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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
/X/ 15, ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended
December 31, 1998
/ / 15, TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from ________________ to _________________
Commission file 02-69494
GLOBAL GOLD CORPORATION
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(Name of small business issuer in its charter)
Delaware 13-3025550
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
734 Franklin Street, Suite 383, Garden City, New York 11530-4525
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (516) 294-7946
Securities registered under Section 12(b) of the Exchange Act:
Title of each class (Name of each exchange on which registered)
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None
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Securities registered under Section 12(g) of the Exchange Act:
None
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(Title of Class)
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(Title of Class)
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes |X| No
/_/.
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to be best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year ending December
31, 1998 were $-0-.
The aggregate market value of the voting stock held by non-affiliates
of the Company computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
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the past 60 days was $123,966(1)
As of December 31, 1998 there were 4,348,114 Shares of the registrant's
Common Stock outstanding.(2)
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(1) The Company's Common Stock is not publicly traded. However, the
Board of Directors of the Company determined that fair market value of the
Common Stock was $0.10 per share.
(2) This number is computed after taking into account the 1 for 10
reverse split of the shares of Common Stock of the Company, effective as of
December 31, 1996 (the "Reverse Split").
ITEM 1. DESCRIPTION OF BUSINESS
(A) General Overview
The Company now holds only special warrants to purchase 4,000,000
shares of common stock of First Dynasty Mines, Ltd., a publicly-traded Canadian
corporation. The Company previously engaged in the development of a gold mining
project in Armenia, a member of the Commonwealth of Independent States. The
Company is currently in the pre-development stage and has not received any
revenues from mining activities as of December 31, 1998, other than such shares
of stock and cash previously paid by First Dynasty Mines, Ltd. Prior thereto,
the Company did not engage in any substantial business activities, except as
described in the section 1(D) entitled "Prior History of the Company" in the
annual reports previously filed by the Company with the Securities and Exchange
Commission ("SEC")
(B) Armenian Mining Project
(a) Armenian Joint Venture Agreement
In 1996, the Company acquired rights under a Joint Venture Agreement
with the Ministry of Industry of Armenia and Armgold, S.F., the Armenian state
enterprises, to provide capital and financing multistage financing of the
Armenian gold industry, which rights were finalized under the Second Armenian
Gold Recovery Company Joint Venture Agreement dated as of September 30, 1997.
(b) Financing of the Armenian Mining Project - First Dynasty Mines
Ltd.
Throughout 1996 and into January, 1997, the Company had discussions
with many unrelated parties in connection with arranging for the financing of
the tailings project at the Ararat processing plant (the "Tailings Project").
As of January 31, 1997, the Company and Global Gold Armenia Limited ("GGA")
reached an agreement with First Dynasty Mines Ltd. ("First Dynasty"), a
Canadian public company whose shares are traded on the Toronto Stock Exchange
and on NASDAQ. Under such preliminary agreement, First Dynasty acquired the
right, subject to certain conditions, to advance funds in stages necessary
for the implementation of the tailings project and the preparation of
engineering and business plan materials for the remaining Armenian mining
projects.
The Company, GGA and First Dynasty entered into a definitive agreement
dated May 13, 1997 reflecting the final agreement of the parties with respect to
the above projects (the "FDM Agreement"). The parties thereafter amended the FDM
Agreement on July 24, 1998.
Under the FDM Agreement, as amended, First Dynasty provided
financing of approximately $24,600,000 towards the Armenian mining projects,
and ultimately acquired 100% of the Company's stock ownership in GGA, a
Caymans Island subsidiary, which held rights to the Armenian mining joint
venture.
In connection with the First Dynasty's purchase of the Company's
remaining 20% interest in GGA, the Company received a certificate representing
special warrants to purchase 4,000,000 shares of First Dynasty common stock,
exercisable, at the Company's option, without any payment therefor. Pursuant to
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the existing terms of the FDM Agreement, First Dynasty agreed to use its best
efforts for a period of one year from August 31, 1998 to cause the shares of
First Dynasty common stock subject to such warrants to become freely tradable
shares.
Also, the delivery by First Dynasty to the Company of the certificate
for the 4,000,000 special warrants of First Dynasty fully satisfied First
Dynasty's obligations under the payment section of the FDM Agreement, subject to
First Dynasty's continuing best efforts obligations described above.
In addition to the Company's ownership of the 4,000,000 special
warrants to purchase First Dynasty common stock, the Company still retains the
right to elect to participate in any exploration project undertaken in Armenia
by First Dynasty or any of its affiliates, including GGA, to a level of a 20%
interest in any such project, pursuant to the terms of a mutually acceptable
participation agreement with respect to any such project.
Also, First Dynasty fully satisfied its obligations to Robert A.
Garrison, the Company's President, under his consulting agreement with GGA on
August 31, 1998 by paying him $62,500 and delivering to him special warrants to
purchase 500,000 shares of First Dynasty common stock, exercisable, at his
option, without any payment therefor, subject to First Dynasty's registration
obligations to use its best efforts to make such shares freely tradable.
For a further description of the background concerning the Armenian
mining project, an interested person can review the quarterly and annual reports
previously filed by the Company with the SEC.
(C) Georgian Mining Project
As of December 31, 1997, the Company abandoned its pursuit of any
mining project in Georgia.
For a further description of the background concerning the Georgian
mining project, an interested person can review the quarterly and annual reports
previously filed by the Company with the SEC.
(D) Recent Activities
(a) Investment in Jet-Line Environmental Services, Inc.
On April 21, 1993, the Company loaned $300,000 to Jet-Line, which it
treated as worthless as of December 31, 1997.
For a further description of the Company's investment in Jet-Line and
its attempts to recover such loan, an interested person can review the quarterly
and annual reports previously filed by the Company with the SEC.
(b) Offering of Convertible Notes of the Company
Pursuant to the Confidential Private Offering Memorandum dated May 17,
1995, as amended, the Company sold the maximum of $500,000 principal amount of
its 10% Convertible Notes, which had a maturity date of September 30, 1996 (the
"Offering"). The Offering of Convertible Notes, Warrants and Common Stock was
offered pursuant to the Memorandum solely to persons who are "accredited
investors" as defined in Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act"), in a transaction exempt from
registration thereunder. The final date of the closing of the Offering was
December 31, 1995.
The Company undertook the Offering in order to raise additional funds
for the Company to enable it to engage in the development and commercial
exploitation of the Armenian and Georgian mining projects, in an attempt to
generate a potential and substantial asset base and potential future
profitability for the Company as part of the Company's long-term strategy to
develop profitable mining operations abroad.
All of the $500,000 principal amount of Convertible Notes was
automatically converted pursuant to their terms into an aggregate of 2,000,000
shares of Common Stock (prior to the Reverse Split) and warrants to purchase
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4,000,000 shares of the Company's Common Stock (prior to the Reverse Split), at
an exercise price of $0.50 per share (the "Warrants"). As of December 31, 1998,
there were Warrants to purchase 400,000 shares of the Company's Common Stock
issued and outstanding. As to the Warrants, each Warrant now has an exercise
price of $.125 per share and expires on December 31, 1999 pursuant to several
amendments made thereto, including the one made in December, 1998 extending the
expiration date as shown above.
Since all of the automatic conversion conditions were satisfied in
1995, there were no Convertible Notes of the Company outstanding as of December
31, 1995 or thereafter.
(c) Reverse Split
Various prospective investment banking firms and potential investors
who expressed an interest in providing funding for the Company's projects in
1996 requested that the Company undertake a reverse split of its Common Stock to
decrease the number of shares outstanding and thereby facilitate possible future
financings. Accordingly, the Company effected a 1 for 10 reverse split of its
Common Stock effective as of December 31, 1996. Such step was taken by the
written consent of the holders of a majority of the Company's issued and
outstanding shares of Common Stock. By virtue of the Reverse Split, each
stockholder's number of shares of Common Stock became 1/10th of the number
previously held. The Company filed its Certificate of Amendment to the
Certificate of Corporation with respect to the reverse split with the Delaware
Secretary of State on December 31, 1996.
(d) Employees.
As of December 31, 1998, the Company had one employee, who was in
charge of the overall business of the Company on a part-time basis, and one
consultant who is principally involved in overseeing the Company's proposed
mining activities on a part-time basis, and one independent contractor who
provides administrative and clerical services on a part-time basis.
(E) Special Considerations
The following risk factors should be considered in connection with an
evaluation of the business of the Company:
No Prior Operating History; Failure to File Reports with the SEC
The Company was incorporated on February 21, 1980, and closed a public
offering of the Common Stock in January, 1981. Several months after the closing
of such offering, the Company withdrew the listing of the Common Stock for
trading on NASDAQ because of the theft of substantially all of the cash funds of
the Company derived from the proceeds of the public offering by its then
president, Samuel McNell in July, 1981. After the consummation of the public
offering, the Company failed to file any further annual or periodic reports
required under the Exchange Act. While the Company filed its Form 10-KSB for the
calendar years 1994 and 1995 and its Form 10-QSB commencing with the quarter
ended March 31, 1995 and each quarter thereafter through and including September
30, 1998 and filed audited financial statements with the Form 10-KSB for
calendar year 1994 covering calendar years 1987, 1988, 1989, 1990, 1992, 1993
and 1994, and covering calendar years 1995, 1996 and 1997 with the Form 10-KSB
filed for each such year, there can be no assurance that the SEC might not
assert claims against the Company and its present and former directors and
officers, which actions might adversely affect the future conduct of the
Company's business or prevent the future trading of the Company's stock on
public markets. Furthermore, the Company's past failure to file reports with the
SEC may have an adverse impact on the Company's ability to have the shares of
Common Stock listed for trading on NASDAQ in the event that the Company is
otherwise able to meet the NASDAQ Stock Market listing standards in the future.
Development Stage Company
Since the Company never engaged in the active conduct of a trade or
business, it has not generated any revenues to date, with the exception of
interest income on the funds recovered by the Company in the lawsuits prosecuted
by it as a result of the theft of the Company's funds and the special
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warrants to purchase 4,000,000 shares of First Dynasty common stock and cash
received from such source under the FDM Agreement, as amended. The Company may
encounter problems, delays, expenses and difficulties typically encountered in
the development stage, many of which may be outside of the Company's control.
These include, without limitation, unanticipated problems and additional cost
relating to development, production, marketing, and competition. The Company
expects to incur operating losses for the near term future and, in any event,
until such time as it derives substantial revenues from the sale of its
investments in the common stock of First Dynasty (after the special warrants to
acquire such shares are exercised) if any. There can be no assurance that the
Company will develop successful operations.
Need for Additional Cash
The Company needs additional funds if it is to conduct any operations
in the foreseeable future, none of which is contemplated at present. Moreover,
there can be no assurance that any financing for any future projects will be
available for such purposes or that such financing, if available, would be on
terms favorable or acceptable to the Company.
Holding Company Structure
The Company is a holding company which will conduct its business
through subsidiaries. As a result, the Company's cash flow and consequent
ability to make dividend payments and meet its debt obligations are primarily
dependent upon the earnings of its subsidiaries and on dividends and other
payments therefrom. Any right of the Company to participate in any distribution
of the assets of its subsidiaries upon the liquidation, reorganization or
insolvency of such subsidiaries would, with certain exceptions, be subject to
the claims of the creditors (including trade creditors) and preferred
stockholders, if any, of such subsidiaries, or may otherwise be restricted by
virtue of a stockholder agreement with respect thereto.
Competition
There is intense competition in the mining industry. If the Company
does engage in any future mining activities, it will be competing with larger
mining companies, many of which have substantially greater financial strength,
capital, marketing and personnel resources than those possessed by the Company.
Need for Key Personnel
The Company presently only has one officer intimately familiar with the
operation of mining projects or the development of such projects. While the
Company does not believe the loss of its president or any other director or
officer of the Company will materially and adversely affect its long-term
business prospects, the loss of any of the Company's senior personnel might
potentially adversely affect the Company until a suitable replacement could be
found. While the Company has an employment agreement with one of its officers,
Drury J. Gallagher, such agreement is for only a three-year term which expires
on June 30, 2000 and Mr. Gallagher's salary has been eliminated as of September
30, 1998 because the Company is no longer conducting any active business
activities. There can be no assurance that such agreement will be renewed or, if
renewed, will be on terms mutually acceptable to all parties.
Failure to Satisfy NASDAQ Listing Rules
Effective in August, 1991, the SEC approved the adoption by the NASDAQ
Stock Market of new maintenance standards for companies whose securities are
traded on NASDAQ. Under these new standards, among other things, a corporation
must have $4 million in total assets and $2 million in capital and surplus and a
minimum bid price of $3.00 per share in order to be eligible for a Nasdaq
listing. At December 31, 1998, the Company had total assets of approximately
$314,124 and stockholders' equity of $140,800. Without increases in assets and
capital surplus, the Company may not be able to be eligible to have its
securities traded on NASDAQ. Moreover, regulations issued by NASDAQ have
increased the thresholds that have to be met in order for a security to be
traded initially on the NASDAQ Small Cap and National Markets, which may
adversely affect the Company's ability to have its Common Stock traded on the
NASDAQ Small Cap or National Markets. Furthermore, the Company could experience
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difficulties in commencing the trading of its securities on NASDAQ. If the
Company is unable to have its securities traded on NASDAQ, its securities will
continue to be eligible for trading on the NASDAQ bulletin board, although the
market for shares of the Company's Common Stock may be reduced and, hence, the
liquidity of the shares of Common Stock and/or the Warrants may be reduced.
However, recent regulations adopted for the trading of securities may adversely
affect the eligibility of the Company's Common Stock for trading on the NASDAQ
electronic bulletin board.
Restrictions on Transfer
Pursuant to the Stockholders Agreement, the then current five principal
holders of the Company's Common Stock, Messrs. Gallagher, Hayman, Hayman, and
Ryan and the Seitz Family Limited Partnership agreed not to sell the shares of
Common Stock owned by them for a period of 24 months following the date of the
final closing of the Offering (i.e., until December 31, 1997), except they each
have the right to pledge a portion of their shares and to make transfers within
their family or to certain family-controlled entities. In addition, Eyre and the
Parry-Beaumont Trust also agreed not to sell, pursuant to the Stockholders
Agreements, the 600,000 and 400,000 shares of the Company's Common Stock owned
by them (after implementation of the Initial Restructuring Agreement) for a
period of 24 months from the date of the final closing of the Offering (i.e.,
until December 31, 1997), except that they each have the right to sell 150,000
shares to non-United States persons (as defined under the Act) (all of which
numbers have been computed after the Reverse Split). Moreover, each purchaser of
Convertible Notes pursuant to the Offering also agreed not to sell the Common
Stock issuable upon the conversion of the Convertible Notes or upon the exercise
of the Warrants issued pursuant to such conversion for a period of 24 months
from the date of the final closing of the Offering (i.e., until December 31,
1997). Upon the expiration of such agreements, which occurred, up to 367,048
shares of Common Stock held by the five major existing shareholders, 600,000
shares of Common Stock held by the purchasers of the Convertible Notes (assuming
all the Warrants issued upon the prior automatic conversion thereof are
exercised in full) and 1,000,000 shares issued to Eyre and the Parry-Beaumont
Trust or a total of 1,967,048 (all computed after the Reverse Split), may
potentially be available for sale under Rule 144, subject in some cases to a
certain volume limitation. No prediction can be made as to the effect, if any,
that future sales of Common Stock or the availability of such shares for sale
will have on the market price of the Common Stock or the Warrants prevailing
from time to time. Sales of substantial shares of the Common Stock or the
Warrants, or the perception that such sales might occur, could adversely affect
the prevailing market price of the Common Stock or the Warrants.
No Dividends
The Company currently anticipates that it will retain all of its future
earnings, if any, for use in its operations and does not anticipate paying any
cash dividends in the near term future. There can be no assurance that the
Company will pay cash dividends at any time, or that the failure to pay
dividends for periods of time will not adversely affect the market price for the
Company's Common Stock.
Control of the Company
Drury J. Gallagher, the Chairman and Chief Executive Officer, and
Robert A. Garrison, the President and Chief Operating Officer, currently own
1,108,451 and 1,000,000 shares, respectively, or a total of 2,108,451 shares of
the Company's Common Stock issued and outstanding as of December 31, 1998. In
addition, Eyre and the Parry-Beaumont Trust own 600,000 and 400,000 shares of
Common Stock, respectively, as of such date. If Messrs. Gallagher and Garrison
act in concert they only control 49% of the issued and outstanding Common Stock
of the Company. However, if they act in concert together with the owner or
owners holding slightly more than 1% in total of the Company's Common Stock
issued and outstanding, they will be able to effectively determine the vote on
any matter being voted on by the Company's stockholders, including the election
of directors and any merger, sale of assets or other change in control of the
Company. In such case, such group would own more than 2,174,057 of the 4,348,114
shares of Common Stock outstanding as of December 31, 1998, or more than 50% of
the issued and outstanding shares of the Company's Common Stock. The same result
would follow if Messrs. Gallagher and Garrison acted in concert with
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Eyre and the Parry-Beaumont Trust.
Disagreement Among Significant Shareholders - Litigation
In February, March and April, 1997, Eyre and the Parry-Beaumont Trust
questioned the validity of the issuance by the Company of 1,000,000 shares of
its Common Stock to each of Messrs. Drury J. Gallagher and Robert A. Garrison.
In addition, in February, March and April, 1997, Eyre and the Parry-Beaumont
Trust questioned the validity of the Second Restructuring Agreement (as defined
in Item 12(B)), including, without limitation, the waiver of their Acquisition
Warrants to purchase 400,000 shares of the Company's Common Stock (computed
after the Reverse Split). For a further description of the Second Restructuring
Agreement and such transfers, see Item 12(B) hereof.
In January, 1998, the Company brought an action against Eyre, the
Parry-Beaumont Trust and Kevin Parry, individually, in the United States
District Court for the Southern District of New York, bearing Docket No. 98 Civ.
0009, seeking damages in excess of $81,000,000 arising out of the alleged fraud
committed by the defendants.
The defendants denied such claims and asserted counterclaims against
the Company seeking damages in an undetermined amount against the Company and
seeking a declaratory judgment voiding the Second Restructuring Agreement (as
defined herein in Section 12(A)). In addition, Eyre and the Parry-Beaumont Trust
brought a third-party complaint against Drury J. Gallagher and Robert A.,
Garrison, individually, seeking, among other things, damages in excess of
$75,000 and directing Messrs. Gallagher and Garrison to return the 2,000,000
shares of the Company's Common Stock issued to them by the Company in January,
1997.
The Company believes that the Company properly issued the shares of its
Common Stock to Messrs. Gallagher and Garrison in exchange for valuable
consideration and that the claim of invalidity of such action has no merit.
Furthermore, the Company believes that the Second Restructuring Agreement is
valid, that Eyre and the Parry-Beaumont Trust waived their rights covered
thereby and that any claim of invalidity with respect thereto has no merit. The
Company intends to prosecute such litigation to completion. However, while the
Company believes it will be successful in the assertion of its claims and
Messrs. Gallagher and Garrison will be successful in the defense of the claims
made against them in such litigation, there can be no assurance as to the
outcome of the above litigation between the parties.
Ownership of Special Warrants to Purchase First Dynasty Common Stock
The Company's principal asset at present consists of special warrants
to purchase 4,000,000 shares of common stock of First Dynasty, the common stock
of which is traded on the Toronto Stock Exchange and NASDAQ. The closing price
of a share of such common stock on March 18, 1999 was U.S. $0.13. However, the
special warrants and the 4,000,000 shares of First Dynasty into which they are
exercisable are an illiquid investment, and are subject to Canadian securities
laws restrictions, and, hence, not freely tradable. Moreover, as of December 31,
1998, First Dynasty had 112,403,797 share of common stock issued and
outstanding, and warrants, options and convertible notes to purchase 36,100,000
shares of common stock outstanding on such date. Since there are outstanding
special warrants to purchase 31,600,000 shares of First Dynasty at prices
ranging from $0.29 to $0.42 over the period ending January 31, 2002, the shares
purchasable thereunder will, in the Company's view, pose an overhang on the
trading market and adversely affect any upward price movement in the shares of
common stock of First Dynasty.
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United States Income Tax Consequences Arising Out of the Asset Purchase
Agreement with Eyre.
The Company neither received a tax opinion nor sought a private letter
ruling from the Internal Revenue Service (the "Service") regarding the United
States income tax consequences arising out of the closing under the Asset
Purchase Agreement between the Company and Eyre on December 1, 1995 (see Item
12(B)). It is possible that the Service may contend that the Company and/or its
subsidiaries recognized substantial gain in such transaction, and there can be
no assurance of the outcome of such challenge. If the Service successfully
asserted such result, the amount due could have a material adverse impact on the
Company's business, assets and financial position.
While the Company had a net operating loss carry forward as of December
31, 1994 of approximately $2,500,000 which expired in 1996, the closing of the
transaction under the Agreement and the Offering eliminated almost the entire
amount thereof as of December 31, 1995. Thus, if a substantial amount of gain
arose upon the closing under the Agreement, the Company's net operating loss
carry forward would not be available, in all likelihood, to offset such gain in
a material way.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company formerly leased office space of approximately 1,000 square
feet, in New York, on premises owned by Penn-Med Consultants, Inc., whose sole
stockholders are the three largest stockholders of the Company, other than Eyre,
the Parry-Beaumont Trust and Robert A. Garrison. The Company accrued rental
payments of $3,000 a month, commencing as of January 1, 1996, for lease of space
at the premises and the provision of various administrative services, including
telephone, fax and xerox. There is no written agreement covering such
arrangement. The lease was terminated on December 31, 1997.
ITEM 3. LEGAL PROCEEDINGS
In January, 1998, the Company brought an action against Eyre, the
Parry-Beaumont Trust and Kevin Parry, individually, in the United States
District Court for the Southern District of New York, bearing Docket No. 98 Civ.
0009, seeking damages in excess of $81,000,000 arising out of the alleged fraud
committed by the defendants.
The defendants denied such claims and asserted counterclaims against
the Company seeking damages in an underdetermined amount against the Company and
seeking a declaratory judgment voiding the Second Restructuring Agreement (as
defined herein in Section 12(A)). In addition, Eyre and the Parry-Beaumont Trust
brought a third-party complaint against Drury J. Gallagher and Robert A.,
Garrison, individually, seeking, among other things, damages in excess of
$75,000 and directing Mr. Gallagher and Mr. Garrison to return the 2,000,000
shares of the Company's common stock issued to them by the Company in January,
1997.
The respective parties have served notices to take the deposition of
the other parties in the action and made requests for the production of
documents. The parties have scheduled the taking of depositions commencing on
May 17, 1999.
The Company intends to prosecute the litigation to completion and
believes that it claims against the plaintiffs will be successfully contested
and that the defendants' claims asserted against the Company and Messrs.
Gallagher and Garrison are without merit, although there can be no assurance as
to the outcome thereof.
The Company has also received requests from Panquest Lte. and from Eyre
relating to amounts alleged to be due to Panquest Lte. relating to the Company's
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acquisition of rights from Eyre relating to the Armenian and Georgian projects.
No evidence has yet been supplied to the Company in this regard.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTER
(a) The Company's Common Stock is not publicly traded on any market.
(b) As of December 31, 1998, there were approximately 1,100 holders of
record of the Company's Common Stock.
(c) The Company did not pay or declare any cash dividends on its Common
Stock during its last two fiscal years ended December 31, 1997 and December 31,
1998.
(d) As of December 31, 1998, the Company was not prohibited from paying
any dividends on its Common Stock.
(e) The Company's transfer agent is American Registrar and Transfer
Company, with offices at 10 Exchange Place, Salt Lake City, Utah 84111.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
As at December 31, 1998, the Company had net assets of $314,124, of
which $58,124 consisted of cash or cash equivalents, and had current liabilities
of $173,324. Thus, the Company's current liabilities exceeded its current
liabilities as of such date.
The Company's plan of operation for calendar year 1999 is:
(a) to exercise the special warrants to purchase 4,000,000 shares of
First Dynasty common stock, at no cost, and hold such stock for investment
purposes thereafter; and
(b) to prosecute the litigation against Mr. Parry, Eyre and the
Parry-Beaumont Trust to completion.
The Company needs financing to meet its anticipated monthly
administrative expenses of $5,000 (exclusive of accrued officers' compensation),
plus additional amounts for legal and accounting costs. Prior to the
commencement of the litigation described in Item 3 hereof, the Company
anticipated that it might obtain additional financing in 1999 from the holders
of its Warrants. Pursuant to the Offering of $500,000 principal amount of the
Convertible Notes of the Company, the Company issued Warrants to purchase
4,000,000 shares of its Common Stock at an exercise price of $0.50 per share. By
virtue of the Reverse Split, the Warrants were converted into Warrants to
purchase 400,000 shares of the Company's Common Stock at an exercise price of $5
per share. On January 23, 1997, the Company amended the Warrants to reduce the
exercise price to $1 per share and to extend the expiration date until December
31, 1997. Again, on December 1, 1997, the Company amended the Warrants to reduce
the exercise price to $0.125 per share and to extend the expiration date until
December 31, 1998, and recently extended the expiration date until December 31,
1999. If the Warrants were exercised in full, the Company would receive $50,000
in gross proceeds. However, the Company does not believe that the Warrants will
be exercised under existing circumstances, and thus does not anticipate that any
amount thereof will be exercised, although there can be no assurance of such
result.
In the event that no contemplated financing is obtained through the
exercise of the Warrants (which the Company considers highly remote), the
Company does not have sufficient financial resources to meet its obligations as
of June 30, 1999.
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Accordingly, based on the Company's needs for additional financing of
its operations, Messrs. Gallagher and Garrison agreed to continue to advance
funds to the Company for such purpose through December 31, 1999 if the Company
also agreed not to encumber the special warrants to purchase First Dynasty
common stock (and the shares issuable thereunder once received), which the
Company agreed to do.
The Company does not intend to engage in any project research and
development during 1999 and does not expect to purchase or sell any plant or
significant equipment.
The Company does not expect to hire any additional full-time employees
in 1999.
ITEM 7. FINANCIAL STATEMENTS
The audited financial statements, notes thereto and reports of
independent certified public accountants thereon for the fiscal years of the
Company ended December 31, 1998 and December 31, 1997 (by Marks Shron & Company,
LLP) are attached hereto as part of, and at the end of, this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Officer
---- --- -------
<S> <C> <C>
Drury J. Gallagher 60 Chairman, Chief Executive Officer,
Treasurer and Director
Robert A. Garrison 58 President, Chief Operating Officer,
Secretary and Director
</TABLE>
Each Director is elected for a period of one year at the Company's
annual meeting of stockholders and serves until his successor is duly elected
and qualified. Each director who is not a full time employee of the Company
receives no remuneration for his services as a director. Officers are appointed
by the Board of Directors.
The Board of Directors has not appointed any audit, compensation or any
other committee. Instead, the Board acts as a whole in all matters.
Mr. Gallagher has served as a director since 1981 and as Chairman,
President and Treasurer of the Company from 1982 until February 1, 1997 and as
Chairman, Chief Executive Officer and Treasurer since that date. Mr. Gallagher
is the general partner, owner and operator of 20 nursing homes in Pennsylvania,
and has served as Executive Vice President and Treasurer of Penn-Med
Consultants, Inc., which is engaged in the business of providing long-term
health care management, since 1992. From 1986 to 1991, he served as Vice
President of Pennsylvania Health and Nursing Care Corporation. He also served as
a member of the Board of Directors of Power Spectra, Inc., a public company
specializing in commercial and defense electronics from April, 1990 through
July, 1996.
Mr. Garrison has served as a director and Vice President of the Company
from June 26, 1995 until February 1, 1997, and became the President and Chief
Operating Officer on February 1, 1997 and was appointed its Secretary on
10
<PAGE>
February 1, 1996. Mr. Garrison is co-founder, owner and President of INFISCO,
Inc., a financial advisory corporation that structures financings, including
project financing principally in foreign countries, since 1992. He was also the
President of AEGIS Commodities Corporation, a packager of commodity export
supported financing programs, serving as such from 1990 to 1992. He also served
as a Director and President and Chief Executive Officer of Sogam Holdings Inc.,
one of the world's largest mining corporations, and a business of Societe
General de Belgique, since 1985. Prior thereto, Mr. Garrison was the Vice
President and Treasurer of Pechiney Trading International Division of Pechiney
Engine Khulman, in Paris, France, and had been employed by AMAX, Inc., a major
mining enterprise, in various financial capacities. Mr. Garrison has also
written articles on financing in the mining industry and has structured foreign
asset-based financings.
ITEM 10. EXECUTIVE COMPENSATION
(a) The summary compensation table below indicates the cash or accrued
compensation paid by the Company as well as other compensation paid or accrued
to the Chairman and Chief Executive Officer (the Company's chief executive
officer) and the next highest compensated executive officer at December 31, 1998
for services rendered in all capacities during calendar years 1998, 1997 and
1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation Awards
- ------------------------------------------------------- -------------------------------------------------------------
Name and Other Annual Restricted Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Stock Awards Options/SARs(#) Payout Compensation
- ------------------ ---- ------ ----- ------------ ------------ -------------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Drury J. Gallagher, 1998 $112,500 -0- -0-(2) -0- -0- -0- -0-
Chairman, Chief 1997 $125,000(1) -0- -0-(2) -0- -0- -0- -0-
Executive Officer 1996 $100,000(1) -0- -0-(2) -0- 250,000 shares -0- -0-
and Treasurer
(the Company's Chief
Executive Officer)
Robert A. Garrison, 1998 $ -0- -0- -0-(2) -0- -0- -0- -0-
President, Chief 1997 $ 13,333(1) -0- -0-(2) -0- -0- -0- -0-
Operating Officer 1996 $100,000(1) -0- -0-(2) -0- 250,000 shares -0- -0-
and Secretary
and Secretary
</TABLE>
- ----------
(1) Under the Company's employment agreements with Mr. Gallagher dated
as of July 1, 1995, and with Mr. Garrison dated as of July 1, 1995 (as amended
as of April 12, 1996), such officers were to be paid an annual salary of
$100,000, in equal monthly installments, commencing as of July 1, 1995. However,
since the Company was unable to pay any of such salaries in 1995 and 1996, all
such amounts accrued, which totalled $150,000 per person, or an aggregate of
$300,000 as of December 31, 1996. Initially, the Company and the officers orally
agreed in July, 1995 to postpone the payment of such accrued salaries and any
additional amounts due under the employment agreements until the Company
received additional funding of at least $2,000,000. As reflected in Item 12(A)
hereof, the Company canceled $100,000 of such accrued compensation and all of
the stock options and stock appreciation rights of each officer as of January 3,
1997, in exchange for 1,000,000 shares of the Company's Common Stock which were
transferred to each of them. In addition, Mr. Gallagher's compensation for 1997
was $125,000, of which $50,000 was accrued, together with the accrual of Mr.
Garrison's compensation of $13,333 for 1997. In addition, Mr. Gallagher accrued
$112,500 of his compensation for 1998. All compensation numbers reflect the
compensation payable for the period from January 1, 1996 to December 31, 1998.
Mr. Gallagher entered into a three-year employment agreement with the
Company as of July 1, 1995. Under such agreement, Mr. Gallagher agreed to spend
up to one-half of his business time as President and be in charge of the
Company's day-to-day operations at an annual salary of $100,000. The agreement
also provided for the reimbursement of expenses incurred by him in the
performance of his duties. Such agreement was amended and restated as of July 1,
11
<PAGE>
1997 to increase Mr. Gallagher's base compensation to $150,000 as of such date
and to extend the term thereof until June 30, 2000. Mr. Gallagher's salary under
such agreement ceased after September 30, 1998 because the Company had become
dormant by that date.
The Company entered into a three-year employment agreement with Mr.
Garrison dated as July 1, 1995 under which he was to receive a salary from the
Company totalling $85,000 and be entitled to the stock options and stock
appreciation rights as described in Item 12(A). Under the agreement, Mr.
Garrison agreed to spend up to one-half of his business time as Vice President
and be in charge of the Company's day-to-day mining and project financing
operations. The agreement also provided for the reimbursement of expenses
incurred by him in connection with the performance of his duties thereunder.
Mr. Garrison also entered into a substantially identical employment
agreement with Autosport under which he was to be paid an annual salary of
$15,000. However, since Autosport (as defined in Item 12(B) in the prior
10-KSBs filed by the Company with the SEC) terminated its Mining Management
Agreement with the Company pursuant to the Initial Restructuring Agreement
(as defined in Item 12(B)), Mr. Garrison's employment with Autosport was also
terminated. Thereafter, on April 12, 1996 the Board of Directors decided to
amend Mr. Garrison's employment agreement with the Company to increase his
annual salary thereunder from $85,000 to $100,000. Pursuant to such Board
action, the parties executed and delivered an amendment to Mr. Garrison's
employment agreement with the Company to such effect.
Mr. Garrison's employment agreement with the Company, as amended,
terminated as of January 31, 1997 when he became entitled to receive consulting
fees from GGA for services rendered on behalf of the Company pursuant to the
consulting agreement dated as of May 13, 1997. Mr. Garrison received $62,500 in
cash and special warrants to purchase 500,000 shares of First Dynasty common
stock on August 31, 1998 in full satisfaction of all of First Dynasty's payment
obligations to him under such consulting agreement, subject to First Dynasty's
continuing obligations to arrange for the free trading of such securities.
Mr. Gallagher and Mr. Garrison received $4,982 and $5,752,
respectively, in partial payment of their accrued salaries in January, 1998,
from the $200,000 cash payments made by First Dynasty to the Company in 1998.
(2) Perquisites and other personal benefits paid or accrued to each of
the above-named officers were less than 10% of the total of their respective
annual salaries in 1998 and all previous years, and the same was true in 1995 in
the case of Mr. Gallagher. Mr. Garrison first joined the Company as of July 1,
1995.
(b) Stock Options and Awards
The Company has no options or awards outstanding under the 1995 Stock
Option Plan, and the Company made no grants or awards thereunder during the year
ended December 31, 1998.(1)
(c) 1995 Stock Option Plan
The Company adopted the 1995 Stock Option Plan under which a maximum of
500,000 shares of Common Stock may be issued (subject to adjustment for stock
splits, dividends and the like).
