SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 5, 1997
_______________
USMX, INC.
(Exact name of registrant as specified in its charter)
______________
Delaware 0-9370 84-1076625
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
141 Union Boulevard, Suite 100
Lakewood, Colorado 80228
(Address of principal executive offices) (Zip Code)
(303) 985-4665
(Registrant's telephone number, including area code)
<PAGE>
USMX, INC.
Item 5. Other Events
On February 4, 1997, USMX, Inc. (the "Company" or
"USMX") entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Dakota Mining Corporation
("Dakota") and Dakota Merger Corporation, a wholly owned
subsidiary of Dakota. Pursuant to the Merger Agreement,
each holder of 1.1 outstanding shares of USMX common stock
will receive one share of Dakota common stock in a tax-free
reorganization to be effected as a reverse triangular merger
in which Dakota Merger Corporation will merge into the
Company and the Company would become an indirect wholly
owned subsidiary of Dakota at the effective time of the
Merger. The consummation of the Merger is subject to
various conditions, including completion of a $5 million
loan by Dakota to the Company, stockholder and creditor
approval, review by regulatory authorities and other
conditions. The Merger Agreement is included as Exhibit 2
to this Report.
In connection with the Merger, USMX granted an option
to Dakota to purchase up to 810,000 shares of USMX common
stock at US$1.75 per share, which would be exercisable in
the event that USMX determines not to engage in the Merger
with Dakota due to a transaction with another entity. The
Option Agreement is included as Exhibit 10(a) to this
Report.
In connection with the Merger, Pegasus Gold Inc.,
holder of approximately 30% of USMX's common stock, entered
into a Support Agreement with USMX and Dakota. Subject to
certain conditions, Pegasus Gold Inc. has agreed in the
Support Agreement to support the proposed Merger. The
Support Agreement is included as Exhibit 10(b) to this
Report.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
2. Agreement and Plan of Merger, dated February 4,
1997, among USMX, Inc., Dakota Mining Corporation and Dakota
Merger Corporation.
10(a) Option Agreement, dated February 4, 1997,
between USMX, Inc. and Dakota Mining Corporation.
10(b) Support Agreement, dated February 4, 1997,
among Pegasus Gold Inc., USMX, Inc. and Dakota Mining
Corporation.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
USMX, INC.
(Registrant)
Date: February 7, 1997 By: /s/ Donald P. Bellum
___________________________
Donald P. Bellum, President
AGREEMENT AND PLAN OF MERGER
dated February 5, 1997
among
DAKOTA MINING CORPORATION,
DAKOTA MERGER CORPORATION,
and
USMX, INC.
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated February 5, 1997 (this
"Agreement") among the following parties (sometimes referred to
herein individually as a "Party" and collectively as the
"Parties"):
(a) Dakota Mining Corporation, a corporation continued
under the Canada Business Corporation Act ("Dakota");
(b) Dakota Merger Corporation, a Delaware corporation and
wholly-owned subsidiary of Dakota ("Merger Corp"); and
(c) USMX, INC., a Delaware corporation ("USMX").
Capitalized terms used in this Agreement shall have the meanings
ascribed to such terms on Schedule A, unless otherwise defined
herein.
RECITALS
WHEREAS, the common stock, par value US$.001 per share, of USMX
("USMX Shares") is publicly traded in the United States and
Canada and is quoted on the Nasdaq National Market System and The
Toronto Stock Exchange;
WHEREAS, the common shares, no par value, of Dakota ("Dakota
Shares") are publicly traded in Europe, Canada, and the United
States and are quoted on the Berlin Stock Exchange, The Toronto
Stock Exchange, and the American Stock Exchange;
WHEREAS, the respective Boards of Directors of Dakota, Merger
Corp, and USMX have approved and declared fair and advisable to,
and in the best interests of, their respective stockholders the
Merger, upon the terms and subject to the conditions set forth
herein, whereby all of the issued and outstanding USMX Shares
will be converted into Dakota Shares;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of
Section 368(a) of the Tax Code; and
WHEREAS, Dakota, Merger Corp, and USMX desire to make certain
representations, warranties and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual benefits to be
derived and the representations and warranties, conditions and
promises herein contained, and intending to be legally bound
hereby, the Parties agree as follows:
ARTICLE I
GENERAL
I.1 Merger. In accordance with the terms and provisions of this
Agreement, the GCL, and other applicable Law, Merger Corp shall
be merged with and into USMX (the "Merger"), and USMX shall be,
and is hereinafter sometimes referred to as, the "Surviving
Corporation." Merger Corp and USMX shall be, and are hereinafter
sometimes referred to as, the "Constituent Corporations."
I.2 Charter and By-laws; Directors and Officers. From and after
the Effective Time:
(a) the Certificate of Incorporation and the By-laws of
Merger Corp shall continue in full force and effect as the
Certificate of Incorporation and the By-laws of the Surviving
Corporation; and
(b) the directors and officers of Merger Corp shall be the
directors and officers of the Surviving Corporation.
I.3 No Separate Identity. Except as hereinafter specifically
set forth, the identity, existence, corporate organization,
purposes, powers, objects, franchises, privileges, rights and
immunities of Merger Corp shall be merged with and into USMX, and
USMX, as the Surviving Corporation, shall be fully vested
therewith. The separate existence and the corporate organization
of Merger Corp, except insofar as they may continue by statute,
shall cease as of the Effective Time.
I.4 Effectiveness. The Merger shall not become effective until,
and shall become effective at, the point in time at which
Certificate of Merger (the "Certificate of Merger") in accordance
with the terms of this Agreement and in substantially the form
attached as Exhibit 1.4, and in accordance with Section 251 of
the GCL, shall have been executed by the Constituent Corporations
and filed with the Secretary of State of the State of Delaware.
The time when the Merger shall become effective as aforesaid is
herein called the "Effective Time." The Parties shall cause the
Certificate of Merger to be executed and filed as aforesaid on
the Closing Date upon the satisfaction or waiver of the
conditions contained in Articles VIII, IX, and X.
I.5 Conversion of Shares. As of the Effective Time, all
outstanding USMX Shares shall be converted automatically into the
right to receive Dakota Shares in the ratio of 1.10 USMX Shares
to one Dakota Share; and each share of the common stock of Merger
Corp shall be converted automatically into the right to receive
one share of common stock of the Surviving Corporation.
I.6 Treasury Shares, Etc. Each USMX Share which, immediately
prior to the Effective Time, is held by (a) USMX as treasury
stock, (b) any other member of the USMX Group, or (c) any member
of the Dakota Group, shall be canceled and no consideration shall
be delivered with respect thereto.
I.7 Warrants, Options, Etc. Each warrant, option, or other
right to acquire USMX Shares as of the Effective Time shall be
converted into a warrant, option, or other right to acquire
Dakota Shares based on the conversion ratio set forth in
Section 1.5, with the exercise price associated therewith, if
any, being adjusted proportionately.
I.8 No Fractional Shares. Fractional Dakota Shares shall not be
issued in exchange for USMX Shares. Except for operation of this
Section, if the conversion of shares pursuant to Section 1.5
would result in any stockholder of USMX being entitled to receive
a fractional interest in a Dakota Share, such stockholder shall
receive a single whole Dakota Share in lieu of such fractional
interest.
I.9 Stock Transfer Books. The stock transfer books of USMX
shall be closed as of the Effective Time, and no transfer of USMX
Shares shall be made or consummated thereafter except by the
Surviving Corporation.
I.10 Exchange of Certificates.
(a) Dakota and USMX shall authorize Montreal Trust Company
of Canada (or such other Person as shall be reasonably acceptable
to Dakota and USMX) to act as Exchange Agent hereunder (the
"Exchange Agent"). As soon as practicable after the Effective
Time, Dakota shall deposit with the Exchange Agent for the
benefit of the holders of certificates which immediately prior to
the Effective Time represented USMX Shares (the "Certificates")
certificates representing Dakota Shares (together with any
dividends or distributions with respect thereto payable as
provided in Section 1.10(c), the "Exchange Fund") issuable
pursuant to Section 1.5 in exchange for outstanding USMX Shares.
(b) As soon as practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a
Certificate whose shares were converted pursuant to Section 1.5
into Dakota Shares a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon actual and proper delivery
of the Certificates to the Exchange Agent, shall contain
instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing Dakota
Shares, and shall be in such form and contain such other
provisions as Dakota and USMX may reasonably specify). Upon
surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole
Dakota Shares which such holder has the right to receive pursuant
to this Article, and the Certificate so surrendered shall
forthwith be canceled. Until surrendered as contemplated by this
Section, each Certificate shall, at and after the Effective Time,
be deemed to represent only the right to receive, upon surrender
of such Certificate, the certificate representing the appropriate
number of Dakota Shares and certain dividends and other
distributions as contemplated by Section 1.10(c).
(c) No dividends or other distributions that are declared
on or after the Effective Time on Dakota Shares or are payable to
the holders of record thereof on or after the Effective Time will
be paid to persons entitled by reason of the Merger to receive
certificates representing Dakota Shares until such persons
surrender their Certificates, as provided in Section 1.10(b).
Subject to the effect of applicable Law, there shall be paid to
such record holders of the certificates representing such Dakota
Shares (1) at the time of such surrender or as promptly as
practicable thereafter, the amount of any dividends or other
distributions theretofore paid with respect to whole Dakota
Shares and having a record date on or after the Effective Time
and a payment date prior to such surrender and (2) at the
appropriate payment date or as promptly as practicable
thereafter, the amount of dividends or other distributions
payable with respect to whole Dakota Shares and having a record
date on or after the Effective Time but prior to surrender and a
payment date subsequent to surrender. In no event shall the
person entitled to receive such dividends or other distributions
be entitled to receive interest on such dividends or other
distributions. If any cash or certificate representing Dakota
Shares is to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such exchange that the
Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of
certificates for such Dakota Shares in a name other than that of
the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable.
(d) Any portion of the Exchange Fund which remains
undistributed to the former stockholders of USMX for one year
after the Effective Time shall be delivered to Dakota, upon
demand of Dakota, and any former stockholders of USMX who have
not theretofore complied with this Section shall thereafter look
only to Dakota for payment of their claim for Dakota Shares and
any dividends or distributions with respect to Dakota Shares.
Neither Dakota nor USMX shall be liable to any holder of USMX
Shares for Dakota Shares (or dividends or distributions with
respect thereto) delivered to a public official pursuant to any
applicable abandoned property, escheat, or similar Law.
I.11 Directors of Dakota. Immediately following the Effective
Time, Dakota shall increase the number of directors comprising
its Board of Directors to nine; Dakota shall allow USMX to
designate three directors and Pegasus Gold Inc. to designate one
director to fill the vacancies created by increasing the board
size, subject to Dakota's approval, with Donald P. Bellum as one
of the three USMX designated directors and the Chairman of the
Board.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF USMX
USMX makes the following representations and warranties to Dakota
and Merger Corp. However, certain matters disclosed on any
Exhibit hereto may not be required to be disclosed therein, but
may be stated therein for information purposes only, and no such
disclosure shall constitute an indication or admission of the
materiality thereof or create a standard of disclosure, and no
representation or warranty shall be deemed to have been made by
USMX by reason of the inclusion of such matters. Further, no
representation or warranty shall be deemed to have been made by
USMX by virtue of any disclosures made on, or contained in, any
Exhibit hereto except to the extent expressly made in this
Article II.
II.1 Organization and Good Standing.
(a) Each of the USMX Group Members is a corporation duly
organized, validly existing, and in good standing under the Laws
of the jurisdiction of its incorporation and is qualified to
transact business and is in good standing as a foreign
corporation in the jurisdictions (which are listed in Exhibit
2.1) where it is required to qualify in order to conduct its
business as presently conducted, and where the failure to be so
qualified would have a Material Adverse Effect. Except as listed
in Exhibit 2.1, there are no subsidiaries of USMX, none of USMX's
subsidiaries has any subsidiaries, and since December 31, 1991,
neither USMX nor any of its subsidiaries has had any
subsidiaries.
(b) Each USMX Group Member has the corporate power and
authority to own, lease, or operate its properties and to carry
on its business as now conducted.
(c) USMX has heretofore delivered or made available to
Dakota and Merger Corp complete and correct copies of USMX's and
its subsidiaries' respective Certificate or Articles of
Incorporation (or like charter document) and By-laws, as each has
been amended and is in effect on the date hereof.
II.2 Consents, Authorizations, and Binding Effect.
(a) USMX may execute, deliver, and perform this Agreement
without the necessity of any USMX Group Member obtaining any
consent, approval, authorization, or waiver, or giving any notice
or otherwise, except for such consents, approvals,
authorizations, waivers, and notices:
(1) disclosed in Exhibit 2.2;
(2) which, with respect to consents, approvals,
authorizations, and waivers, have been obtained, are
unconditional, and are in full force and effect, and which, with
respect to notices, have been given; or
(3) approval of the USMX stockholders in accordance
with the GCL to be obtained pursuant to Section 5.10.
(b) USMX has the full corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Transactions.
(c) This Agreement and the Transactions have been duly
authorized by the board of directors of USMX. This Agreement has
been duly executed and delivered by USMX and constitutes the
legal, valid, and binding obligation of USMX, enforceable against
USMX in accordance with its terms, except
(1) as may be limited by bankruptcy, reorganization,
insolvency, and similar Laws of general application relating to
or affecting the enforcement of creditors' rights or the relief
of debtors; and
(2) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(d) The execution, delivery, and performance of this
Agreement by USMX will not
(1) constitute a violation of the respective
Certificates or Articles of Incorporation (or like charter
documents) or By-laws, each as amended, of any USMX Group Member;
(2) with respect to the USMX Group, subject to
obtaining any consent, approval, authorization, or waiver
described in Exhibit 2.2, conflict with, result in the breach of
or constitute a default under any Contract which would have a
Material Adverse Effect;
(3) constitute a material violation of any Law
applicable or relating to any USMX Group Member or the businesses
of the USMX Group; or
(4) with respect to the USMX Group, subject to
obtaining any consent, approval, authorization, or waiver
described in Exhibit 2.2, result in the creation of any Lien upon
any of the assets of any USMX Group Member.
II.3 Minute and Stock Transfer Books. The minute books of each
USMX Group Member fairly reflect the corporate actions of the
respective boards of directors and the stockholders of each such
USMX Group Member. The stock transfer books of each USMX Group
Member are correct, complete, and current, and all documentary
and stock transfer tax stamps required in connection with the
issuance and transfer of shares of the capital stock of each USMX
Group Member, if any, have been duly paid, affixed, and canceled.
II.4 Financial Statements and Financial Condition.
(a) The USMX Group has maintained its accounting books and
records in all material respects in compliance with the Foreign
Corrupt Practices Act, as amended.
(b) Except as described in Exhibit 2.4(b), the accounting
books and records of the USMX Group during the periods covered by
the 1995 USMX Financial Statements and the Interim USMX Financial
Statements fairly reflect in all material respects the items of
income and expense and the assets and liabilities of the USMX
Group, including the nature thereof and the transactions giving
rise thereto (to the extent normally reflected in the accounting
books and records of the USMX Group Members) and provided a fair
basis for the preparation of the 1995 USMX Financial Statements
and the Interim USMX Financial Statements.
(c) Attached as Exhibit 2.4(c) are the Interim USMX
Financial Statements.
(d) The 1995 USMX Financial Statements have been prepared
in accordance with U.S. GAAP.
(e) The 1995 USMX Financial Statements and the Interim USMX
Financial Statements are correct and complete in all material
respects and present fairly in accordance with U.S. GAAP (except
that the Interim USMX Financial Statements may not contain notes
and may be subject to year-end adjustments) the financial
position of the USMX Group as of the dates of such financial
statements and the results of operations and cash flows of the
USMX Group for the periods covered by such financial statements.
(f) The USMX Group has no liabilities (absolute,
contingent, or otherwise) required under U.S. GAAP to be set
forth on a consolidated balance sheet (or in the notes thereto)
of the USMX Group, other than:
(1) those set forth, reserved against, or described on
or in the 1995 USMX Balance Sheet (or in the notes thereto) or
the Interim USMX Financial Statements;
(2) those incurred by the USMX Group in the ordinary
course of business since the date of the Interim USMX Balance
Sheet;
(3) obligations to be performed after the date hereof
based on the operations of any USMX Group Member after the date
hereof under any Contract of such USMX Group Member; and
(4) those described or disclosed on, or which may
arise out of or with respect to the matters or Contracts
described or disclosed on, the Exhibits to this Agreement, or
those which may arise out of or with respect to matters or
Contracts that would be required to be disclosed on such Exhibits
but for the limitations on such disclosure contained in the
representations and warranties relating to such Exhibits.
II.5 Title and Condition of Assets.
(a) Exhibit 2.5(a) lists all of the real property owned by
the USMX Group in fee simple and all unpatented mining claims,
real property leases, and concessions in which any USMX Group
Member has a right or interest.
(b) To the knowledge of USMX, except as described in
Exhibit 2.5(b),
(1) the USMX Group has good and sufficient title to
all real property owned by it in fee simple, and is in exclusive
possession thereof, free and clear of Liens other than Permitted
Liens and statutory Liens not yet delinquent;
(2) the USMX Group has good and sufficient title to
all material tangible personal property owned by it free and
clear of Liens other than Permitted Liens and statutory Liens not
yet delinquent;
(3) with respect to the unpatented mining claims in
which any USMX Group Member has a right or interest,
(A) such claims were properly laid out and staked
and properly recorded and filed with appropriate Governmental
agencies and, subject to the paramount title of the United
States, are free and clear of Liens other than Permitted Liens
and statutory Liens not yet delinquent;
(B) all required assessment work has been
performed and all affidavits of assessment work and other filings
required to maintain such claims in good standing have been
properly and timely recorded and filed with appropriate
Governmental agencies;
(C) all claim maintenance and claim rental fees
and all taxes assessed against such claims have been timely paid;
and
(D) there are no conflicting claims;
provided that USMX makes no representation that there has been a
discovery of minerals on each of the unpatented mining claims;
and
(4) with respect to concessions in which the USMX
Group has an interest, all acts and payments necessary to obtain
and maintain such concessions in good standing have been timely
made or performed.
(c) To the knowledge of USMX, all mineral production rights
or other royalties of any sort whatsoever which are payable with
respect to any real property in which any USMX Group Member has a
right or interest are described in Exhibit 2.5(c).
(d) To the knowledge of USMX, no improvement or structure
on any real property owned or leased by any USMX Group Member
encroaches to any material extent on any adjacent property or
conflicts with the rights of any owner thereof.
(e) The material improvements, fixtures, and appurtenances
on or to the property and the material tangible assets, owned or
leased and used by any USMX Group Member, are in substantially
good operating condition, order, and repair, subject to ordinary
wear and tear, except as described in Exhibit 2.5(e). Since
December 31, 1996, none of the assets of any USMX Group Member
has been affected by any fire, accident, act of God, or any other
casualty that has had a Material Adverse Effect. All of the
material assets used by any USMX Group Member in its businesses
are owned or leased by such USMX Group Member.
(f) The businesses of the USMX Group as conducted by the
USMX Group Members in any jurisdiction are not conducted under
any material restriction imposed in any such jurisdiction upon
the USMX Group Members (but not imposed upon other persons
conducting similar businesses or operating similar assets for
similar purposes in the same jurisdictions where the businesses
and assets of the USMX Group are located) by any zoning,
anti-pollution, health, or other Law.
II.6 Insurance.
(a) Exhibit 2.6 contains a list of all material policies of
insurance maintained by the USMX Group, including insurance
providing benefits for employees, in effect on the date hereof
and generally describing the coverage thereby.
(b) Except for amounts deductible under the policies of
insurance described, or as otherwise disclosed, in Exhibit 2.6,
no USMX Group Member is or has been at any time since December
31, 1994, subject to any Liability as a self-insurer of the
businesses and assets of the USMX Group, in respect of insurance
of the type customarily carried by businesses of the type engaged
in by the USMX Group in the jurisdictions where the USMX Group
maintains offices, which could have a Material Adverse Effect.
(c) There are no material coverage disputes with
underwriters pending or, to the knowledge of USMX, threatened,
and all premiums due and payable have been timely paid and all
such material policies are in full force and effect in accordance
with their respective terms (however, no representation or
warranty is made as to the solvency or financial condition of any
underwriter or issuer of such policy).
II.7 Litigation and Compliance.
(a) Except as to the matters described in Exhibit 2.7(a),
and except for actions, suits, claims, and proceedings where the
damages asserted by the plaintiff in such actions, suits, claims,
or proceedings (together with the damages claimed in the matters
described in Exhibit 2.7(a)) would not have a Material Adverse
Effect or where insurance proceeds will be actually available for
such actions, suits, claims, and proceedings:
(1) as of the date of this Agreement, there are no
actions, suits, claims, or proceedings, whether in equity or at
law, or Governmental investigations pending or, to the knowledge
of USMX, threatened against any USMX Group Member or with respect
to any asset or property owned, leased, or used by any USMX Group
Member; and
(2) there are no actions, suits, claims, or
proceedings, whether in equity or at law, or Governmental
investigations pending or, to the knowledge of USMX, threatened
which question or challenge the validity of this Agreement or any
action taken or to be taken pursuant to this Agreement.
(b) Each USMX Group Member is in compliance with, and is
not in default or violation under, any Law applicable to the
businesses or operations of the USMX Group, including without
limitation all safety and health Laws (but excluding any
Environmental Law), except for noncompliances, defaults, and
violations which would not, in the aggregate, have a Material
Adverse Effect, and no USMX Group Member has received any notice
of the same.
