, and in any part of the world.
(14) To buy and sell foreign exchange and the currencies of any nation.
To engage in foreign trade and in this connection to purchase and sell goods,
wares and merchandise manufactured in foreign countries.
(h) It is hereby expressly provided that the foregoing enumerations of
specific powers, objects and purposes of this Corporation shall be in
furtherance, and not in limitation, of the general powers conferred upon a
corporation by the laws of the State of Arizona, it being
<PAGE> 4
specifically provided that this Corporation shall have and may exercise all the
rights and powers conferred by the State of Arizona upon like corporations
organized under its laws, and that such specific objects, purposes and powers,
in any paragraph enumerated herein, excepting where otherwise clearly indicated
herein, shall not be limited or restricted by reference to or inference from the
terms of any other clause or paragraph of these Articles.
ARTICLE IV.
The total amount of the authorized capital stock of this Corporation
shall be Twenty Five Million, Seven Hundred Fifty Thousand dollars
($25,750,000), divided into One Million Five Hundred Thousand (1,500,000) shares
of Preferred Stock, par value $0.50 per share, Twenty Million (20,000,000)
shares of Common Stock having a par value of $0.50 per share, and Thirty Million
(30,000,000) shares of Convertible Common Stock, par value $0.50 per share. All
such stock, Preferred, Common, and Convertible Common, shall have equal voting
powers, each share entitling the holder to one vote at all meetings of the
stockholders on all matters upon which stockholders are entitled to vote under
Arizona law, and, except for the 8% Convertible Common Stock dividend as
described in the designation of Convertible Common Stock set forth herein, all
such stock, Preferred, Common and Convertible Common Stock, shall participate
equally in all dividends declared; one share of Preferred Stock shall receive
the same amount of dividends as one share of Common Stock and as one share of
Convertible Common Stock. In the event of any liquidation, dissolution, or
winding up of the Corporation, the holders of the Preferred Stock shall be
entitled, before any of the assets of the Corporation shall be distributed among
the holders of the Convertible Common Stock or Common Stock, to be paid in full
the par amount of their shares.
Except as otherwise provided in the designation of Convertible Common
Stock set forth herein, the Board of Directors may in their discretion from time
to time and in such amounts as they may determine, sell to any person whomsoever
the unsubscribed stock of the company, Convertible Common, Common and Preferred,
at not less than its par value.
The amount, the voting powers, preferences and relative rights and
privileges and other rights granted to the Common Stock and the Convertible
Common Stock and the qualifications, limitations or restrictions imposed thereon
be, and they hereby are as follows:
1. Rights and Privileges. The Common Stock and the Convertible Stock
shall be of equal rank and shall entitle the holders thereof to the same rights
and privileges, except as hereinafter provided.
2. Designation and Amount. Thirty Million (30,000,000) shares of the
capital stock of the Corporation are hereby designated as Convertible Common
Stock.
3. Common Stock Outstanding. All common stock heretofore issued and
outstanding is Common Stock of the Corporation without surrender or exchange of
certificates therefor.
<PAGE> 5
4. Certain Restrictions. Until the earlier of the date a minimum of
8,500,000 shares of Convertible Common Stock is issued and outstanding or
December 31, 2002, the Corporation shall issue no dividends other than the 8%
annual dividend on the Convertible Common Stock; and so long as any Convertible
Common Stock is outstanding, issuance of additional shares of Convertible Common
Stock is restricted pursuant to the terms of that certain Stock Purchase
Agreement entered into by the Corporation and Dimeling, Schreiber and Park,
dated as of November 19, 1999.
5. Dividends and Distributions. Subject to certain Restrictions set
forth in paragraph 4 above, so long as equivalent dividends and distributions
are made to the holders of Convertible Common Stock, and dividends in the form
of Convertible Common Stock are paid only to holders of Convertible Common
Stock, holders of Common Stock shall be entitled to receive dividends and other
distributions when, as, and if declared by the Board of Directors out of funds
legally available for the purpose. The holders of the Convertible Common Stock
shall be entitled to receive when, as, and if declared by the Board of Directors
out of funds legally available for the purpose, dividends at an annual rate of
8%, payable annually solely in additional shares of Convertible Common Stock.