For a description of the terms of the 1995 Stock Option Plan, and the
tax consequences thereunder, an interested person can review the annual reports
previously filed by the Company with the SEC.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Set forth below is information as of December 31, 1998 pertaining
to ownership of the Company's Common Stock, determined in accordance with Rule
13(d)(3) under the Securities and Exchange Act of 1934, by persons known to the
Company who own more than 5% of the Company's Common Stock:
12
<PAGE>
<TABLE>
<CAPTION>
Title of Class Beneficial Owner Shares(1) Percent of Class
- -------------- ------------------- --------- -----------------
Common
------
<S> <C> <C> <C>
Common Stock Drury J. Gallagher 1,132,451(2) 26.0
c/o Global Gold Corporation
734 Franklin Avenue
Suite 303
Garden City, NY 11530
Common Stock Robert A. Garrison 1,000,000(3) 23.0
44 Lords Highway East
Weston, Connecticut 06883
Common Stock Eyre Resource N.L. 600,000(4) 13.8
Crest House - Suite 5
7 Havelock Street
West Perth WA 6005
Australia
Common Stock Jeffrey Beaumont, Trustee
of the Parry-Beaumont Trust 400,000(4) 9.2
18, Pioneer Sector 1
Jurong, Singapore 2262
</TABLE>
- ----------
(1) For purposes of this table, a person or group is deemed to have
beneficial ownership of any shares which such person has the right to acquire
within 60 days after December 31, 1998. For purposes of calculating the
percentage of outstanding shares held by each person named herein, any shares
which such person has the right to acquire within 60 days after December 31,
1998 are deemed to be outstanding, but not for the purpose of calculating the
percentage ownership of any other person.
(2) This amount includes 24,000 shares of Common Stock issuable upon
the exercise of the Warrants acquired by Mr. Gallagher pursuant to the Offering.
See Item 12(A) hereof for a description pertaining to the acquisition of
1,000,000 shares of the Company's Common Stock by Mr. Gallagher. The validity of
such acquisition is being contested by Eyre and the Parry-Beaumont Trust in the
lawsuit described in Item 3 hereof.
Mr. Gallagher disclaims any beneficial interest in the 20,000 shares of
the Company's Common Stock and 40,000 shares of Common Stock issuable upon the
exercise of the Warrants acquired by Francis L. Gallagher, Jr. (Mr. Gallagher's
brother), as trustee of the Drury J. Gallagher Trust F/B/O Children dated March
1, 1985.
(3) See Item 12(A) hereof for a description pertaining to the
acquisition of 1,000,000 shares of the Company's Common Stock by Mr. Garrison.
The validity of such acquisition is being contested by Eyre and the
Parry-Beaumont Trust in the lawsuit described in Item 3 hereof.
(4) The shares owned by each of Eyre and the Parry-Beaumont Trust
reflects the surrender of 6,000,000 and 4,000,000 shares of the Company's Common
Stock, respectively (prior to the 1 for 10 reverse split of such common stock
effective as of December 31, 1996), and the surrender of Acquisition Warrants to
purchase 3,600,000 (prior to the Reverse Split) and 2,400,000 (prior to the
Reverse Split) shares of Common Stock, respectively, as well as the surrender by
Autosport of its options to purchase 2,000,000 shares of the Company's Common
Stock (prior to the Reverse Split), all pursuant to the Initial Restructuring
Agreement. Under the Second Restructuring Agreement, Eyre and the Parry-Beaumont
Trust surrendered their Acquisition Warrants to acquire 2,400,000 (prior to the
Reverse Split) and 1,600,000 shares (prior to the Reverse Split)of the Company's
Common Stock, respectively. The validity of such surrender of Acquisition
Warrants, among other things, is being contested by Eyre and the Parry-Beaumont
Trust in the lawsuit
described in Item 3 hereof.
(b) Set forth below is information as of December 31, 1998 pertaining to
ownership of the Company's Common Stock by all directors and executive officers
of the Company:
13
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Number of
Title of Class Beneficial Owner Shares(1) Percent of Class
- -------------- -------------------- ----------- ----------------
<S> <C> <C> <C>
Common Drury J. Gallagher 1,132,451(2) 26.0(2)
c/o Global Gold Corporation
734 Franklin Avenue
Suite 303
Garden City, NY 11530
Common Robert A. Garrison 1,000,000(3) 23.0(3)
44 Lords Highway East
Weston, Connecticut 06883
------------ ---------
Total 2,132,451 49.0
</TABLE>
(c) As of December 31, 1998, except as described in Item 12 hereof,
there were no arrangements in effect which may result in a change of control of
the Company, after taking into account the effects of the Restructuring
Agreements discussed above.
- ----------
(1) For purposes of this table, a person or group is deemed to have
beneficial ownership of any shares which such person has the right to acquire
within 60 days after December 31, 1998. For purposes of calculating the
percentage of outstanding shares held by each person named herein, any shares
which such person has the right to acquire within 60 days after December 31,
1998 are deemed to be outstanding, but not for the purpose of calculating the
percentage ownership of any other person.
(2) This amount includes 24,000 shares of Common Stock issuable upon
the exercise of the Warrants acquired by Mr. Gallagher pursuant to the Offering.
See Item 12(A) hereof for a description pertaining to the acquisition of
1,000,000 shares of the Company's Common Stock by Mr. Gallagher. The validity of
such acquisition is being contested by Eyre and the Parry-Beaumont Trust in the
lawsuit described in Item 3 hereof.
Mr. Gallagher disclaims any beneficial interest in the 20,000 shares of
the Company's Common Stock and 40,000 shares of Common Stock issuable upon the
exercise of the Warrants acquired by Francis L. Gallagher, Jr. (Mr. Gallagher's
brother) as trustee of the Drury J. Gallagher Trust F/B/O Children dated March
1, 1985.
(3) See Item 12(A) hereof for a description pertaining to the
acquisition of 1,000,000 shares of the Company's Common Stock by Mr. Garrison.
The validity of such acquisition is being contested by Eyre and the
Parry-Beaumont Trust in the lawsuit described in Item 3 hereof.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(A) Transactions with Officers
As described in Item 6 hereof in the Form 10-KSB filed by the Company
for the period ended December 31, 1996, Mr. Gallagher agreed to advance funds to
the Company to cover its administrative expenses and legal and accounting
expenses through June 30, 1997, if he was paid in full by such date or earlier
out of the proceeds of any financing received by the Company in excess of
$500,000 and provided that the Company also secured his loan with the Jet-Line
Note, which the Company agreed to do.
Pursuant to such agreement, Mr. Gallagher loaned $192,000 to the
Company, which loan was evidenced by a new consolidated note which the Company
issued to him as of such date and cancelled the earlier consolidated note dated
November 12, 1996. The Company discharged its loan Mr. Gallagher in full on May
19, 1997 by paying him such amount plus interest thereon of $14,058.49 on such
date.
On January 3, 1997, the Board of Directors of the Company approved the
transfer of 1,000,000 shares of its Common Stock (computed after the Reverse
Split) to each of Messrs. Gallagher and Garrison in exchange for, (a) in Mr.
Gallagher's case, the cancellation of $100,000 of accrued salary, and the
cancellations of his options to acquire 175,000 shares of the Common Stock of
14
<PAGE>
the Company (computed after the Reverse Split) and the cancellation of his stock
appreciation rights (the "SARs") which, under certain circumstances, could have
resulted in the issuance to him of up to 37,500 shares of the Company's Common
Stock (computed after the Reverse Split)1 and (b) in Mr. Garrison's case, the
cancellation of $100,000 of accrued salary, the cancellation of his options to
buy 75,000 shares of the Company's Common Stock and the cancellation of his
SARs. The Company made such transfer to reward each of them for their efforts to
secure financing for the Company and/or the Armenian mining project, for
maintaining the Company's existence in the face of the Company's potential
insolvency, and to increase their proprietary stake as the day-to-day management
of the Company at the request of prospective investment banking firms and
potential investors with whom the Company was then seeking to obtain funding.
Since July, 1995, Messrs. Gallagher and Garrison had deferred the
payment of their salaries due them under their employment agreements and
continued such deferral from July 1, 1996 through December 31, 1996. Since July,
1996, they undertook to keep the Company alive financially, by Mr. Gallagher's
further advances to the Company of $192,000, by Mr. Garrison's payment of his
own travel and travel-related expenses totally over $50,000, by their
undertaking joint and several guarantees of $500,000 to London and International
Mercantile Limited, a financial institution organized under the laws of England
and Wales, and their constant fund-raising activities including frequent trips
to London, Toronto, Vancouver and various places in the United States for such
purpose. Without such efforts, the Company's activities would have ceased in
substantially all respects. No financial assistance of this type, or any
guaranty, was provided by Eyre or its officers, directors or shareholders or by
the Parry-Beaumont Trust (except for $100), despite the Company's written
requests to them for such assistance. Furthermore, when the holders of the
Warrants acquired in the Offering were asked to exercise them at the reduced
exercise price of $0.25 per share during the 30-day period ended December 15,
1996, none of the holders exercised them (except for one holder, Mr. Ian
Darragh, an Eyre director, who purchased 400 shares for a total of $100,
computed prior to the Reverse Split).
As a result of such transfers of Common Stock to Messrs. Gallagher and
Garrison, Mr. Gallagher increased his beneficial ownership of Common Stock to
26.0% and Mr. Garrison became the beneficial owner of 23.0% of the Common Stock,
at such time and, taken together as a group, they now own 49% of the issued and
outstanding shares of the Company's Common Stock (excluding the Warrants owned
by Mr. Gallagher). Consequently, if Messrs. Gallagher and Garrison act in
concert, they, together with any one or more stockholders owning in total
slightly more than 1% of the shares of the Company's Common Stock issued and
outstanding, will be able to effectively determine the vote on any matter voted
by the Company's stockholders, including the election of directors and any
merger, sale of assets or other significant corporate action.
- ----------
(1) The Board of Directors granted each of Messrs. Gallagher and
Garrison a SAR for 500,000 units of the Company's Common Stock, with the base
price thereof of $0.20 per share (the "Base Price") on the date of grant, July
21, 1995 (based on the Board's determination of the fair market value of the
Company's Common Stock on that date). If the value of the units increases over
the Base Price during the period of six years after the grant, and if the market
capitalization of the Company (determined by multiplying the number of shares of
Common Stock outstanding over the mean of the publicly-traded fair market value
of the Common Stock in the over-the-counter market, NASDAQ or elsewhere) exceeds
the formula price as set forth below for a consecutive period of three months,
the holder of the SAR shall be entitled to be paid such excess by the Company in
cash, or shares of Common Stock, or a combination thereof, in one or more annual
installments over a period not in excess of three years, as the Board of
Directors determines in its sole discretion, but such payment shall cause the
holder of the SAR to forfeit options to purchase 12,500 shares of the Company's
Common Stock under the option described in (1)(iii) and (2)(ii) above. The
formula price is set forth below:
<TABLE>
<CAPTION>
Percentage of Excess of Value of Award
Market Capitalization over Base Price to which Recipient is Entitled
- --------------------- ----------------------------------------------
<S> <C>
$100,000,000 50%
$200,000,000 66 2/3%
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
$300,000,000 75%
</TABLE>
Thus, each holder became potentially entitled to receive a maximum of 375,000
shares of the Company's Common Stock payable under the SARs awarded to him
computed prior to the Reverse Split).
(B) Relationship with Eyre Resources N.L. and the Parry-Beaumont Trust
In January, 1995 the Company entered into a letter of intent with Eyre
Resources N.L., an Australian corporation ("Eyre"), with respect to certain
foreign mining projects. Thereafter, the Company entered into a definitive Asset
Purchase Agreement with Eyre, dated as of June 30, 1995 (the "Agreement"), with
respect to certain Armenian, Georgian and Australian mining projects, and closed
the transactions contemplated thereunder on December 1, 1995.
For a description of such transaction, the Initial Restructuring
Agreement, the Second Restructuring Agreement and information with respect to
Eyre, the Parry-Beaumont Trust, and the loan transaction between the Company and
Eyre, an interested person can review the annual reports previously filed by the
Company with the SEC.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
1. The following documents are filed as part of this report: Financial
Statements of the Company, including reports of independent certified public
accountants, Balance Sheets, Statements of Income, Statements of Stockholders
Equity, Statements of Cash Flow and Notes to Financial Statements: as at and for
the periods ended December 31, 1998 and December 31, 1997.
2. The Exhibits which are listed on the Exhibit Index attached hereto.
3. No reports on Form 8-K were filed by the registrant during the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GLOBAL GOLD CORPORATION
(Registrant)
By: /s/ Drury J. Gallagher
----------------------------------
Drury J. Gallagher, Chairman, Chief
Executive Officer and Treasurer
Dated: April 14, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Drury J. Gallagher Chairman, Chief Executive Officer, April 14, 1999
- ---------------------- Treasurer and Director (Principal
Drury J. Gallagher Executive and Financial Officer)
/s/ Robert A. Garrison President, Chief Operating
- ---------------------- Officer, Secretary and Director April 14, 1999
Robert A. Garrison
16
<PAGE>
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Financial Statements
December 31, 1998
17
<PAGE>
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Financial Statements
December 31, 1998
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C>
Independent Auditors= Report 1
A Balance Sheets - as of December 31, 1998 2
B Statements of Income and (Loss) - for the years
ended December 31, 1998 and 1997 and the
development stage period
January 1, 1995 through December 31, 1998 3
C Statement of Changes in Stockholders= Equity - for
the years ended December 31, 1998 and 1997 and the
development stage period January 1, 1995 through
December 31,1998 4a/4b
D Statement of Cash Flow - for the years ended December 31, 1998
and 1997 and the development stage period January 1, 1995 through
December 31, 1998 5
Notes to Financial Statements 15
</TABLE>
18
<PAGE>
Page 2
Exhibit A
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Balance Sheet
December 31, 1998
ASSETS
<TABLE>
<S> <C>
CURRENT
Cash $ 24,623.
Refundable Deposit 33,347.
------------
57,970.
OTHER ASSETS
Special Warrants - First Dynasty Mines Ltd. 256,000.
------------
TOTAL ASSETS $ 313,970.
------------
------------
LIABILITIES AND STOCKHOLDERS- EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 173,170.
------------
STOCKHOLDERS- EQUITY - Exhibit C
Common stock $0.001 par, 100,000,000 shares authorized
4,348,114 shares issued and outstanding 4,348.
Paid Capital-dormant period 3,236,602.
Paid Capital-development stage 1,493,223.
Retained earnings-dormant period (2,907,648)
Retained earnings-development stage (1,685,725)
------------
140,800.
------------
TOTAL LIABILITIES AND STOCKHOLDERS- EQUITY $ 313,970.
------------
------------
</TABLE>
See Independent Auditors' Report and Notes to the Financial Statements.
19
<PAGE>
Page 3
Exhibit B
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Statement of Income and (Loss)
<TABLE>
<CAPTION>
For the For the January 1, 1995
Year Ended Year Ended (development stage
December 31, December 31, through
1998 1997 December 31, 1998
------------ ------------ ------------------
<S> <C> <C> <C>
REVENUE $ -- $ -- $ --
---------- ---------- ----------
EXPENSES
Officers' compensation 112,500. 138,334. 550,834.
Legal 73,761. 145,020. 542,110.
Accounting and auditing 22,500. 30,100. 123,448.
Transfer agent and securities fees -- 1,534. 12,446.
Proxy costs -- -- 26,555.
Rent (18,000) 36,000. 54,000.
Office expense 29,758. 62,621. 122,990.
Travel 92. 193. 43,234.
---------- ---------- ----------
OPERATING (LOSS) (220,611) (413,802) (1,475,617)
OTHER INCOME (EXPENSES)
Interest and royalty income 817. 3,693. 5,379.
Organization costs -- -- (4,800)
Interest expense (601) (7,090) (15,422)
Provision for bad debts -- (150,000) (325,000)
Write-off investment in Georgia mining
interests -- (135,723) (135,723)
Gain on sale of interest in Global Gold
Armenia 255,999. 12,875. 268,874.
---------- ---------- ----------
INCOME/(LOSS) BEFORE INCOME TAXES 35,604. (690,047) (1,682,309)
Income taxes (660) (700) (3,416)
---------- ---------- ----------
NET INCOME/(LOSS) $ 34,944. $(690,747) $(1,685,725)
---------- ---------- ----------
---------- ---------- ----------
NET INCOME/(LOSS) PER SHARE $ .008 $ (.1589)
---------- ----------
---------- ----------
</TABLE>
See Independent Auditors' Report and Notes to the Financial Statements.
20
<PAGE>
Page 4a
Exhibit C
GLOBAL GOLD CORPORATION
(A Development Stage Company
Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Paid-in Retained Retained Paid-in
Issued and Capital Earnings Earnings Capital
Outstanding Common (Dormant (Dormant (Development (Development
Shares Stock Period) Period) Stage) Stage) Total
----------- ---------- ---------- ------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Stockholders' equity
December 31, 1994 898,074. $ 89,807. $3,147,693. $(2,907,648.) $ -- $ -- $ 329,852.
Net Loss January 1-
December 31, 1995 -- -- (361,345.) (361,345.)
Adjustment re: restatement
of par value (88,909.) 88,909. -- -- -- --
Eyre acquisition 1,000,000. 1,000. -- -- -- 849,000. 850,000.
Proceeds through private
offering 200,000. 200. -- -- -- 421,373. 421,573.
---------- --------- ----------- ------------- ------------ ---------- ----------
Stockholders' equity
December 31, 1995 2,098,074. 2,098. 3,236,602. (2,907,648.) (361,345.) 1,270,373. 1,240,080.
Net Loss January 1-
December 31, 1996 -- -- -- -- (668,577.) -- (668,577)
Warrants exercised 40. -- -- -- -- 100. 100.
---------- --------- ----------- ------------- ------------ ---------- ----------
Stockholders' Equity
December 31,1996 2,098,114 $ 2,098 $3,236,602. $(2,907,648.) $(1,029,922.) $1,270,473. $ 571,603.
---------- --------- ----------- ------------- ------------ ---------- ----------
---------- --------- ----------- ------------- ------------ ---------- ----------
</TABLE>
See Independent Auditors' Report and Notes to the Financial Statements.
21
<PAGE>
Page 4b
Exhibit C
GLOBAL GOLD CORPORATION
(A Development Stage Company
Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Paid-in Retained Retained Paid-in
Issued and Capital Earnings Earnings Capital
Outstanding Common (Dormant (Dormant (Development (Development
Shares Stock Period) Period) Stage) Stage) Total
----------- ---------- ---------- ------------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Stockholders' equity
December 31, 1996 2,098,114. $2,098. $3,236,602. $(2,907,648.) $(1,029,922). $1,270,473. $ 571,603.
Net Loss January 1 -
December 31, 1997 -- -- -- (690,747) -- -- (690,747.)
Issuance of Common Stock 2,250,000 2,250. -- -- -- 222,750. 225,000.
Shareholders' Equity
December 31, 1997 4,348,114. $4,348. $3,236,602. $(2,907,648.) $(1,720,669.) $1,493,223. $105,856.
---------- ------- ----------- ------------- ------------- ----------- ---------
---------- ------- ----------- ------------- ------------- ----------- ---------
Net Income January 1-
December 31, 1998 -- -- -- -- 34,944. -- 34,944.
Stockholders' equity
December 31, 1998 4,348,114 $4,348. $3,236,602. $(2,907,648.) $(1,685,725.) $1,493,223. $140,800.
---------- ------- ----------- ------------- ------------- ----------- ---------
---------- ------- ----------- ------------- ------------- ----------- ---------
</TABLE>
In 1997 the company issued 2,000,000 common shares in exchange for $200,000
in accrued salaries and additional consideration. Also, 250,000 common shares
were issued as a finders fee in connection with the First Dynasty financing.
See Independent Auditors- Report and Notes to the Financial Statements.
22
<PAGE>
Page 5
Exhibit D
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Statement of Cash Flow
<TABLE>
<CAPTION>
For the For the January 1, 1995
Year Ended Year Ended (development
December 31, December 31, stage through
1998 1997 December 31, 1998
------------- -------------- -----------------
<S> <C> <C> <C>
CASH FLOW FROM DEVELOPMENT
STAGE ACTIVITIES:
Net Income/(Loss) $ 34,944 $ (690,747) $(1,685,725)
Adjustments to reconcile net income/(loss) to
net cash provided by operating activities:
Increase (decrease) in:
Provision for bad debt included in net loss -- 150,000. 325,000.
Write-off of mining investment in Georgia -- 135,723. 135,723.
Organization costs -- -- (9,601)
Gain on sale of Armenia mining interests (255,999) ( 12,875) (268,874)
Accounts receivable and deposits (33,501) -- (33,501)
Accounts payable, accrued expenses
and miscellaneous 12,835 (1,016,281) 269,773.
--------- ------------ ------------
Net cash (used) by Development Stage Activities (241,721) (1,434,180) (1,267,205)
--------- ------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of Armenia mining
interests (net of Note Receivable) -- 1,691,155. 1,691,155.
Collection of Note Receivables 200,000 -- 200,000
--------- ------------ ------------
Investment in certain mining interests
- net of financing -- -- (153,494)
Deferred - mining interests -- -- (878,858)
Net cash provided by Investing Activities 200,000. 1,691,155. 858,803.
--------- ------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from private placement offering -- -- 421,573.
Note Payable - officer (net) -- (191,000) --
Warrants exercised -- -- 100.
--------- ------------ ------------
Net cash provided (used) by Financing Activities -- (191,000) 421,673.
--------- ------------ ------------
NET INCREASE (DECREASE) IN CASH (41,721) 65,975. 13,271.
CASH - beginning 66,344. 369. 11,352.
--------- ------------ ------------
CASH - end $ 24,623. $ 66,344. $ 24,623.
--------- ------------ ------------
--------- ------------ ------------
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid $ 660. $ 700. $ 2,008.
--------- ------------ ------------
--------- ------------ ------------
Interest Paid $ 601. $ 7,090. $ 15,422.
--------- ------------ ------------
--------- ------------ ------------
</TABLE>
In 1995 the Company issued one million shares of common stock for certain
mining interests, with an estimated value of $850,000 (Note 5). In 1997 the
Company issued 2,000,000 common shares in exchange for $200,000 in accrued
salaries and additional consideration. Also, 250,000 common shares were
issued as a finders fee in connection with the First Dynasty financing.
In 1998 the Company exchanged its interest in Global Gold Armenia Limited for
4,000,000 First Dynasty Mines Ltd. Special Warrants exchangeable at no cost into
4,000,000 shares of common stock of First Dynasty Mines Ltd. (Note 17)
23
<PAGE>
Page 7
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE 1: ORGANIZATION (AS A DEVELOPMENT STAGE COMPANY) AND ACCOUNTING POLICIES
Global Gold Corporation (the "Company") was incorporated as Triad
Energy Corporation in the State of Delaware on February 21, 1980 and,
as further described hereafter, had no operating or development stage
history from its inception until January 1, 1995. Accordingly, the
Company had been dormant until 1995. During 1995 the Company changed
its name from Triad Energy Corporation to Global Gold Corporation. An
Australian corporation, Eyre Resources N.L. and an affiliate (hereafter
"Eyre"), presented to management an opportunity to develop certain gold
and copper mining rights in the former Soviet Republics of Armenia and
Georgia. As part of the plan to acquire the mining interests and raise
venture capital, the Company increased the number of shares authorized
to be issued from ten million to one hundred million.
The Company had offices in New York City which it leased from Penn-Med
Consultants, Inc., which was charging rent in the amount of $3,000 per
month to the Company commencing January 1, 1996 through December 31,
1997 for use of the premises, office equipment, facilities, etc. The
lease was terminated on December 31, 1997 and Penn-Med canceled $18,000
in accrued rent payable.
During 1995 the Company formed certain wholly-owned foreign
subsidiaries. Any reference in these statements to the Company may also
include one, some or all of the subsidiaries. All intercompany
transactions were eliminated.
As a result of ownership changes, the Company will not be able to
benefit from all of its net operating loss carryforwards. (Income Tax
Matters - see Note 14.)
NOTE 2: USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
balance sheet date, and also the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
NOTE 3: COMPANY HISTORY AND REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION
The Company was incorporated as Triad Energy Corporation on February
21, 1980, and closed a public offering of its common stock in January
1981. Several months after the closing of such public offering, the
Company withdrew the listing of the common stock for trading on NASDAQ
because of the theft of substantially all of the cash funds of the
Company derived from the proceeds of the public offering by its then
president, Samuel McNell, in July 1981. The case has long since gone
through the judicial system and Samuel McNell is no longer an officer,
director, employee or in any other fashion doing business with the
Company. After the consummation of the public offering, the Company
failed to file any further annual or periodic reports required under
the Exchange Act. The Company filed its Form 10-KSB for the calendar
years 1994, 1995, 1996 and 1997, its Form 10-Q for all quarters in 1995
and thereafter, and also filed audited financial statements covering
the calendar years 1987, 1988, 1989, 1990, 1992, 1993, 1994, 1995, 1996
and 1997. There can be no assurance that the SEC might not assert
claims against the Company and its present and former directors and
officers, which actions
24
<PAGE>
Page 8
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE 3: COMPANY HISTORY AND REPORTS WITH THE SECURITIES AND EXCHANGE
COMMISSION (continued)
might adversely affect the future conduct of the Company's business or
be detrimental to future trading of the Company's stock in the public
markets.
NOTE 4: DEVELOPMENT STAGE COMPANY
The Company may encounter problems, delays, expenses and difficulties
typically encountered in the development stage, many of which may be
outside of the Company's control. Management must also be successful in
securing additional investor and/or lender financing. The Company
expects to incur operating losses for the near term and, in any event,
until such time as it derives substantial revenues from its investment
in First Dynasty Mines Ltd. or other future projects.
NOTE 5: ACQUISITION OF ARMENIAN MINING INTEREST FROM EYRE
Pursuant to the Asset Purchase Agreement dated June 1995, the Company
acquired from Eyre, an Australian corporation, all of its potential
interest in its Armenian gold mining project and all of Eyre's
potential interest in its Georgia gold and copper mining project (Note
8).
The Company paid Eyre for the Armenian and Georgian interests as
follows:
<TABLE>
<S> <C>
Cash $153,494
Note payable 100,000
Note payable 46,506
--------
$300,000
</TABLE>
The Asset Purchase Agreement also provided for the Company to cause the
delivery to Eyre and the Parry Beaumont Trust, a Singapore Trust, two
million shares of stock, with an estimated value of $850,000, and
warrants to acquire an additional one million shares. The Asset
Purchase Agreement left Eyre and the Parry Beaumont Trust with two out
of five seats on the Board of Directors.
As of December 1, 1995, the Company and Eyre and the Parry Beaumont
Trust entered into a Restructuring Agreement pursuant to which Eyre
surrendered 600,000 shares of common stock and acquisition warrants to
purchase 360,000 shares of common stock, the Parry Beaumont Trust
surrendered 400,000 shares of common stock and warrants to purchase
240,000 shares of common stock, and Eyre acquired a 2% overriding
production royalty.
Various prospective investment banking firms and potential investors
who expressed an interest in providing funding for the Company's
projects in the Fall of 1996, requested that the Company undertake a
reverse split of its common stock (Note 16) to decrease the number of
shares outstanding in order to facilitate possible future financing and
to reduce the equity stake of certain shareholders who received shares
pursuant to the Restructuring Agreement essentially in their capacity
as finders. In response thereto, by letter dated December 4, 1996, Eyre
and the Parry-Beaumont Trust surrendered their acquisition warrants to
purchase 240,000 and 160,000 shares, respectively, of the Company's
common stock (a total of 400,000 shares), and surrendered their right
to designate two
25
<PAGE>
Page 9
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE 5: ACQUISITION OF ARMENIAN MINING INTEREST FROM EYRE (continued)
members of the Board of Directors of the Company. In addition, Eyre
agreed to waive its overriding royalties in the Armenian projects and
to waive the approximately $146,000 due it under the promissory notes
received at the closing of the Second Restructuring Agreement.
In January, 1998, the Company brought an action against Eyre, the
Parry-Beaumont Trust and Kevin Parry, individually, in the United
States District Court for the Southern District of New York, seeking
damages in excess of $81,000,000 arising out of the alleged fraud
committed by the defendants.
The defendants denied such claims and asserted counterclaims against
the Company seeking damages in an underdetermined amount against the
Company and seeking a declaratory judgment voiding the Second
Restructuring Agreement. In addition, Eyre and the Parry-Beaumont Trust
brought a third-party complaint against Drury J. Gallagher and Robert
A., Garrison, individually, seeking, among other things, damages in
excess of $75,000 and directing Mr. Gallagher and Mr. Garrison to
return the 2,000,000 shares of the Company=s Common Stock issued to
them by the Company in January, 1997.
The respective parties have served notices to take the deposition of
the other parties in the action and made requests for the production of
documents. The parties have scheduled the taking of depositions
commencing on May 17, 1999.
The Company intends to prosecute the litigation to completion and
believes that its claims against the plaintiffs will be successfully
contested and that the defendants' claims asserted against the Company
and Messrs. Gallagher and Garrison are without merit, although there
can be no assurance as to the outcome thereof.
The Company funded the litigation with $50,000 in a refundable deposit
account which had a balance of $33,347 on December 31, 1998.
NOTE 6: PATTERSON, BELKNAP, WEBB & TYLER, L.L.P.
The Company retained the law firm of Patterson, Belknap, Webb & Tyler,
L.L.P. (PBW&T) to represent the Company in its dealings with the
Armenian and Georgian Republics. PBW&T has an international law
practice involving commercial, nonprofit and humanitarian issues, and
has offices in Moscow.
In connection with preparation and negotiation of the Armenian Joint
Venture Agreement and associated documents, as well as corporate, tax,
strategic, regulatory, financing, political risk insurance and other
miscellaneous matters, PBW&T agreed to be compensated $930,000 plus
expenses ratably over the period May 1, 1995 through May 1, 1999, with
minimum quarterly payments of $25,000.
As of May 13, 1997, unbilled contingent project charges in excess of
the minimum $25,000 per quarter were assumed by First Dynasty Mines
Ltd. ("First Dynasty"), payable upon receipt of an executed agreement
assigning the rights to the Zod Mine to the Armenian Gold Recovery
Company ("AGRC"). Global Gold reversed fees accrued of $76,000 as of
that date. Unbilled fees and expenses through September 30, 1998 total
approximately $300,000, which will be finalized with First Dynasty.
26
<PAGE>
Page 10
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE 6: PATTERSON, BELKNAP, WEBB & TYLER, L.L.P. (Continued)
PBW&T also represented the Company in preparation and negotiation with
the Georgian government of a revised Joint Venture Agreement and
associated documents, and other related matters similar to the
aforementioned Armenian retainer agreement. The contemplated Georgian
fee was $180,000 for the period July 1, 1995 to July 1, 1999, and the
minimum quarterly payment was $10,000. The quarterly billing was
discontinued as of June 30, 1997, and the accumulated investment
written-off as of December 1997.
The PBW&T arrangement was terminated on March 1, 1998.
NOTE 7: THE ARMENIAN JOINT VENTURE AGREEMENT
On February 2, 1996, the Company and Armgold, a division of the
Ministry of Industry of the Government of the Republic of Armenia,
initialed a Joint Venture Agreement (the "Venture") entitled the
Armenian Gold Recovery Company. The Venture was modified on May 1,
1996. On June 29, 1996, the Republic of Armenia issued a parliamentary
decree authorizing Armgold's joint venture with the Company.
The Venture called for processing talings at the Ararat plant site and
for reconditioning and restarting operations at the Zod and Meghradzor
Mine sites.
On October 7, 1996, the Armenian government issued a license for a
five-year period of implementation of the development plan at Ararat,
effective after the registration of the Venture with the appropriate
Armenian governmental authorities, in accordance with the applicable
Armenian law. The registration of the Venture occurred on November 8,
1996.
Pursuant to the decree issued in connection with the Venture, Global
Gold Armenia Limited ("GGA") was required to invest $5,000,000 in the
Tailings Project on or before February 1, 1997. Such requirement was
deemed satisfied by the parties.
The Tailings Project began operations at an official dedication
ceremony on February 25, 1998.
An agreement to contribute the Zod and Meghradzor mines to the Venture
was signed on September 30, 1997, and approved by the Armenian
government on June 25, 1998 based on a feasibility study prepared by a
joint venture between Kilborn-SNC Lavalin and CMPS&F, and submitted on
June 8, 1998.
NOTE 8: THE GEORGIAN AGREEMENT
The Company also acquired from Eyre rights under a Foundation Agreement
dated April 22, 1995 (including a Charter for a joint venture company)
with R.C.P.A. Madneuli, a Georgian state enterprise, in connection with
carrying out certain mining of the Madneuli deposit. The Company was
subsequently advised that the application for the license required to
be filed with the Georgian government had not been filed, and it had no
definitive agreement granting it fixed rights to mining production or
processing in Georgia.
27
<PAGE>
Page 11
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE 8: THE GEORGIAN AGREEMENT (continued)
The Company thereafter learned that the Georgian government was
planning to privatize the development of the Madneuli mine through a
public bidding process which was slated to end on April 15, 1997. Since
the structure of the Madneuli mining project under the public tender
differed markedly from that contemplated under the Asset Purchase
Agreement between the Company and Eyre dated as of June 30, 1995, the
Company decided not to submit a bid for the development of the Madneuli
mining project. As of December 31, 1997, the Company wrote-off its
investment in the Georgian mining property resulting in a loss of
$135,723.
NOTE 9: NOTES RECEIVABLE
The Company holds a note receivable from Jet-Line Environmental
Services Inc. for $300,000 bearing interest at prime plus 2.0%.
The Jet-Line Note, as more fully described in the documents, is
convertible into at least 20% of Jet-Line's common stock. Jet-Line has
defaulted on prior balloon payment obligations and is in default of its
current interest requirements. The Note was understood to be secured by
U.C.C.'s on certain equipment; however, there were no filings located.
Jet-Line advised the Company in early March 1997 that it received a
notice of the revocation of its license to do business in Massachusetts
and a fine of $100,000 from the Massachusetts environmental
authorities. Jet-Line contested such revocation and fine in the
Massachusetts state courts unsuccessfully. As a result, Jet-Line has
been requested by such authorities to sell its facility in
Massachusetts, and Jet-Line was unable to sell the facility. The
Company sent Jet-Line a written notice of default and demand for
payment on March 14, 1997, and further demand letters on April 2, 1997
and November 10, 1997. The Company has been notified by the Business
Loan Center who made a U.S. Small Business Administration guaranteed
loan to Jet-Line of $550,000 in 1994, that it would liquidate the
Jet-Line assets, as to which it held a senior security interest. The
Company thereafter unsuccessfully disputed the Business Loan Center's
position as a senior secured creditor in late 1997. After determining
that, among other things, the value of the assets held by it as
collateral was negligible, the Company decided to write off the
Jet-Line loan as worthless as of December 31, 1997.