(c) Except as described in Exhibit 2.7(c), no USMX Group
Member, no material assets of any USMX Group Member, nor the
Transactions are subject to any judgment, order, or decree
entered in any lawsuit or proceeding which has had, or which is
reasonably likely to have, a Material Adverse Effect or which
would prevent USMX from performing its obligations under this
Agreement. Each USMX Group Member subject to any such judgment,
order, or decree is in compliance in all material respects with,
and is not in default or violation in any material respect under,
any such judgment, order, or decree.
(d) Except as described in Exhibit 2.7(d), and except as
may be required under any Environmental Law, each USMX Group
Member has duly filed all reports and returns required to be
filed by it with any Government and obtained all Governmental
permits and licenses and other Governmental consents which are
required in connection with the businesses and operations of the
USMX Group, the failure of which would have a Material Adverse
Effect. All of such material permits, licenses, and consents are
in full force and effect, and to the knowledge of USMX, no
proceedings for the suspension or cancellation of any of them are
pending or threatened.
(e) Neither USMX nor, to the knowledge of USMX, any other
USMX Group Member, either on its own behalf or on behalf of any
of its respective officers, agents, consultants, or employees,
has
(1) made or agreed to make any contributions,
payments, or gifts of their funds or property to any Governmental
official, employee, or agent where the payment of such
contribution, payment, or gift was illegal under any applicable
Law;
(2) established or maintained any unrecorded fund or
asset for any such purpose, or made any intentional false or
artificial entry on any of its books or records in connection
with any such activity; or
(3) made or agreed to make any contribution, or
reimbursed any political gift or contribution made by any other
person, to candidates for public office, whether federal, state,
local, or foreign, where such contribution was a violation of
applicable Law by any USMX Group Member.
II.8 Taxes.
(a) The USMX Group has paid in all material respects on or
before the due date thereof, or accrued in all material respects
on the 1995 USMX Financial Statements, all federal, state, local,
and foreign Taxes for all periods ending on or prior to December
31, 1996. The USMX Group has made provision (subject to year-end
audit adjustments) in all material respects on its accounting
books and on the Interim USMX Balance Sheet for all federal,
state, local, and foreign Taxes accruing since the date of the
1995 USMX Financial Statements. As of the Effective Time, the
USMX Group will have duly and timely filed all Tax reports and
returns required to be filed by any USMX Group Member on or
before such date (subject to extensions which have been granted
to such USMX Group Member or extensions to which such USMX Group
Member is entitled under then applicable Laws); and all such Tax
reports and returns were, or will be, complete and correct in all
material respects.
(b) Since December 31, 1991, the taxable income of the USMX
Group has been included in the consolidated federal income tax
returns of USMX to the extent required to be included under the
Tax Code; and all such federal income tax returns as they relate
to the USMX Group were complete and correct in all material
respects.
(c) Except as described in Exhibit 2.8, no USMX Group
Member has received notice of any material Tax deficiency, claim,
or dispute outstanding, proposed, or assessed against any USMX
Group Member (which has not been satisfied or for which provision
has not been made on the books and records of the USMX Group),
nor has any USMX Group Member executed any waiver of any statute
of limitations on the assessment or collection of any material
Taxes or executed or filed with the Internal Revenue Service or
any other Taxing authority (including foreign Taxing authorities)
or executed any agreement now in effect extending the period for
assessment or collection of any material Taxes.
(d) There are no Tax Liens (other than Permitted Liens)
upon, pending against or, to the knowledge of USMX, threatened
against any asset of any USMX Group Member, which Tax Lien would
have a Material Adverse Effect.
(e) No USMX Group Member is a party to any pending or, to
the knowledge of USMX, threatened action or proceeding,
assessment or collection of Taxes by any Taxing authority,
foreign or domestic, relating to the business and operation of
any USMX Group Member.
(f) The USMX Group Members are not parties to any Tax
sharing agreement.
(g) No election under 341(f) of the Tax Code has been or
shall hereafter be made to treat any USMX Group Member as a
"consenting corporation" as defined in 341(f).
(h) Since December 31, 1991, no USMX Group Member has ever
been a "Subchapter S" or an "S" corporation within the meaning of
the Tax Code.
(i) No representation or warranty is made by USMX with
respect to whether any deferred tax benefit accrued on the books
of the USMX Group or reflected in the 1995 USMX Financial
Statements or Interim USMX Financial Statements will ultimately
be usable by any USMX Group Member.
II.9 Intangible Assets. Neither USMX nor any USMX Group Member
owns or has any proprietary interest in any domestic or foreign
patents, patent applications, trademarks, trademark
registrations, applications for trademark registrations, trade
names, or copyrights.
II.10 Employees. USMX has delivered to Dakota and Merger
Corp a list of all employees of each USMX Group Member and each
such employee's date of hire and annual rate of compensation as
of the date hereof.
II.11 Pension and Other Employee Plans and Agreements.
(a) Exhibit 2.11 sets forth all Employee Plans maintained
by each USMX Group Member, and USMX has furnished or made
available to Dakota and Merger Corp true and complete copies of
all such Employee Plans as amended and in effect on the date
hereof.
(b) To the knowledge of USMX,
(1) the execution and delivery of this Agreement by
USMX and the consummation of the Transactions do not constitute
and will not result in any "prohibited transaction" within the
meaning of ERISA or 4975 of the Tax Code;
(2) each Employee Plan of the USMX Group and any
related trust agreements, annuity contracts, insurance contracts,
or other funding instruments are currently, and have been in the
past, in compliance in all material respects with the
requirements of applicable Laws as to the form, operation, and
administration of such plans;
(3) all reports, notices, and applications relating
thereto required by any Governmental agency have been in all
material respects timely filed;
(4) all contributions required to be made on or before
the date hereof to each such Employee Plan under the terms of
such plan, ERISA, the Tax Code or other applicable law have been
in all material respects timely made;
(5) no USMX Group Member has incurred, or will incur
as a result of the Transactions, any Liability (except for
premiums) to the Pension Benefit Guaranty Corporation; and
(6) none of the Employee Plans of the USMX Group is a
"Multi-employer Plan" (as such term is defined in 3(37) of
ERISA); and
(c) There are no actions, suits, claims or proceedings,
whether in equity or at law, or Governmental investigations
pending or, to the knowledge of USMX, threatened against or with
respect to any Employee Plan of the USMX Group or any assets of
any such Employee Plan.
II.12 Labor Relations.
(a) Except as described in Exhibit 2.12, no employees of
any USMX Group Member are covered by any collective bargaining
agreement.
(b) Except as described in Exhibit 2.12:
(1) each USMX Group Member has complied with all
applicable Laws (including without limitation ERISA and Laws
governing foreign employee benefit and pension plans) relating to
the employment of labor, including without limitation those
relating to wages, hours, unfair labor practices, discrimination,
payment of social security, and similar Taxes, where the failure
to be in compliance would have a Material Adverse Effect;
(2) no USMX Group Member is engaged in any unfair
labor practice which would have a Material Adverse Effect;
(3) there are no complaints against any USMX Group
Member pending as of the date hereof before the National Labor
Relations Board or any similar foreign, state, or local labor
agency by or on behalf of any employee of any USMX Group Member
which would have a Material Adverse Effect; and
(4) there are no representation questions, arbitration
proceedings, labor strikes, slow-downs or stoppages, material
grievances, or other labor troubles pending or, to the knowledge
of USMX, threatened as of the date hereof with respect to the
employees of any USMX Group Member which would have a Material
Adverse Effect.
II.13 Contracts, Etc.
(a) Except as set forth in Exhibit 2.13, all Contracts to
which any USMX Group Member is a party or by which any USMX Group
Member is bound are valid and in full force and effect and
constitute the legal, valid, and binding obligations of such USMX
Group Member and, to the knowledge of USMX, the other parties
thereto; and there are no existing defaults by any USMX Group
Member or, to the knowledge of USMX, by any other party
thereunder; and no event, act, or omission has occurred which
(with or without notice, lapse of time, or the happening or
occurrence of any other event) would result in a default
thereunder which has had, or which is reasonably likely to have,
a Material Adverse Effect. To the knowledge of USMX, no other
party to any such Contract has asserted the right to renegotiate
the material terms or conditions of any such Contract.
(b) Except as set forth in Exhibit 2.13, to the knowledge
of USMX, all Contracts of the USMX Group are listed in the USMX
SEC Reports except the following:
(1) employment agreements terminable at will and
Contracts for miscellaneous services terminable at will, in each
case without the necessity of payment of any material penalty,
bonus, severance payment, or additional compensation (other than
liabilities accruing to the effective date of such termination);
(2) Contracts with customers, distributors, and
suppliers; and
(3) other Contracts involving aggregate liabilities
under all such Contracts providing for future payments by any
USMX Group Member of not more than US$50,000 individually and of
not more than US$250,000 in the aggregate.
(c) USMX has heretofore delivered or made available to
Dakota and Merger Corp true, correct, and complete copies of all
Contracts required to be listed pursuant to Section 2.13.
II.14 Absence of Certain Changes, Etc. Except as described
in Exhibit 2.14, and except for any actions required to be
performed by USMX or otherwise permitted pursuant to this
Agreement, since December 31, 1996
(a) there has been no Material Adverse Change in the
results of operations or financial condition of the USMX Group
(taken as a whole) from that reflected in the Interim USMX
Financial Statements;
(b) no USMX Group Member has:
(1) sold, transferred, distributed, or otherwise
disposed of any of its assets, or agreed to do any of the
foregoing, except in the ordinary course of business;
(2) made or agreed to make any capital expenditure or
commitment for additions to property, plant, or equipment, except
for expenditures and commitments in accordance with budgets
heretofore approved by the USMX Group or otherwise not in excess
of US$50,000 in the aggregate;
(3) experienced any damage, destruction, or loss to or
of any of its assets, whether or not covered by insurance,
exceeding US$50,000 in the aggregate;
(4) made or agreed to make any increase in the
compensation payable to any employee, except for increases made
in the ordinary course of business and consistent with presently
existing policies or agreements;
(5) conducted its operations otherwise than in due
course;
(6) entered into any transaction or Contract, or
amended or terminated any transaction or Contract, except
transactions or Contracts entered into in the ordinary course of
business in arm's-length transactions;
(7) effected any material change in the practices
followed by the USMX Group in calculating bad debts,
contingencies, or other reserves from that reflected in the
Interim USMX Financial Statements; or
(8) agreed or committed to do any of the foregoing.
II.15 Subsidiaries.
(a) Exhibit 2.15(a) sets forth with respect to each
subsidiary of USMX
(1) the date and jurisdiction of its incorporation;
(2) the number and class of shares of its equity
securities;
(3) its equity securities owned, directly or
indirectly, by USMX;
(4) the number of its equity securities owned,
directly or indirectly, by any person other than USMX;
(5) a description of any limitations on USMX's ability
to vote, pledge or alienate such equity securities; and
(6) a description of any agreements containing any
right of first negotiation or refusal, options, or warrants with
respect to the equity securities of such subsidiary owned by any
person other than USMX.
(b) Except as set forth in Exhibit 2.15(b), all of the
outstanding shares of capital stock of each USMX Group Member
(other than USMX) owned of record and beneficially by USMX are so
owned free and clear of all Liens. Except with respect to the
subsidiaries listed in Exhibit 2.15(a), USMX does not own,
directly or indirectly, any equity securities or interests of or
in any entity or enterprise organized under the Laws of the
United States, any state thereof, the District of Columbia,
Canada, any province thereof, or any other domestic or foreign
jurisdiction.
(c) All outstanding shares of the capital stock of or other
equity interests in each USMX Group Member (other than USMX) have
been duly authorized and are validly issued, fully paid, and
nonassessable, and no Liability attaches to the ownership thereof
(except Liabilities imposed by Law).
(d) Except as described in Exhibit 2.15(d), there are no
authorized, outstanding, or existing
(1) proxies, voting trusts, or other agreements or
understandings with respect to the voting of any capital stock of
any USMX Group Member (other than USMX);
(2) securities convertible into or exchangeable for
any capital stock of any USMX Group Member (other than USMX);
(3) options, warrants, or other rights to purchase or
subscribe for any capital stock of, or securities convertible
into or exchangeable for any capital stock of, any USMX Group
Member (other than USMX);
(4) agreements of any kind relating to the issuance of
any capital stock of any USMX Group Member (other than USMX), any
such convertible or exchangeable securities or any such options,
warrants, or rights;
(5) agreements of any kind which may obligate any USMX
Group Member (other than USMX) to issue or purchase any of its
securities; or
(6) agreements containing any right of first
negotiation or refusal with respect to the equity securities of
any USMX Group Member (other than USMX).
(e) Exhibit 2.15(e) lists the name of each subsidiary of
USMX since January 1, 1990 not listed on Exhibit 2.15(a). The
USMX Group has no Liabilities with respect to the ownership or
disposition of any such subsidiaries.
II.16 Capitalization and Title to Shares.
(a) The authorized capital stock of USMX consists of
45,000,000 USMX Shares, of which 16,184,182 shares were
outstanding as of December 31, 1996, and 20,000,000 shares of
preferred stock, par value $.001 per share, of which no shares
are outstanding as of the date hereof.
(b) The USMX Shares constitute all of the outstanding
shares of all classes of the capital stock of USMX.
(c) The USMX Shares have been duly authorized and are
validly issued, fully paid, and nonassessable, and no Liability
attaches to the ownership thereof.
(d) Except as described in Exhibit 2.16, there are no
authorized, outstanding, or existing:
(1) voting trusts or other agreements or
understandings with respect to the voting of any USMX Shares, or
to the knowledge of USMX, proxies;
(2) securities convertible into or exchangeable for
any USMX Shares;
(3) options, warrants, or other rights to purchase or
subscribe for any USMX Shares or securities convertible into or
exchangeable for any USMX Shares;
(4) agreements of any kind relating to the issuance of
any USMX Shares, any such convertible or exchangeable securities,
or any such options, warrants, or rights; or
(5) agreements of any kind which may obligate USMX to
issue or purchase any of its securities.
II.17 Environmental Matters. Except as to the matters
described in the environmental reports and other documents
described in Exhibit 2.17, if any:
(a) there exists no Environmental Condition which is
reasonably likely to result in any Liability to, or would have a
Material Adverse Effect on, the USMX Group; and
(b) each of the USMX Group Members has duly filed all
material reports, returns, and filings required to be filed by it
with any Government, and has obtained all material Governmental
permits and licenses and other Governmental consents which are
required in connection with the businesses of the USMX Group
relating to an Environmental Condition and Environmental Laws.
II.18 Brokers. Except for fees and expenses payable to
Newcrest Capital Corp. in an amount mutually agreeable to the
Parties, the USMX Group, their Affiliates, and their respective
Advisers have not retained any broker or finder in connection
with the Transactions, nor have any of the foregoing incurred any
Liability to any broker or finder by reason of the Transactions.
II.19 Officers and Directors. Exhibit 2.19 is a list of the
names and addresses of all officers and directors of each USMX
Group Member.
II.20 Fairness of Transaction. USMX believes that the
transaction contemplated by this Agreement is fair to, and in the
best interests of, USMX and its stockholders.
II.21 Valid Issuance of New Stock. Upon consummation of the
Transactions, the shares of common stock of the Surviving
Corporation issued hereunder will be duly and validly authorized
and, when issued and delivered in accordance with the terms and
provisions of this Agreement and the Certificate of Merger as
provided for in Article I, will be fully paid and nonassessable.
At the Closing, USMX will have the power to issue the new shares
of Common Stock of the Surviving Corporation free and clear of
all liens, encumbrances, security agreements, equities, options,
claims, charges, and restrictions, except for generally
applicable restrictions imposed under applicable securities laws.
II.22 No Misstatements or Omissions. The representations,
warranties, and statements made by USMX in this Agreement, the
Exhibits, and the documents and information furnished by USMX to
Dakota or Merger Corp in connection with the Transactions, when
considered both in the aggregate and individually, and both in
light of the circumstances under which those representations,
warranties, and statements were made and in light of the
circumstances as of the date of this Agreement, did not and do
not contain any untrue statement of a material fact, and did not
fail to state any material facts that are necessary in order to
make the statements contained in this Agreement, the Exhibits,
and the documents and information furnished to Dakota or Merger
Corp pursuant to the terms and conditions of this Agreement, not
misleading. There are no facts known to USMX which, either
individually or in the aggregate, could have a Material Adverse
Effect which have not been disclosed in this Agreement, the
Exhibits, or otherwise in writing to Dakota and Merger Corp.
II.23 USMX SEC Reports.
(a) USMX has delivered to Dakota the following: (1) its
Annual Report on Form 10-K for the year ended December 31, 1995,
(2) all of its Quarterly Reports on Form 10-Q for 1996, (3) all
of its Current Reports on Form 8-K filed with the SEC since
October 1, 1996, and (4) its Registration Statement on Form S-2,
as filed with the SEC in November, 1996 (in each case, with all
amendments thereto and documents incorporated by referenced
therein, excluding preliminary materials, the "USMX SEC
Reports").
(b) Except as set forth in Exhibit 2.23, as of its
respective filing date, each USMX SEC Reports complied in all
material respects with the requirements of the laws, rules, and
regulations applicable to such USMX SEC Report, including,
without limitation, the Securities Act and the Exchange Act.
(c) Except as set forth in Exhibit 2.23, as of its
respective filing date, no USMX SEC Report contained any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(d) Except as set forth in Exhibit 2.23, each USMX SEC
Report, as amended or supplemented, if applicable, as of the date
of such USMX SEC Report or amendment became effective, did not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading.
II.24 Information in Disclosure Documents. None of the
information with respect to any USMX Group Member to be included
or incorporated by reference in the Joint Proxy/ Registration
Statement will (a) at the respective times such documents are
filed with the SEC and (b)(1) in the case of the Joint Proxy
Statement or any amendments thereof or supplements thereto, at
the time of the mailing of the Joint Proxy Statement and any
amendments or supplements thereto and at the times of the USMX
Stockholders' Meeting and the Dakota Shareholders' Meeting or (2)
in the case of the Registration Statement or any amendments
thereof or supplements thereto, at the time it becomes effective
and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading, or necessary to correct any statement in any
earlier filing with the SEC of the Joint Proxy/Registration
Statement or any amendment thereof or supplement thereto or any
earlier communication to stockholders of USMX or shareholders of
Dakota with respect to the Transactions; provided, however, that
this provision shall not apply to statements or omissions in the
Joint Proxy/Registration Statement based upon information
furnished by Dakota or Merger Corp for use therein. The Joint
Proxy Statement will comply as to form in all material respects
with the applicable provisions of the Exchange Act and the
Securities Act relating to the USMX Stockholders' Meeting and the
issuance of the Dakota Shares.
II.25 No Knowledge of Breach of Representations and
Warranties of Merger Corp. USMX has no knowledge of any breach
by Dakota or Merger Corp of any of the representations and
warranties contained in Article III.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DAKOTA AND MERGER CORP
Dakota and Merger Corp make the following representations and
warranties to USMX. However, certain matters disclosed on any
Exhibit hereto may not be required to be disclosed therein, but
may be stated therein for information purposes only, and no such
disclosure shall constitute an indication or admission of the
materiality thereof or create a standard of disclosure, and no
representation or warranty shall be deemed to have been made by
Dakota or Merger Corp by reason of the inclusion of such matters.
Further, no representation or warranty shall be deemed to have
been made by Dakota or Merger Corp by virtue of any disclosures
made on, or contained in, any Exhibit hereto except to the extent
expressly made in this Article III.
III.1 Organization and Good Standing.
(a) Each Dakota Group Member is a corporation duly
organized, validly existing, and in good standing under the Laws
of the jurisdiction of its incorporation and is qualified to
transact business and is in good standing as a foreign
corporation in the jurisdictions (which are listed in Exhibit
3.1) where it is required to qualify in order to conduct its
business as presently conducted, and where the failure to be so
qualified would have a Material Adverse Effect. Except as listed
in Exhibit 3.1, there are no subsidiaries of Dakota, none of
Dakota's subsidiaries has any subsidiaries, and since December
31, 1991, neither Dakota nor any of its subsidiaries has had any
subsidiaries.
(b) Each Dakota Group Member has the corporate power and
authority to own, lease, or operate its properties and to carry
on its business as now conducted.
(c) Dakota has heretofore delivered or made available to
USMX complete and correct copies of Dakota's and its
subsidiaries' respective Certificates or Articles of
Incorporation (or like charter document) and By-laws, as each has
been amended and is in effect on the date hereof.
III.2 Consents, Authorizations, and Binding Effect.
(a) Dakota and Merger Corp may execute, deliver, and
perform this Agreement without the necessity of any Dakota Group
Member obtaining any consent, approval, authorization, or waiver,
or giving any notice or otherwise, except for such consents,
approvals, authorizations, waivers, and notices:
(1) disclosed in Exhibit 3.2;
(2) which, with respect to consents, approvals,
authorizations, and waivers, have been obtained and are
unconditional, and are in full force and effect, and which, with
respect to notices, have been given; or
(3) approval of the Dakota shareholders in accordance
with applicable Law to be obtained pursuant to Section 6.9.
(b) Each of Dakota and Merger Corp has the full corporate
power and authority to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the
Transactions.