Such a dividend shall be payable as a simple dividend for all periods ending
prior to the earlier of December 31, 2002 or the Tranche B Closing. Thereafter,
dividends paid on the Convertible Common Stock shall be cumulative accruing on a
daily basis, based on actual days elapsed since payment of the most recent
dividend, and rights shall accrue to the holders of the Convertible Common Stock
in the event that the Corporation shall fail to declare or pay dividends on the
Convertible Common Stock for any fiscal year, whether or not earnings of the
Corporation for such year were sufficient to pay such dividends in whole or in
part. At such time as DS&P owns 68% of Corporation no further dividends will be
paid on Convertible Common Stock.
6. Voting Rights. Holders of Convertible Common Stock shall be entitled
to one vote per each full share of Common Stock into which the Convertible
Common Stock they hold could be converted, notwithstanding any restriction on
convertibility as to time, at the date a vote of stockholders is taken or a
written consent of stockholders is solicited.
7. Redemption. The Convertible Common Stock is redeemable pursuant to
the terms of that certain Stock Purchase Agreement entered into by the
Corporation and Dimeling, Schreiber & Park, dated as of November 19, 1999.
8. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of the Common Stock of
the Corporation unless first the holders of the Preferred Stock shall have
received an aggregate amount equal to $0.50 per share of Preferred Stock then
held, and then the holders of the Convertible Common Stock shall have received
an aggregate amount equal to $2.00 per share of Convertible Common Stock then
held, plus an amount equal to all declared but unpaid dividends thereon.
(b) In the event the assets to be distributed to the holders
of Convertible
<PAGE> 6
Common Stock shall be insufficient to permit the payment to holders of the full
preferential amount aforesaid, then all the assets of the Corporation to be
distributed to the holders of the Convertible Common Stock shall be distributed
on a pro rata basis in accordance with their respective holdings of Convertible
Common Stock.
(c) The rights of the holders of the Convertible Common Stock
to the liquidation preference are subordinate only to the rights of the holders
of the Corporation's outstanding Preferred Stock to receive an aggregate amount
of $0.50 per share upon the liquidation, dissolution or winding up of the
Corporation.
(d) In the event that assets of the Corporation remain after
distribution to holders of Preferred Stock and the holders of the Convertible
Common Stock to the extent of their respective preferences, the holders of each
class of stock shall be entitled to distribution of such assets on a pro rata
basis in accordance with their holdings.
9. Optional Conversion. Each share of Convertible Common Stock shall be
convertible at any time at the option of the holder thereof, into one fully paid
and non-assessable share of Common Stock of the Corporation ("Conversion Rate"),
subject to adjustment in the Conversion Rate in accordance with paragraph 10
hereof.
10. Adjustments to the Conversion Rate. The Conversion Rate for the
Convertible Common Stock shall be subject to adjustment from time to time,
calculated as follows:
(a) if the Corporation:
(i) pays a dividend or makes a distribution on its
Common Stock or Preferred Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(iii) combines its outstanding shares of Common Stock
into a smaller number of shares; or
(iv) issues by reclassification of its Common Stock
any shares of its capital stock;
then the Conversion Rate in effect immediately prior to such action shall be
adjusted so that each holder of Convertible Common Stock thereafter converted
may receive the number of shares of Common Stock of the Corporation which such
holder would have owned immediately following such action if such holder had
converted such shares of Convertible Common Stock immediately prior to such
action.
(b) if the Corporation:
<PAGE> 7
(i) issues rights or warrants entitling holders of
Common Stock to subscribe for or purchase shares of its Common Stock or
securities convertible into Common Stock; or
(ii) distributes to the holders of its Common Stock
or Preferred Stock any of its assets or debt securities or any rights or
warrants to purchase debt securities, assets or other securities of the
Corporation;
then the Conversion Rate in effect immediately prior to such action shall be
adjusted so that each holder of Convertible Common Stock thereafter converted
may receive the number of rights, warrants, assets or debt securities to which
such holder would have been entitled immediately following such action if such
holder had converted such Convertible Common Stock immediately prior to such
action.