NOTE 10: NOTES PAYABLE
Drury Gallagher loaned the Company $192,000. The Note evidencing the
loan bore interest at 10% per annum and was due on or before June 30,
1997, together with accrued and unpaid interest. The Note was repaid in
full together with interest thereon. The officers loaned the Company
$20,000 at an interest rate of 10% per annum due on or before December
31, 1998. The loans were repaid in full together with interest thereon.
NOTE 11: CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM
Pursuant to a Private Placement Offering (the "Offering") dated May 17,
1995, as amended, the Company issued $500,000 of 10% Convertible Notes
due December 31, 1996. Expenses in connection with the Offering were
$78,427. Each $1,000 Convertible Note entitled the holder to 400
28
<PAGE>
Page 12
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE 11: CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM (continued)
shares of common stock and warrants to purchase 800 shares of common
stock at an adjusted exercise price of $.50 per share at any time
before December 31, 1998. The exercise price was subsequently reduced
to $.125 per share to reflect the current market valuation as
determined by management and the exercise date was extended to December
31, 1999.
In accordance with the Offering, interest was not payable on the
Convertible Notes so long as they were converted to equity within a
specified time frame. After the December 1, 1995 Eyre closing, the
entire $500,000 of Convertible Notes were exchanged for 200,000 shares
of common stock.
NOTE 12: WARRANTS OUTSTANDING
The Company had warrants outstanding as follows:
<TABLE>
<CAPTION>
# Shares Right Price/Share Expiration
Warrant Holder(s) to Purchase Exercisable at Date
----------------- -------------- -------------- ----------
<S> <C> <C> <C>
Stockholders through Note
Conversion (Note 5) 400,000 $ .125 12/31/99
</TABLE>
NOTE 13: OFFICERS' COMPENSATION, INCENTIVE STOCK OPTIONS AND STOCK
APPRECIATION RIGHTS
Management presently consists of Mr. Drury J. Gallagher and Mr. Robert
A. Garrison. Mr. Gallagher had been President of the Company and a
stockholder since 1981; he is currently Chairman of the Company. Mr.
Garrison was subsequently hired to oversee mining and related financing
activities, and is currently President. Messrs. Gallagher and Garrison
entered into employment agreements with the Company effective July 1,
1995. Each was entitled to receive a base salary of $100,000 per year
for 50% of their time for a three-year term. The employment agreements
called for automatic annual increases as defined. The Board of
Directors of the Company may award bonuses up to 50% of base
compensation. On February 1, 1997 Mr. Garrison's employment agreement
was canceled and replaced with a GGA consulting contract. Mr.
Gallagher's base salary was increased to $150,000 per year on July 1,
1997.
As of December 31, 1998 accrued salary of $162,500 was due to Mr.
Gallagher.
On January 3, 1997, the Board of Directors of the Company approved the
issuance of 1,000,000 shares of its common stock to each of Messrs.
Gallagher and Garrison in exchange for $100,000 in accrued salary each
plus cancellations of stock options and stock appreciation rights (the
SARs) and personal guarantees up to $500,000. In 1997, Eyre
questioned the validity of the issuance by the Company of 1,000,000
shares of its common stock to each of Messrs. Gallagher and Garrison
and asserted a counterclaim against Messrs. Gallagher and Garrison
individually, directing Mr. Gallagher and Mr. Garrison to return the
2,000,000 shares of the company's common stock.
29
<PAGE>
Page 13
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE 13: OFFICERS' COMPENSATION, INCENTIVE STOCK OPTIONS AND STOCK
APPRECIATION RIGHTS (continued)
GGA agreed to retain Robert A. Garrison as a consultant for a
three-year period commencing February 1, 1997 for $150,000 per annum
pursuant to the terms of the consulting agreement entered into between
such parties. The consulting agreement was terminated on August 31,
1998 with the payment of consulting fees through that date and the
issuance of 500,000 special warrants of First Dynasty convertible into
common shares at no cost and which become fully tradable within one
year or with the public offering of common shares, whichever comes
first.
NOTE 14: NON-UNITED STATES WHOLLY-OWNED SUBSIDIARIES / INCOME TAX MATTERS
On November 29, 1995, the Company formed Global Gold Armenia Limited
and Global Gold Georgia Limited, which were respectively assigned the
Armenian and Georgian mining rights from Eyre at the closing on
December 1, 1995 (Note 5). The two subsidiaries are Cayman Island
entities which were granted a twenty-year tax exemption from any law of
that jurisdiction which hereafter imposes any tax to be levied on
profits, income, gains or appreciation, commencing December 19, 1995.
The Company experienced net operating losses for each of the years
ended December 31, 1996 and 1997. The Company has elected to
carryforward such losses for federal income tax purposes and offset
future taxable earnings. However, since the Company is a development
stage company and its ability to obtain future earnings is uncertain,
no deferred tax asset has been recorded. Inasmuch as management valued
the shares of stock distributed to Eyre in exchange for acquiring the
aforementioned mining interests at $.085 per share (such interests,
described herein, were not substantially perfected at the time of the
transaction), it is management's position that even if the Internal
Revenue Service deemed the transaction to be a taxable event, there
would nevertheless be insignificant income tax consequences. However,
there can be no such assurance. Furthermore, the Company will have to
determine that the structure will not in any way be a deterrent from
obtaining future financing or political risk insurance. Management will
consider future structural changes, if necessary.
For 1998 the Company's tax provision reflects the utilization of a net
operating loss of $34,944.
NOTE 15: INCOME/(LOSS) PER SHARE
Net income/(loss) per share is computed using the weighted average
number of shares outstanding during the period. Common stock
equivalents have not been included since the effect would be
antidilutive.
NOTE 16: REVERSE STOCK SPLIT
Various prospective investment banking firms and potential investors
who expressed an interest in providing funding for the Company's
projects in 1996 requested that the Company undertake a reverse split
of its common stock to decrease the number of shares outstanding and
thereby facilitate possible future financings. Accordingly, the Company
effected a 1 for 10 reverse split of its common stock
30
<PAGE>
Page 14
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE 16: REVERSE STOCK SPLIT (continued)
effective as of December 31, 1996. Such step was taken by the written
consent of the holders of a majority of the Company's issued and
outstanding shares of common stock. By virtue of the reverse split,
each stockholder's number of shares of common stock became one-tenth of
the number previously held. The Company filed its Certificate of
Amendment to the Certificate of Incorporation with respect to the
reverse split with the Delaware Secretary of State on December 31,1996.
All share and per share data in this report have been restated to
reflect the reverse stock split, unless otherwise noted.
NOTE 17: FIRST DYNASTY MINES LTD.
The Company, GGA and First Dynasty, a Canadian public company, entered
into a preliminary agreement dated January 27, 1997, whereby First
Dynasty agreed to advance funds in stages necessary for the development
of the Armenian mining projects.
The Company and First Dynasty entered into a definitive agreement dated
May 13, 1997, reflecting the final agreement of the parties with
respect to the Armenian mining projects (the "FDM Agreement"). The
principal terms of the FDM Agreement are outlined as follows:
First Dynasty agreed to advance a maximum of $24,510,000 under the FDM
Agreement. All funds advanced by First Dynasty were advanced to GGA as
debt, which was convertible into stock of GGA at First Dynasty's
option, or was automatically converted into such stock under certain
circumstances, as follows:
a. The first $6,490,000 of debt was convertible into 25% of the
capital stock of GGA.
b. The next $3,520,000 of debt together with the advance described
above was convertible into 51% of the capital stock of GGA.
c. For every additional $.5 million advanced in respect of the
development of the Zod and Meghradzor mines (excluding the
$10,010,000 Tailings Project expenditure) as a loan to GGA, such
debt was convertible into an additional 1% of the capital stock of
GGA, up to a maximum of 80% of the issued and outstanding shares
of capital stock of GGA.
Upon obtaining 80% of the capital stock of GGA, or upon making
aggregate advances of $24,510,000, First Dynasty would be entitled to
acquire the remaining 20% of the outstanding capital stock of GGA
within 18 months after making such total advances, by issuance of
4,000,000 shares of its common stock.
First Dynasty carried out certain initial commitments in February 1997.
They loaned GGA $675,000 to pay outstanding payables, agreed to fund
the $640,000 Tailings Dam Construction Contract and agreed to guarantee
or co-sign up to $3,500,000 of the equipment purchase contract and up
to $1,000,000 of the Engineering, Procurement and Construction
Management Services Contract between the Venture and a Canadian
engineering firm. First Dynasty further agreed to loan the Company an
additional $675,000 to cover the balance of the outstanding payables.
31
<PAGE>
Page 15
GLOBAL GOLD CORPORATION
(A Development Stage Company)
Notes to Financial Statements
December 31, 1998
NOTE 17: FIRST DYNASTY MINES LTD. (continued)
In addition, First Dynasty agreed to pay the Company $400,000 to defray
its expenses in participating in the negotiation of the second Armenian
Joint Venture Agreement, of which $200,000 was paid upon the execution
and the delivery of the FDM Agreement, and the balance of $200,000 was
due on June 30, 1998. This amount was paid $50,000 on July 28, 1998 and
$150,000 on September 1, 1998. Although not reflected in the FDM
Agreement, First Dynasty also paid the Company $141,155 on May 15, 1997
to defray the expenses incurred by GGA during the three-month period
ending March 31, 1997. The total cash and notes received of $1,891,155
from First Dynasty was offset against the investment in Armenia mining
interests of $944,465, deferred costs as of December 31, 1997 as
adjusted of $929,015 and organization costs of $4,800, resulting in a
profit of $12,875.
The Company and GGA, in conjunction with First Dynasty, negotiated for
AGRC to develop the Zod and Meghradzor mines and concluded the amended
Armenian Joint Venture Agreement on September 30, 1997, subject to the
passage of a parliamentary decree approving it. The Armenian government
passed a governmental decree on June 25, 1998. On July 24, 1998 First
Dynasty and the Company entered into an agreement to accelerate the
issuance of 4,000,000 special warrants exchangeable into an equal
amount of First Dynasty common shares. The warrants were distributed on
August 31, 1998. The 4,000,000 special warrants are exchangeable into
4,000,000 common shares of First Dynasty Mines Ltd. at no cost and
become freely tradable within one year or with the public offering of
common shares, whichever comes first. The common shares were valued at
13/64 on the Toronto Stock Exchange or US$.128 on August 31, 1998. For
reporting purposes, the shares were discounted 50% for absence of a
market for the warrants, presence of Canadian securities law
restrictions on resale thereof, lack of trading volume and future
dilution. As of December 31, 1998, there was no market for the special
warrants. The common shares were valued at C$.15 per share on the
Toronto Stock Exchange and US$.10 on the NASDAQ Bulletin Board. It is
anticipated that the special warrants will be exchanged for common
shares and the common shares will have a market value, although there
can be no assurance of such result. The Company will retain the right
until December 31, 2009 to elect to participate at a level of up to
twenty percent with First Dynasty or any of its affiliates in any
exploration project undertaken in Armenia.
In connection with the First Dynasty financing, the Company paid a
finders fee of 125,000 shares of its common stock to each of Walker
Investments Ltd. and Alpine Holdings Ltd. at $.10 per share which
approximated fair market value as determined by management.
32
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
1 Certificate of Incorporation, as amended.(1)
2 By-laws(1)
3 Certificate of Merger between the Registrant
and Everest Petroleum Inc.(1)
4 Agreement of Merger between the
Registrant and Everest Petroleum Inc.(1)
5 Asset Purchase Agreement between the
Registrant and Eyre Resources N.L. dated as
of June 30, 1995(1)
6 Form of 1995 Stock Option Plan+(1)
7 Letter Agreement between Registrant, Eyre
Resources N.L. and Robert A. Garrison+(1)
8 Employment Agreement between the
Registrant and Drury J. Gallagher dated as of
July 1, 1995+(2)
9 Employment Agreement between the
Registrant and Robert A. Garrison dated as
of July 1, 1995+(2)
10 Employment Agreement between Autosport
(Asia) Pte. Ltd. and Robert A. Garrison
dated as of July 1, 1996+(2)
</TABLE>
33
<PAGE>
<TABLE>
<S> <C>
11 Stock Option Agreement between the
Registrant and Drury J. Gallagher dated as of
July 1, 1995 with respect to the grant of
1,000,000 shares of the Company's Common
Stock+(2)
12 Stock Option Agreement between the
Registrant and Drury J. Gallagher dated as of
July 1, 1995 with respect to the grant of
487,500 shares of the Company's Common
Stock+(2)
13 Stock Option Agreement between the
Registrant and Drury J. Gallagher dated as of
July 1, 1995 with respect to the grant of
12,500 shares of the Company's Common
Stock+(2)
14 Stock Option Agreement between the
Registrant and Robert A. Garrison dated as
of July 1, 1995 with respect to the grant of
487,500 shares of the Company's Common
Stock+(2)
15 Stock Option Agreement between the
Registrant and Robert A. Garrison dated as
of July 1, 1995 with respect to the grant of
12,500 shares of the Company's Common
Stock+(2)
16 Stock Appreciation Rights Agreement
between the Registrant and Drury J.
Gallagher dated July 21, 1995+(2)
17 Stock Appreciation Rights Agreement
between the Registrant and Robert A.
Garrison dated July 21, 1995+(2)
18 Assignment and Assumption Agreement
between Eyre Resources N.L. and Global
Gold Armenia Limited dated December 1,
1995(2)
</TABLE>
34
<PAGE>
<TABLE>
<S> <C>
19 Assignment and Assumption Agreement
between Eyre Resources N.L. and Global
Gold Georgia Limited dated December 1,
1995(2)
20 Assignment and Assumption Agreement
between Eyre Resources N.L. and Global
Gold Australia Limited dated December 1,
1995(2)
21 Promissory Note of the Registrant dated December 1,
1995 in the principal amount of
$100,000(2)
22 Promissory Note of the Registrant dated as
of December 1, 1995 in the principal amount
of $100,000(2)
23 Stockholders Agreement by and among the
Registrant, Eyre Resources N.L., the Parry-
Beaumont Trust, Drury J. Gallagher, Francis
A. Hayman, John Hayman. Howard G. Seitz
and George L. Ryan dated December 1,
1995(2)
24 Guarantee and Indemnification Agreement of the
Registrant dated December 1, 1995(2)
25 Warrant Agreement to purchase 20,000
shares of the Registrant's Common Stock
dated December 1, 1995 issued to David
Steadly(2)
26 Warrant Agreement to purchase 20,000
shares of the Registrant's Common Stock
dated December 1, 1995 issued to Karekin
Arzoomanian(2)
27 Form of Warrant Agreement issued to 20
purchasers of the Registrant's 10%
Convertible Notes pursuant to the
Confidential Private Placement Memorandum
dated May 17, 1995, as amended(2)
27.1 Financial Data Schedule*
</TABLE>
35
<PAGE>
<TABLE>
<S> <C>
28 Restructuring Agreement dated as of
December 1, 1995 by and among the
Registrant, Global Gold Armenia Ltd.,
Global Gold Georgia Ltd., Global Gold
Australia Ltd., Eyre Resources N.L., and the
Parry-Beaumont Trust (2)
29 Promissory Note of Global Gold Armenia
Limited dated as of December 1, 1995 in the
principal amount of $802,740(2)
30 Promissory Note of Global Gold Georgia
Limited dated as of December 1, 1995 in the
principal amount of $47,260(2)
31 Amended Employment Agreement between
the Registrant and Robert A. Garrison dated
as of April 11, 1996+(2)
32 Agreement No. 1 by and between the
Registrant, London & International
Mercantile Limited and HCL
Communications Ltd.(3)
33 Agreement No. 2 by and between the
Registrant, London & International
Mercantile Limited and HCL
Communications Ltd.(3)
34 Warrant Agreements to purchase 2,000,000
shares of the Registrant's Common Stock
issued to London & International Mercantile
Limited and HCL Communications Ltd.
under Agreement No. 1 with such party. (3)
35 Warrant Agreements to purchase 2,000,000
shares of the Registrant's Common Stock
issued to London & International Mercantile
Limited and HCL Communications Ltd.
under Agreement No. 2 with such party. (3)
36 Assignment and Assumption Agreement
between the Registrant and Global Gold
Armenia Limited dated as of July 30, 1996. (3)
37 Stock Option Agreement between the
Registrant and Drury J. Gallagher dated as
of July 19, 1996, as amended on
November 4, 1996+ (3)
</TABLE>
36
<PAGE>
<TABLE>
<S> <C>
38 Stock Option Agreement between the
Registrant and Robert A. Garrison dated as
of July 19, 1996, as amended on
November 4, 1996+ (3)
39 Restructuring Agreement dated December
4, 1996 by and among the Registrant,
Eyre Resources N.L. and the
Parry-Beaumont Trust (3)
40 Certificate of Amendment to the Certificate
of Incorporation of the Registrant filed
with the Delaware Secretary of State on
December 31, 1996 (3)
41 Unanimous Written Consent of the Board
of Directors of the Registrant dated as of
January 3, 1997, approving the transfer of
1,000,000 shares of the Registrant's
Common Stock to each of Drury J.
Gallagher and Robert A. Garrison.+ (3)
42 Letter Agreement by and among the
Registrant, Global Gold Armenia Limited
and First Dynasty Mines Ltd. (3)
43 Debenture of Global Gold Armenia Limited
issued to First Dynasty Mines Ltd. dated
February 3, 1997, including Guarantee
thereof by the Registrant (3)
44 Global Gold Armenia Limited Charge Over
Shares issued to First Dynasty Mines Ltd.
dated February 3, 1997 (3)
45 Form of Amendments No. 2, 3 and 4 to
Warrant Agreement issued to the purchasers
of the Registrant's 10% Convertible Notes
pursuant to the Confidential Private
Placement Memorandum dated May 17, 1995,
as amended (3)
46 Definitive Agreement by and among the
Registrant, Global Gold Armenia Limited
and First Dynasty Mines Ltd. dated as of
May 13, 1997(4)
47 First Amendment to the Definitive
Agreement by and among the Registrant,
Global Gold Armenia Limited and First
Dynasty Mines Ltd. dated as of October 10,
1997(4)
48 Restated Employment Agreement between the
Registrant and Drury J. Gallagher dated as
of July 1, 1997+(4)
49 Restated Debenture of Global Gold Armenia
Limited issued to First Dynasty Mines Ltd.
dated October 3, 1997, including Guarantee
thereof issued by the Registrant(4)
50 Form of Amendment No. 5 to Warrant
Agreement issued to the purchasers of the
Registrant's 10% Convertible Notes
pursuant to the Confidential Private
Placement Memorandum dated May 17, 1995,
as amended(4)
51 Letter Agreement dated July 24, 1998
between Global Gold Corporation, First
Dynasty Mines Ltd. and Global Gold Armenia
Ltd. and Robert A. Garrison.+*
52 Release dated as of August 31, 1998 given to
Global Gold Corporation
</TABLE>
37
<PAGE>
<TABLE>
<S> <C>
with respect to its guaranty of Debenture of
Global Gold Armenia Limited and the Change
Over Shares issued to First Dynasty Mines
Ltd.*
53 Share Transfer Certificate with respect
to the transfer of shares of shares of
First Dynasty Mines Armenia Limited
(formerly known as Global Gold Armenia
Limited) to First Dynasty Mines (USA)
LLC dated August 31, 1998*
54 Joint Acknowledgement by First
Dynasty Mines Armenia Limited and
Robert A. Garrison dated August 31,
1998+*
55 Joint Acknowledgement between First
Dynasty Mines Ltd., First Dynasty
Mines Armenia Limited and First
Dynasty Mines (USA) LLC and the
Registrant dated August 31, 1998
terminating all rights under the
Shareholders Agreement between the
parties*
56 Special Warrants to purchase
4,000,000 shares of common stock of
First Dynasty Mines Ltd. issued to
the Registrant*
57 Special Warrants to purchase 500,000
shares of common stock of First
Dynasty Mines Ltd. issued to Robert
A. Garrison+*
58 Special Trust Indenture dated as of
August 31, 1998 between First
Dynasty Mines Ltd. and CIBC Mellon
Trust Company providing for the
issue of special warrants to
purchase common stock of First
Dynasty Mines Ltd. issued to the Registrant
and Robert A. Garrison+*
59 Form of Amendment No. 6 to Warrant
Agreement issued to the purchasers
of the Registrant's 10% Convertible
Notes pursuant to the Confidential
Private Placement Memorandum dated
May 17, 1995, as amended*
- ----------
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
(1) Filed with 10-KSB for period ended December 31, 1994.
(2) Filed with 10-KSB for period ended December 31, 1995.
(3) Filed with 10-KSB for period ended December 31, 1996.
(4) Filed with 10-KSB for period ended December 31, 1997.
</TABLE>
38
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 24623
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 57970
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 313970
<CURRENT-LIABILITIES> 173170
<BONDS> 0
0
0
<COMMON> 4348
<OTHER-SE> 136452
<TOTAL-LIABILITY-AND-EQUITY> 313970
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 220611
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 601
<INCOME-PRETAX> 35604
<INCOME-TAX> 660
<INCOME-CONTINUING> 34944
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34944
<EPS-PRIMARY> .008
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.51
FIRST DYNASTY MINES LTD.
No. 1 Temasek Avenue
37th Floor, Millenia Tower
Singapore 039192
July 24, 1998
Global Gold Corporation Robert A. Garrison
438 West 37th Street 44 Lords Highway East
Suite 5G Weston, Connecticut 06883
New York, New York 10018
Attention: Robert A. Garrison,
President
Dear Sirs:
Re: Definitive Agreement dated May 13, 1997 (the "Definitive
Agreement") among First Dynasty Mines ltd. ("FDM"), Global Gold
Corporation ("Global") and First Dynasty Mines Armenia Limited
(formerly Global Gold Armenia Limited) ("FD Armenia")
This letter is intended to confirm our recent discussions respecting certain
proposed amendments to the Definitive Agreement and to reflect a binding
agreement among, FDM, Global, Robert Garrison ("Garrison") and FD Armenia with
respect to the subject matter hereof.
Terms denoted with initial capital letters and not otherwise defined herein have
the meanings assigned to them in the Definitive Agreement.
We confirm our agreement as follows:
1. CASH PAYMENTS TO GLOBAL
FDM will fulfil its obligations to Global under Section 3.2(b) of the Definitive
Agreement by paying to Global:
(a) the sum of U.S.$50,000 upon execution of this letter agreement by all
parties hereto; and
(b) the sum of U.S.$150,000 upon that date (the "Closing Date") which is the
earlier of,
<PAGE>
(i) three business days after FDM receives the cash proceeds from the
sale of its Indonesian oil properties, or
(ii) August 31, 1998.
2. ACQUISITION OF FOURTH INSTALMENT SHARES
Subject to the prior approval of the Toronto Stock Exchange (which approval FDM
agrees to apply for promptly), FDM will acquire from Global all of the Fourth
Installment Shares (whereupon FDM will own 100% of the issued and outstanding
shares of FD Armenia) in consideration for the issuance to Global of 4,000,000
FDM Special Warrants.
On the Closing Date, FDM will deliver to Global a certificate representing
4,000,000 FDM Special Warrants, whereupon
(a) FDM will be deemed to have acquired all right, title and interest in
and to the Fourth Instalment Shares and will be entitled to the
absolute benefit and use of all of the security documents in its
possession as security for the Debenture in order to effectuate the
transfer from Global to FDM of the Fourth Instalment Shares; and
(b) Global's guarantee of the obligations of FD Armenia under the Debenture
will be deemed to have been released in full.
Global will, at FDM's reasonable request, execute, acknowledge and deliver any
all additional documents and instruments as may be necessary in order to
effectuate the transfer from Global to FDM of the Fourth Instalment Shares.
Delivery by FDM to Global of a certificate representing 4,000,000 FDM Special
Warrants will be in full and final satisfaction of FDM's obligations under
Section 4.5 of the Definitive Agreement but will not affect FDM's obligations
under Sections 4.6 and 4.7 of the Definitive Agreement which will remain in
effect until the first anniversary of the Closing Date or the date upon which
Global exercises its FDM Special Warrants, whichever is earlier.
3. GARRISON CONSULTING AGREEMENT
FDM will, or will cause FD Armenia to, compensate Garrison under the Garrison
Consulting Agreement by:
(a) paying to Garrison the sum of U.S.$62,500 on the Closing Date; and
(b) subject to the prior approval of the Toronto Stock Exchange (which
approval FDM agrees to apply for promptly), delivering to Garrison on
the Closing Date 500,000 FDM Special Warrants (which will also be
subject to Section 4.6 of the Definitive Agreement in all respects
until the first anniversary of the Closing Date or the date upon which
Garrison
<PAGE>
exercises his FDM Special Warrants, whichever is earlier).
In consideration for, and subject to Garrison's receipt of, the compensation
described in (a) and (b) above, Garrison agrees that the Garrison Consulting
Agreement will be deemed terminated as of the date of Garrison's receipt of the
compensation described in (a) and (b) above. Garrison acknowledges that such
compensation will fulfil all of FD Armenia's obligations under the Garrison
Consulting Agreement and all of FDM's obligations under Section 3.3 of the
Definitive Agreement.
4. SHAREHOLDERS AGREEMENT
Provided that the parties perform their respective obligations hereunder, the
Shareholders' Agreement will be deemed terminated as of the Closing Date.
5. EXPLORATION RIGHTS
As of the Closing Date, Section 4.8 of the Definitive Agreement will be deemed
to be deleted and replaced by the following:
"Until December 31, 2009, Global Gold will be entitled to elect to
participate with FDM or any of its affiliates (including FD Armenia) in
any exploration projects undertaken in Armenia, directly or indirectly,
by FDM or any of its affiliates (including FD Armenia) and, prior to
the commencement of any such exploration project, FDM will provide
Global Gold with all information in the possession of FDM or the
relevant affiliate respecting such proposed exploration project
whereupon Global Gold will have the right upon notice, exercisable for
a period of 60 days from the date of such notice is received, to elect
to participate in the rights and obligations of FDM or the relevant
affiliate in respect of such exploration project to a level of up to
twenty percent (20%) of such rights and obligations. FDM or the
relevant affiliate and Global Gold will enter into a mutually
acceptable participation agreement in respect of any exploration
project in which Global Gold elects to participate, which will provide
for, among other things, mutual rights of first refusal and a dilution
formula."
6. SURVIVAL OF DEFINITIVE AGREEMENT
Provided that the parties perform their respective obligations hereunder, the
following provisions of the Definitive Agreement will be deemed to have lapsed
as of the Closing Date:
(a) Part 2 other than Section 2.7;
<PAGE>
(b) Part 3;
(c) Part 4 other than Sections 4.6, 4.7 and 4.8 (as hereby amended); and
(d) Part 5
All provisions of the Definitive Agreement which will not be deemed to have
lapsed as of the Closing Date will survive and will remain in full force and
effect in accordance with their terms.
If the foregoing accurately reflects our agreement respecting amendments to the
Definitive Agreement, please so indicate by signing and returning a copy of this
letter to the undersigned.
Yours truly,
FIRST DYNASTY MINES LTD.
Per: /s/ MP Randolph
---------------------------
Marcus Randolph, President
Acknowledged and agreed
GLOBAL GOLD CORPORATION
By:/s/ Robert Garrison /s/ Robert Garrison
----------------------------- -------------------
Robert A. Garrison, President ROBERT A. GARRISON
<PAGE>
Exhibit 99.52
RELEASE
Reference is made to:
A. the guarantee (the "Guarantee"), dated as of the 7th day of
October, 1997, made by Global Gold Corporation ("Global Gold") in
favour of First Dynasty Mines (USA) LLC. ("FDM LLC") pursuant to
the original debenture, dated February 3, 1997, between First
Dynasty Mines Armenia Limited (formerly, Global Gold Armenia
Limited) ("FD Armenia") and First Dynasty Mines Ltd. ("FDM"),
which was further amended by an amended and restated debenture
dated October 3, 1997 to have effect as of and from the 15th day
of May, 1997 between FD Armenia and the FDM LLC; and
B. the Deed of Charge over Shares dated February 3, 1997 and made by
Global Gold in favour of FDM with respect to 100,000 FD Armenia
shares represented by share certificates number 2 and 3 (the
"SHARES")(the "Charge over Shares").
For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, FDM and FDM LLC hereby release and discharge Global Gold
absolutely and forever from all of its liability and obligations under the
Guarantee and the Charge over Shares.
Dated this 31st day of August, 1998.
FIRST DYNASTY MINES (USA) LLC.
Per: /s/ MP Randolph
-------------------------------
Title: Director
-------------------------------
FIRST DYNASTY MINES LTD.
Per: /s/ Beverly Downing
-------------------------------
Title: Director
-------------------------------
<PAGE>
Exhibit 99.53
FIRST DYNASTY MINES ARMENIA LIMITED
SHARE TRANSFER CERTIFICATE
We, GLOBAL GOLD CORPORATION (the "Transferor"), for good and valuable
consideration received by me from FIRST DYNASTY MINES (USA) LLC (the
"Transferee") do hereby:
1. transfer to the Transferee 100,000 Shares (the
"Shares") standing in my name in register of the
Company to hold unto the Transferee, his executors,
administrators and assigns, subject to the several
conditions on which I held the same at the time of
execution of this SHARE TRANSFER CERTIFICATE; and
2. consent that my name remains on the register of the
Company until such time as the Company enters the
Transferee's name in the register of the Company.
And I, the Transferee, do hereby agree to take the Shares subject to the same
conditions.
AS WITNESS OUR HANDS
Signed by the Transferor on the
31st day of August , 1998,
in the presence of:
/s/ Barbara Garrison /s/ Robert Garrison
- ----------------------------- --------------------------------
Witness Transferor
Signed by the Transferee on the
day of , 1998,
in the presence of:
- ----------------------------- --------------------------------
Witness Transferee
<PAGE>
Exhibit 99.54
JOINT ACKNOWLEDGEMENT
---------------------
This Acknowledgement is delivered in connection with the consulting agreement
(the "Consulting Agreement") dated as of May 13, 1997 between First Dynasty
Mines Armenia Limited (formerly Global Gold Armenia Limited) ("FD Armenia")
and Robert A. Garrison ("Garrison").
FD Armenia and Garrison have agreed pursuant to section 3 of the Letter
Agreement dated for reference the 24th day of July, 1998 between First
Dynasty Mines, Global Gold Corporation, and Garrison to terminate the
Consulting Agreement.
The undersigned hereby acknowledge that the Consulting Agreement is hereby
terminated and, as such, all the rights, duties and obligations of each of FD
Armenia and Garrison to each other arising out of or related to the
Consulting Agreement are hereby terminated.
The undersigned also hereby acknowledge that each of FD Armenia and Garrison
are hereby released and discharged absolutely and forever from any further
obligations in respect of the Consulting Agreement.
Dated this 31st day of August, 1998.
------- --------
FIRST DYNASTY MINES ARMENIA LIMITED
Per:/s/ MP Randolph /s/ Robert Garrison
-------------------------------- -------------------------------
Authorized Signatory ROBERT A. GARRISON
<PAGE>
Exhibit 99.55
JOINT ACKNOWLEDGEMENT
This Acknowledgement is delivered in connection with the shareholders agreement
of First Dynasty Mines Armenia Limited (formerly Global Gold Armenia Limited)
("FD Armenia") (the "Shareholders Agreement") dated as of May 13, 1997 among
First Dynasty Mines (USA) LLC ("FDM LLC"), as assignee of First Dynasty Mines
Ltd. ("FDM"), Global Gold Corporation ("Global Gold"), and FD Armenia.
FDM, Global Gold, and FD Armenia have agreed pursuant to section 4 of the Letter
Agreement dated for reference the 24th day of July, 1998 between FDM, Global
Gold and Robert A. Garrison to terminate the Shareholders Agreement.
The undersigned hereby acknowledge that the Shareholders Agreement is hereby
terminated and, as such, all the rights, duties and obligations of each of FDM,
FDM LLC, Global Gold and FD Armenia to each other arising out of or related to
the Shareholders Agreement are hereby terminated.
The undersigned also hereby acknowledge that each of FDM, FDM LLC, Global Gold,
and FD Armenia are hereby released and discharged absolutely and forever from
any further obligations in respect of the Shareholders Agreement.
Dated this 31st day of August, 1998.
---- -----
FIRST DYNASTY MINES LIMITED FIRST DYNASTY MINES ARMENIA LIMITED
Per: /s/ Beverly Downing Per: /s/ Marcus Randolph
--------------------------- -------------------------
Authorized Signatory Authorized Signatory
GLOBAL GOLD CORPORATION FIRST DYNASTY MINES (USA) LLC
Per: /s/ Robert Garrison Per: /s/ Marcus Randolph
---------------------------- --------------------------
Authorized Signatory Authorized Signatory
<PAGE>
Exhibit 99.56
SPECIAL WARRANT CERTIFICATE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "U.S. SECURITIES ACT"), AND MAY NOT BE OFFERED FOR SALE, SOLD, OR
OTHERWISE TRANSFERRED OR ASSIGNED UNLESS THEY ARE OFFERED FOR SALE,
SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED: (A) TO THE CORPORATION: (B)
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE U.S. SECURITIES ACT; (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS; OR (D) WITH THE PRIOR CONSENT OF THE CORPORATION,
PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE U.S.
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. DELIVERY OF
THE CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED THAT THE
CORPORATION IS A "FOREIGN ISSUER" WITHIN THE MEANING OF REGULATION S AT
THE TIME OF SALE, A NEW CERTIFICATE, BEARING NO LEGEND MAY BE OBTAINED
FROM THE REGISTRAR AND TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE
AND DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE REGISTRAR
AND TRANSFER AGENT AND THE CORPORATION, TO THE EFFECT THAT SUCH SALE IS
BEING MADE IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT.
FIRST DYNASTY MINES LTD.
(the "Corporation")
THE SPECIAL WARRANTS REPRESENTED BY THIS CERTIFICATE WILL EXPIRE AS OF 4:30
P.M., VANCOUVER TIME, ON THE EARLIER OF:
1. THE FIFTH BUSINESS DAY AFTER THE DAY UPON WHICH A RECEIPT (OR A COPY THEREOF)
FOR THE FINAL PROSPECTUS IS ISSUED BY THE LAST OF THE SECURITIES COMMISSIONS OR
SIMILAR REGULATORY AUTHORITIES OF THE CANADIAN JURISDICTIONS TO ISSUE A RECEIPT
FOR THE FINAL PROSPECTUS; AND
2. AUGUST 31, 1999;
(THE "EXPIRY DATE"), UNLESS SPECIFICALLY EXERCISED OR DEEMED TO BE
EXERCISED IN THE MANNER HEREINAFTER DESCRIBED PRIOR TO THE EXPIRY
DATE.