(c) This Agreement and Transactions have been duly
authorized by the respective boards of directors of Dakota and
Merger Corp, as applicable. This Agreement has been duly
executed and delivered by Dakota and Merger Corp and constitutes
the legal, valid, and binding obligation of Dakota and Merger
Corp, enforceable against each in accordance with its terms,
except
(1) as may be limited by bankruptcy, reorganization,
insolvency and similar Laws of general application relating to or
affecting the enforcement of creditors' rights or the relief of
debtors; and
(2) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(d) The execution, delivery, and performance of this
Agreement by Dakota and Merger Corp will not
(1) constitute a violation of the respective
Certificates or Articles of Incorporation (or like charter
documents) or By-laws, each as amended, of any Dakota Group
Member;
(2) subject to obtaining any consent, approval,
authorization, or waiver described in Exhibit 3.2, conflict with,
result in the breach of, or constitute a default under any
Contract which would have a Material Adverse Effect;
(3) constitute a material violation of any Law
applicable or relating to any Dakota Group Member or the
businesses of the Dakota Group; or
(4) subject to obtaining any consent, approval,
authorization, or waiver described in Exhibit 3.2, result in the
creation of any Lien upon any of the assets of any Dakota Group
Member.
III.3 Minute and Stock Transfer Books. The minute books of
each Dakota Group Member fairly reflect the corporate actions of
the respective boards of directors and the shareholders of each
such Dakota Group Member. The stock transfer books of each
Dakota Group Member are correct, complete, and current, and all
documentary and stock transfer tax stamps required in connection
with the issuance and transfer of shares of the capital stock of
each Dakota Group Member, if any, have been duly paid, affixed,
and canceled.
III.4 Financial Statements and Financial Condition.
(a) The Dakota Group has maintained its accounting books
and records in all material respects in compliance with the
Foreign Corrupt Practices Act, as amended.
(b) Except as described in Exhibit 3.4(b), the accounting
books and records of the Dakota Group during the periods covered
by the 1995 Dakota Financial Statements and the Interim Dakota
Financial Statements fairly reflect in all material respects the
items of income and expense and the assets and liabilities of the
Dakota Group, including the nature thereof and the transactions
giving rise thereto (to the extent normally reflected in the
accounting books and records of the Dakota Group) and provided a
fair basis for the preparation of the 1995 Dakota Financial
Statements and the Interim Dakota Financial Statements.
(c) Attached as Exhibit 3.4(c) are the Interim Dakota
Financial Statements.
(d) The 1995 Dakota Financial Statements have been prepared
in accordance with Canadian GAAP.
(e) The 1995 Dakota Financial Statements and the Interim
Dakota Financial Statements are correct and complete in all
material respects and present fairly in accordance with Canadian
GAAP (except that the Interim Dakota Financial Statements may not
contain notes and may be subject to year-end adjustments) the
financial position of the Dakota Group as of the dates of such
financial statements and the results of operations and cash flows
of the Dakota Group for the periods covered by such financial
statements.
(f) The Dakota Group has no liabilities (absolute,
contingent, or otherwise) required under Canadian GAAP to be set
forth on a consolidated balance sheet (or in the notes thereto)
of the Dakota Group, other than:
(1) those set forth, reserved against, or described on
or in the Interim Dakota Balance Sheet (or in the notes thereto)
or the Interim Dakota Financial Statements;
(2) those incurred by the Dakota Group in the ordinary
course of business since the date of the Interim Dakota Balance
Sheet;
(3) obligations to be performed after the date hereof
based on the operations of any Dakota Group Member after the date
hereof under any Contract of such Dakota Group Member; and
(4) those described or disclosed on, or which may
arise out of or with respect to the matters or Contracts
described or disclosed on, the Exhibits to this Agreement, or
those which may arise out of or with respect to matters or
Contracts that would be required to be disclosed on such Exhibits
but for the limitations on such disclosure contained in the
representations and warranties relating to such Exhibits.
III.5 Title and Condition of Assets.
(a) Exhibit 3.5(a) lists all of the real property owned by
the Dakota Group in fee simple and all unpatented mining claims,
real property leases, and concessions in which any Dakota Group
Member has a right or interest; provided that Exhibit 3.5 (a)
does not list any real property interests in which the Dakota
Group has any right or interest pursuant to The Golden Reward
Mining Co., L.P. or The Cactus Gold Mines Company Joint Venture,
and Dakota and Merger Corp make no representation or warranty
with respect thereto.
(b) To the knowledge of Dakota and Merger Corp, except as
described in Exhibit 3.5(b),
(1) the Dakota Group has good and sufficient title to
all real property owned by it in fee simple, and is in exclusive
possession thereof, free and clear of Liens other than Permitted
Liens and statutory Liens not yet delinquent;
(2) the Dakota Group has good and sufficient title to
all material tangible personal property owned by it free and
clear of Liens other than Permitted Liens and statutory Liens not
yet delinquent;
(3) with respect to the unpatented mining claims in
which any Dakota Group Member has a right or interest,
(A) such claims were properly laid out and staked
and properly recorded and filed with appropriate Governmental
agencies and, subject to paramount title of the United States,
are free and clear of Liens other than Permitted Liens and
statutory Liens not yet delinquent;
(B) all required assessment work has been
performed and all affidavits of assessment work and other filings
required to maintain such claims in good standing have been
properly and timely recorded and filed with appropriate
Governmental agencies;
(C) all claim maintenance and claim rental fees
and all taxes assessed against such claims have been timely paid;
and
(D) there are no conflicting claims;
provided that Dakota and Merger Corp make no representation that
there has been a discovery of minerals on each of the unpatented
mining claims; and
(4) with respect to concessions held by the Dakota
Group, if any, all acts and payments necessary to obtain and
maintain such concessions in good standing have been timely made
or performed.
(c) To the knowledge of Dakota and Merge Corp, all mineral
production rights or other royalties of any sort whatsoever which
are payable with respect to any real property in which any Dakota
Group Member has a right or interest are described in Exhibit
3.5(c).
(d) To the knowledge of Dakota and Merger Corp, no
improvement or structure on any real property owned or leased by
any Dakota Group Member encroaches to any material extent on any
adjacent property or conflicts with the rights of any owner
thereof.
(e) The material improvements, fixtures, and appurtenances
on or to the property and the material tangible assets, owned or
leased and used by any Dakota Group Member, are in substantially
good operating condition, order, and repair, subject to ordinary
wear and tear, except as described in Exhibit 3.5(e). Since
December 31, 1996, none of the assets of any Dakota Group Member
has been affected by any fire, accident, act of God, or any other
casualty that has had a Material Adverse Effect. All of the
material assets used by any Dakota Group Member in its businesses
are owned or leased by such Dakota Group Member.
(f) The businesses of the Dakota Group as conducted by the
Dakota Group Members in any jurisdiction are not conducted under
any material restriction imposed in any such jurisdiction upon
the Dakota Group Members (but not imposed upon other persons
conducting similar businesses or operating similar assets for
similar purposes in the same jurisdictions where the businesses
and assets of the Dakota Group are located) by any zoning,
anti-pollution, health, or other Law.
III.6 Insurance.
(a) Exhibit 3.6 contains a list of all material policies of
insurance maintained by the Dakota Group, including insurance
providing benefits for employees, in effect on the date hereof
and generally describing the coverage thereby.
(b) Except for amounts deductible under the policies of
insurance described, or as otherwise disclosed, in Exhibit 3.6,
no Dakota Group Member is or has been at any time since December
31, 1994, subject to any Liability as a self-insurer of the
businesses and assets of the Dakota Group, in respect of
insurance of the type customarily carried by businesses of the
type engaged in by the Dakota Group in the jurisdictions where
the Dakota Group maintains offices, which could have a Material
Adverse Effect.
(c) There are no material coverage disputes with
underwriters pending or, to the knowledge of Dakota threatened,
and all premiums due and payable have been timely paid and all
such material policies are in full force and effect in accordance
with their respective terms (however, no representation or
warranty is made as to the solvency or financial condition of any
underwriter or issuer of such policy).
III.7 Litigation and Compliance.
(a) Except as described in Exhibit 3.7(a), and except for
actions, suits, claims, and proceedings where the damages
asserted by the plaintiff in such actions, suits, claims, or
proceedings would not have a Material Adverse Effect or where
insurance proceeds will be actually available (subject to
applicable deductibles) for such actions, suits, claims, and
proceedings:
(1) as of the date of this Agreement, there are no
actions, suits, claims or proceedings, whether in equity or at
law, or Governmental investigations pending or, to the knowledge
of Dakota or Merger Corp, threatened against any Dakota Group
Member or with respect to any asset or property owned, leased, or
used by any Dakota Group Member; and
(2) there are no actions, suits, claims, or
proceedings, whether in equity or at law, or Governmental
investigations pending or, to the knowledge of Dakota or Merger
Corp, threatened which question or challenge the validity of this
Agreement or any action taken or to be taken pursuant to this
Agreement.
(b) Each Dakota Group Member is in compliance with, and is
not in default or violation under, any Law applicable to the
businesses or operations of the Dakota Group, including without
limitation all safety and health Laws (but excluding any
Environmental Law), except for noncompliances, defaults, and
violations which would not, in the aggregate, have a Material
Adverse Effect, and no Dakota Group Member has received any
notice of the same.
(c) Except as described in Exhibit 3.7(c), no Dakota Group
Member, no material assets of any Dakota Group Member, nor the
Transactions are subject to any judgment, order, or decree
entered in any lawsuit or proceeding which has had, or which is
reasonably likely to have, a Material Adverse Effect or which
would prevent Dakota or Merger Corp from performing its
obligations under this Agreement. Each Dakota Group Member
subject to any such judgment, order, or decree is in compliance
in all material respects with, and is not in default or violation
in any material respect under, any such judgment, order, or
decree.
(d) Except as described in Exhibit 3.7(d), and except as
may be required under any Environmental Law, each Dakota Group
Member has duly filed all reports and returns required to be
filed by it with Governmental authorities and obtained all
Governmental permits and licenses and other Governmental consents
which are required in connection with the businesses and
operations of the Dakota Group, the failure of which would have a
Material Adverse Effect. All of such material permits, licenses,
and consents are in full force and effect, and to the knowledge
of Dakota or Merger Corp no proceedings for the suspension or
cancellation of any of them are pending or threatened.
(e) Neither Dakota nor Merger Corp nor, to the knowledge of
Dakota or Merger Corp, any other Dakota Group Member, either on
its own behalf, or on behalf of any of its respective officers,
agents, consultants, or employees, has
(1) made or agreed to make any contributions,
payments, or gifts of their funds or property to any Governmental
official, employee, or agent where the payment of such
contribution, payment, or gift was illegal under any applicable
Law;
(2) established or maintained any unrecorded fund or
asset for any such purpose, or made any intentional false or
artificial entry on any of its books or records in connection
with any such activity; or
(3) made or agreed to make any contribution, or
reimbursed any political gift or contribution made by any other
person, to candidates for public office, whether federal, state,
local, or foreign, where such contribution was a violation of
applicable Law by any Dakota Group Member.
III.8 Taxes. The Dakota Group has paid in all material
respects on or before the due date thereof, or accrued in all
material respects on the 1995 Dakota Financial Statements, all
federal, state, local, and foreign Taxes for all periods ending
on or prior to December 31, 1996. The Dakota Group has made
provision (subject to year-end audit adjustments) in all material
respects on its accounting books and on the Interim Dakota
Balance Sheet for all federal, state, local, and foreign Taxes
accruing since the date of the 1995 Dakota Financial Statements.
As of the Effective Time, the Dakota Group will have duly and
timely filed all Tax reports and returns required to be filed by
any Dakota Group Member on or before such date (subject to
extensions which have been granted to such Dakota Group Member or
extensions to which such Dakota Group Member is entitled under
then applicable Laws); and all such Tax reports and returns were,
or will be, complete and correct in all material respects.
III.9 Intangible Assets. Neither Dakota nor any Dakota Group
Member owns or has any proprietary interest in any domestic or
foreign patents, patent applications, trademarks, trademark
registrations, applications for trademark registrations, trade
names, or copyrights.
III.10 Pension and Other Employee Plans and Agreements.
(a) Exhibit 3.10 sets forth all Employee Plans maintained
by each Dakota Group Member, and Dakota has furnished or made
available to USMX true and complete copies of all such Employee
Plans as amended and in effect on the date hereof.
(b) To the knowledge of Dakota and Merger Corp,
(1) the execution and delivery of this Agreement by
Dakota and the consummation of the Transactions do not constitute
and will not result in any "prohibited transaction" within the
meaning of ERISA or 4975 of the Tax Code;
(2) each Employee Plan of the Dakota Group and any
related trust agreements, annuity contracts, insurance contracts,
or other funding instruments are currently, and have been in the
past, in compliance in all material respects with the
requirements of applicable Laws as to the form, operation, and
administration of such plans;
(3) all reports, notices, and applications relating
thereto required by any Governmental agency have been in all
material respects timely filed;
(4) all contributions required to be made on or before
the date hereof to each such Employee Plan under the terms of
such plan, ERISA, the Tax Code or other applicable law have been
in all material respects timely made;
(5) no Dakota Group Member has incurred, or will incur
as a result of the Transactions, any Liability (except for
premiums) to the Pension Benefit Guaranty Corporation; and
(6) none of the Employee Plans of the Dakota Group is
a "Multi-employer Plan" (as such term is defined in 3(37) of
ERISA); and
(c) There are no actions, suits, claims or proceedings,
whether in equity or at law, or Governmental investigations
pending or, to the knowledge of Dakota or Merger Corp, threatened
against or with respect to any Employee Plan of the Dakota Group
or any assets of any such Employee Plan.
III.11 Labor Relations.
(a) No employees of any Dakota Group Member are covered by
any collective bargaining agreement.
(b) Each Dakota Group Member has complied with all
applicable Laws (including without limitation ERISA and Laws
governing foreign employee benefit and pension plans) relating to
the employment of labor, including without limitation those
relating to wages, hours, unfair labor practices, discrimination,
payment of social security, and similar Taxes, where the failure
to be in compliance would have a Material Adverse Effect.
(c) No Dakota Group Member is engaged in any unfair labor
practice which would have a Material Adverse Effect.
(d) There are no complaints against any Dakota Group Member
pending as of the date hereof before the National Labor Relations
Board or any similar foreign, state, or local labor agency by or
on behalf of any employee of any Dakota Group Member which would
have a Material Adverse Effect.
(e) There are no representation questions, arbitration
proceedings, labor strikes, slow-downs or stoppages, material
grievances, or other labor troubles pending or, to the knowledge
of Dakota or Merge Corp, threatened as of the date hereof with
respect to the employees of any Dakota Group Member which would
have a Material Adverse Effect.
III.12 Contracts, Etc.
(a) Except as set forth in Exhibit 3.12, all Contracts to
which any Dakota Group Member is a party or by which any Dakota
Group Member is bound are valid and in full force and effect and
constitute the legal, valid, and binding obligations of such
Dakota Group Member and, to the knowledge of Dakota and Merger
Corp, the other parties thereto; and there are no existing
defaults by any Dakota Group Member or, to the knowledge of
Dakota, by any other party thereunder; and no event, act, or
omission has occurred which (with or without notice, lapse of
time, or the happening or occurrence of any other event) would
result in a default thereunder which has had, or which is
reasonably likely to have, a Material Adverse Effect. To the
knowledge of Dakota and Merger Corp, no other party to any such
Contract has asserted the right to renegotiate the material terms
or conditions of any such Contract.
(b) Except as listed in Exhibit 3.12, to the knowledge of
Dakota and Merger, all Contracts of the Dakota Group are listed
in the Dakota SEC Reports except the following:
(1) employment agreements terminable at will and
Contracts for miscellaneous services terminable at will, in each
case without the necessity of payment of any material penalty,
bonus, severance payment, or additional compensation (other than
liabilities accruing to the effective date of such termination);
(2) Contracts with customers, distributors, and
suppliers; and
(3) other Contracts involving aggregate liabilities
under all such Contracts providing for future payments by any
Dakota Group Member of not more than US$50,000 individually and
of not more than US$250,000 in the aggregate.
(c) Dakota has heretofore delivered or made available to
USMX true, correct, and complete copies of all Contracts required
to be listed pursuant to Section 3.12(b).
III.13 Absence of Certain Changes, Etc. Except as described
in Exhibit 3.13, and except for any actions required to be
performed by Dakota or Merger Corp or otherwise permitted
pursuant to this Agreement, since December 31, 1996
(a) there has been no Material Adverse Change in the
results of operations or financial condition of the Dakota Group
(taken as a whole) from that reflected in the Interim Dakota
Financial Statements;
(b) no Dakota Group Member has:
(1) sold, transferred, distributed, or otherwise
disposed of any of its assets, or agreed to do any of the
foregoing, except in the ordinary course of business;
(2) made or agreed to make any capital expenditure or
commitment for additions to property, plant, or equipment, except
for expenditures and commitments in accordance with budgets
heretofore approved by the Dakota Group or otherwise not in
excess of US$50,000 in the aggregate;
(3) experienced any damage, destruction or loss to or
of any of its assets, whether or not covered by insurance,
exceeding US$50,000 in the aggregate;
(4) made or agreed to make any increase in the
compensation payable to any employee, except for increases made
in the ordinary course of business and consistent with presently
existing policies or agreements;
(5) conducted its operations otherwise than in due
course;
(6) entered into any transaction or Contract, or
amended or terminated any transaction or Contract, except
transactions or Contracts entered into in the ordinary course of
business in arm's-length transactions;
(7) effected any material change in the practices
followed by the Dakota Group in calculating bad debts,
contingencies, or other reserves from that reflected in the
Interim Dakota Financial Statements; or
(8) agreed or committed to do any of the foregoing.
III.14 Subsidiaries.
(a) Exhibit 3.14(a) sets forth with respect to each
subsidiary of Dakota,
(1) the date and jurisdiction of its incorporation;
(2) the number and class of shares of its equity
securities;
(3) its equity securities owned, directly or
indirectly, by Dakota;
(4) the number of its equity securities owned,
directly or indirectly, by any person other than Dakota;
(5) a description of any limitations on Dakota's
ability to vote, pledge, or alienate such equity securities; and
(6) a description of any agreements containing any
right of first negotiation or refusal, options, or warrants with
respect to the equity securities of such subsidiary owned by any
person other than Dakota.
(b) Except as set forth in Exhibit 3.14(b), all such
outstanding shares of capital stock of each Dakota Group Member
(other than Dakota) owned of record and beneficially by Dakota
are so owned free and clear of all Liens. Except with respect to
the subsidiaries listed in Exhibit 3.14(a), Dakota does not own,
directly or indirectly, any equity securities or interests of or
in any entity or enterprise organized under the Laws of the
United States, any state thereof, Canada, any province thereof,
the District of Columbia or any other domestic or foreign
jurisdiction.
(c) All outstanding shares of the capital stock of or other
equity interests in each such subsidiary have been duly
authorized and are validly issued, fully paid, and nonassessable,
and no Liability attaches to the ownership thereof (except
Liabilities imposed by Law).
(d) Except as described in Exhibit 3.14(d), there are no
authorized, outstanding, or existing:
(1) proxies, voting trusts, or other agreements or
understandings with respect to the voting of any capital stock of
any Dakota Group Member (other than Dakota);
(2) securities convertible into or exchangeable for
any capital stock of any Dakota Group Member (other than Dakota);
(3) options, warrants, or other rights to purchase or
subscribe for any capital stock of any Dakota Group Member (other
than Dakota) or securities convertible into or exchangeable for
any capital stock of any Dakota Group Member (other than Dakota);
(4) agreements of any kind relating to the issuance of
any capital stock of any Dakota Group Member (other than Dakota),
any such convertible or exchangeable securities or any such
options, warrants, or rights;
(5) agreements of any kind which may obligate any
Dakota Group Member (other than Dakota) to issue or purchase any
of its securities; or
(6) agreements containing any right of first
negotiation or refusal with respect to the equity securities of
any Dakota Group Member (other than Dakota).
(e) Dakota has had no subsidiaries since January 1, 1990
not listed in Exhibit 3.14(a).
III.15 Capitalization and Title to Shares.
(a) The authorized capital stock of Dakota consists of an
unlimited number of Dakota Shares, of which 35,479,742 shares
were outstanding as of December 31, 1996, and 20,000 preference
shares, no nominal or par value, of which no shares are
outstanding as of the date hereof.
(b) The Dakota Shares constitute all of the outstanding
shares of all classes of the capital stock of Dakota.
(c) The Dakota Shares have been duly authorized and are
validly issued, fully paid, and nonassessable, and no Liability
attaches to the ownership thereof.
(d) Except as described in Exhibit 3.15, there are no
authorized, outstanding, or existing:
(1) voting trusts or other agreements or
understandings with respect to the voting of any Dakota Shares,
or, to the knowledge of Dakota and Merger Corp, proxies;
(2) securities convertible into or exchangeable for
any Dakota Shares;
(3) options, warrants, or other rights to purchase or
subscribe for any Dakota Shares or securities convertible into or
exchangeable for any Dakota Shares;
(4) agreements of any kind relating to the issuance of
any Dakota Shares, any such convertible or exchangeable
securities or any such options, warrants, or rights; or
(5) agreements of any kind which may obligate Dakota
to issue or purchase any of its securities.
III.16 Environmental Matters. Except as to the matters
described in the environmental reports and other documents
described in Exhibit 3.16, if any:
(a) there exists no Environmental Condition which is
reasonably likely to result in any Liability to, or would have a
Material Adverse Effect on, the Dakota Group; and
(b) each Dakota Group Member has duly filed all material
reports, returns, and filings required to be filed by it with any
Government, and has obtained all material Governmental permits
and licenses and other Governmental consents which are required
in connection with the businesses of the Dakota Group relating to
an Environmental Condition and Environmental Laws.
III.17 Fairness of Transaction. Dakota and Merger Corp
believe that the transaction contemplated by this Agreement is
fair to, and in the best interests of Dakota, Merger Corp, and
Dakota's shareholders.