(c) If the Corporation shall consolidate with or merge into
any other corporation or transfer all of its properties and assets as an
entirely to any person, then upon consummation of such transaction, each share
of the Convertible Common Stock shall automatically become convertible into the
kind and amount of securities, cash or other assets to which the holder of such
share would have been entitled immediately after such consolidation, merger or
transfer if such holder had converted such share of Convertible Common Stock
immediately prior to the effective date of such transaction.
11. Mechanics of Conversion.
In the event of conversion at the option of the holder of shares of
Convertible Common Stock pursuant to paragraph 9 hereof, the holder shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation and shall give written notice to the Corporation of such
holder's election to convert same and shall state therein the number of shares
of Convertible Common Stock being converted. Thereupon, the Corporation shall
promptly issue and deliver to such holder of Convertible Common Stock a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled.
12. Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Convertible Common Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Convertible Common Stock, and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Convertible
Common Stock, the Corporation will take such corporate action, as may be, in the
opinion of its counsel, necessary to increase its authorized but unissued shares
of Common Stock to such number of shares as shall be sufficient for such
purpose.
13. Restriction on Amendment. So long as any Convertible Common Stock
shall be issued and outstanding, the Corporation shall not amend these Articles
of Incorporation
<PAGE> 8
without the affirmative vote of the holders of Convertible Common Stock, voting
as a class.
ARTICLE V.
The time of the commencement of the Corporation shall be the date of
filing a certified copy of these Articles of Incorporation in the office of the
Territorial Auditor of the Territory of Arizona and the existence of the
Corporation shall be perpetual.
ARTICLE VI
The affairs of this Corporation shall be conducted by the Board of
Directors consisting of not less than three (3) persons nor more than seven (7)
persons who shall be shareholders. The number of directors to serve shall be
fixed by the Board of Directors. All directors shall be elected annually at a
stockholders' meeting on the third Tuesday of May of each year and shall hold
office until their successors are elected and qualify or as provided by the
By-laws of the Corporation.
The Board of Directors shall have full power to fill all vacancies
occurring in the Board from any cause, and to appoint from their own number an
executive committee, and vest said committee with all the powers granted the
Board of Directors by these articles.
ARTICLE VII
The officers of this Corporation shall be a President, two
Vice-presidents, Secretary and Treasurer, and such minor officers as the Board
of Directors may see fit to appoint. The President, Vice-president, Secretary
and Treasurer shall be elected annually by the Board of Directors at its first
meeting after the annual election of directors. The office of Secretary and
Treasurer may, in the discretion of the directors, be held by the same person,
and it shall not be necessary for the Secretary and Treasurer to be a director
of the Corporation.
ARTICLE VIII
The Board of Directors shall have full power to borrow money and incur such
indebtedness as it shall see fit, and to mortgage or pledge any or all of the
property of the Corporation to secure such loans and indebtedness.
ARTICLE IX
The Board of Directors may adopt by-laws for this Corporation which may be
repealed or amended by said Board.
ARTICLE X
The private property of the stockholders of this Corporation shall be exempt
from any and all liability for the debts of this Corporation.
<PAGE> 1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CHIEF CONSOLIDATED MINING COMPANY
AND
DIMELING, SCHREIBER & PARK
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE(S)
- ------- -------
<S> <C>
1. DEFINITIONS.....................................................................................3
2. TRANSACTIONS AND CLOSING........................................................................7
2.1 SALE AND PURCHASE OF THE CONVERTIBLE COMMON STOCK......................................7
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
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
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
</TABLE>
-ii-
<PAGE> 4
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:
2
<PAGE> 5
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,
3
<PAGE> 6
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.
Sections 9601 et seq., the Resource Conservation and Recovery Act
of 1976, as amended, 42 U.S.C. Sections 6901 et seq., the Clean
Water Act, 33 U.S.C. 1251 et seq., Clean Air Act, as amended, 42 U.S.C.