<PAGE>
SPECIAL WARRANTS
FIRST DYNASTY MINES LTD. (the "Corporation")
(Incorporated under the laws of Yukon Territory)
SPECIAL WARRANT CERTIFICATE NO. SW-US002 4,000,000 Special Warrants
THIS IS TO CERTIFY that GLOBAL GOLD CORPORATION of 438 West
37th Street, Suite 5G, New York, New York, 10018 (the "holder") is entitled to
acquire, in the manner herein provided, subject to the restrictions contained
herein, at any time and from time to time on or prior to 4:30 p.m. Vancouver
time (the "Expiry Time"), on the Expiry Date, subject to the adjustments
described below, that number of Common Shares which is equal to the number of
Special Warrants represented hereby without payment of any additional
consideration.
The Special Warrants represented by this certificate are
issued under and pursuant to a Special Warrant Indenture (the "Indenture") made
as of August 31, 1998 between the Corporation and the Trustee (which expression
shall include any successor trustee appointed under the Indenture), to which
Indenture (and any amendments thereto and instruments supplemental thereto)
reference is hereby made for a full description of the rights of the holders of
the Special Warrants and the terms and conditions upon which such Special
Warrants are or are to be, issued and held, all to the same effect as if the
provisions of the Indenture and all amendments thereto and instruments
supplemental thereto were herein set forth and to all of which provisions the
holder of these Special Warrants by acceptance hereof assents. All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Indenture.
In the event of any conflict or inconsistency between the
provisions of the Indenture (and any amendments thereto and instruments
supplemental thereto) and the provisions of this Special Warrant Certificate,
except those that are necessary by context, the provisions of the Indenture (and
any amendments thereto and instruments supplemental thereto) shall prevail. The
terms and provisions of the Indenture (and any amendments thereto and
instruments supplemental thereto) are incorporated herein by reference.
The right to subscribe for Common Shares in the capital of the
Corporation represented hereby may be exercised by either the holder hereof or
the Trustee as follows:
(1) The holder hereof may exercise the Special Warrants before the
Expiry Time by:
(a) duly completing in the manner indicated and executing the
Exercise Form attached hereto; and
(b) surrendering this Special Warrant Certificate to CIBC Mellon
Trust
<PAGE>
Company (the "Trustee") as hereinafter set forth.
This Special Warrant Certificate shall be validly surrendered only upon delivery
thereof or by mailing the same to the Trustee at its principal office in the
city of Vancouver (at the address hereinafter indicated). The Exercise Form
attached hereto shall be deemed not to be duly completed if not fully completed
in the manner indicated or if the name and mailing address of the holder do not
appear legibly on such Exercise Form or such Exercise Form is not signed by the
holder.
(2) Subject as provided herein, the Trustee will be deemed to have
exercised and surrendered the Special Warrants represented by this
Special Warrant Certificate on behalf of the holder thereof as of 4:29
p.m. (Vancouver time) on the Expiry Date if the holder fails to
exercise the Special Warrants that may be exercised by it before the
Expiry Time. All Special Warrants shall expire immediately after the
Expiry Time.
In the case of a Special Warrant which is deemed exercised and
surrendered by the Trustee on behalf of a holder, as soon as practicable
following the exercise by the Trustee of such Special Warrants, the Trustee
shall immediately notify the holder hereof in accordance with the provisions of
Section 9.2 of the Indenture to the effect the Trustee has so exercised the
Special Warrants on behalf of the holder and within five Business Days after the
Expiry Date, the Corporation shall cause certificates representing such Common
Shares to be mailed to the address of the holder of the Special Warrants.
Not later than the fifth Business Day after the surrender to the
Trustee of the Special Warrant Certificate evidencing any Special Warrant with
the attached Exercise Form duly completed or the deemed exercise of any Special
Warrant, the Trustee will mail to the holder, or to such person as the holder
may otherwise specify in the Exercise Form or by written notice given to the
Trustee prior to such mailing, at the address of the holder or, if so specified,
of such person, or, if specified in the Exercise Form or by written notice given
to the Trustee prior to such mailing, will deliver to such holder or person at
the place where such Special Warrant Certificate was surrendered certificates
representing the number of Common Shares registered in the name of the holder
or, if so specified, such person. In the event of non-receipt of any such
certificate by the person to whom it is so sent as aforesaid, or the loss or
destruction thereof, the Corporation shall issue and the Trustee shall
countersign and deliver to such person a replacement certificate of like date
and tenor in place of the one lost or destroyed upon being furnished with such
evidence of ownership and non-receipt, loss or destruction and with such
indemnity or security as the Trustee may reasonably require. The holder shall
bear the cost of the issue of such replacement certificate.
Upon valid or deemed exercise of the Special Warrants as provided
herein, the person or persons in whose name or names the Common Shares are
issuable, shall be deemed for all purposes (except as provided in the Indenture)
to be the holder or holders of record of such Common Shares and the Corporation
covenants that it will (subject to and in accordance with the
<PAGE>
provisions of the Indenture) cause certificates representing such Common Shares
to be delivered or mailed to such person or persons at the address or addresses
specified in such Exercise Form.
To the extent that the Special Warrants represented by this Special
Warrant Certificate confer the right to subscribe for a fraction of a Common
Share, such right may be exercised in respect of such fraction only in
combination with an additional Special Warrant or Special Warrants which in the
aggregate entitle the holder to acquire a whole number of Common Shares. No
fractional Common Shares will be issued. If a holder is not able to, or elects
not to, combine Special Warrants so as to be entitled to acquire a whole number
of Common Shares, the Corporation shall make an appropriate cash adjustment. In
respect of any holder, the Corporation shall only be required to make such a
cash adjustment once and for one fractional Common Share and no more. The amount
of the cash adjustment shall be equal to the fraction of a Common Share to which
the holder would be entitled multiplied by the Current Market Price. The
Corporation will not, under any circumstances, be obligated to issue a cheque to
a Special Warrantholder in an amount less than Cdn$5.00.
The Indenture provides for adjustments to the subscription rights
attaching to these Special Warrants in certain events and also provides for the
giving of notice by the Corporation prior to taking certain actions specified
therein.
The holding of the Special Warrants evidenced by this Special
Warrant Certificate shall not constitute the holder hereof a shareholder of the
Corporation or entitle such holder to any right or interest in respect thereof
except as herein and in the Indenture expressly provided.
The Special Warrants evidenced by this Special Warrant Certificate
are transferable only in accordance with the terms and conditions set forth in
Section 2.3 of the Indenture which makes reference to the fact that a person who
furnishes evidence (unless the Corporation has instructed the Trustee in writing
to waive such requirement) to the reasonable satisfaction of the Trustee that he
is:
(a) the executor, administrator, heir or legal representative of the
heirs of the estate of a deceased registered holder hereof,
(b) a guardian, committee, trustee, curator or tutor representing a
registered holder who is an infant, an incompetent person or a
missing person,
(c) a liquidator of, or a trustee in bankruptcy for, a holder hereof,
or
(d) a transferee of a Special Warrantholder who provides the Trustee
with evidence satisfactory to the Corporation and the Trustee,
acting reasonably, including, but not limited to a properly
completed and executed declaration in the form attached to the
Special Warrant Certificate, that such transferee is/was either (i)
not in the United States at the time the buy order for the Special
Warrants was executed, not
<PAGE>
acquiring the Special Warrants for the account or benefit of a U.S.
Person or a person in the United States and was not offered the
Special Warrants in the United States, or (ii) a person that has
purchased or acquired Special Warrants in a transaction exempt from
registration under the U.S. Securities Act of 1933 and has provided
the Corporation with satisfactory evidence of the availability of
such exemption which may, at the Corporation's discretion, include
an opinion of counsel and, in the case of (ii) was exempt from
registration under any applicable securities laws of any state of
the United States and that the securities laws of any other
applicable jurisdiction(s) have been complied with in relation to
the transfer of the Special Warrants involved,
may, as set forth in the Indenture, by surrendering to the Trustee such evidence
together with the Special Warrant Certificate in question with a duly executed
instrument of transfer in the form attached and subject to such reasonable
requirements relating to the payment of costs of the transfer by the holder as
the Trustee may prescribe and all applicable securities legislation and
requirements of regulatory authorities, become noted upon the register of
holders.
If any of the Common Shares in respect of which the Special
Warrants are exercised are to be issued to a person or persons other than the
holder (as aforesaid), the holder shall pay to the Trustee all requisite stamp
transfer taxes or other governmental charges exigible in connection with the
issue of such Common Shares to such other person or persons or shall establish
to the satisfaction of the Trustee that such taxes and charges have been paid.
This Special Warrant Certificate shall not be valid for any purpose
whatever unless and until it has been countersigned by or on behalf of the
Trustee.
Time shall be of the essence hereof. The Special Warrants and the
Indenture (and any amendments thereto and instruments supplemental thereto)
shall be governed by, performed, construed and enforced in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein and shall be treated in all respects as British Columbia contracts.
The Corporation is under no obligation to file and clear a
Prospectus solely to qualify the Common Shares issuable upon exercise or deemed
exercise of the Special Warrants by a designated date or at all and any such
filing, if made, will be subject to all necessary regulatory approvals. If the
Corporation files a prospectus in connection with an offering of securities of
the Corporation prior to the Expiry Date, it has agreed that it will file such
prospectus in each of the Canadian Jurisdictions and include therein for
qualification the distribution to the holders of Special Warrants the Common
Shares issuable upon exercise or deemed exercise thereof. The Corporation will
only be required to file the prospectus in respect of any of its securities in
the event that the Corporation considers that it is in its best interests to do
so, in its sole and unfettered discretion.
<PAGE>
Unless the Corporation has instructed the Trustee in writing to
waive any or all of the following requirements, the Special Warrants may not be
exercised by or for the account or benefit of a U.S. Person or a person in the
United States unless the holder certifies in writing to the Corporation and the
Trustee that the holder is: (i) Global Gold or Garrison as an original
subscriber of Special Warrants; or (ii) a registered transferee of such Special
Warrants who has complied with the terms of the Special Warrant Indenture
provided that the Corporation may, in its sole discretion, accept, in
substitution for the foregoing, evidence satisfactory to the Corporation and the
Trustee, acting reasonably, to the effect that the Common Shares have been
registered under the U.S. Securities Act and applicable state securities laws or
that the Common Shares may be issued upon exercise of the Special Warrants
without registration under the U.S. Securities Act and any applicable state
securities laws.
This Special Warrant may not be exercised in the United States or
by or for the account or benefit of a U.S. Person or person in the United States
other than by: (i) Global Gold or Garrison as an original subscriber of the
Special Warrants from the Corporation; or (ii) by a registered transferee of
Special Warrants that acquired the Special Warrants in a transaction exempt from
registration under the U.S. Securities Act of 1933 and applicable state
securities laws and in compliance with the Special Warrant Indenture.
Unless otherwise determined by the Corporation by way of written
instructions to the Trustee:
(a) Common Shares issued to persons in the United States upon the
exercise of Special Warrants shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "U.S. SECURITIES ACT"), AND MAY NOT BE OFFERED FOR
SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS THEY ARE
OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED: (A)
TO THE CORPORATION: (B) OUTSIDE THE UNITED STATES IN ACCORDANCE
WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT; (C)
PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE U.S.
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF APPLICABLE, AND
IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS; OR (D) WITH
THE PRIOR CONSENT OF THE CORPORATION, PURSUANT TO ANOTHER EXEMPTION
FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. DELIVERY OF THE CERTIFICATE MAY NOT
CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK
EXCHANGES IN
<PAGE>
CANADA. PROVIDED THAT THE CORPORATION IS A "FOREIGN ISSUER" WITHIN
THE MEANING OF REGULATION S AT THE TIME OF SALE, A NEW CERTIFICATE,
BEARING NO LEGEND MAY BE OBTAINED FROM THE REGISTRAR AND TRANSFER
AGENT UPON DELIVERY OF THIS CERTIFICATE AND DULY EXECUTED
DECLARATION, IN A FORM SATISFACTORY TO THE REGISTRAR AND TRANSFER
AGENT AND THE CORPORATION, TO THE EFFECT THAT SUCH SALE IS BEING
MADE IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT."
(b) Certificates representing Common Shares issued upon the exercise of
Special Warrants exercised or deemed exercised prior to the earlier of the
Qualification Date or the Expiry Date, shall bear the following legend:
"THE SECURITIES REPRESENTED BY THE CERTIFICATE ARE LISTED ON THE
TORONTO STOCK EXCHANGE; HOWEVER, THE SAID SECURITIES CANNOT BE
TRADED THROUGH THE FACILITIES ON SUCH EXCHANGE SINCE THEY ARE NOT
FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING
SUCH SECURITIES IS NOT "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON THE TORONTO STOCK EXCHANGE."
IN WITNESS WHEREOF the Corporation has caused this Special Warrant
Certificate to be signed by its duly authorized officer as of August 31, 1998.
FIRST DYNASTY MINES LTD.
Per:/s/ Beverly Downing
Authorized Signatory
Countersigned by:
CIBC MELLON TRUST COMPANY
Per: /s/ R. Massender
Authorized Signatory
<PAGE>
EXERCISE INSTRUCTIONS TO SPECIAL WARRANTHOLDER
The registered holder hereof may exercise his right to subscribe
for Common Shares of FIRST DYNASTY MINES LTD. (the "Corporation"), by completing
the exercise form and surrendering this Special Warrant Certificate and the duly
completed exercise form to CIBC Mellon Trust Company by delivering or mailing it
to CIBC Mellon Trust Company at its principal office in the city of Vancouver at
1177 West Hastings Street, Mall Level, Vancouver, B.C. V6E 2K3.
For your own protection, it is suggested that all documentation be
forwarded to the Trustee by registered mail.
<PAGE>
EXERCISE FORM
To: First Dynasty Mines Ltd.
c/o CIBC Mellon Trust Company
1177 West Hastings Street
Mall Level
Vancouver, B.C.
V6E 2K3
The undersigned holder of the within Special Warrant Certificate, pursuant to
the Special Warrant Indenture mentioned therein hereby exercises ____________ of
the Special Warrants (the "Exercised Special Warrants") evidenced thereby and
hereby subscribes for a number of Common Shares of First Dynasty Mines Ltd. or
such other number of Common Shares or number or amount of other shares or
securities or property, or combination thereof, to which such exercise entitles
him under the provisions of the Special Warrant Indenture and on the terms
specified in such Special Warrant Certificate and the Special Warrant Indenture.
The undersigned hereby irrevocably directs that such Common Shares be issued and
delivered as follows:
<TABLE>
<CAPTION>
Number(s) or
Amount(s) of Common
Name(s) in Full Address(es) Shares
<S> <C> <C>
- --------------------------------------- --------------------------------------- -----------------------------------
- --------------------------------------- --------------------------------------- -----------------------------------
- --------------------------------------- --------------------------------------- -----------------------------------
</TABLE>
NO CERTIFICATES WILL BE REGISTERED OR DELIVERED TO AN ADDRESS IN THE UNITED
STATES UNLESS BOX B BELOW IS CHECKED.
(Please print full name in which share certificates are to be issued. If any
Common Shares are to be issued to a person or persons other than the Special
Warrantholder, the Special Warrantholder must pay to the Trustee all exigible
transfer taxes or other government charges.)
THE UNDERSIGNED CERTIFIES THAT EACH OF THE REPRESENTATIONS AND WARRANTIES MADE
BY THE UNDERSIGNED TO THE CORPORATION IN CONNECTION WITH THE UNDERSIGNED'S
ACQUISITION OF THE EXERCISED SPECIAL WARRANTS REMAINS TRUE AND CORRECT ON THE
DATE HEREOF.
The undersigned represents that it: [CHECK ONE ONLY]
/ / A. is not in the United States or a U.S. Person as defined in Rule 902
of Regulation
<PAGE>
S under the United States Securities Act of 1933, as amended (the
"U.S. Securities Act") and is not exercising the Exercised Special
Warrants for the account or benefit of a U.S. Person or a person in
the United States.
/ / B. Global Gold or Garrison as an original subscriber of Special
Warrants.
/ / C. is (a) an institutional accredited investor that satisfies the
requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the U.S. Securities Act that purchased this Special Warrant
directly from the First Dynasty Mines Ltd., or (b) a registered
holder that acquired the Exercised Special Warrants in a
transaction that was exempt from registration under the U.S.
Securities Act and applicable state securities laws and in
compliance with Subsection 2.3(d)(iii) of the Special Warrant
Indenture.
DATED AT THIS day of , 199 .
Witness Signature of Subscriber*
Name of Subscriber
Address (include Postal Code)
SIN/TIN Number (if any)
* If the Underlying Securities are to be issued to a person other than the
registered holder, then the signature of the Subscriber must be guaranteed by a
bank, trust company or medallion guaranteed by a member of a recognized stock
exchange.
** This signature must correspond exactly with the name appearing on the
registration panel.
Check box if the share and warrant certificates are to be delivered at the
office where this Special Warrant is exercised, failing which they will be
mailed. / /
<PAGE>
TRANSFER OF SPECIAL WARRANTS
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers to:
------------------------------------------------------------------
Name
------------------------------------------------------------------
Address
------------------------------------------------------------------
________________ Special Warrants of First Dynasty Mines Ltd. registered in the
name of the undersigned on the records of First Dynasty Mines Ltd. maintained by
CIBC Mellon Trust Company represented by the Special Warrant Certificate
attached and irrevocably appoints ______________ the attorney of the undersigned
to transfer the said securities on the books or register with full power of
substitution.
DATED this day of , 19
----------- --------------------------- --
- ---------------------------- ---------------------------------------
Signature Guaranteed (Signature of Special Warrant Holder)
---------------------------------------
Print full name
---------------------------------------
Print full address and SIN/TIN (if any)
---------------------------------------
INSTRUCTIONS
1. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person
acting in a fiduciary or representative capacity, the certificate must
be accompanied by evidence of authority to sign satisfactory to the
Trustee and the Corporation.
2. The signature on the Transfer Form must be guaranteed by an authorized
officer of a chartered bank, trust company or an investment dealer who
is a member of a recognized stock exchange.
3. Special Warrants will only be transferable in accordance with
applicable securities laws and stock exchange regulations. The transfer
of Special Warrants to a transferee may, depending on the residency of
such transferee, result in the securities obtained upon the exercise of
the Special Warrants (whether after or before obtaining receipts for a
final prospectus relating to the distribution of such securities upon
exercise of Special Warrants) not being freely tradeable in the
jurisdiction where the transferee is resident.
4. UNLESS THE CORPORATION HAS OTHERWISE INSTRUCTED THE TRUSTEE IN WRITING,
NO TRANSFER OF SPECIAL WARRANTS WILL BE VALID UNLESS THIS TRANSFER FORM
IS ACCOMPANIED BY: (A) DULY EXECUTED DECLARATION BY THE TRANSFEREE OF
SPECIAL WARRANTS IN THE FORM ATTACHED AS EXHIBIT "A" TO THIS TRANSFER
FORM; AND (B) SUCH OTHER EVIDENCE AS THE TRUSTEE MAY REASONABLY REQUIRE
THAT THE TRANSFER OF SUCH SPECIAL WARRANTS IS BEING MADE IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LEGISLATION.
<PAGE>
EXHIBIT "A"
DECLARATION OF TRANSFEREE OF SPECIAL WARRANTS OF
FIRST DYNASTY MINES LTD.
TO: CIBC Mellon Trust Company, trustee of the Special Warrants of
First Dynasty Mines Ltd.
AND TO: First Dynasty Mines Ltd. (the "Corporation")
- --------------------------------------------------------------------------------
The undersigned transferee ("Transferee") of special warrants of First Dynasty
Mines Ltd. ("Special Warrants") whose name appears as such on the form of
transfer of such Special Warrants that accompanies this declaration, hereby
declares and certifies, for himself and on behalf of each beneficial transferee
of all or any part of such Special Warrants, that:
[check one only]
/ / A. (i) no offers to sell the Special Warrants or the
Subject Securities were made by any person to the
Transferee or any beneficial transferee for whom
he is acting while such persons were in the
United States;
(ii) the Transferee and each beneficial transferee for
whom he is acting were outside the United States
at the time of execution and delivery of the
instrument by which the Transferee and each
beneficial transferee for whom he is acting
agreed to acquire the Special Warrants; and
(iii) the Transferee is not, and is not acquiring the
Special Warrants for the account or benefit of, a
U.S. Person as defined in Rule 904 of Regulation
S under the United States Securities Act of 1933,
as amended (the "U.S. Securities Act").
/ / B. The Transferee has acquired the Special Warrants in a
transaction exempt from registration under the U.S. Securities
Act and applicable state securities laws and has
<PAGE>
- 2 -
provided herewith evidence (which the Transferee acknowledges
must be satisfactory to the Corporation) of such exemption.
DATED at this day of
-------------------------------- ---- ----------------
19 .
---
--------------------------------------------
Name of Transferee
By:
---------------------------------------
Signature of Authorized Representative
--------------------------------------------
Name of Person Signing
--------------------------------------------
Title
<PAGE>
SCHEDULE "B"
NOTICE TO SPECIAL WARRANTHOLDERS
Reference is made to the Special Warrant Indenture made as of
August 31, 1998 (the "Indenture") between First Dynasty Mines Ltd. and CIBC
Mellon Trust Company. Unless defined herein, capitalized terms used herein have
the respective meanings ascribed to them in the Indenture.
Pursuant to Section 3.2 of the Indenture, we hereby confirm
that receipts have been issued by the securities commissions in each of the
Canadian Jurisdictions in respect of the prospectus qualifying the distribution
of the Special Warrants. The last receipt was issued on __________________ by
the ______________________ Securities Commission. The Expiry Time is therefore
4:30 p.m. (Vancouver Time) on ____________________.
<PAGE>
Exhibit 99.57
SPECIAL WARRANT CERTIFICATE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "U.S. SECURITIES ACT"), AND MAY NOT BE OFFERED FOR SALE, SOLD, OR
OTHERWISE TRANSFERRED OR ASSIGNED UNLESS THEY ARE OFFERED FOR SALE,
SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED: (A) TO THE CORPORATION: (B)
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S
UNDER THE U.S. SECURITIES ACT; (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS; OR (D) WITH THE PRIOR CONSENT OF THE CORPORATION,
PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE U.S.
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. DELIVERY OF
THE CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED THAT THE
CORPORATION IS A "FOREIGN ISSUER" WITHIN THE MEANING OF REGULATION S AT
THE TIME OF SALE, A NEW CERTIFICATE, BEARING NO LEGEND MAY BE OBTAINED
FROM THE REGISTRAR AND TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE
AND DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE REGISTRAR
AND TRANSFER AGENT AND THE CORPORATION, TO THE EFFECT THAT SUCH SALE IS
BEING MADE IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT.
FIRST DYNASTY MINES LTD.
(the "Corporation")
THE SPECIAL WARRANTS REPRESENTED BY THIS CERTIFICATE WILL EXPIRE AS OF 4:30
P.M., VANCOUVER TIME, ON THE EARLIER OF:
1. THE FIFTH BUSINESS DAY AFTER THE DAY UPON WHICH A RECEIPT (OR A COPY THEREOF)
FOR THE FINAL PROSPECTUS IS ISSUED BY THE LAST OF THE SECURITIES COMMISSIONS OR
SIMILAR REGULATORY AUTHORITIES OF THE CANADIAN JURISDICTIONS TO ISSUE A RECEIPT
FOR THE FINAL PROSPECTUS; AND
2. AUGUST 31, 1999;
(THE "EXPIRY DATE"), UNLESS SPECIFICALLY EXERCISED OR DEEMED TO BE
EXERCISED IN THE MANNER HEREINAFTER DESCRIBED PRIOR TO THE EXPIRY
DATE.
<PAGE>
SPECIAL WARRANTS
FIRST DYNASTY MINES LTD. (the "Corporation")
(Incorporated under the laws of Yukon Territory)
SPECIAL WARRANT CERTIFICATE NO. SW-US001 500,000 Special Warrants
THIS IS TO CERTIFY that ROBERT A. GARRISON of 44 Lords Highway
East, Weston, Connecticut, 06883 (the "holder") is entitled to acquire, in the
manner herein provided, subject to the restrictions contained herein, at any
time and from time to time on or prior to 4:30 p.m. Vancouver time (the "Expiry
Time"), on the Expiry Date, subject to the adjustments described below, that
number of Common Shares which is equal to the number of Special Warrants
represented hereby without payment of any additional consideration.
The Special Warrants represented by this certificate are
issued under and pursuant to a Special Warrant Indenture (the "Indenture") made
as of August 31, 1998 between the Corporation and the Trustee (which expression
shall include any successor trustee appointed under the Indenture), to which
Indenture (and any amendments thereto and instruments supplemental thereto)
reference is hereby made for a full description of the rights of the holders of
the Special Warrants and the terms and conditions upon which such Special
Warrants are or are to be, issued and held, all to the same effect as if the
provisions of the Indenture and all amendments thereto and instruments
supplemental thereto were herein set forth and to all of which provisions the
holder of these Special Warrants by acceptance hereof assents. All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Indenture.
In the event of any conflict or inconsistency between the
provisions of the Indenture (and any amendments thereto and instruments
supplemental thereto) and the provisions of this Special Warrant Certificate,
except those that are necessary by context, the provisions of the Indenture (and
any amendments thereto and instruments supplemental thereto) shall prevail. The
terms and provisions of the Indenture (and any amendments thereto and
instruments supplemental thereto) are incorporated herein by reference.
The right to subscribe for Common Shares in the capital of the
Corporation represented hereby may be exercised by either the holder hereof or
the Trustee as follows:
(1) The holder hereof may exercise the Special Warrants before the
Expiry Time by:
(a) duly completing in the manner indicated and executing
the Exercise Form attached hereto; and
(b) surrendering this Special Warrant Certificate to CIBC
Mellon Trust
<PAGE>
Company (the "Trustee") as hereinafter set forth.
This Special Warrant Certificate shall be validly surrendered only upon delivery
thereof or by mailing the same to the Trustee at its principal office in the
city of Vancouver (at the address hereinafter indicated). The Exercise Form
attached hereto shall be deemed not to be duly completed if not fully completed
in the manner indicated or if the name and mailing address of the holder do not
appear legibly on such Exercise Form or such Exercise Form is not signed by the
holder.
(2) Subject as provided herein, the Trustee will be deemed to have
exercised and surrendered the Special Warrants represented by this
Special Warrant Certificate on behalf of the holder thereof as of 4:29
p.m. (Vancouver time) on the Expiry Date if the holder fails to
exercise the Special Warrants that may be exercised by it before the
Expiry Time. All Special Warrants shall expire immediately after the
Expiry Time.
In the case of a Special Warrant which is deemed exercised and
surrendered by the Trustee on behalf of a holder, as soon as practicable
following the exercise by the Trustee of such Special Warrants, the Trustee
shall immediately notify the holder hereof in accordance with the provisions of
Section 9.2 of the Indenture to the effect the Trustee has so exercised the
Special Warrants on behalf of the holder and within five Business Days after the
Expiry Date, the Corporation shall cause certificates representing such Common
Shares to be mailed to the address of the holder of the Special Warrants.
Not later than the fifth Business Day after the surrender to
the Trustee of the Special Warrant Certificate evidencing any Special Warrant
with the attached Exercise Form duly completed or the deemed exercise of any
Special Warrant, the Trustee will mail to the holder, or to such person as the
holder may otherwise specify in the Exercise Form or by written notice given to
the Trustee prior to such mailing, at the address of the holder or, if so
specified, of such person, or, if specified in the Exercise Form or by written
notice given to the Trustee prior to such mailing, will deliver to such holder
or person at the place where such Special Warrant Certificate was surrendered
certificates representing the number of Common Shares registered in the name of
the holder or, if so specified, such person. In the event of non-receipt of any
such certificate by the person to whom it is so sent as aforesaid, or the loss
or destruction thereof, the Corporation shall issue and the Trustee shall
countersign and deliver to such person a replacement certificate of like date
and tenor in place of the one lost or destroyed upon being furnished with such
evidence of ownership and non-receipt, loss or destruction and with such
indemnity or security as the Trustee may reasonably require. The holder shall
bear the cost of the issue of such replacement certificate.
Upon valid or deemed exercise of the Special Warrants as
provided herein, the person or persons in whose name or names the Common Shares
are issuable, shall be deemed for all purposes (except as provided in the
Indenture) to be the holder or holders of record of such Common Shares and the
Corporation covenants that it will (subject to and in accordance with the
<PAGE>
provisions of the Indenture) cause certificates representing such Common Shares
to be delivered or mailed to such person or persons at the address or addresses
specified in such Exercise Form.
To the extent that the Special Warrants represented by this
Special Warrant Certificate confer the right to subscribe for a fraction of a
Common Share, such right may be exercised in respect of such fraction only in
combination with an additional Special Warrant or Special Warrants which in the
aggregate entitle the holder to acquire a whole number of Common Shares. No
fractional Common Shares will be issued. If a holder is not able to, or elects
not to, combine Special Warrants so as to be entitled to acquire a whole number
of Common Shares, the Corporation shall make an appropriate cash adjustment. In
respect of any holder, the Corporation shall only be required to make such a
cash adjustment once and for one fractional Common Share and no more. The amount
of the cash adjustment shall be equal to the fraction of a Common Share to which
the holder would be entitled multiplied by the Current Market Price. The
Corporation will not, under any circumstances, be obligated to issue a cheque to
a Special Warrantholder in an amount less than Cdn$5.00.
The Indenture provides for adjustments to the subscription
rights attaching to these Special Warrants in certain events and also provides
for the giving of notice by the Corporation prior to taking certain actions
specified therein.
The holding of the Special Warrants evidenced by this Special
Warrant Certificate shall not constitute the holder hereof a shareholder of the
Corporation or entitle such holder to any right or interest in respect thereof
except as herein and in the Indenture expressly provided.
The Special Warrants evidenced by this Special Warrant
Certificate are transferable only in accordance with the terms and conditions
set forth in Section 2.3 of the Indenture which makes reference to the fact that
a person who furnishes evidence (unless the Corporation has instructed the
Trustee in writing to waive such requirement) to the reasonable satisfaction of
the Trustee that he is:
(a) the executor, administrator, heir or legal representative of
the heirs of the estate of a deceased registered holder
hereof,
(b) a guardian, committee, trustee, curator or tutor representing
a registered holder who is an infant, an incompetent person or
a missing person,
(c) a liquidator of, or a trustee in bankruptcy for, a holder
hereof, or
(d) a transferee of a Special Warrantholder who provides the
Trustee with evidence satisfactory to the Corporation and the
Trustee, acting reasonably, including, but not limited to a
properly completed and executed declaration in the form
attached to the Special Warrant Certificate, that such
transferee is/was either (i) not in the United States at the
time the buy order for the Special Warrants was executed, not
<PAGE>
acquiring the Special Warrants for the account or benefit of a
U.S. Person or a person in the United States and was not
offered the Special Warrants in the United States, or (ii) a
person that has purchased or acquired Special Warrants in a
transaction exempt from registration under the U.S. Securities
Act of 1933 and has provided the Corporation with satisfactory
evidence of the availability of such exemption which may, at
the Corporation's discretion, include an opinion of counsel
and, in the case of (ii) was exempt from registration under
any applicable securities laws of any state of the United
States and that the securities laws of any other applicable
jurisdiction(s) have been complied with in relation to the
transfer of the Special Warrants involved,
may, as set forth in the Indenture, by surrendering to the Trustee such evidence
together with the Special Warrant Certificate in question with a duly executed
instrument of transfer in the form attached and subject to such reasonable
requirements relating to the payment of costs of the transfer by the holder as
the Trustee may prescribe and all applicable securities legislation and
requirements of regulatory authorities, become noted upon the register of
holders.
If any of the Common Shares in respect of which the Special
Warrants are exercised are to be issued to a person or persons other than the
holder (as aforesaid), the holder shall pay to the Trustee all requisite stamp
transfer taxes or other governmental charges exigible in connection with the
issue of such Common Shares to such other person or persons or shall establish
to the satisfaction of the Trustee that such taxes and charges have been paid.
This Special Warrant Certificate shall not be valid for any
purpose whatever unless and until it has been countersigned by or on behalf of
the Trustee.
Time shall be of the essence hereof. The Special Warrants and
the Indenture (and any amendments thereto and instruments supplemental thereto)
shall be governed by, performed, construed and enforced in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein and shall be treated in all respects as British Columbia contracts.
The Corporation is under no obligation to file and clear a
Prospectus solely to qualify the Common Shares issuable upon exercise or deemed
exercise of the Special Warrants by a designated date or at all and any such
filing, if made, will be subject to all necessary regulatory approvals. If the
Corporation files a prospectus in connection with an offering of securities of
the Corporation prior to the Expiry Date, it has agreed that it will file such
prospectus in each of the Canadian Jurisdictions and include therein for
qualification the distribution to the holders of Special Warrants the Common
Shares issuable upon exercise or deemed exercise thereof. The Corporation will
only be required to file the prospectus in respect of any of its securities in
the event that the Corporation considers that it is in its best interests to do
so, in its sole and unfettered discretion.
<PAGE>
Unless the Corporation has instructed the Trustee in writing
to waive any or all of the following requirements, the Special Warrants may not
be exercised by or for the account or benefit of a U.S. Person or a person in
the United States unless the holder certifies in writing to the Corporation and
the Trustee that the holder is: (i) Global Gold or Garrison as an original
subscriber of Special Warrants; or (ii) a registered transferee of such Special
Warrants who has complied with the terms of the Special Warrant Indenture
provided that the Corporation may, in its sole discretion, accept, in
substitution for the foregoing, evidence satisfactory to the Corporation and the
Trustee, acting reasonably, to the effect that the Common Shares have been
registered under the U.S. Securities Act and applicable state securities laws or
that the Common Shares may be issued upon exercise of the Special Warrants
without registration under the U.S. Securities Act and any applicable state
securities laws.
This Special Warrant may not be exercised in the United States
or by or for the account or benefit of a U.S. Person or person in the United
States other than by: (i) Global Gold or Garrison as an original subscriber of
the Special Warrants from the Corporation; or (ii) by a registered transferee of
Special Warrants that acquired the Special Warrants in a transaction exempt from
registration under the U.S. Securities Act of 1933 and applicable state
securities laws and in compliance with the Special Warrant Indenture.