III.18 Valid Issuance of New Stock. Upon consummation of the
Transactions, the Dakota Shares issued hereunder will be duly and
validly authorized and, when issued and delivered in accordance
with the terms and provisions of this Agreement and the
Certificate of Merger as provided for in Article I, will be fully
paid and nonassessable. At the Closing, Dakota will have the
power to issue the new Dakota Shares free and clear of all liens,
encumbrances, security agreements, equities, options, claims,
charges, and restrictions, except for generally applicable
restrictions imposed under applicable securities laws.
III.19 No Misstatements or Omissions. The representations,
warranties and statements made by Dakota and Merger Corp in this
Agreement, the Exhibits, and the documents and information
furnished by Dakota and Merger Corp to USMX in connection with
the Transactions, when considered both in the aggregate and
individually, and both in light of the circumstances under which
those representations, warranties, and statements were made and
in light of the circumstances as of the date of this Agreement,
did not and do not contain any untrue statement of a material
fact, and did not fail to state any material facts that are
necessary in order to make the statements contained in this
Agreement, the Exhibits, and the documents and information
furnished to USMX pursuant to the terms and conditions of this
Agreement, not misleading. There are no facts known to Dakota or
Merger Corp which, either individually or in the aggregate, could
have a Material Adverse Effect which have not been disclosed in
this Agreement, the Exhibits, or otherwise in writing to USMX.
III.20 Dakota SEC Reports.
(a) Dakota has delivered to USMX the following: (1) its
Annual Report on Form 10-K for the year ended December 31, 1995,
(2) all of its Quarterly Reports on Form 10-Q for 1996, and (3)
all of its Current Reports on Form 8-K filed with the SEC since
October 1, 1996 (in each case, with all amendments thereto and
documents incorporated by referenced therein, excluding
preliminary materials, the "Dakota SEC Reports").
(b) Except as set forth in Exhibit 3.20, as of its
respective filing date, each Dakota SEC Report complied in all
material respects with the requirements of the laws, rules, and
regulations applicable to such Dakota SEC Report, including,
without limitation, the Securities Act and the Exchange Act.
(c) Except as set forth in Exhibit 3.20, as of its
respective filing date, no Dakota SEC Report contained any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(d) Except as set forth in Exhibit 3.20, each Dakota SEC
Report, as amended or supplemented, if applicable, as of the date
of the Dakota SEC Report or amendment became effective, did not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein not misleading.
III.21 Information in Disclosure Documents. None of the
information with respect to any Dakota Group Member to be
included or incorporated by reference in the Joint Proxy/
Registration Statement will (a) at the respective times such
documents are filed with the SEC and (b)(1) in the case of the
Joint Proxy Statement or any amendments thereof or supplements
thereto and at the time of the mailing of the Joint Proxy
Statement and any amendments or supplements thereto, at the times
of the Dakota Shareholders' Meeting and the USMX Stockholders'
Meeting or (2) in the case of the Registration Statement or any
amendments thereof or supplements thereto, at the time it becomes
effective and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading, or necessary to correct any statement in any
earlier filing with the SEC of the Joint Proxy/Registration
Statement or any amendment thereof or supplement thereto or any
earlier communication to stockholders of USMX or shareholders of
Dakota with respect to the Transactions; provided, however, that
this provision shall not apply to statements or omissions in the
Joint Proxy/Registration Statement based upon information
furnished by USMX for use therein. The Joint Proxy Statement
will comply as to form in all material respects with the
applicable provisions of the Exchange Act and the Securities Act
relating to the Dakota Shareholders' Meeting and the issuance of
the Dakota Shares.
III.22 No Knowledge of Breach of Representations and
Warranties of USMX. Neither Dakota nor Merger Corp has no
knowledge of any breach by USMX of any of the representations and
warranties contained in Article II.
ARTICLE IV
NO OTHER REPRESENTATIONS AND WARRANTIES
IV.1 No Other Representations and Warranties. None of USMX,
Dakota, or Merger Corp shall be deemed to have made to any Party,
or any of their respective Affiliates, any representation or
warranty other than as expressly made in Article II or Article
III, respectively (as such representations and warranties are
supplemented by the Exhibits relating thereto).
IV.2 Projections, Etc. Without limiting the generality of the
foregoing, but subject to the express representations and
warranties made by USMX in Article II and by Dakota and Merger
Corp in Article III, none of USMX, Dakota, or Merger Corp makes
any representation and warranty to any Party, or any of their
respective Affiliates, with respect to the following:
(a) any projections, estimates, or budgets heretofore
delivered to or made available to any Party, or any of their
respective Affiliates or Advisers, of future revenues, expenses,
or expenditures, results of operations (or any component thereof)
or financial condition (or any component thereof) or business and
operations; or
(b) any other information or documents made available to
any Party, or any of their respective Affiliates or Advisers,
with respect to business and operations, except to the extent
that such information or documents are set forth, disclosed, or
described on, or attached to, any Exhibit hereto; however,
certain matters disclosed on any Exhibit hereto may not be
required to be disclosed therein, but may be stated therein for
information purposes only, and no such disclosure shall
constitute an indication or admission of the materiality thereof
or create a standard of disclosure, and no representation or
warranty is shall be deemed to have been made by reason of the
inclusion of such matters.
ARTICLE V
USMX COVENANTS
From and after the date hereof and until the Closing Date (except
as hereinafter otherwise provided), unless Dakota and Merger Corp
shall otherwise agree in writing:
V.1 Access. USMX shall permit, and shall cause each USMX Group
Member to permit:
(a) Dakota, Merger Corp, and their Advisers to have
reasonable access to all properties, books, accounts, records,
Contracts, files, correspondence, tax records, and documents of
or relating to the USMX Group, and to discuss such matters with
the executive officers of the USMX Group; USMX shall make
available to Dakota, Merger Corp, and their Advisers a copy of
each report filed with the SEC and all other information
concerning its business and properties as Dakota may reasonably
request;
(b) Dakota and Merger Corp, at their sole cost and expense,
to conduct, or cause its agents to conduct, such reasonable
reviews, inspections, surveys, tests, and investigations of the
assets of the USMX Group as Dakota or Merger Corp deems necessary
or advisable;
(c) Dakota, Merger Corp, and their Advisers to consult with
the accountants for the USMX Group, and said accountants are
hereby authorized to disclose all information in their possession
to Dakota, Merger Corp, and their Advisers with respect to the
USMX Group and the businesses thereof; and
(d) Dakota, Merger Corp, and their Advisers to discuss the
proposed Merger with the employees of the USMX Group; provided
that representatives of USMX may be present during any such
discussions (except that Dakota and Merger Corp shall be free to
have discussions with those persons permitted pursuant to Section
5.1(c) without representatives of USMX being present) and
provided that such discussions are coordinated with
representatives of USMX as to the content of such proposed
discussions to assure that such discussions do not interfere
unreasonably with the business and operations of any USMX Group
Member or harm the relationship which any USMX Group Member has
with its employees;
provided, however, any investigation pursuant to this Section
shall be conducted in such manner as not to interfere
unreasonably with the businesses and operations of the USMX
Group.
V.2 Ordinary Course. Except as set forth in Exhibit 5.2, and
except for any actions required to be performed by USMX or
otherwise permitted pursuant to this Agreement, USMX shall (and
shall cause each USMX Group Member to) conduct its business only
in the ordinary and usual course in all material respects and use
all reasonable efforts to preserve its business organizations
intact and its existing relations with customers, suppliers,
employees, and business associates, and USMX shall not (and shall
cause each USMX Group Member not to) do any of the following:
(a) sell or pledge or agree to sell or pledge any capital
stock owned by it in any of its Subsidiaries;
(b) amend its Certificate of Incorporation (or like charter
documents) or By-laws;
(c) subdivide, split, combine, consolidate, or reclassify
any of its outstanding shares of capital stock;
(d) declare, set aside or pay any dividend or make any
other distribution payable in cash, shares, stock, securities or
property with respect to any of its shares of capital stock;
(e) repurchase, redeem, or otherwise acquire, directly or
indirectly, any of its capital stock or any securities
convertible into or exchangeable or exercisable into any of its
capital stock;
(f) enter into any material transaction not in the ordinary
course of its business consistent with past practice;
(g) issue, sell, pledge, dispose of, or encumber, or
authorize or propose the issuance, sale, pledge, disposition, or
encumbrance of, any of its capital stock, or any securities
convertible into or exchangeable or exercisable for, or options,
puts, warrants, calls, commitments or rights of any kind to
acquire, any of its shares of capital stock other than debentures
or notes convertible into USMX Shares as contemplated in clause
(h) below or USMX Shares issuable pursuant to securities
convertible into USMX Shares outstanding on the date hereof;
(h) transfer, lease, license, sell, mortgage, pledge,
encumber, or dispose of any property or assets or incur,
guarantee, assume, or modify any indebtedness or other liability
other than in the ordinary and usual course of business
consistent with past practice, other than convertible debentures
or notes issued by USMX or other indebtedness incurred by USMX in
an aggregate principal amount of up to US$3 Million on terms and
conditions acceptable to Dakota, acting reasonably;
(i) authorize capital expenditures other than in the
ordinary and usual course of business consistent with past
practice;
(j) make any material acquisition of, or investment in,
assets, shares, capital stock or other securities of any other
person or entity other than its wholly-owned Subsidiaries or in
the ordinary and usual course of business consistent with past
practice;
(k) except as may be required to satisfy contractual
obligations existing as of the date hereof and the requirements
of applicable Law, establish, adopt, enter into, make, amend in
any material respect, or make any material elections under any
collective bargaining agreement or Employee Plan;
(l) implement any change in its accounting principles,
practices, or methods, other than as may be required by generally
accepted accounting principles; and
(m) authorize or enter into any agreement to take any of
the actions referred to in this Section.
V.3 Representations and Warranties. USMX shall, and shall cause
each USMX Group Member to, refrain from doing, or causing to be
done, anything which would cause the representations and
warranties set forth in Article II from being true, complete, and
accurate in all material respects on the Closing Date as if made
on such date (except to the extent that such representations and
warranties are, by their terms, made expressly as of the date of
this Agreement).
V.4 Insurance. USMX shall use best efforts to continue to
insure the USMX Group and all property, real and personal, owned
or leased by any USMX Group Member substantially in accordance
with the manner set forth in Exhibit 2.6, and to use, operate,
maintain, and repair all property in accordance with prior
practice.
V.5 No Breach. USMX shall, and shall cause the USMX Group
Members to, refrain from doing any act or omitting to do any act,
or permitting any act or omission to act, which will cause a
material breach of any Contract or this Agreement.
V.6 Financial Statements. USMX shall furnish to Dakota within
30 days after the end of each fiscal month ending after the date
hereof an unaudited consolidated and consolidating balance sheet
and income statement of the USMX Group for each such period.
V.7 Litigation. USMX shall promptly notify Dakota in writing of
any action, written investigation, claim, action, suit, or
proceeding which is commenced against, by or relating to any USMX
Group Member or this Agreement before any court or Governmental
department, commission, board, bureau, agency, or
instrumentality.
V.8 Closing Conditions. USMX shall use best efforts to cause
all of the conditions to the obligations of Dakota and Merger
Corp under this Agreement to be satisfied on or prior to the
Closing Date (to the extent the satisfaction of such conditions
is within the control of the USMX Group).
V.9 Contracts. USMX shall use best efforts to cause the USMX
Group to consult with Dakota prior to entering into any Contract
not in the ordinary course of business.
V.10 USMX Stockholders' Approval. The board of directors of USMX
shall call a stockholders' meeting ("USMX Stockholders' Meeting")
to be held at the earliest practicable date following delivery of
the Joint Proxy Statement to the USMX stockholders for the
purpose of voting on the adoption of this Agreement and the
Transactions as required by the GCL and, to the extent
applicable, the Nasdaq National Market System. USMX shall use
its best efforts to obtain its stockholders' approval of the
foregoing, including without limitation specifically recommending
that its stockholders vote to approve the foregoing; provided,
however, that in the event of a third-party offer (which USMX
shall not encourage or solicit), and in all other instances, USMX
shall be free, with respect to its recommendation, to exercise
its fiduciary duties to its stockholders.
V.11 Rule 145 Affiliates. Prior to the Effective Time, USMX
shall cause to be delivered to Dakota a list identifying all
persons who might, at the time of the meeting of the USMX
Stockholders' Meeting, be deemed to be Securities Act Affiliates
of USMX. USMX shall use its reasonable efforts to cause each
person who is identified as a possible Securities Act Affiliate
to enter into prior to the Effective Time an agreement in the
form attached hereto as Exhibit 5.11 pursuant to which each such
Person acknowledges its responsibilities as such a Securities Act
Affiliate.
V.12 No Shop.
(a) From and after the date hereof until the Closing Date,
USMX shall not, and shall use its best efforts to ensure that no
other USMX Group Member or their respective directors do not, and
shall not permit the respective officers, employees,
representatives, and other Advisors of the USMX Group to,
directly or indirectly, (1) solicit, initiate, or engage in
discussions or negotiations with any person, encourage submission
of any inquiries, proposals, or offers by, or take any other
action intended or designed to facilitate the efforts of any
person, other than Dakota, relating to the possible acquisition
of, or business combination with, USMX or any of its Subsidiaries
(whether by way of merger, consolidation, take-over bid, tender
offer, purchase of shares, purchase of assets, or otherwise) or
any material portion of its or their shares of capital stock or
assets (with any such efforts by any such person, including a
firm proposal to make such an acquisition or combination, herein
referred to as a "Competing Transaction"), (2) provide non-public
information with respect to USMX or any USMX Group Member, or
afford any access to the properties, books, or records of the
same, to any Person, other than Dakota, relating to a possible
Competing Transaction by any person other than Dakota, (3) make
or authorize any statement, recommendation, or solicitation in
support of any possible Competing Transaction by any Person other
than by Dakota, or (4) enter into an agreement with any person,
other than Dakota, providing for a possible Competing
Transaction. The USMX Group and their respective directors,
officers, employees, representatives, and other Advisors shall
immediately cease any and all activities, discussions, or
negotiations with any parties conducted heretofore with respect
to any of the foregoing.
(b) Notwithstanding paragraph (a) above, prior to the
approval of the Merger by the holders of USMX Shares, nothing
contained in this Section shall prevent the Board of Directors of
USMX (or its agents pursuant to its instructions) from
(1) engaging in discussions or negotiations with (but not
soliciting or initiating such discussions or negotiations or
encouraging inquiries from) a party concerning an unsolicited
proposal for a Competing Transaction, (2) providing non-public
information with respect to the USMX Group that has previously
been provided to Dakota, or (3) making any statement or
recommendation in support of any Competing Transaction, in each
case if the USMX Board of Directors first determines in good
faith, after consultation with and receiving written advice from
its outside legal counsel (which advice need not constitute an
opinion), that such action is required by reason of the fiduciary
duties of the directors of USMX to the USMX stockholders under
applicable Law; provided that in each such event USMX first
notifies Dakota of such determination and provides Dakota with
the fact that it is furnishing information to, or entering into
discussions or negotiations with, a person or entity, and USMX
keeps Dakota informed of the status of any such discussions or
negotiations. If USMX or any USMX Group Member receives any
unsolicited offer or proposal to enter negotiations relating to a
Competing Transaction, USMX shall immediately notify Dakota
thereof. USMX shall be responsible for any breach of this
Section by any USMX Group Member or any of their respective
directors, officers, employees, representatives, or other
Advisors or Affiliates.
(c) Dakota may, in its sole discretion, prior to the
holding of USMX Stockholders' Meeting, amend the terms of this
Agreement to increase the consideration payable to holders of
USMX Shares pursuant thereto, by delivering such amended terms to
USMX before the holding of such meeting, provided that such
amendment shall not materially delay the consummation of the
Merger.
(d) Notwithstanding any other provisions hereof, USMX shall
not (1) enter into a Competing Transaction until at least (A) ten
Business Days following the first notification by USMX to Dakota
that it has entered into discussions with a third party in
respect of such Competing Transaction and (B) five Business Days
following delivery of written notice by USMX to Dakota of the
identity of the parties to and the terms and conditions of such
Competing Transaction or (2) for a period of ten Business Days
following termination of this Agreement pursuant to Section 11.2
hereof, grant or agree to grant to any third party, in connection
with a Competing Transaction, an option to purchase treasury
securities or assets of USMX or any USMX Group Member, pay or
agree to pay to any such third party, termination, expense
reimbursement, "topping" or similar fees in the event of non-
consummation of such Competing Transaction or otherwise commit to
any inducement to any such third party.
V.13 Cooperation. USMX shall, and shall use its best efforts to
cause the USMX Group to, cooperate with Dakota in all reasonable
respects in connection with the transaction described in Section
10.10 (including preparation and filing of preliminary and final
prospectuses in Canada in connection therewith).
ARTICLE VI
DAKOTA'S AND MERGER CORP'S COVENANTS
From and after the date hereof and until the Closing Date (except
as hereinafter otherwise provided), unless USMX shall otherwise
agree in writing:
VI.1 Access. Dakota and Merger Corp shall permit, and shall
cause each Dakota Group Member to permit:
(a) USMX and its Advisers to have reasonable access to all
properties, books, accounts, records, Contracts, files,
correspondence, tax records, and documents of or relating to the
Dakota Group and to discuss such matters with the executive
officers of the Dakota Group; Dakota shall make available to USMX
and its Advisers a copy of each report filed with the SEC and all
other information concerning its business and properties as USMX
may reasonably request;
(b) USMX, at its sole cost and expense, to conduct, or
cause its agents to conduct, such reasonable reviews,
inspections, surveys, tests, and investigations of the assets of
the Dakota Group as USMX deems necessary or advisable;
(c) USMX and its Advisers to consult with the accountants
for the Dakota Group, and said accountants are hereby authorized
to disclose all information in their possession to USMX and its
Advisers with respect to the Dakota Group and the businesses
thereof; and
(d) USMX and its Advisers to discuss the proposed Merger
with the employees of the Dakota Group; provided that
representatives of Dakota and Merger Corp may be present during
any such discussions (except that USMX shall be free to have
discussions with those persons permitted pursuant to Section
6.1(c) without representatives of Dakota or Merger Corp being
present), and provided that such discussions are coordinated with
representatives of Dakota or Merger Corp as to the content of
such proposed discussions to assure that such discussions do not
interfere unreasonably with the business and operations of any
Dakota Group Member or harm the relationship which any Dakota
Group Member has with its employees;
provided, however, any investigation pursuant to this Section
shall be conducted in such manner as not to interfere
unreasonably with the businesses and operations of the Dakota
Group.
VI.2 Ordinary Course. Except as set forth in Exhibit 6.2, and
except for any actions required to be performed by Dakota or
Merger Corp or otherwise permitted pursuant to this Agreement,
Dakota shall (and shall cause each Dakota Group Member to)
conduct its business only in the ordinary and usual course in all
material respects and use all reasonable efforts to preserve its
business organizations intact and its existing relations with
customers, suppliers, employees, and business associates, and
Dakota shall not (and shall cause each Dakota Group Member not
to) do any of the following:
(a) sell or pledge or agree to sell or pledge any capital
stock owned by it in any of its Subsidiaries;
(b) amend its Certificate of Incorporation (or like charter
documents) or By-laws;
(c) subdivide, split, combine, consolidate, or reclassify
any of its outstanding shares of capital stock;
(d) declare, set aside or pay any dividend or make any
other distribution payable in cash, shares, stock, securities or
property with respect to any of its shares of capital stock;
(e) repurchase, redeem, or otherwise acquire, directly or
indirectly, any of its capital stock or any securities
convertible into or exchangeable or exercisable into any of its
capital stock;
(f) enter into any material transaction not in the ordinary
course of its business consistent with past practice;
(g) issue, sell, pledge, dispose of, or encumber, or
authorize or propose the issuance, sale, pledge, disposition, or
encumbrance of, any of its capital stock, or any securities
convertible into or exchangeable or exercisable for, or options,
puts, warrants, calls, commitments or rights of any kind to
acquire, any of its shares of capital stock other than Dakota
Shares or securities directly or indirectly convertible into or
exchangeable or exercisable for Dakota Shares in connection with
the offering referenced in Section 9.7;
(h) transfer, lease, license, sell, mortgage, pledge,
encumber, or dispose of any property or assets or incur,
guarantee, assume, or modify any indebtedness or other liability
other than in the ordinary and usual course of business
consistent with past practice, other than convertible debentures
or notes issued by Dakota in connection with the offering
referenced in Section 9.7;
(i) authorize capital expenditures other than in the
ordinary and usual course of business consistent with past
practice;
(j) make any material acquisition of, or investment in,
assets, shares, capital stock or other securities of any other
person or entity other than its wholly-owned Subsidiaries or in
the ordinary and usual course of business consistent with past
practice;
(k) except as may be required to satisfy contractual
obligations existing as of the date hereof and the requirements
of applicable Law, establish, adopt, enter into, make, amend in
any material respect, or make any material elections under any
collective bargaining agreement or Employee Plan;
(l) implement any change in its accounting principles,
practices, or methods, other than as may be required by generally
accepted accounting principles; and
(m) authorize or enter into any agreement to take any of
the actions referred to in this Section.
VI.3 Representations and Warranties. Dakota shall, and shall
cause each Dakota Group Member to, refrain from doing, or causing
to be done, anything which would cause the representations and
warranties set forth in Article III from being true, complete,
and accurate in all material respects on the Closing Date as if
made on such date (except to the extent that such representations
and warranties are, by their terms, made expressly as of the date
of this Agreement).