Sections 7401 et seq., Toxic Substances Control Act, 15 U.S.C.
Sections 2601 et seq., Hazardous Materials Transportation Act, 49
U.S.C. Section 5101, et seq., Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Sections 651 et seq., Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. Sections
11001 et seq., Safe Drinking Water Act, as amended, 42 U.S.C.
Sections 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.
4
<PAGE> 7
"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 Section 3(3).
"PLAN SPONSOR" - has the meaning given in ERISA Section
3(16)(B).
"PREFERRED STOCK" - as defined in Section 3.1.
5
<PAGE> 8
"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.
6
<PAGE> 9
"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
7
<PAGE> 10
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,
8
<PAGE> 11
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
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<PAGE> 12
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
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<PAGE> 13
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
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<PAGE> 14
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,
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<PAGE> 15
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
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<PAGE> 16
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
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<PAGE> 17
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.
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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
Section 341(f). The Company is not liable for any
Taxes of another Person (i) under Treas. Reg. Section
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 Section
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 Section 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 Section 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.
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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;
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<PAGE> 20
(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
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<PAGE> 21
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:
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<PAGE> 22
(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 Section s 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
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<PAGE> 23
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,
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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
22
<PAGE> 25
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
23
<PAGE> 26
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
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<PAGE> 27
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.
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<PAGE> 28
(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
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<PAGE> 29
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
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<PAGE> 30
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 Section s
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
28
<PAGE> 31
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
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<PAGE> 32
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
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<PAGE> 33
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
31
<PAGE> 34
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.
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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: /s/ Leonard Weitz
Name: Leonard Weitz
Title: President
DIMELING, SCHREIBER & PARK
By: /s/ William R. Dimeling
Name: William R. Dimeling
Title: Partner
<PAGE> 36
EXHIBITS
A Registration Rights Agreement
B Form of Warrant
C Articles of Incorporation as Amended and Restated
D Forms of Opinion
E Secretary's Certificate
iii
<PAGE> 37
SCHEDULES
3.1 Capitalization
3.4 Equity Investment; Subsidiaries
3.5 Financial Statements
3.7 Assets
3.8 Patents, Trademarks, Copyrights, etc.
3.9 Litigation
3.10 Taxes
3.11 Contracts and Commitments
3.12 Compliance with law. Permits and authorizations; Environmental and
Safety Matters
3.16 Employee Benefit Plans
3.21 Insurance
3.23 Real Estate
iv
<PAGE> 1
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.
<PAGE> 2
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
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<PAGE> 3
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
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<PAGE> 4
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
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<PAGE> 5
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
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<PAGE> 6
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
certificates 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
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<PAGE> 7
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 satisfactory to the Company in form and amount or (b) in
the case of any such mutilation, upon surrender of such Warrant for cancellation
at the principal office of the Company, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant.
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<PAGE> 8
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
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<PAGE> 9
(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
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<PAGE> 10
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
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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
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<PAGE> 12
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
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<PAGE> 13
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
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<PAGE> 14
(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 dividend 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 distribution 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
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<PAGE> 15
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:
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<PAGE> 16
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
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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
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<PAGE> 18
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
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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.
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<PAGE> 20
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: /s/ Leonard Weitz
-----------------------------
Name: Leonard Weitz
Title: President
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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.
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<PAGE> 22
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.
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<PAGE> 1
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".
<PAGE> 2
"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.
<PAGE> 3
"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.
<PAGE> 4
"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
<PAGE> 5
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;
<PAGE> 6
(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
<PAGE> 7
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
<PAGE> 8
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.
<PAGE> 9
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
<PAGE> 10
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
<PAGE> 11
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
<PAGE> 12
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
<PAGE> 13
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
<PAGE> 14
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
<PAGE> 15
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.
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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 COMPANY DIMELING, SCHREIBER & PARK
By: /s/ Leonard Weitz By: /s/ William R. Dimeling
------------------------------- -------------------------
Name: Leonard Weitz Name: William R. Dimeling
Title: President Title: Partner