Unless otherwise determined by the Corporation by way of
written instructions to the Trustee:
(a) Common Shares issued to persons in the United States upon the
exercise of Special Warrants shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT
BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "U.S. SECURITIES ACT"), AND MAY NOT BE OFFERED
FOR SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS
THEY ARE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED OR
ASSIGNED: (A) TO THE CORPORATION: (B) OUTSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
U.S. SECURITIES ACT; (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS; OR (D) WITH THE PRIOR
CONSENT OF THE CORPORATION, PURSUANT TO ANOTHER EXEMPTION FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. DELIVERY OF THE CERTIFICATE MAY NOT
CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON
STOCK EXCHANGES IN
<PAGE>
CANADA. PROVIDED THAT THE CORPORATION IS A "FOREIGN ISSUER"
WITHIN THE MEANING OF REGULATION S AT THE TIME OF SALE, A NEW
CERTIFICATE, BEARING NO LEGEND MAY BE OBTAINED FROM THE
REGISTRAR AND TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE
AND DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE
REGISTRAR AND TRANSFER AGENT AND THE CORPORATION, TO THE
EFFECT THAT SUCH SALE IS BEING MADE IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE U.S. SECURITIES ACT."
(b) Certificates representing Common Shares issued upon the exercise of
Special Warrants exercised or deemed exercised prior to the earlier of the
Qualification Date or the Expiry Date, shall bear the following legend:
"THE SECURITIES REPRESENTED BY THE CERTIFICATE ARE LISTED ON
THE TORONTO STOCK EXCHANGE; HOWEVER, THE SAID SECURITIES
CANNOT BE TRADED THROUGH THE FACILITIES ON SUCH EXCHANGE SINCE
THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY
CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK
EXCHANGE."
IN WITNESS WHEREOF the Corporation has caused this Special
Warrant Certificate to be signed by its duly authorized officer as of August 31,
1998.
FIRST DYNASTY MINES LTD.
Per:/s/ Beverly Downing
--------------------------------
Authorized Signatory
Countersigned by:
CIBC MELLON TRUST COMPANY
Per: /s/ R. Massender
-----------------------------------
Authorized Signatory
<PAGE>
EXERCISE INSTRUCTIONS TO SPECIAL WARRANTHOLDER
The registered holder hereof may exercise his right to
subscribe for Common Shares of FIRST DYNASTY MINES LTD. (the "Corporation"), by
completing the exercise form and surrendering this Special Warrant Certificate
and the duly completed exercise form to CIBC Mellon Trust Company by delivering
or mailing it to CIBC Mellon Trust Company at its principal office in the city
of Vancouver at 1177 West Hastings Street, Mall Level, Vancouver, B.C. V6E 2K3.
For your own protection, it is suggested that all
documentation be forwarded to the Trustee by registered mail.
<PAGE>
EXERCISE FORM
To: First Dynasty Mines Ltd.
c/o CIBC Mellon Trust Company
1177 West Hastings Street
Mall Level
Vancouver, B.C.
V6E 2K3
The undersigned holder of the within Special Warrant Certificate, pursuant to
the Special Warrant Indenture mentioned therein hereby exercises _______ of
the Special Warrants (the "Exercised Special Warrants") evidenced thereby and
hereby subscribes for a number of Common Shares of First Dynasty Mines Ltd.
or such other number of Common Shares or number or amount of other shares or
securities or property, or combination thereof, to which such exercise
entitles him under the provisions of the Special Warrant Indenture and on the
terms specified in such Special Warrant Certificate and the Special Warrant
Indenture.
The undersigned hereby irrevocably directs that such Common Shares be issued and
delivered as follows:
<TABLE>
<CAPTION>
Number(s) or
Amount(s) of Common
Name(s) in Full Address(es) Shares
<S> <C> <C>
- --------------------- ------------------- --------------------------
- --------------------- ------------------- --------------------------
- --------------------- ------------------- --------------------------
</TABLE>
NO CERTIFICATES WILL BE REGISTERED OR DELIVERED TO AN ADDRESS IN THE UNITED
STATES UNLESS BOX B BELOW IS CHECKED.
(Please print full name in which share certificates are to be issued. If any
Common Shares are to be issued to a person or persons other than the Special
Warrantholder, the Special Warrantholder must pay to the Trustee all exigible
transfer taxes or other government charges.)
THE UNDERSIGNED CERTIFIES THAT EACH OF THE REPRESENTATIONS AND WARRANTIES MADE
BY THE UNDERSIGNED TO THE CORPORATION IN CONNECTION WITH THE UNDERSIGNED'S
ACQUISITION OF THE EXERCISED SPECIAL WARRANTS REMAINS TRUE AND CORRECT ON THE
DATE HEREOF.
The undersigned represents that it: [CHECK ONE ONLY]
/ / A. is not in the United States or a U.S. Person as defined in
Rule 902 of Regulation
<PAGE>
S under the United States Securities Act of 1933, as amended
(the "U.S. Securities Act") and is not exercising the
Exercised Special Warrants for the account or benefit of a
U.S. Person or a person in the United States.
/ / B. Global Gold or Garrison as an original subscriber of Special
Warrants.
/ / C. is (a) an institutional accredited investor that satisfies the
requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation
D under the U.S. Securities Act that purchased this Special
Warrant directly from the First Dynasty Mines Ltd., or (b) a
registered holder that acquired the Exercised Special Warrants
in a transaction that was exempt from registration under the
U.S. Securities Act and applicable state securities laws and
in compliance with Subsection 2.3(d)(iii) of the Special
Warrant Indenture.
DATED AT THIS day of , 199 .
------- -----------
Witness Signature of Subscriber*
Name of Subscriber
Address (include Postal Code)
SIN/TIN Number (if any)
* If the Underlying Securities are to be issued to a person other than the
registered holder, then the signature of the Subscriber must be guaranteed by a
bank, trust company or medallion guaranteed by a member of a recognized stock
exchange.
** This signature must correspond exactly with the name appearing on the
registration panel.
Check box if the share and warrant certificates are to be delivered at the
office where this Special Warrant is exercised, failing which they will be
mailed. / /
<PAGE>
TRANSFER OF SPECIAL WARRANTS
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers to:
--------------------------------------------------
Name
--------------------------------------------------
Address
--------------------------------------------------
_____________________ Special Warrants of First Dynasty Mines Ltd. registered
in the name of the undersigned on the records of First Dynasty Mines Ltd.
maintained by CIBC Mellon Trust Company represented by the Special Warrant
Certificate attached and irrevocably appoints the attorney of the undersigned to
transfer the said securities on the books or register with full power of
substitution.
DATED this day of ,19
------- -----------
- ------------------------------- -------------------------------------
Signature Guaranteed (Signature of Special Warrant Holder)
--------------------------------------
Print full name
--------------------------------------
Print full address and SIN/TIN (if any)
--------------------------------------
INSTRUCTIONS
1. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person
acting in a fiduciary or representative capacity, the certificate must
be accompanied by evidence of authority to sign satisfactory to the
Trustee and the Corporation.
2. The signature on the Transfer Form must be guaranteed by an authorized
officer of a chartered bank, trust company or an investment dealer who
is a member of a recognized stock exchange.
3. Special Warrants will only be transferable in accordance with
applicable securities laws and stock exchange regulations. The transfer
of Special Warrants to a transferee may, depending on the residency of
such transferee, result in the securities obtained upon the exercise of
the Special Warrants (whether after or before obtaining receipts for a
final prospectus relating to the distribution of such securities upon
exercise of Special Warrants) not being freely tradeable in the
jurisdiction where the transferee is resident.
4. UNLESS THE CORPORATION HAS OTHERWISE INSTRUCTED THE TRUSTEE IN WRITING,
NO TRANSFER OF SPECIAL WARRANTS WILL BE VALID UNLESS THIS TRANSFER FORM
IS ACCOMPANIED BY: (A) DULY EXECUTED DECLARATION BY THE TRANSFEREE OF
SPECIAL WARRANTS IN THE FORM ATTACHED AS EXHIBIT "A" TO THIS TRANSFER
FORM; AND (B) SUCH OTHER EVIDENCE AS THE TRUSTEE MAY REASONABLY REQUIRE
THAT THE TRANSFER OF SUCH SPECIAL WARRANTS IS BEING MADE IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LEGISLATION.
<PAGE>
EXHIBIT "A"
DECLARATION OF TRANSFEREE OF SPECIAL WARRANTS OF
FIRST DYNASTY MINES LTD.
TO: CIBC Mellon Trust Company, trustee of the Special Warrants of First
Dynasty Mines Ltd.
AND TO: First Dynasty Mines Ltd. (the "Corporation")
The undersigned transferee ("Transferee") of special warrants of First Dynasty
Mines Ltd. ("Special Warrants") whose name appears as such on the form of
transfer of such Special Warrants that accompanies this declaration, hereby
declares and certifies, for himself and on behalf of each beneficial transferee
of all or any part of such Special Warrants, that:
[check one only]
/ / A. (i) no offers to sell the Special Warrants or
the Subject Securities were made by any
person to the Transferee or any beneficial
transferee for whom he is acting while such
persons were in the United States;
(ii) the Transferee and each beneficial
transferee for whom he is acting were
outside the United States at the time of
execution and delivery of the instrument by
which the Transferee and each beneficial
transferee for whom he is acting agreed to
acquire the Special Warrants; and
(iii) the Transferee is not, and is not acquiring
the Special Warrants for the account or
benefit of, a U.S. Person as defined in Rule
904 of Regulation S under the United States
Securities Act of 1933, as amended (the
"U.S. Securities Act").
/ / B. The Transferee has acquired the Special Warrants in a
transaction exempt from registration under the U.S. Securities
Act and applicable state securities laws and has
<PAGE>
provided herewith evidence (which the Transferee acknowledges
must be satisfactory to the Corporation) of such exemption.
DATED at this day of , 19 .
--------------------- ---- --------------- ---
----------------------------------
Name of Transferee
By:
--------------------------------------
Signature of Authorized Representative
----------------------------------
Name of Person Signing
----------------------------------
Title
<PAGE>
SCHEDULE "B"
NOTICE TO SPECIAL WARRANTHOLDERS
Reference is made to the Special Warrant Indenture made as of
August 31, 1998 (the "Indenture") between First Dynasty Mines Ltd. and CIBC
Mellon Trust Company. Unless defined herein, capitalized terms used herein have
the respective meanings ascribed to them in the Indenture.
Pursuant to Section 3.2 of the Indenture, we hereby confirm
that receipts have been issued by the securities commissions in each of the
Canadian Jurisdictions in respect of the prospectus qualifying the distribution
of the Special Warrants. The last receipt was issued on by the_____________
_________________ Securities Commission. The Expiry Time is therefore 4:30 p.m.
(Vancouver Time) on ____________________.
<PAGE>
EXHIBIT 99.58
FIRST DYNASTY MINES LTD.
- AND -
CIBC MELLON TRUST COMPANY
- --------------------------------------------------------------------------------
SPECIAL WARRANT INDENTURE
DATED AS OF AUGUST 31, 1998
PROVIDING FOR THE ISSUE OF SPECIAL WARRANTS
OF FIRST DYNASTY MINES LTD.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
ARTICLE 1
INTERPRETATION
<S> <C> <C>
1.1 Definitions.......................................................................... 2
1.2 Headings............................................................................. 4
1.3 Gender............................................................................... 4
1.4 Business Day......................................................................... 4
1.5 Meaning of "Outstanding"............................................................. 4
1.6 Time................................................................................. 4
1.7 Applicable Law....................................................................... 5
ARTICLE 2
ISSUE AND PURCHASE OF SPECIAL WARRANTS
2.1 Creation and Issue of Special Warrants............................................... 5
2.2 Form and Terms of Special Warrants................................................... 5
2.3 Transfer and Ownership of Special Warrants........................................... 5
2.4 Special Warrantholders Not Shareholders.............................................. 7
2.5 Signing of Special Warrants.......................................................... 7
2.6 Countersigning....................................................................... 8
2.7 Loss, Mutilation, Destruction or Theft of Special Warrants........................... 8
2.8 Issue of Special Warrants............................................................ 8
2.9 Fractions............................................................................ 9
2.10 Special Warrants to Rank Pari Passu.................................................. 9
2.11 Exchange of Special Warrants......................................................... 9
2.12 Recognition of Registered Holder..................................................... 9
ARTICLE 3
COVENANTS OF THE CORPORATION
3.1 Covenants of the Corporation......................................................... 9
3.2 Notice of Prospectus................................................................. 11
3.3 Suits by Special Warrantholder....................................................... 11
3.4 Securities Qualification Requirements................................................ 12
ARTICLE 4
ADJUSTMENT OF SUBSCRIPTION RIGHTS
4.1 Adjustment of Subscription Rights.................................................... 12
4.2 Proceedings Prior to any Action Requiring Adjustment................................. 15
4.3 Certificate of Adjustment............................................................ 15
4.4 Adjustment Rules..................................................................... 16
</TABLE>
<PAGE>
- ii -
<TABLE>
<S> <C> <C>
4.5 Notice of Special Matters............................................................ 16
4.6 No Action after Notice............................................................... 16
4.7 Protection of Trustee................................................................ 16
ARTICLE 5
EXERCISE AND CANCELLATION OF SPECIAL WARRANTS
5.1 Exercise of Special Warrants......................................................... 17
5.2 Effect of Exercise of Special Warrants............................................... 19
5.3 Postponement of Delivery of Certificates............................................. 19
5.5 Fractions............................................................................ 20
5.6 Partial Exercise of Special Warrants................................................. 20
5.7 Accounting and Recording............................................................. 20
ARTICLE 6
MEETINGS OF SPECIAL WARRANTHOLDERS
6.1 Convening of Meeting................................................................. 21
6.2 Notice............................................................................... 21
6.3 Chairman............................................................................. 21
6.4 Quorum............................................................................... 21
6.5 Show of Hands........................................................................ 21
6.6 Poll................................................................................. 21
6.7 Regulations.......................................................................... 22
6.8 Minutes.............................................................................. 22
6.9 Powers Exercisable by Extraordinary Resolution....................................... 22
6.10 Meaning of "Extraordinary Resolution"................................................ 24
6.11 Powers Cumulative.................................................................... 24
6.12 Corporation, Special Warrantholders and Trustee May be Represented................... 24
6.13 Instruments in Writing............................................................... 24
6.14 Binding Effect of Resolutions........................................................ 25
6.15 Holdings by the Corporation or Subsidiaries of the Corporation
Disregarded................................................................................... 25
ARTICLE 7
SUPPLEMENTAL AGREEMENTS, MERGER, SUCCESSORS
7.1 Provision for Supplemental Agreements for Certain Purposes........................... 25
7.2 Corporation May Consolidate, etc. on Certain Terms................................... 26
7.3 Successor Body Corporate Substituted................................................. 26
</TABLE>
<PAGE>
- iii -
<TABLE>
ARTICLE 8
CONCERNING THE TRUSTEE
<S> <C> <C>
8.1 No Conflict of Interest.............................................................. 27
8.2 Replacement of Trustee............................................................... 27
8.3 Duty of Trustee...................................................................... 27
8.4 Experts, Advisors and Agents......................................................... 27
8.5 Trustee Not Required to Give Security................................................ 28
8.6 Trustee Not Ordinarily Bound......................................................... 28
8.7 Trustee may Rely on Certificates..................................................... 28
8.8 Recitals or Statements of Fact Made by Corporation................................... 29
8.9 Trustee's Liability.................................................................. 29
8.10 Indemnification...................................................................... 29
8.11 No Representation as to Validity..................................................... 29
8.12 Acceptance of Duties................................................................. 30
8.13 Contracting with Corporation......................................................... 30
8.14 Trustee's Authority to Carry on Business............................................. 30
8.15 Execution of Documents............................................................... 30
8.16 Power To Institute Proceedings....................................................... 30
8.17 No Requirement to Register........................................................... 30
8.18 No Notice............................................................................ 30
8.19 Trustee Not Appointed Receiver....................................................... 30
ARTICLE 9
NOTICE AND CERTIFICATES
9.1 Notice to Corporation................................................................ 31
9.2 Notice to Special Warrantholders..................................................... 31
9.3 Notice to Trustee.................................................................... 31
9.4 Mail Service Interruption............................................................ 32
9.5 General Provisions as to Certificates................................................ 32
ARTICLE 10
GENERAL PROVISIONS
10.1 Power of Board of Directors.......................................................... 33
10.2 Formal Date and Execution Date....................................................... 33
10.3 Further Assurances................................................................... 33
10.4 Unenforceable Terms.................................................................. 33
10.5 Entire Agreement..................................................................... 33
10.6 Amendments........................................................................... 34
10.7 Counterparts......................................................................... 34
10.8 No Waiver............................................................................ 34
10.9 Enurement............................................................................ 34
</TABLE>
<PAGE>
THIS SPECIAL WARRANT INDENTURE made as of the o day of
August, 1998.
B E T W E E N:
FIRST DYNASTY MINES LTD., a corporation incorporated under the
laws of the Yukon Territory
(the "Corporation")
AND:
CIBC MELLON TRUST COMPANY, a trust company incorporated under
the laws of Canada having an office in the City of Vancouver,
British Columbia
(the "Trustee")
WHEREAS:
(A) the Corporation has entered into a definitive agreement dated May 13,
1997, among the Corporation, Global Gold Corporation ("Global Gold")
and Global Gold Armenia Limited (renamed First Dynasty Mines Armenia
Limited) as amended by a letter agreement dated July 24, 1998 among the
same parties and Robert Garrison ("Garrison") (the "Letter Agreement")
pursuant to which the Corporation has agreed to issue Special Warrants
of the Corporation to Global Gold and to Garrison;
(B) the Corporation proposes to create and issue Special Warrants to be
constituted and issued in the manner set forth;
(C) the Corporation is authorized to create and issue the Special Warrants;
(D) the Corporation represents to the Trustee that all necessary
resolutions of the directors of the Corporation have been duly enacted,
passed or confirmed and all other proceedings taken and conditions
complied with to authorize the execution and delivery of this Indenture
and the execution and issue of the Special Warrants and to make the
same legal and valid and binding on the Corporation in accordance with
the laws relating to the Corporation;
(E) the foregoing recitals are made as representations and statements of
fact by the Corporation and not by the Trustee;
(F) the Trustee has agreed to act as trustee for the Special Warrantholders
on the terms and conditions herein set forth; and
(G) all things necessary have been done and performed to make the Special
Warrants, when certified by the Trustee and issued as in this Indenture
provided, legal, valid and binding upon the Corporation with the
benefits of and subject to the terms of this Indenture;
<PAGE>
- 2 -
NOW THEREFORE, in consideration of the premises and in further
consideration of the mutual covenants herein set forth, the parties hereto agree
as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. In this Indenture unless there is something in the subject
matter or context inconsistent therewith, the following words have the
respective meaning indicated below:
(a) "Business Day" means a day which is not a Saturday, Sunday or
civic or statutory holiday in Vancouver, British Columbia;
(b) "Canadian Jurisdictions" means Ontario and such other
provinces of Canada, other than Quebec, in which holders of
the Special Warrants reside;
(c) "Certificate of the Corporation" means a certificate signed by
any one of the President, Vice-President, Secretary or Chief
Financial Officer of the Corporation in accordance with
Section 9.5;
(d) "Closing Date" means, August 31, 1998;
(e) "Common Shares" means, collectively, the fully, includes paid
and non-assessable common shares in the capital of the
Corporation as presently constituted and, except where the
context hereof otherwise requires, includes the common shares
issued or to be issued in accordance with the due exercise of
Special Warrants hereunder;
(f) "Corporation's auditors" means the firm of accountants
appointed by the shareholders of the Corporation as the
auditors of the Corporation from time to time;
(g) "counsel" means a barrister and solicitor or a firm of
barristers and solicitors retained by the Trustee or retained
by the Corporation and acceptable to the Trustee;
(h) "Current Market Price" in respect of a Common Share at any
date means the weighted average price of a Common Share for
any twenty-five (25) consecutive trading days (which may be
selected by the directors of the Corporation), commencing not
more than forty-five (45) trading days before such date, on
The Toronto Stock Exchange or, if the Common Shares are not
then listed thereon, on such stock exchange on which the
Common Shares are then listed as may be selected for such
purpose by the directors of the Corporation or, if the Common
Shares are not then listed on any stock exchange, on the
over-the-counter market, or, if the Common Shares are not then
traded in the over- the-counter market, the Current Market
Price of the Common Shares shall be the fair value of a Common
Share as determined by the Board of Directors of the
Corporation, after consultation with a nationally and
internationally recognized investment banking firm with
respect to the fair value of such securities. The weighted
average price shall be determined by dividing the aggregate
sale price of all the Common Shares sold on the said
<PAGE>
- 3 -
exchange or market, as the case may be, during the said
twenty-five (25) consecutive trading days by the total number
of Common Shares so sold provided that, if the date for which
the Current Market Price is to be determined is a record date
for an event relating to the Common Shares (other than a
record date in respect of a meeting of shareholders) the said
twenty five (25) consecutive trading days shall be determined
as at, and shall not include, the five (5) trading days
immediately preceding such record date;
(i) "director" means a director of the Corporation for the time
being and reference without more to action by the directors
means action by the directors of the Corporation as a board
or, whenever duly empowered, action by a committee of the
board;
(j) "Expiry Date" means the earlier of:
(i) the fifth Business Day after the
Qualification Date; or
(ii) the date which is one year following the
Closing Date;
(k) "Expiry Time" means 4:30 p.m. (Vancouver time) on the Expiry
Date;
(l) "Extraordinary Resolution" has the meaning attributed to it in
Section 6.10 and 6.13 hereof;
(m) "Indenture", "hereto", "hereunder", "hereof", "hereby" and
similar expressions mean or refer to this Indenture and not to
any particular Article, Section, Subsection, paragraph,
clause, subdivision or portion hereof and include any
agreement, deed or instrument supplemental or ancillary hereto
and the expressions "Article", "Section", "Subsection" and
"paragraph" followed by a number mean and refer to the
specified Articles, Sections, Subsections or paragraphs of
this Indenture;
(n) "person" means any entity whatsoever including, without
limitation, an individual, a corporation, a partnership, a
trust, an unincorporated organization, a syndicate and words
importing persons have a similar meaning;
(o) "Prospectus" means a prospectus (either preliminary or final,
as so indicated) to be filed by the Corporation with the
securities commission or similar regulatory authority in each
of the Canadian Jurisdictions with respect to the distribution
of the Common Shares to be issued upon the exercise or deemed
exercise of the Special Warrants;
(p) "Qualification Date" means the day on which a receipt (or a
copy thereof) for the final Prospectus is issued by the last
of the securities commissions or similar regulatory
authorities of the Canadian Jurisdictions to issue a receipt
for the final Prospectus;
(q) "Regulation S" means Regulation S adopted by the SEC under the
U.S. Securities Act;
(r) "SEC" means the Securities and Exchange Commission of the
United States;
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(s) "Special Warrant Certificate" means a certificate
substantially in the form attached hereto as Schedule "A"
evidencing one or more Special Warrants;
(t) "Special Warrantholder" or "holder" means the registered
holder of a Special Warrant hereunder;
(u) "Special Warrants" means, collectively, the special warrants
of the Corporation issued and certified hereunder entitling
holders thereof to receive, upon the exercise thereof, one
Common Share, or such kind and amount of securities or
property determined pursuant to Article 4 hereof;
(v) "subsidiary of the Corporation" means a corporation of which
voting securities carrying a majority of votes attached to all
outstanding voting securities are owned, directly or
indirectly, by the Corporation or by one or more subsidiaries
of the Corporation, or by the Corporation and one or more
subsidiaries of the Corporation, and, as used in this
definition, voting securities means securities, other than
debt securities, carrying a voting right to elect directors
either under all circumstances or under some circumstances
that may have occurred and are continuing;
(w) "United States" means the United States of America as that
term is defined in Regulation S;
(x) "U.S. Person" means a U.S. person as defined in Rule 902 of
Regulation S; and
(y) "U.S. Securities Act" means the United States SECURITIES ACT
OF 1933, as amended.
1.2 HEADINGS. The division of this Indenture into Articles, Sections,
Subsections, paragraphs or other subdivisions, the provision of a table of
contents and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation of this Indenture or the
Special Warrants.
1.3 GENDER. In this Indenture wherever the context permits or requires words
importing number shall include the singular and the plural and words importing
gender shall include all genders.
1.4 BUSINESS DAY. In the event that any day on or before which any action is
required to be taken hereunder is not a Business Day, then such action shall be
required to be taken on or before the requisite time on the next succeeding day
that is a Business Day.
1.5 MEANING OF "OUTSTANDING". Every Special Warrant represented by a Special
Warrant Certificate countersigned and delivered by the Trustee hereunder shall
be deemed to be outstanding until it shall be cancelled or delivered to the
Trustee for cancellation or until the Expiry Time; provided that where a new
Special Warrant Certificate has been issued pursuant to Section 2.7 hereof to
replace one which has been mutilated, lost, stolen or destroyed, the Special
Warrants represented by any such new Special Warrant Certificate shall be
counted for the purpose of determining the aggregate number of Special Warrants
outstanding.
1.6 TIME. Time shall be of the essence hereof and of the Special Warrants issued
hereunder.
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1.7 APPLICABLE LAW. This Indenture and the Special Warrants shall be governed by
and construed in accordance with the laws of the Province of British Columbia.
The parties hereto submit to the exclusive jurisdiction of the courts in the
Province of British Columbia. The parties agree that any litigation between the
parties which arises pursuant to or in connection with this Indenture, or any of
its provisions, shall be referred to the courts in the Province of British
Columbia and shall not be referred to the courts in any other jurisdiction.
ARTICLE 2
ISSUE AND PURCHASE OF SPECIAL WARRANTS
2.1 CREATION AND ISSUE OF SPECIAL WARRANTS. A total of 4,500,000 Special
Warrants are hereby created and authorized to be issued.
2.2 FORM AND TERMS OF SPECIAL WARRANTS. Subject to the provisions hereof, the
Special Warrants to be issued under this Indenture shall be limited in the
aggregate to 4,500,000 Special Warrants and each Special Warrant shall entitle a
holder, upon exercise or deemed exercise thereof, to acquire, without the
payment by such holder of any additional consideration, one Common Share (or
such other kind and amount of securities or property determined pursuant to the
provisions of Article 4, as the case may be). The Special Warrants may be
exercised by the holder thereof, at no additional cost, at any time after the
Closing Date until the Expiry Time. Special Warrants not exercised or tendered
for cancellation prior to the Expiry Time will be deemed to be exercised and
surrendered to the Trustee on behalf of the holder thereof at the Expiry Time
without any further action on the part of the holder or the Corporation.
The Special Warrants shall be issued in registered form and
the Special Warrant Certificates, including all replacements issued in
accordance with this Indenture, shall be substantially in the form set out in
Schedule "A" hereto with, subject to the provisions of this Indenture, such
additions, variations and/or omissions as may from time to time be agreed upon
between the Corporation and the Trustee, shall be dated as of the Closing Date,
and shall be numbered in such manner as the Corporation, with the approval of
the Trustee, may prescribe. Special Warrant Certificates may be engraved,
lithographed, printed or partly in one form and partly in another, as the
Corporation may determine. All Special Warrants shall, save as to denominations,
be of like tenor and effect. No change in the form of the Special Warrant
Certificates shall be required by reason of any adjustment made pursuant to
Article 4 hereof. The Trustee shall maintain a register of the holders at its
principal office in the City of Vancouver, which shall be open for inspection by
any agent or representative of the Corporation or a Special Warrantholder, in
which shall be entered the name and addresses of the Special Warrantholders and
the number of Special Warrants held by them and all other information required
by law. The Trustee shall, from time to time when requested to do so in writing
by the Corporation, furnish the Corporation with a list of the names and
addresses of the Special Warrantholders entered in the registers kept by the
Trustee and showing the number of Common Shares which might then be acquired
upon the exercise of the Special Warrants held by each such holder.
2.3 TRANSFER AND OWNERSHIP OF SPECIAL WARRANTS. Unless the Corporation has
instructed the Trustee in writing to waive any or all of the following
requirements, Special Warrants may be transferred upon receipt by the Trustee of
a duly executed transfer instrument in the form attached to the
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Special Warrant Certificate together with evidence to its reasonable
satisfaction that the transferee of such Special Warrants is:
(a) the executor, administrator, heir or legal representative of
the heirs of the estate of a
deceased Special Warrantholder;
(b) a guardian, committee, trustee, curator or tutor representing
a Special Warrantholder who is an infant, an incompetent
person or a missing person;
(c) a liquidator of, or a trustee in bankruptcy for, a Special
Warrantholder; or
(d) a transferee of a Special Warrantholder who provides the
Trustee with evidence satisfactory to the Trustee and the
Corporation, acting reasonably, including but not limited to a
properly completed and executed declaration in the form
attached to the Special Warrant Certificate, that such
transferee is/was either: (i) not in the United States at the
time the buy order for the Special Warrants was executed, not
acquiring the Special Warrants for the account or benefit of a
U.S. Person or a person in the United States and was not
offered the Special Warrants in the United States, or (ii) a
person that has purchased or acquired Special Warrants in a
transaction exempt from registration under the U.S. Securities
Act of 1933 and has provided the Corporation with satisfactory
evidence of the availability of such exemption which may, at
the Corporation's discretion, include an opinion of counsel
and, in the case of (ii) was exempt from registration under
any applicable securities laws of any state of the United
States and that the securities laws of any other applicable
jurisdiction(s) have been complied with in relation to the
transfer of the Special Warrants involved,
together with the Special Warrant Certificate in question (by delivery or mail
as set forth in Section 9.3 hereof), and subject to such reasonable requirements
relating to the payment of costs of the transfer by the holder as the Trustee
may prescribe and compliance with all applicable securities legislation and
requirements of regulatory authorities. A transferee of Special Warrants who
complies with the requirements of this Section 2.3 will be entitled to become
noted upon the register of holders as a Special Warrantholder. After receiving
the surrendered Special Warrant Certificate and upon the person surrendering the
same meeting the requirements as hereinbefore set forth, the Trustee shall
forthwith give written notice thereof together with confirmation as to the
identity of the person entitled to become the holder to the Corporation.
Forthwith after receiving written notice from the Trustee as aforesaid the
Corporation shall, in accordance with the provisions of Section 2.8 hereof,
cause a new Special Warrant Certificate to be issued and sent to the new holder
and the Trustee shall alter its register of holders accordingly.
Each Special Warrant and each Common Share issuable upon the
exercise or deemed exercise thereof, shall bear a legend as set forth below:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND
WILL NOT BE REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES
ACT"), AND MAY NOT BE OFFERED FOR SALE, SOLD, OR
OTHERWISE TRANSFERRED OR ASSIGNED UNLESS THEY ARE
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OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED:
(A) TO THE CORPORATION: (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT; (C) PURSUANT TO THE EXEMPTION FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS; OR (D) WITH THE PRIOR
CONSENT OF THE CORPORATION, PURSUANT TO ANOTHER EXEMPTION FROM
REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS. DELIVERY OF THE CERTIFICATE MAY NOT
CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON
STOCK EXCHANGES IN CANADA. PROVIDED THAT THE CORPORATION IS A
"FOREIGN ISSUER" WITHIN THE MEANING OF REGULATION S AT THE
TIME OF SALE, A NEW CERTIFICATE, BEARING NO LEGEND MAY BE
OBTAINED FROM THE REGISTRAR AND TRANSFER AGENT UPON DELIVERY
OF THIS CERTIFICATE AND DULY EXECUTED DECLARATION, IN A FORM
SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT AND THE
CORPORATION, TO THE EFFECT THAT SUCH SALE IS BEING MADE IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT."
In addition, certificates representing Common Shares issued
upon the exercise or deemed exercise of Special Warrants exercised prior to the
earlier of the Qualification Date or the Expiry Date, shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THE CERTIFICATE ARE LISTED ON
THE TORONTO STOCK EXCHANGE; HOWEVER, THE SAID SECURITIES
CANNOT BE TRADED THROUGH THE FACILITIES ON SUCH EXCHANGE SINCE
THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY
CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON THE TORONTO STOCK
EXCHANGE."
Subject to the provisions of this Indenture and applicable
law, the Special Warrantholder shall be entitled to the rights and privileges
attaching to the Special Warrants free from all equities and rights of set-off
or counter claim between the Corporation and the transferor or any previous
holder of Special Warrants and the issue of the Common Shares by the Corporation
upon the exercise of Special Warrants by any Special Warrantholder in accordance
with the terms and conditions herein contained shall discharge all
responsibilities of the Corporation and the Trustee with respect to such Special
Warrants.
2.4 SPECIAL WARRANTHOLDERS NOT SHAREHOLDERS. A Special Warrantholder shall not,
as such, be deemed to be or regarded as a shareholder of the Corporation nor
shall such Special Warrantholder be entitled to any right or interest except as
is expressly provided in this Indenture and in the Special Warrant Certificate.
<PAGE>
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2.5 SIGNING OF SPECIAL WARRANTS. The Special Warrant Certificates shall be
signed either manually or by facsimile signature by any officer or director of
the Corporation and may, but need not be, under the corporate seal of the
Corporation. A facsimile signature upon any Special Warrant Certificate shall
for all purposes hereof be deemed to be the signature of the person whose
signature it purports to be and to have been signed at the time such facsimile
signature is reproduced. If a person whose signature, either manually or in
facsimile, appears on a Special Warrant Certificate is not a director or officer
of the Corporation at the date of this Indenture or at the date of the
countersigning and delivery of such Special Warrant Certificate, such fact shall
not affect in any way the validity of the Special Warrants or the entitlement of
the holder thereof to the benefits of this Indenture.
2.6 COUNTERSIGNING. No Special Warrant Certificate shall be issued, or if
issued, shall be valid or exercisable or entitle the holder thereof to the
benefits of this Indenture until the Special Warrant Certificate has been
countersigned by or on behalf of the Trustee. The Trustee will countersign the
Special Warrant Certificates upon the written direction of the Corporation. The
countersignature by or on behalf of the Trustee on any Special Warrant
Certificate shall not be construed as a representation or warranty by the
Trustee as to the validity of this Indenture or of the Special Warrants or as to
the performance by the Corporation of its obligations under this Indenture and
the Trustee shall in no way be liable or answerable for the use made of the
Special Warrants or any of them, or of the consideration therefor except as
otherwise specified herein. The countersignature of the Trustee shall, however,
be a representation and warranty of the Trustee that the Special Warrant
Certificate has been duly countersigned by or on behalf of the Trustee pursuant
to the provisions of this Indenture and shall be conclusive evidence as against
the Corporation that the Special Warrant Certificate so countersigned has been
duly issued hereunder and the holder is entitled to the benefits hereof.