VI.4 No Breach. Dakota shall, and shall cause the Dakota Group
Members to, refrain from doing any act or omitting to do any act,
or permitting any act or omission to act, which will cause a
material breach of any Contract or this Agreement.
VI.5 Financial Statements. Dakota shall furnish to USMX within 30
days after the end of each fiscal month ending after the date
hereof an unaudited consolidated and consolidating balance sheet
and income statement of the Dakota Group for each such period.
VI.6 Litigation. Dakota shall promptly notify USMX in writing of
any action, written investigation, claim, action, suit, or
proceeding which is commenced against, by or relating to any
Dakota Group Member or this Agreement before any court or
Governmental department, commission, board, bureau, agency, or
instrumentality.
VI.7 Closing Conditions. Dakota and Merger Corp shall use best
efforts to cause all of the conditions to the obligations of USMX
under this Agreement to be satisfied on or prior to the Closing
Date (to the extent the satisfaction of such conditions is within
the control of the Dakota Group).
VI.8 Contracts. Dakota shall use best efforts to cause the Dakota
Group to consult with USMX prior to entering into any Contract
not in the ordinary course of business.
VI.9 Dakota Shareholders' Approval. The board of directors of
Dakota shall call a shareholders' meeting ("Dakota Shareholders'
Meeting") to be held at the earliest practicable date following
delivery of the Joint Proxy Statement to the Dakota shareholders
for the purpose of voting on the adoption of this Agreement and
the Transactions as required by The Toronto Stock Exchange.
Dakota shall use its best efforts to obtain its shareholders'
approval of the foregoing, including without limitation
specifically recommending that its shareholders vote to approve
the foregoing; provided, however, that in the event of a third-
party offer (which Dakota shall not encourage or solicit), Dakota
shall be free, with respect to its recommendation, to exercise
its fiduciary duties to its shareholders.
VI.10 Stock Listing. Dakota shall cause the Dakota Shares to
be issued in connection with the Merger to be listed on The
Toronto Stock Exchange and the American Stock Exchange.
VI.11 Line of Credit. Dakota shall provide a line of credit
to USMX on the terms and subject to the conditions set forth in
Exhibit 6.11 on or prior to February 21, 1997, provided, however,
Dakota shall not be required to provide such line of credit
unless (a) the definitive agreements between USMX and Pegasus
Gold Corp., in form and substance acceptable to Dakota, with
respect to the disposition described in Section 8.8 have been
executed and delivered and (b) with respect to the offering
described in Section 9.7, Canaccord Capital Corporation has
consented to the release of US$5 million from escrow to Dakota.
If Dakota has not provided such line of credit to USMX on or
prior to February 21, 1997, USMX may terminate this Agreement
upon written notice to Dakota; provided, however, USMX may not
terminate this Agreement pursuant to the foregoing if Dakota,
USMX, and NM Rothschild & Sons Limited are in agreement (which
may include oral agreement to the reasonable satisfaction of
USMX) on all material terms and conditions of such line of credit
at February 21, 1997, and each such party thereafter is using and
continues to use reasonable efforts to document such agreement in
an extremely expeditious manner with no material change to the
material terms and conditions of such line of credit; and
provided further that USMX may not terminate this Agreement
pursuant to the foregoing once the line of credit has been
consummated.
VI.12 Employee Benefit Plans. Each of the Parties agrees to
use its reasonable efforts to coordinate the conversion or merger
of any employee benefit plans of USMX into Dakota plans, to the
extent that such plans may exist, to provide any and all
employees of the USMX Group who become employees of the Dakota
Group with the same employee benefits uniformly offered to
employees of such Dakota Group Member. Dakota shall use its best
efforts to ensure that any and all employees of the USMX Group
who become employees of the Dakota Group are not subject to any
pre-existing condition requirement under Dakota's medical
insurance plan.
VI.13 Indemnification; Directors' and Officers' Insurance.
(a) In the event of any threatened or actual claim, action,
suit, proceeding, or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim,
action, suit, proceeding, or investigation in which any person
who is now, or has been at any time prior to the date of this
Agreement, a director or officer of any USMX Group Member (for
purposes of this Section the "Indemnified Parties") is, or is
threatened to be, made a party based in whole or in part on, or
arising in whole or in part out of, or pertaining to (1) the fact
that he is or was a director or officer of any USMX Group Member
or any of their respective predecessors or is or was serving at
the request of any such party as a director, officer, employee,
fiduciary, or agent of another corporation, partnership, trust or
other enterprise, or (2) this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Time, the appropriate
Dakota Group Member will after the Effective Time cooperate and
use its best efforts to defend against and respond thereto. It
is understood and agreed that after the Effective Time, the
appropriate Dakota Group Member shall indemnify and hold harmless
(as and to the full extent permitted by applicable Law and to the
full extent USMX would have been required to indemnify such
Indemnified Party had such claim, action, suit, proceeding, or
investigation been finally determined prior to the Effective
Time) each such Indemnified Party against any Liability or
Penalty in connection with any such threatened or actual claim,
action, suit, proceeding, or investigation, and shall advance
reasonable litigation expenses incurred by Indemnified Parties,
and in the event of any such threatened or actual claim, action,
suit, proceeding, or investigation (whether asserted or arising
before or after the Effective Time), the Indemnified Parties may
retain counsel reasonably satisfactory to them after consultation
with Dakota; provided, however, (A) the indemnifying entity shall
have the right to assume the defense thereof and upon such
assumption the appropriate Dakota Group Member shall not be
liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any
Indemnified Party in connection with the defense thereof, except
that if the indemnifying entity elects not to assume such defense
or counsel for the Indemnified Parties reasonably advises that
there are issues which raise conflicts of interest between the
indemnifying entity and the Indemnified Parties, the Indemnified
Parties may retain counsel reasonably satisfactory to them after
consultation with Dakota, and the indemnifying entity shall pay
the reasonable fees and expenses of such counsel for the
Indemnified Parties, (B) the indemnifying entity shall be
obligated pursuant to this paragraph to pay for only one firm of
counsel for all Indemnified Parties, (C) the indemnifying entity
shall not be liable for any settlement effected without its prior
written consent, and (D) the indemnifying entity shall have no
obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable Law. Any
Indemnified Party wishing to claim Indemnification under this
Section, upon learning of any such claim, action, suit,
proceeding or investigation, shall notify Dakota thereof,
provided that the failure to so notify shall not affect the
obligations of the indemnifying entity under this Section except
to the extent such failure to notify materially prejudices such
indemnifying entity. The obligations under this Section shall
continue in full force and effect for a period of six years from
the Effective Time; provided, however, that all rights to
indemnification in respect of any claim asserted or made within
such period shall continue until the final disposition of such
claim.
(b) Dakota shall use commercially reasonable efforts to
cause the persons serving as officers and directors of USMX
immediately prior to the Effective Time to be covered for a
period of six years from the Effective Time by the directors' and
officers' liability insurance policy currently maintained by the
Dakota Group with respect to acts or omissions occurring prior to
the Effective Time which were committed by such officers and
directors in their capacity as such; provided that in no event
shall Dakota or any Dakota Group Member be required to obtain any
new or additional directors' and officers' liability insurance
policies to accomplish the foregoing.
(c) In the event Dakota or any of its successors or assigns
(1) consolidates with or merges into any other Person and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger, or (2) transfers or conveys all or
substantially all of its properties and assets to any Person,
then, and in each such case, to the extent necessary to
effectuate the purposes of this Section, Dakota shall use
commercially reasonable efforts to make proper provision so that
the successors and assigns of Dakota assume the obligations set
forth in this Section.
(d) The provisions of this Section are intended to be for
the benefit of, and shall be enforceable by, each Indemnified
Party and his or her heirs and representatives.
VI.14 Assumption of Existing Agreements Relating to
Employment.
(a) Following the Effective Time, the Surviving Corporation
shall honor in accordance with their terms all employment,
severance, stock option, and other compensation agreements and
arrangements existing prior to the execution of this Agreement,
which are between any USMX Group Member and any director,
officer, or employee thereof and which have been disclosed to
Dakota, and to assume all duties, liabilities, and obligations
under such agreements as in effect at the date of this Agreement.
(b) The provisions of this Section are intended to be for
the benefit of, and shall be enforceable by, the directors,
officers, or employees who are parties to the agreements and
arrangements referred to in such section.
VI.15 USMX Stock Options. At or prior to the Effective Time,
Dakota shall take all corporate action necessary to authorize and
reserve for issuance a sufficient number of Dakota Shares for
delivery upon exercise of options to purchase USMX Shares assumed
by it in accordance with Section 1.7. As soon as practicable
after the Effective Time, Dakota shall file a registration
statement on Form S-8 (or any successor or other appropriate
forms), or another appropriate form with respect to the Dakota
Shares subject to such options and shall use its best efforts to
maintain the effectiveness of such registration statements (and
maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options remain
outstanding.
ARTICLE VII
OTHER COVENANTS OF THE PARTIES
VII.1 Consents and Notices. Promptly after the date hereof
and, if necessary, for a reasonable time after the Closing Date:
(a) The Parties shall use their best efforts, and the
Parties shall cooperate with each other, to obtain all consents,
waivers, approvals, and authorizations which may be necessary to
effect the Transactions, including without limitation obtaining
those consents, waivers, approvals, and authorizations described
in Exhibits 2.2 and 3.2; provided, however, the foregoing shall
not impose upon any of the Parties any obligation to effect any
payment or to incur any further or additional Liability to any
third party in order to obtain any such consent, waiver,
approval, or authorization.
(b) The Parties and their Affiliates shall give all notices
to third parties and make all Governmental filings required to be
given or made by the Parties and their Affiliates in contempla
tion of, and as a result of, the Transactions, including without
limitation those notices described in Exhibits 2.2 and 3.2.
VII.2 Joint Proxy/Registration Statement.
(a) The Parties shall jointly prepare and file with the SEC
as soon as reasonably practicable after the date hereof (1) a
Registration Statement on Form S-4 to be filed under the
Securities Act by Dakota in connection with the Merger for
purposes of registering Dakota Shares to be issued in the Merger
(the "Registration Statement") and (2) a joint proxy statement
and management information circular to be filed under the
Exchange Act by Dakota and USMX to be distributed by Dakota and
USMX, respectively, in connection with the Dakota Shareholders'
Meeting and USMX Stockholders' Meeting (the "Joint Proxy
Statement" and, together with the Registration Statement, the
"Joint Proxy/Registration Statement"). USMX shall cooperate with
Dakota and both USMX and Dakota shall use all reasonable efforts
to cause the Registration Statement to be declared effective
under the Securities Act as promptly as practicable after such
filing. Dakota and USMX shall use all reasonable efforts to take
any action required to cause Dakota Shares issuable pursuant to
the Merger to be registered or to obtain an exemption from
registration under applicable provincial, state, or foreign "blue
sky" or securities laws. Dakota and Merger Corp will furnish to
USMX and USMX shall furnish to Dakota and Merger Corp all
information concerning itself as each Party or its Advisors may
reasonably request and which is required or customary for
inclusion in the Joint Proxy/Registration Statement.
(b) Dakota and Merger Corp covenant to USMX that the Joint
Proxy/ Registration Statement (1) will comply as to form in all
material respects with the applicable provisions of the Exchange
Act and the Securities Act relating to the Dakota Shareholders'
Meeting and the issuance of the Dakota Shares and (2) will not
(A) at the respective times such documents are filed with the
SEC, (B) in the case of the Joint Proxy Statement and any
amendments thereof or supplements thereto, at the time of the
Dakota Shareholders' Meeting and USMX Stockholders' Meeting, and
(C) in the case of the Registration Statement and any amendment
thereof or any supplement thereto, at all times after it becomes
effective under the Securities Act and at the Effective Time,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or
necessary to correct any statement in any earlier filing with the
SEC of such Joint Proxy/Registration Statement or any amendment
thereof or any supplement thereto or any earlier communication to
shareholders of Dakota or stockholders of USMX with respect to
the Transactions; provided, however, that no representation,
covenant, or agreement is made by Dakota or Merger Corp with
respect to information supplied by USMX for inclusion in the
Joint Proxy/ Registration Statement.
(c) Dakota covenants to USMX, and USMX covenants to Dakota
and Merger Corp, that all filings required by Law to be made by
Dakota or USMX, as applicable, in the various jurisdictions in
Canada shall be made in connection with the Joint
Proxy/Registration Statement.
(d) USMX covenants to Dakota and Merger Corp that the Joint
Proxy Statement and Registration Statement (1) will comply as to
form in all material respects with the applicable provisions of
the Exchange Act and the Securities Act relating to the USMX
Stockholders' Meeting and the issuance of the Dakota Shares and
(2) will not (A) at the respective times such documents are filed
with the SEC, (B) in the case of the Joint Proxy Statement or any
amendments thereof or supplements thereto, at the time of the
Dakota Shareholders' Meeting and USMX Stockholders' Meeting, and
(C) in the case of the Registration Statement and any amendment
thereof or any supplement thereto, at all times after it becomes
effective under the Securities Act and at the Effective Time,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading, or
necessary to correct any statement in any earlier filing with the
SEC of such Joint Proxy/Registration Statement or any amendment
thereof or any supplement thereto or any earlier communication to
shareholders of Dakota or stockholders of USMX with respect to
the Transactions; provided, however, that no representation,
covenant, or agreement is made by USMX with respect to
information supplied by any Person other than USMX or its
Affiliate and Advisors for inclusion in the Joint Proxy Statement
and Registration Statement.
(e) USMX shall cause to be delivered to Dakota a letter of
KPMG Peat Marwick LLP or other nationally recognized certified
public accounting firm, dated the date of the Joint
Proxy/Registration Statement, and addressed to Dakota and Merger
Corp, in form and substance satisfactory to Dakota (with such
changes to which Dakota shall consent, it being understood that
such consent shall not be unreasonably withheld) relating to the
independence of such certified public accountants with respect to
the USMX Group, compliance with the form requirements of the
financial statements of USMX, and as to the procedures of the
financial statements of the USMX Group.
(f) Dakota shall cause to be delivered to USMX a letter of
KPMG or other nationally recognized certified public accounting
firm, dated the date of the Joint Proxy/Registration Statement,
and addressed to USMX, in form and substance satisfactory to USMX
(with such changes to which USMX shall consent, it being
understood that such consent shall not be unreasonably withheld)
relating to the independence of such certified public accountants
with respect to the Dakota Group, compliance with the form
requirements of the financial statements of the Dakota Group, and
as to the procedures of the financial statements of the Dakota
Group.
(g) It shall be a condition to the mailing of the Joint
Proxy Statement to the shareholders of Dakota and the
stockholders of USMX that Dakota and USMX shall independently
have received opinions of Canaccord Capital Corporation and
Newcrest Capital Corp., respectively, dated the mailing date of
the Joint Proxy Statement, to the effect that, as of the date
thereof, the conversion ratio set forth in Section 1.5 is fair
from a financial point of view to the shareholders of Dakota and
the stockholders of USMX, respectively.
VII.3 Support Agreements. The Parties shall use their best
efforts to procure from Pegasus Gold Inc. a Support Agreement
substantially in the form of Exhibit 7.3.
VII.4 Confidentiality. Prior to the Effective Time and for
one year from any termination of this Agreement, each of the
parties hereto will hold, and will use commercially reasonable
efforts to cause its respective officers, directors, employees,
and Advisors to hold, in confidence, unless compelled to disclose
by judicial or administrative process or by other requirements of
Law, all confidential documents and information concerning the
other Party furnished to such Party by such other Party in
connection with the Transactions, except to the extent that such
information can be shown to have been (a) previously known on a
nonconfidential basis by such Party, (b) in the public domain
through no fault of such Party, or (c) later acquired by such
Party from sources other than such other Party so long as, to the
knowledge of such Party, such sources are not subject to a
contractual or fiduciary duty of confidentiality with respect to
such information; provided that such Party may disclose such
information to its officers, directors, employees, and Advisors
in connection with the Transactions so long as such persons are
informed by such Party of the confidential nature of such
information and are directed by such Party to treat such
information confidentially. The obligations of the parties
hereto to hold any such information in confidence shall be
satisfied if it exercises the same care with respect to such
information a it would take to preserve the confidentiality of
its own similar information. If this Agreement is terminated,
each of the parties hereto will, and will use its best efforts to
cause its officers, directors, employees, and Advisors to,
destroy or deliver to the other Party all documents and other
materials, and all copies thereof, obtained by such Party from
such other Party in connection with the Transactions that are
subject to such confidence.
VII.5 Press Releases. Before issuing any press release or
otherwise making any public statements with respect to the
Transactions, Dakota and Merger Corp, on the one hand, and USMX,
on the other hand, shall consult with each other and shall
undertake reasonable efforts to agree upon the terms of such
press release, and shall not issue any such press release or make
any such public statement prior to such consultation, except as
may be required by applicable Law or by obligations pursuant to
any listing agreement with any stock exchange or national
securities exchange.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF DAKOTA AND MERGER CORP
The obligations of Dakota and Merger Corp to consummate the
Transactions are subject to the satisfaction of the following
conditions on or prior to the Closing Date, each of which may be
waived by Dakota and Merger Corp:
VIII.1 Representations and Warranties. The representations
and warranties of USMX set forth in Article II shall be true and
correct in all material respects as of the date hereof and on the
Closing Date as if made on the Closing Date, except to the extent
that such representations and warranties are, by their terms,
made expressly as of the date of this Agreement.
VIII.2 Compliance with Covenants. USMX shall have performed
and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied
with by USMX prior to or on the Closing Date. Without limiting
the generality of the foregoing, it shall be a further condition
to the obligations of Dakota and Merger Corp that the USMX Group
shall have taken, and shall not have failed to have taken, such
actions in all material respects as USMX shall have covenanted in
Articles V and VII to use best efforts to cause the USMX Group to
take or to refrain from taking.
VIII.3 Opinion of Counsel. Dakota and Merger Corp shall have
received the opinion of Bearman Talesnick & Clowdus dated the
Closing Date in form and substance reasonably acceptable to the
Parties.
VIII.4 No Material Adverse Change. There shall not have
occurred any Material Adverse Change since December 31, 1996 in
the results of operations or financial condition of the USMX
Group (taken as a whole) from that reflected in the Interim USMX
Financial Statements.
VIII.5 Other Matters. USMX shall have furnished, or caused to
be furnished, to Dakota and Merger Corp, in form and substance
reasonably satisfactory to Dakota and Merger Corp, such
certificates and other evidence as Dakota and Merger Corp may
have reasonably requested as to the satisfaction of the
conditions contained in this Article and as to such other matters
as Dakota and Merger Corp may reasonably request.
VIII.6 Consents. The consents, waivers, approvals, and
authorizations expressly designated in Exhibits 2.2 and 3.2 as
required to be obtained as a condition to closing shall have been
obtained.
VIII.7 Accountant's Bring-Down Letter. Dakota and Merger
Corporation shall have received a letter from the certified
public accountants referred to in Section 7.2(e), dated the
Closing Date, confirming and updating the information contained
in their letter delivered pursuant to Section 7.2(e) to a date
not more than five Business Days prior to the Closing Date.
VIII.8 Montana Tunnel. USMX and Pegasus Gold Inc. shall have
entered into an agreement in form and substance satisfactory to
Dakota with respect to the disposition of USMX's royalty interest
in the Montana Tunnels properties.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF USMX
The obligations of USMX to consummate the Transactions are
subject to the satisfaction of the following conditions on or
prior to the Closing Date, each of which may be waived by USMX:
IX.1 Representations and Warranties. The representations and
warranties of Dakota and Merger Corp set forth in Article III
shall be true and correct in all material respects as of the date
hereof and on the Closing Date as if made on the Closing Date,
except to the extent that such representations and warranties
are, by their terms, made expressly as of the date of this
Agreement.
IX.2 Compliance with Covenants. Dakota and Merger Corp shall
have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be
performed or complied with by Dakota or Merger Corp prior to or
on the Closing Date. Without limiting the generality of the
foregoing, it shall be a further condition to the obligations of
USMX that the Dakota Group shall have taken, and shall not have
failed to have taken, such actions in all material respects as
Dakota or Merger Corp shall have covenanted in Articles VI and
VII to use best efforts to cause the Dakota Group to take or to
refrain from taking.
IX.3 Opinions of Counsel. USMX shall have received the opinions
of Parcel, Mauro, Hultin & Spaanstra, P.C. and McCarthy Tetrault
dated the Closing Date in form and substance reasonably
acceptable to the Parties.
IX.4 No Material Adverse Change. There shall not have occurred
any Material Adverse Change since December 31, 1996 in the
results of operations or financial condition of the Dakota Group
(taken as a whole) from that reflected in the Interim Dakota
Financial Statements.
IX.5 Other Matters. Dakota and Merger Corp shall have furnished,
or caused to be furnished, to USMX, in form and substance
reasonably satisfactory to USMX, such certificates and other
evidence as USMX may have reasonably requested as to the
satisfaction of the conditions contained in this Article and as
to such other matters as USMX may reasonably request.
IX.6 Consents. The consents, waivers, approvals, and
authorizations expressly designated in Exhibits 2.2 and 3.2 as
required to be obtained as a condition to closing shall have been
obtained.