2.7 LOSS, MUTILATION, DESTRUCTION OR THEFT OF SPECIAL WARRANTS. In case any of
the Special Warrant Certificates issued and countersigned hereunder shall become
mutilated or be lost, destroyed or stolen, the Corporation shall, upon the
holder complying with this Section 2.7, issue and thereupon the Trustee shall
countersign and deliver a new Special Warrant Certificate of like date and tenor
in exchange for and in place of the one mutilated, lost, destroyed or stolen and
upon surrender and cancellation of such mutilated Special Warrant Certificate or
in lieu of and in substitution for such lost, destroyed or stolen Special
Warrant Certificate and the substituted Special Warrant Certificate shall be in
a form approved by the Trustee and shall entitle the holder thereof to the
benefits hereof and rank equally in accordance with its terms with all other
Special Warrants issued hereunder.
The applicant for the issue of a new Special Warrant
Certificate pursuant to this Section 2.7 shall bear the reasonable costs
including applicable taxes of the issue thereof and in case of loss, destruction
or theft shall, as a condition precedent to the issue thereof, furnish to the
Corporation and to the Trustee such evidence of ownership and of the loss,
destruction or theft of the Special Warrant Certificate so lost, destroyed or
stolen as shall be satisfactory to the Corporation and to the Trustee, in their
discretion and such applicant shall also be required to furnish an indemnity in
amount and form satisfactory to the Corporation and the Trustee in their
discretion, and shall pay the reasonable charges of the Corporation and the
Trustee in connection therewith.
2.8 ISSUE OF SPECIAL WARRANTS. Special Warrant Certificates shall be signed by
the Corporation as aforesaid and delivered to the Trustee from time to time. The
Trustee shall countersign any Special Warrant Certificate delivered by the
Corporation to the Trustee as aforesaid and shall forthwith deliver to the
person or persons in whose name or names the Special Warrant Certificate is to
be issued (as specified
<PAGE>
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in any written order from time to time given by the Corporation to the Trustee
and signed by the Chairman, President, Vice-President, Treasurer, Secretary or
Assistant Secretary of the Corporation) or mail to such person or persons at
their respective addresses specified in the written order from the Corporation
the Special Warrant Certificate for the appropriate number of Special Warrants.
Any such written order shall specify which Special Warrant Certificates shall
bear the legends required pursuant to Section 2.3.
2.9 FRACTIONS. Certificates representing fractional Special Warrants shall not
be issued or otherwise provided for.
2.10 SPECIAL WARRANTS TO RANK PARI PASSU. All Special Warrants shall rank pari
passu, whatever may be the actual date of issue of same.
2.11 EXCHANGE OF SPECIAL WARRANTS. Except as otherwise herein provided:
(a) Special Warrant Certificates may, upon compliance with the
reasonable requirements of the Trustee, be exchanged for
Special Warrant Certificates in any other authorized
denomination representing in the aggregate the same number of
Special Warrants. The Corporation shall sign and the Trustee
shall countersign, in accordance with Section 2.5 and 2.6, all
Special Warrant Certificates necessary to carry out the
exchanges contemplated herein;
(b) Special Warrant Certificates may be exchanged only at the
principal office of the Trustee in the city of Vancouver. Any
Special Warrant Certificates tendered for exchange shall be
surrendered to the Trustee and cancelled; and
(c) the Trustee may charge registered holders requesting an
exchange a reasonable sum for each Special Warrant Certificate
exchanged and payment of such charges and reimbursement of the
Trustee or the Corporation for any and all taxes or
governmental or other charges required to be paid shall be
made by the party requesting such exchange as a condition
precedent to such exchange.
2.12 RECOGNITION OF REGISTERED HOLDER. The Corporation and the Trustee may deem
and treat the registered holder of any Special Warrant Certificate as the
absolute beneficial owner of the Special Warrants represented thereby for all
purposes under this Indenture, and the Corporation and the Trustee shall not be
affected by any notice or knowledge to the contrary except where the Corporation
or the Trustee is required to take notice by statute or by order of a court of
competent jurisdiction. A Special Warrantholder shall be entitled to the rights
evidenced by the Special Warrants registered in his name free from all equities
or rights of set-off or counterclaim between the Corporation and the original or
any intermediate holder thereof and all persons may act accordingly and the
receipt by any such Special Warrantholder of the Common Shares issuable upon the
exercise thereof shall be a good discharge to the Corporation and the Trustee
for the same and neither the Corporation nor the Trustee shall be bound to
inquire into the title of any such holder except where the Corporation or the
Trustee is required to take notice by statute or by order of a court of
competent jurisdiction.
<PAGE>
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ARTICLE 3
COVENANTS OF THE CORPORATION
3.1 COVENANTS OF THE CORPORATION. The Corporation represents, warrants,
covenants and agrees with the Trustee for the benefit of the Trustee and the
Special Warrantholders as follows:
(a) TO ISSUE SPECIAL WARRANTS AND RESERVE COMMON SHARES: The
Corporation is duly authorized to create and issue the Special
Warrants and the Special Warrant Certificates, when issued and
countersigned as herein provided, will be valid and
enforceable against the Corporation and, subject to the
provisions of this Indenture, the Corporation will cause a
sufficient number of the Common Shares from time to time
issuable pursuant to the Special Warrants under this Indenture
and the certificates representing such Common Shares to be
duly issued and delivered in accordance with instructions on
the Special Warrant Certificates and the terms hereof. At all
times prior to and including the Expiry Time, while any of the
Special Warrants are outstanding, the Corporation shall
reserve and allot and conditionally issue out of its
authorized capital a number of Common Shares sufficient to
enable the Corporation to meet its obligation to issue Common
Shares in respect of the exercise or deemed exercise of all
Special Warrants outstanding hereunder from time to time. All
Common Shares acquired pursuant to the exercise or deemed
exercise of the Special Warrants shall be fully paid and
non-assessable.
(b) TO PAY TRUSTEE'S REMUNERATION: The Corporation will pay the
Trustee reasonable remuneration for its services hereunder and
will repay to the Trustee on demand the amount of all
expenditures whatsoever which the Trustee reasonably incurs in
and about the execution of the trusts hereby created including
compensation and disbursements of its counsel and other
advisors not regularly in its employ.
(c) TO EXECUTE FURTHER ASSURANCES: The Corporation will do,
execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered, all other acts, deeds
and assurances in law as the Trustee may reasonably require
for effecting the intentions and provisions of this Indenture.
(d) TO CARRY ON BUSINESS: Subject to the express provisions
hereof, the Corporation will at all times maintain its
corporate existence, carry on and conduct and will cause to be
carried on and conducted its business in the same manner as
heretofore carried on and conducted, provided, however, that
the Corporation or any subsidiary of the Corporation may
dispose of any business, premises, property or operation if in
the reasonable opinion of the directors or officers of the
Corporation or any subsidiary of the Corporation, as the case
may be, it would be advisable and in the best interests of the
Corporation or any subsidiary of the Corporation to do so; and
subject to the express provisions hereof, it will do or cause
to be done all things necessary to preserve and keep in full
force and effect its corporate existence, provided, however,
that (subject to compliance with the provisions of Article 4
hereof) nothing herein contained shall prevent the
amalgamation, consolidation or merger of the Corporation or
any subsidiary of the Corporation or the abandonment of any
rights and franchises of the Corporation or any subsidiary of
the Corporation if, in the reasonable opinion of the directors
or officers of the Corporation, or the directors or
<PAGE>
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officers of any subsidiary of the Corporation, as the case
may be, it would be advisable and in the best interests of the
Corporation or of such subsidiary of the Corporation to do so.
(e) TO DELIVER INFORMATION: The Corporation will send to each
Special Warrantholder copies of all financial statements and
other materials furnished from time to time to holders of
Common Shares after the date hereof.
(f) FILING PROSPECTUS: The Corporation is under no obligation to
file and clear a Prospectus solely to qualify the Common
Shares issuable upon exercise or deemed exercise of the
Special Warrants by a designated date or at all and any such
filing, if made, will be subject to all necessary regulatory
approvals. If the Corporation files a prospectus prior to the
Expiry Date, it has agreed that it will file such prospectus
in each of the Canadian Jurisdictions and include therein for
qualification the distribution to the holders of Special
Warrants the Common Shares issuable upon exercise or deemed
exercise thereof. The Corporation will only be required to
file the Prospectus in the event that the Corporation
considers that it is in its best interests to do so, in its
sole and unfettered discretion. If a preliminary Prospectus is
filed, the Corporation will use its commercially reasonable
best efforts to resolve any regulatory comments and satisfy
any regulatory deficiencies in respect of the preliminary
Prospectus and, as soon as possible after such comments or
deficiencies have been resolved or satisfied, provided that
the Corporation determines to proceed with the offering of its
securities contemplated thereunder, shall prepare and use its
commercially reasonable best efforts to file and to obtain a
receipt from each of the securities commissions or similar
regulatory authorities in each of the Canadian Jurisdictions
for the final Prospectus and will take all other steps and
proceedings that may reasonably be necessary in order to
qualify the Common Shares issuable upon exercise or deemed
exercise of the Special Warrants for distribution in each of
the Canadian Jurisdictions to holders of Special Warrants.
(g) PERFORMANCE OF INDENTURE: The Corporation will well and truly
perform and carry out all of the acts or things to be done by
it as provided in this Indenture.
(h) PERFORMANCE OF COVENANTS BY TRUSTEE: If the Corporation shall
fail to perform any of its covenants contained in this
Indenture the Trustee may notify the Special Warrantholders of
such failure on the part of the Corporation or may itself
perform any of the said covenants capable of being performed
by it, but, subject to Section 8.3 hereof, the Trustee shall
be under no obligation to do so or to notify any Special
Warrantholder. All sums reasonably expended or advanced by the
Trustee in performance of its rights provided for in this
Subsection 3.1(h) shall be repayable as provided in Subsection
3.1(b). No such performance, expenditure or advance by the
Trustee shall be deemed to relieve the Corporation of any
default hereunder or its continuing obligations hereunder.
3.2 NOTICE OF PROSPECTUS. The Corporation will give written notice to the
Trustee of the issuance of the receipts referred to in Subsection 3.1(f) hereof
forthwith of such issuance, which notice, if given in respect of the issuance of
receipts for a final Prospectus, shall be accompanied by a sufficient number of
commercial copies of such final Prospectus for distribution to each Special
Warrantholder. The
<PAGE>
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Trustee shall, within three Business Days following the receipt of such notice,
deliver written notice thereof to the holders and, if such notice relates to the
issuance of receipts for a final Prospectus, such notice will be in the form of
Schedule "B" and will be accompanied by a commercial copy of the final
Prospectus.
3.3 SUITS BY SPECIAL WARRANTHOLDER. All or any of the rights conferred upon a
Special Warrantholder by the terms of the Special Warrants held by him or by
this Indenture may be enforced by such Special Warrantholder by appropriate
legal proceedings, but subject to the rights which are hereby conferred upon the
Trustee and subject to the provisions of Section 8.9 hereof. Nothing contained
herein shall in any way limit or derogate from any other rights a Special
Warrantholder may have in law or equity.
3.4 SECURITIES QUALIFICATION REQUIREMENTS.
(a) If, in the opinion of counsel, any instrument (not including a
prospectus, except as contemplated by Section 3.1 hereof) is
required to be filed with or any permission, order or ruling
is required to be obtained from any securities regulatory
authority or any stock exchange or any other actions are
required under any Canadian federal law or any provincial laws
of the Canadian Jurisdictions or any stock exchange rules
before any securities or property, including Common Shares,
which a Special Warrantholder is entitled to receive pursuant
to the exercise or deemed exercise of a Special Warrant may
properly and legally be issued and delivered upon the due
exercise of a Special Warrant and thereafter traded, the
Corporation covenants that it will use its best efforts to
file such instrument, obtain such permission, order or ruling
or take all such other actions at its expense, as is required
or appropriate in the circumstances.
(b) The Corporation, or if required by the Corporation, the
Trustee, will give written notice of, and will make all
necessary filings in respect of, the issue of the Common
Shares pursuant to the exercise or deemed exercise of Special
Warrants, in such detail as may be required, to any stock
exchange upon which the Common Shares are then listed or to
the securities regulatory authority in a Canadian Jurisdiction
if there is therein any legislation, ruling or order requiring
the giving of any such notice or the making of any such
filings in order that the subsequent disposition of the Common
Shares so issued will not be subject to the prospectus
requirements of such legislation, ruling or order (subject to
any applicable hold periods).
(c) The Corporation has no obligation to register or qualify the
Special Warrants or the Common Shares under the U.S.
Securities Act or the securities laws of any state of the
United States.
<PAGE>
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ARTICLE 4
ADJUSTMENT OF SUBSCRIPTION RIGHTS
4.1 ADJUSTMENT OF SUBSCRIPTION RIGHTS. The subscription rights attaching to the
Special Warrants with respect to the Common Shares issuable upon the exercise or
deemed exercise of the Special Warrants shall be subject to adjustment from time
to time as follows:
(a) if and whenever at any time from the date hereof and prior to
the Expiry Time, the Corporation shall:
(i) subdivide its outstanding Common Shares into a
greater number of shares; or
(ii) consolidate its outstanding Common Shares into a
smaller number of shares;
the number of Common Shares obtainable upon the exercise of
each Special Warrant shall be adjusted, at no cost to such
holder, immediately after the effective date of such
subdivision or consolidation by multiplying the number of
Common Shares theretofore obtainable on the exercise thereof
by the fraction of which:
(A) the numerator shall be the total number of
Common Shares outstanding immediately after
such date, or, in the case of the issuance
of convertible securities, the total number
of Common Shares outstanding immediately
after such date plus the total number of
Common Shares issuable upon conversion or
exchange of such convertible securities, and
(B) the denominator shall be the total number of
Common Shares outstanding immediately prior
to such date,
and such adjustment shall be made successively whenever any
event referred to in this Subsection 4.1(a) shall occur (and
all adjustments in this Subsection are cumulative);
(b) if and whenever at any time from the date hereof and prior to
the Expiry Time, the Corporation shall issue or distribute to
the holders of all or substantially all of the Corporation's
outstanding Common Shares any securities of the Corporation
including rights, options or warrants to acquire shares of the
Corporation or securities convertible into or exchangeable for
shares of the Corporation or property or assets including
evidences of indebtedness, the holder of any Special Warrant
who thereafter shall exercise or be deemed to have exercised
his right to subscribe for Common Shares thereunder shall be
entitled to receive, at no cost to such holder, and shall
accept for the same aggregate consideration, in addition to
the Common Shares to which he was theretofore entitled upon
such exercise, the kind and amount of securities or property
which such holder would have been entitled to receive as a
result of such issue or distribution as if, on the effective
date thereof, he had been the registered holder of the number
of Common Shares to which he was theretofore entitled upon
such exercise and if determined appropriate by the directors,
<PAGE>
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appropriate adjustments shall be made as a result of any such
issue or distribution to the rights and interests of Special
Warrantholders thereafter so that the provisions of this
Article 4 shall thereafter apply correspondingly to any
securities or other property thereafter deliverable upon the
exercise of any Special Warrant and any such adjustments shall
be made by and set forth in an agreement supplemental hereto
approved by the directors and shall for all purposes be
conclusively deemed to be appropriate adjustments;
(c) if and whenever at any time from the date hereof and prior to
the Expiry Time, there is a reclassification of the Common
Shares or a capital reorganization of the Corporation other
than as described in Subsections 4.1(a) or (b) or a
consolidation, amalgamation or merger of the Corporation with
or into any other body corporate, trust, partnership or other
entity, or a sale or conveyance of the property and assets of
the Corporation as an entirety or substantially as an
entirety, any Special Warrantholder who has not exercised his
right of subscription prior to the effective date of such
reclassification, reorganization, consolidation, amalgamation,
merger, sale or conveyance, upon the exercise of such right
thereafter, shall be entitled to receive and shall accept the
kind and number of shares or other securities or property that
such Special Warrantholder would have been entitled to receive
on such reclassification, capital reorganization,
consolidation, amalgamation, merger, sale or conveyance, if,
on the record date or the effective date thereof, as the case
may be, the Special Warrantholder had been the registered
holder of the number of Common Shares receivable upon the
exercise of Special Warrants then held, subject to adjustment
thereafter in accordance with provisions the same, as nearly
as may be possible, as those contained in this Section 4.1;
provided that no such action shall be carried into effect
unless all necessary steps shall have been taken so that the
holders of the Special Warrants shall thereafter be entitled
to receive such kind and number of shares or other securities
and property. The Corporation, its successor, or the
purchasing body corporate, partnership, trust or other entity,
as the case may be, shall, as a condition precedent to any
such reclassification, reorganization, consolidation,
amalgamation, merger, sale or conveyance, take all necessary
steps hereunder to enter into an agreement which shall
provide, to the extent possible, for the application of the
provisions set forth in this Indenture with respect to the
rights and interests thereafter of the Special Warrantholders
to the end that the provisions set forth in this Indenture
shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, with respect to any shares other
securities or property to which a Special Warrantholder is
entitled on the exercise of his Special Warrants thereafter.
Any agreement entered into between the Corporation and the
Trustee pursuant to the provisions of this Subsection 4.1(c)
shall be a supplemental agreement entered into pursuant to the
provisions of Article 7 hereof. Any agreement entered into
between the Corporation, any successor to the Corporation or
any purchasing body corporate, partnership, trust or other
entity and the Trustee shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the
adjustments provided in this Section 4.1 and which shall apply
to successive reclassifications, reorganizations,
amalgamations, consolidations, mergers, sales or conveyances;
(d) in any case in which this Section 4.1 shall require that an
adjustment shall become effective immediately after a record
date for an event referred to herein, the Corporation may
defer, until the occurrence of such event, issuing to the
holder of any Special Warrant
<PAGE>
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exercising his subscription rights after such record date the
additional Common Shares or other securities or property
issuable upon such exercise by reason of the adjustment
required by such event; provided, however, that the
Corporation shall deliver to such holder an appropriate
instrument evidencing such holder's right to receive such
additional Common Shares, other securities or property, as the
case may be, upon the occurrence of the event requiring such
adjustment and the right to receive any distributions made on
such additional Common Shares, other securities or property,
as the case may be, declared in favour of holders of record of
Common Shares, other securities or property, as the case may
be, on and after the date of exercise or such later date as
such holder would but for the provisions of this Subsection
4.1(d), have become the holder of record of such additional
Common Shares, other securities or property, as the case may
be, pursuant to the due exercise of the Special Warrants held
by such holder;
(e) after any adjustment pursuant to this Section 4.1, the term
"Common Shares" where used in this Indenture shall be
interpreted to mean securities of any class or classes which,
as a result of such adjustment and all prior adjustments
pursuant to this Section 4.1, a Special Warrantholder is
entitled to receive upon the exercise of such holder's Special
Warrants, and the number of Common Shares indicated in any
exercise made pursuant to a Special Warrant shall be
interpreted to include the number of Common Shares and other
property or securities a Special Warrantholder is entitled to
receive, as a result of such adjustment and all prior
adjustments pursuant to this Section, upon the full exercise
of a Special Warrant;
(f) all shares of any class or other securities or property which
a Special Warrantholder is at the time in question entitled to
receive on the full exercise of his Special Warrant, whether
or not as a result of adjustments made pursuant to this
Section 4.1 shall, for the purposes of the interpretation of
this Indenture, be deemed to be Common Shares which such
Special Warrantholder is entitled to subscribe for pursuant to
the exercise of such Special Warrant;
(g) anything in this Section 4.1 to the contrary notwithstanding,
no adjustment shall be made in the subscription rights
attached to the Special Warrants if the issue of Common Shares
is being made pursuant to any stock option or stock purchase
plan in force from time to time for directors, officers or
employees of the Corporation or any other currently existing
obligation of the Corporation; and
(h) in the event of any question arising with respect to the
adjustments provided for in this Section 4.1 such question
shall be conclusively determined, subject to the consent of
any stock exchange upon which the Common Shares are then
listed, by a firm of chartered accountants appointed by the
Corporation and acceptable to the Trustee (which may be the
Corporation's auditors). Such accountants shall have access to
all necessary records of the Corporation, and such
determination shall be binding upon the Corporation, the
Trustee, all Special Warrantholders and all other persons
interested therein. In the event that any such determination
is made, the Corporation shall deliver a certificate to the
Trustee describing such determination;
<PAGE>
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provided that no adjustment will be required if the holder of a Special Warrant
is otherwise entitled to participate in the event which triggers the adjustment
pursuant to this Section 4.1 on the same basis as such Special Warrantholder
would have been entitled had he exercised his Special Warrants and subscribed
for Common Shares immediately prior to such event.
4.2 PROCEEDINGS PRIOR TO ANY ACTION REQUIRING ADJUSTMENT. As a condition
precedent to the taking of any action which would require an adjustment in any
of the rights arising pursuant to the exercise or deemed exercise of any of the
Special Warrants, including the number of Common Shares which are to be received
upon the exercise or deemed exercise thereof, the Corporation shall take any
corporate action which may, in the opinion of counsel, be necessary in order for
the Corporation to allot and reserve for issuance and to validly and legally
issue as fully paid and non-assessable, such number of Common Shares and validly
and legally deliver all other securities or property which the holders of such
Special Warrants are entitled to receive on the full exercise thereof in
accordance with the provisions hereof.
4.3 CERTIFICATE OF ADJUSTMENT. The Corporation shall from time to time
immediately after the occurrence of any event which requires an adjustment or
readjustment as provided in Section 4.1 hereof, deliver a certificate of the
Corporation to the Trustee specifying the nature of the event requiring the same
and the amount of the adjustment necessitated thereby and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based, which certificate and the amount of the adjustment
specified therein shall be verified by the auditors of the Corporation, upon
whose verification the Trustee shall be entitled to rely. When so verified, the
Corporation shall, except in respect of any subdivision, or consolidation of the
Common Shares, forthwith give written notice to the Special Warrantholders
specifying the event requiring such adjustment or readjustment and the results
thereof; provided that if the Corporation has already given the required notices
under Section 4.5 hereof covering all the relevant facts in respect of such
event and no further notice need be given under this Section 4.3.
4.4 ADJUSTMENT RULES. The adjustments provided for in this Article 4 are
cumulative and shall apply (without duplication) to successive actions requiring
an adjustment under the provisions of Section 4.1; provided that,
notwithstanding any other provision of this Article 4, no adjustment shall be
made in the number of Common Shares which may be subscribed for on the exercise
or deemed exercise of a Special Warrant unless it would result in a change of at
least one-hundredth of a Common Share (provided, however, that any adjustments
which by reason of this Section 4.4 are not required to be made shall be carried
forward and taken into account in any subsequent adjustment).
In the event that the Corporation after the date of this
Indenture shall take any action affecting the Common Shares other than action
described in this Article 4, the directors of the Corporation may, but shall not
be required to, make any other adjustments to the number of Common Shares which
may be acquired upon exercise or deemed exercise of the Special Warrants, to the
extent, if any, such directors deem appropriate.
4.5 NOTICE OF SPECIAL MATTERS. The Corporation covenants with the Trustee that
so long as any Special Warrant remains outstanding it will give at least 14
days' prior written notice in the manner provided for in Article 9 to the
Trustee and to each Special Warrantholder of any event which requires an
adjustment to the subscription rights attaching to any of the Special Warrants
pursuant to this Article 4. The Corporation covenants and agrees that such
notice shall contain the particulars of such event in reasonable detail and, if
determinable, the required adjustment in the manner provided for in this Article
<PAGE>
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4. The Corporation further covenants and agrees that it shall promptly, as soon
as the adjustment calculations are reasonably determinable, file a Certificate
of the Corporation with the Trustee showing how such adjustment shall be
computed and direct the Trustee to send a copy of such certificate to the
Special Warrantholders.
4.6 NO ACTION AFTER NOTICE. The Corporation covenants with the Trustee that it
will not close its transfer books or take any other corporate action which might
deprive the holder of a Special Warrant of the opportunity of exercising his
right of subscription pursuant thereto during the period of fourteen (14) days
after the giving of the notice set forth in Section 4.3 and 4.5 hereof.
4.7 PROTECTION OF TRUSTEE. Except as provided in Section 8.3 hereof, the
Trustee, unless it has been grossly negligent or acting with wilful misconduct
or fraudulently;
(a) shall not at any time be under any duty or responsibility to
any Special Warrantholder to determine whether any facts exist
which may require any adjustment contemplated by Section 4.1
hereof, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed
in making the same;
(b) shall not be accountable with respect to the validity or value
(or the kind or amount) of any Common Shares or of any shares
or other securities or property which may at any time be
issued or delivered upon the exercise of the subscription
rights attaching to any Special Warrant;
(c) shall not be responsible for any failure of the Corporation to
make any cash payment or to issue, transfer or deliver Common
Shares or certificates for the same upon the surrender of any
Special Warrants for the purpose of the exercise of such
rights or to comply with any of the covenants contained in
this Article 4; and
(d) shall not incur any liability or responsibility whatever or be
in any way responsible for the consequence of any breach on
the part of the Corporation of any of the representations,
warranties or covenants herein contained or of any acts of the
agents or servants of the Corporation.
ARTICLE 5
EXERCISE AND CANCELLATION OF SPECIAL WARRANTS
5.1 EXERCISE OF SPECIAL WARRANTS. Upon and subject to the provisions of this
Article 5, any holder of a Special Warrant may exercise the right thereby
conferred on him to subscribe for Common Shares for no additional consideration
by surrendering to the Trustee after the date hereof and until the Expiry Time
at its principal office in the city of Vancouver, the Special Warrant
Certificate evidencing the Special Warrants, with the exercise form attached to
the Special Warrant Certificate duly completed and executed by the holder or his
executors or administrators or other legal representatives or his or their
attorney duly appointed by an instrument in writing in form and manner
satisfactory to the Trustee.
<PAGE>
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Unless the Corporation has instructed the Trustee in writing
to waive any or all of the following requirements, the Special Warrants may not
be exercised by or for the account of or benefit of a U.S. Person or a person in
the United States unless the holder certifies in writing to the Corporation and
the Trustee that the holder is: (i) Global Gold or Garrison as an original
subscriber of Special Warrants; or (ii) a registered transferee of such Special
Warrants who has complied with Section 2.3(d) hereof provided that the
Corporation may, in its sole discretion, accept, in substitution for the
foregoing, evidence satisfactory to the Corporation and the Trustee, acting
reasonably, to the effect that the Common Shares have been registered under the
U.S. Securities Act and applicable state securities laws or that the Common
Shares may be issued upon exercise of the Special Warrants without registration
under the U.S.
Securities Act and any applicable state securities laws.
The foregoing requirements shall not apply to any deemed
exercise by the Trustee of Special Warrants pursuant to the terms hereof as long
as the holder is an original subscriber or a registered transferee of such
Special Warrants.
The exercise form attached to the Special Warrant Certificate
shall be signed as set out above and shall specify:
(a) the number of Common Shares which the Special Warrantholder
wishes to subscribe for upon the exercise of the Special
Warrants (being not greater than the aggregate number of the
Common Shares which such Special Warrantholder is entitled to
acquire pursuant to the Special Warrants so surrendered); and
(b) the person or persons in whose name or names the Common Shares
are to be registered, the address or addresses and social
insurance number or numbers of such person or persons and the
number of Common Shares to be issued to each such person if
more than one is so specified, provided that the Special
Warrantholder shall only be entitled to direct his entitlement
to the Common Shares in a manner permitted by applicable
securities legislation, and provided further that no
certificates for Common Shares shall be registered at or
delivered to an address in the United States unless the person
in whose name the certificates are registered has complied
with the requirements of Subsection 2.3(d) hereof.
Any Special Warrants not exercised before the Expiry Date
shall be deemed to be exercised by the Trustee as of 4:29 p.m. (Vancouver time)
on the Expiry Date and shall expire as of the Expiry Time.
If any of the Common Shares in respect of which the Special
Warrants are exercised are to be issued to a person or persons other than the
Special Warrantholder in accordance with the provisions of Section 2.3 hereof,
the Special Warrantholder shall pay to the Trustee all requisite stamp or
security transfer taxes or other governmental charges exigible in connection
with the issue of such Common Shares to such other person or persons or shall
establish to the satisfaction of the Trustee that such taxes and charges have
been paid.
If at the time of the exercise of the Special Warrants, there
remain trading restrictions on the Common Shares acquired, due to applicable
securities legislation in the Canadian Jurisdictions, the Corporation may, on
the advice of counsel, endorse the certificates evidencing such Common Shares
accordingly until such time as the Corporation determines that such endorsement
is no longer necessary
<PAGE>
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to avoid a violation of such laws by the Corporation and so advises the Trustee
in writing or the holder of any such endorsed certificate, at the holder's
expense, provides the Corporation with evidence satisfactory in form and
substance to the Corporation (which may include an opinion of counsel
satisfactory to the Corporation) to the effect that such holder is entitled to
sell or otherwise transfer such Common Shares in a transaction in which such
endorsement is not required, whereupon such endorsed certificate may thereafter
be surrendered to the Corporation in exchange for a certificate which does not
bear such endorsement.
In the case only of any trading restriction under applicable
securities legislation in the Canadian Jurisdictions that would cease to apply
as of the Expiry Date (provided that the Corporation and the transferor then
meet all other necessary criteria), the Corporation will, provided that the
Corporation then meets such criteria, advise the Trustee as of the Expiry Date
that any endorsement pertaining to such restriction may be removed at the
request of the holder.
After delivery of the certificates representing the Common
Shares, in the event of non- receipt of any such certificates by the person to
whom it is so sent as aforesaid, or the loss or destruction thereof, the
Corporation shall issue and the Trustee shall countersign and deliver to such
person a replacement certificate of like date and tenor in place of the one lost
or destroyed upon being furnished with such evidence of ownership and
non-receipt, loss or destruction and with such indemnity or security as the
Trustee may reasonably require. The Special Warrantholder shall bear the cost of
the issue of such replacement certificates.
5.2 EFFECT OF EXERCISE OF SPECIAL WARRANTS. Upon valid exercise or deemed
exercise of the Special Warrants as provided in Section 5.1, the Common Shares
in respect of which the Special Warrants are validly exercised shall be deemed
to have been issued, and such person or persons as are specified pursuant to
Section 5.1 hereof shall be deemed to have become the holder or holders of
record of such securities on the date of such valid exercise (herein called the
"Exercise Date") unless the stock transfer books of the Corporation shall be
closed by law on the said date of such valid exercise, in which case such
securities shall be deemed to have been issued, such person or persons shall be
deemed to have become the holder or holders of record of such securities and the
Exercise Date shall be deemed to be on the date on which such stock transfer
books are next re-opened.
Upon valid exercise of the Special Warrants as aforesaid, the
Trustee shall forthwith give written notice thereof to the Corporation.
In the case of a Special Warrant which is exercised by a
holder in accordance with the provisions of Section 5.1, within five Business
Days after the Exercise Date of such Special Warrant, the Corporation shall:
(a) cause to be mailed to the person in whose name the Common
Shares so subscribed for are to be issued, as specified in the
Special Warrant, at the address specified therein;
(b) if so specified therein, cause to be delivered to such person
at the office of the Trustee where such Special Warrant was
surrendered; or
(c) if no specification as contemplated by (a) or (b) is provided,
cause to be mailed to the person in whose name the Common
Shares are to be issued at the address of such person
<PAGE>
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last appearing on the register maintained by the Trustee
pursuant hereto or as such person may otherwise notify the
Trustee in writing on or prior to the Exercise Date,
certificates for the Common Shares to which the Special Warrantholder is
entitled pursuant to the Special Warrants so exercised.
In the case of a Special Warrant which is deemed to be
exercised and surrendered by the Trustee on behalf of a Special Warrantholder in
accordance with the provisions of Section 5.1, as soon as practicable following
the deemed exercise by the Trustee of such Special Warrants, the Trustee shall
immediately notify each of such holders in accordance with the provisions of
Section 9.2 to the effect the Trustee has so exercised the Special Warrants on
behalf of the Special Warrantholder and that upon surrender to the Trustee by
the holders of their Special Warrants, or their nominee(s) or assignee(s), they
shall be entitled to receive certificates for the Common Shares to which they
have become entitled. Within five Business Days after such deemed exercise and
surrender of such Special Warrant, the Corporation shall cause certificates
representing such Common Shares to be mailed to the address of the holder of the
Special Warrants so exercised last appearing on the register maintained by the
Trustee pursuant to Section 2.2 or as such person may otherwise notify the
Trustee in writing on or prior to the Exercise Date.
5.3 POSTPONEMENT OF DELIVERY OF CERTIFICATES. The Corporation shall not be
required to deliver certificates in respect of Common Shares during any period
when the stock transfer books of the Corporation are closed by law and in the
event of an exercise of a Special Warrant during such period, the delivery of
certificates evidencing such Common Shares may be postponed for a period not
exceeding five (5) Business Days after the date of the re-opening of the stock
transfer books.
5.4 SPECIAL WARRANTS VOID AFTER EXPIRY TIME. After the Expiry Time, the Special
Warrants shall be void and of no value or effect.
5.5 FRACTIONS. To the extent that the holder of a Special Warrant is entitled to
receive on the exercise or partial exercise thereof a fraction of a Common
Share, such right may only be exercised in respect of such fraction in
combination with another Special Warrant or other Special Warrants which in the
aggregate entitle the holder to receive a whole number of Common Shares.
If a holder is not able to, or elects not to, combine Special
Warrants so as to be entitled to acquire a whole number of Common Shares, the
Corporation shall make an appropriate cash adjustment to such holder in respect
only of the entitlement to a fractional Common Share. In respect of any holder,
the Corporation shall only be required to make such a cash adjustment once and
for one (1) fractional Common Share and no more. The amount of the cash
adjustment shall be equal to the fraction of a Common Share to which the holder
would be entitled multiplied by the Current Market Price. The Corporation will
not, under any circumstances, be obligated to issue a cheque to a Special
Warrantholder in an amount less than Cdn$5.00.
5.6 PARTIAL EXERCISE OF SPECIAL WARRANTS. The holder of any Special Warrants may
acquire a number of Common Shares less than the number which the holder is
entitled to acquire pursuant to the surrendered Special Warrant Certificate(s).
In the event of any exercise of a number of Special Warrants less than the
number which the holder is entitled to exercise, the holder of the Special
Warrants upon such exercise shall be entitled to receive, without charge
therefor, a new Special Warrant Certificate(s) in
<PAGE>
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respect of the balance of the Special Warrants represented by the surrendered
Special Warrant Certificate(s) which were not then exercised.
5.7 ACCOUNTING AND RECORDING. The Trustee shall:
(a) promptly account to the Corporation with respect to Special
Warrants exercised and any securities or other instruments,
from time to time received by the Trustee shall be received in
trust for, and shall be segregated and kept apart by the
Trustee in trust for, the Corporation; and
(b) record the particulars of Special Warrants exercised, which
particulars shall include the names and addresses of the
persons who become holders of Common Shares on exercise and
the Exercise Date in respect thereof. The Trustee shall
provide such particulars in writing to the Corporation within
five Business Days of any request by the Corporation therefor.
ARTICLE 6
MEETINGS OF SPECIAL WARRANTHOLDERS
6.1 CONVENING OF MEETING. A meeting of Special Warrantholders may be convened at
any time by the Trustee or the Corporation or by the holders of Special Warrants
holding not less than twenty-five per cent (25%) of the aggregate number of
Special Warrants then outstanding, who shall serve the Trustee with a
requisition signed by such holders and the Trustee shall then be bound to
convene a meeting of Special Warrantholders upon being adequately funded and
indemnified. In the event that the Trustee fails to convene the meeting after
being duly required to do so, the holders of the then outstanding Special
Warrants representing no less than twenty-five per cent (25%) of the aggregate
number of Special Warrants then outstanding may themselves convene a meeting,
the notice of which shall be signed by any person as such Special Warrantholders
may specify, provided that every such meeting shall be held at the City of
Vancouver or such other place as the Trustee may approve and the Trustee and the
Corporation shall receive notice of such meeting, as provided in Section 6.2
hereof.
6.2 NOTICE. At least twenty-one (21) days prior notice of a meeting of Special
Warrantholders shall be given to all Special Warrantholders, the Trustee and the
Corporation in accordance with Article 9 hereof, and the notice shall state the
time, place and in general terms the nature of the business to be transacted but
it shall not be necessary to specify the text of the resolutions to be
considered. It shall not be necessary to specify the nature of business to be
transacted at an adjourned meeting.
6.3 CHAIRMAN. The Chairman of the meeting of Special Warrantholders shall be
designated in writing by the Trustee and need not be a Special Warrantholder. If
no person is so designated or if the person so designated is not present within
twenty-five (25) minutes after the time fixed for the holding of a meeting, the
Special Warrantholders and proxyholders for Special Warrantholders present at
the meeting shall choose one of their number to be the chairman.
6.4 QUORUM. A quorum consists of those Special Warrantholders, whether present
or represented by proxy, holding not less than twenty-five per cent (25%) of the
aggregate number of Special
<PAGE>
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Warrants then outstanding. If at a meeting, a quorum is not present or
represented by proxy within thirty (30) minutes after the time appointed for the
meeting, then the meeting, if called by or upon the requisition of Special
Warrantholders shall be dissolved, but in any other case after the appointment
of a chairman, the meeting shall stand adjourned to such day being not less than
five (5) Business Days later and to such place and time as may be appointed by
the chairman of the meeting. At the adjourned meeting, those persons present in
person and owning Special Warrants or representing by proxy Special
Warrantholders shall, in any event, constitute a quorum for the transaction of
business for which the original meeting was convened. The chairman of any
meeting at which a quorum of the Special Warrantholders is present may with the
consent of the meeting, adjourn any such meeting, and no notice of such
adjournment need be given except such notice, if any, as the meeting may
prescribe.
6.5 SHOW OF HANDS. Subject to Section 6.6 hereof, every question submitted to a
meeting, except one requiring an Extraordinary Resolution, shall be decided in
the first instance by a majority of hands on a show of hands, the outcome of
which will be declared by the Chairman. Each Special Warrantholder present, in
person or by proxy, shall have one vote.
6.6 POLL. A poll shall be taken when requested by a Special Warrantholder acting
in person or by proxy and, when demanded on the election of a chairman or on the
question of adjournment, it shall be taken forthwith. If demanded on any other
question or on an Extraordinary Resolution, a poll shall be taken in such manner
and either at once or after an adjournment as the chairman may direct. The
result of a poll shall be the decision of the meeting at which the poll was
demanded. On a poll vote, each Special Warrantholder acting in person or by
proxy shall have one vote for each Special Warrant which he holds or represents.
Votes may be given in person or by proxy and the proxyholder need not be a
Special Warrantholder. The chairman of any meeting shall be entitled to vote in
respect of any Special Warrants and proxies held by him.
6.7 REGULATIONS. The Trustee, or the Corporation with the approval of the
Trustee, may from time to time make and from time to time vary such regulations
not contrary to the provisions of this Indenture as it shall think fit providing
for and governing:
(a) the setting of the record date for a meeting for the purpose
of determining Special Warrantholders entitled to receive
notice of and to vote at a meeting;
(b) voting by proxy, the form of instrument appointing
proxyholders, the manner in which proxies are to be executed
and the production of the authority of any persons signing on
behalf of a Special Warrantholder;
(c) the lodging of and means of forwarding the instruments
appointing proxyholders and the time before the holding of a
meeting or adjourned meeting by which the instruments
appointing proxyholders are to be deposited; and
(d) any other matter relating to the conduct of meetings of
Special Warrantholders.
Any regulations so made shall be binding and effective and votes given in
accordance therewith shall be valid. The Trustee may permit Special
Warrantholders to provide proof of ownership of the Special Warrants in such
manner as the Trustee may approve. Save as aforesaid, the only persons who shall
be recognized at any meeting as Special Warrantholders or entitled to vote or,
except as provided in Section
<PAGE>
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6.12 hereof, be present at the meeting in respect thereof shall be persons who
are registered holders of Special Warrants or are duly appointed proxyholders
for registered holders of Special Warrants.
6.8 MINUTES. Minutes of all resolutions passed and proceedings taken at every
meeting as aforesaid shall be made and duly entered in books to be from time to
time provided for that purpose by the Trustee at the expense of the Corporation
and any such minutes as aforesaid, if signed by the chairman of the meeting at
which such resolutions were passed or proceedings taken, or by the chairman of
the next succeeding meeting of Special Warrantholders, shall be prima facie
evidence of the matters therein stated and until the contrary is proved, every
such meeting in respect of the proceedings of which minutes shall have been made
shall be deemed to have been duly held and convened and all resolutions passed
thereat or proceedings taken to have been duly passed and taken.
6.9 POWERS EXERCISABLE BY EXTRAORDINARY RESOLUTION. The Special Warrantholders
shall have the power from time to time by Extraordinary Resolution:
(a) to agree to or sanction any modification, abrogation,
alteration or compromise of the rights of the Special
Warrantholders or the Trustee, subject to the Trustee's prior
consent in its capacity as agent hereunder or on behalf of
Special Warrantholders against the Corporation which shall be
agreed to by the Corporation whether such rights arise under
this Indenture or under the Special Warrants or otherwise;
(b) to assent to any change in or omission from the provisions
contained in the Special Warrants and this Indenture or any
ancillary or supplemental instrument which may be agreed to by
the Corporation and to authorize the Trustee to concur in and
execute any ancillary or supplemental agreement embodying the
change or omission;
(c) with the consent of the Corporation, not to be unreasonably
withheld, to remove the Trustee or its successor in office and
to appoint a new agent or agents to take the place of the
Trustee so removed;
(d) to require, direct or authorize the Trustee to enforce any of
the covenants on the part of the Corporation contained in this
Indenture or the Special Warrants or to enforce any of the
rights of the Special Warrantholders in any manner specified
in such Extraordinary Resolution or to refrain from enforcing
any such covenant or right upon the Trustee being furnished
with an indemnity, and such funding as the Trustee may, in the
reasonable exercise of its discretion determine it requires to
so act;
(e) to restrain any Special Warrantholder from instituting or
continuing any suit or proceedings against the Corporation for
the enforcement of the covenants on the part of the
Corporation contained in this Indenture or any of the rights
conferred upon the Special Warrantholders by the Special
Warrants and this Indenture;
(f) to direct any Special Warrantholder who, as such, has brought
any suit, action or proceeding to stay or discontinue or
otherwise deal with the same upon payment of the costs,
charges and expenses reasonably and properly incurred by such
Special Warrantholder in connection therewith;
<PAGE>
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(g) to waive, authorize and direct the Trustee to waive any
default on the part of the Corporation in complying with any
of the provisions of this Indenture or the Special Warrants
either unconditionally or upon any conditions specified in
such Extraordinary Resolution;
(h) to assent to any compromise or arrangement with any creditor
or creditors or any class or classes of creditors, whether
secured or unsecured, and with holders of any shares or other
securities of the Corporation; and
(i) to amend, alter or repeal any Extraordinary Resolution
previously passed or sanctioned by the Special Warrantholders.
An Extraordinary Resolution of the Special Warrantholders is
binding upon all the Special Warrantholders whether present or not present at
the meeting at which the Extraordinary Resolution was passed or whether or not
assented to in writing and each Special Warrantholder, the Trustee and the
Corporation shall be bound to give effect to the Extraordinary Resolution to the
extent that the Extraordinary Resolution applies to such party.
6.10 MEANING OF "EXTRAORDINARY RESOLUTION". The expression "Extraordinary
Resolution" when used in this Indenture means, subject to Section 6.13, a
resolution proposed to be passed as an extraordinary resolution at a meeting of
Special Warrantholders duly convened for the purpose and held in accordance with
the provisions of this Article 6 and attended in person or by proxy by Special
Warrantholders holding not less than fifty-one per cent (51%) of the Special
Warrants outstanding and passed by not less than sixty-six and two-thirds
percent (662/3%) of the votes cast upon such resolution.
If, at any meeting called for the purpose of passing an
Extraordinary Resolution, Special Warrantholders holding at least fifty-one per
cent (51%) of the aggregate number of Special Warrants are not present in person
or by proxy within thirty (30) minutes after the time appointed for the meeting,
then the meeting if convened by Special Warrantholders or on a Special
Warrantholders' request, shall be dissolved; but in any other case it shall be
adjourned to such day, being not less than fifteen (15) or more than sixty (60)
days later, and to such place and time as may be appointed by the Chairman. Not
less than ten (10) days' prior notice shall be given of the time and place of
such adjourned meeting in the manner provided in Section 9.2. Such notice shall
state that at the adjourned meeting the Special Warrantholders present in person
or by proxy shall form a quorum but it shall not be necessary to set forth the
purposes for which the meeting was originally convened or any other particulars.
At the adjourned meeting the Special Warrantholders present in person or by
proxy shall form a quorum and may transact the business for which the meeting
was originally convened and a resolution proposed at such adjourned meeting and
passed by the requisite vote as provided in this Section shall be an
Extraordinary Resolution within the meaning of this Indenture notwithstanding
that Special Warrantholders holding at least fifty-one per cent (51%) of the
aggregate number of Special Warrants outstanding are not present in person or by
proxy at such adjourned meeting.
Subject to Section 6.13 hereof, votes on an Extraordinary
Resolution shall always be given on a poll.
6.11 POWERS CUMULATIVE. It is hereby declared and agreed that any one or more of
the powers or any combination of the powers in this Indenture stated to be
exercisable by the Special Warrantholders
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by Extraordinary Resolution or otherwise may be exercised from time to time and
the exercise of any one or more of such powers or any combination of powers from
time to time shall not be deemed to exhaust the right of the Special
Warrantholders to exercise the same or any other such power or powers or
combination of powers then or thereafter from time to time.
6.12 CORPORATION, SPECIAL WARRANTHOLDERS AND TRUSTEE MAY BE REPRESENTED. The
Corporation and the Trustee, by their respective employees, officers and
directors, and the legal and financial advisors and auditors of the Corporation
and the Trustee may attend any meeting of the Special Warrantholders, but they
shall have no vote as such. In addition, any Special Warrantholder is entitled
to have his legal or financial advisers present at any such meeting, but they
shall have no vote as such.
6.13 INSTRUMENTS IN WRITING. All actions that may be taken and all powers that
may be exercised by the Special Warrantholders at a meeting as hereinbefore in
this Article provided may also be taken and exercised by holders of not less
than sixty-six and two-thirds per cent (662/3%) of the aggregate number of
Special Warrants then outstanding by an instrument in writing signed in one or
more counterparts by such holders and the expression "Extraordinary Resolution"
when used in this Indenture shall include an instrument so signed.
6.14 BINDING EFFECT OF RESOLUTIONS. Every resolution and every Extraordinary
Resolution passed in accordance with the provisions of this Article 6 at a
meeting of Special Warrantholders shall be binding upon all the Special
Warrantholders, whether present at or absent from such meeting, and every
instrument in writing signed by Special Warrantholders in accordance with
Section 6.13 shall be binding upon all the Special Warrantholders, whether
signatories thereto or not and each and every Special Warrantholder and the
Trustee (subject to the provisions for indemnity herein contained) shall be
bound to give effect accordingly to every such resolution and Extraordinary
Resolution. In the case of an Extraordinary Resolution in writing, the Trustee
shall give notice in the manner contemplated in Article 9 of the effect of the
Extraordinary Resolution in writing to all Special Warrantholders and the
Corporation as soon as is reasonably practicable.
6.15 HOLDINGS BY THE CORPORATION OR SUBSIDIARIES OF THE CORPORATION DISREGARDED.
In determining whether Special Warrantholders holding the required number of
Special Warrants are present at a meeting of Special Warrantholders for the
purpose of determining a quorum or have concurred in any consent, waiver,
resolution, Extraordinary Resolution or other action under this Indenture,
Special Warrants owned legally or beneficially by the Corporation or any
subsidiary of the Corporation shall be disregarded. The Corporation shall
provide to the Trustee upon a request a certificate of the Corporation detailing
the exact registrations and denominations of any Special Warrants owned legally
or beneficially by the Corporation or any subsidiary of the Corporation.
<PAGE>
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ARTICLE 7
SUPPLEMENTAL AGREEMENTS, MERGER, SUCCESSORS
7.1 PROVISION FOR SUPPLEMENTAL AGREEMENTS FOR CERTAIN PURPOSES. From time to
time the Corporation (when authorized by a resolution of its directors) and the
Trustee may, subject to the provisions of these presents, and they shall, when
so required by any provision of this Indenture, execute and deliver by their
proper officers, deeds, agreements or instruments supplemental hereto, which
thereafter shall form part hereof, for any one or more of the following
purposes:
(a) adding to the provisions hereof such additional covenants and
enforcement provisions as, in the opinion of counsel, are
necessary or advisable in the premises, provided that the same
are not, in the opinion of counsel to the Trustee, prejudicial
to the interests of the Special Warrantholders;
(b) giving effect to any Extraordinary Resolution passed as provided
in Article 6 hereof;
(c) making such provisions not inconsistent with this Indenture as
may be necessary or desirable with respect to matters or
questions arising hereunder or for the purpose of obtaining a
listing or quotation of the Common Shares issuable upon the
exercise of the Special Warrants thereof on any stock exchange,
or for the purpose of complying with applicable laws, provided
that such provisions are not, in the opinion of counsel to the
Trustee, prejudicial to the interests of the Special
Warrantholders;
(d) making any modification in the form of the Special Warrant
Certificate which does not affect the substance of the Special
Warrants;
(e) evidencing any succession, or successive successions, of other
bodies corporate to the Corporation and the assumption by any
successor of the covenants of the Corporation herein and in the
Special Warrant Certificates contained as provided hereafter in
this Article 7; and
(f) for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any
ambiguities, defective provisions, errors or omissions herein,
provided that, in the opinion of the Trustee, the rights of the
Trustee and of the Special Warrantholders are in no way
prejudiced thereby.
7.2 CORPORATION MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. Subject to Subsection
4.1(b), nothing in this Indenture shall prevent any consolidation,
reorganization, arrangement, amalgamation or merger of the Corporation with or
into any other body corporate, or bodies corporate, or person, or a conveyance
or transfer of all or substantially all the properties and assets of the
Corporation as an entirety to any body corporate or person lawfully entitled to
acquire and operate the same, provided, however, that the body corporate or
person formed by such consolidation or amalgamation or arrangement or into which
such merger shall have been made or the person which acquires by conveyance or
transfer all or substantially all the properties and assets of the Corporation
as an entirety shall execute and deliver to the Trustee prior to or
contemporaneously with such consolidation, reorganization, amalgamation,
arrangement, merger, conveyance or transfer, and as a condition precedent
thereto an agreement
<PAGE>
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supplemental hereto wherein the due and punctual performance and observance of
all the covenants and conditions of this Indenture to be performed or observed
by the Corporation shall be assumed by such body corporate or person on terms
and conditions not adverse to the Special Warrantholders. The Trustee shall be
entitled to receive and shall be fully protected in relying upon an opinion of
counsel and such other advisors as they deem necessary that any such
consolidation, reorganization, amalgamation, arrangement, merger, conveyance or
transfer and any supplemental agreement executed in connection therewith,
complies with the provisions of this Section 7.2.
7.3 SUCCESSOR BODY CORPORATE SUBSTITUTED. In case the Corporation, pursuant to
Section 7.2 hereof, shall be consolidated, amalgamated, reorganized, arranged or
merged with or into any other body corporate, bodies corporate or person or
shall convey or transfer all or substantially all of the properties and assets
of the Corporation as an entirety to another body corporate or person, the
successor body corporate or person formed by such consolidation, reorganization,
arrangement or amalgamation or into which the Corporation shall have been merged
or which shall have received a conveyance or transfer as aforesaid shall succeed
to and be substituted for the Corporation hereunder with the same effect as
nearly as may be possible as if it had been named herein as a party in
substitution for the Corporation. Such changes may be made in the Special
Warrants as may be appropriate in view of such consolidation, reorganization,
amalgamation, merger, conveyance or transfer and as may be necessary to ensure
that the Special Warrantholders are not adversely affected by such
consolidation, organization, amalgamation, merger, conveyance or transfer.
ARTICLE 8
CONCERNING THE TRUSTEE
8.1 NO CONFLICT OF INTEREST. The Trustee represents to the Corporation that, to
the best of its knowledge, at the date of the execution and delivery of this
Indenture, there exists no material conflict of interest in the role of the
Trustee as a fiduciary hereunder and its role in any other capacity and agrees
that in the event of a material conflict of interest arising hereafter it will,
within 90 days after ascertaining that it has such material conflict of
interest, either eliminate the same or assign its trust hereunder to a successor
trustee approved by the Corporation. Notwithstanding the foregoing provisions of
this Section 8.1, if any such material conflict of interest exists or hereunder
shall exist, the validity and enforceability of this Indenture and the Special
Warrant Certificates shall not be affected in any manner whatsoever by reason
thereof.
8.2 REPLACEMENT OF TRUSTEE. The Trustee may resign its duties and be discharged
from all further duties and liabilities hereunder after giving 60 days notice in
writing to the Corporation, provided that such shorter notice may be given as
the Corporation shall accept as sufficient. In the event of the office of
Trustee becoming vacant by resignation or incapacity to act or otherwise, the
Corporation shall appoint in writing a new trustee unless such new trustee has
already been appointed by the Special Warrantholders pursuant to an
Extraordinary Resolution. If the Corporation makes default for a period of ten
(10) Business Days in making such appointment, then any Special Warrantholder or
the retiring or former Trustee at the Corporation's expense may apply to a judge
of the Supreme Court of the Province of British Columbia for the appointment of
a new trustee after such notification to the holders of the then outstanding
Special Warrants and the Corporation as such judge may order. Upon appointment,
the successor trustee shall be vested with the same powers, rights, duties and
responsibilities as if it had been
<PAGE>
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originally named as Trustee without any further assurance, conveyance, act or
deed; but if for any reason it becomes necessary or expedient to execute any
further deed or assurance the same shall be done at the expense of the
Corporation and may and shall be legally and validly executed by the former
Trustee. Any company resulting from a merger, consolidation or amalgamation to
which the Trustee for the time being is a party shall be the successor trustee
under this Indenture without any further act. Any new trustee appointed under
this Section 8.2 shall be a corporation authorized to carry on the business of a
trust company in the Canadian Jurisdictions. Upon the appointment of a new
trustee, the Corporation shall promptly notify the Special Warrantholders
thereof in the manner provided in Section 9.2.
8.3 DUTY OF TRUSTEE. In the exercise of the rights, duties and obligations
prescribed or conferred by the terms of this Indenture, the Trustee shall
exercise that degree of care, diligence and skill that a reasonably prudent
agent would exercise in comparable circumstances.
8.4 EXPERTS, ADVISORS AND AGENTS. The Trustee may:
(a) in relation to these presents act and rely on the opinion or
advice of or information obtained from any barrister, solicitor,
auditor, valuer, engineer, surveyor or other expert, whether
obtained by the Trustee or by the Corporation or otherwise;
and/or
(b) employ or retain such agents and other assistants as it may
reasonably require for the proper determination and discharge of
its duties hereunder and may pay reasonable remuneration for all
services performed for it in the discharge of the duties hereof
and shall receive reimbursement from the Corporation for all
disbursements, costs and expenses reasonably made or incurred by
it in the discharge of its duties hereunder and in the
management of the trusts hereof. Any barristers or solicitors
employed or consulted by the Trustee may, but need not be,
barristers or solicitors for the Corporation.
8.5 TRUSTEE NOT REQUIRED TO GIVE SECURITY. The Trustee shall not be required to
give security for its conduct or administration of the trusts hereof and shall
not be responsible for the acts, omissions, defaults, errors or failures of any
agents whom it may reasonably employ in the exercise of the powers conferred
upon it hereby, nor for any loss occasioned by its own acts, omissions or
defaults unless such acts, omissions or defaults constitute a wilful misconduct,
wilful or negligent breach of trust or fraud.
8.6 TRUSTEE NOT ORDINARILY BOUND. Subject to Sections 6.1 and 6.9 hereof, the
Trustee shall not be bound to do or to take any action for the enforcement of
any of the obligations of the Corporation under this Indenture unless and until
it is required to do so by an instrument in writing signed by the holders
representing not less than twenty-five per cent (25%) of the aggregate number of
Special Warrants then outstanding. The Trustee may, before taking the action,
require the Special Warrantholders at whose instance the action is required to
deposit with the Trustee the Special Warrants held by them for which the Trustee
shall issue receipts. The obligation of the Trustee to commence or continue any
act, action or proceeding shall be conditional upon such Special Warrantholders
furnishing, when required in writing so to do by the Trustee, funds sufficient
for commencing or continuing the act, action or proceeding and an indemnity
reasonably satisfactory to the Trustee to protect and hold harmless the Trustee
against any loss, damage or liability by reason thereof.
<PAGE>
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None of the provisions contained in this Indenture shall require the
Trustee to risk or expend its own funds or otherwise incur financial liability
in the performance of any of its duties or in the exercise of any of its rights
and powers unless funded and indemnified as aforesaid.
8.7 TRUSTEE MAY RELY ON CERTIFICATES. Whenever in the administration of the
trusts of this Indenture the Trustee shall deem it necessary or desirable that
any matter be proved or established by the Corporation prior to taking or
suffering any action to be taken hereunder, such matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate or instrument signed by any
of the Chairman of the Board, the President, a Vice-President, the Secretary or
the Treasurer of the Corporation and delivered to the Trustee and such
certificate or instrument shall be full authority to the Trustee for any action
taken or suffered by it under the provisions of this Indenture on the faith
thereof; provided in its reasonable discretion the Trustee may in lieu thereof
accept other evidence of such fact or matter or may require such further or
additional evidence as to it may seem reasonable.
In the exercise of its rights and duties, the Trustee may, if it is
acting in good faith, act and rely as to the truth of the statements and the
accuracy of the opinions expressed therein, upon statutory declarations,
opinions, reports, certificates or other evidence furnished to the Trustee
pursuant or pursuant to a request of the Trustee.
The Trustee may act and rely and shall be protected in acting and
relying upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, letter, telegram, cablegram or other
paper document believed by it to be genuine and to have been signed, sent or
presented by or on behalf of the proper party or parties.
8.8 RECITALS OR STATEMENTS OF FACT MADE BY CORPORATION. Subject to the
provisions hereof, the Trustee shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Indenture or in the Special
Warrant Certificates or be required to verify the same but all such statements
and recitals are and shall be deemed to have been made by the Corporation only.
8.9 TRUSTEE'S LIABILITY. The Trustee shall not be liable or accountable
for any loss or damage whatsoever to any person caused by the performance or
failure to perform by it of its responsibilities under this Indenture save only
to the extent that such loss or damage is attributable to the gross negligence,
wilful misconduct or fraud of the Trustee. The Trustee shall not be responsible
for any misconduct on the part of any barrister, solicitor, attorney, banker,
receiver, agent or other person appointed with due care by it hereunder, or
bound to supervise the proceedings of any such appointee.
The Trustee shall not incur any liability or responsibility whatever or
be in any way responsible for the consequences of any breach by the company of
any obligation herein contained or of any act of any director, officer, employee
or agent of the Corporation.
8.10 INDEMNIFICATION. Without limiting any protection or indemnity of the
Trustee under any other provision hereof, or otherwise at law, the Corporation
hereby agrees to indemnify and hold harmless the Trustee, its employees,
officers, directors and agents from and against any and all liabilities, losses,
damages, penalties, claims, actions, suits, costs, expenses and disbursements,
including legal or advisor fees and disbursements, of whatever kind and nature
which may at any time be imposed on, incurred by or asserted against the Trustee
in connection with the performance of its duties and obligations hereunder,
<PAGE>
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other than such liabilities, losses, damages, penalties, claims, actions, suits,
costs, expenses and disbursements arising by reason of the negligence, wilful
misconduct or fraud of the Trustee. This provision shall survive the resignation
or removal of the Trustee, or the termination of this Indenture.
8.11 NO REPRESENTATION AS TO VALIDITY. The Trustee shall be under no
responsibility in respect of the validity of this Indenture or the execution and
delivery hereof by the Corporation or in respect of the validity or the
execution by the Corporation of any Special Warrant Certificate issued
hereunder; nor shall it be responsible for any breach by the Corporation of any
covenant or condition contained in this Indenture or in any Special Warrant
Certificate; nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Common
Shares to be issued upon the right to acquire provided for in this Indenture
and/or in any Special Warrant Certificate or as to whether any Common Shares
will, when issued, be duly authorized or be validly issued and fully paid and
non-assessable, it being hereby agreed and declared that as to all the matters
and things referred to in this Section 8.11, the duty and responsibility shall
rest upon the Corporation and not upon the Trustee and the failure of the
Corporation to discharge any such duty and responsibility shall not in any way
render the Trustee liable or place upon it any duty or responsibility for breach
of which it would be liable.
Trustee shall not be bound to give any notice or do or take any act,
action or proceeding by virtue of the powers conferred on it hereby unless and
until it shall have been required so to do under the terms hereof; nor shall the
Trustee be required to take notice of any default hereunder, unless and until
notified in writing of such default, which notice shall distinctly specify the
default desired to be brought to the attention of the Trustee and in the absence
of any such notice the Trustee may for all purposes of this Indenture
conclusively assume that no default has been made in the observance or
performance of any of the representations, warranties, covenants, agreements or
conditions contained herein. Any such notice shall in no way limit any
discretion herein given the Trustee to determine whether or not the Trustee
shall take action with respect to any default.
8.12 ACCEPTANCE OF DUTIES. The Trustee hereby accepts the duties set out in this
Indenture and agrees to perform the same upon the terms and conditions herein
set forth or referred to unless and until discharged therefrom by resignation or
in some other lawful manner.
8.13 CONTRACTING WITH CORPORATION. The Trustee may contract with the Corporation
and deal with the Special Warrants constituted hereunder without being
accountable for profits arising therefrom.
8.14 TRUSTEE'S AUTHORITY TO CARRY ON BUSINESS. The Trustee represents to the
Corporation that as at the date hereof it is authorized to carry on the business
of a trust company in the Provinces of British Columbia and Ontario. If,
notwithstanding the provisions of this Section 8.14, it ceases to be authorized
to carry on such business in such provinces, the validity and enforceability of
this Indenture and the Special Warrants issued hereunder shall not be affected
in any manner whatsoever by reason only of such event provided that the Trustee
shall, within thirty (30) days after ceasing to be authorized to carry on such
business in such province, either become so authorized or resign in the manner
and with the effects specified in Section 8.2 hereof.
8.15 EXECUTION OF DOCUMENTS. Proof of execution of any document or instrument in
writing; including a Special Warrantholders' request, may be made by the
certificate of a notary public, or other officer with similar powers, that the
person signing such instrument acknowledged to such notary public,
<PAGE>
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or other officer with similar powers, the execution thereof, or by an affidavit
of a witness to such execution, or in any other manner the Trustee considers
adequate.
8.16 POWER TO INSTITUTE PROCEEDINGS. The Trustee shall have the power to
institute and maintain such actions and proceedings as it may consider necessary
or expedient to preserve, protect and enforce its interests and the interests of
the Special Warrantholders.
8.17 NO REQUIREMENT TO REGISTER. Nothing herein contained in this Indenture will
impose on the Trustee any obligation to see to, or to require evidence of, the
registration or filing (or renewal thereof) of this Indenture or any instrument
ancillary or supplemental hereto.
8.18 NO NOTICE. The Trustee shall not be bound to give notice to any person of
the execution hereof.
8.19 TRUSTEE NOT APPOINTED RECEIVER. The Trustee and any person related to the
Trustee will not be appointed a receiver or receiver and manager or liquidator
of all or any part of the assets or undertaking of the Corporation.
ARTICLE 9
NOTICE AND CERTIFICATES
9.1 NOTICE TO CORPORATION. Unless and until the Corporation notifies the Trustee
of a change of address, any notice or communication required or permitted to be
given to the Corporation under the provisions of this Indenture shall be valid
and effective if delivered to the Corporation at 900 - 200 Burrard Street,
Vancouver, British Columbia, V6C 3L6 Attention: President, or sent by telecopier
(and a copy by regular mail) or other means of prepaid transmitted or recorded
communication to such address, or subject to the provisions of Section 9.4
hereof, if mailed by prepaid first class mail addressed to the Corporation at
900 - 200 Burrard Street, Vancouver, British Columbia, V6C 3L6 Attention:
Secretary, telecopier number (604) 682-2060. Any notice to the Corporation as
aforesaid shall be deemed to have been effectively given on the earlier of:
(a) the date of delivery, if delivered during normal business hours
of the Corporation (and, if not, on the next following Business
Day);
(b) the Business Day immediately following the day of sending, if
sent by telecopier (with receipt confirmed), or
(c) on the tenth (10th) Business Day after effectual posting in
Canada.
9.2 NOTICE TO SPECIAL WARRANTHOLDERS. Unless and until a Special Warrantholder
notifies the Corporation of a change of address, any notice or communication
required or permitted to be given to a Special Warrantholder under the
provisions of this Indenture shall be valid and effective if delivered to such
holders at their post office addresses appearing on the register to be kept by
the Trustee or subject to the provisions of Section 9.4 hereof, if mailed by
prepaid first class mail addressed to such holders at their
<PAGE>
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post office addresses appearing on the register to be kept by the Trustee. Any
notice to a Special Warrantholder as aforesaid shall be deemed to have been
effectively given on the earlier of:
(a) the date of delivery, if delivered during normal business hours
(and, if not, on the next following Business Day);
(b) the Business Day immediately following the day of sending, if
sent by telex, telegram, cable or telecopier (with receipt
confirmed), or
(c) on the tenth (10th) Business Day after effectual posting in
Canada.
Accidental error or omission in giving notice or accidental failure to provide
notice to any holder will not invalidate any action or proceeding founded
thereon.
9.3 NOTICE TO TRUSTEE. Unless and until the Trustee is changed in accordance
with the provisions of this Indenture or the Trustee notifies the Corporation of
a change of address, any notice or communication required or permitted to be
given to the Trustee under the provisions of this Indenture shall be valid and
effective if delivered to the Trustee at CIBC Mellon Trust Company (Attention:
Manager, Corporate Trust Department) at 1177 West Hastings Street, Mall Level,
Vancouver, B.C. V6E 2K3, or sent by telecopier (and a copy by regular mail) or
other means of prepaid transmitted or recorded communication to either of such
addresses, or subject to the provisions of Section 9.4 hereof, if mailed
by prepaid first class mail addressed to the Trustee (Attention: Manager,
Corporate Trust Department) in Vancouver at telecopier number: (604) 688-4301.
Any notice to the Trustee as aforesaid shall be deemed to have been effectively
given on the earlier of:
(a) the date of delivery, if delivered during normal business hours
of the Trustee (and, if not, on the next following Business
Day);
(b) the Business Day immediately following the day of sending, if
sent by telecopier (with receipt confirmed), or
(c) on the tenth (10th) Business Day after effectual posting in
Canada.
Surrender of a Special Warrant Certificate and evidence relating thereto
pursuant to Section 2.2 or Section 5.1 hereof shall be valid and effective if
delivered or mailed by prepaid registered mail to the Trustee, (Attention:
Corporate Trust) at 1177 West Hastings Street, Mall Level, Vancouver, B.C. V6E
2K3, telecopier number (604) 688-4301 and shall be deemed to have been
effectively surrendered on the date of delivery, if delivered during normal
business hours of the Trustee (and, if not, on the next following Business Day).
9.4 MAIL SERVICE INTERRUPTION. If by reason of strike, lockout or other work
stoppage, actual or threatened, of postal employees, any notice to be given to
the Trustee or the Corporation would be unreasonably delayed in reaching its
destination, such notice shall be valid and effective only if delivered to an
officer of the party to which it is addressed or if sent to such party, at the
appropriate address in accordance with Sections 9.1 or 9.3 hereof, as the case
may be, by telecopier or other means of prepaid transmitted or recorded
communication.
<PAGE>
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9.5 GENERAL PROVISIONS AS TO CERTIFICATES. Each Certificate of the Corporation,
and opinion of counsel ("Document") required under or referred to in this
Indenture or furnished in connection with any application, written order or
written request made to the Trustee or a Special Warrantholder pursuant to any
provisions of this Indenture shall specify the section under which such
Document, application, written order or written request is being made and shall
include:
(a) a statement that the person signing such Document has read and
understands the conditions precedent with respect to compliance
with which such evidence is being given;
(b) a description of the nature and scope of the examination or
investigation upon which the Document is based; and
(c) a statement that the person providing the Document has made such
examination or investigation as he believes is necessary to
enable him to make the statements or give the opinions contained
or expressed therein.