IX.7 Accountant's Bring-Down Letter. USMX shall have received a
letter from the certified public accountants referred to in
Section 7.2(f), dated the Closing Date, confirming and updating
the information contained in their letter delivered pursuant to
Section 7.2(f) to a date not more than five Business Days prior
to the Closing Date.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The obligations of the Parties to consummate the Transactions are
subject to the satisfaction of the following conditions on or
prior to the Closing Date, each of which may be waived upon the
mutual consent of all of the Parties:
X.1 No Adverse Proceedings. On the Closing Date, no action or
proceeding shall be pending involving any Government or other
Person or before any court or administrative body to restrain,
enjoin, or otherwise prevent the consummation of this Agreement
or the Transactions or to recover any damages or obtain any other
relief as a result of the Transactions.
X.2 No Termination. This Agreement shall not have been
terminated pursuant to Section 11.2.
X.3 No Injunctions. No temporary restraining order, preliminary
injunction, or permanent injunction or other order preventing the
consummation of the Transactions shall have been issued by any
federal, state, or provincial court (whether domestic of foreign)
and remain in effect. The Parties agree to use its best efforts
to have any such injunction or order lifted.
X.4 Support Agreement. Pegasus Gold Inc. shall have entered
into the Support Agreement described in Section 7.3 in form and
substance satisfactory to Dakota and USMX.
X.5 Stock Exchange Approvals. To the extent necessary, this
Agreement and the Transactions shall comply with the requirements
of the American Stock Exchange, The Toronto Stock Exchange, the
Berlin Stock Exchange, and the Nasdaq National Market System.
X.6 Shareholder Approval. This Agreement and the Transactions
shall have been adopted and/or approved by (a) the stockholders
of USMX in accordance with the GCL and USMX's Certificate of
Incorporation and By-Laws and (b) the shareholders of Dakota in
accordance with The Toronto Stock Exchange and the Articles of
Incorporation and Bylaws of Dakota.
X.7 SEC Filings. Prior to the first date upon which the Joint
Proxy Statement is mailed to the USMX stockholders and Dakota
shareholders, the SEC shall have declared the Registration
Statement effective, and any required approvals of state
securities administrators shall have been obtained and
appropriate filings made. On the Closing Date, no stop order or
similar restraining order that has been entered by the SEC or any
state securities administrator shall still be in effect.
X.8 Tax Letter. Dakota, Merger Corp, and USMX shall have
received an opinion from Coopers & Lybrand L.L.P. dated the
Closing Date, based on the appropriate representations of Dakota,
Merger Corp, and USMX, to the effect that no gain or loss should
be recognized by Dakota, Merger Corp, or USMX as a result of the
Merger or, provided that a gain recognition agreement is entered
into with the Internal Revenue Service where appropriate, by the
U.S. holders of USMX Shares as a result their receipt of Dakota
Shares in exchange for their USMX Shares as contemplated herein,
and otherwise in form and substance reasonably acceptable to the
Parties.
X.9 Rothschild Loan. The written consent of N M Rothschild &
Sons Limited shall have been obtained in a form acceptable to the
Parties.
X.10 Canadian Offering. The aggregate proceeds from the offering
by Dakota described in the letter agreement dated December 23,
1996 between Dakota and Canaccord Capital Corporation of not less
than Cdn.$25 Million shall have been released from escrow to
Dakota or shall be held in escrow subject only to consummation of
the Merger.
X.11 Up-Dating of Exhibits; Election Not to Close.
(a) At least three Business Days prior to the Closing Date,
USMX may deliver to Dakota and Merger Corp, and Dakota and Merger
Corp may deliver to USMX, new or additional Exhibits modifying,
qualifying, or supplementing the representations and warranties
contained in Articles II and III, respectively. Except as
provided in the next sentence, such new or additional Exhibits
shall be deemed to have modified the representations and
warranties made by USMX and Dakota or Merger Corp, as applicable,
on the date of this Agreement (and as of the Closing Date) and to
have superseded any similarly numbered or named Exhibit hereto
delivered on the date hereof. The foregoing shall not affect the
conditions to the obligations or the covenants of USMX, Dakota,
or Merger Corp contained in Articles V through X, as applicable,
as such conditions relate to such representations and warranties
prior to giving effect to the delivery of such new or additional
Exhibits (except, in the case of any representation and warranty
qualified by a reference to "Material Adverse Effect," to the
extent that the additional information furnished pursuant to the
new or additional Exhibits would not in the aggregate have or
result in a Material Adverse Effect), such that if such condition
is not satisfied as a result of the disclosures in such new or
additional Exhibits, USMX or Dakota and Merger Corp, as
applicable, may terminate this Agreement in accordance with
Section 11.2.
(b) In the event that any of the conditions to the
obligations of Dakota and Merger Corp set forth in Article VIII
or this Article, or USMX set forth in Article IX or this Article,
shall not have been satisfied, USMX or Dakota and Merger Corp, as
the case may be, shall advise the other, prior to the Closing
Date, that such conditions are not satisfied, and shall advise
the other, prior to the Closing Date, of the basis on which such
Person believes such condition has not been satisfied.
(c) Without limiting the generality of the foregoing,
Dakota and Merger Corp and USMX shall not be entitled to assert
any claim against USMX or Dakota and Merger Corp, respectively,
based on any breach of the representations and warranties
contained in Articles II and III, respectively, based upon the
disclosures made in such new or additional Exhibits pursuant to
Section 10.11(a) or if the non-breaching Party or its Affiliates
shall, prior to the Closing, have had knowledge of such breach.
ARTICLE XI
CLOSING AND TERMINATION
XI.1 Closing. The Closing shall take place at the offices of
Parcel, Mauro, Hultin & Spaanstra, P.C., Suite 3600, 1801
California Street, Denver, Colorado 80202, at 9:00 o'clock a.m.
(Denver, Colorado time) (or at such other place and time as the
Parties may otherwise agree), on the Closing Date.
XI.2 Termination of this Agreement.
(a) In the event that the Closing shall not have occurred
on or before the Termination Date, then Dakota and Merger Corp or
USMX shall have the right (provided in each case that such person
or persons is not in material breach of its obligations under
this Agreement), exercisable at any time after such date by
notice in writing, to terminate this Agreement and its
obligations hereunder.
(b) In the event that, prior to the Termination Date, any
Party (the "Breaching Party") is in material breach of its or
their obligations under this Agreement (and such breach cannot
reasonably be expected to be cured by the Breaching Party prior
to the Termination Date, or the Breaching Party is not taking
reasonable efforts to cure such breach, and, in either event,
such breach is not waived), then, so long as any other Party (the
"Non-Breaching Party") entitled to the benefit of such
obligations is not in default of its or their obligations under
this Agreement, the Non-Breaching Party shall have the right to
terminate this Agreement (unless such breach is or has been cured
prior to the giving of such notice of termination).
(c) No termination of this Agreement, whether pursuant to
this Section or otherwise, shall terminate or impair any claim by
Dakota and Merger Corp against USMX, or by USMX against Dakota
and Merger Corp, based upon any breach by the other of its
obligations under this Agreement if such breach serves as the
principal reason for the failure of the conditions contained in
Article VIII, IX, or X to have been satisfied; subject to
Sections 10.11(c) and 11.3.
XI.3 Liquidated Damages. If this Agreement is terminated
consistent with Section 11.2 for the following reasons:
(a) by Dakota, if the Board of Directors of USMX shall have
made any recommendation to the USMX stockholders against the
Merger or in support of a Competing Transaction, or if USMX shall
have entered into a Competing Transaction; or
(b) by USMX, if the Board of Directors of USMX determines
in good faith, after consultation with and receiving written
advice from its outside legal counsel (which advice need not be
an opinion), that it is required, by reason of the fiduciary
duties of the directors of USMX to the USMX stockholders under
applicable Law, to recommend to the USMX stockholders that they
vote against the Merger and approve instead a Competing
Transaction that the USMX Board of Directors, has determined in
good faith, after consultation with its outside financial
advisors, is financially more favorable to the USMX stockholders
than the Merger (including any adjustment to the terms and
conditions of the Merger proposed by Dakota in response to such
Competing Transaction, if any), is the subject of a firm written
offer from a third party that is capable of consummating such
Competing Transaction and is likely to be successful, taking into
account any adjustments proposed by Dakota and the conditions and
valid and binding character of such offer,
then USMX may pay to Dakota (by wire transfer of immediately
available funds) a fee (the "Termination Fee") of US$500,000
within thirty days after the delivery of the notice of
termination in exchange for cancellation of the option, dated
February 5, 1997, granted to Dakota to purchase 810,000 USMX
Shares; provided that USMX shall not be permitted to make such
payment if at any time prior to the making of such payment,
Dakota shall have exercised such option and USMX shall have
issued to Dakota the USMX Shares issuable upon such exercise.
The obligations of USMX to pay the Termination Fee are in lieu of
any damages or any other payment which USMX might otherwise be
obligated to pay to Dakota as a result of any termination for
which payment is due hereunder. USMX agrees that, in view of the
nature of the issues likely to arise in the event of such a
termination, it would be impracticable or extremely difficult to
fix the actual damages resulting from such termination and
proving actual damages, causation and foreseeability in the case
of such termination would be costly, inconvenient and difficult.
In requiring USMX to pay the Termination Fee as set forth herein,
it is in the intent of the parties to provide, as of the date
hereof, for a liquidated amount of damages to be paid by USMX to
Dakota. Such liquidated amount shall be deemed full and adequate
damages for such termination and is not intended by either party
to be a penalty.
ARTICLE XII
INDEMNIFICATION
XII.1 Indemnification by USMX.
(a) USMX shall indemnify the Dakota Group against, and hold
the Dakota Group harmless from, at all times after the date
hereof, any and all Indemnifiable Claims incurred, suffered,
sustained, or required to be paid by the Dakota Group resulting
from, arising out of, based upon, or in respect of the following:
(1) any breach of any of the representations or
warranties made by USMX in Article II; provided that to the
extent exceptions or qualifications to such representations and
warranties are disclosed to Dakota and Merger Corp in or on the
Exhibits hereto prior to the Closing Date (including as disclosed
pursuant to Section 10.11(a)), such representations and
warranties shall not be deemed to have been breached for purposes
of these indemnification provisions; and
(2) any breach of the covenants made by USMX in or
pursuant to this Agreement, including Articles V and VII.
(b) The Dakota Group shall not be entitled to assert any
claim for indemnification in respect of a breach of any
representation and warranty under Section 12.1(a)(1):
(1) until such time as all Indemnifiable Claims of the
Dakota Group under Section 12.1(a)(1) exceed US$100,000 (the
"Basket") in the aggregate, at which time all Indemnifiable
Claims of the Dakota Group under Sections 12.1(a)(1) may be
asserted;
(2) if the matter which is the basis of such claim for
indemnification under Section 12.1(a)(1) is subject to a reserve
established on the books of the USMX Group as of the Closing
Date, except to the extent that any Indemnifiable Claims based on
such matters exceed such reserves;
(3) in any case, in an aggregate amount in excess of
US$3,500,000.
Except as otherwise set forth herein, claims for indemnification
in respect of breaches of covenants by USMX may be made at any
time and from time to time after the date hereof and shall not be
subject to the limitations contained in the preceding sentence.
XII.2 Indemnification by Dakota and Merger Corp.
(a) Dakota and Merger Corp shall indemnify the USMX Group
against, and hold the USMX Group harmless from, at all times
after the date hereof, any and all Indemnifiable Claims incurred,
suffered, sustained, or required to be paid by the USMX Group
resulting from, arising out of, based upon, or in respect of the
following:
(1) any breach of any of the representations or
warranties made by Dakota or Merger Corp in Article III; provided
that to the extent exceptions or qualifications to such
representations and warranties are disclosed to USMX in or on the
Exhibits hereto prior to the Closing Date (including as disclosed
pursuant to Section 10.11(a)), such representations and
warranties shall not be deemed to have been breached for purposes
of these indemnification provisions;
(2) any breach of the covenants made by Dakota or
Merger Corp in or pursuant to this Agreement, including
Articles VI and VII.
(b) The USMX Group shall not be entitled to assert any
claim for indemnification in respect of a breach of any
representation and warranty under Section 12.2(a)(1):
(1) until such time as all Indemnifiable Claims of the
Dakota Group under Section 12.2(a)(1) exceed the Basket in the
aggregate, at which time all Indemnifiable Claims of the USMX
Group under Sections 12.2(a)(1) may be asserted;
(2) if the matter which is the basis of such claim for
indemnification under Section 12.2(a)(1) is subject to a reserve
established on the books of the Dakota Group as of the Closing
Date, except to the extent that any Indemnifiable Claims based on
such matters exceed such reserves;
(3) in any case, in an aggregate amount in excess of
US$3,500,000.
Except as otherwise set forth herein, claims for indemnification
in respect of breaches of covenants by Dakota or Merger Corp may
be made at any time and from time to time after the date hereof
and shall not be subject to the limitations contained in the
preceding sentence.
XII.3 Assertion of Claims; Etc.
(a) If a party entitled to be indemnified pursuant to this
Agreement (an "Indemnitee") receives notice of the assertion by a
third party of any claim or of the commencement by any such
person of any action or proceeding (a "Third-Party Claim") with
respect to which another Party (an "Indemnifying Party") is
obligated to provide indemnification, the Indemnitee shall give
the Indemnifying Party prompt notice thereof after becoming aware
of such Third-Party Claim in reasonable detail and shall indicate
the amount (estimated if necessary) of the Indemnifiable Claim
that has been or may be sustained by the Indemnitee. The receipt
of such notice shall be a condition precedent to any Liability of
the Indemnifying Party for any Third-Party Claim under the
provisions for indemnification contained in this Agreement;
provided, however, that the rights of the Indemnitee to be
indemnified or compensated hereunder in respect of any Third-
Party Claim shall only be affected by its failure to give prompt
notice to the Indemnifying Party of such Third-Party Claim if and
to the extent that such failure prejudices that Indemnifying
Party in the defense of such Third-Party Claim.
(b) If the Indemnifying Party elects to compromise or
defend such Third-Party Claim, it shall within thirty days notify
the Indemnitee of its intent to do so, it shall consult with the
Indemnitee and keep the Indemnitee fully informed as to matters
concerning such Third-Party Claim during the course of such
compromise or defense and the Indemnitee shall cooperate, at the
expense (out-of-pocket expenses only) of the Indemnifying Party,
in the compromise of, or defense against, such Third-Party Claim.
(c) If the Indemnifying Party elects not to compromise or
defend against the Third-Party Claim, or fails to notify the
Indemnitee of its election as herein provided or fails to
diligently defend any such Third-Party Claim, the Indemnitee may
pay (without prejudice of any of its rights as against the
Indemnifying Party), compromise or defend such Third-Party Claim.
The Indemnifying Party shall give the Indemnitee thirty days
notice of its intent to cease defending the Indemnitee with
respect to such Third-Party Claim and the Indemnitee shall be
fully indemnified hereunder for any additional damages suffered
by the Indemnitee if the cessation of such defense prejudices the
Indemnitee in the continuing defense or compromise of such Third-
Party Claim; provided, that upon assuming such responsibility the
Indemnitee shall use its best efforts to diligently defend or
attempt to compromise such Third-Party Claim.
(d) Notwithstanding the foregoing, neither the Indemnifying
Party nor the Indemnitee may settle or compromise any claim over
the objection of the other, provided, however, that consent to
settlement or compromise shall not be unreasonably withheld.
(e) The Indemnitee and the Indemnifying Party may each
participate, at its own expense, in the defense of such Third-
Party Claim.
(f) Any Indemnifiable Claim which does not result from a
Third-Party Claim shall be asserted by written notice given by
the party claiming indemnity to the party from which indemnity is
claimed.
(g) To the extent an Indemnifiable Claim may be covered by
insurance carriers under applicable insurance policies covering
such Indemnifiable Claim, the Indemnitee shall use its best
efforts to seek recovery in good faith for such Indemnifiable
Claim from such insurers. Notwithstanding the foregoing, the
Indemnitee shall not be obligated to exhaust its remedies against
such insurance carriers in the event such carriers fail to accept
responsibility for such Indemnifiable Claim and the Indemnitee
shall be able to fully assert its rights of indemnification
against the Indemnifying Party hereunder; provided, that in such
event the Indemnitee shall assign its right of recovery with
respect to such Indemnifiable Claim against such insurance
carrier to the Indemnifying Party. Any Indemnifiable Claim
hereunder shall be reduced by the amounts actually recovered by
the Indemnitee from its insurance carriers and any amounts
recovered by the Indemnitee subsequent to the payment by the
Indemnitor with respect to the same claim shall be remitted to
the Indemnitor; provided that such remittance shall not exceed
the amount of such indemnification payment by the Indemnitor.
XII.4 Survival of Representations, Warranties and Covenants.
(a) No claim for indemnification under the representations
and warranties contained in Article II and Article III shall be
made following April 30, 1998.
(b) The expiration of any representation and warranty shall
not affect any claim timely and validly made prior to the date of
such expiration.
(c) Except as otherwise expressly set forth herein, all
covenants and agreements of USMX, Dakota, and Merger Corp
contained in this Agreement shall survive the Closing hereunder,
without limitation. However, any claim by USMX, Dakota, or
Merger Corp against the other based on a breach of any covenant
of the other required to be performed on or prior to the Closing
Date ("Pre-Closing Covenants") shall not survive the Closing and
shall be deemed to have been waived by the Party for whose
benefit such covenant exists; unless the Party who has made such
Pre-Closing Covenant has taken actions to intentionally conceal
the existence of such breach from the Party for whose benefit
such Pre-Closing Covenant exists, but provided that the Party for
whose benefit such Pre-Closing Covenant exists has suffered a
damage or loss that would otherwise constitute an Indemnifiable
Claim.
XII.5 Insurance. The benefits of any property, casualty, and
other business insurance which is available to cover any damage
or loss that might be the basis for any Indemnifiable Claim shall
be made available to cover any such damage or loss. The Parties
shall prosecute any claim for insurance and apply the proceeds
thereof as aforesaid. No covenant or agreement by any Party to
indemnify any other Party shall release, or be deemed to release,
any insurer or indemnitor of any damage or loss which might be
the basis for any Indemnifiable Claim.
XII.6 Other Claims. Dakota and Merger Corp shall not be
entitled to assert against USMX, and USMX shall not be entitled
to assert against Dakota and Merger Corp, any claim for damages,
indemnification, or otherwise relating to the Transactions
(including without limitation any Liability arising from or in
connection with this Agreement) except pursuant to this Agreement
and subject to the provisions and limitations of this Article.
ARTICLE XIII
MISCELLANEOUS
XIII.1 Further Actions. From time to time, as and when
requested by any Party, the other Parties shall execute and
deliver, or cause to be executed and delivered, such documents
and instruments and shall take, or cause to be taken, such
further or other actions as may reasonably request in order to:
(a) carry out the intent and purposes of this Agreement;
(b) effect the Merger (or to evidence the foregoing); and
(c) consummate and give effect to the other transactions,
covenants, and agreements contemplated by this Agreement.
XIII.2 Indemnification Regarding Brokers. The Parties shall
indemnify the other Parties against, and hold the other parties
harmless from, at all times after the date hereof, any and all
Liabilities and expenses (including without limitation legal and
professional fees) resulting from, related to or arising out of
any final judgment obtained by any person claiming brokerage
commissions or finder's fees, or rights to similar compensation,
on account of services purportedly rendered on behalf of any
Party in connection with this Agreement or the Transactions.
XIII.3 Expenses. Except as otherwise specifically provided
herein, USMX, Dakota and Merger Corp shall each bear their own
legal fees and other costs and expenses with respect to the
negotiation, execution, and the delivery of this Agreement and
the consummation of the Transactions.
XIII.4 Entire Agreement. This Agreement, which includes the
Exhibits hereto and the other documents, agreements, and
instruments executed and delivered pursuant to or in connection
with this Agreement, contains the entire Agreement among the
Parties with respect to the Transactions and, except as expressly
provided herein, supersedes all prior arrangements or
understandings with respect thereto, including, without
limitation, the letter agreement dated January 3, 1997 between
Dakota and USMX (except for such agreements supplementing or
amending this Agreement which specifically make reference to this
Section).
XIII.5 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.
XIII.6 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and
sufficient if delivered personally or sent by telecopier,
nationally recognized over-night courier, or registered or
certified mail, postage prepaid, addressed as follows:
(a) If to any USMX Group Member:
USMX INC.
141 Union Boulevard, Suite 100
Lakewood, Colorado 80228
Attention: Donald P. Bellum, President
Telecopy: (303) 980-1363
with a copy to:
Bearman Talesnick & Clowdus Professional Corporation
1200 17th Street, Suite 2600
Denver, Colorado 80202-5826
Attention: Robert M. Bearman, Esq.
Telecopy: (303) 572-6511
(b) If to any Dakota Group Member:
Dakota Mining Corporation
410 Seventeenth Street, Suite 2450
Denver, Colorado 80202
Attention: Robert R. Gilmore, Vice President-Finance
and CFO
Telecopy: (303) 573-1012
with a copy to:
Parcel, Mauro, Hultin & Spaanstra, P.C.
Suite 3600, 1801 California Street
Denver, Colorado 80202
Attention: Richard F. Mauro, Esq.
Telecopy: (303) 295-3040
and
McCarthy Tetrault
P.O. Box 10424, Pacific Centre
Suite 1300, 777 Dunsmuir Street
Vancouver, B.C.
CANADA V7Y 1K2
Attention: Richard J. Balfour, Esq.
Telecopy: (604) 643-7900
Any such notices or communications shall be deemed to have been
received: (1) if delivered personally or sent by telecopier (with
transmission confirmed) or nationally recognized overnight
courier, on the date of such delivery; or (2) if sent by
registered or certified mail, on the third Business Day following
the date on which such mailing was postmarked. Any Party may by
notice change the address to which notices or other
communications to it are to be delivered or mailed.
XIII.7 Governing Law.
(a) This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware (other than the
choice of law principles thereof), except that any
representations and warranties with respect to real and tangible
property shall be governed by and construed in accordance with
the Laws of the jurisdiction where such property is situated if
other than in the State of Delaware.
(b) Any action, suit, or other proceeding initiated by
USMX, Dakota, or Merger Corp against the other under or in
connection with this Agreement may be brought in any federal or
state court in the State of Colorado, as the Party bringing such
action, suit, or proceeding shall elect, having jurisdiction over
the subject matter thereof. USMX, Dakota, and Merger Corp hereby
submit themselves to the jurisdiction of any such court for the
purpose of any such action and agree that service of process on
them in any such action, suit, or proceeding may be effected by
the means by which notices are to be given to it under this
Agreement.
XIII.8 Assignability. This Agreement shall not be assignable
otherwise than by operation of law by any Party without the prior
written consent of the other Parties, and any purported
assignment by any Parties without the prior written consent of
the other Party shall be void.
XIII.9 Remedies. The Parties acknowledge that the remedy at
law for any breach of the obligations undertaken by the Parties
is and shall be insufficient and inadequate and that the Parties
shall be entitled to equitable relief, in addition to remedies at
law. In the event of any action to enforce the provisions of
this Agreement, each of the Parties waive the defense that there
is an adequate remedy at law. The Parties acknowledge that the
USMX Shares and Dakota Shares are unique. Without limiting any
remedies any Party may otherwise have, in the event any other
Party refuses to perform its obligations under this Agreement,
the Parties shall have, in addition to any other remedy at law or
in equity, the right to specific performance.
XIII.10 Waivers and Amendments. Any waiver of any term or
condition of this Agreement, or any amendment or supplementation
of this Agreement, shall be effective only if 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 hereunder at any time to enforce strict
compliance thereafter with every term or condition of this
Agreement.
XIII.11 Third-Party Rights. Notwithstanding any other
provision of this Agreement, this Agreement shall not create
benefits on behalf of any stockholder or employee of the USMX
Group or the Dakota Group, any third party or any other Person
(including without limitation any broker or finder,
notwithstanding the provisions of Section 13.2 ); and this
Agreement shall be effective only as between the Parties, their
successors and permitted assigns.
XIII.12 Illegalities. In the event that any provision
contained in this Agreement shall be determined to be invalid,
illegal, or unenforceable in any respect for any reason, the
validity, legality, and enforceability of any such provision in
every other respect and the remaining provisions of this
Agreement shall not, at the election of the Party for whose
benefit the provision exists, be in any way impaired.
* * *
The remainder of this page is blank.
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Agreement as of the day and year first above written.
USMX, INC. DAKOTA MINING CORPORATION
By: By:
Name: Donald P. Bellum Name: Alan R. Bell
Title: President Title: President and
CEO
DAKOTA MERGER CORPORATION
By:
Name: Alan R. Bell
Title: President
Schedule A
Certain Definitions
"1995 Dakota Financial Statements" shall mean the audited
consolidated balance sheet of the Dakota Group as of December 31,
1995, with the related audited consolidated statements of income
and retained deficits and of cash flows for the fiscal year ended
as of such date (together with the related notes and schedules
thereto), which financial statements contain a letter from KPMG
Peat Marwick Thorne reporting thereon.
"1995 USMX Financial Statements" shall mean the audited
consolidated balance sheet of USMX and its subsidiaries as of
December 31, 1995, with the related audited consolidated
statements of income and retained deficits and of cash flows for
the fiscal year ended as of such date (together with the related
notes and schedules thereto), which financial statements contain
a letter from KPMG Peat Marwick LLP reporting thereon.
"Advisers" when used with respect to any Person shall mean such
Person's directors, officers, employees, representatives, agents,
counsel, accountants, advisers, engineers, and consultants.
"Affiliate" shall mean as to any Person, any other Person which
directly or indirectly controls, or is under common control with,
or is controlled by, such Person and, if such Person is an
individual, any member of the immediate family (including
parents, spouse, children and grandchildren) of such individual
and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any Person who
is controlled by any such member or trust. As used in this
definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause
the direction of the management or policies (whether through the
ownership of securities or partnership or other ownership
interests, by Contract or otherwise).
"Agreement" shall mean this Agreement and Plan of Merger, as it
may be amended or supplemented at any time and from time to time
after the date hereof.
"Basket" shall have the meaning ascribed in Section 12.1(b)(1).
"Breaching Party" shall have the meaning ascribed in Section
11.2(b).
"Business Day" shall mean any day on which commercial banks are
not authorized or required to close in Denver, Colorado.
"Canadian GAAP" shall mean generally accepted accounting
principles in Canada consistently applied.
"Certificate" shall have the meaning ascribed in Section 1.10(a).
"Certificate of Merger" shall have the meaning ascribed in
Section 1.4.
"Closing" shall mean the consummation of the Transactions.
"Closing Date" shall mean a date as soon as practicable after
approval and/or adoption of this Agreement and the Transactions
by the shareholders of Dakota and the stockholders of USMX and
satisfaction or waiver of the conditions set forth in Articles
VIII, IX, and X.
"Competing Transaction" shall have the meaning ascribed in
Section 5.12.
"Constituent Corporations" shall have the meaning ascribed in
Section 1.1.
"Contract" shall mean any contract, lease, agreement, instrument,
license, commitment, order, or quotation.
"Dakota Group" shall mean and include Dakota, Merger Corp, and
their respective subsidiaries, taken as a whole.
"Dakota Group Member" shall mean and include Dakota, Merger Corp,
or any of their respective subsidiaries.
"Dakota SEC Reports" shall have the meaning ascribed in Section
3.15.
"Dakota Shareholders' Meeting" shall have the meaning ascribed in
Section 6.9.
"Dakota Shares" shall have meaning ascribed in the Recitals.
"Effective Time" shall have the meaning ascribed in Section 1.4.
"Employee Plans" shall mean any employee benefit plan (as defined
in 3(3) of ERISA), other deferred compensation plan, bonus plan,
material fringe benefit plan (as defined in 6039D of the Tax
Code) and other material employee benefit plan maintained (other
than those required by Law to be maintained) for the benefit of
employees.
"Environmental Condition" shall mean and include:
(a) the generation, discharge, emission, or release into
the environment (including without limitation ambient air,
surface water, groundwater or land), spill, receiving, handling,
use, storage, containment, treatment, transportation, shipment,
or disposition prior to the Closing of any Hazardous Substance by
any Person (or their predecessors) as to which Remedial Action is
currently or in the future required under any Environmental Law
or as to which any Liability is currently or in the future
imposed on any Person based on the actions or omissions prior to
the Closing of any Person (or their predecessors) with respect to
any Hazardous Substance or reporting with respect thereto; and
(b) the presence as of the Closing Date on any real
property owned by any member of the USMX Group or Dakota Group,
as applicable, of any underground storage tank which contains or
contained Hazardous Substances.
"Environmental Laws" shall mean Laws regulating or pertaining to
the generation, discharge, emission or release into the
environment (including without limitation ambient air, surface
water, groundwater or land), spill, receiving, handling, use,
storage, containment, treatment, transportation, shipment,
disposition or remediation or clean-up of any Hazardous
Substance, as such Laws are amended and in effect as of the date
hereof, including without limitation the following Laws of the
United States: the Clean Air Act; the Clean Water Act; the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980; the Resource Conservation and Recovery Act of 1976;
and the Toxic Substances Control Act.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" shall have the meaning ascribed in Section
1.10(a).
"Exchange Fund" shall have the meaning ascribed in Section
1.10(a).
"GCL" shall mean the General Corporation Law of the State of
Delaware.
"Government" shall mean:
(a) the government of the United States, Canada, or any
other foreign country;
(b) the government of any state, province, county,
municipality, city, town, or district of the United States,
Canada, or any other foreign country; and any multi-county
district; and
(c) any ministry, agency, department, authority,
commission, administration, corporation, bank, court, magistrate,
tribunal, arbitrator, instrumentality, or political subdivision
of, or within the geographical jurisdiction of, any government
described in the foregoing clauses (a) and (b).
"Governmental" shall mean pertaining to any Government.
"Hazardous Substance" shall include petroleum products, hazardous
substances, hazardous waste, or hazardous materials, or
pollutants or contaminants, as such terms are defined in the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980; the Resource Conservation and Recovery Act of 1976;
or any other Environmental Law (including any foreign
Environmental Law); all as amended and in effect as of the date
hereof.
"Income Tax" shall mean any Tax based on or measured by income
(including without limitation based on net income, gross income,
income as specifically defined, earnings, profits or selected
items of income, earnings or profits); and any interest,
Penalties and additions to tax with respect to any such tax (or
any estimate or payment thereof).
"Indemnifiable Claims" shall mean and include any and all loss or
damage or Liability, and all expenses (including without
limitation reasonable legal fees incurred in the investigation,
defense, compromise and settlement of any Indemnifiable Claim for
which such Person is entitled to indemnification under Article
XII), of any Person entitled to indemnification under Article
XII. "Indemnifiable Claim" shall not include any injury to
business reputation, lost business opportunities, lost profits
(other than actual lost profits), punitive, special or
consequential damages or interference with business operations
(other than actual damages resulting from interference with
business operations). The amount of any Indemnifiable Claim
shall be determined or computed net of:
(a) any proceeds of insurance or third-party indemnity
(whether maintained by USMX or Merger Corp) actually received or
collected in respect of any such Indemnifiable Claims; and
(b) any Indemnification Tax Benefit received by the Person
entitled to indemnification with respect to any tax year in which
the claim for indemnification is satisfied or in any prior tax
year.
"Indemnification Tax Benefit" shall mean an amount equal to the
amount of any Tax savings actually recognized and actually
realized by reason of a net reduction in taxes paid by an
indemnitee attributable to the payment by the indemnitor of such
Indemnifiable Claim (after taking into account the Tax effect, if
any, of receipt of payment of any Indemnifiable Claim). In
computing the amount of any Indemnification Tax Benefit, the
indemnitee shall be deemed to have used all other items of loss,
deduction or credit before using any loss attributable to any
Indemnifiable Claim.
"Indemnified Party" shall have the meaning ascribed in Section
6.13.
"Indemnifying Party" shall have the meaning ascribed in Section
12.3(a).
"Indemnitee" shall have the meaning ascribed in Section 12.3(a).
"Interim Dakota Balance Sheet" shall mean the unaudited
consolidated balance sheet included in the Interim Dakota
Financial Statements.
"Interim Dakota Financial Statements" shall mean the unaudited
financial statements dated as of December 31, 1996, or such other
more recent unaudited financial statements delivered (from time
to time) to USMX.
"Interim USMX Balance Sheet" shall mean the unaudited
consolidated balance sheet included in the Interim USMX Financial
Statements.
"Interim USMX Financial Statements" shall mean the unaudited
financial statements dated as of December 31, 1996, or such other
more recent unaudited financial statements delivered (from time
to time) to Dakota.
"Joint Proxy Statement" shall have the meaning ascribed in
Section 7.2.
"Joint Proxy/Registration Statement"shall have the meaning
ascribed in Section 7.2.
"Law" shall mean any of the following of, or issued by, any
Government, in effect on or prior to the date hereof, including
any amendment, modification, or supplementation of any of the
following from time to time subsequent to the original enactment,
adoption, issuance, announcement, promulgation, or granting
thereof and prior to the date hereof: any statute, law, act,
ordinance, code, rule, or regulation or any writ, injunction,
award, decree, judgment, or order of any Government.
"Liability" of any Person shall mean and include:
(a) any right against such Person to payment, whether or
not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured;
(b) any right against such Person to an equitable remedy
for breach of performance if such breach gives rise to a right to
payment, whether or not such right to any equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured; and
(c) any obligation of such Person for the performance of
any covenant or agreement (whether for the payment of money or
otherwise).
"Liens" shall mean liens, encumbrances, licenses, claims,
security interests, mortgages, pledges, charges, escrows,
options, or rights of first refusal or offer.
"Material Adverse Change" or "Material Adverse Effect" shall mean
a material adverse change in, or material adverse effect on, the
business, properties, assets, liabilities, results of operations
or financial condition of the USMX Group or Dakota Group (as
applicable), in any case after application of the proceeds of any
insurance or indemnity under any contract or agreement between
the applicable Group, USMX or Dakota and any third party. The
foregoing shall not include any change or effect attributable to
changes in the economy (of the United States, Canada, or any
other country) generally, changes in the industries in which the
applicable Group engages, changes in metal prices, or seasonality
of the businesses of the Group. No "Material Adverse Change" or
"Material Adverse Effect" shall be deemed to have occurred by
virtue or as a result of any voluntary termination or termination
for cause of the employment of any officer of the applicable
Group or the termination of any consulting relationship between
any Person and the applicable Group.
"Merger" shall have the meaning ascribed in Section 1.1.
"Non-Breaching Party" shall have the meaning ascribed in Section
11.2(b).
"Parties" and "Party" shall have the meanings ascribed in the
Preamble.
"Penalty" shall mean any civil or criminal penalty (including any
interest thereon), fine, levy, lien, assessment, charge, monetary
sanction, or payment, or any payment in the nature thereof, of
any kind required to be made to any Government under any Law.
"Permitted Liens" shall mean Liens arising out of the ordinary
course of business which do not, individually or in the
aggregate, materially detract from the use, value or enjoyment
(in the ordinary course of business as presently conducted) of
the assets which are the subject of such Liens.
"Person" shall mean any corporation, partnership, limited
lability company or partnership, joint venture, trust,
unincorporated association or organization, business, enterprise,
or other entity; any individual; and any Government.
"Pre-Closing Covenant" shall have the meaning ascribed in Section
12.4(c).
"Registration Statement" shall have the meaning ascribed in
Section 7.2.
"Remedial Action" shall mean any investigation, feasibility
study, monitoring, testing, sampling, removal (including without
limitation removal of underground storage tanks), restoration,
clean-up, remediation, corrective action, closure, site
restoration, remedial response or remedial work with respect to
any Environmental Condition.
"SEC" shall mean the Securities and Exchange Commission of the
United States.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securities Act Affiliate" shall mean any affiliate of a Person
for purposes of Rule 145 of the Securities Act.
"Surviving Corporation" shall have the meaning ascribed in
Section 1.1.
"Tax" shall mean any tax, levy, charge, assessment, penalty,
interest or fine imposed by or due any Government, including
without limitation any of the following:
(a) any tax based on or measured by income (including
without limitation based on net income, gross income, income as
specifically defined, earnings, profits or selected items of
income, earnings or profits);
(b) any franchise, sales, use and value added tax or any
license or withholding tax; any payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
alternative or add-on minimum tax; and any customs duties or
other taxes;
(c) any "trust fund" tax under Subtitle C, Chapter 24A of
the Tax Code;
(d) any tax on property (real or personal, tangible or
intangible, based on transfer or gains);
(e) any estimate or payment of any of tax described in the
foregoing clauses (a) through (d); and
(f) any interest, Penalties and additions to tax with
respect to any tax (or any estimate or payment thereof) described
in the foregoing clauses (a) through (e).
"Tax Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Termination Date" shall mean April 30, 1997, provided that, if
the Joint Proxy/ Registration Statement has not been declared
effective by the SEC by a date which allows sufficient time
(under applicable Law) to properly hold the USMX Stockholders'
Meeting and the Dakota Shareholders' Meeting, or if other
required regulatory approvals or clearances have not been
received, on or prior to April 30, 1997, the Termination Date
shall be extended to a date which allows for the foregoing, which
date, in no event, shall be later than May 31, 1997.
"Termination Fee" shall have the meaning ascribed in Section
11.3.
"Third-Party Claim" shall have the meaning ascribed in Section
12.3(a).
"Transactions" shall mean the Merger, and any other actions or
transactions contemplated under this Agreement.
"U.S. GAAP" shall mean generally accepted accounting principles
in the United States consistently applied.
"USMX Group" shall mean and include USMX and its subsidiaries,
taken as a whole.
"USMX Group Member" shall mean and include USMX or any
subsidiary.
"USMX SEC Reports" shall have the meaning ascribed in Section
2.26.
"USMX Stockholders' Meeting" shall have the meaning ascribed in
Section 5.10.
"USMX Shares" shall have the meaning ascribed in the Recitals.
TABLE OF CONTENTS
RECITALS 1
AGREEMENT 1
ARTICLE I--GENERAL 2
1.1 Merger. 2
1.2 Charter and By-laws; Directors and Officers. 2
1.3 No Separate Identity. 2
1.4 Effectiveness. 2
1.5 Conversion of Shares. 2
1.6 Treasury Shares, Etc. 2
1.7 Warrants, Options, Etc. 3
1.8 No Fractional Shares. 3
1.9 Stock Transfer Books. 3
1.10 Exchange of Certificates 4
1.11 Directors of Dakota. 4
ARTICLE II--REPRESENTATIONS AND WARRANTIES OF USMX 4
2.1 Organization and Good Standing. 5
2.2 Consents, Authorizations, and Binding Effect. 5
2.3 Minute and Stock Transfer Books. 6
2.4 Financial Statements and Financial Condition. 6
2.5 Title and Condition of Assets. 7
2.6 Insurance. 9
2.7 Litigation and Compliance. 9
2.8 Taxes. 10
2.9 Intangible Assets. 11
2.10 Employees. 11
2.11 Pension and Other Employee Plans and Agreements. 11
2.12 Labor Relations. 12
2.13 Contracts, Etc. 13
2.14 Absence of Certain Changes, Etc. 13
2.15 Subsidiaries. 14
2.16 Capitalization and Title to Shares. 16
2.17 Environmental Matters. 16
2.18 Brokers. 16
2.19 Officers and Directors. 17
2.20 Fairness of Transaction. 17
2.21 Valid Issuance of New Stock. 17
2.22 No Misstatements or Omissions. 17
2.23 USMX SEC Reports. 17
2.24 Information in Disclosure Documents. 18
2.25 No Knowledge of Breach of Representations and
Warranties of
Merger Corp. 18
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF DAKOTA AND MERGER
CORP 18
3.1 Organization and Good Standing. 19
3.2 Consents, Authorizations, and Binding Effect. 19
3.3 Minute and Stock Transfer Books. 20
3.4 Financial Statements and Financial Condition. 20
3.5 Title and Condition of Assets. 21
3.6 Insurance. 23
3.7 Litigation and Compliance. 23
3.8 Taxes. 24
3.9 Intangible Assets. 25
3.10 Pension and Other Employee Plans and Agreements. 25
3.11 Labor Relations. 25
3.12 Contracts, Etc. 26
3.13 Absence of Certain Changes, Etc. 27
3.14 Subsidiaries. 27
3.15 Capitalization and Title to Shares. 29
3.16 Environmental Matters. 29
3.17 Fairness of Transaction. 30
3.18 Valid Issuance of New Stock. 30
3.19 No Misstatements or Omissions. 30
3.20 Dakota SEC Reports. 30
3.21 Information in Disclosure Documents. 31
3.22 No Knowledge of Breach of Representations and
Warranties of USMX. 31
ARTICLE IV--NO OTHER REPRESENTATIONS AND WARRANTIES 31
4.1 No Other Representations and Warranties. 31
4.2 Projections, Etc. 31
ARTICLE V--USMX COVENANTS 32
5.1 Access. 32
5.2 Ordinary Course. 32
5.3 Representations and Warranties. 34
5.4 Insurance. 34
5.5 No Breach. 34
5.6 Financial Statements. 34
5.7 Litigation. 34
5.8 Closing Conditions. 34
5.9 Contracts. 34
5.10 USMX Stockholders' Approval. 34
5.11 Rule 145 Affiliates. 35
5.12 No Shop. 35
5.13 Cooperation. 36
ARTICLE VI--DAKOTA'S AND MERGER CORP'S COVENANTS 36
6.1 Access. 36
6.2 Ordinary Course. 37
6.3 Representations and Warranties. 38
6.4 No Breach. 39
6.5 Financial Statements. 39
6.6 Litigation. 39
6.7 Closing Conditions. 39
6.8 Contracts. 39
6.9 Dakota Shareholders' Approval. 39
6.10 Stock Listing. 39
6.11 Line of Credit. 39
6.12 Employee Benefit Plans 40
6.13 Indemnification; Directors' and Officers' Insurance 40
6.14 Assumption of Existing Agreements Relating to
Employment 41
6.15 USMX Stock Options 42
ARTICLE VII--OTHER COVENANTS OF THE PARTIES 42
7.1 Consents and Notices. 42
7.2 Joint Proxy/Registration Statement. 42
7.3 Support Agreements. 44
7.4 Confidentiality. 44
7.5 Press Releases. 45
ARTICLE VIII--CONDITIONS TO OBLIGATIONS OF DAKOTA AND MERGER CORP
45
8.1 Representations and Warranties. 45
8.2 Compliance with Covenants. 45
8.3 Opinion of Counsel. 45
8.4 No Material Adverse Change. 45
8.5 Other Matters. 45
8.6 Consents. 45
8.7 Accountant's Bring-Down Letter. 46
8.8 Montana Tunnel. 46
ARTICLE IX--CONDITIONS TO OBLIGATIONS OF USMX 46
9.1 Representations and Warranties. 46
9.2 Compliance with Covenants. 46
9.3 Opinions of Counsel. 46
9.4 No Material Adverse Change. 46
9.5 Other Matters. 46
9.6 Consents. 47
9.7 Accountant's Bring-Down Letter. 47
ARTICLE X--CONDITIONS TO OBLIGATIONS OF THE PARTIES 47
10.1 No Adverse Proceedings. 47
10.2 No Termination. 47
10.3 No Injunctions. 47
10.4 Support Agreement. 47
10.5 Stock Exchange Approvals. 47
10.6 Shareholder Approval. 47
10.7 SEC Filings. 47
10.8 Tax Letter. 48
10.9 Rothschild Loan. 48
10.10 Canadian Offering. 48
10.11 Up-Dating of Exhibits; Election Not to Close. 48
ARTICLE XI--CLOSING AND TERMINATION 49
11.1 Closing. 49
11.2 Termination of this Agreement. 49
11.3 Liquidated Damages. 49
ARTICLE XII--INDEMNIFICATION 50
12.1 Indemnification by USMX. 50
12.2 Indemnification by Dakota and Merger Corp. 51
12.3 Assertion of Claims; Etc. 52
12.4 Survival of Representations, Warranties and Covenants.53
12.5 Insurance. 54
12.6 Other Claims. 54
ARTICLE XIII--MISCELLANEOUS 54
13.1 Further Actions. 54
13.2 Indemnification Regarding Brokers. 54
13.3 Expenses. 54
13.4 Entire Agreement. 54
13.5 Descriptive Headings. 55
13.6 Notices. 55
13.7 Governing Law. 56
13.8 Assignability. 56
13.9 Remedies. 56
13.10 Waivers and Amendments. 57
13.11 Third-Party Rights. 57
13.12 Illegalities. 57
SCHEDULE OF EXHIBITS
EXHIBIT NO. DESCRIPTION
1.4 Form of Certificate of Merger
USMX Disclosure Exhibits
2.1 Foreign Qualification and Subsidiaries
2.2 Consents, Etc.
2.4(b) Accounting Books and Records
2.4(c) Interim USMX Financial Statements
2.5(a) Real Property Interests
2.5(b) Property Liens and Defects
2.5(c) Royalties
2.5(e) Operating Condition Defects
2.6 Insurance
2.7(a) Litigation
2.7(c) Judgments, Etc.