Any application, written demand, statement, request, notice,
designation, direction, nomination or other instrument to be made by the
Corporation under any of the provisions of this Indenture shall, unless
otherwise provided, be deemed sufficiently made and executed if executed by any
one of the President, any Vice-President, the Secretary, the Assistant Secretary
or the Chief Financial Officer of the Corporation and need not be under the
corporate seal of the Corporation. The Trustee shall accept a certificate signed
by the Secretary or the Assistant Secretary of the Corporation as sufficient
evidence of the passage of any resolution by the directors.
Any Document may be based, insofar as it relates to factual matters,
upon information with respect to the Corporation which is in the possession of
the Corporation or upon the certificate or opinion of or representations by an
officer or officers of the Corporation, unless such counsel knows that the
certificate or opinion or representations with respect to the matters upon which
the certificate or opinion may be based as aforesaid are erroneous, or in the
exercise of reasonable care should have known that the same were erroneous.
Counsel in giving any opinion under this Indenture may rely in whole or
in part upon the opinion of other counsel provided that counsel shall consider
such other counsel as one upon whom he may properly rely.
Any certificate of any expert, insofar as it relates to matters outside
of such expert's competence or responsibility, may be based upon a certificate
or opinion of or upon representations by counsel or some other qualified expert,
unless such first-mentioned expert knows that the certificate or opinion or
representations with respect to the matters upon which his certificate may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
have known that the same were erroneous.
<PAGE>
- 34 -
ARTICLE 10
GENERAL PROVISIONS
10.1 POWER OF BOARD OF DIRECTORS. In this Indenture, wherever the Corporation is
required or empowered to exercise any acts, all such acts may be exercised by
the directors of the Corporation or by those officers of the Corporation
authorized to exercise such acts.
10.2 FORMAL DATE AND EXECUTION DATE. For the purpose of convenience this
Indenture may be referred to as bearing the formal date of August 31, 1998,
which shall be the date on which this Indenture shall become effective between
the parties hereto, irrespective of the actual date of execution hereof.
10.3 FURTHER ASSURANCES. The parties hereto and each of them do hereby covenant
and agree to do such things and execute such further documents, agreements and
assurances as may be necessary or advisable from time to time in order to carry
out the terms and conditions of this Indenture in accordance with their true
intent.
10.4 UNENFORCEABLE TERMS. If any term, covenant or condition of this Indenture,
or the applicable thereof to any party or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Indenture or application of
such term, covenant or condition to a party or circumstance other than those to
which it is held invalid or unenforceable shall not be affected thereby and each
remaining term, covenant or condition of this Indenture shall be valid and shall
be enforceable to the fullest extent permitted by law.
10.5 ENTIRE AGREEMENT. This Indenture constitutes the entire agreement between
the parties hereto relating to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties and there are no general or
specific warranties, representations or other agreements by or among the parties
in connection with the entering into of this Indenture or the subject matter
hereof except as specifically set forth herein.
10.6 AMENDMENTS. This Indenture may be altered or amended in any of its
provisions when any such changes are reduced to writing and signed by the
parties hereto but not otherwise.
10.7 COUNTERPARTS. This Indenture may be executed in one or more counterparts,
each of which so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same instrument.
10.8 NO WAIVER. Subject to the express provisions hereof, no consent or waiver,
express or implied, by either party to or of any breach or default by the other
party in the performance by the other party of its obligations hereunder shall
be deemed or construed to be a consent or waiver to or of any other breach or
default in the performance of obligations hereunder by such party hereunder.
Failure on the party of either party to complain of any act or failure to act of
the other party or to declare the other party in default, irrespective of how
long such failure continues, shall not constitute a waiver by such party of its
rights hereunder.
<PAGE>
- 35 -
10.9 ENUREMENT. This Indenture shall benefit and bind the parties to it and
their respective successors and assigns.
IN WITNESS WHEREOF the parties hereto have executed this Indenture as
of the 31st day of August, 1998.
FIRST DYNASTY MINES LTD.
Per: /s/ Beverly Downing
--------------------------
Per:
CIBC MELLON TRUST COMPANY
Per: /s/ Gaureau
--------------------------
Per: /s/ R. Massender
--------------------------
<PAGE>
SCHEDULE A
FORM OF SPECIAL WARRANT CERTIFICATE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S.
SECURITIES ACT"), AND MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE
TRANSFERRED OR ASSIGNED UNLESS THEY ARE OFFERED FOR SALE, SOLD, OR
OTHERWISE TRANSFERRED OR ASSIGNED: (A) TO THE CORPORATION: (B) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT; (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE
U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF APPLICABLE, AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS; OR (D) WITH THE PRIOR
CONSENT OF THE CORPORATION, PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION
UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
DELIVERY OF THE CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN
SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED THAT THE
CORPORATION IS A "FOREIGN ISSUER" WITHIN THE MEANING OF REGULATION S AT THE
TIME OF SALE, A NEW CERTIFICATE, BEARING NO LEGEND MAY BE OBTAINED FROM THE
REGISTRAR AND TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND DULY
EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE REGISTRAR AND TRANSFER
AGENT AND THE CORPORATION, TO THE EFFECT THAT SUCH SALE IS BEING MADE IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT.
<PAGE>
- 2 -
FIRST DYNASTY MINES LTD.
(the "Corporation")
THE SPECIAL WARRANTS REPRESENTED BY THIS CERTIFICATE WILL EXPIRE AS OF 4:30
P.M., VANCOUVER TIME, ON THE EARLIER OF:
1. THE FIFTH BUSINESS DAY AFTER THE DAY UPON WHICH A RECEIPT (OR A COPY THEREOF)
FOR THE FINAL PROSPECTUS IS ISSUED BY THE LAST OF THE SECURITIES COMMISSIONS OR
SIMILAR REGULATORY AUTHORITIES OF THE CANADIAN JURISDICTIONS TO ISSUE A RECEIPT
FOR THE FINAL PROSPECTUS; AND
2. AUGUST 31, 1999;
(THE "EXPIRY DATE"), UNLESS SPECIFICALLY EXERCISED OR DEEMED TO BE EXERCISED IN
THE MANNER HEREINAFTER DESCRIBED PRIOR TO THE EXPIRY DATE.
<PAGE>
- 3 -
SPECIAL WARRANTS
FIRST DYNASTY MINES LTD. (the "Corporation")
(Incorporated under the laws of Yukon Territory)
SPECIAL WARRANT CERTIFICATE NO. ______________________________ Special Warrants
THIS IS TO CERTIFY that _____________________________________
_____________________________________________________ (the "holder") is entitled
to acquire, in the manner herein provided, subject to the restrictions contained
herein, at any time and from time to time on or prior to 4:30 p.m. Vancouver
time (the "Expiry Time"), on the Expiry Date, subject to the adjustments
described below, that number of Common Shares which is equal to the number of
Special Warrants represented hereby without payment of any additional
consideration.
The Special Warrants represented by this certificate are issued under
and pursuant to a Special Warrant Indenture (the "Indenture") made as of August
31, 1998 between the Corporation and the Trustee (which expression shall include
any successor trustee appointed under the Indenture), to which Indenture (and
any amendments thereto and instruments supplemental thereto) reference is hereby
made for a full description of the rights of the holders of the Special Warrants
and the terms and conditions upon which such Special Warrants are or are to be,
issued and held, all to the same effect as if the provisions of the Indenture
and all amendments thereto and instruments supplemental thereto were herein set
forth and to all of which provisions the holder of these Special Warrants by
acceptance hereof assents. All capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Indenture.
In the event of any conflict or inconsistency between the provisions of
the Indenture (and any amendments thereto and instruments supplemental thereto)
and the provisions of this Special Warrant Certificate, except those that are
necessary by context, the provisions of the Indenture (and any amendments
thereto and instruments supplemental thereto) shall prevail. The terms and
provisions of the Indenture (and any amendments thereto and instruments
supplemental thereto) are incorporated herein by reference.
The right to subscribe for Common Shares in the capital of the
Corporation represented hereby may be exercised by either the holder hereof or
the Trustee as follows:
(1) The holder hereof may exercise the Special Warrants before the Expiry
Time by:
(a) duly completing in the manner indicated and executing the
Exercise Form attached hereto; and
(b) surrendering this Special Warrant Certificate to CIBC Mellon
Trust Company (the "Trustee") as hereinafter set forth.
This Special Warrant Certificate shall be validly surrendered only upon delivery
thereof or by mailing the same to the Trustee at its principal office in the
city of Vancouver (at the address hereinafter indicated). The Exercise Form
attached hereto shall be deemed not to be duly completed if not fully completed
in the manner indicated or if the name and mailing address of the holder do not
appear legibly on such Exercise Form or such Exercise Form is not signed by the
holder.
<PAGE>
- 4 -
(2) Subject as provided herein, the Trustee will be deemed to have
exercised and surrendered the Special Warrants represented by this Special
Warrant Certificate on behalf of the holder thereof as of 4:29 p.m.
(Vancouver time) on the Expiry Date if the holder fails to exercise the
Special Warrants that may be exercised by it before the Expiry Time. All
Special Warrants shall expire immediately after the Expiry Time.
In the case of a Special Warrant which is deemed exercised and
surrendered by the Trustee on behalf of a holder, as soon as practicable
following the exercise by the Trustee of such Special Warrants, the Trustee
shall immediately notify the holder hereof in accordance with the provisions of
Section 9.2 of the Indenture to the effect the Trustee has so exercised the
Special Warrants on behalf of the holder and within five Business Days after the
Expiry Date, the Corporation shall cause certificates representing such Common
Shares to be mailed to the address of the holder of the Special Warrants.
Not later than the fifth Business Day after the surrender to the
Trustee of the Special Warrant Certificate evidencing any Special Warrant with
the attached Exercise Form duly completed or the deemed exercise of any Special
Warrant, the Trustee will mail to the holder, or to such person as the holder
may otherwise specify in the Exercise Form or by written notice given to the
Trustee prior to such mailing, at the address of the holder or, if so specified,
of such person, or, if specified in the Exercise Form or by written notice given
to the Trustee prior to such mailing, will deliver to such holder or person at
the place where such Special Warrant Certificate was surrendered certificates
representing the number of Common Shares registered in the name of the holder
or, if so specified, such person. In the event of non-receipt of any such
certificate by the person to whom it is so sent as aforesaid, or the loss or
destruction thereof, the Corporation shall issue and the Trustee shall
countersign and deliver to such person a replacement certificate of like date
and tenor in place of the one lost or destroyed upon being furnished with such
evidence of ownership and non-receipt, loss or destruction and with such
indemnity or security as the Trustee may reasonably require. The holder shall
bear the cost of the issue of such replacement certificate.
Upon valid or deemed exercise of the Special Warrants as provided
herein, the person or persons in whose name or names the Common Shares are
issuable, shall be deemed for all purposes (except as provided in the Indenture)
to be the holder or holders of record of such Common Shares and the Corporation
covenants that it will (subject to and in accordance with the provisions of the
Indenture) cause certificates representing such Common Shares to be delivered or
mailed to such person or persons at the address or addresses specified in such
Exercise Form.
To the extent that the Special Warrants represented by this Special
Warrant Certificate confer the right to subscribe for a fraction of a Common
Share, such right may be exercised in respect of such fraction only in
combination with an additional Special Warrant or Special Warrants which in the
aggregate entitle the holder to acquire a whole number of Common Shares. No
fractional Common Shares will be issued. If a holder is not able to, or elects
not to, combine Special Warrants so as to be entitled to acquire a whole number
of Common Shares, the Corporation shall make an appropriate cash adjustment. In
respect of any holder, the Corporation shall only be required to make such a
cash adjustment once and for one fractional Common Share and no more. The amount
of the cash adjustment shall be equal to the fraction of a Common Share to which
the holder would be entitled multiplied by the Current Market Price.
The Corporation will not, under any circumstances, be obligated to issue a
cheque to a Special Warrantholder in an amount less than Cdn$5.00.
<PAGE>
- 5 -
The Indenture provides for adjustments to the subscription rights
attaching to these Special Warrants in certain events and also provides for the
giving of notice by the Corporation prior to taking certain actions specified
therein.
The holding of the Special Warrants evidenced by this Special Warrant
Certificate shall not constitute the holder hereof a shareholder of the
Corporation or entitle such holder to any right or interest in respect thereof
except as herein and in the Indenture expressly provided.
The Special Warrants evidenced by this Special Warrant Certificate are
transferable only in accordance with the terms and conditions set forth in
Section 2.3 of the Indenture which makes reference to the fact that a person who
furnishes evidence (unless the Corporation has instructed the Trustee in writing
to waive such requirement) to the reasonable satisfaction of the Trustee that he
is:
(a) the executor, administrator, heir or legal representative of the
heirs of the estate of a deceased registered holder hereof,
(b) a guardian, committee, trustee, curator or tutor representing a
registered holder who is an infant, an incompetent person or a
missing person,
(c) a liquidator of, or a trustee in bankruptcy for, a holder
hereof, or
(d) a transferee of a Special Warrantholder who provides the Trustee
with evidence satisfactory to the Corporation and the Trustee,
acting reasonably, including, but not limited to a properly
completed and executed declaration in the form attached to the
Special Warrant Certificate, that such transferee is/was either
(i) not in the United States at the time the buy order for the
Special Warrants was executed, not acquiring the Special
Warrants for the account or benefit of a U.S. Person or a person
in the United States and was not offered the Special Warrants in
the United States, or (ii) a person that has purchased or
acquired Special Warrants in a transaction exempt from
registration under the U.S. Securities Act of 1933 and has
provided the Corporation with satisfactory evidence of the
availability of such exemption which may, at the Corporation's
discretion, include an opinion of counsel and, in the case of
(ii) was exempt from registration under any applicable
securities laws of any state of the United States and that the
securities laws of any other applicable jurisdiction(s) have
been complied with in relation to the transfer of the Special
Warrants involved,
may, as set forth in the Indenture, by surrendering to the Trustee such evidence
together with the Special Warrant Certificate in question with a duly executed
instrument of transfer in the form attached and subject to such reasonable
requirements relating to the payment of costs of the transfer by the holder as
the Trustee may prescribe and all applicable securities legislation and
requirements of regulatory authorities, become noted upon the register of
holders.
If any of the Common Shares in respect of which the Special Warrants
are exercised are to be issued to a person or persons other than the holder (as
aforesaid), the holder shall pay to the Trustee all requisite stamp transfer
taxes or other governmental charges exigible in connection with the issue of
such Common Shares to such other person or persons or shall establish to the
satisfaction of the Trustee that such taxes and charges have been paid.
<PAGE>
- 6 -
This Special Warrant Certificate shall not be valid for any purpose
whatever unless and until it has been countersigned by or on behalf of the
Trustee.
Time shall be of the essence hereof. The Special Warrants and the
Indenture (and any amendments thereto and instruments supplemental thereto)
shall be governed by, performed, construed and enforced in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein and shall be treated in all respects as British Columbia contracts.
The Corporation is under no obligation to file and clear a Prospectus
solely to qualify the Common Shares issuable upon exercise or deemed exercise of
the Special Warrants by a designated date or at all and any such filing, if
made, will be subject to all necessary regulatory approvals. If the Corporation
files a prospectus in connection with an offering of securities of the
Corporation prior to the Expiry Date, it has agreed that it will file such
prospectus in each of the Canadian Jurisdictions and include therein for
qualification the distribution to the holders of Special Warrants the Common
Shares issuable upon exercise or deemed exercise thereof. The Corporation will
only be required to file the prospectus in respect of any of its securities in
the event that the Corporation considers that it is in its best interests to do
so, in its sole and unfettered discretion.
Unless the Corporation has instructed the Trustee in writing to waive
any or all of the following requirements, the Special Warrants may not be
exercised by or for the account or benefit of a U.S. Person or a person in the
United States unless the holder certifies in writing to the Corporation and the
Trustee that the holder is: (i) Global Gold or Garrison as an original
subscriber of Special Warrants; or (ii) a registered transferee of such Special
Warrants who has complied with the terms of the Special Warrant Indenture
provided that the Corporation may, in its sole discretion, accept, in
substitution for the foregoing, evidence satisfactory to the Corporation and the
Trustee, acting reasonably, to the effect that the Common Shares have been
registered under the U.S. Securities Act and applicable state securities laws or
that the Common Shares may be issued upon exercise of the Special Warrants
without registration under the U.S. Securities Act and any applicable state
securities laws.
This Special Warrant may not be exercised in the United States or by or
for the account or benefit of a U.S. Person or person in the United States other
than by: (i) Global Gold or Garrison as an original subscriber of the Special
Warrants from the Corporation; or (ii) by a registered transferee of Special
Warrants that acquired the Special Warrants in a transaction exempt from
registration under the U.S. Securities Act of 1933 and applicable state
securities laws and in compliance with the Special Warrant Indenture.
Unless otherwise determined by the Corporation by way of written
instructions to the Trustee:
(a) Common Shares issued to persons in the United States upon the exercise
of Special Warrants shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "U.S. SECURITIES ACT"), AND MAY NOT BE OFFERED FOR SALE, SOLD, OR
OTHERWISE TRANSFERRED OR ASSIGNED UNLESS THEY
<PAGE>
- 7 -
ARE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED: (A)
TO THE CORPORATION: (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH
RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT; (C) PURSUANT TO
THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER, IF APPLICABLE, AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS; OR (D) WITH THE PRIOR CONSENT OF THE
CORPORATION, PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE
U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. DELIVERY
OF THE CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. PROVIDED THAT THE
CORPORATION IS A "FOREIGN ISSUER" WITHIN THE MEANING OF REGULATION S AT
THE TIME OF SALE, A NEW CERTIFICATE, BEARING NO LEGEND MAY BE OBTAINED
FROM THE REGISTRAR AND TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE
AND DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE REGISTRAR
AND TRANSFER AGENT AND THE CORPORATION, TO THE EFFECT THAT SUCH SALE IS
BEING MADE IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT."
(b) Certificates representing Common Shares issued upon the exercise of
Special Warrants exercised or deemed exercised prior to the earlier of the
Qualification Date or the Expiry Date, shall bear the following legend:
"THE SECURITIES REPRESENTED BY THE CERTIFICATE ARE LISTED ON THE
TORONTO STOCK EXCHANGE; HOWEVER, THE SAID SECURITIES CANNOT BE TRADED
THROUGH THE FACILITIES ON SUCH EXCHANGE SINCE THEY ARE NOT FREELY
TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH
SECURITIES IS NOT "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON THE
TORONTO STOCK EXCHANGE."
<PAGE>
- 8 -
IN WITNESS WHEREOF the Corporation has caused this Special Warrant
Certificate to be signed by its duly authorized officer as of August 31, 1998.
FIRST DYNASTY MINES LTD.
Per:
-------------------------------
Authorized Signatory
Countersigned by:
CIBC MELLON TRUST COMPANY
Per:
-----------------------------------
Authorized Signatory
<PAGE>
EXERCISE INSTRUCTIONS TO SPECIAL WARRANTHOLDER
The registered holder hereof may exercise his right to subscribe for
Common Shares of FIRST DYNASTY MINES LTD. (the "Corporation"), by completing the
exercise form and surrendering this Special Warrant Certificate and the duly
completed exercise form to CIBC Mellon Trust Company by delivering or mailing it
to CIBC Mellon Trust Company at its principal office in the city of Vancouver at
1177 West Hastings Street, Mall Level, Vancouver, B.C. V6E 2K3.
For your own protection, it is suggested that all documentation be
forwarded to the Trustee by registered mail.
<PAGE>
EXERCISE FORM
To: First Dynasty Mines Ltd.
c/o CIBC Mellon Trust Company
1177 West Hastings Street
Mall Level
Vancouver, B.C.
V6E 2K3
The undersigned holder of the within Special Warrant Certificate, pursuant to
the Special Warrant Indenture mentioned therein hereby exercises of the
Special Warrants (the "Exercised Special Warrants") evidenced thereby and hereby
subscribes for a number of Common Shares of First Dynasty Mines Ltd. or such
other number of Common Shares or number or amount of other shares or securities
or property, or combination thereof, to which such exercise entitles him under
the provisions of the Special Warrant Indenture and on the terms specified in
such Special Warrant Certificate and the Special Warrant Indenture.
The undersigned hereby irrevocably directs that such Common Shares be issued and
delivered as follows:
<TABLE>
<CAPTION>
Number(s) or Amount(s)
Name(s) in Full Address(es) of Common Shares
<S> <C> <C>
- --------------------------------------- --------------------------------------- -----------------------------------
- --------------------------------------- --------------------------------------- -----------------------------------
- --------------------------------------- --------------------------------------- -----------------------------------
</TABLE>
NO CERTIFICATES WILL BE REGISTERED OR DELIVERED TO AN ADDRESS IN THE UNITED
STATES UNLESS BOX B BELOW IS CHECKED.
(Please print full name in which share certificates are to be issued. If any
Common Shares are to be issued to a person or persons other than the Special
Warrantholder, the Special Warrantholder must pay to the Trustee all exigible
transfer taxes or other government charges.)
THE UNDERSIGNED CERTIFIES THAT EACH OF THE REPRESENTATIONS AND WARRANTIES MADE
BY THE UNDERSIGNED TO THE CORPORATION IN CONNECTION WITH THE UNDERSIGNED'S
ACQUISITION OF THE EXERCISED SPECIAL WARRANTS REMAINS TRUE AND CORRECT ON THE
DATE HEREOF.
The undersigned represents that it: [CHECK ONE ONLY]
/ / A. is not in the United States or a U.S. Person as defined in
Rule 902 of Regulation S under the United States Securities Act
of 1933, as amended (the "U.S. Securities Act") and is not
exercising the Exercised Special Warrants for the account or
benefit of a U.S. Person or a person in the United States.
/ / B. Global Gold or Garrison as an original subscriber of Special
Warrants.
/ / C. is (a) an institutional accredited investor that satisfies the
requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation
D under the U.S. Securities Act that purchased this Special
Warrant directly from the First Dynasty Mines Ltd., or (b) a
registered holder that acquired the Exercised Special Warrants
in a transaction that was exempt from registration under the
<PAGE>
- 2 -
U.S. Securities Act and applicable state securities laws and in
compliance with Subsection 2.3(d)(iii) of the Special Warrant
Indenture.
DATED AT THIS day of , 199 .
- --------------------------------- ----------------------------------
Witness Signature of Subscriber*
----------------------------------
Name of Subscriber
----------------------------------
Address (include Postal Code)
----------------------------------
SIN/TIN Number (if any)
* If the Underlying Securities are to be issued to a person other than the
registered holder, then the signature of the Subscriber must be guaranteed by a
bank, trust company or medallion guaranteed by a member of a recognized stock
exchange.
** This signature must correspond exactly with the name appearing on the
registration panel.
Check box if the share and warrant certificates are to be delivered at the
office where this Special Warrant is exercised, failing which they will be
mailed. / /
<PAGE>
TRANSFER OF SPECIAL WARRANTS
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to:
----------------------------------------------------------------------------
Name
----------------------------------------------------------------------------
Address
----------------------------------------------------------------------------
___________ Special Warrants of First Dynasty Mines Ltd. registered in the name
of the undersigned on the records of First Dynasty Mines Ltd. maintained by CIBC
Mellon Trust Company represented by the Special Warrant Certificate attached and
irrevocably appoints ____________ the attorney of the undersigned to transfer
the said securities on the books or register with full power of substitution.
DATED this______day of________________, 19__.
- ----------------------------- ---------------------------------------
Signature Guaranteed (Signature of Special Warrant Holder)
---------------------------------------
Print full name
---------------------------------------
Print full address and SIN/TIN (if any)
---------------------------------------
INSTRUCTIONS
1. If the Transfer Form is signed by a trustee, executor, administrator,
curator, guardian, attorney, officer of a corporation or any person acting
in a fiduciary or representative capacity, the certificate must be
accompanied by evidence of authority to sign satisfactory to the Trustee
and the Corporation.
2. The signature on the Transfer Form must be guaranteed by an authorized
officer of a chartered bank, trust company or an investment dealer who is
a member of a recognized stock exchange.
3. Special Warrants will only be transferable in accordance with applicable
securities laws and stock exchange regulations. The transfer of Special
Warrants to a transferee may, depending on the residency of such
transferee, result in the securities obtained upon the exercise of the
Special Warrants (whether after or before obtaining receipts for a final
prospectus relating to the distribution of such securities upon exercise
of Special Warrants) not being freely tradeable in the jurisdiction where
the transferee is resident.
4. UNLESS THE CORPORATION HAS OTHERWISE INSTRUCTED THE TRUSTEE IN WRITING, NO
TRANSFER OF SPECIAL WARRANTS WILL BE VALID UNLESS THIS TRANSFER FORM IS
ACCOMPANIED BY: (A) DULY EXECUTED DECLARATION BY THE TRANSFEREE OF SPECIAL
WARRANTS IN THE FORM ATTACHED AS EXHIBIT "A" TO THIS TRANSFER FORM; AND
(B) SUCH OTHER EVIDENCE AS THE TRUSTEE MAY REASONABLY REQUIRE THAT THE
TRANSFER OF SUCH SPECIAL WARRANTS IS BEING MADE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LEGISLATION.
<PAGE>
EXHIBIT "A"
DECLARATION OF TRANSFEREE OF SPECIAL WARRANTS OF
FIRST DYNASTY MINES LTD.
TO: CIBC Mellon Trust Company, trustee of the Special Warrants of First
Dynasty Mines Ltd.
AND TO: First Dynasty Mines Ltd. (the "Corporation")
- -------------------------------------------------------------------------------
The undersigned transferee ("Transferee") of special warrants of First Dynasty
Mines Ltd. ("Special Warrants") whose name appears as such on the form of
transfer of such Special Warrants that accompanies this declaration, hereby
declares and certifies, for himself and on behalf of each beneficial transferee
of all or any part of such Special Warrants, that:
[check one only]
/ / A. (i) no offers to sell the Special Warrants or the Subject
Securities were made by any person to the Transferee or
any beneficial transferee for whom he is acting while
such persons were in the United States;
(ii) the Transferee and each beneficial transferee for
whom he is acting were outside the United States at the
time of execution and delivery of the instrument by
which the Transferee and each beneficial transferee
for whom he is acting agreed to acquire the Special
Warrants; and
(iii) the Transferee is not, and is not acquiring the
Special Warrants for the account or benefit of, a
U.S. Person as defined in Rule 904 of Regulation S under
the United States Securities Act of 1933, as amended
(the "U.S. Securities Act").
/ / B. The Transferee has acquired the Special Warrants in a
transaction exempt from registration under the U.S. Securities
Act and applicable state securities laws and has
<PAGE>
- 2 -
provided herewith evidence (which the Transferee acknowledges
must be satisfactory to the Corporation) of such exemption.
DATED at ________________________________ this ____ day of ________________,
19___.
------------------------------------
Name of Transferee
By:
--------------------------------------
Signature of Authorized Representative
------------------------------------
Name of Person Signing
------------------------------------
Title
<PAGE>
SCHEDULE "B"
NOTICE TO SPECIAL WARRANTHOLDERS
Reference is made to the Special Warrant Indenture made as of August
31, 1998 (the "Indenture") between First Dynasty Mines Ltd. and CIBC Mellon
Trust Company. Unless defined herein, capitalized terms used herein have the
respective meanings ascribed to them in the Indenture.
Pursuant to Section 3.2 of the Indenture, we hereby confirm that
receipts have been issued by the securities commissions in each of the Canadian
Jurisdictions in respect of the prospectus qualifying the distribution of the
Special Warrants. The last receipt was issued on by the Securities
Commission. The Expiry Time is therefore 4:30 p.m. (Vancouver Time) on
____________________.
<PAGE>
CERTIFIED COPY OF
RESOLUTIONS OF DIRECTORS
OF
FIRST DYNASTY MINES LTD.
I, Beverly Downing, Corporate Secretary of First Dynasty Mines Ltd. (the
"Company"), hereby certify that the following is a true and complete extract of
a resolution of the Board of Directors of the Company and that such resolutions
passed have not been amended or rescinded and are still in full force and effect
at the date hereof:
"WHEREAS the Corporation wishes to issue 4,500,000 special warrants of the
Corporation, each entitling the holder thereof to one common share in the
capital of the Corporation pursuant to the letter agreement dated July 24, 1998
between the Corporation, Global Gold Corporation, and Robert A. Garrison (the
"Letter Agreement").
BE IT RESOLVED THAT:
CREATION OF SPECIAL WARRANTS AND ALLOTMENT OF SPECIAL WARRANT SHARES
RESOLVED THAT:
1. The creation of 4,500,000 special warrants of the Corporation (the
"Special Warrants") each Special Warrant exchangeable, subject to
adjustment pursuant to the terms of the Special Warrant Indenture (as
hereinafter defined), for one Common Share, in accordance with and
subject to the terms of the Special Warrant Indenture (as hereinafter
defined) be and it is hereby ratified, confirmed and approved;
2. The Special Warrants shall be issued pursuant to the terms of a special
warrant indenture to be entered into between the Corporation and CIBC
Mellon Trust Company (the "Special Warrant Indenture");
3. Any one director or officer of the Corporation be and is hereby
authorized and directed, for and on behalf of the Corporation, to
approve the form of and to execute and deliver the Special Warrant
Indenture containing such terms and conditions as may be approved by
such director or officer, such approval to be conclusively evidenced by
the signing of the Special Warrant Indenture by such director or
officer;
4. CIBC Mellon Trust Company is hereby appointed as the trustee under the
Special Warrant Indenture, for and on behalf of the holders of all
Special Warrants issued thereunder;
<PAGE>
- 2 -
5. Up to 4,500,000 Special Warrants be and the same are hereby authorized
to be reserved for issuance to the subscribers therefor pursuant to the
Letter Agreement and the Special Warrant Indenture and each Special
Warrant will be deemed issued upon the issuance of a certificate and
receipt by the Corporation of full payment therefor;
6. Any one director or one officer of the Corporation be and he is hereby
authorized to execute on behalf of the Corporation certificates for the
Special Warrants to be issued pursuant to the Special Warrant Indenture
representing up to 4,500,000 Special Warrants to be issued to the
subscribers pursuant to the terms of the Subscription Agreements, under
the corporate seal of the Corporation or otherwise, and to deliver the
same to the Trustee for certification; and
7. 4,500,000 authorized and unissued Common Shares in the capital of the
Corporation be and the same are hereby reserved and allotted for
issuance upon due exercise of the Special Warrants in accordance with
the terms and conditions thereof;
8. Upon due exercise of the Special Warrants in accordance with the terms
and conditions thereof, the number of Common Shares issued pursuant to
such exercise shall be duly issued as fully paid and non-assessable
shares without the necessity of any further act or formality on the
part of the Board of Directors, and the Corporation's registrar and
transfer agent shall be and is hereby authorized and directed to issue,
countersign and register a certificate or certificates representing
such number of Common Shares in the name of the holder of the Special
Warrants that are exercised or in such other name as such holder
otherwise directs.
GENERAL AUTHORITY
RESOLVED THAT any one of the directors or officers of the Corporation be
authorized for and on behalf of the Corporation to do such things and to execute
and deliver, whether under the common seal of the Corporation or otherwise, all
such statements, forms and other documents as they may consider advisable in
connection with the foregoing resolutions and execution by any one or more of
the directors of such officers shall be conclusive proof of their authority to
execute the same on behalf of the Corporation."
DATED as of August 31, 1998.
- -------------------------------------
Beverly Downing, Corporate Secretary
<PAGE>
Exhibit 99.59
Global Gold Corporation
734 Franklin Avenue
Suite 383
Garden City, New York 11530-4525
TO: Holders of Warrants (individually a "Warrant" and collectively the
"Warrants") issued pursuant to the Confidential Private Placement Memorandum of
Global Gold Corporation (formerly known as Triad Energy Corp.) dated May 17,
1995 as amended (each a "Holder" and collectively the "Holders")
Dear Holder:
We enclose for your information a copy of the Form 10-QSB filed by
Global Gold Corporation (the "Corporation") for the quarter ended September 30,
1997.
As the Form 10-QSB reflects, the Corporation received special warrants
to purchase 4,000,000 shares of common stock of First Dynasty Mines Ltd. ("First
Dynasty") in payment of the amount due to the Corporation pursuant to its
Definitive Agreement with First Dynasty.
In addition, we do not anticipate commencing the public trading of the
Corporation's stock in the near future.
The Board of Directors of the Corporation believes that the
Warrantholders need additional time to consider making a potential additional
investment in the Corporation through the exercise of the Warrants.
Accordingly, the Board of Directors has decided to extend the
expiration date of the Warrants from December 31, 1998, the current expiration
date, to December 31, 1999. Attached hereto as Exhibit A is the formal amendment
to the first full paragraph of the Warrants.
Any Holder having any questions or desiring information should contact:
Drury J. Gallagher, Chairman and Chief
Executive Officer
Global Gold Corporation
734 Franklin Avenue
Suite 383
Garden City, New York 11530-4525
Telephone (516) 627-2388
Dated: December 28, 1998 GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
------------------------------------
Drury J. Gallagher
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT A
AMENDMENT TO WARRANT NO. W-____
ISSUED BY
GLOBAL GOLD CORPORATION
Warrant No. ___ issued by Global Gold Corporation (formerly known as
Triad Energy Corp.) (the "Warrant") pursuant to the Confidential Private
Placement Memorandum dated May 17, 1995, as amended, is hereby amended as
follows:
1. The first paragraph of the Warrant is hereby amended to substitute
the following paragraph in lieu of the paragraph appearing therein:
"Global Gold Corporation (formerly known as Triad Energy Corp.), a
Delaware corporation (the "Company"), hereby certifies that, for value received,
____________________ _________________________________, or registered permitted
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time or from time to time before 5:30 P.M., New York time, on
December 31, 1999, _______ fully paid and nonassessable shares of Common Stock,
$.001 par value, of the Company, at a purchase price per share of $.125 (such
purchase price per share as adjusted from time to time as herein provided is
referred to herein as the "Purchase Price"). The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein."
2. Section 17 of the Warrant is hereby amended to read as follows:
"The right to exercise this Warrant shall expire at 5:30 p.m., New York
time, on December 31, 1999."
3. Except as otherwise set forth herein, all of the other terms and
conditions of the Warrant shall remain in full force and effect.
Dated: December 28, 1998 GLOBAL GOLD CORPORATION
By: /s/ Drury J. Gallagher
-------------------------------
Drury J. Gallagher, Chairman and
Chief Executive Officer