2.7(d) Permits, Etc.
2.8 Taxes
2.11 Employee Plans
2.12 Labor Matters
2.13 Contracts
2.14 Certain Changes
2.15(a) Subsidiaries
2.15(b) Liens on Subsidiary Capital Stock
2.15(d) Subsidiary Proxies, Options, Etc.
2.15(e) Disposed Subsidiaries
2.16 Capital Stock of USMX
2.17 Environmental Matters
2.19 Officers and Directors
2.23 USMX SEC Reports
Dakota Disclosure Exhibits
3.1 Foreign Qualification and Subsidiaries
3.2 Consents, Etc.
3.4(b) Accounting Books and Records
3.4(c) Interim Dakota Financial Statements
3.5(a) Real Property Interests
3.5(b) Property Liens and Defects
3.5(c) Royalties
3.5(e) Operating Condition Defects
3.6 Insurance
3.8(a) Litigation
3.7(c) Judgments, Etc.
3.7(d) Permits, Etc.
3.10 Employee Plans
3.12 Contracts
3.13 Certain Changes
3.14(a) Subsidiaries
3.14(b) Liens on Subsidiary Capital Stock
3.14(d) Subsidiary Proxies, Options, Etc.
3.15 Capital Stock of Dakota
3.16 Environmental Matters
3.20 Dakota SEC Reports
5.2 USMX Exceptions to Ordinary Course
5.11 Form of Securities Act Affiliate Agreement
6.2 Dakota Exceptions to Ordinary Course
6.11 Terms of Line of Credit
7.3 Form of Support Agreement
OPTION AGREEMENT
THIS AGREEMENT dated for reference the 4th day of
February, 1997
BETWEEN:
DAKOTA MINING CORPORATION, of Suite 2450,
410 Seventeenth Street, Denver, Colorado, 80202
(hereinafter referred to as "Dakota"),
AND:
USMX, INC., of Suite 100, 141 Union Boulevard,
Lakewood, Colorado 80228
(hereinafter referred to as "USMX"),
WHEREAS:
A. The board of directors of USMX has determined that, as
an inducement and consideration for Dakota entering into the
letter of intent (the "Letter") dated January 3, 1997
between Dakota and USMX (including Schedule (the "Schedule")
to the Letter which constitutes a binding agreement between
Dakota and USMX) and agreeing, subject to the terms and
conditions thereof, to effect the merger (as defined in the
Letter), the granting of an option to Dakota to purchase up
to 810,000 authorized and unissued shares of common stock of
USMX, $.001 par value per share, as presently constituted
("Shares") of USMX on the terms and conditions set forth
below, is in the best interests of USMX; and
B. Pursuant to paragraph 4 of the Schedule, USMX has
agreed to grant such option to Dakota subject to acceptance
for filing by The Toronto Stock Exchange (the "TSE") of
notice by USMX of the grant of such option (which notice has
been given by USMX and accepted for filing by the TSE).
NOW THEREFORE THIS AGREEMENT WITNESSES that, for and in
consideration of the premises and for other good and
valuable consideration, it is hereby agreed by and between
the parties hereto as follows:
1. USMX hereby grants to Dakota, on the terms and
conditions hereinafter set forth, an irrevocable option (the
"Option") to purchase at any time or from time to time
during the period hereinafter referred to all or any part of
810,000 authorized and unissued Shares of USMX (the
"Optioned Shares"), for a purchase price of US$1.75 per
Optioned Share (the "Exercise Price"), provided that, if the
Termination Fee (as defined in the Schedule) shall have been
paid to Dakota pursuant to and in accordance with the terms
of the Schedule or (if the Letter and the Schedule have been
superseded by the Merger Agreement (as defined in the
Letter)) the Merger Agreement, then the Option shall,
without any action on the part of USMX, cease and terminate
and be of no further force and effect.
2. Dakota shall have the right to exercise the Option at
any time or from time to time with respect to all or any
part of the Optioned Shares during the period (i) commencing
immediately after the Schedule or (if the Letter and the
Schedule are superseded by the Merger Agreement) the Merger
Agreement is terminated in accordance with its terms (x) by
Dakota pursuant to subparagraph 3(j) of the Schedule or (if
the Letter and the Schedule are superseded by the Merger
Agreement) pursuant to the provisions of the Merger
Agreement corresponding to such subparagraph or (y) by USMX
pursuant to subparagraph 3(k) of the Schedule or (if the
Letter and the Schedule are superseded by the Merger
Agreement) pursuant to the provisions of the Merger
Agreement corresponding to such subparagraph and (ii)
expiring at 5:00 p.m. (Denver time) on the day that is six
months after the date of such termination or at such earlier
time as may be determined in accordance with section 4
hereof (the "Expiry Time") and, at the earlier to occur of
the time at which the consummation of the Merger becomes
effective and the Expiry Time, the Option shall expire and
terminate as to such of the Optioned Shares in respect of
which the Option has not then been exercised. The Option
shall be exercisable whether or not the Merger Agreement is
executed and delivered by Dakota and USMX. If the Schedule
or (if the Letter andf the Schedule have been superseded by
the Merger Agreement) the Merger Agreement has been
terminated (other than pursuant to subparagraphs 3(j) or (k)
of the Schedule or (if the Letter and Schedule have been
superseded by the Merger Agreement) other than pursuant to
the provisions of the Merger Agreement corresponding to such
subparagraphs), then the Option shall, without any action on
the part of USMX, cease and terminate and be of no further
force and effect.
3. No written notice of Dakota electing to exercise the
Option in whole or in part shall be necessary but payment by
or on behalf of Dakota by certified cheque or bank draft
payable to or to the order of American Securities Transfer
(the "Agent"), the transfer agent and registrar of the
Shares, at its office located at 938 Quail Street, Suite
101, Lakewood, Colorado, 80215, of the Exercise Price, in
respect of so many of the Optioned Shares as Dakota shall
from time to time determine to take up and purchase, shall
be an exercise pro tanto of the Option hereby granted. The
Agent shall be advised in writing at the time of any such
payment of the number of Optioned Shares in respect of which
the Option is then being exercised. Upon each such exercise
of the Option, USMX shall forthwith cause the Agent to
deliver forthwith to Dakota, at its address sert forth
above, a definitive certificate or certificates registered
in the name of Dakota, at its address sert forth above, a
definitive certificate or certificates registered in the
name of Dakota, or as Dakota may otherwise direct in
writing, representing in the aggregate such number of the
Optioned Shares as Dakota shall have then paid for.
4. Notwithstanding anything herein provided, Dakota may at
any time in its sole discretion terminate the Option by
giving written notice thereof, delivered to USMX at its
address set forth above, or sent by facsimile transmission
to USMX (facsimile no.: (303) 980-1363), and forthwith upon
such delivery or sending of such notice and notwithstanding
that such notice may not have been received by USMX, the
Option shall forthwith expire and terminate as to such of
the Optioned Shares in respect of which the Option has not
then been exercised.
5. Nothing herein contained or done pursuant hereto shall
obligate Dakota to purchase and/or pay for, or USMX to
issue, any Optioned Shares, except those Optioned Shares in
respect of which Dakota shall have exercised its option to
purchase hereunder in the manner hereinbefore provided.
6. In the event of any subdivision or change of the Shares
at any time prior to the Expiry Time into a greater number
of Shares, USMX shall deliver in connection with any issue
of Optioned Shares occurring after the record date of the
subdivision or change such additional number of Shares as
would have resulted from such subdivision or change if such
issue of Optioned Shares had been made prior to the record
date of such subdivision or change. In the event of any
consolidation or change of the Shares at any time prior to
the Expiry Time into a lesser number of Shares, the number
of Shares to be delivered by USMX on any exercise thereafter
of the Option shall be reduced to such number of Shares as
would have resulted from such consolidation or change if
such exercise of the Option had been made prior to the
record date of such consolidation or change.
7. If USMX shall at any time prior to the Expiry Time pay
any dividend or make any distribution or issuance, whether
or not payable in cash, property or other assets or in
shares or other securities of USMX, or make any payment by
way of return of capital, Dakota shall be entitled to
receive upon any exercise thereafter of the Option (in
addition to the number of Optioned Shares that Dakota
otherwise would have been entitled to receive on the
exercise of the Option) such cash, property or other assets
or such additional number of shares or other securities of
USMX or such capital payment as would have been payable on
the Shares that would have been issuable on such exercise of
the Option if they had been outstanding on record date for
payment of such dividend or such issuance, distribution or
capital payment, and USMX covenants and agrees that in the
event of any such payment of any dividend or issuance or
distribution payable in any shares or other securities of
USMX, it will reserve and set asisde a sufficient number of
shares or other securities of the appropriate class in which
any such dividend, issuance or distribution shall be payable
to enable it to fulfil its obligations hereunder.
8. USMX covenants that it has duly reserved, set aside and
allotted the Optioned Shares to and in favour of Dakota, its
successors and assigns, and that upon the exercise of the
Option in accordance with the terms hereof and payment of
the Exercise Price, the Optioned Shares in respect of which
Dakota shall have duly taken up and paid for hereunder shall
be duly issued and outstanding as fully paid and non-
asessable.
9. Time shall be of the essence of this agreement.
10. USMX acknowledges that Dakota will have no adequate
remedy at law if USMX fails to perform any of its
obligations under this agreement. In such event, USMX
agrees that Dakota shall have the right, in addition to any
other rights it may have, to specific performance of this
agreement and that it will not take any action to impede
Dakota's efforts to enforce such right of specific
performance.
11. USMX and Dakota severally convenant and agree to use
their respective reasonable best efforts to comply with,
satisfy and fulfil promptly any contions and requirements
imposed by or arising out of legal, regulatory, stock
exchange or administrative requirements applicable to the
rant of the Option hereunder, the issue of Optioned Shares
on the exercise of the Option and to lising and posting for
trading of Optioned shares issued on the exe4cise of the
Option on the TSE and on such other stock exchanges or
through such over-the-counter or other organized markets on
or through which the Shares may be listed or traded, and to
co-operate with each other concerning such matters.
12. Dakota represents and warrants to USMX, as a continuing
representation and warranty, which shall be true and correct
on the date hereof and on each date that Dakota exercises
the Option as if made and given on and as of each such date,
that Dakota is acquiring the Option and will acquire
Optioned Shares pruchased by it upon any exercise of the
Option as principal. Dakota acknowledtes that (i) the
Option has not been and the Optioned Shares will not be
registered under the United States Securities Act of 1933
(the "1933 Act"), as amended, or under any state securities
laws and therefore the Optioned Shares cannot be sold
without registration under the 1933 Act and the securities
laws of all applicable states in the United States unless an
exemption from registration is available, and (ii) Dakota is
an "accredited investor" as that term is defined under
Regulation D of the 1933 Act.
13. This agreement shall enure to the benefit of and be
binding upon the successors and assigns of the parties
hereto. All rights granted hereunder to Dakota are fully
assignable.
14. This agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
15. This agreement may be executed by the parties in one or
more counterparts and, if so executed and delivered, either
in original or facsimile form, such counterparts shall
together constitute a single instrument.
IN WITNESS WHEREOF the parties hereto have executed
these presents as of the day and year first above written.
DAKOTA MINING CORPORATION
By:
Title:
USMX, INC.
By:
Title:
SUPPORT AGREEMENT
SUPPORT AGREEMENT dated as of February 4, 1997 (this
"Support Agreement") among the following parties (collectively,
the "Parties" and individually, a "Party"):
(a) Dakota Mining Corporation, a federal corporation
organized under the Canada Business Corporation Act ("Dakota");
(b) USMX INC., a Delaware corporation ("USMX"); and
(c) Pegasus Gold Inc., a British Columbia corporation
("Shareholder").
RECITALS
WHEREAS, Shareholder is the legal or beneficial owner of
4,826,000 shares (or approximately 29.8%) of the voting common
stock, par value $.001 per share, of USMX ("USMX Shares");
WHEREAS, Dakota and USMX have entered into a letter of
intent dated January 3, 1997 ("Letter of Intent") for the
purposes of entering into, or have entered into, a merger
agreement (the "Merger Agreement"), whereby, pursuant to a
reverse-triangular merger (the "Merger"), Dakota Merger Corp, a
Delaware corporation and wholly-owned subsidiary of Dakota
("Merger Corp"), will merger with and into USMX, with USMX as the
surviving corporation;
WHEREAS, as a result of the Merger, all of the outstanding
USMX Shares will be automatically converted into common shares,
no par value, of Dakota ("Dakota Shares"), which are listed
and/or quoted on the American, Berlin, and Toronto Stock
Exchanges, in the ratio of 1.1 USMX Shares to one Dakota Share;
all of the outstanding capital stock of Merger Corp will be
automatically converted into USMX Shares in the ratio of one
share of Merger Corp to one USMX Share;
WHEREAS, pursuant to the General Corporation Law of the
State of Delaware, the Merger Agreement and the Merger will
require the approval of a majority of the USMX Shares at a duly
called shareholders' meeting, which will be held at the time and
in the manner set forth in the Merger Agreement (the
"Shareholders' Meeting");
WHEREAS, Shareholder deems it in its best interest of
shareholder and USMX that the Merger Agreement and the Merger be
approved by the holders of USMX Shares; and
WHEREAS, Shareholder understands that USMX and Dakota are
relying on the Shareholder's covenants and agreements contained
herein in executing the Merger Agreement, and that USMX and
Dakota will incur substantial expenses in proceeding toward
consummation of the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual benefits to
be derived and the representations and warranties, conditions and
premises herein contained, and intending to be legally bound
hereby, Dakota, USMX, and Shareholder agree as follows:
1. Affirmative Vote. Shareholder, in its capacity as a holder
of USMX Shares or as a representative with the authority to vote
USMX Shares, shall vote (or appoint proxies who will vote), and
shall use its best efforts to cause all of its affiliates with
authority to vote USMX Shares to vote, all of the USMX Shares
that it owns or they own, or over which it controls or they
control voting power, as of the record date for the Shareholders'
Meeting (a) in favor of the approval, consent, and ratification
of the Merger Agreement and the Merger and (b) against any action
which would impede, interfere, or discourage the Merger or result
in any breach of representation, warranty, covenant, or agreement
of USMX under the Merger Agreement; provided, however,
Shareholder shall have no obligation with respect to voting USMX
Shares if (a) the Board of Directors of USMX recommends that
their respective shareholders vote against that Merger or (b) the
opinion of Coopers & Lybrand L.L.P. delivered pursuant to Section
10.8 of the Merger Agreement, based on the appropriate
representations of Dakota, Merger Corp, and USMX, and provided
that U.S. holders of USMX Shares enter into gain recognition
agreements with the Internal Revenue Service where appropriate,
does not conclude that no gain or loss should be recognized by
the U.S. holders of USMX Shares upon their receipt of Dakota
Shares in exchange for their USMX Shares; and provided further
that this agreement to vote shall immediately terminate on the
earliest to occur of termination of the Letter of Intent (other
than by execution of the Merger Agreement), or termination of the
Merger Agreement, or June 1, 1997.
2. Standstill. Without the prior written consent of Dakota,
which may be withheld in Dakota's sole discretion, Shareholder
shall not, and shall use its best efforts to cause its affiliates
not to, offer to sell, sell, contract to sell, or otherwise
dispose of any USMX Shares or any securities convertible into
USMX Shares from the date hereof until the earliest of (a)
consummation of the Merger, (b) termination of the Letter of
Intent in accordance with its terms, unless the Letter of Intent
is terminated by execution by Dakota and USMX of the Merger
Agreement, or (c) termination of the Merger Agreement in
accordance with its terms. For purposes of the foregoing, the
Merger or Merger Agreement shall in form and substance embody the
terms of the Letter of Intent dated January 3, 1997.
3. Representations and Warranties of Shareholder. Shareholder
is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
Shareholder may execute, deliver, and perform this Support
Agreement without the necessity of obtaining any consent,
approval, authorization, or waiver, or giving any notice or
otherwise. Shareholder has the full corporate power and
authority to execute and deliver this Support Agreement and to
perform its obligations hereunder. This Support Agreement has
been duly authorized by the Shareholder. This Support Agreement
has been duly executed and delivered by Shareholder and
constitutes the legal, valid, and binding obligation of
Shareholder, enforceable against Shareholder in accordance with
its terms, except that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. The execution,
delivery, and performance of this Support Agreement by
Shareholder will not constitute a violation of the Certificates
or Articles of Incorporation (or like charter documents) or By-
laws, each as amended, of Shareholder, or constitute a material
violation of any law applicable or relating to the Shareholder.
4. Injunctive Relief. The Parties acknowledge that the remedy
at law for any breach of the obligations undertaken by
Shareholder may be insufficient and inadequate, and that Dakota
and USMX sole remedy for Shareholder's breach of this Agreement
shall be equitable relief, in addition to remedies at law. In
the event of any action to enforce the provisions of this Support
Agreement, Shareholder waives the defense that there is an
adequate remedy at law. Shareholder acknowledges that the USMX
Shares are unique. In the event Shareholder refuses to perform
its obligations under this Support Agreement, Dakota and USMX
shall have, in addition to any other remedy at law or in equity,
the right to specific performance. In no event shall Shareholder
be liable for monetary damages hereunder.
5. Consideration.
(a) Board Seat. Shareholder, in consideration for this
Agreement, and reflecting its ownership position in USMX, shall
be appointed to fill a seat on the Board of Directors of the
surviving corporation, subject to shareholder approval, and shall
receive the recommendation of the Board of the surviving
corporation to its shareholders to continue to hold that Board
seat as long as the Shareholder holds not less than five percent
of the common stock of the surviving corporation.
(b) Montana Tunnels. Dakota and USMX shall use their best
efforts, subject to applicable law and the fiduciary obligations
of USMX's Board of Directors, to obtain the approval of the
shareholders of USMX with respect to the disposition of USMX's
royalty interest in the Montana Tunnels properties.
6. Miscellaneous.
(a) Entire Agreement. This Support Agreement contains the
entire agreement among the Parties with respect to the subject
matter hereof and, except as expressly provided herein,
supersedes all prior arrangements or understandings with respect
thereto (except for such agreements supplementing or amending
this Support Agreement which specifically make reference to this
Section).
(b) Descriptive Headings. The descriptive headings of this
Support Agreement are for convenience only and shall not control
or affect the meaning or construction of any provision of this
Support Agreement.
(c) Governing Law. This Support Agreement shall be
governed by and construed in accordance with the laws of the
State of Washington (other than the choice of law principles
thereof).
(d) Waivers and Amendments. Any waiver of any term of this
Support Agreement, or any amendment or supplementation of this
Support Agreement, shall be effective only if in writing. A
waiver of any breach or failure to enforce any of the terms or
conditions of this Support Agreement shall not in any way affect,
limit, or waive a Party's rights hereunder at any time to enforce
strict compliance thereafter with every term or condition of this
Support Agreement.
(e) Third-Party Rights. Notwithstanding any other
provision of this Support Agreement to the contrary, this Support
Agreement shall not create benefits on behalf of any third party
or any other person; and this Support Agreement shall be
effective only as between the Parties, their successors and
permitted assigns.
(f) Illegalities. In the event that any provision
contained in this Support Agreement shall be determined to be
invalid, illegal, or unenforceable in any respect for any reason,
the validity, legality, and enforceability of any such provision
in every other respect and the remaining provisions of this
Support Agreement shall not, at the election of the Party for
whose benefit the provision exists, be in any way impaired.
IN WITNESS WHEREOF, the undersigned have executed this Support
Agreement as of the day and year first above written.
USMX, INC. DAKOTA MINING CORPORATION
By:___________________________ BY: __________________________
Name: Name: Alan R. Bell
Title: Title: President and CEO
PEGASUS GOLD INC.
By: ________________________________
Name:
Title:
