ROYAL OAK MINES INC
S-4/A, 1996-10-07
GOLD AND SILVER ORES
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<PAGE>   1
 
   
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1996
    
 
   
                                                      REGISTRATION NO. 333-11117
    
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                      ------------------------------------
   
                                AMENDMENT No. 1
    
   
                                       to
    
                                    FORM S-4
                             REGISTRATION STATEMENT
                                     under
                           THE SECURITIES ACT OF 1933
                      ------------------------------------
                             ROYAL OAK MINES INC.*
                      ------------------------------------
 
<TABLE>
<S>                                <C>                                <C>
        ONTARIO, CANADA                         1040                               NONE
(State or other jurisdiction of     (Primary standard industrial             (I.R.S. employer
incorporation or organization)       Classification Code Number)          identification number)
</TABLE>
 
                              5501 LAKEVIEW DRIVE
                           KIRKLAND, WASHINGTON 98033
                                 (206) 822-8992
         (Address, including zip code, and telephone number, including
            area code, of the Company's principal executive offices)
 
                      ------------------------------------
 
                              DAVID A. KATZ, ESQ.
                         WACHTELL, LIPTON, ROSEN & KATZ
                              51 WEST 52ND STREET
                            NEW YORK, NEW YORK 10019
                                 (212) 403-1000
                   (Name, address and the telephone number of
                    agent for service in the United States)
 
                                   Copies to:
 
<TABLE>
<S>                                                  <C>
                  JAMES H. WOOD                                 WILLIAM J.V. SHERIDAN, ESQ.
             CHIEF FINANCIAL OFFICER                                   LANG MICHENER
              ROYAL OAK MINES INC.                                 BCE PLACE, SUITE 2500
               5501 LAKEVIEW DRIVE                               TORONTO, ONTARIO M5J 2TJ
           KIRKLAND, WASHINGTON 98033                                 (416) 360-8600
                 (206) 822-8992
</TABLE>
 
                      ------------------------------------
 
   
     Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
    
                      ------------------------------------
 
     If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G check the following box. / /
   
                      ------------------------------------
    
     The Registrant hereby amends the Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>   2
 
                               *OTHER REGISTRANT
 
<TABLE>
<CAPTION>
                                              STATE OR OTHER
                                             JURISDICTION OF     PRIMARY STANDARD
                                              INCORPORATION          INDUSTRY             I.R.S. EMPLOYER
    NAME, ADDRESS AND TELEPHONE NUMBER       OR ORGANIZATION   CLASSIFICATION NUMBER   IDENTIFICATION NUMBER
- -------------------------------------------  ----------------  ---------------------   ---------------------
<S>                                          <C>               <C>                     <C>
Kemess Mines Inc...........................  Ontario, Canada            1040               None
Unit 9
3167 Tatlow Road
P.O. Box 3519
Smithers, British Columbia
V0J 2N0
(604) 847-5667
</TABLE>
<PAGE>   3
 
                             CROSS-REFERENCE SHEET
 
                     PURSUANT TO ITEM 501 OF REGULATION S-K
                 SHOWING THE LOCATION IN THE PROSPECTUS OF THE
                   INFORMATION REQUIRED BY PART I OF FORM S-4
 
   
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION                              LOCATION IN THE PROSPECTUS
- -----------------------                              --------------------------
<S>  <C>                                             <C>
A.   Information About the Transaction

     1.    Forepart of Registration Statement and
           Outside Front Cover Page of the
           Prospectus............................    Front Cover Page of the Registration
                                                       Statement; Outside Front Cover Page of the
                                                       Prospectus
     2.    Inside Front and Outside Back Cover
           Pages of the Prospectus...............    Inside Front Cover Page of the Prospectus;
                                                       Outside Back Cover Page of the Prospectus
     3.    Risk Factors, Ratio of Earnings to
           Fixed Charges and Other Information...    Prospectus Summary; Risk Factors; Business;
                                                       Selected Historical Consolidated Financial
                                                       and Operating Data

     4.    Terms of the Transaction..............    Prospectus Summary; Risk Factors; The
                                                       Exchange Offer; Certain Federal Income Tax
                                                       Consequences of The Exchange Offer;
                                                       Description of Exchange Notes; Exchange
                                                       Offer and Registration Rights
     5.    Pro Forma Financial Information.......    *

     6.    Material Contracts with the Company
           Being Acquired........................    *

     7.    Additional Information Required for
           Reoffering by Persons and Parties
           Deemed to be Underwriters.............    *

     8.    Interest of Named Experts and
           Counsel...............................    Validity of Exchange Notes

     9.    Disclosure of Commission Position on
           Indemnification for Securities Act
           Liabilities...........................    *

B.   Information About the Registrant

     10.   Information with Respect to S-3
           Registrants...........................    *

     11.   Incorporation of Certain Information
           by Reference..........................    Information Incorporated by Reference

     12.   Information With Respect to S-2 or S-3
           Registrants...........................    *

     13.   Incorporation of Certain Information
           by Reference..........................    *

     14.   Information With Respect to
           Registrants Other Than S-3 or S-2
           Registrants...........................    Prospectus Summary; Risk Factors;
                                                       Capitalization; Selected Historical
                                                       Consolidated Financial and Operating Data;
                                                       Management's Discussion and Analysis of
                                                       Financial Condition and Results of
                                                       Operations; Business; Management; Certain
                                                       Relationships and Related Transactions;
                                                       Security Ownership; Financial Statements
</TABLE>
    
<PAGE>   4
 
<TABLE>
<CAPTION>
             ITEM NUMBER AND CAPTION                       LOCATION IN THE PROSPECTUS
- ------------------------------------------------- --------------------------------------------
<C>  <S>                                          <C>
  C. Information About the Company Being Acquired
     15.   Information With Respect to S-3
           Companies............................. *
     16.   Information with Respect to S-2 or S-3
           Companies............................. *
     17.   Information With Respect to Companies
           Other Than S-3 or S-2 Companies....... *
  D. Voting and Management Information
     18.   Information if Proxies, Consents or
           Authorizations are to be Solicited.... *
     19.   Information if Proxies, Consents or
           Authorizations are not to be
           Solicited, or in an Exchange Offer.... Management; The Exchange Offer; Certain
                                                    Relationships and Related Transactions
</TABLE>
 
- ---------------
 
*Item is omitted because response is negative or item is inapplicable.
<PAGE>   5
 
   
                               Offer to Exchange
    
                                all outstanding
 
                     11% Senior Subordinated Notes due 2006
                 (US$175,000,000 principal amount outstanding)
                                      for
                Series B 11% Senior Subordinated Notes due 2006
                       (US$175,000,000 principal amount)
 
                                       of
 
                              Royal Oak Mines Inc.
 
   
           THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
                  TIME, ON NOVEMBER 7, 1996, UNLESS EXTENDED.
    
 
   
    Royal Oak Mines Inc., an Ontario, Canada corporation (the "Company"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying Letter of Transmittal (the "Letter
of Transmittal"), to exchange up to an aggregate principal amount of
US$175,000,000 of its Series B 11% Senior Subordinated Notes due 2006 (the
"Exchange Notes") for an equal principal amount of its outstanding 11% Senior
Subordinated Notes due 2006 (the "Notes"), in integral multiples of US$1,000.
The Exchange Notes will be fully and unconditionally guaranteed on a senior
subordinated basis by Kemess Mines Inc., an Ontario, Canada corporation which is
a wholly owned subsidiary of the Company (the "Guarantor"). The Exchange Notes
will be senior subordinated unsecured obligations of the Company and are
substantially identical (including principal amount, interest rate, maturity and
redemption rights) to the Notes for which they may be exchanged pursuant to this
offer, except that (i) the offering and sale of the Exchange Notes will have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and (ii) holders of Exchange Notes will not be entitled to certain rights
of holders under a Registration Rights Agreement of the Company dated as of
August 12, 1996 (the "Registration Rights Agreement"). The Notes have been, and
the Exchange Notes will be, issued under the indenture (the "Indenture") dated
as of August 12, 1996, among the Company, the Guarantor and Mellon Bank, F.S.B.,
as trustee (the "Trustee"). See "Description of Exchange Notes." There will be
no proceeds to the Company from this offering; however, pursuant to the
Registration Rights Agreement, the Company will bear certain offering expenses.
    
 
   
    The Exchange Notes will be general, unsecured obligations of the Company,
will be subordinated to all Senior Indebtedness of the Company, will rank pari
passu with all senior subordinated indebtedness of the Company and will be
senior in right of payment to all future subordinated indebtedness, if any, of
the Company. The claims of holders of the Exchange Notes will be effectively
subordinated to the Senior Indebtedness of the Company which, as of June 30,
1996, was $1,991,000, consisting of capitalized lease obligations, and as of
August 27, 1996 also included $1,940,000 in outstanding letters of credit issued
under the Credit Facility (as defined herein), and such claims will be
effectively subordinated to all indebtedness and other liabilities (including
trade payables and capital lease obligations) of the subsidiaries of the Company
that are not Guarantors. Such indebtedness and other liabilities of such
subsidiaries on an adjusted basis (giving effect to the issuance of the Notes)
aggregated approximately $675,000 as of June 30, 1996. The Company's pro forma
ratio of debt to total capitalization at June 30, 1996 was approximately 34.4%.
See "Capitalization." The Notes are not currently, and the Exchange Notes upon
issuance are not expected to be, senior in priority to any outstanding
indebtedness of the Company or its subsidiaries. The Company has no current plan
or intention to incur any indebtedness to which the Notes or the Exchange Notes
would be senior in priority. The Notes and the Exchange Notes rank pari passu
with one another.
    
 
                                             (Cover text continued on next page)
                            ------------------------
 
   
SEE "RISK FACTORS," COMMENCING ON PAGE 16, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER NOTES IN THE EXCHANGE OFFER.
    
                            ------------------------
 
THE ENFORCEMENT BY INVESTORS OF CIVIL LIABILITIES UNDER THE FEDERAL SECURITIES
LAWS MAY BE ADVERSELY AFFECTED BY THE FACT THAT THE COMPANY AND THE GUARANTOR
ARE INCORPORATED OR ORGANIZED UNDER THE LAWS OF A FOREIGN COUNTRY, THAT SOME OR
ALL OF THE EXPERTS NAMED IN THIS PROSPECTUS MAY BE RESIDENTS OF A FOREIGN
COUNTRY AND THAT ALL OR A SUBSTANTIAL PORTION OF THE ASSETS OF THE COMPANY AND
THE GUARANTOR AND SAID PERSONS MAY BE LOCATED OUTSIDE THE UNITED STATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE OR PROVINCIAL SECURITIES COMMISSION NOR
     HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR
        PROVINCIAL SECURITIES COMMISSION PASSED UPON THE ACCURACY
             OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
                  TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
   
                The date of this Prospectus is October 9, 1996.
    
<PAGE>   6
 
   
     The Company will accept for exchange any and all validly tendered Notes on
or prior to 5:00 p.m. New York City time, on November 7, 1996, unless the
Exchange Offer is extended (the "Expiration Date"). Tenders of Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date; otherwise such tenders are irrevocable. Mellon Bank, F.S.B. will act as
Exchange Agent (in such capacity, the "Exchange Agent") in connection with the
Exchange Offer. The Exchange Offer is not conditioned upon any minimum principal
amount of Notes being tendered for exchange, but is otherwise subject to certain
customary conditions.
    
 
     The Notes were sold by the Company on August 12, 1996 (the "Offering") in
transactions not registered under the Securities Act in reliance upon the
exemption provided in Section 4(2) of the Securities Act. The Notes were
subsequently resold to qualified institutional buyers in reliance upon Rule 144A
under the Securities Act and to a limited number of institutional accredited
investors in a manner exempt from registration under the Securities Act.
Accordingly, the Notes may not be reoffered, resold or otherwise transferred in
the United States unless registered under the Securities Act or unless an
applicable exemption from the registration requirements of the Securities Act is
available. The Exchange Notes are being offered hereunder in order to satisfy
certain obligations of the Company under the Registration Rights Agreement. See
"The Exchange Offer."
 
     The Exchange Notes will bear interest from August 12, 1996, the date of
issuance of the Notes that are tendered in exchange for the Exchange Notes (or
the most recent Interest Payment Date (as defined herein) to which interest on
such Notes has been paid), at a rate equal to 11% per annum. Interest on the
Exchange Notes will be payable semi-annually on February 15 and August 15 of
each year, commencing February 15, 1997. The Exchange Notes are redeemable at
the option of the Company (i) in whole or in part at any time on or after March
15, 2001, (ii) on or prior to August 15, 1999 in an amount of up to 35% of the
aggregate principal amount of the Notes originally issued with the net cash
proceeds of certain public equity offerings and (iii) in whole but not in part
in the event of certain changes affecting Canadian withholding taxes, in each
case at the redemption prices set forth herein, plus accrued and unpaid interest
to the date of redemption. See "Prospectus Summary -- Summary of Terms of
Exchange Notes."
 
     Upon the occurrence of a Change of Control (as defined herein), each holder
of Exchange Notes may require the Company to repurchase all or a portion of such
holder's Exchange Notes at 101% of the aggregate principal amount of the
Exchange Notes, together with accrued and unpaid interest, if any, to the date
of repurchase. In addition, subject to certain conditions, the Company will be
obligated to make an offer to repurchase the Exchange Notes at 100% of their
principal amount, plus accrued and unpaid interest to the date of repurchase,
with the net cash proceeds of certain sales or other dispositions of assets. See
"Risk Factors -- Change of Control" and "Description of Exchange Notes."
 
     The Exchange Offer is being made in reliance on certain no-action positions
that have been published by the staff of the United States Securities and
Exchange Commission (the "Commission") which require each tendering noteholder
to represent that it is acquiring the Exchange Notes in the ordinary course of
its business and that such holder does not intend to participate and has no
arrangement or understanding with any person to participate in a distribution of
the Exchange Notes. In some cases, certain broker-dealers may be required to
deliver a prospectus in connection with the resale of the Exchange Notes that
they receive in the Exchange Offer. See "Prospectus Summary -- The Exchange
Offer."
 
     There has not previously been any public market for the Exchange Notes. The
Company does not intend to list the Exchange Notes on any securities exchange or
to seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the Exchange Notes will develop. To
the extent that an active market for the Exchange Notes does develop, the market
value of the Exchange Notes will depend on market conditions (such as yields on
alternative investments), general economic conditions, the Company's financial
condition, and other factors. Such conditions might cause the Exchange Notes, to
the extent that they are actively traded, to trade at a significant discount
from face value. See "Risk Factors -- Lack of Public Market for the Exchange
Notes."
 
     ANY NOTES NOT TENDERED AND ACCEPTED IN THE EXCHANGE OFFER WILL REMAIN
OUTSTANDING. TO THE EXTENT ANY NOTES ARE TENDERED AND ACCEPTED IN THE EXCHANGE
OFFER, A HOLDER'S ABILITY TO SELL UNTENDERED NOTES COULD BE
 
                                      (ii)
<PAGE>   7
 
ADVERSELY AFFECTED. FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER, THE HOLDERS OF
NOTES WILL CONTINUE TO BE SUBJECT TO THE EXISTING RESTRICTIONS UPON TRANSFER
THEREOF AND THE COMPANY WILL HAVE FULFILLED ONE OF ITS OBLIGATIONS UNDER THE
REGISTRATION RIGHTS AGREEMENT. HOLDERS OF NOTES WHO DO NOT TENDER THEIR NOTES
GENERALLY WILL NOT HAVE ANY FURTHER REGISTRATION RIGHTS UNDER THE REGISTRATION
RIGHTS AGREEMENT OR OTHERWISE. SEE "THE EXCHANGE OFFER -- CONSEQUENCES OF
FAILURE TO EXCHANGE."
 
     The Exchange Notes issued pursuant to this Exchange Offer generally will be
issued in the form of Global Exchange Notes (as defined herein), which will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Exchange Notes representing the Exchange Notes will be
shown on, and transfers thereof will be effected through, records maintained by
DTC and its participants. Notwithstanding the foregoing, Notes held in
certificated form will be exchanged solely for the Exchange Notes in
certificated form. After the initial issuance of the Global Exchange Notes,
Exchange Notes in certificated form will be issued in exchange for the Global
Exchange Notes only on the terms set forth in the Indenture. See "Book-Entry;
Delivery and Form."
                            ------------------------
 
     NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE EXCHANGE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE EXCHANGE NOTES TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
 
   
     UNTIL JANUARY 6, 1997 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
    
 
                                      (iii)
<PAGE>   8
 
                             AVAILABLE INFORMATION
 
   
     The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Company has filed with the Commission a Registration Statement
on Form S-4 under the Securities Act for the registration of the Exchange Notes
offered hereby (the "Registration Statement"). This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in exhibits and schedules to the Registration Statement as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company or the Exchange Notes offered hereby, reference is made
to the Registration Statement, including the exhibits and financial statement
schedules thereto, which may be inspected without charge at the public reference
facility maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of which may be obtained from the Commission at
prescribed rates. Statements made in this Prospectus concerning the contents of
any document referred to herein are not necessarily complete. With respect to
each such document filed with the Commission as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
    
 
     Such documents and other information filed by the Company can be inspected
and copied at the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and the regional offices of the Commission
located at 7 World Trade Center, New York, New York 10048 and 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661. Copies of such materials may be
obtained from the Public Reference Section of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at its public reference
facilities in New York, New York and Chicago, Illinois at prescribed rates. The
Company makes its filings with the Commission electronically. The Commission
maintains a website that contains reports, proxy and information statements and
other information regarding registrants that file electronically, which
information can be accessed at http://www.sec.gov.
 
     The Guarantor is not currently subject to the informational requirements of
the Exchange Act. As a result of the offering of the Exchange Notes, the
Guarantor will become subject to the informational requirements of the Exchange
Act. The Company will fulfill its obligations with respect to such requirements
by including information regarding the Guarantor in the Company's periodic
reports. In addition, the Company will send to each holder of Exchange Notes
copies of annual reports and quarterly or financial reports containing the
information required to be filed under the Exchange Act if furnished by it to
stockholders generally.
 
     So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it is required to furnish the information required to be filed
with the Commission to the Trustees and the holders of the Notes and the
Exchange Notes. The Company has agreed that, even if it is not required under
the Exchange Act to furnish such information to the Commission, it will
nonetheless continue to furnish information that would be required to be
furnished by the Company by Section 13 of the Exchange Act to the Trustees and
the holders of the Notes or Exchange Notes as if it were subject to such
periodic reporting requirements.
 
     In addition, the Company has agreed that, for so long as any of the Notes
remain outstanding, it will make available, upon request, to any seller of such
Notes the information specified in Rule 144(d)(4) under the Securities Act,
unless the Company and the Guarantor are then subject to Section 13 or 15(d) of
the Exchange Act.
                            ------------------------
 
     THIS PROSPECTUS INCLUDES REFERENCES TO THE FUTURE PERFORMANCE, PLANS AND
EXPECTATIONS OF THE COMPANY WHICH ARE FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A(i)(1) OF THE SECURITIES ACT, INCLUDING WITHOUT LIMITATION
STATEMENTS MADE UNDER THE HEADINGS "PROSPECTUS SUMMARY," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 
                                        2
<PAGE>   9
 
RESULTS OF OPERATIONS" AND "BUSINESS." SUCH STATEMENTS ARE BASED ON NUMEROUS
VARIABLES AND ASSUMPTIONS THAT ARE INHERENTLY UNCERTAIN, INCLUDING WITHOUT
LIMITATION FACTORS RELATED TO THE COMPANY'S ABILITY TO SUCCESSFULLY COMPLETE
DEVELOPMENT PROJECTS WITHIN PROJECTED CAPITAL BUDGETS OR TO CARRY ON MINING
OPERATIONS WITHIN PROJECTED OPERATING BUDGETS, VOLATILITY IN THE PRICE OF GOLD,
COPPER AND OTHER COMMODITIES, INTEREST AND FOREIGN EXCHANGE RATES, GOVERNMENT
REGULATION AND AGENCY ACTION, COMPETING LAND CLAIMS, THE ACCURACY OF ESTIMATES
OF ORE RESERVES AND MINERAL INVENTORY AND GENERAL ECONOMIC AND COMPETITIVE
CONDITIONS. ACCORDINGLY, ACTUAL FUTURE RESULTS OR VALUES MAY BE SIGNIFICANTLY
MORE OR LESS FAVORABLE THAN PROVIDED BY SUCH REFERENCES.
 
                     INFORMATION INCORPORATED BY REFERENCE
 
     All documents filed with the Commission by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the Expiration Date are incorporated herein by reference
and such documents shall be deemed to be a part hereof from the date of filing
of such documents. Any statement contained in this Prospectus or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
 
                               EXCHANGE RATE DATA
 
     The Company publishes its consolidated financial statements in Canadian
dollars. All dollar amounts set forth in this Prospectus are expressed in
Canadian dollars unless otherwise specifically indicated. The following table
sets forth, for the periods indicated, the high and low exchange rates (i.e.,
the highest and lowest rates at which Canadian dollars were sold), the average
exchange rate (i.e., the average of the exchange rates on the last business day
of each month during the applicable period) and the period end exchange rate of
the Canadian dollar in exchange for the United States dollar, as calculated from
the inverse of the exchange rate reported by the Federal Reserve Bank of New
York for cable transfers payable in Canadian dollars as certified for customs
purposes (the "Noon Buying Rate"). On August 27, 1996, the inverse of the Noon
Buying Rate was Cdn $1.00 equals US$0.7312.
 
<TABLE>
<CAPTION>
                                                                                          SIX MONTHS
                                                      YEAR ENDED DECEMBER 31             ENDED JUNE 30
                                            ------------------------------------------   -------------
                                             1991     1992     1993     1994     1995        1996
                                            ------   ------   ------   ------   ------   -------------
<S>                                         <C>      <C>      <C>      <C>      <C>      <C>
Exchange rate at period end...............  0.8652   0.7867   0.7544   0.7129   0.7323       0.7322
Average exchange rate during the period...  0.8726   0.8276   0.7751   0.7321   0.7305       0.7310
Highest exchange rate during the period...  0.8941   0.8760   0.8046   0.7632   0.7527       0.7381
Lowest exchange rate during the period....  0.8573   0.7760   0.7439   0.7105   0.7023       0.7265
</TABLE>
 
                                        3
<PAGE>   10
 
                               PROSPECTUS SUMMARY
 
     The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
the notes thereto appearing elsewhere in this Prospectus. References to the
"Company" or "Royal Oak" mean Royal Oak Mines Inc., an Ontario, Canada
corporation and its subsidiaries, unless the context otherwise requires. The
consolidated financial statements of Royal Oak included herein have been
prepared in accordance with Canadian generally accepted accounting principles
and are subject to Canadian auditing and independent auditor standards and thus
may not be comparable to financial statements of United States companies.
Certain terms relating to the mining industry as used herein are defined in the
"Glossary of Certain Mining Terms" beginning on page 106. Reserve data in this
Prospectus dated as of December 31, 1995, includes data for the Kemess, Duport
and Cape Ray properties acquired by the Company in 1996. IN THIS PROSPECTUS,
UNLESS OTHERWISE SPECIFIED OR THE CONTEXT OTHERWISE REQUIRES, ALL DOLLAR AMOUNTS
ARE EXPRESSED IN CANADIAN DOLLARS. See "Exchange Rate Data."
 
     The financial information presented below includes operating results
expressed in terms of EBITDA, which represents net income before net interest
expense, income taxes, depreciation and amortization, and other net income or
net expenses. EBITDA information is included as supplemental information herein
because the Company understands that such information is used by certain
investors as one measure of an issuer's historical ability to service debt.
EBITDA is not intended to represent, and should not be considered more
meaningful than, or an alternative to measures of, performance determined in
accordance with generally accepted accounting principles.
 
                                  THE COMPANY
 
     Royal Oak is a major North American gold mining company which, together
with its predecessors, has produced in excess of 50 million ounces of gold over
a 60-year period. The Company, which owns and operates five producing gold
mines, is in the process of expanding one producing mine and is developing four
major new projects. The Company has extensive land positions in Canada covering
approximately 704,000 acres, as well as over 7,000 acres in the United States,
which provide it with the opportunity to expand its reserves through focused
exploration and development. As of and for the fiscal year ending December 31,
1995, Royal Oak had approximately 9.8 million ounces of mineable gold reserves
and had produced 371,151 ounces of gold.
 
     The Company's five producing gold mines consist of the Colomac and Giant
Mines in the Northwest Territories, the Pamour and Nighthawk Mines in Ontario
and the Hope Brook Mine in Newfoundland. Through acquisitions, exploration and
the implementation of more advanced and efficient mining methods, the Company
has increased its annual production by a compounded annual growth rate of 17.5%
since 1991. The Company conducts a focused exploration program to develop
additional mineable gold reserves in close proximity to its existing mines in
order to maximize the utilization of its processing facilities and to increase
processing efficiencies. In 1995, the Company's exploration efforts resulted in
the addition of approximately 2.2 million ounces of mineable gold reserves to
its existing reserve base at a cost of approximately $6.95 per ounce. A
significant part of this exploration program was focused on the Pamour Mine open
pit expansion which is expected to contribute approximately 60,000 ounces of
gold annually when production commences in the first half of 1998.
 
                              DEVELOPMENT PROJECTS
 
     Royal Oak's four major development projects consist of the Kemess South,
Matachewan, Red Mountain and Duport gold properties. (These properties are
collectively referred to herein as the "Development Projects.") The addition of
these four projects has contributed approximately 6.1 million ounces of gold to
the Company's mineable ore reserves. The Company believes that the development
of these properties will extend the Company's overall reserve life, dramatically
increase production and decrease overall cash costs per ounce of gold produced.
 
                                        4
<PAGE>   11
 
- -   Kemess -- In January 1996, the Company completed a series of transactions
     which resulted in the acquisition of the Kemess gold-copper ore body
     comprised of Kemess South and Kemess North located in British Columbia. The
     aggregate consideration for the Kemess acquisition was approximately $202
     million in cash and common shares. Construction of the Kemess South open
     pit mine and processing facility (the "Kemess South Project") began in July
     1996 and is expected to be completed in the first half of 1998. The Company
     estimates that the aggregate development costs of the Kemess South Project
     will be approximately $390 million, of which up to $166 million will be
     provided in the form of economic assistance, compensation and investment by
     the British Columbia provincial government ($14.5 million of which has been
     received) with the remainder to be provided from proceeds of the Offering,
     vendor financing, borrowings under the Credit Facility and cash flow from
     operations. The Kemess South Project contains approximately 4.1 million
     ounces of mineable gold reserves and approximately 1.0 billion pounds of
     copper. The Company estimates that the average annual production of Kemess
     South will be approximately 250,000 ounces of gold with an estimated
     average cash cost of US$189 per ounce and approximately 60 million pounds
     of copper with an estimated average cash cost of US$0.48 per pound over the
     life of the mine.
 
- -   Matachewan -- The Company expects to complete the construction of the open
     pit mine and concentrator at the Matachewan property located in Ontario in
     the second half of 1998 with an underground mine to follow. Concentrate
     from Matachewan will be transported to the Pamour Mill for cyanidation.
     Total capital costs to develop the property are expected to be
     approximately $115 million. The property was previously an active producing
     mine which presently contains approximately 884,000 ounces of mineable gold
     reserves. Annual production is targeted at approximately 100,000 ounces of
     gold with an estimated average cash cost of US$227 per ounce.
 
- -   Red Mountain -- Following the commencement of construction in 1998, the
     Company expects to complete construction of the underground mine and
     processing operation at the Red Mountain property located in British
     Columbia in 1999. Total capital costs to develop the property are expected
     to be approximately $113 million. The property contains approximately
     800,000 ounces of mineable gold reserves with annual production targeted at
     approximately 150,000 ounces of gold with an estimated average cash cost of
     US$162 per ounce.
 
- -   Duport -- Following the commencement of construction in 1999, the Company
     expects to complete construction of the underground mine and processing
     operation at the Duport property located in Ontario in 2000. Total capital
     costs to develop the property are expected to be approximately $70 million.
     The property contains approximately 383,000 ounces of mineable gold
     reserves with annual production targeted at approximately 47,250 ounces of
     gold per year with an estimated average cash cost of US$224 per ounce.
 
     While the Company intends to proceed with the Development Projects on the
schedule outlined above, the Company's initial priority is completion of the
development of the Kemess South Project. The timing of the other Development
Projects will be dependent in part upon completion of the Kemess South Project
and other factors such as available financing and receipt of required government
approvals and permits.
 
                               BUSINESS STRENGTHS
 
     Royal Oak believes it has certain strengths that provide the Company with
advantages in successfully pursuing its operating strategy, including the
following:
 
- -   Long Reserve Life -- Royal Oak's properties contain approximately 9.8
     million ounces of mineable gold ore reserves with an estimated reserve
     life, based on estimated future production, of over 15 years.
 
- -   Attractive Development Projects -- The Company's Development Projects will,
     upon completion, increase the Company's annual gold production, extend
     overall mine operating life and significantly reduce the Company's average
     cash costs.
 
                                        5
<PAGE>   12
 
- -   Extensive Exploration Property Portfolio -- The Company owns an extensive
     portfolio of mineral properties covering 711,000 acres of prospective
     mining rights in Canada and the United States. Royal Oak's exploration
     program is primarily focused on those properties that are adjacent to its
     producing mines in order to maximize the utilization of the Company's
     existing processing facilities and to increase processing efficiencies.
 
- -   Management Expertise -- Royal Oak's senior management team has extensive
     operating and exploration experience in the mining industry. Management's
     significant experience has been instrumental in helping the Company achieve
     its historical growth and provides a significant base upon which to expand
     the Company's future operations. In addition, the Company has recently
     formed a 21-member project development team to construct, develop and
     manage the Kemess South Project as well as a separate team to focus on the
     other Development Projects.
 
                               OPERATING STRATEGY
 
     In order to capitalize on its business strengths, the Company has developed
the following operating strategy to continue its growth:
 
- -   Increase Production and Reduce Average Cash Costs -- As a result of
     increased production at the Colomac Mine and the first full year of
     production at the Nighthawk Mine, the Company expects to increase its gold
     production in 1996 to approximately 415,000 ounces from 371,151 ounces in
     1995. In addition, through the successful implementation of advanced mining
     technologies accompanied by cost reduction programs, the Company believes
     that its average cash costs will decrease from US$358 per ounce of gold in
     1995 to approximately US$315 per ounce of gold in 1996. The Company's cash
     costs for the six months ended June 30, 1996 were US$331 per ounce of gold
     compared to US$351 in the same period in 1995.
 
- -   Complete Development of Major Projects -- The Company's primary objective
     with respect to the Development Projects is to efficiently complete the
     development of the Kemess South Project. The Company estimates that, upon
     completion, the Development Projects will generate additional annual
     production of approximately 547,000 ounces of gold and 60 million pounds of
     copper with an average estimated cash cost of US$192 per ounce of gold and
     US$0.48 per pound of copper over the life of the properties.
 
- -   Expand Reserve Base Through Focused Exploration -- The Company's exploration
     program focuses on identifying additional mineable ore reserves in close
     proximity to its existing mines. This strategy allows the Company to
     maximize utilization of existing processing facilities, to increase
     processing efficiencies and to capitalize on its extensive land position in
     Canada. In 1995, the Company's $15.3 million exploration program delineated
     approximately 2.2 million ounces of mineable gold reserves. The Company has
     budgeted $12 million for its 1996 exploration program.
 
     Management believes that the gold mining industry will continue to
consolidate over the next several years and that numerous acquisition
opportunities will become available to the Company. In 1996, the Company
acquired the Kemess, Duport and Cape Ray properties. In addition to the
operating strategy described above, the Company intends to review acquisition
opportunities as they become available and will pursue selective acquisitions of
gold properties that will increase production, mineable ore reserves and cash
flow from operations while reducing average cash costs. These acquisitions could
be an important component of the Company's future growth.
 
                                        6
<PAGE>   13
 
                               THE NOTE OFFERING
 
THE NOTES..................  The Notes were sold by the Company in the Offering
                             on August 12, 1996, and were subsequently resold to
                             qualified institutional buyers pursuant to Rule
                             144A under the Securities Act and to institutional
                             investors that are accredited investors in a manner
                             exempt from registration under the Securities Act.
 
REGISTRATION RIGHTS
AGREEMENT..................  In connection with the Offering, the Company
                             entered into the Registration Rights Agreement,
                             which grants holders ("Holders") of the Notes
                             certain exchange and registration rights. The
                             Exchange Offer is intended to satisfy such exchange
                             and registration rights, which generally terminate
                             upon the consummation of the Exchange Offer.
 
                               THE EXCHANGE OFFER
 
SECURITIES OFFERED.........  US$175,000,000 aggregate principal amount of Series
                             B 11% Senior Subordinated Notes due August 15,
                             2006.
 
THE EXCHANGE OFFER.........  US$1,000 principal amount of the Exchange Notes in
                             exchange for each US$1,000 principal amount of
                             Notes. As of the date hereof, US$175,000,000
                             aggregate principal amount of Notes are
                             outstanding. The Company will issue the Exchange
                             Notes to Holders on or promptly after the
                             Expiration Date.
 
                             Based on an interpretation by the staff of the
                             Commission set forth in no-action letters issued to
                             third parties, the Company believes that Exchange
                             Notes issued pursuant to the Exchange Offer in
                             exchange for Notes may be offered for resale,
                             resold and otherwise transferred by any holder
                             thereof (other than any such holder which is an
                             "affiliate" of the Company within the meaning of
                             Rule 405 under the Securities Act) without
                             compliance with the registration and prospectus
                             delivery provisions of the Securities Act, provided
                             that such Exchange Notes are acquired in the
                             ordinary course of such holder's business and that
                             such holder does not intend to participate and has
                             no arrangement or understanding with any person to
                             participate in the distribution of such Exchange
                             Notes.
 
                             Each broker-dealer that receives Exchange Notes for
                             its own account pursuant to the Exchange Offer must
                             acknowledge that it will deliver a prospectus in
                             connection with any resale of such Exchange Notes.
                             The Letter of Transmittal states that by so
                             acknowledging and by delivering a prospectus, a
                             broker-dealer will not be deemed to admit that it
                             is an "underwriter" within the meaning of the
                             Securities Act. This Prospectus, as it may be
                             amended or supplemented from time to time, may be
                             used by a broker-dealer in connection with resales
                             of Exchange Notes received in exchange for Notes
                             where such Notes were acquired by such
                             broker-dealer as a result of market-making
                             activities or other trading activities. The Company
                             has agreed that for a period of 180 days after the
                             Expiration Date, it will make this Prospectus
                             available to any broker-dealer for use in
                             connection with any such resale.
 
                             Any Holder who tenders in the Exchange Offer with
                             the intention to participate, or for the purpose of
                             participating, in a distribution of the Exchange
                             Notes could not rely on the position of the staff
                             of the SEC enunciated in Exxon Capital Holdings
                             Corporation (available April 13,
 
                                        7
<PAGE>   14
 
                             1989), Morgan Stanley & Co., Inc. (available June
                             5, 1991) or similar no-action letters and, in the
                             absence of an exemption therefrom, must comply with
                             the registration and prospectus delivery
                             requirements of the Securities Act in connection
                             with the resale of the Exchange Notes. Failure to
                             comply with such requirements in such instance may
                             result in such Holder incurring liability under the
                             Securities Act for which the Holder is not
                             indemnified by the Company.
 
                             In any State where the Exchange Offer does not fall
                             under a statutory exemption to such State's Blue
                             Sky laws, the Company has filed the appropriate
                             registrations and notices, and has made the
                             appropriate requests, to permit the Exchange Offer
                             to be made in such State.
 
   
EXPIRATION DATE............  5:00 p.m., New York City time, on November 7, 1996,
                             unless the Exchange Offer is extended, in which
                             case the term "Expiration Date" means the latest
                             date and time to which the Exchange Offer is
                             extended.
    
 
INTEREST ON THE EXCHANGE
NOTES
  AND THE NOTES............  The Exchange Notes will bear interest from August
                             12, 1996, the date of issuance of the Notes that
                             are tendered in exchange for the Exchange Notes (or
                             the most recent Interest Payment Date (as defined
                             below in the Summary of Terms of Exchange Notes) to
                             which interest on such Notes has been paid).
                             Accordingly, Holders of Notes that are accepted for
                             exchange will not receive interest on the Notes
                             that is accrued but unpaid at the time of tender,
                             but such interest will be payable on the first
                             Interest Payment Date after the Expiration Date.
 
CONDITIONS TO THE
  EXCHANGE OFFER...........  The Exchange Offer is subject to certain customary
                             conditions, which may be waived by the Company. See
                             "The Exchange Offer -- Conditions."
 
PROCEDURES FOR
  TENDERING NOTES..........  Each Holder of Notes wishing to accept the Exchange
                             Offer must complete, sign and date the accompanying
                             Letter of Transmittal, or a facsimile thereof, in
                             accordance with the instructions contained herein
                             and therein, and mail or otherwise deliver the
                             Letter of Transmittal, or such facsimile, together
                             with the Notes and any other required documentation
                             to the Exchange Agent at the address set forth in
                             the Letter of Transmittal. By executing the Letter
                             of Transmittal, each Holder will represent to the
                             Company that, among other things, the Holder or the
                             person receiving such Exchange Notes, whether or
                             not such person is the Holder, is acquiring the
                             Exchange Notes in the ordinary course of business
                             and that neither the Holder nor any such other
                             person has any arrangement or understanding with
                             any person to participate in the distribution of
                             such Exchange Notes. In lieu of physical delivery
                             of the certificates representing Notes, tendering
                             Holders may transfer Notes pursuant to the
                             procedure for book-entry transfer as set forth
                             under "The Exchange Offer -- Procedures for
                             Tendering."
 
SPECIAL PROCEDURES FOR
  BENEFICIAL OWNERS........  Any beneficial owner whose Notes are registered in
                             the name of a broker, dealer, commercial bank,
                             trust company or other nominee and who wishes to
                             tender should contact such registered Holder
                             promptly and instruct such registered Holder to
                             tender on such beneficial owner's behalf. If such
                             beneficial owner wishes to tender on such owner's
                             own
 
                                        8
<PAGE>   15
 
                             behalf, such owner must, prior to completing and
                             executing the Letter of Transmittal and delivering
                             its Notes, either make appropriate arrangements to
                             register ownership of the Notes in such owner's
                             name or obtain a properly completed bond power from
                             the registered Holder. The transfer of registered
                             ownership may take considerable time.
 
GUARANTEED DELIVERY
  PROCEDURES...............  Holders of Notes who wish to tender their Notes and
                             whose Notes are not immediately available or who
                             cannot deliver their Notes, the Letter of
                             Transmittal or any other documents required by the
                             Letter of Transmittal to the Exchange Agent (or
                             comply with the procedures for book-entry transfer)
                             prior to the Expiration Date must tender their
                             Notes according to the guaranteed delivery
                             procedures set forth in "The Exchange Offer --
                             Guaranteed Delivery Procedures."
 
WITHDRAWAL RIGHTS..........  Tenders may be withdrawn at any time prior to 5:00
                             p.m., New York City time, on the Expiration Date
                             pursuant to the procedures described under "The
                             Exchange Offer -- Withdrawals of Tenders."
 
ACCEPTANCE OF NOTES AND
  DELIVERY OF EXCHANGE
  NOTES....................  The Company will accept for exchange any and all
                             Notes that are properly tendered in the Exchange
                             Offer prior to 5:00 p.m., New York City time, on
                             the Expiration Date. The Exchange Notes issued
                             pursuant to the Exchange Offer will be delivered
                             promptly following the Expiration Date. See "The
                             Exchange Offer -- Terms of the Exchange Offer."
 
FEDERAL INCOME TAX
  CONSEQUENCES.............  The issuance of the Exchange Notes to Holders of
                             the Notes pursuant to the terms set forth in this
                             Prospectus will not constitute an exchange for
                             federal income tax purposes. Consequently, no gain
                             or loss would be recognized by Holders of the Notes
                             upon receipt of the Exchange Notes. See "Certain
                             Federal Income Tax Consequences of the Exchange
                             Offer."
 
EFFECT ON HOLDERS OF
NOTES......................  As a result of the making of this Exchange Offer,
                             the Company will have fulfilled certain of its
                             obligations under the Registration Rights
                             Agreement, and Holders of Notes who do not tender
                             their Notes will generally not have any further
                             registration rights under the Registration Rights
                             Agreement or otherwise. Such Holders will continue
                             to hold the untendered Notes and will be entitled
                             to all the rights and subject to all the
                             limitations applicable thereto under the Indenture,
                             except to the extent such rights or limitations, by
                             their terms, terminate or cease to have further
                             effectiveness as a result of the Exchange Offer.
                             All untendered Notes will continue to be subject to
                             certain restrictions on transfer. Accordingly, if
                             any Notes are tendered and accepted in the Exchange
                             Offer, the trading market for the untendered Notes
                             could be adversely affected.
 
EXCHANGE AGENT.............  Mellon Bank, F.S.B.
 
                                        9
<PAGE>   16
 
                       SUMMARY OF TERMS OF EXCHANGE NOTES
 
     The form and terms of the Exchange Notes are the same as the form and terms
of the Notes (which they replace) except that (i) the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof and (ii) the holders of Exchange Notes
generally will not be entitled to further registration rights under the
Registration Rights Agreement, which rights generally will be satisfied when the
Exchange Offer is consummated. The Exchange Notes will evidence the same debt as
the Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
 
SECURITIES OFFERED.........  US$175,000,000 aggregate principal amount of Series
                             B 11% Senior Subordinated Notes due 2006 (equal to
                             Cdn $239,332,604 based upon the exchange rate on
                             August 27, 1996).
 
ISSUER.....................  Royal Oak Mines Inc.
 
MATURITY DATE..............  August 15, 2006.
 
INTEREST PAYMENT DATES.....  Interest on the Exchange Notes will accrue from
                             August 12, 1996 (the "Issue Date") and is payable
                             semi-annually on each of February 15 and August 15
                             of each year, commencing February 15, 1997.
 
RANKING....................  The Exchange Notes will be general unsecured
                             obligations of the Company and will be subordinated
                             in right of payment to all existing and future
                             Senior Indebtedness (as defined) of the Company
                             (which includes the Credit Facility). The Exchange
                             Notes will rank pari passu with all future senior
                             subordinated indebtedness of the Company and will
                             rank senior to all other subordinated indebtedness,
                             if any, of the Company. As of June 30, 1996, there
                             was no Guarantor Senior Indebtedness and $1,991,000
                             of Senior Indebtedness consisting of capitalized
                             lease obligations. In addition, as of August 27,
                             1996, the Company had outstanding under its Credit
                             Facility letters of credit in the aggregate amount
                             of $1,940,000.
 
OPTIONAL REDEMPTION........  The Exchange Notes are redeemable, in whole or in
                             part, at the option of the Company, on or after
                             August 15, 2001, at the redemption prices set forth
                             herein, plus accrued interest to the date of
                             redemption. In addition, on or prior to August 15,
                             1999, the Company, at its option, may redeem an
                             amount of Exchange Notes equal to up to 35% of the
                             aggregate principal amount of the Notes originally
                             issued in the Offering with the net cash proceeds
                             of one or more Public Equity Offerings (as
                             defined), at the redemption prices set forth herein
                             plus accrued interest to the date of redemption.
                             The Exchange Notes are also redeemable at the
                             option of the Company, in whole but not in part, at
                             a redemption price equal to 100% of the aggregate
                             principal amount so redeemed, plus accrued and
                             unpaid interest thereon to the date of the
                             redemption, in the event of certain changes
                             affecting Canadian withholding taxes. See
                             "Description of Exchange Notes -- Optional
                             Redemption."
 
SUBSIDIARY GUARANTEE.......  The Exchange Notes will be guaranteed on a senior
                             subordinated basis by the Guarantor.
 
CHANGE OF CONTROL..........  Upon a Change of Control Triggering Event (as
                             defined), each holder will have the right to
                             require the Company to offer to repurchase such
                             holder's Exchange Notes at a price equal to 101% of
                             the principal amount thereof plus accrued interest
                             to the date of repurchase.
 
CERTAIN COVENANTS..........  The Indenture contains certain covenants that limit
                             the ability of the Company and its Restricted
                             Subsidiaries to, among other things, incur
 
                                       10
<PAGE>   17
 
                             additional indebtedness, pay dividends or make
                             certain other restricted payments, consummate
                             certain asset sales, enter into certain
                             transactions with affiliates, incur indebtedness
                             that is subordinated in right of payment to any
                             Senior Indebtedness and senior in right of payment
                             to the Exchange Notes, incur liens, in the case of
                             a subsidiary, to pay dividends or make certain
                             payments to the Company and its Restricted
                             Subsidiaries, merge or consolidate with any other
                             person or sell, assign, transfer, lease, convey or
                             otherwise dispose of all or substantially all of
                             the assets of the Company or its Restricted
                             Subsidiaries.
 
EXCHANGE OFFER;
REGISTRATION RIGHTS........  In the event that applicable law or interpretations
                             of the staff of the Commission do not permit the
                             Company to effect the Exchange Offer, or if certain
                             holders of the Notes are not permitted to
                             participate in, or do not receive the benefit of,
                             the Exchange Offer, the Registration Rights
                             Agreement provides that the Company and the
                             Guarantor will use all reasonable efforts to cause
                             to become effective a shelf registration statement
                             with respect to the resale of the Notes and to keep
                             such shelf registration statement effective until
                             three years after the Issue Date or such shorter
                             period ending when all the Notes have been sold
                             thereunder. The interest rate on the Notes is
                             subject to increase under certain circumstances if
                             the Company and the Guarantor are not in compliance
                             with their obligations under the Registration
                             Rights Agreement. See "Exchange Offer and
                             Registration Rights."
 
  For additional information regarding the Exchange Notes, see "Description of
                                Exchange Notes."
 
                                  RISK FACTORS
 
     See "Risk Factors," which begins on page 16, for a discussion of certain
factors that should be considered by prospective investors in evaluating an
investment in the Exchange Notes.
 
                                       11
<PAGE>   18
 
                 SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
 
     The following table sets forth historical consolidated financial data for
the Company as of and for the periods noted. The consolidated balance sheet and
income statement data as of and for the years ended December 31, 1991 through
1995 has been derived from the audited consolidated financial statements of
Royal Oak. The consolidated balance sheet and income statement data as of and
for the six months ended June 30, 1995 and 1996 has been derived from the
unaudited financial statements of Royal Oak which, in the opinion of management
of the Company, contain all adjustments necessary for a fair presentation of
this information. The historical data with respect to the results of operations
for the six months ended June 30, 1996 should not be regarded as necessarily
indicative of the results that may be expected for the entire year. The
Operating Data presented below has been derived from the Company's accounting
and other records. The consolidated financial statements of Royal Oak and the
notes thereto have been prepared in accordance with accounting principles
generally accepted in Canada ("Cdn GAAP"). These principles are also in
conformity, in all material respects, with accounting principles generally
accepted in the United States ("US GAAP") except as described in Note 13 of the
notes to the audited consolidated financial statements of Royal Oak and the
notes thereto as of December 31, 1994 and 1995 and for each fiscal year in the
three-year period ended December 31, 1995 (the "Annual Consolidated Financial
Statements"). All dollar amounts are expressed in Canadian dollars except as
noted below. The following table should be read together with the Annual
Consolidated Financial Statements and the unaudited consolidated financial
statements of Royal Oak and the notes thereto as of and for the six months ended
June 30, 1995 and 1996 (the "Unaudited Consolidated Financial Statements" and,
together with the Annual Consolidated Financial Statements, the "Consolidated
Financial Statements") appearing elsewhere in this Prospectus. See "Index to
Consolidated Financial Statements."
 
<TABLE>
<CAPTION>
                                                                                                                SIX MONTHS
                                                                                                                  ENDED
                                                                YEAR ENDED DECEMBER 31                           JUNE 30
                                                -------------------------------------------------------    --------------------
                                                 1991        1992        1993        1994        1995        1995        1996
                                                -------    --------    --------    --------    --------    --------    --------
<S>                                             <C>        <C>         <C>         <C>         <C>         <C>         <C>
                                                            (DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA AND RATIO)
INCOME STATEMENT DATA:
  CDN GAAP
  Revenue....................................   $96,433    $113,673    $135,326    $162,111    $208,311    $100,839    $105,846
  Operating expenses.........................    72,581      89,874     110,258     117,790     182,214      89,714      81,383
  Royalties and marketing expenses...........       830         881       1,248       2,490       2,535       1,108       1,408
  Administrative and corporate expenses......     3,500       4,082       3,411       5,271       8,549       4,945       4,861
  Depreciation and amortization..............     4,966       4,275       4,998       8,525      14,895       6,270      11,366
  Exploration expenses(1)....................        --          --          --          --          --         254       2,409
  Provision for (recovery of) loss on foreign
    currency contracts.......................        --          --          --      15,267      (5,244)     (3,772)       (976)
                                                --------   --------    --------    --------    --------    --------    --------
  Operating income...........................    14,556      14,561      15,411      12,768       5,362       2,320       5,395
  Interest and other income, net(2)..........     1,314         638       2,289       7,074      20,902      12,135       2,462
  Other(1)...................................    (7,124)     (3,654)     (1,862)      2,960      (1,553)       (235)        (23)
  Provision for income taxes.................      (105)       (108)       (215)       (636)     (1,542)       (969)     (2,729)
                                                --------   --------    --------    --------    --------    --------    --------
  Net income.................................   $ 8,641    $ 11,437    $ 15,623    $ 22,166    $ 23,169    $ 13,251    $  5,105
                                                ========   ========    ========    ========    ========    ========    ========
  US GAAP(3)
  Net income.................................   $ 8,226    $  9,562    $ 13,940    $ 19,978    $ 17,177    $  9,762    $  3,654
OPERATING DATA:
  Recovered gold ounces......................   194,952     245,469     276,320     318,171     371,151     184,206     179,643
  Average spot gold price per ounce (US$)....       362         344         360         384         384         383         395
  Average realized gold price per ounce
    (US$)....................................       432         383         380         428         409         394         431
  Cash cost per ounce (US$)..................       327         304         311         311         358         351         331
  Total cost per ounce (US$)(4)..............       367         346         340         353         410         400         413
  Total cost excluding depreciation and
    amortization (US$).......................       345         332         326         333         381         375         367
OTHER DATA:
  EBITDA(5)..................................   $19,522    $ 18,836    $ 20,409    $ 21,293    $ 20,257    $  8,590    $ 16,761
  Net additions to property, plant and
    equipment(6).............................     6,513      19,889      26,803      52,461      66,018      22,943     255,728
  Ratio of earnings to fixed charges.........      4.43        N.A.      163.93      376.02       84.85      150.32       92.57
</TABLE>
 
                                       12
<PAGE>   19
 
<TABLE>
<CAPTION>
                                                                                                                SIX MONTHS
                                                                                                                  ENDED
                                                                YEAR ENDED DECEMBER 31                           JUNE 30
                                                 1991        1992        1993        1994        1995        1995        1996
                                                --------   --------    --------    --------    --------    --------    --------
<S>                                             <C>        <C>         <C>         <C>         <C>         <C>         <C>
                                                            (DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA AND RATIO)
BALANCE SHEET DATA (AT PERIOD END)
  CDN GAAP
  Cash and cash equivalents..................   $ 4,935    $ 12,719    $ 79,644    $148,524    $139,410    $164,294    $ 14,797
  Property, plant and equipment..............    58,200      77,547      99,218     137,954     191,381     154,824     435,690
  Total assets...............................    74,484     111,670     217,226     384,074     428,963     421,312     580,118
  Long-term debt(2)(7).......................        --          --          --          --          --          --          --
  Shareholders' equity.......................    49,273      81,935     185,362     302,731     340,495     330,556     459,959
  US GAAP(3)
  Total assets...............................   $73,319    $108,630    $213,253    $377,913    $416,810    $411,662    $646,636
  Shareholders' equity.......................    48,533      79,320     181,389     296,570     328,342     320,906     446,355
</TABLE>
 
- ---------------
 
(1) Prior to January 1, 1996, the Company's exploration expenses were not
    material and were classified under "Other."
 
(2) The Company historically has had no material long-term debt and,
    accordingly, has had no material interest expense. As a result of the
    Offering, the Company would have had as of June 30, 1996 annual interest
    expense of approximately US$19.25 million (or approximately Cdn $26.3
    million based upon the exchange rate as of June 30, 1996) associated with
    the Notes.
 
(3) Under US GAAP (i) depreciation and amortization are calculated on the
    unit-of-production method based upon proven and probable reserves, whereas
    under Cdn GAAP, total mineral inventory may be used in the calculations; and
    (ii) for defined benefit pension plans, the projected benefit obligation
    should be discounted using interest rates at which the obligation could be
    effectively settled whereas under Cdn GAAP, the projected benefit obligation
    may be discounted using interest rates which are consistent with long-term
    assumptions. See Note 13 to the Annual Consolidated Financial Statements.
 
(4) Total cost per ounce includes depreciation and amortization.
 
(5) "EBITDA," as used in this Prospectus, means operating income plus
    depreciation and amortization. EBITDA differs from the definition of
    Consolidated EBITDA under the Indenture. See "Description of Notes." EBITDA
    is not a measure of financial performance under US GAAP. Accordingly, it
    does not represent net income or cash flows from operations as defined by US
    GAAP and does not necessarily indicate that cash flows will be sufficient to
    fund cash needs. As a result, EBITDA should not be considered as an
    alternative to net income as an indicator of operating performance or to
    cash flows as a measure of liquidity.
 
(6) Net additions to property, plant and equipment for the six months ended June
    30, 1996 include investments in Kemess capital assets of $202 million
    through the acquisitions of Geddes Resources Limited, El Condor Resources
    Ltd. and St. Philips Resources Inc. and Duport capital assets through the
    acquisition of Consolidated Professor Mines Limited.
 
(7) As of June 30, 1996, the Company had capital lease obligations in the amount
    of $1,991,000.
 
                                       13
<PAGE>   20
 
                            SUMMARY RESERVE DATA(1)
 
     The following table lists the Company's mineable ore reserves for the years
noted:
 
<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31
                                                                       --------------------------------------------------
                                                                       1991       1992       1993       1994      1995(2)
                                                                       -----     ------     ------     ------     -------
<S>                                                                    <C>       <C>        <C>        <C>        <C>
GOLD RESERVES (AT END OF PERIOD):
Northwest Territories Division
Giant Mine(3)
  Mineable ore (000s tons).........................................    2,339      2,821      2,617      2,395       2,466
  Average grade (ounces per ton)...................................    0.311      0.319      0.321      0.319       0.335
  Contained ounces (000s)..........................................      727        899        840        763         826
Colomac Mine(4)
  Mineable ore (000s tons).........................................       --         --     13,618     13,054      12,255
  Average grade (ounces per ton)...................................       --         --      0.052      0.053       0.058
  Contained ounces (000s)..........................................       --         --        709        694         711
Ontario Division
Pamour and Nighthawk Mines
  Mineable ore (000s tons).........................................    3,812      3,825      3,993      9,398      38,471
  Average grade (ounces per ton)...................................    0.099      0.099      0.097      0.067       0.046
  Contained ounces (000s)..........................................      379        378        386        629       1,771
Matachewan
  Mineable ore (000s tons).........................................       --         --         --      1,400      13,253
  Average grade (ounces per ton)...................................       --         --         --      0.062       0.067
  Contained ounces (000s)..........................................       --         --         --         87         884
Duport
  Mineable ore (000s tons).........................................       --         --         --         --       1,008
  Average grade (ounces per ton)...................................       --         --         --         --       0.380
  Contained ounces (000s)..........................................       --         --         --         --         383
Newfoundland Division
Hope Brook Mine
  Mineable ore (000s tons).........................................       --      8,255      7,300      3,936       2,448
  Average grade (ounces per ton)...................................       --      0.104      0.102      0.087       0.087
  Contained ounces (000s)..........................................       --        856        746        343         215
Cape Ray
  Mineable ore (000s tons).........................................       --         --         --         --         502
  Average grade (ounces per ton)...................................       --         --         --         --       0.294
  Contained ounces (000s)..........................................       --         --         --         --         147
British Columbia Division
Kemess South
  Mineable ore (000s tons).........................................       --         --         --         --     220,947
  Average grade (ounces per ton)...................................       --         --         --         --       0.018
  Contained ounces (000s)..........................................       --         --         --         --       4,056
Red Mountain
  Mineable ore (000s tons).........................................       --         --         --         --       3,053
  Average grade (ounces per ton)...................................       --         --         --         --       0.262
  Contained ounces (000s)..........................................       --         --         --         --         800
Royal Oak Consolidated
  Total mineable ore (000s tons)...................................    6,151     14,901     27,527     30,183     294,402
  Average grade (ounces per ton)...................................    0.180      0.143      0.097      0.083       0.033
  Total Company contained ounces (000s)............................    1,106      2,133      2,682      2,517       9,793
COPPER RESERVES (AT END OF PERIOD):
British Columbia Division
Kemess South
  Mineable ore (000s tons).........................................       --         --         --         --     220,947
  Average grade (%)................................................       --         --         --         --       0.224
  Content (000s pounds)............................................       --         --         --         --     989,843
</TABLE>
 
- ---------------
 
See footnotes on following page.
 
                                       14
<PAGE>   21
 
(1) "Mineable ore reserves" include both proven and probable reserves. The term
    "reserves" means that part of a mineral deposit which can be reasonably
    assumed to be economically extracted or produced at the time of the reserves
    determination. The term "economically," as used in the definition of
    reserves, implies that profitable extraction or production under defined
    investment assumptions has been established or analytically demonstrated.
    The assumptions made must be reasonable, including assumptions concerning
    the prices and costs that will prevail during the life of the project.
 
    The term "proven reserves" means reserves for which (a) quantity is computed
    from dimensions revealed in outcrops, trenches, workings and drill holes;
    grade and/or quality are computed from the results of detailed sampling; and
    (b) the sites for inspection, sampling and measurement are spaced so closely
    and the geologic character is so well defined that size, shape, depth and
    mineral content of reserves are well established.
 
    The term "probable reserves" means reserves for which quantity and grade
    and/or quality are computed from information similar to that used for
    reserves, but the sites for inspection, sampling and measurement are farther
    apart or are otherwise less adequately spaced. The degree of assurance,
    although lower than that for proven reserves, is high enough to assume
    continuity between points of observation.
 
    The term "contained ounces" means that the reserves are estimated to
    encompass a stated number of ounces of gold in place. The number of ounces
    ultimately recovered and available for sale depends upon mining efficiency
    and processing efficiency.
 
    See "Risk Factors -- Reserve Estimates; Mineral Inventory."
 
(2) Reserve data dated as of December 31, 1995 includes data for the Kemess,
    Duport and Cape Ray properties acquired by the Company in 1996.
 
(3) Reserve data includes data for the Nicholas Lake property. See "Business --
    Operating Properties -- Giant."
 
(4) Reserve data includes data for the Kim-Cass property on a 100% ownership
    basis. See "Business -- Operating Properties -- Colomac." As of June 30,
    1996, the mine plan at the Colomac Mine was under review by the Company's
    management which could affect the reserves at such property; however, based
    upon information currently available to the Company, any adjustment to such
    reserves is not anticipated to be material to the Company's total mineable
    inventory in the Indin Lake area that would be processed by the Colomac
    Mill.
 
                                       15
<PAGE>   22
 
                                  RISK FACTORS
 
     Prospective participants should consider carefully the risk factors set
forth below as well as the other information contained in this Prospectus before
participating in the Exchange Offer.
 
ADVERSE CONSEQUENCES OF FINANCIAL LEVERAGE
 
     Following the sale of the Notes, the Company increased its level of
indebtedness and debt service obligations. As of June 30, 1996, after giving
effect to the sale of the Notes, the Company would have had approximately
US$176.5 million (Cdn $241 million based upon the exchange rate in effect on
such date) aggregate amount of indebtedness outstanding, representing 34.4% of
total capitalization. See "Capitalization." The Company's average annual
interest expense in respect of the Notes is approximately US$19.25 million
(approximately Cdn $26.3 million based upon the exchange rate as of June 30,
1996).
 
     The degree of the Company's leverage could have important consequences to
holders of the Exchange Notes including: (i) limiting the Company's ability to
obtain additional financing to fund future working capital requirements, capital
expenditures, acquisitions or other general corporate requirements; (ii)
requiring a portion of the Company's cash flow from operations to be dedicated
to debt service requirements, thereby reducing the funds available for
operations and future business opportunities; and (iii) increasing the Company's
vulnerability to adverse economic and industry conditions.
 
     The Company may incur additional indebtedness in the future, including
Senior Indebtedness. See " -- Subordination." The ability of the Company to make
scheduled payments under its present and future indebtedness will depend on,
among other things, the future operating performance of the Company and the
Company's ability to refinance its indebtedness when necessary. Each of these
factors is to a large extent subject to economic, financial, competitive and
other factors beyond the Company's control.
 
SUBORDINATION
 
     The Exchange Notes will be general unsecured obligations of the Company and
will be subordinated in right of payment to all existing and future Senior
Indebtedness. Subject to certain limitations, the Indenture permits the Company
to incur additional Senior Indebtedness. See "Description of Exchange Notes --
Certain Covenants -- Limitation on Indebtedness." As a result of the
subordination provisions contained in the Indenture, in the event of a
liquidation or insolvency, holders of Senior Indebtedness and trade creditors of
the Company and the Guarantor may recover more, ratably, than the holders of the
Exchange Notes. The holders of any indebtedness of the Company's subsidiaries
(other than the Guarantor) will be entitled to payment of their indebtedness
from the assets of such subsidiaries prior to the holders of any general
unsecured obligations of the Company, including the Exchange Notes. In addition,
substantially all of the assets of the Company and its subsidiaries may in the
future be pledged to secure other indebtedness of the Company. See "Description
of Exchange Notes."
 
DEVELOPMENT PROJECTS
 
     General -- The Company from time to time engages in the development of new
ore bodies, both at newly acquired properties and currently existing mining
operations. The Company's ability to sustain or increase its present level of
gold production is dependent in part on the successful development of such new
ore bodies and/or expansion of existing mining operations. The economic
feasibility of any individual development project and all such projects
collectively is based upon, among other things, estimates of ore reserves,
metallurgical recoveries, production rates and capital and operating costs of
such development projects, and future metal prices. Development projects are
also subject to the completion of favorable feasibility studies, the issuance of
necessary permits and the receipt of adequate financing. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources." Development projects may have no operating
history upon which to base estimates of future operating costs and capital
requirements. Particularly for development projects, estimates of ore reserves,
metal recoveries and cash operating costs are to a large extent based upon the
interpretation of geological data obtained from drill holes and other sampling
techniques and feasibility studies which derive estimates of cash operating
costs based
 
                                       16
<PAGE>   23
 
upon anticipated tonnage and grades of ore to be mined and processed, the
configuration of the ore body, expected recovery rates of metals from the ore,
comparable facility and equipment costs, anticipated climate changes and other
factors. As a result, actual cash operating costs and economic returns of any
and all development projects may materially differ from the costs and returns
currently estimated.
 
     Pending Projects -- The development and construction cost requirements for
the Development Projects and the Pamour open pit expansion are significant. For
the development of the Kemess South Project, the Company is relying on the
updated cost estimates developed by the Company in 1996 and completion of the
development is subject to receipt of adequate financing and receipt of all
remaining governmental approvals and permits. See "Business -- Development
Projects -- Kemess South." The Company's other pending Development Projects are
subject to the completion of favorable feasibility studies on each of such
properties and the receipt of adequate financing and all required governmental
approvals and permits.
 
GOLD AND METAL PRICE VOLATILITY
 
     The Company's profitability is significantly affected by changes in the
market price of gold, and upon completion of the Kemess South Project, may be
significantly affected by changes in the market price of copper. Gold prices may
fluctuate dramatically and are affected by numerous industry factors, such as
demand for precious metals, forward selling by producers, central bank sales and
purchases of gold, and production and cost levels in major gold-producing
regions such as North America, South Africa and the former Soviet Union.
Moreover, gold prices are also affected by macro-economic factors such as
expectations for inflation, interest rates, currency exchange rates, and global
or regional political and economic situations. The current demand for, and
supply of, gold affects gold prices, but not necessarily in the same manner as
current demand and supply affect the prices of other commodities. The potential
supply of gold consists of new gold mine production plus existing stocks of
bullion and fabricated gold held by governments, financial institutions,
industrial organizations and individuals. Since mine production in any single
year constitutes a very small portion of the total potential supply of gold,
normal variations in current production do not necessarily have a significant
effect on the supply of gold or on its price. If gold prices should decline
below the Company's cash costs and remain at such levels for any sustained
period, the Company could determine that it is not economically feasible to
continue commercial production at any or all of its mines. Although the Company
has hedging programs in place to reduce certain of the risks associated with
gold price volatility, there can be no assurance that such hedging strategies
will be successful. See " -- Hedging Activities." The aggregate effect of these
factors, all of which are beyond the Company's control, is impossible to
predict.
 
     Copper prices may also fluctuate dramatically and are affected by numerous
factors beyond the Company's control, including expectations of inflation,
speculative activities, the relative exchange rate of the United States dollar,
global and regional demand, production and production costs in major producing
regions. For example, between January 1, 1996 and July 31, 1996, the price per
pound of copper fluctuated between a high of US$1.288 and a low of US$0.829. The
aggregate effect of these factors, all of which are beyond the Company's
control, is impossible to predict.
 
     The volatility of gold and copper prices is illustrated in the following
table which sets forth the average of the daily closing prices in United States
dollars of gold and copper for 1980, 1985, 1990 and each year thereafter until
1996:
 
   
<TABLE>
<CAPTION>
                                1980       1985       1990       1991       1992       1993       1994       1995      1996(3)
                               -------    -------    -------    -------    -------    -------    -------    -------    -------
<S>                            <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Gold(1) (per ounce).........   $614.32    $317.22    $383.64    $362.23    $343.94    $359.86    $384.15    $384.08    $391.59
Copper(2) (per pound).......   $ 0.990    $ 0.643    $ 1.208    $ 1.059    $ 1.035    $ 0.866    $ 1.049    $ 1.331    $  1.06
</TABLE>
    
 
- ---------------
 
(1) London Bullion Market
 
(2) London Metal Exchange
 
   
(3) Through September 30, 1996
    
 
   
     As of October   , the closing price for gold was US$     per ounce and the
closing price for copper was US$     per pound.
    
 
                                       17
<PAGE>   24
 
HEDGING ACTIVITIES
 
     In the normal course of its business, the Company uses gold spot deferred
contracts, gold forward sales commitments and gold call option contracts to
manage its exposure to fluctuations in the price of gold. Contracted prices on
spot deferred and forward sales contracts are recognized in revenue when
production is delivered against the commitment. If actual delivery is not made
against a particular spot deferred contract at the time of maturity, gains and
losses, if any, are recognized at that time. In addition, the Company uses oil
swap agreements and foreign exchange contracts to minimize the impact of
fluctuations in oil and foreign currency prices, respectively. Contract
positions are designed to ensure that the Company will receive a defined minimum
price for certain quantities of its production. The related costs paid or
premiums received for option contracts which hedge the sales prices of
commodities are deferred and included in income as part of the hedged
transaction. Revenues from the aforementioned contracts are recognized at the
time contracts expire or are closed out by either delivery of the underlying
commodity or settlement of the net position in cash. The Company is exposed to
certain losses on forward sales contracts, generally the amount by which the
contract price exceeds the spot price of the commodity, in the event of
non-performance by the counterparties to these agreements. The Company believes
that it has minimized credit risk relating to its hedging activities by dealing
with large credit-worthy institutions and by limiting its credit exposure to
such institutions.
 
     As of December 31, 1995, the Company had contractual arrangements, in both
United States and Canadian dollars (i) to deliver an aggregate of 459,028 ounces
of gold between 1996 and 1999 at prices of US$385 to $654 per ounce, (ii) for
892,792 ounces of gold call options written with expiry dates between 1996 and
1999 at strike prices of US$410 to $664, (iii) to sell an aggregate of
approximately US$115.9 million at an exchange rate of Cdn$1.28/US$1.00, and (iv)
to purchase an aggregate of 400,000 barrels of crude oil between 1996 and 1997
at a price per barrel of US$16.85 to US$17.40. See Note 11 to the Annual
Consolidated Financial Statements. In 1996, the Company closed out the contracts
referred to in clause (i) above, resulting in the generation of cash and
deferred revenue of $20,131,000, exchanged the gold call options expiring
between 1997 and 1999 referred to in clause (ii) above for call options with
strike prices of $549 to $561, resulting in the generation of cash and deferred
revenue of $11,235,000, and settled contracts for 200,000 barrels of crude oil
which matured in 1996 referred to in clause (iv) above, resulting in the
generation of cash of $537,000 which was used to reduce fuel costs.
 
FOREIGN EXCHANGE
 
     Currency fluctuations may affect the cash flow which the Company will
realize from its operations as gold and copper are sold in world markets in
United States dollars and the Company's costs are incurred primarily in Canadian
dollars. Although the Company has hedging programs in place to reduce certain
risks associated with foreign exchange exposure, there can be no assurance that
such hedging strategies will be successful. See Note 6 to the Annual
Consolidated Financial Statements for a further discussion of such activities as
of December 31, 1995.
 
RESERVE ESTIMATES; MINERAL INVENTORY
 
     The reserves presented in this Prospectus are estimates and no assurance
can be given that the indicated amount of gold or other minerals may be
economically recovered. Reserve estimates may require revisions based on actual
production experience. The ore grade actually recovered by the Company may
differ from the estimated grade of the reserves. The Company's reserve estimates
are revised annually based on the previous year's operating history. Many
factors relating to each mine, such as the design of the mine plan, unexpected
operating and processing problems, increases in the stripping ratio in open pit
mines, unforeseen geotechnical conditions which may result in increased ground
support or dilution in underground operations, and the complexity of the
metallurgy of an ore body, may adversely affect cash costs. Moreover,
fluctuations in the market price of gold or other minerals, as well as increased
production costs or reduced recovery rates, may render reserves containing
relatively lower grades of mineralization uneconomical to recover and may
ultimately result in a restatement of reserves.
 
     References in this Prospectus to "mineral inventory" refer to the
combination of mineable ore reserves and the Company's estimates of mineralized
material which is either not sufficiently delineated as to size, tonnage and
grade or, even if delineated, cannot be economically extracted at the time of
the reserve
 
                                       18
<PAGE>   25
 
determination and accordingly, cannot be classified as mineable ore reserves.
Information described in this Prospectus as "mineral inventory" and "mineralized
material" is provided for informational purposes only as the Commission
generally permits disclosure of only proven ore reserves, probable ore reserves
and mineable ore reserves. There can be no assurance that any mineralized
material will ever become mineable ore reserves.
 
GOVERNMENT PERMITS AND PAYMENTS
 
     In the ordinary course of business, mining companies are required to seek
governmental permits for expansion of existing operations or for the
commencement of new operations. Obtaining the necessary governmental permits is
a complex and time-consuming process involving numerous jurisdictions and often
involving public hearings and costly undertakings on the part of the Company.
The duration and success of permitting efforts are contingent upon many
variables not within the Company's control. Environmental protection permitting,
including the approval of reclamation plans, may increase costs and cause delays
depending on the nature of the activity to be permitted and the interpretation
of applicable requirements implemented by the permitting authority. There can be
no assurance that all necessary permits will be obtained and, if obtained, that
the costs involved will not exceed those previously estimated by the Company. It
is possible that the costs and delays associated with the compliance with such
standards and regulations could become such that the Company would not proceed
with the development or operation of a mine or mines.
 
     The Company, through an agreement with the British Columbia provincial
government which settled the issue of compensation pertaining to the Windy
Craggy property and provided grants and investment for the development of the
Kemess South Project and other properties in British Columbia, is expected to
bring the Kemess South Project into production in the second quarter of 1998.
The development of the Kemess South Project will be facilitated by up to $166
million of compensation, economic assistance and investment from the British
Columbia provincial government, subject to the satisfaction of certain
conditions which the Company expects to meet. Section 25 of the Financial
Administration Act (British Columbia) provides that, notwithstanding the
commitment to pay, any payment of money by the British Columbia provincial
government pursuant to an agreement is subject to (i) an appropriation being
available for that agreement in the year in which the payment falls due and (ii)
the Treasury Board (as defined in the Financial Administration Act) not having
controlled or limited expenditure under any such appropriation. Although the
Company fully expects that adequate appropriations will be made for all amounts
to be paid by the British Columbia provincial government and that the Treasury
Board will not control or limit such appropriations, there can be no assurance
that this will be the case. To the Company's knowledge, the British Columbia
provincial government has never failed to make an appropriation for a payment of
money pursuant to an agreement in the year in which a payment was due and the
Treasury Board has not controlled or limited any such appropriation. See
"Business -- Development Projects -- Kemess South."
 
REGULATIONS AND MINING LAW
 
     The Company's mining operations and exploration activities are subject to
extensive federal, provincial, state and local laws and regulations governing
exploration, development, production, exports, taxes, labour standards,
occupational health and safety, waste disposal, monitoring, protection and
remediation of the environment, reclamation, mine safety, toxic substances and
other matters. Compliance with such laws and regulations increases the costs of
planning, designing, drilling, developing, constructing, operating and closing
mines and other facilities. It is possible that the costs and delays associated
with compliance with such laws and regulations could become such that the
Company would not proceed with the development or continue the operation of a
mine or mines.
 
     The Company has expended significant resources, both financial and
managerial, to comply with environmental protection laws, regulations and
permitting requirements and the Company anticipates that it will continue to do
so in the future. Although the Company believes that its operations and
facilities comply in all material respects with applicable environmental
protection requirements, there can be no assurance that additional significant
costs and liabilities will not be incurred to comply with current and future
requirements. Moreover, it is possible that future developments, such as
increasingly strict environmental protection laws, regulations and enforcement
policies thereunder, and claims for damages to natural resources, property and
 
                                       19
<PAGE>   26
 
persons resulting from or alleged to result from the Company's operations, could
result in substantial costs and liabilities in the future.
 
MINING RISKS AND INSURANCE
 
     The business of mining for gold and other metals is generally subject to a
number of risks and hazards, including environmental hazards, industrial
accidents, labour disputes, encountering unusual or unexpected geological
conditions, stope failures, changes in the regulatory environment and natural
phenomena such as inclement weather conditions, floods, blizzards and
earthquakes. Such occurrences could result in damage to, or destruction of,
mineral properties or production facilities, personal injury or death,
environmental damage, delays in mining, monetary losses and possible legal
liability. The Company maintains insurance against risks that are typical in the
mining industry, but which may not provide adequate coverage in certain
unforeseen circumstances. Moreover, insurance against certain risks (including
certain liabilities for environmental pollution or other hazards as a result of
exploration and production) is not generally available to companies within the
industry. Without such insurance, if the Company becomes subject to
environmental liabilities, the payment of such liabilities would reduce its
available funds.
 
EXPLORATION AND RESERVE GROWTH
 
     Exploration for gold and other precious metals is highly speculative in
nature, involves many risks and is frequently unsuccessful. There can be no
assurance that exploration efforts will result in the discovery of gold
mineralization or that any mineralization discovered will result in an increase
of reserves. If reserves are developed, it may take a number of years and
substantial expenditures from the initial phases of drilling until production is
possible, during which time the economic feasibility of production may change.
No assurance can be given that the exploration programs will result in the
replacement of current production with new reserves or that the development
programs will be able to extend the life of existing mines or locate new mines.
In the event that new reserves are not developed, the Company may not be able to
sustain its current level of gold production.
 
COMPETITION
 
     Because mines have limited lives based on proven and probable ore reserves,
the Company is continually seeking to replace and expand its reserves. The
Company encounters competition from other mining companies in connection with
the acquisition of properties producing or capable of producing gold and in the
recruitment and retention of qualified employees. As a result of this
competition, some of which is with companies having significantly greater
financial resources, the Company may be unable to acquire attractive mining
properties on terms it considers acceptable. In addition, there are a number of
uncertainties inherent in any program relating to the location of economic ore
reserves, the development of appropriate metallurgical processes, the receipt of
necessary governmental permits and the construction of mining and processing
facilities and the appropriate financing thereof. Accordingly, there can be no
assurance that the Company's programs will yield new reserves to replace mined
reserves and expand current reserves. The Indenture contains limitations on the
ability of the Company to acquire additional properties. See "Description of
Exchange Notes -- Certain Covenants -- Limitation on Indebtedness," and "--
Limitation on Restricted Payments."
 
ABORIGINAL LAND CLAIMS
 
     Aboriginal groups have made claims in Canada asserting aboriginal rights to
land located within their "traditional territory" or resource tenure. In order
to pursue a claim, an aboriginal group must notify the responsible federal,
provincial or territorial government where the land is located. Each
jurisdiction has one or more procedures in place to review and resolve any such
claim, failing which judicial consideration may prevail. No government has
advised the Company to date of any formal title claim or award that would
include the Company's properties. There is, however, no assurance that future
claims negotiations or judgments will not affect the Company's properties. If
the Company's properties are included in any future negotiated settlements or
awards, there can be no assurance that the Company would receive adequate
compensation.
 
                                       20
<PAGE>   27
 
LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES
 
     The Notes are currently owned by a relatively small number of beneficial
owners. The Notes have not been registered under the Securities Act or any state
securities laws and, unless so registered and to the extent not exchanged for
the Exchange Notes, may not be offered or sold except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws.
 
     The Exchange Notes will constitute a new class of securities with no
established trading market. Although the Exchange Notes will generally be
permitted to be resold or otherwise transferred by nonaffiliates of the Company
without compliance with the registration requirements under the Securities Act,
the Company does not intend to list the Exchange Notes on any national
securities exchange or to seek admission thereof to trading in the Nasdaq
National Market. BT Securities Corporation and Scotia Capital Markets (USA) Inc.
(the "Initial Purchasers") have advised the Company that they currently intend
to make a market in the Exchange Notes. The Initial Purchasers are not obligated
to do so, however, and any market-making with respect to Exchange Notes may be
interrupted or discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Exchange
Act. See "Exchange Offer and Registration Rights." Accordingly, no assurance can
be given that an active public or other market will develop for the Exchange
Notes or as to the liquidity of the trading market for the Exchange Notes. If a
trading market does not develop or is not maintained, holders of the Exchange
Notes may experience difficulty in reselling the Exchange Notes or may be unable
to sell them at all. If a market for the Exchange Notes develops, any such
market may be discontinued at any time. If a public trading market develops for
the Exchange Notes future trading prices of such Exchange Notes will depend on
many factors, including, among other things, prevailing interest rates, the
Company's financial condition and results of operations, and the market for
similar notes. Depending on these and other factors, the Exchange Notes may
trade at a discount from their principal amount.
 
CHANGE OF CONTROL
 
     The Indenture provides that, upon the occurrence of any Change of Control
Triggering Event (as defined), which requires both a Change of Control (as
defined) and a Rating Event (as defined), the Company will be required to make
an offer (a "Change of Control Offer") to purchase all of the Exchange Notes
issued and then outstanding under the Indenture at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest thereon
and Additional Interest (as defined), if any, to the date of purchase. There can
be no assurance that the Company would be able to obtain financing on
commercially reasonable terms or at all at such time, and consequently no
assurance can be given that the Company would be able to purchase any of the
Exchange Notes tendered pursuant to a Change of Control Offer. See "Description
of Exchange Notes." Clause (i) of the definition of "Change of Control" under
"Description of Exchange Notes" includes a sale, lease, exchange or other
transfer of "all or substantially all" of the assets of the Company to a person
or group of persons. There is little case law interpreting the phrase "all or
substantially all" in the context of an indenture. Because there is no precise
established definition of this phrase, the ability of a holder of Exchange Notes
to require the Company to repurchase such Notes as a result of a sale, lease,
exchange or other transfer of all or substantially all of the Company's assets
to a person or group of persons may be uncertain.
 
EXCHANGE OFFER PROCEDURES
 
     Issuance of the Exchange Notes in exchange for Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Exchange Agent of
such Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, Holders of the Notes desiring to tender
such Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. The Company is under no duty to give notification of defects or
irregularities with respect to the tenders of Notes for exchange. Notes that are
not tendered or are tendered but not accepted will, following the consummation
of the Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Exchange Offer, the registration
rights under the Registration Rights Agreement generally will terminate. In
addition, any Holder of Notes who tenders in the Exchange Offer for the purpose
of participating in a
 
                                       21
<PAGE>   28
 
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. To the extent that Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Notes could be
adversely affected. See "The Exchange Offer."
 
RESTRICTIONS ON TRANSFER
 
     The Notes were offered and sold by the Company in a private offering exempt
from registration pursuant to the Securities Act and have been resold pursuant
to Rule 144A under the Securities Act and to a limited number of other
institutional "accredited investors" (as defined in Rule 501(a) (1), (2), (3) or
(7) under the Securities Act). As a result, the Notes may not be reoffered or
resold by purchasers except pursuant to an effective registration statement
under the Securities Act, or pursuant to an applicable exemption from such
registration, and the Notes are legended to restrict transfer as aforesaid. Each
Holder (other than any Holder who is an affiliate or promoter of the Company)
who duly exchanges Notes for Exchange Notes in the Exchange Offer will receive
Exchange Notes that are freely transferable under the Securities Act. Holders of
Notes who participate in the Exchange Offer should be aware, however, that if
they accept the Exchange Offer for the purpose of engaging in a distribution,
the Exchange Notes may not be publicly reoffered or resold without complying
with the registration and prospectus delivery requirements of the Securities
Act. As a result, each Holder of Notes accepting the Exchange Offer will be
deemed to have represented, by its acceptance of the Exchange Offer, that it
acquired the Exchange Notes in the ordinary course of business and that it is
not engaged in, and does not intend to engage in, a distribution of the Exchange
Notes. If existing Commission interpretations permitting free transferability of
the Exchange Notes following the Exchange Offer are changed prior to
consummation of the Exchange Offer, the Company will use its best efforts to
register the Notes for resale under the Securities Act. See "Prospectus Summary
- -- The Exchange Offer" and "Exchange Offer and Registration Rights."
 
     The Notes currently may be sold pursuant to the restrictions set forth in
Rule 144A under the Securities Act or pursuant to another available exemption
under the Securities Act without registration under the Securities Act. To the
extent that Notes are tendered and accepted in the Exchange Offer, the trading
market for the untendered and tendered but unaccepted Notes could be adversely
affected.
 
                                       22
<PAGE>   29
 
                               THE EXCHANGE OFFER
 
     The following discussion sets forth or summarizes what the Company believes
to be the material terms of the Exchange Offer, including those set forth in the
Letter of Transmittal distributed with this Prospectus. This summary is
qualified in its entirety by reference to the full text of the documents
underlying the Exchange Offer, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part, and are incorporated
herein by reference.
 
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
 
     The Notes were sold by the Company on August 12, 1996, and were
subsequently resold to qualified institutional buyers pursuant to Rule 144A
under the Securities Act and to institutional investors that are accredited
investors in a manner exempt from registration under the Securities Act. In
connection with the Note Offering, the Company entered into the Registration
Rights Agreement, which requires, among other things, that promptly following
the Issue Date the Company and the Guarantor (i) file with the Commission a
registration statement under the Securities Act with respect to an issue of new
notes of the Company identical in all material respects (other than transfer
restrictions) to the Notes (which obligation has been satisfied by the filing of
the Registration Statement of which this Prospectus is a part), (ii) use their
best efforts to cause such registration statement to become effective under the
Securities Act and (iii) upon the effectiveness of that registration statement,
offer to the Holders of the Notes the opportunity to exchange their Notes for a
like principal amount of Exchange Notes, which would be issued without a
restrictive legend and may be reoffered and resold by the holder without
restrictions or limitations under the Securities Act (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act). A copy of the Registration Rights Agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part. The
term "Holder" with respect to the Exchange Offer means any person in whose name
the Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder.
 
     Any Notes tendered and exchanged in the Exchange Offer will reduce the
principal amount of Notes outstanding. Following the consummation of the
Exchange Offer, Holders of the Notes who did not tender their Notes generally
will not have any further registration rights under the Registration Rights
Agreement, and such Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Notes could be
adversely affected. The Notes are currently eligible for sale pursuant to Rule
144A through the PORTAL System of the National Association of Securities
Dealers, Inc. Because the Company anticipates that most Holders of Notes will
elect to exchange such Notes for Exchange Notes due to the absence of
restrictions on the resale of Exchange Notes under the Securities Act, the
Company anticipates that the liquidity of the market for any Notes remaining
after the consummation of the Exchange Offer may be substantially limited.
 
TERMS OF THE EXCHANGE OFFER
 
     Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Notes
validly tendered and not withdrawn prior to 5:00 p.m. New York City time on the
Expiration Date. The Company will issue US$1,000 principal amount of Exchange
Notes in exchange for each US$1,000 principal amount of outstanding Notes
accepted in the Exchange Offer. Holders may tender some or all of their Notes
pursuant to the Exchange Offer. However, Notes may be tendered only in integral
multiples of US$1,000.
 
     The form and terms of the Exchange Notes are the same as the form and terms
of the Notes except that (i) the Exchange Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof
and (ii) the holders of the Exchange Notes generally will not be entitled to
certain rights under the Registration Rights Agreement, which rights generally
will terminate upon consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Notes and will be entitled to the benefits of the
Indenture.
 
     Holders of Notes do not have any appraisal or dissenters' rights under the
Ontario Business Corporations Act or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange
 
                                       23
<PAGE>   30
 
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission thereunder, including Rule 14e-1
thereunder. The Exchange Offer will not necessarily be conducted in compliance
with the securities laws of the province of Ontario, Canada.
 
     The Company shall be deemed to have accepted validly tendered Notes when,
as and if the Company has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering Holders for the
purpose of receiving the Exchange Notes from the Company.
 
     If any tendered Notes are not accepted for exchange because of an invalid
tender, the occurrence of certain other events set forth herein or otherwise,
the certificates for any such unaccepted Notes will be returned, without
expense, to the tendering Holder thereof as promptly as practicable after the
Expiration Date.
 
     Holders who tender Notes in the Exchange Offer will not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of Notes pursuant to
the Exchange Offer. The Company will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "-- Fees and Expenses."
 
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
 
   
     The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
November 7, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
    
 
     To extend the Exchange Offer, the Company will notify the Exchange Agent of
any extension by oral or written notice, followed by a public announcement
thereof no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
 
     The Company reserves the right, in its reasonable judgment, (i) to delay
accepting any Notes, to extend the Exchange Offer or to terminate the Exchange
Offer if any of the conditions set forth below under "-- Conditions" shall not
have been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent or (ii) to amend the terms of the Exchange
Offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a public announcement
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered Holders, and, depending upon the significance of the amendment and
the manner of disclosure to the registered Holders, the Company will extend the
Exchange Offer for a period of five to ten business days if the Exchange Offer
would otherwise expire during such five to ten business day period.
 
     If the Company does not consummate the Exchange Offer, or, in lieu thereof,
the Company does not file and cause to become effective a resale shelf
registration for the Notes within the time periods set forth herein, liquidated
damages will accrue and be payable on the Notes either temporarily or
permanently. See "Exchange Offer and Registration Rights."
 
     Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
 
INTEREST ON EXCHANGE NOTES
 
     The Exchange Notes will bear interest from August 12, 1996, the date of
issuance of the Notes that are tendered in exchange for the Exchange Notes (or
the most recent Interest Payment Date to which interest on such Notes has been
paid). Accordingly, holders of Notes that are accepted for exchange will not
receive interest that is accrued but unpaid on the Notes at the time of tender,
but such interest will be payable on the first Interest Payment Date after the
Expiration Date. Interest on the Exchange Notes will be payable semiannually on
each February 15 and August 15, commencing on February 15, 1997.
 
                                       24
<PAGE>   31
 
PROCEDURES FOR TENDERING
 
     Only a Holder of Notes may tender such Notes in the Exchange Offer. To
tender in the Exchange Offer, a Holder must complete, sign and date the Letter
of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed
if required by the Letter of Transmittal and mail or otherwise deliver such
Letter of Transmittal or such facsimile, together with the Notes and any other
required documents, to the Exchange Agent so as to be received by the Exchange
Agent at the address set forth below prior to 5:00 p.m., New York City time, on
the Expiration Date. Delivery of the Notes may be made by book-entry transfer in
accordance with the procedures described below. Confirmation of such book-entry
transfer must be received by the Exchange Agent prior to the Expiration Date.
 
     By executing the Letter of Transmittal, each Holder will make to the
Company the representation set forth below in the second paragraph under the
heading "-- Resale of Exchange Notes."
 
     The tender by a Holder and the acceptance thereof by the Company will
constitute an agreement between such Holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
 
     THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
 
     Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered Holder promptly and instruct such registered
Holder to tender on such beneficial owner's behalf.
 
     Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Notes tendered pursuant thereto are tendered (i) by a registered
Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
 
     If the Letter of Transmittal is signed by a person other than the
registered Holder of any Notes listed therein, such Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered Holder
as such registered Holder's name appears on such Notes with the signature
thereon guaranteed by an Eligible Institution.
 
     If the Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
 
     The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Notes at the DTC for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in the DTC may make book-entry delivery of the Notes by causing the
DTC to transfer such Notes into the Exchange Agent's account with respect to the
Notes in accordance with the DTC's procedures for such transfer. Although
delivery of the Notes may be effected through book-entry transfer into the
Exchange Agent's account at the DTC, a Letter of Transmittal properly completed
and duly executed with any required
 
                                       25
<PAGE>   32
 
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to the DTC does not
constitute delivery to the Exchange Agent.
 
     All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of Transmittal)
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Notes must be cured within such
time as the Company shall determine. Although the Company intends to notify
Holders of defects or irregularities with respect to tenders of Notes, none of
the Company, the Exchange Agent or any other person shall incur any liability
for failure to give such notification. Tenders of Notes will not be deemed to
have been made until such defects or irregularities have been cured or waived.
Any Notes received by the Exchange Agent that are not properly tendered and as
to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering Holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
 
GUARANTEED DELIVERY PROCEDURES
 
     Holders who wish to tender their Notes and (i) whose Notes are not
immediately available, (ii) who cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
 
          (a) the tender is made through an Eligible Institution;
 
          (b) prior to the Expiration Date, the Exchange Agent receives from
     such Eligible Institution a properly completed and duly executed Notice of
     Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
     setting forth the name and address of the Holder, the certificate number(s)
     of such Notes and the principal amount of Notes tendered, stating that the
     tender is being made thereby and guaranteeing that, within three New York
     Stock Exchange trading days after the Expiration Date, the Letter of
     Transmittal (or facsimile thereof), together with the certificate(s)
     representing the Notes (or a confirmation of book-entry transfer of such
     Notes into the Exchange Agent's account at the DTC) and any other documents
     required by the Letter of Transmittal, will be deposited by the Eligible
     Institution with the Exchange Agent; and
 
          (c) such properly completed and executed Letter of Transmittal (or
     facsimile thereof), as well as the certificate(s) representing all tendered
     Notes in proper form for transfer (or a confirmation of book-entry transfer
     of such Notes into the Exchange Agent's account at the DTC) and all other
     documents required by the Letter of Transmittal, are received by the
     Exchange Agent within three New York Stock Exchange trading days after the
     Expiration Date.
 
     Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above.
 
WITHDRAWALS OF TENDERS
 
     Except as otherwise provided herein, tenders of Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
 
     To withdraw a tender of Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at the
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Notes to be withdrawn (the "Depositor"), (ii)
identify the Notes to be withdrawn (including the certificate number(s) and
principal amount of such Notes, or, in the case of notes transferred
 
                                       26
<PAGE>   33
 
by book-entry transfer, the name and number of the account at the DTC to be
credited), (iii) be signed by the Holder in the same manner as the original
signature on the Letter of Transmittal by which such Notes were tendered
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee register the transfer of such Notes into
the name of the person withdrawing the tender and (iv) specify the name in which
any such Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time or
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Notes so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no
Exchange Notes will be issued with respect thereto unless the Notes so withdrawn
are validly retendered. Any Notes which have been tendered but which are not
accepted for exchange will be returned to the Holder thereof without cost to
such Holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Notes may be retendered by
following one of the procedures described above under "-- Procedures for
Tendering" at any time prior to the Expiration Date.
 
CONDITIONS
 
     Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or to exchange Exchange Notes for, any
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Notes, if:
 
          (a) any law, statute, rule, regulation or interpretation by the staff
     of the Commission is proposed, adopted or enacted, which, in the reasonable
     judgment of the Company, might materially impair the ability of the Company
     to proceed with the Exchange Offer or materially impair the contemplated
     benefits of the Exchange Offer to the Company; or
 
          (b) any governmental approval has not been obtained, which approval
     the Company shall, in its reasonable judgment, deem necessary for the
     consummation of the Exchange Offer as contemplated hereby.
 
     If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Notes and
return all tendered Notes to the tendering Holders, (ii) extend the Exchange
Offer and retain all Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of Holders to withdraw such Notes (see
"-- Withdrawals of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Notes which have
not been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and, depending
upon the significance of the waiver and the manner of disclosure to the
registered Holders, the Company will extend the Exchange Offer for a period of
five to 10 business days if the Exchange Offer would otherwise expire during
such five to ten business-day period.
 
EXCHANGE AGENT
 
     Mellon Bank, F.S.B. will act as Exchange Agent for the Exchange Offer with
respect to the Notes.
 
     Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Notes and requests for
copies of Notice of Guaranteed Delivery should be directed to the Exchange
Agent, addressed as follows:
 
     By Registered or Certified Mail, Overnight Mail or Courier Service or in
Person by Hand:
   
     Mellon Bank, F.S.B.
     c/o Mellon Bank, N.A.
     Corporate Trust Operations
     2 Mellon Bank Center, Room 325
     Pittsburgh, PA 15259-0001
     Attention: Elaine Renn, Vice President
 
     By Facsimile:

     (412) 234-9196
    
 
                                       27
<PAGE>   34
 
FEES AND EXPENSES
 
     The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telephone, facsimile or in person by officers and regular
employees of the Company and its affiliates.
 
     The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith and pay
other registration expenses, including fees and expenses of the Trustee, filing
fees, blue sky fees and printing and distribution expenses.
 
     The Company will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Exchange Offer. If, however, certificates
representing the Exchange Notes or the Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Notes tendered, or if
tendered Notes are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of the Notes pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered Holder
or any other person) will be payable by the tendering Holder.
 
ACCOUNTING TREATMENT
 
     The Exchange Notes will be recorded at the same carrying value as the
Notes, which is the aggregate principal amount of the Notes, as reflected in the
Company's accounting records on the date of exchange. Accordingly, no gain or
loss for accounting purposes will be recognized in connection with the Exchange
Offer. A gain or loss, however, may be recognized due to changes in the carrying
value of the Notes or the Exchange Notes during an accounting period due to, for
example, fluctuations in the exchange rate for United States and Canadian
dollars (due to the fact that the Notes and Exchange Notes are denominated in
United States dollars and the value thereof is recorded on the Company's books
in Canadian dollars). The expenses of the Exchange Offer will be amortized over
the term of the Exchange Notes.
 
RESALE OF EXCHANGE NOTES
 
     Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Notes may be offered
for resale, resold and otherwise transferred by any holder of such Exchange
Notes (other than any such holder which is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holder's
business and such holder does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of such
Exchange Notes. Any holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes may not rely on the position of the staff of the SEC enunciated
in Exxon Capital Holdings Corporation (available April 13, 1989) and Morgan
Stanley & Co., Incorporated (available June 5, 1991), or similar no-action
letters, but rather must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. In
addition, any such resale transaction should be covered by an effective
registration statement containing the selling security holders information
required by Item 507 of Regulation S-K of the Securities Act. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Notes, where
such Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, may be a statutory underwriter and must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
 
     By tendering in the Exchange Offer, each Holder will represent to the
Company that, among other things, (i) the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is the
registered Holder, (ii) neither the Holder nor any such other person has an
arrangement or understanding with any person to
 
                                       28
<PAGE>   35
 
participate in the distribution of such Exchange Notes and (iii) the Holder and
such other person acknowledge that if they participate in the Exchange Offer for
the purpose of distributing the Exchange Notes (a) they must, in the absence of
an exemption therefrom, comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Exchange
Notes and cannot rely on the no-action letters referenced above and (b) failure
to comply with such requirements in such instance could result in such Holder or
such other person incurring liability under the Securities Act for which such
Holder or such other person is not indemnified by the Company. Further, by
tendering in the Exchange Offer, each Holder and such other person that may be
deemed an "affiliate" (as defined under Rule 405 of the Securities Act) of the
Company will represent to the Company that such Holder and such other person
understand and acknowledge that the Exchange Notes may not be offered for
resale, resold or otherwise transferred by that Holder or such other person
without registration under the Securities Act or an exemption therefrom.
 
CONSEQUENCES OF FAILURE TO EXCHANGE
 
     As a result of the making of this Exchange Offer, the Company will have
fulfilled one of its obligations under the Registration Rights Agreement, and
Holders of Notes who do not tender their Notes generally will not have any
further registration rights under the Registration Rights Agreement or
otherwise. Accordingly, any Holder of Notes that does not exchange that Holder's
Notes for Exchange Notes will continue to hold the untendered Notes and will be
entitled to all the rights and limitations applicable thereto under the
Indenture, except to the extent that such rights or limitations, by their terms,
terminate or cease to have further effectiveness as a result of the Exchange
Offer.
 
     The Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii)
pursuant to an effective registration statement under the Securities Act, (iii)
so long as the Notes are eligible for resale pursuant to Rule 144A under the
Securities Act, to a qualified institutional buyer within the meaning of Rule
144A under the Securities Act in a transaction meeting the requirements of Rule
144A, (iv) outside the United States to a foreign person pursuant to the
exemption from the registration requirements of the Securities Act provided by
Regulation S thereunder, (v) pursuant to an exemption from registration under
the Securities Act provided by Rule 144 thereunder (if available) or (vi) to an
institutional accredited investor in a transaction exempt from the registration
requirements of the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States or other
jurisdiction. See "Risk Factors -- Restrictions on Transfer."
 
OTHER
 
     Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Notes are urged to consult
their financial and tax advisors in making their own decision on what action to
take.
 
     The Company may in the future seek to acquire untendered Notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plans to acquire any Notes that are not
tendered in the Exchange Offer or to file a registration statement to permit
resales of any untendered Notes.
 
     In any state where the Exchange Offer does not fall under a statutory
exemption to the blue sky rules, the Company has filed the appropriate
registrations and notices, and has made the appropriate requests, to permit the
Exchange Offer to be made in such State.
 
                                       29
<PAGE>   36
 
                    CERTAIN FEDERAL INCOME TAX CONSEQUENCES
                             OF THE EXCHANGE OFFER
 
     The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "IRS") will not take a contrary view, and
no ruling from the IRS has been or will be sought. Legislative, judicial or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conditions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to Holders. Certain Holders of the Notes (including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. Each Holder of a
Note should consult his, her or its own tax advisor as to the particular tax
consequences of exchanging such Holder's Notes for Exchange Notes, including the
applicability and effect of any state, local or foreign tax laws.
 
     The issuance of the Exchange Notes to Holders of the Notes pursuant to the
terms set forth in this Prospectus will not constitute an exchange for United
States federal income tax purposes. Consequently, no gain or loss would be
recognized by Holders of the Notes upon receipt of the Exchange Notes, and
ownership of the Exchange Notes will be considered a continuation of ownership
of the Notes. For purposes of determining gain or loss upon the subsequent sale
or exchange of the Exchange Notes, a Holder's basis in the Exchange Notes should
be the same as such Holder's basis in the Notes exchanged therefor. A Holder's
holding period for the Exchange Notes should include the Holder's holding period
for the Notes exchanged therefor. The issue price, original issue discount
inclusion and other tax characteristics of the Exchange Notes should be
identical to the issue price, original issue discount inclusion and other tax
characteristics of the Notes exchanged therefor.
 
     See also "Certain Income Tax Considerations."
 
                                       30
<PAGE>   37
 
                                 CAPITALIZATION
 
     The following table sets forth the capitalization of the Company as of June
30, 1996, and as adjusted to give effect to the issuance of the Notes. The
information presented below should be read in conjunction with the Consolidated
Financial Statements included elsewhere in this Prospectus. See "Index to
Consolidated Financial Statements."
 
<TABLE>
<CAPTION>
                                                                         AS OF JUNE 30, 1996
                                                                     ---------------------------
                                                                      ACTUAL      AS ADJUSTED(3)
                                                                     --------     --------------
<S>                                                                  <C>          <C>
                                                                       (DOLLARS IN THOUSANDS)
CDN GAAP
Cash and cash equivalents........................................    $ 14,797        $246,804
                                                                     ========        ========
Credit Facility(1)...............................................    $     --        $     --
Long-term debt (including current portion):
  11% Senior Subordinated Notes due 2006(2)......................    $     --        $239,006
  Capital leases.................................................       1,991           1,991
                                                                     --------        --------
     Total long-term debt........................................       1,991         240,997
                                                                     --------        --------
Shareholders' equity:
  Common shares..................................................     376,316         376,316
  Retained earnings..............................................      83,643          83,643
                                                                     --------        --------
     Total shareholders' equity..................................     459,959         459,959
                                                                     --------        --------
Total capitalization.............................................    $461,950        $700,956
                                                                     ========        ========
US GAAP
Total shareholders' equity.......................................    $446,355        $446,355
Total capitalization.............................................     448,346         687,352
</TABLE>
 
- ---------------
 
(1) The Company entered into the Credit Facility on February 15, 1996. As of
    August 27, 1996, $1,940,000 was outstanding under the Credit Facility in the
    form of letters of credit issued thereunder. The Credit Facility matures on
    February 14, 1997 and is renewable annually at the option of the lender. See
    "Description of Credit Facility."
 
(2) Reflects the full face amount of the Notes converted to Canadian dollars
    based on the Noon Buying Rate on June 30, 1996 of Cdn $1.00 equals
    US$0.7322.
 
(3) After giving effect to the issuance of the Notes.
 
                                       31
<PAGE>   38
 
         SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
 
     The following table sets forth historical consolidated financial and
operating data for the Company as of and for the periods noted. The consolidated
balance sheet and income statement data as of and for the years ended December
31, 1991 through 1995 has been derived from the audited consolidated financial
statements of Royal Oak. The consolidated balance sheet and income statement
data as of and for the six months ended June 30, 1995 and 1996 has been derived
from the unaudited financial statements of Royal Oak which, in the opinion of
management of the Company, contain all adjustments necessary for a fair
presentation of this information. The historical data with respect to the
results of operations for the six months ended June 30, 1996 should not be
regarded as necessarily indicative of the results that may be expected for the
entire year. The Operating Data presented below has been derived from the
Company's accounting and other records. The Consolidated Financial Statements
have been prepared in accordance with Cdn GAAP. These principles are also in
conformity, in all material respects, with US GAAP except as described in Note
13 of the notes to the Annual Consolidated Financial Statements. The following
table should be read together with the Consolidated Financial Statements
(including the notes thereto) appearing elsewhere in this Prospectus. See "Index
to Consolidated Financial Statements."
 
<TABLE>
<CAPTION>
                                                                                                                SIX MONTHS
                                                                                                                  ENDED
                                                                YEAR ENDED DECEMBER 31                           JUNE 30
                                               --------------------------------------------------------    --------------------
                                                 1991        1992        1993        1994        1995        1995        1996
                                               --------    --------    --------    --------    --------    --------    --------
<S>                                            <C>         <C>         <C>         <C>         <C>         <C>         <C>
                                                           (DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA AND RATIO)
INCOME STATEMENT DATA:
  CDN GAAP
  Revenue...................................   $ 96,433    $113,673    $135,326    $162,111    $208,311    $100,839    $105,846
  Operating expenses........................     72,581      89,874     110,258     117,790     182,214      89,714      81,383
  Royalties and marketing expenses..........        830         881       1,248       2,490       2,535       1,108       1,408
  Administrative and corporate expenses.....      3,500       4,082       3,411       5,271       8,549       4,945       4,861
  Depreciation and amortization.............      4,966       4,275       4,998       8,525      14,895       6,270      11,366
  Exploration expenses(1)...................         --          --          --          --          --         254       2,409
  Provision for (recovery of) loss on
    foreign currency contracts..............         --          --          --      15,267      (5,244)     (3,772)       (976)
                                                -------    --------    --------    --------    --------    --------    --------
  Operating income (loss)...................     14,556      14,561      15,411      12,768       5,362       2,320       5,395
  Interest and other income, net(2).........      1,314         638       2,289       7,074      20,902      12,135       2,462
  Other(1)..................................     (7,124)     (3,654)     (1,862)      2,960      (1,553)       (235)        (23)
  Provision for income taxes................       (105)       (108)       (215)       (636)     (1,542)       (969)     (2,729)
                                                -------    --------    --------    --------    --------    --------    --------
  Net income................................   $  8,641    $ 11,437    $ 15,623    $ 22,166    $ 23,169    $ 13,251    $  5,105
                                                =======    ========    ========    ========    ========    ========    ========
  US GAAP(3)
  Net income................................   $  8,226    $  9,562    $ 13,940    $ 19,978    $ 17,177    $  9,762    $  3,654
OPERATING DATA:
  Recovered gold ounces.....................    194,952     245,469     276,320     318,171     371,151     184,206     179,643
  Average spot gold price per ounce (US$)...        362         344         360         384         384         383         395
  Average realized gold price per ounce
    (US$)...................................        432         383         380         428         409         394         431
  Cash cost per ounce (US$).................        327         304         311         311         358         351         331
  Total cost per ounce (US$)(4).............        367         346         340         353         410         400         413
  Total cost excluding depreciation and
    amortization (US$)......................        345         332         326         333         381         375         367
OTHER DATA:
  EBITDA(5).................................   $ 19,522    $ 18,836    $ 20,409    $ 21,293    $ 20,257    $  8,590    $ 16,761
  Net additions to property, plant and
    equipment(6)............................      6,513      19,889      26,803      52,461      66,018      22,943     255,728
  Ratio of earnings to fixed charges........       4.43        N.A.      163.93      376.02       84.85      150.32       92.57
BALANCE SHEET DATA (AT PERIOD END):
  CDN GAAP
  Cash and cash equivalents.................   $  4,935    $ 12,719    $ 79,644    $148,524    $139,410    $164,294    $ 14,797
  Property, plant and equipment.............     58,200      77,547      99,218     137,954     191,381     154,824     435,690
  Total assets..............................     74,484     111,670     217,226     384,074     428,963     421,312     580,118
  Long-term debt(2)(7)......................         --          --          --          --          --          --          --
  Shareholders' equity......................     49,273      81,935     185,362     302,731     340,495     330,556     459,959
</TABLE>
 
                                       32
<PAGE>   39
 
<TABLE>
<CAPTION>
                                                                                                                SIX MONTHS
                                                                                                                  ENDED
                                                                YEAR ENDED DECEMBER 31                           JUNE 30
                                                 1991        1992        1993        1994        1995        1995        1996
                                               -------     --------    --------    --------    --------    --------    --------
<S>                                            <C>         <C>         <C>         <C>         <C>         <C>         <C>
                                                           (DOLLARS IN THOUSANDS, EXCEPT OPERATING DATA AND RATIO)
  US GAAP(3)
  Total assets..............................   $ 73,319    $108,630    $213,253    $377,913    $416,810    $411,662    $646,636
  Shareholders' equity......................     48,533      79,320     181,389     296,570     328,342     320,906     446,355
</TABLE>
 
- ---------------
 
(1) Prior to January 1, 1996, the Company's exploration expenses were not
    material and were classified under "Other."
 
(2) The Company historically has had no material long-term debt and,
    accordingly, has had no material interest expense. As a result of the
    Offering, the Company would have had, as of June 30, 1996, annual interest
    expense of approximately US$19.25 million (or approximately Cdn $26.3
    million based upon the exchange rate as of June 30, 1996) associated with
    the Notes.
 
(3) Under US GAAP (i) depreciation and amortization are calculated on the
    unit-of-production method based upon proven and probable reserves, whereas
    under Cdn GAAP, total mineral inventory may be used in the calculations; and
    (ii) for defined benefit pension plans, the projected benefit obligation
    should be discounted using interest rates at which the obligation could be
    effectively settled whereas under Cdn GAAP, the projected benefit obligation
    may be discounted using interest rates which are consistent with long-term
    assumptions. See Note 13 to the Annual Consolidated Financial Statements.
 
(4) Total cost per ounce includes depreciation and amortization.
 
(5) "EBITDA," as used in this Prospectus, means operating income plus
    depreciation and amortization. EBITDA differs from the definition of
    Consolidated EBITDA under the Indenture. See "Description of Exchange
    Notes." EBITDA is not a measure of financial performance under US GAAP.
    Accordingly, it does not represent net income or cash flows from operations
    as defined by US GAAP and does not necessarily indicate that cash flows will
    be sufficient to fund cash needs. As a result, EBITDA should not be
    considered as an alternative to net income as an indicator of operating
    performance or to cash flows as a measure of liquidity.
 
(6) Net additions to property, plant and equipment for the six months ended June
    30, 1996 include investments in Kemess capital assets of $202 million
    through the acquisitions of Geddes Resources Limited, El Condor Resources
    Ltd. and St. Philips Resources Inc. and Duport capital assets through the
    acquisition of Consolidated Professor Mines Limited.
 
(7) As of June 30, 1996, the Company had capital lease obligations in the amount
    of $1,991,000.
 
                                       33
<PAGE>   40
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     This discussion should be read in conjunction with the information
contained in Royal Oak's Consolidated Financial Statements (including the notes
thereto) appearing elsewhere in the Prospectus. See "Index to Consolidated
Financial Statements."
 
GENERAL
 
     The majority of the Company's revenue is derived from gold sales. Revenue
varies with the volume of gold produced and the price received for that
production. Set out below is a table indicating the impact on revenue of
increased production and of prices for the years 1993 through 1995.
 
<TABLE>
<CAPTION>
                                                                 1993        1994        1995
                                                                -------     -------     -------
<S>                                                             <C>         <C>         <C>
                                                                    (DOLLARS IN THOUSANDS)
Impact on revenue due to:
  Increased Production......................................    $15,126     $   750     $52,480
  Increased (Decreased) Prices(1)...........................      6,527      26,035      (6,280)
                                                                -------     -------     -------
Incremental revenue from prior year.........................    $21,653     $26,785     $46,200
                                                                =======     =======     =======
</TABLE>
 
- ---------------
 
(1) Based upon realized prices and includes impact of changes in relative
    exchange rates.
 
     In 1995, a US$10 per ounce increase in the gold price would have increased
revenue for the year ended December 31, 1995 by approximately $5.1 million.
 
     Each year since the acquisition of the Pamour and Giant Yellowknife Groups
in November 1990, the Company has increased its gold production, mineral
inventory, revenue, net income, and total assets through a number of
acquisitions and development of several properties. This growth has been
reflected in the market capitalization of the Company which has increased
significantly, from $90 million at the end of 1991 to approximately $690 million
as of June 30, 1996.
 
     Gold production has increased since 1990 primarily through the acquisition
of the Hope Brook Mine and the Colomac Mine. Gold production is currently
expected to increase from 371,151 ounces in 1995 to approximately 415,000 ounces
in 1996. This increase is expected to come from increased production at the
Colomac Mine and the first full year of production at the Nighthawk Mine. Future
increases in production are expected to come from the Pamour Mine open pit
expansion and the Development Projects.
 
     The majority of the Company's expenses consist of operating costs
associated with recovering gold from the Company's mines. Operating costs
include mining and processing costs for gold. The most significant of these
costs are labour, consumable materials, repairs of machinery and equipment, fuel
and utilities. The Company's average cash costs increased from US$311 per ounce
in 1994 to US$358 per ounce in 1995 due primarily to a change in mining methods
at the Pamour Mine and start-up costs at the Colomac Mill. The Company expects
that average cash costs will decrease to approximately US$315 per ounce in 1996
with the implementation of more effective mining methods and the full year's
operation of the Colomac Mill. See "Business -- Operating Strategy."
 
                                       34
<PAGE>   41
 
RESULTS OF OPERATIONS
 
     The following table indicates the Company's expenses and income as a
percentage of revenue for the periods indicated:
 
<TABLE>
<CAPTION>
                                                                               SIX MONTHS ENDED
                                                 YEAR ENDED DECEMBER 31             JUNE 30
                                              ----------------------------     -----------------
                                               1993       1994       1995       1995       1996
                                              ------     ------     ------     ------     ------
<S>                                           <C>        <C>        <C>        <C>        <C>
Revenue...................................    100.0%     100.0%     100.0%     100.0%     100.0%
Operating expenses........................     81.4       72.7       87.5       89.0       76.9
Royalties and marketing expenses..........      0.9        1.5        1.2        1.1        1.3
Administrative and corporate expenses.....      2.5        3.2        4.1        4.9        4.6
Depreciation and amortization.............      3.7        5.3        7.1        6.2       10.7
Exploration expense(1)....................     --         --         --          0.2        2.3
Provision for (recovery of) loss on
  foreign currency contracts..............     --          9.4       (2.5)      (3.7)      (0.9)
                                              -----      ---- -     ---- -     ---- -     ---- -
Operating income (loss)...................     11.5        7.9        2.6        2.3        5.1
Interest and other income, net(2).........      1.6        4.4       10.0       12.0        2.3
Other(1)..................................     (1.4)       1.8       (0.8)      (0.2)      --
Provision for income taxes................     (0.2)      (0.4)      (0.7)      (1.0)      (2.6)
                                              -----      ---- -     ---- -     ---- -     ---- -
Net income................................     11.5%      13.7%      11.1%      13.1%       4.8%
                                              =====      =====      =====      =====      =====
</TABLE>
 
- ---------------
 
(1) Prior to January 1, 1996, the Company's exploration expenses were not
    material and were classified under "Other."
 
(2) The Company historically has had no material long-term debt and,
    accordingly, has had no material interest expense. As a result of the
    Offering, the Company as of June 30, 1996 would have had annual interest
    expense of approximately US$19.25 million (or approximately Cdn$26.3 million
    based upon the exchange rate as of June 30, 1996) associated with the Notes.
 
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
 
     Revenue from the sale of gold for the three months ended June 30, 1996
increased 3% to $54.8 million compared to the same period of 1995. In the second
quarter of 1996, a 9% increase in the average realized price of US$439 per ounce
of gold compared to US$401 in the same period in 1995 accounted for this
increase. However, this increase was partially offset by a 6% decrease in
production to 91,447 ounces (compared to 97,246 ounces in the second quarter of
1995) and a strengthening of the Canadian dollar from US$0.729 in the second
quarter of 1995 to US$0.733 in the same period of 1996 which reduced revenue by
approximately $0.2 million in the second quarter of 1996 compared to the same
period in 1995.
 
     Revenue from the sale of gold for the six months ended June 30, 1996
increased 5% to $105.8 million compared to the same period of 1995. In the
year-to-date, a 9% increase in the average realized price of US$431 per ounce of
gold compared to US$394 in the same period in 1995 accounted for this increase.
However, this increase was partially offset by a 2% decrease in production to
179,643 ounces (compared to 184,206 ounces in the year-to-date 1995) and a
strengthening of the Canadian dollar from US$0.720 in the six months ended June
30, 1995 to US$0.732 in the same period of 1996 which reduced revenue by
approximately $1.6 million in the first six months of 1996 compared to the same
period in 1995.
 
     The increase in production at the Company's Ontario operations for the
three months and the six months ended June 30, 1996 is mainly attributable to
the production from the Nighthawk Mine which commenced operation in late 1995.
The decrease in production at the Company's Newfoundland operations for the
three months and the six months ended June 30, 1996 resulted from the fact that
the Hope Brook Mill was temporarily shut down in March and April, as planned.
Mining operations continued during this period and ore was stockpiled. This
shutdown not only enabled the Company to reduce operating costs but also has
allowed the mill to operate more efficiently for the balance of 1996. The Hope
Brook Mill resumed operations on May 1 and all ore stockpiled during the
shutdown is expected to be milled by the end of 1996.
 
                                       35
<PAGE>   42
 
     Operating costs decreased 14% from $45.7 million in the second quarter of
1995 to $39.4 million in the same period in 1996. Operating costs decreased 9%
on a year-to-date basis from $89.7 million for the six months ended June 30,
1995 to $81.4 million for the same period in 1996. The decreases were mainly
attributable to the shutdown of the Hope Brook Mill in the months of March and
April 1996. Operations recommenced on May 1, 1996. Mining costs incurred during
the planned shutdown at the Hope Brook Mine have been deferred and will be
charged to operating costs as the ore mined during the shutdown is milled during
the balance of 1996.
 
     Cash operating costs on a per ounce basis decreased 8% from US$342 in the
second quarter of 1995 to US$315 in the second quarter of 1996. For the
year-to-date, the decrease was 6% from US$351 in the second quarter of 1995 to
US$331 in the second quarter of 1996. These decreases reflect the cost controls
implemented during 1996 and steps taken to reduce the average cash operating
cost per ounce.
 
     Royalties and marketing expenses remained relatively constant for the
second quarter. However, on a year-to-date basis, these expenses have increased
by $0.3 million mainly due to royalties on production from the Nighthawk Mine
where substantial mining began in 1996.
 
     Administrative and corporate expenses decreased to $2.7 million in the
second quarter of 1996 from $3.3 million in the same period in 1995. This
decrease was attributable to timing differences as certain expenses were
incurred in the first quarter of 1996 whereas those similar expenses were
incurred in the second quarter of 1995. For the six months ended June 30, 1996
and 1995, respectively, the administrative and corporate expenses were not
significantly different. This reflects a decrease in corporate expenses as a
result of cost controls, offset by an increase in capital taxes pursuant to the
exercise of warrants and as a result of the issuance of shares of the Company in
connection with the acquisitions of Geddes Resources Limited ("Geddes") and El
Condor Resources Ltd. ("El Condor").
 
     Depreciation and amortization increased from $3.0 million in the second
quarter of 1995 to $6.1 million in the same period in 1996 and from $6.3 million
in the first six months of 1995 to $11.4 million in the same period in 1996.
Increases in capital assets and deferred mining costs over the past several
years, combined with adjustments to mineral inventory on specific properties
have led to these increases. Depreciation and amortization of the Nighthawk Mine
assets and deferred development costs commenced in early 1996.
 
     Exploration expenses increased from $0.1 million in the second quarter of
1995 to $1.4 million in the same period in 1996 and from $0.3 million in the
first six months of 1995 to $2.4 million in the same period in 1996. The Company
has been evaluating its exploration projects as part of its overall strategic
plan and to the extent that certain exploration costs are determined not to be
recoverable due to insufficient or lack of expected mineralized material or
otherwise, exploration costs have been charged to operations.
 
     Recovery of loss on foreign currency contracts resulted in a recovery of
$0.2 million with respect to these contracts for the three months ended June 30,
1996 as a result of the strengthening of the Canadian dollar. The comparable
recovery in the same period of 1995 was $3.8 million which reflected a
substantial strengthening of the Canadian dollar compared to the United States
dollar for that period. For the six months ended June 30, 1996 and 1995,
respectively, the recovery balances were $1.0 million and $3.8 million. The
Company's hedging strategies for foreign currency attempt to protect the Company
from exchange rate fluctuations.
 
     Operating income in the second quarter of 1996 increased to $4.5 million
from $4.2 million in the second quarter of 1995, and in the first six months of
1996 increased to $5.4 million from $2.3 million in the first six months of
1995.
 
     Interest and other income decreased from $6.4 million in the second quarter
of 1995 to $1.1 million in the same period in 1996. Interest and other income
for the six month periods ended June 30, 1995 and 1996, respectively, were $12.1
million and $2.5 million. These decreases reflect the reduction of cash balances
due to the acquisitions of Geddes, El Condor, St. Philips Resources Inc. ("St.
Philips") and Consolidated Professor Mines Limited ("Consolidated Professor"),
and capital expenditures in the last 12 months which, in total, have reduced
investment income in 1996.
 
                                       36
<PAGE>   43
 
     Income taxes increased by $1.1 million from $0.7 million in the second
quarter of 1995 to $1.8 million in the same period in 1996 while the increase
was $1.7 million from $1.0 million in the six months ended June 30, 1995 to $2.7
million in the same period in 1996. The 1996 balances include a provision for
deferred taxes of $1.5 million and $2.0 million for the three months and the six
months ended June 30, 1996, respectively. No such provision for deferred taxes
was required for 1995 because the Company had unrecognized deferred tax assets.
However, the balance of the Company's unrecognized deferred tax assets has
virtually been utilized such that an accrual for deferred income taxes is
necessary for 1996.
 
     Net income for the second quarter of 1996 decreased by $6.0 million, or
62%, to $3.7 million from net income of $9.7 million during the same period in
1995. Net income for the six months ended June 30, 1996 decreased by $8.2
million, or 62%, to $5.1 million from net income of $13.3 million during the
same period in 1995. Significantly lower investment income after the completion
of the purchases of Geddes, El Condor, St. Philips and Consolidated Professor,
combined with a reduction of the Company's unrecognized deferred tax assets,
which have necessitated the accrual of deferred income taxes in 1996, were
mainly responsible for the lower net income in the second quarter and the
year-to-date.
 
1995 Compared to 1994
 
     Revenue from gold sales of 371,151 ounces was $208.3 million in 1995, which
was 28% higher than revenue of $162.1 million in 1994. Production in 1994
included 40,568 ounces from the Colomac Mine. Revenue from this production was
netted against start-up costs which were deferred as pre-production costs in
1994 because the mine had not reached commercial levels of production by the end
of 1994. Revenue in 1995 includes a full year of production from the Colomac
Mine of 117,646 ounces. The increase in production at Colomac in 1995 from the
level in 1994 was offset by 24,098 fewer ounces of production at three of the
Company's other operating mines (i.e. Giant, Pamour and Hope Brook). The
Company's average realized price decreased to US$409 per ounce in 1995 as
compared to US$428 per ounce in 1994. In 1995, the Canadian/United States dollar
exchange rate adversely affected the Company's revenue whereas in 1994, the
exchange rate positively affected revenues.
 
     Operating costs increased to $182.2 million in 1995 from $117.8 million in
1994. The inclusion in 1995 of the Colomac Mine operating costs contributed
approximately $61.5 million to this increase. In 1994, because the Colomac Mill
had not reached commercial levels of production, start-up costs net of revenue
generated from gold sales were deferred to pre-production costs. Operating costs
at both the Giant and Pamour Mines increased slightly while the operating cost
at the Hope Brook Mine decreased in 1995. Operating costs include mining and
processing costs for gold. The most significant of these costs are labour,
consumable materials, repairs of machinery and equipment, fuel and utilities.
The costs of transporting personnel and freight to the Colomac and Hope Brook
Mines are also significant costs for those operations. Average cash costs
increased by 15% to US$358 per ounce in 1995 from US$311 per ounce in 1994. The
increase reflected a change in mining methods at the Pamour Mine which resulted
in lower mill feed grades and tonnages mined and milled, and costs at Colomac
that were significantly above budget as a result of overcoming the difficulties
associated with the start-up of the mill. These problems at both operations have
been addressed in 1996.
 
     Royalties and marketing expenses increased marginally in 1995 as a result
of increased marketing costs related to increased production at the Colomac
Mine. Should the average selling price of gold exceed US$400 per ounce in 1996,
an additional $1.0 million in royalties will be payable under the terms of the
Colomac Mine asset purchase agreement.
 
     Administrative and corporate expenses increased 62% to $8.5 million in 1995
from $5.3 million in 1994. The corporate office relocated from Vancouver,
British Columbia to Kirkland, Washington in March 1995. Costs associated with
this relocation were approximately $0.5 million. Salary and benefit costs
increased as a number of personnel were added in both 1994 and 1995 to
strengthen the corporate office and position the Company for future growth.
Travel, telephone and professional fees increased in 1995 as the Company
examined various acquisition and merger opportunities and dealt with bringing
cash operating costs under control. In 1994, much of the travel costs and
professional fees related to the bid to acquire Lac Minerals Ltd. ("Lac
Minerals") were netted against the gain on sale of securities when the shares
acquired by the Company
 
                                       37
<PAGE>   44
 
in connection with the bid were sold. Corporate expenses are expected to
decrease in 1996 as many of the one-time costs associated with moving the
corporate office in 1995 will be eliminated.
 
     Depreciation and amortization increased in 1995 to $14.9 million (US$29.24
per ounce) from $8.5 million (US$22.48 per ounce) in 1994. Increases in capital
assets and deferred mining costs over the past several years, combined with
adjustments to mining reserves on specific properties, have led to these
increases. Depreciation and amortization are provided on the unit-of-production
method. Higher production in 1995 associated with the Colomac Mine increased
depreciation and amortization by $7.4 million in 1995, while lower production at
the other three mines in 1995 reduced the difference to $6.4 million.
 
     Provision for (recovery of) loss on foreign currency contracts resulted in
a recovery of $5.2 million in 1995 as compared to a loss of $15.3 million in
1994 as a result of the strengthening of the Canadian dollar in 1995 (see below
under "1994 Compared to 1993" for a discussion of the 1994 loss). These
contracts were associated with the Company's contractual obligation to deliver
future gold production at specified prices in United States dollars. The
Company's hedging strategies for foreign currency attempt to protect the Company
from exchange rate fluctuations.
 
     Operating income in 1995 was $5.4 million as compared to $12.8 million in
1994 for the reasons described above.
 
     Interest and other income increased 195% to $20.9 million in 1995 from $7.1
million in 1994. (See Note 9 to the Annual Consolidated Financial Statements for
a breakdown and comparison of these amounts.) Interest income was significantly
higher in 1995 as a result of the Company's high cash balances which increased
due to a $100 million equity issue in 1994. Interest income in 1995 includes
$1.3 million of interest received on a refund of 1988 Ontario mining taxes.
Surplus cash is primarily invested in highly liquid, low risk financial
instruments with relatively short maturities. This strategy gives the Company
maximum flexibility should funds be needed for acquisitions or other purposes.
The gain on sale of securities was $8.3 million in 1995 compared to $1.2 million
in 1994. In 1994, the Company acquired approximately 1.83 million shares of
Barrick Gold Corporation ("Barrick Gold") in exchange for shares of Lac Minerals
which it tendered to the Barrick Gold bid for Lac Minerals. While the Company
made a partial disposition of the Barrick Gold shares in 1994, it sold the
remaining 978,000 Barrick Gold shares that it held during 1995. In 1995, the
Company established an acquisition team to evaluate many opportunities in North
America and overseas. Consistent with the approach taken in 1994 when the
Company bid for Lac Minerals, the Company purchased shares in certain companies
to establish an equity position prior to holding discussions with management
regarding a merger or takeover. These positions were subsequently sold when
discussions and negotiations with such companies were terminated, resulting in
gains on sale of securities. Other income in 1995 includes a $2.0 million refund
of 1988 Ontario mining taxes previously paid. Other income in 1994 includes
dividends and option premiums earned on the shares of both Lac Minerals and
Barrick Gold.
 
     Income taxes for 1995 were minimal. The Company has tax deductions,
including earned depletion and mining exploration depletion, available to be
utilized in future years totaling $183 million. Because of past reorganizations
undertaken by the Company, utilization of some of these tax deductions may be
restricted. The Company does not expect to pay cash income taxes or mining taxes
in Canada for at least the next two years. However, the Company is subject to
capital taxes and minimum taxes in certain Canadian jurisdictions. The Company's
United States operations are taxable, however, the total of 1996 United States
taxes is not expected to be material. The balance of the Company's unrecognized
deferred income tax assets is decreasing. Accordingly, the Company expects to
report a deferred income tax provision in 1996 which will increase the Company's
effective tax rate above the 6% level in 1995.
 
     Net income for the year ended December 31, 1995 increased 5% to $23.2
million on revenues of $208.3 million. This compares with $22.2 million on
revenues of $162.1 million in 1994.
 
1994 Compared to 1993
 
     Revenue in 1994 increased 19.8% to $162.1 million from $135.3 million in
1993. This increase was primarily the result of higher gold production,
favorable exchange rates and the Company's hedging program.
 
                                       38
<PAGE>   45
 
Gold production increased 15.1% from 276,320 ounces in 1993 to 318,171 ounces in
1994. Gold production of 40,568 ounces at the Colomac Mine, which began
production in July 1994, was primarily responsible for this increase. All
revenue from gold production at the Colomac Mine in 1994 was netted against
start-up costs and deferred as pre-production cost. The Company's hedging
strategy allowed it to realize an average gold price of US$428 per ounce in
1994, the highest in the industry, up from US$380 per ounce in 1993. The average
spot price in 1994 was US$384 per ounce. The US$44 premium contributed $16.5
million to revenue.
 
     Operating costs in 1994 increased 6.8% to $117.8 million from $110.3
million in 1993, but the average cost per ounce remained at US$311. The 15.1%
increase in gold production offset utility rate increases at the Giant Mine and
increased labour rates, which are tied to gold prices, at the Giant and Hope
Brook Mines.
 
     Royalties and marketing expenses doubled in 1994 to $2.5 million from $1.2
million in 1993 primarily as a result of royalty increases at the Hope Brook
Mine. Under the terms of the Hope Brook Mine purchase agreement, the Company is
obligated to pay an operating royalty of $1.3 million to $3.3 million annually
depending on the average price of gold when the average price exceeds US$380 per
ounce in respect of gold production from the Hope Brook Mine. Since the average
price of gold was US$384 in 1994, the Company made a $1.3 million royalty
payment in respect of the Hope Brook Mine. Obligations under this agreement
expire in 1996.
 
     Administrative and corporate expenses in 1994 increased 54.5% to $5.3
million from $3.4 million in 1993. This increase was the result of (i) the
addition of key personnel to the corporate office in late 1993 and early 1994,
(ii) investor relations fees associated with the attempted takeover by the
Company of Lac Minerals, (iii) higher capital taxes due to the increase in
shareholders' equity and (iv) one-time costs related to the relocation of the
corporate office from Vancouver.
 
     Depreciation and amortization in 1994 increased 70.6% to $8.5 million from
$5.0 million in 1993. The increase is primarily due to the increase in capital
assets and deferred mining costs, as well as adjustments to mining reserves on
specific properties.
 
     Provision for (recovery of) loss on foreign currency contracts recorded by
the Company in 1994 included a $15.3 million provision for loss on foreign
currency contracts. Prior to 1994, the Company had entered into a series of
foreign currency contracts at an average exchange rate of Cdn $1.2744/US$1.00 to
hedge contractual obligations to deliver future gold production at specified
prices in United States dollars. In November 1994, the Emerging Issues Committee
of the Canadian Institute of Chartered Accountants issued an abstract
restricting the use of hedge accounting when spot deferred forward contracts
mature and are rolled forward to future periods. In view of this recommendation,
the Company adopted a conservative approach and provided for the loss on foreign
currency contracts which matured subsequent to November 1994 and prior to the
end of 1994 and as well provided for the potential future loss related to its
currency contracts by marking them to market at the end of 1994. The Company
intends to continue to roll these foreign exchange contracts forward as they
mature and will continue to mark-to-market these contracts in the future. The
effect of this provision was to adjust the book carrying value of the contracts
to Cdn $1.4028/US$1.00 as of December 31, 1994.
 
     Gain on issuance of shares by associated company recorded by the Company in
1994 consisted of a $3.0 million gain. Mountain Minerals Co. Ltd. ("Mountain
Minerals") issued stock in 1994 which reduced the Company's equity interest from
51.1% to 41.2%. On August 12, 1996, Highwood Resources Ltd. ("Highwood"), in
which the Company has a 32% interest, acquired all of the outstanding shares of
Mountain Minerals. See "Business -- Strategic Investments."
 
     Operating income in 1994 decreased 16.9% to $12.8 million from $15.4
million in 1993.
 
     Interest and other income in 1994 increased to $7.1 million from $2.3
million in 1993. This increase was primarily the result of higher cash balances
resulting from equity issues in 1993 and 1994.
 
     Income taxes were $0.6 million in 1994, up from $0.2 million in 1993. The
Company continued to pay minimal income taxes as it utilized tax deductions from
earned depletion and mining exploration depletion which it was able to carry
forward.
 
     Net income in 1994 increased 41.9% to $22.2 million from $15.6 million in
1993.
 
                                       39
<PAGE>   46
 
SIGNIFICANT DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
 
     The Company, as a Canadian company, uses Canadian dollars as the basis of
measurement and follows Cdn GAAP in reporting its financial results. The
differences in the reported results that would have resulted from using US GAAP
as opposed to Cdn GAAP are summarized in Note 13 to the Annual Consolidated
Financial Statements.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     At June 30, 1996, the Company had cash, cash equivalents and short-term
investments of $39.7 million compared to $41.1 million at March 31, 1996 and
$142.4 million at December 31, 1995.
 
     Operating Activities. Net cash provided by operating activities for the
second quarter of 1996 was $0.2 million compared to $6.3 million in the same
period in 1995. However, for the six months ended June 30, 1996, the net cash
used amounted to $9.5 million compared to net cash provided by operating
activities of $7.7 million in the first six months of 1995. These changes for
the second quarter and the year-to-date reflected a reduction in interest and
other income due to reduced cash balances as well as the impact of a seasonal
increase in inventory net of an increase in current liabilities which financed
much of this increase in inventory. (See Note 5 to the Unaudited Consolidated
Financial Statements). The increase in inventory and current liabilities was
attributable to the need to supply operating and maintenance materials to the
Colomac Mine site over a winter ice road, as weather conditions permit. The
change was more pronounced in 1996 compared to the prior year because management
decided to transport more supplies over the winter ice road than by airplane.
 
     Financing Activities. Net cash provided by financing activities for the
second quarter of 1996 was $20.5 million compared to $2.3 million in the same
period in 1995. The higher cash provided in the 1996 period of $18.2 million
compared to 1995 was mainly the result of the early settlement of forward
contracts which the Company had at December 31, 1995. For the six months ended
June 30, net cash provided in 1996 amounted to $141.9 million compared to $21.1
million in 1995. This higher cash provided in 1996 resulted mainly from the
issuance of share capital which generated proceeds of $114.0 million and the
above-noted settlement of forward contracts in the second quarter. The issuance
of shares was part of the consideration for the acquisition of the Kemess
property. (See Note 8 to the Unaudited Consolidated Financial Statements.)
 
     Investing Activities. Net cash used in investing activities for the second
quarter of 1996 was $22.0 million compared to $14.4 million in the same period
in 1995. The higher use of cash in the 1996 period primarily reflected a higher
investment in property, plant and equipment at the Company's current mines and
development projects including $1.1 million for mining equipment related to the
Pamour Mine open pit expansion, $6.0 million for the advanced exploration and
development of the Red Mountain property and $7.9 million for the development of
the Kemess property, among other items. The latter two investments were offset
by an initial $14.5 million compensation payment received from the British
Columbia provincial government.
 
     Net cash used in investing activities for the six months ended June 30,
1996 was $235.1 million compared to $24.6 million in the corresponding period in
1995. The Company completed the acquisition of the Kemess property in January
1996 for aggregate consideration of approximately $202.0 million. This included
cash consideration of $87.8 million of which $26.9 million was incurred in prior
periods in respect of open market purchases of shares of Geddes, El Condor and
St. Philips. (See Note 8 to the Unaudited Consolidated Financial Statements.) In
addition, during the second quarter of 1996, the Company completed the
acquisition of all of the shares of Consolidated Professor for total
consideration of approximately $16.2 million. (See Note 9 to the Unaudited
Consolidated Financial Statements.) For the six months ended June 30, 1996, the
Company had also invested $37.9 million in property, plant and equipment at its
various mines and development projects including $5.1 million for mining
equipment related to the Pamour Mine open pit expansion, $6.4 million for the
advanced exploration and development of the Red Mountain property, $9.5 million
for the development of the Kemess property and $22.6 million on mine site
maintenance capital and development. The expenditures on the Red Mountain and
Kemess properties were offset by an initial $14.5 million compensation payment
received from the British Columbia provincial government. Also during 1996,
 
                                       40
<PAGE>   47
 
the Company made $6.3 million of additional investments in Mountain Minerals and
Asia Minerals Corp. ("Asia Minerals"), two strategic long-term investments. Asia
Minerals has recently completed a private placement offering, the proceeds of
which will provide funds to allow the company to pursue its ventures in China.
 
     Capital Expenditures. The Company currently expects to spend $129 million
for capital expenditures in 1996, of which approximately $45 million has been or
is expected to be funded by the British Columbia provincial government.
Approximately $102 million of the total will be spent on the Development
Projects. See "Business -- Development Projects." The balance of the budget will
be used for exploration and sustaining capital for the Company's existing
operations.
 
     The Company expects that the approximately US$170.6 million of proceeds
received from the Offering, together with its current cash position, amounts
available under the Credit Facility, vendor financing, compensation from the
British Columbia provincial government and its investment and economic
assistance package (see "Business -- Development Projects -- Kemess South") and
the cash flow from existing operations will be sufficient to fund the Company's
capital expenditure and exploration programs and ongoing operations until 1998,
when the Kemess South Project is expected to be brought into production and to
generate sufficient cash flow to fund future growth.
 
                                       41
<PAGE>   48
 
                                    BUSINESS
 
THE COMPANY
 
     Royal Oak is a major North American gold mining company which, together
with its predecessors, has produced in excess of 50 million ounces of gold over
a 60-year period. The Company, which owns and operates five producing gold
mines, is in the process of expanding one producing mine and is developing four
major new projects. The Company has extensive land positions in Canada covering
approximately 704,000 acres, as well as over 7,000 acres in the United States,
which provide it with the opportunity to expand its reserves through focused
exploration and development. As of and for the fiscal year ending December 31,
1995, Royal Oak had approximately 9.8 million ounces of mineable gold reserves
and produced 371,151 ounces of gold.
 
     The Company's five producing gold mines consist of the Colomac and Giant
Mines in the Northwest Territories, the Pamour and Nighthawk Mines in Ontario
and the Hope Brook Mine in Newfoundland. Through acquisitions, exploration and
the implementation of more advanced and efficient mining methods, the Company
has increased its annual production by a compounded annual growth rate of 17.5%
since 1991. The Company conducts a focused exploration program to develop
additional mineable gold reserves in close proximity to its existing mines in
order to maximize the utilization of its processing facilities and to increase
processing efficiencies. In 1995, the Company's exploration efforts resulted in
the addition of approximately 2.2 million ounces of mineable gold reserves to
its existing reserve base at a cost of approximately $6.95 per ounce. A
significant part of this exploration program was focused on the Pamour Mine open
pit expansion which is expected to contribute approximately 60,000 ounces of
gold annually when production commences in the first half of 1998.
 
     As of June 30, 1996, the Company employed 1,461 people, of which 937 are
represented by one of two unions. The Company's principal executive offices are
located at 5501 Lakeview Drive, Kirkland, Washington 98033, and its telephone
number is (206) 822-8992.
 
MINING PROCESS
 
     The business of gold mining is essentially divided into four phases:
exploration, development, production and reclamation. During the exploration
phase, geologists search for indications of mineralization. Quite often, large
areas of land must be examined. Consequently, geologists rely on such general
techniques as the review of geological maps, the interpretation of satellite or
aerial surveys and the review of historical mining data in order to search for
possible indications of mineralization. Once an area of interest has been
identified, surface samples are taken and analyzed for the presence of anomalous
levels of mineralization. Trenches are often dug in order to take sub-surface
samples and better determine the geological structure. The final step in the
identification of a mineralized body involves drilling of the identified targets
by either reverse circulation or diamond core drills.
 
     Before proceeding further, a determination must be made as to whether the
mineralization represents an economic ore body. To accomplish this, a
feasibility study is completed. The feasibility study involves the comprehensive
analysis of the entire proposed mine operation and ultimately determines whether
the mine will be placed into production. The results from exploratory trenching
and drilling, and in certain instances, additional work, including bulk sampling
and underground development, together with estimates of capital and operating
costs, are used to assess the economics of the deposit.
 
     Once a decision has been made to proceed, permission is sought and the
infrastructure for the mine is constructed, including access roads, runways,
power lines, living quarters, maintenance sheds and processing facilities.
Concurrently, the mine is developed. In the case of an underground mine, access
to the ore body must be provided. This may include the sinking of shafts and/or
the development of declines, ramps or drifts. In an open pit mine, development
will generally involve the removal of non-mineralized surface rock in order to
allow access to the ore body.
 
     Once construction and development have been completed, the mine is brought
into production with the mining of both ore and waste rock. Ore is segregated
from the waste rock and then sent to the mill for further processing in order to
extract the gold. Ore is first crushed in order to reduce the size of the larger
pieces. If
 
                                       42
<PAGE>   49
 
the concentration of gold is high enough, the crushed ore will typically be
processed further in a mill. In the mill, crushed ore is ground to a size small
enough to ensure liberation of the gold from the associated rock, thereby
forming a fine ore slurry. A gravity circuit may be employed to remove free gold
or, if the gold is still associated with the waste rock, the gold is dissolved
in a cyanide solution, thereby allowing the waste rock to be discarded as
tailings. The goldbearing cyanide solution is then processed to remove the gold,
typically through the use of either a carbon adsorption or a zinc precipitation
circuit. Once extracted, the gold is smelted in a furnace and poured into molds,
creating dore bars. These bars are then sent to a refinery for final
purification.
 
     If the grade of the ore is low, it may be more economical to use heap
leaching rather than milling to extract the gold. In heap leaching, the crushed
ore is placed on lined leach pads where a weak cyanide solution is applied to
the surface of the heap. The solution percolates down through the ore where it
dissolves the gold and flows to a central collection location. The gold-bearing
solution is then processed further at the mill (as described above).
 
     Although reclamation of a mine may occur concurrently during the production
phase, it will begin in earnest once all the economic mineralization has been
extracted from the ore body. Reclamation involves the returning of land
disturbed by mining, including waste dumps, tailings ponds and pits, to
environmentally acceptable conditions and disposal of the remaining waste in an
approved manner. Reclamation may include revegetation and recontouring of the
disturbed land and removal of all buildings, machinery and equipment. If
necessary, monitoring of the site for potential leakage of acid rock drainage or
other soluble elements may be undertaken. Reclamation requirements vary greatly
according to location of the property.
 
HISTORY
 
     The Company came into existence on July 23, 1991 as a result of the
amalgamation of five companies: Giant Yellowknife Mines Limited, Pamour Inc.,
Pamorex Minerals Inc., Royal Oak Resources Ltd. and Akaitcho Yellowknife Gold
Mines Limited, certain of which commenced operations approximately 60 years ago.
As a result of this amalgamation, the Company had two operating mines, Pamour
and Giant. On January 1, 1992, the Company amalgamated with its wholly-owned
subsidiary, Supercrest Mines Limited. In addition to its wholly owned
subsidiaries, the Company has a majority interest in three companies, Ronnoco
Gold Mines Limited, Northbelt Yellowknife Gold Mines Limited and Royal Eagle
Exploration Inc.
 
     Since 1991, Royal Oak has acquired the following properties and interests:
 
     -  the Broulan property in Ontario from Balmoral Mines Ltd. (1991);
 
     -  a 20% interest in Athabaska Gold Resources Ltd. (1991-1993);
 
     -  the Hope Brook Mine in Newfoundland from Hope Brook Gold Inc. (1992);
 
     -  the Colomac Mine in the Northwest Territories (and an existing royalty
       interest) from Neptune Resources Corp. (1993);
 
     -  a controlling interest in Geddes Resources Limited from Neptune
       Resources Corp. (1993);
 
     -  an option in respect of the Kim-Cass property in the Northwest
       Territories from Echo Bay Mines Ltd. (1994);
 
     -  the Red Mountain property in British Columbia from Barrick Gold
       Corporation (1995);
 
     -  the Nicholas Lake gold property in the Northwest Territories from
       Athabaska Gold Resources Ltd. (1995);
 
     -  an 89.4% interest in Ronnoco Gold Mines Limited, thereby providing the
       Company with a strategic land position on the Nighthawk Lake Break in
       Ontario (1995-6);
 
     -  a leasehold interest in the Copperstone property located in Arizona
       (1995);
 
                                       43
<PAGE>   50
 
     -  all of the outstanding shares of Geddes, El Condor and St. Philips,
       thereby acquiring the Kemess property in British Columbia (1996);
 
     -  all of the outstanding shares of Consolidated Professor, thereby
       acquiring the Duport property in Ontario (1996); and
 
     -  the Cape Ray gold property in Newfoundland from American Gem Corporation
       and the net smelter return royalty on the property from Homestake Canada
       Inc. (1996).
 
     In addition, the Company has certain strategic investments. See "--
Strategic Investments."
 
OPERATING STRATEGY
 
     In order to capitalize on its business strengths, the Company has developed
the following operating strategy to continue its growth:
 
     -  Increase Production and Reduce Average Cash Costs -- As a result of
       increased production at the Colomac Mine and the first full year of
       production at the Nighthawk Mine, the Company expects to increase its
       gold production in 1996 to approximately 415,000 ounces from 371,151
       ounces in 1995. In addition, through the successful implementation of
       advanced mining technologies accompanied by cost reduction programs, the
       Company believes that its average cash costs will decrease from US$358
       per ounce of gold in 1995 to approximately US$315 per ounce of gold in
       1996. The Company's cash costs for the six months ended June 30, 1996
       were US$331 per ounce of gold compared to US$351 in the same period in
       1995.
 
     -  Complete Development of Major Projects -- The Company's primary
       objective with respect to the Development Projects is to efficiently
       complete the development of the Kemess South Project. The Company
       estimates that, upon completion, the Development Projects will generate
       additional annual production of approximately 547,000 ounces of gold and
       60 million pounds of copper with an average estimated cash cost of US$192
       per ounce of gold and US$0.48 per pound of copper over the life of the
       properties.
 
     -  Expand Reserve Base Through Focused Exploration -- The Company's
       exploration program focuses on identifying additional mineable ore
       reserves in close proximity to its existing mines. This strategy allows
       the Company to maximize utilization of existing processing facilities, to
       increase processing efficiencies and to capitalize on its extensive land
       position in Canada. In 1995, the Company's $15.3 million exploration
       program delineated approximately 2.2 million ounces of mineable gold
       reserves. The Company has budgeted $12 million for its 1996 exploration
       program.
 
     Management believes that the gold mining industry will continue to
consolidate over the next several years and that numerous acquisition
opportunities will become available to the Company. In 1996, the Company
acquired the Kemess, Duport and Cape Ray properties. In addition to the
operating strategy described above, the Company intends to review acquisition
opportunities as they become available and will pursue selective acquisitions of
gold properties that will increase production, mineable ore reserves and cash
flow from operations while reducing average cash costs. These acquisitions could
be an important component of the Company's future growth.
 
OPERATING PROPERTIES
 
     The Company produced a record 371,151 ounces of gold in 1995, an increase
of 17% from the 318,171 ounces produced in 1994. This production came from the
Company's five operating gold mining properties: the Colomac and Giant Mines in
the Northwest Territories, the Pamour and Nighthawk Mines in Ontario and the
Hope Brook Mine in Newfoundland.
 
     Set forth on the following page is a summary, on a property-by-property
basis, of the Company's production, reserve and cost data:
 
                                       44
<PAGE>   51
 
                        PRODUCTION, RESERVE & COST DATA
<TABLE>
<CAPTION>
                                                                                                              RESERVES AT
                                                                              PRODUCTION                      YEAR END(1)
                                                           ------------------------------------------------   -----------
                                                                                                  RECOVERED    MINEABLE
                                                           ORE MILLED    HEAD GRADE    RECOVERY     GOLD          ORE
                                                             (TONS)     (OUNCES/TON)     (%)      (OUNCES)    (000S TONS)
                                                           ----------   ------------   --------   ---------   -----------
<S>                                                        <C>          <C>            <C>        <C>         <C>
GOLD
Gold Colomac Mine(2)
1995.....................................................  2,725,388        0.047        92.34     117,646       12,255
1994.....................................................    985,091        0.047        87.10      40,568       13,054
1993.....................................................         --           --           --          --       13,618
Giant Mine(3)
1995.....................................................    410,966        0.254        86.73      91,423        2,466
1994.....................................................    430,238        0.264        86.95     101,176        2,395
1993.....................................................    413,098        0.264        85.86      92,948        2,617
Pamour and Nighthawk Mines
1995.....................................................  1,329,846        0.067        90.20      80,120       38,471
1994.....................................................  1,350,007        0.069        89.20      85,755        9,398
1993.....................................................  1,330,722        0.072        89.60      87,346        3,993
Hope Brook Mine
1995.....................................................  1,090,250        0.090        84.43      81,962        2,448
1994.....................................................  1,227,136        0.089        82.10      90,672        3,936
1993.....................................................  1,149,071        0.101        82.48      96,026        7,300
Kemess South(4)
1995.....................................................         --           --           --          --      220,947
Kemess North(4)
1995.....................................................         --           --           --          --           --
Red Mountain
1995.....................................................         --           --           --          --        3,053
Matachewan
1995.....................................................         --           --           --          --       13,253
1994.....................................................         --           --           --          --        1,400
Duport(4)
1995.....................................................         --           --           --          --        1,008
Cape Ray(4)
1995.....................................................         --           --           --          --          502
Copperstone
1995.....................................................         --           --           --          --           --
Royal Oak Consolidated
1995.....................................................  5,556,450           --           --     371,151      294,402
1994.....................................................  3,992,472           --           --     318,171       30,183
1993.....................................................  2,892,891           --           --     276,320       27,527
 
<CAPTION>
                                                                                             MINERALIZED MATERIAL
                                                                                                AT YEAR END(1)
                                                                                     -------------------------------------
                                                             AVERAGE                 MINERALIZED     AVERAGE
                                                              GRADE         GOLD      MATERIAL        GRADE         GOLD
                                                           (OUNCES/TON)   (OUNCES)   (000S TONS)   (OUNCES/TON)   (OUNCES)
                                                           ------------   --------   -----------   ------------   --------
<S>                                                        <C>             <C>         <C>      <C>
GOLD
Gold Colomac Mine(2)
1995.....................................................      0.058       711,000       4,438         0.058       260,000
1994.....................................................      0.053       694,000       7,375         0.060       467,000
1993.....................................................      0.052       709,000       4,026         0.044       179,000
Giant Mine(3)
1995.....................................................      0.335       826,000       6,043         0.218      1,317,000
1994.....................................................      0.319       763,000       6,066         0.216      1,313,000
1993.....................................................      0.321       840,000       6,171         0.216      1,331,000
Pamour and Nighthawk Mines
1995.....................................................      0.046      1,771,000     19,927         0.081      1,611,000
1994.....................................................      0.067       629,000       6,223         0.086       536,000
1993.....................................................      0.097       386,000       5,615         0.090       506,000
Hope Brook Mine
1995.....................................................      0.088       215,000       3,960         0.101       399,000
1994.....................................................      0.087       343,000       4,389         0.109       477,000
1993.....................................................      0.102       746,000       2,673         0.116       311,000
Kemess South(4)
1995.....................................................      0.018      4,056,000         --(5)         --            --
Kemess North(4)
1995.....................................................         --            --     173,063         0.011      1,918,000
Red Mountain
1995.....................................................      0.262       800,000         525         0.203       106,000
Matachewan
1995.....................................................      0.067       884,000       1,976         0.139       274,000
1994.....................................................      0.062        87,000      11,409         0.103      1,176,000
Duport(4)
1995.....................................................      0.380       383,000       1,007         0.320       322,000
Cape Ray(4)
1995.....................................................      0.294       147,000          --            --            --
Copperstone
1995.....................................................         --            --       2,424         0.172       417,000
Royal Oak Consolidated
1995.....................................................      0.033      9,793,000    213,363         0.031      6,625,000
1994.....................................................      0.083      2,517,000     35,822         0.111      3,969,000
1993.....................................................      0.097      2,682,000     18,485         0.126      2,327,000
 
<CAPTION>
                                                                                        COSTS
                                                                           --------------------------------
                                                                           OPERATING    CASH    DEPRECIATION
                                                           TOTAL MINERAL   COST/TON     COST        AND
                                                           INVENTORY(1)     MILLED     (US$/    AMORTIZATION
                                                           (OUNCES GOLD)    ($/TON)    OUNCE)   (US$/OUNCE)
                                                           -------------   ---------   ------   -----------
GOLD
Gold Colomac Mine(2)
1995.....................................................      970,000      $ 22.72     $383        $46
1994.....................................................    1,162,000           --       --         --
1993.....................................................      888,000           --       --         --
Giant Mine(3)
1995.....................................................    2,143,000       100.59      329         10
1994.....................................................    2,076,000        92.71      289         11
1993.....................................................    2,171,000        95.86      330          9
Pamour and Nighthawk Mines
1995.....................................................    3,382,000        30.39      368         20
1994.....................................................    1,165,000        28.34      327         37
1993.....................................................      892,000        26.25      310         20
Hope Brook Mine
1995.....................................................      614,000        35.35      343         32
1994.....................................................      820,000        32.30      320         23
1993.....................................................    1,057,000        31.48      292         13
Kemess South(4)
1995.....................................................    4,056,000           --       --         --
Kemess North(4)
1995.....................................................   1,918,0000           --       --         --
Red Mountain
1995.....................................................      906,000           --       --         --
Matachewan
1995.....................................................    1,159,000           --       --         --
1994.....................................................    1,263,000           --       --         --
Duport(4)
1995.....................................................      705,000           --       --         --
Cape Ray(4)
1995.....................................................      147,000           --       --         --
Copperstone
1995.....................................................      417,000           --       --         --
Royal Oak Consolidated
1995.....................................................   16,418,000        32.79      358         29
1994.....................................................    6,485,000        39.17      311         22
1993.....................................................    5,009,000        38.27      311         14
</TABLE>
<TABLE>
<CAPTION>
                                                                                                       RESERVES AT YEAR END(1)
                                                                                                      --------------------------
                                                                                                       MINEABLE
                                                                                                          ORE         AVERAGE
                                               COPPER                                                 (000S TONS)    GRADE (%)
                                                                                                      -----------   ------------
<S>                                                                                                   <C>           <C>
Kemess South(4)
1995................................................................................................    220,947         0.224
Kemess North(4)
1995................................................................................................         --            --
 
<CAPTION>
                                                                                                                 MINERALIZED
                                                                                                                  MATERIAL
                                                                                                                   AT YEAR
                                                                                                                   END(1)
                                                                                                                 -----------
                                                                                                       COPPER    MINERALIZED
                                                                                                       (000S      MATERIAL
                                               COPPER                                                  POUND)    (000S TONS)
                                                                                                      --------   -----------
<S>                                                                                                   <C>      <C>
Kemess South(4)
1995................................................................................................   989,843          --(5)
Kemess North(4)
1995................................................................................................        --     173,063
 
<CAPTION>
 
                                                                                                                      COPPER
                                                                                                        AVERAGE       (000S
                                               COPPER                                                  GRADE (%)     POUNDS)
                                                                                                      ------------   --------
Kemess South(4)
1995................................................................................................         --
Kemess North(4)
1995................................................................................................      0.180       623,026
 
<CAPTION>
 
                                               COPPER
 
Kemess South(4)
1995................................................................................................
Kemess North(4)
1995................................................................................................
 
<CAPTION>
 
                                               COPPER
 
Kemess South(4)
1995................................................................................................
Kemess North(4)
1995................................................................................................
</TABLE>
 
- ---------------
 
(1) See "Risk Factors -- Reserve Estimates; Mineral Inventory."
 
(2) In 1994, revenue from production at Colomac was netted against start-up
    costs and deferred as pre-production costs, and 1994 and 1995 include data
    with respect to the Kim-Cass property on a 100% ownership basis. See
    "Business -- Operating Properties -- Colomac." As of June 30, 1996, the mine
    plan at the Colomac Mine was under review by the Company's management which
    could affect the reserves at such property; however, based upon information
    currently available to the Company, any adjustment to such reserves is not
    anticipated to be material to the Company's total mineral inventory in the
    Indin Lake area that would be processed by the Colomac Mill.
 
(3) 1995 reserves include data with respect to the Nicholas Lake property.
 
(4) Property acquired in 1996.
 
(5) In addition, the Kemess South property includes in-situ mineralization of
    approximately 151 million tons. The Company intends to further delineate
    such mineralization during the development of Kemess South.
 
                                       45
<PAGE>   52
 
COLOMAC
 
Background
 
     The Colomac Mine, which is located approximately 137 miles northwest of
Yellowknife in the vicinity of Indin Lake, was acquired in April 1993 from
Neptune Resources Corp. ("Neptune") after having been shut down since June 1991.
Stripping operations at the Colomac Mine recommenced in March 1994, and the
first gold production was realized in July 1994. During 1995, the Colomac Mine
produced 117,646 ounces of gold at an average cash cost per ounce of US$383. For
the six months ended June 30, 1996, the Colomac Mine produced approximately
60,552 ounces of gold at an average cash cost per ounce of US$356. As of
December 31, 1995, the Colomac Mine and the nearby Kim-Cass deposit had mineable
ore reserves of 711,000 ounces of gold and additional mineralized material of
260,000 ounces of gold. As of June 30, 1996, the mine plan at the Colomac Mine
was under review by the Company's management which could affect the reserves at
such property; however, based upon information currently available to the
Company, any adjustment to such reserves is not anticipated to be material to
the Company's total mineral inventory in the Indin Lake area that would be
processed by the Colomac Mill. The property is accessible by winter road from
Yellowknife for approximately three months each year or on a year round basis by
chartered aircraft to a 5,000 foot airstrip at the mine site. The Kim-Cass
property, which is located 9 miles southwest of the Colomac Mine, contains two
deposits, the Main Zone and the Cass Zone, that will become feed for the Colomac
Mill. The Kim-Cass property consists of 12 leased mining claims covering
approximately 15,322 acres and will be accessible from Colomac by an all-weather
road. Currently, the Kim-Cass property is accessible by chartered aircraft from
Yellowknife or by winter road from Colomac.
 
Ownership
 
     The Colomac property is comprised of four mining leases and three surface
leases which cover approximately 3,400 acres. In 1993, the Company acquired the
Colomac Mine for shares of Royal Oak worth $7,875,000 and the gross production
royalty on the Colomac property for shares of Royal Oak worth $4,000,000. The
Company holds a 100% interest in the leases. The mining leases are subject to an
operating royalty payable to Neptune. The Company is obligated to pay an
operating royalty when the average price of gold for a calendar year exceeds
US$400 per ounce. Amounts payable are $1.0 million or $2.0 million annually
depending on the average price of gold. No amount has been payable under this
royalty to date. Obligations under this agreement expire after five years of
production, which is currently expected to be reached at the end of 1999. The
net book value of the Colomac property, plant and equipment was approximately
$45.9 million as of December 31, 1995.
 
     In 1994, the Company entered into an agreement with Echo Bay Mines Ltd.
("Echo Bay") pursuant to which Echo Bay granted the Company an option to acquire
up to a 100% interest in the Kim-Cass property, exclusive of diamond rights, by
placing the property into production within a four-year period. The Company is
obligated to incur minimum annual exploration expenses of $250,000 on the
property during the four-year earn-in period and has the right to extend the
earn-in period for consideration of $100,000 per year. Upon the Company placing
the Kim-Cass property into production, the property will be subject to a net
smelter return royalty which will be on a sliding scale based on the price of
gold. The Company has spent over $1.0 million for exploration on the property to
date, which spending satisfies the option requirements.
 
Mining and Milling Facilities
 
     The Colomac Mine uses conventional open pit mining techniques. The mill,
built in 1989, is a conventional 9,300 tons per day CIP circuit with historical
recoveries of approximately 90%. The mill circuitry was modified, including
installation of a pebble crusher by-pass, in 1996 to overcome operating
difficulties and to facilitate the processing of 10,000 tons of ore per day. The
plant and equipment are generally in good to excellent condition. The design of
the open pit was carried out with computer-aided mine design software which
allows for block model generation, reserve calculation and interactive pit
design. The power for this property is diesel-generated on site.
 
                                       46
<PAGE>   53
 
Geology
 
     The Colomac ore body is hosted within a large quartz feldspar porphyry sill
of the Pre-Cambrian age. It was later tilted into a vertically dipping
orientation and has been named the Colomac Dyke. This intrusion was fractured
and recemented by quartz veinlets containing free gold and pyrite. The Colomac
Dyke averages 120 feet wide in the Zone 2.0 pit. It has a strike length of
approximately 7 miles. The Main Zone occurs within a package of steeply dipping
mafic pillowed volcanics. The gold occurs associated with enriched areas of
sulphides. The Cass Zone occurs within a steeply dipping mafic intrusive body.
Gold occurs associated with swarms of quartz veinlets containing minor amounts
of sulphides.
 
Ore Reserves
 
     As of December 31, 1995, the Colomac operation, including its satellite
deposits, the Main and Cass Zones, had proven and probable ore reserves of
approximately 12,255,000 tons grading 0.058 ounces of gold per ton. As of June
0, 1996, the mine plan at the Colomac Mine was under review by the Company's
management which could affect the reserves at such property; however, based upon
information currently available to the Company, any adjustment to such reserves
is not anticipated to be material to the Company's total mineral inventory at
Indin Lake area that would be processed by the Colomac Mill. The cut-off grade
used in estimating these reserves of 0.030 ounces of gold per ton for the open
pit is based on current mining costs and a gold price of $517 (US$383) per
ounce. Allowances are made in these estimates for dilution and mining losses.
Ore reserves do not include allowances for losses in milling.
 
GIANT
 
Background
 
     The Giant Mine, located approximately three miles north of Yellowknife, has
been in production continuously since 1948. The Ingraham Trail and Vee Lake Road
from Yellowknife both pass through the centre of the property. Mining is
conducted underground and there is an on-site mill. In 1995, the Giant Mine
produced 91,423 ounces of gold at an average cash cost per ounce of US$329. For
the six months ended June 30, 1996, the Giant Mine produced approximately 40,049
ounces of gold at an average cash cost per ounce of US$352. Since the
commissioning of the mill in 1948, the Giant Mine has produced in excess of
7,000,000 ounces of gold.
 
     The Company has undertaken a number of development initiatives on
properties in the vicinity of the Giant Mine, namely the Supercrest deposit and
the Nicholas Lake property. The Company has begun rehabilitation of the
infrastructure which accesses the Supercrest ore body and which enables large
scale mining of this ore body. The higher grade mineable ore from Supercrest,
which averages 0.384 ounces of gold per ton in situ compared to 0.301 ounces of
gold per ton at Giant, is expected to have a beneficial impact on production and
cash cost of the Company beginning in the second half of 1996. The net book
value of the Giant Mine property, plant and equipment was approximately $49.9
million as of December 31, 1995.
 
     The Nicholas Lake property, which was acquired in 1995 from Athabaska Gold
Resources Ltd., is located 60 miles north of Yellowknife. It can be accessed by
chartered aircraft from Yellowknife or by winter road. Production is expected to
commence in 1998. Ore will be mined year round, and stockpiled at site, for
shipment to the Giant Mine in Yellowknife on the winter ice road. The ore will
be processed at the Giant facility in a parallel circuit that will utilize
common infrastructure where possible, namely buildings, power and tailing ponds.
The Nicholas Lake parallel circuit is expected to operate at a capacity of 200
to 300 tons per day.
 
Ownership
 
     The Company owns a 100% interest in the Giant Mine property which consists
of six mining leases covering 1,636 acres and one surface lease covering 2,243
acres.
 
     The Company purchased a 100% interest in the Nicholas Lake property in 1995
from Athabaska Gold Resources Ltd., for $3.8 million. The Nicholas Lake property
is subject to a 1% net smelter return royalty.
 
                                       47
<PAGE>   54
 
Mining and Milling Facilities
 
     The Giant Mine currently operates underground with access provided by two
large service raises, five declines and the "C" shaft, which is the principal
operating opening for hoisting and extends to a depth of 2,124 feet. Mining is
by conventional underground mining techniques utilizing equipment to drill small
diameter holes for blasting the ore. The ore is carried to the ore dumps by
mechanized scooptrams and/or battery operated trains. Development is carried out
by conventional equipment as well as with some mechanized drill jumbos. The mill
at the Giant Mine is a 1,100 ton per day milling and refining complex. The power
source for this property is Northwest Territories Power Corp.
 
     The Nicholas Lake ore body consists of eleven zones of mineralization.
These zones are near vertical quartz-sulphide veins. The zones have been drilled
from surface and underground at a spacing of approximately 65 feet. The ore body
is accessed by a ramp (driven in 1994) to a depth of 300 feet below surface. A
total of 750 feet of cross-cutting and silling has been conducted on two of the
major zones (including detailed mapping and sampling). Mining methods during the
production phase will be shrinkage. Access will be provided by deepening the
existing ramp as mining progresses.
 
     The main infrastructure of the Giant Mine has been in place since 1946. An
Edwards Hearth roaster was added in 1948 and a fluid bed roaster was added in
1950. In the mid-1950s, a two-stage fluid bed roaster was added along with a
roaster gas cleaning plant. In the early 1980s, a new effluent treatment plant
was added, and in 1992 to 1994, the mill's flotation cells were replaced. As a
result of the Company's operations at the Giant Mine, there are small amounts of
sulphur dioxide and arsenic emissions, but the Company's roaster currently
operates in compliance with all existing legislation and regulations in this
regard. The Giant Mine's plant and equipment are generally in good condition.
 
Geology
 
     The Giant Mine is in the Yellowknife Greenstone belt, a package of
Pre-Cambrian basic volcanic rocks. Ore bodies are hosted in shear zones within
the greenstones. Individual ore bodies are veins, quartz lenses or silicified
areas within the shear. Gold is associated with fine-grained arsenopyrite.
 
     The Nicholas Lake deposit is a series of narrow, steeply dipping quartz
veins containing gold, arsenopyrite and other sulphides. These veins occur
within a granitic intrusive body.
 
Ore Reserves
 
     As of December 31, 1995, the Yellowknife operation, including Nicholas
Lake, had remaining proven and probable ore reserves of approximately 2,466,000
tons grading 0.335 ounces of gold per ton. A cut-off grade of 0.20 ounces of
gold per ton, based on current mining costs and a gold price of $517 (US$383)
per ounce, was used in calculating these reserves. Allowances are made in these
estimates for dilution and mining losses. Ore reserves do not include allowances
for losses in milling. In some areas, such as Nicholas Lake, higher cut-off
grades were used.
 
PAMOUR
 
Background
 
     The Pamour Mine consists of two underground and two open pit mining
operations. The Pamour Mine is located approximately 15 miles east of the City
of Timmins, Ontario, and has been in production since 1936. Both the Pamour and
Hoyle properties are transected by Highway 101. In 1995, the Pamour and
Nighthawk Mines produced approximately 80,120 ounces of gold at an average cash
cost per ounce of US$368. For the six months ended June 30, 1996, the Pamour and
Nighthawk Mines produced approximately 47,977 ounces of gold at an average cash
cost per ounce of US$287. Since the commissioning of the mill in 1936, the
Pamour Mine has produced in excess of 4.0 million ounces of gold. The net book
value of the Company's property, plant and equipment in the Ontario operations,
including those associated with the Pamour, Hoyle and Nighthawk properties, was
approximately $57.2 million as of December 31, 1995.
 
                                       48
<PAGE>   55
 
Ownership
 
     The Pamour property consists of 38 patented mining claims and one License
of Occupation. Together, the property covers approximately 1,531 acres of mining
and surface rights. Directly adjacent to the Pamour Mine is the Hoyle property
which is comprised of 37 patented mining claims and 4 leased claims covering
approximately 1,608 acres. The Company has a renewable 10-year lease on that
portion of the Hoyle property lying south of the Timiskaming Unconformity. The
lease terms include the payment of a minimum annual rent of $100,000 which is
credited against a production royalty, being the higher of $0.75 per ton or a 2%
net smelter return. In order to renew the lease, which expires in 1999, for a
further 10-year term, the Company must spend $1.0 million on exploration and
mine one million tons of ore. The Company has a 51% interest in the portion of
the Hoyle property north of the Timiskaming Unconformity, which is not currently
in production.
 
Mining and Milling Facilities
 
     The Pamour Mine currently operates both open pit and underground mining
operations. The underground mine currently produces approximately 2,000 tons of
ore per day, while the open pit operations produce approximately 1,500 tons per
day. The Pamour Mine is comprised of the Pamour No. 1 Underground Mine, surface
pits and the Hoyle Mine.
 
     The Pamour No. 1 Underground Mine commenced operations in 1936 as the
original Pamour Mine and has operated continuously since. The leased Hoyle Mine
extension, which commenced production in April 1990, is the eastern strike
extension of the Pamour ore body and is a large resource of bulk mineable
conglomerate ore which has been accessed by a decline from surface and by
underground drifts from the Pamour shaft. The underground mine currently
produces approximately 2,000 tons per day through a 3,145 foot deep
five-compartment timbered shaft. The Hoyle property has the capacity to produce
18,000 tons per month. The mine is adjacent to the Pamour No. 1 operation and
has higher grade ore than present reserves at the Pamour No. 1 Mine.
 
     Where possible, bulk mining methods are utilized, primarily by modified
vertical crater retreat as well as sublevel blasthole stoping. The bulk mining
areas are developed with large mechanized drill jumbos, scooptrams and trucks.
The blocks are drilled off with 4.5 inch and/or 6.5 inch diameter blastholes and
blasted into drawpoints located at the bottom of the block. Scooptrams and
trucks move the blasted ore from the drawpoints to an internal pass. An electric
trolley with 5 ton cars transports the ore from the internal pass to 3 Shaft
where it is shipped to the surface. Higher grade, narrow veins are mined by a
modified open shrinkage method. The ore is developed and mined with jacklegs and
stopers which drill narrow blastholes (1.25 inch in diameter). The broken ore is
transported to the surface through mechanized scoops, trucks and/or electric
trains.
 
     The No. 3 Pit is located immediately southeast of the Pamour Mill. This
open pit was developed over the workings of the Pamour Mine and first came into
production in 1985. The No. 5 Pit, at the extreme west end of the Pamour No. 1
property, was brought into production in 1989. Total pit production is 1,500
tons of ore per day.
 
     An additional jaw crusher was added to the Pamour Mine in the early 1990s.
In 1995, all 25-cycle electrical motors in the mine were replaced due to the
change in the power supply from 25 cycles to 60 cycles. Also in 1995, an
additional ball mill was installed to increase capacity from 3,600 to 4,500 tons
per day. The on-site mill at Pamour has the capacity to treat approximately
4,000 tons per day and is expected to increase to 8,000 tons per day after the
completion of modifications which are underway. The Pamour Mine plant and
equipment are generally in good condition. A gold pyrite flotation concentrate
is produced from the ore and is treated by a conventional cyanidation process to
produce a gold precipitate which is refined into dore. The power source for this
property is Ontario Hydro.
 
                                       49
<PAGE>   56
 
Pamour Mine open pit expansion
 
     As a result of its successful exploration program, the Company is
developing a significant expansion project at the Pamour property. The Company
has focused on examining the low grade halo around the mined out stopes at the
Pamour Mine. As of December 31, 1995, the Company had added approximately 1.14
million ounces of gold to mineable ore reserves from this exploration.
Production from the site is expected to commence in 1998 at a rate of 60,000
ounces of gold per year. The current dimensions of the planned pit are
approximately 6,000 feet long, 2,400 feet wide and 800 feet deep. However, the
ultimate extent of the pit will be determined by staged drilling over the next
few years. Total capital costs to complete the expansion are expected to be
approximately $22 million.
 
Geology
 
     The Pamour Mine is located approximately one mile north of the
Destor-Porcupine Fault, an east-northeast to west-southwest striking structure.
The majority of the historic gold producing mines in the Porcupine Gold Camp
have been located near this structure. On the property, a series of basic
volcanic rocks are unconformably overlain by greywackes and a thick
conglomerate, known as the Pamour conglomerate. All rocks are of the
Pre-Cambrian age. Gold occurs in narrow high grade quartz veins in the volcanics
and in the sediments. The majority of the gold that has been mined from this
property occurs in sheeted sets of quartz veins in the Pamour conglomerate and
in the greywackes on either side of it. Gold also occurs in broad irregular
zones of quartz veinlets in the volcanic rocks.
 
Ore Reserves
 
     As of December 31, 1995, the Pamour and Nighthawk operations had remaining
proven and probable ore reserves of approximately 38,471,000 tons grading 0.046
ounces of gold per ton. The ore reserves at this division have increased in each
of the last three years due to expansion of open pit reserves. A major drilling
campaign was undertaken in 1995 for this purpose. Cut-off grades (which range
from 0.023 to 0.200 ounces per ton) are determined for each type of ore based on
current mining costs, and a gold price of $517 (US$383) per ounce. Allowances
are made in these estimates for dilution and mining losses. Ore reserves do not
include allowances for losses in milling.
 
NIGHTHAWK
 
Background
 
     The Nighthawk Mine, which was operated by Porcupine Peninsular Gold Mines
Limited between 1924 and 1927, is located east of the Pamour Mine and commenced
production in September 1995. Access is via highway, 10 miles from the Pamour
Mill. The Company and its predecessors paid a total of $287,500 from 1973 to
1994 in the form of cash payments and work requirements of the Nighthawk Mine.
The net book value of the Company's properties and the associated plants and
equipment in its Ontario division, which includes the Nighthawk Mine, was
approximately $57.2 million as of December 31, 1995. In 1995, the Pamour and
Nighthawk Mines produced approximately 80,120 ounces of gold at an average cash
cost per ounce of US$368. For the six months ended June 30, 1996 the Pamour and
Nighthawk Mines produced approximately 47,977 ounces of gold at an average cash
cost per ounce of US$287.
 
Ownership
 
     The Company's land holdings in the Nighthawk Lake area are extensive with
approximately 11,726 acres held representing 254 claims. Most of the property is
held outright by the Company as staked claims. Other portions are held through
various option agreements which also provide for some form of production
royalty. The Ronnoco claims on the east peninsula of the lake are held through a
subsidiary company, Ronnoco Gold Mines Limited. The current producing deposit,
the Nighthawk Mine, is located on the north peninsula of the lake and is subject
to a production royalty being the higher of (i) $0.003 times tons times dollars
per ounce of gold or (ii) 20% of the net profits.
 
                                       50
<PAGE>   57
 
Mining and Milling Facilities
 
     During the period from 1924 to 1927, the Nighthawk Mine produced 99,628
tons of ore grading 0.32 ounces of gold per ton. Additional exploration was done
periodically over the ensuing years. The Company developed the Nighthawk Mine
and began production in September 1995. Full production levels of 750 tons per
day were reached in May 1996.
 
     The ore body is accessed by a ramp currently at 450 feet below surface,
which will ultimately be driven to 750 feet below surface. Mining methods for
this underground mine are primarily longhole open stoping, with 50 feet between
sublevels. Waste rock will be placed in stopes as delayed backfill. Ore is
hauled to surface stockpiles in 30 ton dump trucks. The material is then hauled
by truck 10 miles to the Pamour Mill for processing. The mine's equipment is
generally in excellent condition. The power source for this property is Ontario
Hydro.
 
Geology
 
     The Nighthawk Mine is adjacent to a major structure called the Nighthawk
Break, which is thought to be a splay off of the Destor-Porcupine Fault. The
geology in this area consists mainly of steeply dipping volcanic flows. In the
mine area, these have undergone intensive carbonate alteration. Gold occurs in
quartz veins and silicified zones associated with minor amounts of sulphide
minerals.
 
Ore Reserves
 
     As of December 31, 1995, the Nighthawk Mine had mineable ore reserves of
853,000 tons grading 0.166 ounces of gold per ton and mineralized material of
599,000 tons grading 0.164 ounces of gold per ton. A cut-off grade of 0.100
ounces per ton, based on current mining costs and a gold price of $517 (US$383)
per ounce, was used in calculating these reserves. Allowances are made in these
estimates for dilution and mining losses. Ore reserves do not include allowances
for losses in milling.
 
HOPE BROOK
 
Background
 
     The Hope Brook Mine is located approximately 5 miles inland from the
southwest coast of Newfoundland, between the towns of Burgeo and Port aux
Basques. It was acquired in April 1992 from Hope Brook Gold Inc., which had shut
down operations in May 1991. The mine currently produces 3,000 tons of ore per
day. For 1995, the Hope Brook Mine produced 81,962 ounces of gold at a cash cost
per ounce of US$343. For the six months ended June 30, 1996, the Hope Brook Mine
produced approximately 31,065 ounces of gold at an average cash cost per ounce
of US$327. As of December 31, 1995, the Hope Brook Mine had mineable ore
reserves of 215,000 ounces of gold and mineralized material of 399,000 ounces of
gold. Access to the mine is restricted to air or sea travel. A 4,000 foot
airstrip was constructed in 1992 to provide transportation for the mine
employees. The mine is being operated as a fly-in, fly-out camp. The principal
mode of access for supplies is by a ship owned and operated by the Company
exclusively for the mine. The ship is based in Rose Blanche, Newfoundland. The
net book value of the Hope Brook Mine property, plant and equipment was
approximately $19.7 million as of December 31, 1995.
 
Ownership
 
     Production from the Hope Brook Mine is subject to an operating royalty for
five years ranging from $1.3 million to $3.3 million annually in favour of the
prior owner when the annual average spot price of gold exceeds US$380 per ounce.
In 1995, the Company paid $1.3 million in respect of such royalty. This
operating royalty expires at the end of 1996. The Hope Brook Mine area consists
of a 25-year mining lease, surface lease and extended exploration licenses which
cover approximately 6,800 acres of mining rights and 490 acres of surface
rights. The Company holds a 100% interest in the property subject to the above
operating royalty. All mining activities are confined to the mining leases.
 
                                       51
<PAGE>   58
 
Mining and Milling Facilities
 
     The Hope Brook Mill was first commissioned in September 1988. The Hope
Brook ore body is intersected by a number of mafic dykes which have proven to be
significantly harder to grind than the ore material. In 1990, Hope Brook Gold
Inc., owned by B.P. Resources Canada Inc., added a pebble crushing circuit to
the primary grinding circuit. This circuit was intended to extract the mafic
pebbles from the SAG mill and to crush them externally, thereby increasing
overall throughput. The circuit was not totally successful and was subsequently
shut down.
 
     In May 1991, operations at the mine were voluntarily suspended by Hope
Brook Gold Inc. due to an unacceptable level of contamination in the tailings
pond and concern about its ability to continue operations while meeting the
environmental discharge specifications set by the federal and provincial
authorities. In 1992, Royal Oak successfully modified the mafic pebble crushing
circuit. This action, coupled with other circuit modifications, has
significantly increased overall throughput. In 1995, Hope Brook produced an
average of 2,987 tons per day. Ore is delivered to the surface and crushed to a
nominal minus 6 inch using a primary gyratory crusher. The crushed ore is
stockpiled and withdrawn as required to feed the mill grinding circuit. Grinding
to 70% minus 200 mesh is accomplished in a conventional SAG circuit followed by
a conventional ball mill grinding circuit operating in closed circuit with
cyclones. Gold is extracted from the grinding circuit product in a conventional
60 hour cyanide leach circuit followed by 6 stages of CIP. Gold is recovered
from activated carbon in a pressure stripping-electrowinning circuit. Gold is
stripped from the electrowinning cell cathodes and melted in an induction
furnace to yield dore bullion. The dore is subsequently shipped to a refinery
for final refining.
 
     In 1993, a sulphide flotation circuit was added to the mill flowsheet. The
final tailings from the CIP circuit are treated through an effluent treatment
plant utilizing the INCO SO2-Air process. The treated slurry is conditioned and
then subjected to a conventional copper rougher-scavenger flotation process. The
resulting concentrate is upgraded through several stages of cleaner flotation to
yield a concentrate grading 20 to 22% copper. The concentrate also bears
significant gold values increasing overall mill gold recovery by up to 4%. The
concentrate is dewatered, dried and shipped to a custom smelter for processing
of both the contained copper and gold values.
 
     The Hope Brook effluent treatment circuit achieved wastewater quality that
was in substantial compliance with the mine's Certificate of Approval in 1993,
1994 and 1995. However, in 1994 and 1995, while the effluent treatment circuit
was in full compliance with the mine's certificate of approval, the discharge
from the mine's tailings impoundment area did not consistently pass Environment
Canada's LC50 fish toxicity test. Although, in Canada, gold mining operations
are exempt from Environment Canada's Metal Mining Liquid Effluent Regulations,
including the LC50 fish toxicity test, remedial actions have been taken to
eliminate the problem and for the last several months, the Company's effluent
has met the LC50 fish toxicity test.
 
     The main access to the underground mine is by ramp which has been driven to
a vertical depth of 1,000 feet below surface. The haulage component of the
ramp-haulage system installed at Hope Brook uses 55 ton capacity electric Kiruna
trucks and diesel trucks. The prior owner of the Hope Brook Mine conducted its
operations using a blasthole stoping and fill method. In 1995, the Company
changed the mining method to sublevel stoping, similar to that used at its Hoyle
property. The Hope Brook plant and equipment are generally in good condition.
The source of power for this property is Newfoundland Hydro.
 
Geology
 
     Gold mineralization occurs in an alteration zone of pervasive silica,
pyrite and pyrophyllite which is approximately 4 kilometres long and 300 metres
wide. The alteration zone exists within the Mid-Ordovician Georges Brook
Formation which consists of a mixed volcanic-sedimentary sequence. The Hope
Brook ore body is located in the zone of alteration. Ore covers a strike length
of 500 metres and extends from surface to a depth of 400 metres, dipping steeply
at an angle of seventy-five degrees.
 
                                       52
<PAGE>   59
 
Ore Reserves
 
     As of December 31, 1995, the Hope Brook Mine had remaining proven and
probable ore reserves of approximately 2,448,000 tons grading 0.088 ounces of
gold per ton. A cut-off grade of 0.079 ounces per ton, based on current mining
costs and a gold price of $517 (US$383) per ounce, was used in calculating stope
reserves. Allowances are made in these estimates for dilution and mining losses.
Ore reserves do not include allowances for losses in milling. The Company
expects that the Cape Ray acquisition will extend the life of the Hope Brook
Mine.
 
Cape Ray Acquisition
 
     In July, 1996, the Company purchased the Cape Ray gold property from
American Gem Corporation for $500,000, and purchased Homestake Canada Inc.'s net
smelter return royalty on the property for $425,000. The acquisition of the Cape
Ray property is of strategic importance to Royal Oak's Newfoundland operations.
The Cape Ray deposit is expected to provide high grade feed over the next
several years to the Hope Brook Mill for processing in combination with lower
grade ore from the Hope Brook Mine. Ore will be transported to the mill using a
combination of truck and the Company's supply ship.
 
     A feasibility study completed by Kilborn Inc. in 1989 indicates that the
Cape Ray property contains a diluted mineable ore reserve of 501,619 tons at a
grade of 0.294 ounces of gold per ton. Underground work in the 1980s included a
decline facilitating development on the 90 foot and 200 foot levels of the 04
Zone.
 
     The Cape Ray property is located 12 miles northeast of the town of Port aux
Basques in southeast Newfoundland. Access to the Cape Ray property is by a 12
mile gravel road from the community of Isle aux Morts. The property consists of
an extensive land position of 62 square miles covering 29 miles of strike length
on the Cape Ray fault. In addition to the existing reserve within the Main Zone,
the property hosts several known mineralized zones including Windowglass Hill,
Gulch, Sleeper and Big Pond. Previous drilling on the Big Pond Zone returned a
significant intersection of 0.62 ounces of gold per ton over 7.7 feet. The Main
Zone is located along a shear zone diverging from the Cape Ray Fault within the
Windsor Point Group, which is comprised of a discontinuous sequence of
volcaniclastics, associated argillaceous sediments, mafic volcanics, schists and
mylonites. The access road will be rehabilitated in the summer of 1996 and the
decline will be dewatered when permitting has been arranged so that underground
development and mining can commence. The Company currently intends to operate
the Cape Ray property as an underground mine. The power source for the property
is expected to be either an on-site diesel generator or Newfoundland Hydro.
 
     The Company plans to conduct geochemical and geophysical surveys and 25,000
feet of diamond drilling over four areas of this property during the summer
field season.
 
     The Company has also optioned the Coast property owned by Coast Petroleum
Transport Ltd., which lies on strike with the Cape Ray deposit. This property is
located 35 miles west of the Hope Brook Mine.
 
DEVELOPMENT PROJECTS
 
KEMESS SOUTH
 
Background
 
     The Kemess South Project is located 186 miles northwest of Mackenzie,
British Columbia, and to the east of Thutade Lake. Currently, access to the area
is by air from Smithers or Prince George to the Sturdee airstrip (a 4,500 foot
gravel strip) 24 miles to the north, or from the south via an all-weather road
from Fort St. James or Mackenzie. As part of the Kemess South Project, the
Company intends to construct an airstrip adjacent to the mine site.
 
     In May 1993, Royal Oak acquired 39% of Geddes, a company whose only
significant asset was a 100% interest in a block of mineral claims located in
the vicinity of Windy Craggy mountain in northwestern British Columbia. In June
1993, the British Columbia provincial government announced that it would
permanently protect, as a provincial park, the region which included Windy
Craggy, and would provide compensation for holders of mineral claims in the
area. Subsequently, in December 1994, the United Nations Educational,
 
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<PAGE>   60
 
Scientific and Cultural Organization (UNESCO) designated the Tatshenshini-Alsek
Provincial Park, which includes Windy Craggy, a World Heritage site.
 
     In May 1995, the British Columbia provincial government commenced active
negotiations with senior officers of Geddes pertaining to compensation
respecting Windy Craggy. In order to facilitate such negotiations, Royal Oak
indicated to the British Columbia provincial government a willingness to
purchase the Kemess and Red Mountain properties and to develop these properties,
provided appropriate project support and investment arrangements were provided
by the British Columbia provincial government.
 
     In January 1996, the Company completed the acquisition of Geddes, El Condor
and St. Philips. The remaining outstanding shares of Geddes were acquired for
shares of the Company and cash with a total acquisition cost of $40.9 million;
the outstanding shares of El Condor were acquired for shares of the Company and
cash worth $110.6 million; and the outstanding shares of St. Philips were
acquired for $38.6 million in cash. El Condor and St. Philips owned the Kemess
South property and El Condor owned the Kemess North property. These properties
are now owned by Kemess Mines Inc. (formerly Geddes Resources Limited). Although
the Company will continue to evaluate the potential of the Kemess North
property, there is presently no plan to develop this property.
 
     On April 29, 1996, the British Columbia provincial government announced
that it had issued a Project Approval Certificate for the Kemess South Project
which entitles the Company to proceed with permitting applications for
construction of the mine site and attendant infrastructure. Federal approval
under the Environmental Assessment Act (Canada) and the Fisheries Act (Canada)
is expected shortly and will facilitate completion of all infrastructure
impacting on viable lakes and streams in the project area.
 
Timetable for Development
 
     The phases of development of the Kemess South Project are: (i) completion
of permitting and planning; (ii) preparation of detailed design and procurement;
and (iii) project management and construction.
 
     Construction of the Kemess South Project commenced in July 1996 and is
anticipated to take 24 months to complete. The construction phase will employ a
work force of approximately 350 persons, peaking at 450 to 550 persons.
 
     The engineering of the processing facilities, which commenced in November
1995, is being carried out by Kilborn Engineering Pacific Ltd. Teshmont
Consultants Inc. of Winnipeg is designing the power line and Knight & Piesold
has commenced engineering studies for the design of the tailings dam.
 
Compensation, Financial Assistance and Investment
 
     The Company currently estimates that its total capital costs for the Kemess
South Project will be approximately $390 million. The net book value of the
plant and equipment of the Company's British Columbia operations which include
the Kemess South Project, was approximately $10.7 million as of December 31,
1995.
 
     The Company is expecting to bring the Kemess South Project into production
in the second quarter of 1998. The project development will be facilitated by up
to $166 million of economic assistance, investment and compensation from the
British Columbia provincial government as described below. The Company is not
obligated to repay the British Columbia provincial government any of such
amounts. Section 25 of the Financial Administration Act (British Columbia)
provides that, notwithstanding the commitment to pay, any payment of money by
the British Columbia provincial government pursuant to an agreement is subject
to (i) an appropriation being available for that agreement in the year in which
the payment falls due and (ii) the Treasury Board not having controlled or
limited expenditure under any such appropriation. See "Risk Factors --
Government Permits and Payments."
 
                                       54
<PAGE>   61
 
     The compensation, financial assistance and investment of up to $166 million
to be provided by the British Columbia provincial government consist of the
following components described below:
 
     (i)   Compensation -- $29 million payable over two years. On April 15,
        1996, the Company's wholly owned subsidiary, Kemess Mines Inc., received
        the first of two equal compensation payments of $14.5 million. The final
        payment is due in April 1997.
 
     (ii)  Royalty interest investment -- $50 million to develop on- and
        off-site mine infrastructure for the Kemess South Project. The Company
        will pay the British Columbia provincial government a royalty of 4.8% on
        all copper extracted and processed from the Kemess South Project. The
        Company is the general partner and a wholly owned subsidiary of the
        Company is currently the sole limited partner of a limited partnership
        which is entitled to a royalty on the copper from the Kemess South
        Project. The royalty payable to the British Columbia provincial
        government will form a portion of the royalty held by the limited
        partnership.
 
     (iii) Power line installation -- $49 million payable over three years to
        cover the cost of constructing a 320 kilometre power line from the
        Kennedy substation to the Kemess Mine site together with related
        equipment. The power will initially be supplied by B.C. Hydro. The power
        line will be owned and operated by the Company for at least 20 years.
 
     (iv) Regional resource infrastructure -- $14 million payable over 14 years
        for emergency health facilities, airport facilities and for developing
        and maintaining a connector road.
 
     (v)  Human resource development program -- $4.0 million payable over two
        years to facilitate recruitment, selection, relocation, mobility,
        training, upgrading and safety training for personnel working at the
        Kemess South Project.
 
     (vi) Mining development -- $20 million to be matched dollar for dollar for
        the development of properties in British Columbia, including the Kemess
        and Red Mountain properties and extensions.
 
     (vii) Facilitation and support -- The British Columbia provincial
        government agreed to facilitate and support the Company with respect to
        the negotiation of appropriate contracts of rail transport, port and
        power charges and to facilitate the review and consideration of permits
        and other authorizations required for the development of the project.
 
Ownership
 
     The Kemess property consists of 404 staked mineral claims in three distinct
groups that cover approximately 68,259 acres. The Kemess South property was
owned by El Condor and St. Philips, and the Kemess North property was owned by
El Condor. The property was transferred to Kemess Mines Inc. pursuant to the
winding up of El Condor and St. Philips. There are two royalty agreements that
affect a small number of claims. The Company will pay the British Columbia
provincial government a royalty of 4.8% on all copper extracted and processed
from the Kemess South Project.
 
Geology
 
     The Kemess South deposit is a large low grade gold-copper porphyry-type
deposit. It is hosted by a flat-lying porphyritic quartz monzodiorite intrusion.
Pyrite, the dominant sulphide, occurs as veins and fracture coatings
accompanying quartz stringers. Chalcopyrite occurs as disseminated grains and in
quartz stockwork veins. Native gold is included within or is peripheral to
grains of chalcopyrite, and gold grades correlate closely with those of copper
in the hypogene zone.
 
     The highest grade of gold and copper mineralization correlate with zones of
intense quartz stockwork development.
 
     A supergene zone, comprising 20% of the deposit, formed during a period of
weathering synchronous with the formation of the Late Cretaceous Sustut Basin.
Copper grades within this zone are locally leached or enriched, while gold
concentrations remain relatively unchanged. Native copper is the dominant
secondary copper mineral except at the base of the supergene zone where
chalcocite becomes more and more abundant.
 
                                       55
<PAGE>   62
 
Mining and Milling
 
     The deposit will be mined at an average rate of approximately 107,000 tons
per day at an estimated cost of $1.56 per ton. Milling at the rate of
approximately 50,000 tons per day will cost approximately $1.81 per ton. At this
mining rate, the life of the project is estimated to be approximately 15 years.
 
Ore Reserves
 
     Ore reserves for the Kemess South Project were calculated in a 1993
pre-feasibility study completed by Kilborn Engineering Pacific Ltd., for El
Condor and St. Philips, the former owners of the property. These reserves were
reviewed by Royal Oak prior to the purchase of the property in 1995. In
addition, they were verified for the Company in February, 1996. Reserves for
this property are 221 million tons of ore averaging 0.018 ounces per ton of gold
and 0.224% copper. These reserve estimates contain allowances for mining losses
and dilution, but not for losses in milling. Net smelter return calculations
were carried out on mineralization at Kemess South in order to determine the
value that would be returned from mining and processing. These estimates
included all transportation and smelter charges. The prices of gold and copper
used in the above feasibility studies were US$350 per ounce and US$1.00 per
pound, respectively, with an exchange rate of US$0.78/Cdn $1.00.
 
RED MOUNTAIN
 
Background
 
     The Red Mountain project area is located in the Coastal Mountain Range, 11
miles east of the seaport of Stewart, in northwestern British Columbia.
Currently, access to the property is by helicopter from Stewart; however, a road
has been constructed to a potential portal site in Bitter Creek adjacent to the
ore zone but at a lower elevation. The net book value of the plant and equipment
of the Company's British Columbia operations, which include the Red Mountain
deposit, was approximately $10.7 million as of December 31, 1995.
 
Ownership
 
     The property consists of 147 staked mining claims that cover 86,070 acres.
The Company acquired 100% of the Red Mountain property from Barrick Gold for $1.
The Company assumed all past environmental liabilities, estimated at $3.0
million, as part of this purchase. The Company is committed to spend $3.0
million in exploration and development on the Red Mountain property over three
years. The Company has budgeted for a $9.0 million development program for 1996.
The prior owner will receive a 1% net smelter return royalty on production from
the property, and on production over 1.85 million ounces of gold, an additional
$10.00 per ounce of gold is payable. In addition, the Company is required to pay
a 2.5% net smelter return royalty to a third party.
 
Geology
 
     The Red Mountain orebody is a hydrothermal gold deposit related to a
multiphase intrusion. The Red Mountain area is underlain by Upper Triassic to
Middle Jurassic sedimentary and volcanic rocks of the Hazelton Group. Early
Jurassic plutons, sills and dykes have intruded this volcanic-sedimentary
assemblage, the largest of which (the Goldslide-Hillside intrusion) lies beneath
Red Mountain. The orebody currently consists of three northwest plunging,
southwest dipping elliptical zones located beneath the summit approximately at
the contact between two phases of the Goldslide intrusion and hosted within both
the stratified sediments and the Hillside intrusion. Both the ore zones and the
host rocks have been disrupted by northwest plunging folds and at least two
phases of brittle faulting.
 
Mining and Milling
 
     It is estimated that over US$30 million was spent by the former owners of
this property, Lac Minerals and Barrick Gold, between 1991 and 1994 outlining
and developing the Marc, AV and JW Zones, which
 
                                       56
<PAGE>   63
 
included 300,000 feet of drilling. These zones remain open down-plunge and the
exploration potential for the area north of the deposit is deemed by the Company
to be excellent.
 
     The main development focus for 1996 will be to expand the mineable reserves
at Red Mountain by 500,000 ounces, from the current 800,000 ounces to 1,300,000
ounces of gold through underground and surface delineation drilling of the
down-plunge extension of the orebody. The decline will be extended approximately
1,000 feet to facilitate the drilling.
 
     A joint federal-provincial committee has been established to address
environmental assessment and permitting of the Red Mountain project. Currently,
an updated feasibility study is being completed and the Company expects to file
a development plan with the British Columbia provincial government in the third
quarter of 1996. Subject to receipt of the necessary permits, the project is
expected to produce approximately 150,000 ounces of gold per year commencing in
the fourth quarter of 1999. It is expected that the Red Mountain mine will be
operated as an underground mine. The source of power for this property will be
British Columbia Hydro.
 
Ore Reserves
 
     The Red Mountain deposit contains 800,000 ounces of gold in the mineable
category, grading 0.262 ounces of gold per ton.
 
MATACHEWAN
 
Background
 
     The Matachewan project is located approximately 56 miles southeast of the
City of Timmins, Ontario and is accessed directly by either two-way highway
and/or all-weather roads from Timmins. The main area of interest is called the
Young Davidson property, located two miles west of the Town of Matachewan.
 
     The Matachewan property was mined from 1933 to 1957 by Young Davidson Mines
Limited and Matachewan Consolidated Mines Limited and produced an aggregate of
956,117 ounces of gold grading 0.10 ounces per ton from both underground and
open pit developments. The Matachewan deposit was milled historically using
flotation and cyanidation which achieved excellent recoveries. The current plan
is to produce a concentrate on site that would be transported to the Pamour Mill
for cyanidation. The presence of free gold and the metallurgical testing at
Lakefield Research Limited has necessitated the addition of a gravity circuit to
the mill design. A very coarse cost effective grind was used historically and it
is expected that this will not change. The source of power for this property
will be Ontario Hydro.
 
     To date, the Company has received permits necessary to dewater the existing
mine shaft, to cross the highway with a pipeline and to proceed with advanced
exploration. Discussions are currently underway with respect to environmental
assessment and permitting of the full project. The current discussions relate to
a fish compensation plan and tailings as well as approval under the
Environmental Assessment Act (Canada).
 
     The development plan calls for milling of the open pit ore to commence by
the second half of 1998 while the underground mine is being developed.
Production is targeted for 100,000 ounces of gold per year at an average cash
cost of US$227 per ounce. The existence of a 2,450 foot deep shaft will allow
the underground mine to be economically developed.
 
Ownership
 
     The Matachewan property is held under two lease agreements. The lease
agreement with Matachewan Consolidated Mines Limited provides for advanced
royalty payments of $15,000 per year or rent of $7,500 per year, depending on
the current gold price. The Young Davidson lease agreement provides for advance
royalty payments of approximately $40,000 per year. The property is subject to a
minimum 3% net smelter return royalty.
 
                                       57
<PAGE>   64
 
Geology
 
     The Matachewan deposit is hosted within a syenite body which has intruded
along and near the highly deformed contact between Timiskaming Group sedimentary
rocks and Larder Lake Group volcanic rocks. The main syenite body is
approximately 2,460 feet long, 410 feet wide and dips steeply to the south.
 
Ore Reserves
 
     As of December 31, 1995, the Matachewan property had proven and probable
ore reserves of 13,253,000 tons grading 0.067 ounces of gold per ton. Allowances
are made in these estimates for dilution and mining losses. Ore reserves do not
include allowances for losses in milling. Cut-off grades used in estimating
these mineable reserves are 0.021 ounces per ton for open pit reserves and 0.080
ounces per ton for underground reserves and are based on current mining costs
and a gold price of $517 (US$383) per ounce.
 
DUPORT
 
Background
 
     The Duport property is located on Shoal Lake, 28 miles southwest of the
Town of Kenora in northwestern Ontario. The development ramp is located on an
island and is accessible by barge.
 
Ownership
 
     Intermittent exploration of the Duport deposit was carried out by various
parties from 1930 to 1950, including underground exploration. In 1973,
Consolidated Professor obtained an option on the Duport property and conducted
an extensive sampling and drilling program from 1973 to 1974. Subsequently, this
option was exercised and Consolidated Professor acquired a 100% interest in this
property after amalgamating with Duport Mining Company Limited. The Company
completed the acquisition of all of the shares of Consolidated Professor in May
1996 pursuant to a tender offer followed by a compulsory acquisition. There is a
royalty payable to Union Carbide Canada Limited ("Union Carbide") equivalent to
a 50% net profits interest until recovery of pre-production expenditures, up to
a maximum of $2.0 million. Thereafter, Union Carbide will receive a 10% net
profits interest until a maximum of $5.0 million in the aggregate has been paid.
There is a buyout provision for this royalty.
 
Mining and Milling Facilities
 
     The Duport project is situated in the environmentally sensitive area of
Shoal Lake, the source of Winnipeg, Manitoba's residential and commercial water
supply. Environmental concerns were raised in 1989 by local cottagers and the
City of Winnipeg, after Consolidated Professor announced its plans to advance
the project to the permitting stage. The main concern was the perception of
potential environmental hazards associated with the processing of the refractory
gold ore and the disposal of cyanide treated tailings. For the past six years,
Consolidated Professor conducted impact and sensitivity studies related to these
concerns. All aspects of mining, ore transport, milling, tailings disposal and
site reclamation were reconsidered and re-engineered with the objective of
alleviating the fears of all concerned parties. Among other features, the
redesigned development plan involved transporting the ore by truck to the
mainland via a year-round ferry to a mill site located 5.2 miles inland, outside
of the Shoal Lake watershed. The new design concept effectively addressed every
concern brought forth during the consultation process. Consolidated Professor
has since submitted a detailed environmental study of the project to the
Ontario, Manitoba and Canadian governments for review.
 
     The Company plans to continue the environmental permitting process
initiated by Consolidated Professor. Development of the project is anticipated
shortly after the permitting process is completed.
 
Geology
 
     The northern end of the Lake of the Woods District is underlain by the
volcanic and sedimentary rocks of an extensive Keewatin greenstone belt. In the
general Shoal Lake area, two granodiorite intrusions, namely,
 
                                       58
<PAGE>   65
 
the Canoe Lake Stock and the Snowshoe Bay Stock, intrude the greenstone belt
assemblage and are separated by a five mile broad section of volcanic and
volcaniclastic rocks. Within this volcanic pile is a wide deformation zone which
hosts the gold mineralized zones of the Duport project which occur as en echelon
lenses within highly sheared felsic tuffs.
 
Ore Reserves
 
     The Duport project has proven and probable ore reserves of approximately
1,008,000 tons grading 0.38 ounces of gold per ton. A cut-off grade of 0.15
ounces per ton, based on current mining costs and a gold price of $517 (US$383)
per ounce, was used in calculating these reserves. Allowances are made in these
estimates for dilution and mining losses. Ore reserves do not include allowances
for losses in milling.
 
OTHER EXPLORATION PROPERTIES
 
     In June 1995, the Company entered into a lease agreement, which includes a
production royalty, with the owner of the Copperstone gold property, located in
La Paz County, southwestern Arizona. The Company proposes to carry out a 10,000
foot reverse circulation drilling program on the Copperstone property which
consists of 284 unpatented mining claims totalling 5,680 acres and two state
leases totaling 1,300 acres. Mineralized material has been estimated by the
Company at 2,424,000 tons at a grade of 0.172 ounces of gold per ton containing
approximately 417,000 ounces of gold.
 
     Cyprus Gold Corp. operated the Copperstone property between 1987 and 1992
and produced in excess of 500,000 ounces of gold from ore grading 0.10 ounces of
gold per ton in the Main Zone by open pit mining and heap leaching. Compiled
data indicates a down dip extension of the Main Zone as well as parallel
structures in the footwall areas that could possibly be economically mined by
underground methods. The Main Zone has been traced an additional 950 feet along
the dip of the structure below the floor of the pit as well as 425 feet along
strike to the north. Gold mineralization remains open at depth and along strike.
Previous drilling encountered high gold values over significant widths: 0.225
ounces of gold per ton over a core length of 50 feet (0.225/50), and 0.602/10
approximately 2,000 feet to the north of the previous hole. Other intersections
below the Main Zone recorded 0.646/15 at a vertical depth of 900 feet and
collared at the pit floor, and 0.268/40 in another hole.
 
     The objective of the first phase of the Company's drill program is to
develop continuity and expand the existing mineral resource of the Main Zone,
and to evaluate additional high priority gold targets in the footwall of the
deposit.
 
STRATEGIC INVESTMENTS
 
     The Company has strategic investments in a number of junior resource
companies including Highwood (32% interest) and Asia Minerals (40.1% interest).
 
     Pursuant to an arrangement with the effective date of August 12, 1996,
Highwood acquired all of the outstanding shares of Mountain Minerals. Mountain
Minerals (in which the Company had held a 45.1% interest prior to the
arrangement) is a diversified producer and marketer of high quality industrial
minerals, particularly barite and silica. Mountain Minerals has expanded into
the Chinese barite market and entered the zeolite business in British Columbia.
The principal business of Highwood is the exploration for specialty mineral
deposits such as beryllium, yttrium and zirconium and the development thereof,
where warranted.
 
     Asia Minerals is active in mineral exploration in China. Asia Minerals
recently announced that it had signed a joint venture contract to acquire a 50%
interest in the Yingezhuang gold mine located in Shandong Province, China. The
Chinese partner is Zhaoyuan City Gold Corp. The Yingezhuang gold mine began
production in 1992 and in 1993, 154,280 tons of ore was mined and 12,000 ounces
of gold were produced at a total cost of US$173 per ounce. In July 1994, Asia
Minerals and the Company jointly completed a pre-feasibility study to evaluate a
proposed expansion which outlined a global geological resource of 21.4 million
tons at a grade of 0.09 ounces of gold per ton, based on a 0.06 ounce per ton
cut-off grade. The total contained gold is estimated at 1.76 million ounces.
 
                                       59
<PAGE>   66
 
     Asia Minerals can earn a 50% interest in the Yingezhuang joint venture by
making staged investments in the project. The first stage requires Asia Minerals
to fund a US$3.5 million mine expansion feasibility study. The total investment
required to earn a full 50% interest is estimated to be US$36 million.
 
     Asia Minerals filed a final prospectus dated August 12, 1996 in British
Columbia, Alberta and Ontario qualifying the distribution in such provinces of
common shares issuable upon the exercise of special warrants previously issued
for aggregate gross proceeds of $7.0 million. Royal Oak subscribed for and
purchased 3,531,250 of such special warrants for $2,825,000. Royal Oak has
advised Asia Minerals that it intends to exercise options that it holds to
purchase an aggregate of 2,750,000 common shares of Asia Minerals for an
aggregate exercise price of $1,675,000 on or before December 31, 1996. After
exercise of such options, Royal Oak will hold approximately 46.5% of the shares
of Asia Minerals (on an undiluted basis).
 
ENVIRONMENTAL
 
     The Canadian mining industry is subject to stringent environmental
regulations. Government regulation of the industry requires extensive monitoring
activities and contingency planning. All phases of the Company's activities are
subject to legislation from exploration through mine development, and mine
operations through decommissioning and reclamation. In 1995, and to date in
1996, all of the Company's operations have continued to be in compliance in all
material respects with applicable environmental legislation. There were no
environmental related legal proceedings pending against the Company in 1995 or
to date in 1996.
 
     The Hope Brook Mine operated in substantial compliance with the terms and
conditions contained in the mine's operating Certificate of Approval in 1995 and
to date in 1996. This Certificate is a perpetual certificate. In December 1995,
the operation failed to comply with effluent quality limits on a weighted
monthly average basis. This noncompliance arose from a circuit upset which
occurred over a three day period. Steps have been taken by management to respond
to such circuit upsets in a more timely fashion. The Newfoundland Department of
Environment was advised of the non-compliance condition and of the action plan
initiated by the Company to prevent reoccurrence. To the Company's knowledge, no
action has been taken at this time by the regulator.
 
     The Pamour Mine and the Nighthawk Mine operated in substantial compliance
with all of the terms and conditions of their respective operating Certificates
of Approval in 1995 and to date in 1996. Both of these certificates are
perpetual.
 
     In 1995 and to date in 1996, the Giant Mine operated in substantial
compliance with all of the terms and conditions of its Water Use Licence. In
response to a complaint filed under the Northwest Territories Environmental
Rights Act alleging damages to vegetation to the northwest of the mine site, the
Northwest Territories government is considering draft regulations under the
Environmental Protection Act (Northwest Territories) that would control the
amount of permissible sulphur dioxide emissions from the Company's roaster
facility at the Giant Mine. The Company has undertaken a cooperative program
with the regulators to evaluate the technical feasibility of such emission
controls and of the environmental and economic impact of such regulations on the
Giant Mine. The Company believes that the economic impact of such regulations on
the Giant Mine will not be material, as installation of a taller roaster stack
in the ordinary course at a cost of $1.5-2.0 million should be sufficient for
compliance. The federal government of Canada is considering the drafting of new
regulations under the Environmental Protection Act (Canada) that would control
the amount of permissible airborne arsenic emissions from the Company's roaster
facility at the Giant Mine. The government is currently assessing the
socio-economic benefits and impacts that would accrue from implementing new
regulations in the area of airborne arsenic emissions. The Company's Giant
roaster facility currently operates in compliance with all existing
environmental requirements. On May 1, 1993, Royal Oak was granted a five-year
renewal of its licence to use water at the Giant Mine to a new expiry date of
April 30, 1998.
 
     The Colomac Mine operated in substantial compliance with all of the terms
and conditions of its Water Use Licence in 1995, which is effective through
February 1999. The Company has recently implemented measures to reduce fresh
water consumption in the Colomac Mill in compliance with new standards that came
into effect in 1996.
 
                                       60
<PAGE>   67
 
     In 1995, the Company spent approximately $0.8 million on capital
improvements and $2.8 million on operations and maintenance for environmental
matters. The Company expects to spend the same amount in 1996 for these matters.
The majority of the operating costs are related to effluent treatment plants at
the Giant Mine and the Hope Brook Mine, as well as increasing the height of
tailings pond dykes at the Pamour Mine.
 
     The Company recognizes that it has a responsibility to operate in a manner
that minimizes the impact of its mining operations on the environment. To this
end, the Company upgrades its policies and practices on a continuing basis with
a view to surpassing regulatory guidelines. In 1994, the Company instituted an
Environmental Code of Practice which established the principles under which the
Company manages the environmental performance of its operations. These
principles encompass compliance with all applicable statutory legislation,
minimizing risk to the environment, self monitoring of environmental protection
management programs, and communicating effectively with governments and the
public on environmental protection matters. In 1996, the Company expects to
commence development of a formal environmental management system, including
periodic internal audits and reporting of results, based on standards developed
by the Canadian Standards Association.
 
RECLAMATION
 
     Where feasible, reclamation is conducted by the Company concurrently with
mining. In general, the Company is required to mitigate long-term environmental
impacts by stabilizing, contouring, resloping and revegetating various portions
of a site once mining and mineral processing operations are completed as well as
by appropriately managing residual waste. These reclamation activities are
conducted in accordance with detailed plans which have been reviewed and, where
applicable, approved by the appropriate regulatory agencies. In Ontario, the
Northwest Territories and British Columbia, the Company is required to post
security against all or part of the estimated cost of such reclamation and has
done so. The Company has completed and filed reclamation plans for all of its
active operations. Reclamation plans have also been prepared for most of the
Company's inactive sites and reclamation is well advanced on many of these
sites. The Company's total estimated cost of reclamation at all active and
inactive mining properties is $25.8 million. The Company has accrued $4.9
million through December 1995 and will charge the remaining amount to
operations, over the remaining lives of its operations, on a unit-of-production
basis. As of December 31, 1995 and 1994, the Company had outstanding bonds for
reclamation of $3.5 million and $0.8 million, respectively, and letters of
credit for reclamation of $1.4 million in 1995. Further, the Company believes
that the salvage value of its assets at its various mine sites will be
sufficient to fund the majority of these reclamation costs.
 
LEGAL MATTERS
 
     In the normal course of business, the Company is subject to proceedings,
lawsuits and other claims, including proceedings under laws and regulations
related to environmental and other matters. It is the belief of management that
the various asserted claims and litigation in which the Company is currently
involved will not have, individually or in the aggregate, a material adverse
effect on its financial position. However, no assurance can be given as to the
ultimate outcome with respect to such claims and litigation. The resolution of
such claims and litigation could be material to the Company's operating results
of any particular period, depending upon the level of income for such period.
 
     On September 18, 1992, nine miners were murdered in an underground
explosion at the Company's Giant Mine. A member of the union which was on strike
at the time was charged and convicted of nine counts of second degree murder. In
September 1994, dependents of the deceased miners sued the Company and two of
its officers and directors, along with 23 other named defendants unrelated to
the Company, for losses allegedly suffered as a result of the explosion. The
claim against the Company and all defendants but one totals approximately $10.8
million plus taxes, interest and costs. The claim against the two officers and
directors and all other defendants, excluding the Company, totals approximately
$33.65 million plus taxes, interest and costs. The Company's insurers have been
notified and a vigorous defense of the claim is intended. Any liability that
might be imposed in the matter as presently pleaded would be within the
Company's liability insurance coverage.
 
                                       61
<PAGE>   68
 
EMPLOYEE RELATIONS
 
     As of June 30, 1996, the Company employed 1,461 people, of which 937 are
represented by either the United Steelworkers of America (177 employees at
Colomac, 308 employees at Pamour and at Nighthawk and 202 employees at Hope
Brook) or the Canadian Auto Workers Union (250 employees at Giant). The Company
is currently negotiating a collective agreement with the United Steelworkers of
America in respect of 177 employees employed at the Colomac Mine. Effective July
1, 1996, the Company and the United Steelworkers of America reached a new
collective agreement, expiring June 30, 1999, in respect of the employees
employed at the Pamour and Nighthawk Mines. The collective agreement with the
United Steelworkers of America in respect of 202 of the Hope Brook Mine
employees expires on April 30, 1997 and the collective agreement with the
Canadian Auto Workers Union in respect of 250 of the Giant Mine employees
expires in November 1996. The current agreement with the Canadian Auto Workers
Union provides that there cannot be a strike or a lockout in November 1996 when
the collective agreement expires.
 
                                       62
<PAGE>   69
 
                                   MANAGEMENT
 
   
     The following table and associated notes set forth the names of each
director and executive officer of the Company, their age as of August 28, 1996
and their respective positions with the Company.
    
 
   
<TABLE>
<CAPTION>
                NAME                    AGE                       POSITION
- -------------------------------------   ---    -----------------------------------------------
<S>                                     <C>    <C>
Margaret K. Witte(1)(2)..............   42     President, Chief Executive Officer and
                                               Chairman of the Board
Ross F. Burns(3).....................   52     Vice-President, Exploration and a Director
James H. Wood........................   49     Chief Financial Officer
John R. Smrke........................   46     Senior Vice-President
J. Graham Eacott.....................   55     Vice-President, Investor Relations
Edmund Szol..........................   55     Vice-President, Human Resources
George W. Oughtred(1)(4).............   66     Director
Matthew Gaasenbeek(1)(2).............   66     Director
William J. V. Sheridan(2)............   51     Secretary and a Director
J. Conrad Lavigne(4).................   79     Director
John L. May(2)(4)....................   61     Director
</TABLE>
    
 
- ---------------
 
(1) Member of the Audit Committee.
 
(2) Member of the Compensation Committee.
 
(3) Member of the Pension Committee.
 
(4) Member of the Governance and Nominating Committee.
 
     Margaret K. (Peggy) Witte has served as President and Chief Executive
Officer and Chairman of the Board of Royal Oak or a predecessor thereof since
1989. From 1986 to 1989, Ms. Witte was President and Chief Executive Officer of
Neptune Resources Corp. Ms. Witte has a Master of Science degree in
Metallurgical Engineering from the Mackay School of Mines and Geology in Reno,
Nevada and a Bachelor of Science degree in Chemistry from the University of
Nevada. Ms. Witte is a member of the American Institute of Mining, Metallurgical
and Petroleum Engineers and the Canadian Institute of Mining and Metallurgy and
a past director of the Mining Association of Canada and the Prospectors and
Developers Association of Canada. Ms. Witte is the recipient of several awards,
including Special Achievement Award, Canadian Mineral Processors (1985), Woman
of Distinction Award Y.W.C.A. (1991), Developer of the Year, Prospectors and
Developers Association of Canada (1993) and the Financial Post's Newsmaker of
the Year (1994). Ms. Witte is also a director and Chairman of Mountain Minerals,
Talisman Energy, an oil and gas company, and Trans Canada Pipelines, an oil and
gas pipeline company.
 
     Ross F. Burns has served as Vice-President, Exploration of Royal Oak or a
predecessor thereof since 1989. From 1986 to 1989, Mr. Burns was Vice-President
of Neptune Resources Corp. Mr. Burns has a Bachelor of Science (Honours) degree
in Geology from Queens University and is a Fellow of the Geological Association
of Canada, a registered professional geologist in the Northwest Territories, and
a member of the Prospectors and Developers Association and the British Columbia
and Yukon Chambers of Mines. Mr. Burns is also the President and a director of
Ronnoco Gold Mines Limited and a director of Asia Minerals.
 
     James H. Wood has served as Chief Financial Officer of Royal Oak since May
1994. From 1992 to 1994, Mr. Wood was Vice-President, Finance of Maclean Hunter
Publishing Limited and from 1980 to 1992 he held various senior financial
positions at CCL Industries Inc. and its subsidiary companies. Mr. Wood has a
Bachelor of Commerce (Honours) degree from Laurentian University and is a
Chartered Accountant. Mr. Wood is a member of the Canadian Institute of
Chartered Accountants, the British Columbia Institute of Chartered Accountants
and the Ontario Institute of Chartered Accountants.
 
     John R. Smrke has served as Senior Vice-President of Royal Oak since 1993.
From 1989 to 1993, Mr. Smrke held the positions of General Manager,
Vice-President, Corporate and Employee Development, and Vice-President,
Operations of Royal Oak or a predecessor thereof. Mr. Smrke received a diploma
in Mining Engineering Technology (Honours) from Cambrian College, Sudbury. Mr.
Smrke is Chief Executive
 
                                       63
<PAGE>   70
 
Officer and Chairman of the Board of Highwood, Chief Executive Officer and a
director of Mountain Minerals and a director of Asia Minerals.
 
   
     J. Graham Eacott joined Royal Oak in 1991 as Manager, Investor Relations
and has served as Vice-President, Investor Relations since 1995. From 1987 to
1991, Mr. Eacott was a Senior Financial Analyst at Maison Placements Canada
Inc., Merrill Lynch Canada Inc. and ScotiaMcLeod Inc. Mr. Eacott has a Master of
Science degree in Industrial Metallurgy & Management Techniques from the
University of Aston, Birmingham, and a Bachelor of Science (Honours) degree in
Metallurgy from Manchester University. Mr. Eacott is a professional engineer in
the Province of Ontario and is a graduate of the Canadian Securities Course and
a Registered Representative. He is a member of the Canadian Institute of Mining
and Metallurgy and is the author of several technical papers.
    
 
     Edmund Szol has served as Vice-President, Human Resources since 1995. Prior
to joining the Company, Mr. Szol was Vice-President, Human Resources and
Administration of Nerco Inc., where he was responsible for all human resources
and administrative functions. Mr. Szol has a Bachelor of Arts degree from
Youngstown University, Youngstown, Ohio and is a graduate of the Advanced
Executive Development Program, Harvard University. Mr. Szol is a member of the
Society for Human Resource Management.
 
     George W. Oughtred has served as a director of Royal Oak since 1991. Mr.
Oughtred is President of Privatbanken Holdings Inc., a private holding company
and a director of C.I. Fund Management Inc., an investment fund manager. Mr.
Oughtred has served as a director and/or officer of numerous other public
companies. Mr. Oughtred has a Bachelor of Commerce degree from McGill University
and a Master of Business Administration degree from the University of Western
Ontario.
 
     Matthew Gaasenbeek has served as a director of Royal Oak since 1993. Mr.
Gaasenbeek is President of Northern Crown Capital Corporation, a private venture
capital company and Chairman of the Ontario Development Corporation. Mr.
Gaasenbeek has been and continues to serve as a director or officer of various
public and private resource and finance companies. Mr. Gaasenbeek has a Bachelor
of Arts (Honours) degree in Business Administration from the University of
Western Ontario. Prior to October 1991, Mr. Gaasenbeek was President and a
director of Camreco Inc., a mining exploration company.
 
     William J.V. Sheridan has served as a director of Royal Oak since 1991. Mr.
Sheridan has a Bachelor of Commerce degree from the University of Toronto and a
law degree from Osgoode Hall Law School, Toronto. Mr. Sheridan joined Lang
Michener, a Canadian law firm, in 1972, became a partner in 1974 and is
currently the Managing Partner. He specializes in mergers and acquisitions,
mining, securities and international joint ventures. Mr. Sheridan is also a
director and/or officer of Eden Roc Mineral Corp., Hydra Capital Corp.,
Pinkerton's of Canada Limited, Witco Canada Inc. and other public and private
companies, and a Governor of the Queen Elizabeth Hospital, Toronto.
 
     J. Conrad Lavigne has served as a director of Royal Oak since 1991. Mr.
Lavigne is President of JCL Corporation, a broadcast consulting firm. Mr.
Lavigne is the former Chairman of Northern Telephone Co. Ltd. and a former
director of Ontario Hydro and National Bank of Canada. Mr. Lavigne is a Lifetime
Honorary Associate Member of the Central Canadian Broadcast Association and was
inducted into the Canadian Broadcasters Hall of Fame in 1990.
 
     John L. May has served as a director of Royal Oak since 1991. Mr. May is a
retired mining executive and prior to his retirement in 1991 was Vice-President
of Exploration of Teck Corporation. Mr. May has a Bachelor of Science degree in
Applied Geology from the University of Toronto. During his career, he has been
an officer and/or director of a number of public natural resource companies. He
is currently a director of HRC Development Corporation.
 
                                       64
<PAGE>   71
 
   
     The table below sets forth certain information regarding equity ownership
of each director or executive officer of the Company and all directors and
executive officers of the Company as a group as of August 28, 1996, and the
percentages set forth are based upon 138,319,213 shares outstanding on such date
(excluding the 1,924,816 shares owned by a wholly owned subsidiary of the
Company, see "Certain Relationships and Related Transactions").
    
 
   
<TABLE>
<CAPTION>
                                                            NUMBER OF             PERCENTAGE OF
DIRECTORS AND EXECUTIVE OFFICERS                       COMMON SHARES(1)(2)     COMMON SHARES(1)(2)
- --------------------------------                       -------------------     -------------------
<S>                                                    <C>                     <C>
Margaret K. Witte(3).................................       2,930,376                 2.1%
Ross F. Burns........................................         349,129                   *
William J.V. Sheridan................................          30,000                   *
J. Conrad Lavigne....................................          55,000                   *
John L. May(3).......................................          22,500                   *
George W. Oughtred...................................         530,000                   *
Matthew Gaasenbeek...................................          52,500                   *
John R. Smrke........................................         211,370                   *
James H. Wood........................................         112,500                   *
J. Graham Eacott.....................................         111,000                   *
Edmund Szol..........................................          50,000                   *
All directors and executive officers as a group
  (11 persons).......................................       4,454,375                 3.2%
</TABLE>
    
 
- ---------------
 
*   The percentage of shares beneficially owned does not exceed 1% of the class.
 
(1) The information as to shares beneficially owned, not being to the knowledge
    of the Company, has been furnished by the respective directors and officers
    individually.
    
(2) Includes and assumes the issuance of the following number of common shares
    issuable upon the exercise by the following individuals of options which are
    currently exercisable or exercisable within 60 days of the date hereof: Ms.
    Witte 350,000; Mr. Burns 95,000; Mr. Sheridan 15,000; Mr. Lavigne 40,000;
    Mr. Gaasenbeek 50,000; Mr. Smrke 160,000; Mr. Wood 110,000; Mr. Eacott
    48,000; and Mr. Szol 50,000.
    
 
   
(3) Subsequent to August 28, 1996, Ms. Witte acquired 17,200 common shares of
    Royal Oak in connection with the exercise of put options previously granted
    by Ms. Witte. In addition, Ms. Witte has granted 2,028 put options which
    oblige Ms. Witte to purchase 202,800 common shares of Royal Oak at a price
    of $6.00 per share if the holder requires her to do so prior to the expiry
    of the options on December 6, 1996. Subsequent to August 28, 1996, Mr. May
    acquired 5,000 common shares of Royal Oak in connection with the exercise of
    put options previously granted by Mr. May. Further, Mr. May has granted 50
    put options which oblige Mr. May to purchase 5,000 common shares of Royal
    Oak at a price of $5.00 per share if the holders require him to do so prior
    to the expiry of the options on December 5, 1996 and 100 put options which
    oblige Mr. May to purchase 10,000 common shares of Royal Oak at a price of
    $6.00 per share if the holders require him to do so prior to the expiry of
    the options on December 6, 1996.
    
 
                                       65
<PAGE>   72
 
EXECUTIVE COMPENSATION
 
     The following table sets forth all compensation for the fiscal years ended
December 31, 1995, 1994 and 1993 for the Chief Executive Officer and the four
other most highly compensated executive officers of the Company (collectively,
the "Named Executive Officers").
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                          LONG TERM
                                                   ANNUAL COMPENSATION                   COMPENSATION
                                       --------------------------------------------    ----------------
                                                                       OTHER ANNUAL    SECURITIES UNDER
          NAME AND                        SALARY          BONUS        COMPENSATION      OPTIONS/SARS
     PRINCIPAL POSITION        YEAR        ($)             ($)            ($)(3)          GRANTED(#)
- -----------------------------  -----   ------------    ------------    ------------    ----------------
<S>                            <C>     <C>             <C>             <C>             <C>
M.K. Witte...................   1995     US$250,200      US$150,000      US$132,735(4)           --
Chairman, President and         1994   Cdn $250,000     Cdn $75,250                          50,000
Chief Executive Officer         1993   Cdn $206,250    Cdn $100,000              --         300,000
                                                                                 --
J.R. Smrke...................   1995     US$132,800       US$30,000       US$63,400(5)           --
Senior Vice-President                                                              (4)
                                                                          US$41,034
                                1994   Cdn $145,000     Cdn $60,250              --          50,000
                                1993   Cdn $136,250     Cdn $40,000     Cdn $52,038              --
J.H. Wood....................   1995     US$123,600       US$30,000       US$41,034(4)           --
Chief Financial Officer(1)      1994    Cdn $87,917     Cdn $40,250                         230,000
                                1993             --              --              --              --
                                                                                 --
R.F. Burns...................   1995     US$124,500       US$30,000       US$25,452(4)           --
Vice-President, Exploration     1994   Cdn $145,000      Cdn $5,250                          50,000
                                1993   Cdn $127,500     Cdn $40,000              --              --
                                                                       Cdn $430,360
J. Graham Eacott.............   1995     US$102,800       US$30,000       US$30,825(4)           --
Vice-President,                 1994             --              --                              --
Investor Relations(2)           1993             --              --              --              --
                                                                                 --
</TABLE>
 
- ---------------
 
(1) Mr. Wood was hired and appointed Chief Financial Officer in May 1994.
 
(2) Mr. Eacott was appointed Vice-President, Investor Relations in January 1995.
    Prior to that time, Mr. Eacott was Manager, Investor Relations.
 
(3) Except as otherwise indicated, the value of perquisites and benefits do not
    exceed the lesser of $50,000 and 10% of the total annual salary and bonus.
 
(4) Relocation payments upon the Company's move of its executive offices to the
    United States were made to Ms. Witte for US$100,000, Mr. Smrke for
    US$40,000, Mr. Wood for US$40,000, Mr. Burns for US$15,000 and to Mr. Eacott
    for US$30,000. Directors' fees were paid to Ms. Witte and Mr. Burns of Cdn
    $14,500 and Cdn $13,000, respectively. Other than with respect to Ms. Witte,
    the balance relates to the Company's contribution to the employees' 401(k)
    savings plan. In respect of Ms. Witte, the balance relates to payment of
    life insurance premiums of US$15,396, car lease payments and reimbursements
    of US$4,653 and the Company's contribution to the 401(k) savings plan of
    US$2,102.
 
(5) Represents the difference between the market price of the Company's common
    shares on the date of exercise and the option exercise price, multiplied by
    the number of shares acquired.
 
STOCK OPTIONS
 
     During 1995, no options were granted to any of the Named Executive
Officers. During 1995, options to purchase a total of 605,000 common shares of
the Company were granted to officers and employees of the Company. Particulars
of the grants of options are as follows:
 
<TABLE>
<CAPTION>
                     DATE OF GRANT                        NUMBER OF SHARES       EXERCISE PRICE
- --------------------------------------------------------  ----------------     -------------------
<S>                                                       <C>                  <C>
February 17, 1995.......................................       260,000         US$3.15, Cdn $4.60
June 29, 1995...........................................        70,000               US$3.15
September 6, 1995.......................................       220,000         US$3.85, Cdn $5.13
November 21, 1995.......................................        55,000               US$4.00
</TABLE>
 
                                       66
<PAGE>   73
 
     AGGREGATE OPTION EXERCISES DURING 1995 AND 1995 YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                                                           VALUE OF UNEXERCISED
                                                        UNEXERCISED OPTIONS AS OF              IN-THE-MONEY
                           SECURITIES     AGGREGATE              YEAR END                  OPTIONS AT YEAR END
                           ACQUIRED ON      VALUE                  (#)                             ($)
                            EXERCISE      REALIZED     ----------------------------    ----------------------------
          NAME                 (#)           ($)       EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
- ------------------------   -----------    ---------    -----------    -------------    -----------    -------------
<S>                        <C>            <C>          <C>            <C>              <C>            <C>
M.K. Witte..............          --            --       383,333          50,000        $ 364,165        $17,500
J.R. Smrke..............      20,500       $86,612       100,000          60,000        $ 331,000        $49,000
R.F. Burns..............          --            --            --          50,000               --        $17,500
J.H. Wood...............          --            --        40,000         190,000               --        $10,500
J.G. Eacott.............          --            --        61,000          30,000        $ 247,050        $10,500
</TABLE>
 
RETIREMENT PLAN
 
     The officers of the Company participate in the Royal Oak Mines (USA)
Retirement Plan, which covers substantially all of the head office employees of
the Company. Contributions to the Retirement Plan, and the related expense or
income, are based on general actuarial calculations and accordingly, no portion
of the Company's contributions, and related expenses or income, is specifically
attributable to the Company's officers. The current maximum annual pension
benefit payable by the Retirement Plan to any employee is $120,000, subject to
specified adjustments. Upon reaching the normal retirement age of 65, each
participant is eligible to receive annual retirement benefits in monthly
installments for life equal to, for each year of credited service, 1.2% of Final
Average Earnings ("FAE") (defined as the average of the highest 60 consecutive
months of earnings during the 120 months preceding severance date). Officers of
the Company are eligible to receive reduced retirement benefits as early as age
55 with 5 years of eligible service. For purposes of the Retirement Plan,
earnings include "regular salary or wages and any base salary deferrals under
the 401(k) savings plan. Earnings do not include any bonus or commissions,
overtime pay, moving expenses, car allowances, other business expense
reimbursement or non-qualified deferrals."
 
     The following table shows estimated aggregate annual benefits under the
Retirement Plan payable upon retirement to a participant who retires in 1996 at
age 65 having the years of service and FAE, as specified.
 
<TABLE>
<CAPTION>
                                                        YEARS OF CREDITED SERVICE
                                      --------------------------------------------------------------
               FAE                      5          10         15         20         25         30
- ----------------------------------    ------     ------     ------     ------     ------     -------
<S>                                   <C>        <C>        <C>        <C>        <C>        <C>
                                        $          $          $          $          $           $
75,000............................     4,500      9,000     13,500     18,000     22,500      27,000
100,000...........................     6,000     12,000     18,000     24,000     30,000      36,000
125,000...........................     7,500     15,000     22,500     30,000     37,500      45,000
150,000...........................     9,000     18,000     27,000     36,000     45,000      54,000
175,000...........................    10,500     21,000     31,500     42,000     52,500      63,000
200,000...........................    12,000     24,000     36,000     48,000     60,000      72,000
225,000...........................    13,500     27,000     40,500     54,000     67,500      81,000
275,000...........................    16,500     33,000     49,500     66,000     82,500      99,000
300,000...........................    18,000     36,000     54,000     72,000     90,000     108,000
</TABLE>
 
     Benefits listed in the pension table are not subject to any deduction for
social security or other offset amounts. As of December 31, 1995, the Named
Executive Officers have completed the indicated number of years of credited
service: R. Burns, five years; G. Eacott, four years; J. R. Smrke, six years, M.
K. Witte, five years and J. Wood, 1.6 years.
 
SUPPLEMENTAL LIFE INSURANCE PLAN
 
     The Company has established a plan effective January 1, 1996 to provide
certain executives of Royal Oak with supplemental life insurance protection for
their families in the event of death under a split dollar life insurance
arrangement. Under this plan, upon the death of a participant, beneficiaries
designated by such
 
                                       67
<PAGE>   74
 
participant will be entitled to receive that portion of the policy proceeds
equal to the greater of the total cash value of the policy or two times the
participant's highest annual compensation from the Company during the three
consecutive calendar years prior to death. The cost to the Company of this plan
in 1996 is estimated to be approximately US$110,000.
 
EMPLOYMENT AGREEMENTS
 
   
     Following the transfer in March 1995 of head office staff to its corporate
offices in Kirkland, Washington, the Company guaranteed the performance of
employment agreements (collectively, the "Agreements") made by its wholly-owned
United States subsidiary, Arctic Precious Metals, Inc., carrying on business as
Royal Oak Mines (USA) Inc. ("Arctic"), with Margaret K. Witte, President and
Chief Executive Officer of the Company, and Ross F. Burns, Vice-President of
Exploration. The Company also guaranteed the performance by Arctic of employment
agreements with the Company's Chief Financial Officer and three Vice-Presidents
(collectively, the "Executives"), being Messrs. Wood, Smrke, Szol, and Eacott.
    
 
   
     The Agreements, which for the four Executives are substantially identical
except for the compensation provisions, were reviewed and approved by the Board
of Directors of the Company following the recommendation of the Compensation
Committee. The Agreements are for initial fixed terms of two years in the case
of Ms. Witte and Mr. Burns and one year for the Executives, with identical
automatic renewal terms of additional 12-month periods until termination. In the
event of a termination of employment without cause and in certain other
specified circumstances, including a change of control of Arctic or the Company,
each employee is entitled to compensation. In the case of Ms. Witte and Mr.
Burns, the acquisition by any person or group acting in concert of more than 30%
of the issued and outstanding common shares of Arctic or the Company or the
election to the Board of Directors of Arctic or the Company of persons employed
by or representing any one person or group acting in concert and constituting
40% or more of the Board of Directors would constitute a "Terminating Event."
    
 
     In the event that the employment of either Ms. Witte or Mr. Burns is
terminated without cause, each is entitled to 24 months' notice of termination
or payment in lieu thereof, with full continuation of benefits for the notice
period. In the event of termination of either employee upon the occurrence of a
Terminating Event, Ms. Witte is entitled to receive a lump sum representing
three years salary, together with all benefits for a 24-month period and Mr.
Burns is entitled to receive a lump sum representing two years salary, together
with all benefits for the 24-month period. In addition, Ms. Witte and Mr. Burns
will have the right for a period of six months from such Terminating Event to
require the Company to purchase or arrange for the purchase of up to 2,000,000
common shares (in the case of Ms. Witte) and up to 50,000 common shares (in the
case of Mr. Burns) held by them or their spouses or any corporation controlled
by any of them, respectively, for a price per share equal to the simple average
of the closing price of the common shares of the Company on The Toronto Stock
Exchange for each of the business days on which there was a closing price
falling not more than 20 business days prior to the receipt by the Company of
the notice of exercise of the right herein described. If such right is not
exercised and Ms. Witte or Mr. Burns, as the case may be, is then indebted to
the Company, the outstanding principal amount of such loan will be forgiven by
the Company. As of the date hereof, Mr. Burns is currently not indebted to the
Company and Ms. Witte is indebted to the Company in the amount of US$700,000.
See "Certain Relationships and Related Transactions."
 
     In the event that the employment of any one of the five Executives is
terminated without cause, including a dismissal arising from or related to a
change of ownership of Arctic or the Company, each is entitled to receive
compensation tied to length of service. When termination occurs prior to the
completion of 12 months of service, the employee is entitled to payment of an
amount equal to one year's salary plus the cost to the Company of one year of
benefits; where termination occurs after 12 months of service but before the
completion of 48 months of service, the employee is entitled to 18 months' base
salary plus the cost to the Company of 18 months of benefits; and where
termination occurs any time after 48 months of service, the employee is entitled
to 24 months' base salary including bonus, plus the cost to the Company of two
years of benefits. In the event of a change of control of Arctic or the Company,
the Executive is entitled upon dismissal to payments of any bonus earned but
unpaid and has the immediate right to exercise all valid option agreements.
Loans outstanding under the Agreements with the Executives are secured and must
be repaid in
 
                                       68
<PAGE>   75
 
full within 120 days following termination of employment. Several of the
Executives are indebted to Arctic. See "Certain Relationships and Related
Transactions." Each of Ms. Witte, Mr. Burns and the Executives are participants
in the Company's Retirement Plan. See "-- Retirement Plan."
 
COMPENSATION OF DIRECTORS
 
     The directors of the Company are entitled to receive an annual fee of
$8,000 plus $1,000 for each meeting of the Board of Directors or a committee
thereof attended. The directors are also entitled to reimbursement from the
Company for all reasonable out-of-pocket expenses incurred in connection with
their attendance at meetings of the Board of Directors or a committee thereof.
 
                          DESCRIPTION OF SHARE CAPITAL
 
     The attributes of the common and special shares of the Company are
summarized below.
 
SHARE CAPITAL
 
   
     The authorized capital of Royal Oak consists of an unlimited number of
common shares and an unlimited number of special shares, issuable in series, of
which, as of October 3, 1996, 138,680,213 common shares (excluding the 1,924,816
common shares owned by a wholly owned subsidiary of the Company, see "Certain
Relationships and Related Transactions") and no special shares were issued and
outstanding.
    
 
COMMON SHARES
 
     Holders of common shares are entitled to one vote for each share held on
all votes taken at meetings of the shareholders of Royal Oak (other than
meetings at which only holders of another class or series of shares will be
entitled to vote). Subject to the rights of holders of the special shares and
other shares of Royal Oak ranking prior to the common shares, holders of common
shares participate ratably in any dividend declared by the directors of Royal
Oak on the common shares and the common shares carry the right to receive a
proportionate share of the assets of Royal Oak available for distribution to
holders of common shares in the event of the liquidation, dissolution or
winding-up of Royal Oak.
 
SPECIAL SHARES
 
     The special shares may be issued from time to time in one or more series
with such rights, privileges, restrictions, conditions and designations attached
thereto as are fixed by resolution of the board of directors of Royal Oak. Each
series of special shares will rank on a parity with the special shares of every
other series. The special shares as a class rank prior to the common shares and
any other shares ranking junior to the special shares with respect to the
payment of dividends and the distribution of assets in the event of the
liquidation, dissolution or winding-up of Royal Oak. Except in limited
circumstances, holders of the special shares will not be entitled to receive
notice of any meeting of the shareholders of Royal Oak (except a meeting called
for the purpose of authorizing the dissolution of Royal Oak or the sale of all
or a substantial part of its undertaking) or to attend or vote thereat.
 
                                       69
<PAGE>   76
 
STOCK OPTIONS
 
   
     As of October 3, 1996, 3,454,500 common shares of the Company are reserved
for issuance upon exercise of options to purchase such shares. The following
table sets out information with respect to such options:
    
 
   
EXECUTIVE OFFICERS (6)
    
 
   
<TABLE>
<CAPTION>
                                             MARKET PRICE ON
             NUMBER OF SHARES                 DATE OF GRANT      EXERCISE PRICE         EXPIRY DATE
- -------------------------------------------  ---------------     --------------     -------------------
<S>                                          <C>                 <C>                <C>
 40,000....................................       $1.40              $1.40          December 12, 1996
 40,000....................................       $1.75              $1.60          May 14, 1997
 30,000....................................       $1.70              $1.70          October 27, 1997
300,000....................................       $5.25              $4.90          September 19, 2000
200,000....................................       $5.50              $5.50          April 19, 2000
210,000....................................       $4.15              $4.50          December 18, 1999
200,000....................................       $4.10             US$3.15         February 16, 2000
360,000....................................       $4.85              $4.90          January 2, 2001
 63,000....................................        n.a.(1)           $2.67          May 10, 2000
</TABLE>
    
 
DIRECTORS OTHER THAN EXECUTIVE OFFICERS (5)
 
<TABLE>
<CAPTION>
                                             MARKET PRICE ON
             NUMBER OF SHARES                 DATE OF GRANT      EXERCISE PRICE         EXPIRY DATE
- -------------------------------------------  ---------------     --------------     -------------------
<S>                                          <C>                 <C>                <C>
 50,000....................................       $4.80               $3.95         April 5, 2000
 40,000....................................       $4.45               $4.45         April 21, 2000
300,000....................................       $4.85               $4.90         January 2, 2001
 15,000....................................        n.a.(1)            $2.67         May 10, 2000
</TABLE>
 
EMPLOYEES
 
   
<TABLE>
<CAPTION>
                                             MARKET PRICE ON
             NUMBER OF SHARES                 DATE OF GRANT      EXERCISE PRICE         EXPIRY DATE
- -------------------------------------------  ---------------     --------------     -------------------
<S>                                          <C>                 <C>                <C>
 30,000....................................       $1.70              $1.70          October 27, 1997
 27,500....................................       $4.45              $4.45          April 21, 1998
 65,000....................................       $6.25              $6.25          October 18, 1998
 50,000....................................       $6.00              $6.00          December 2, 1998
640,000....................................       $4.15              $4.50          December 18, 1999
 60,000....................................       $4.10              $4.60          February 16, 2000
180,000....................................       $4.70              $5.13          September 6, 2000
 40,000....................................       $4.70             US$3.85         September 6, 2000
 55,000....................................       $5.50             US$4.00         November 20, 2000
 24,000....................................        n.a.(1)           $2.67          May 10, 2000
 60,000....................................       $4.25              $4.90          January 2, 2001
 50,000....................................       $6.00              $6.00          January 31, 2001
 20,000....................................       $6.75              $6.75          February 15, 2001
 35,000....................................       $6.50              $6.38          February 15, 2001
 40,000....................................       $6.50              $6.50          February 15, 2001
100,000....................................       $5.30              $5.30          July 30, 2001
 50,000....................................       $5.25              $5.25          August 28, 2001
 20,000....................................       $5.30              $5.30          September 30, 2001
</TABLE>
    
 
   
- ---------------
    
 
(1) Outstanding options to purchase common shares of Geddes, converted to
    options to purchase shares of the Company upon the arrangement involving the
    Company, Geddes, El Condor and St. Philips becoming effective on January 11,
    1996.
 
                                       70
<PAGE>   77
 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     Since January 1, 1995, the only transactions involving the Company, in
which any director, executive officer or any member of their immediate family
had any material interest are as set out below.
 
     Witteck Development Inc. ("Witteck"), a private Ontario, Canada
corporation, was wholly-owned by Margaret K. Witte, a director and the Chairman,
Chief Executive Officer and President of the Company. Ms. Witte was a director
and the sole officer of Witteck. Witteck's only asset consisted of 1,924,816
common shares of the Company. Pursuant to the terms of an agreement dated April
28, 1995, the Company acquired all of the outstanding shares of Witteck in
exchange for 1,924,816 common shares of the Company. The common shares of the
Company owned by Witteck will be disposed of by Witteck within five years of the
acquisition of Witteck by the Company in accordance with the requirements of the
Business Corporations Act (Ontario). The shares of the Company owned by Witteck
may not be voted for as long as the shares are owned by Witteck (and such shares
are not considered to be outstanding for financial reporting purposes, including
the calculation of the Company's earnings per share). All costs and expenses
associated with the transaction were paid by Ms. Witte. In addition, Ms. Witte
has agreed to indemnify the Company for any and all losses incurred by the
Company as a result of the transaction, including any liabilities of Witteck and
any costs incurred by the Company in connection with this transaction. The
acquisition was approved by the shareholders of the Company on May 31, 1995.
 
     The aggregate amount of indebtedness to the Company or its subsidiaries
incurred in connection with the purchase of securities of the Company by all
present and former officers, directors and employees of the Company outstanding
as at June 30, 1996 was US$31,525. The following table sets forth the
indebtedness incurred by directors, senior officers and executive officers of
the Company for the purchase of securities of the Company:
 
    INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS UNDER
                          SECURITIES PURCHASE PROGRAMS
 
<TABLE>
<CAPTION>
                                                                                            FINANCIALLY
                                                                             AMOUNT          ASSISTED
                                     INVOLVEMENT        LARGEST AMOUNT     OUTSTANDING      SECURITIES
                                      OF ISSUER          OUTSTANDING          AS OF          PURCHASES
   NAME AND PRINCIPAL POSITION     OR SUBSIDIARY(1)     DURING 1995(1)    JUNE 30, 1996     DURING 1995
- --------------------------------- ------------------    --------------    -------------    -------------
<S>                               <C>                   <C>               <C>              <C>
J.R. Smrke, Senior                Loan by Subsidiary         US$31,525        US$31,525    20,500 shares
  Vice-President.................
</TABLE>
 
- ---------------
 
(1) Arctic Precious Metals, Inc., a subsidiary of Royal Oak, provided loans to
    Mr. Smrke. The loans do not bear interest and will be secured by a mortgage
    on real property owned by Mr. Smrke. The loans are repayable from future
    bonus amounts earned by Mr. Smrke and from the aggregate net value of any
    stock options exercised by Mr. Smrke at the rate of one-half of the
    after-tax value to Mr. Smrke of such amounts.
 
     As of June 30, 1996, the aggregate amount of indebtedness to Royal Oak
incurred, other than in connection with the purchase of securities of Royal Oak,
by all current and former directors, officers and employees of Royal Oak was
US$1,080,000.
 
                                       71
<PAGE>   78
 
     The following table sets forth the indebtedness to Royal Oak incurred by
the executive officers, senior officers and directors of Royal Oak, other than
for the purchase of securities of the Royal Oak:
 
       INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
                 OTHER THAN UNDER SECURITIES PURCHASE PROGRAMS
 
   
<TABLE>
<CAPTION>
                                                                     LARGEST AMOUNT       AMOUNT OUTSTANDING
                                         INVOLVEMENT OF ISSUER     OUTSTANDING DURING       AS OF JUNE 30,
      NAME AND PRINCIPAL POSITION            OR SUBSIDIARY                1995                   1996
- ---------------------------------------- ---------------------     ------------------     ------------------
<S>                                      <C>                       <C>                    <C>
M.K. Witte..............................         Subsidiary(1)                     --             US$700,000
Chairman, President and
Chief Executive Officer
J. Wood.................................         Subsidiary(2)              US$75,000              US$66,300
Chief Financial Officer
J.R. Smrke..............................         Subsidiary(3)              US$31,400              US$23,000
Senior Vice-President
</TABLE>
    
 
- ---------------
 
(1) In 1996, loans were made to Ms. Witte by Arctic Precious Metals, Inc., a
    subsidiary of Royal Oak. The loans bear interest at prescribed rates, are
    repayable on demand, provided that the maximum amount repayable in any one
    year is one third of the principal amount of the loans and will be secured
    by a mortgage on real property owned by Ms. Witte. Ms. Witte's compensation
    will be increased to the extent that any interest is paid.
 
   
(2) In May 1995, a housing loan was made to Mr. Wood by Arctic Precious Metals,
    Inc. The loan does not bear interest and is secured against Mr. Wood's
    residence. The loan is repayable over a maximum of ten years from future
    bonus amounts earned by Mr. Wood and from the aggregate net value of any
    stock options exercised by Mr. Wood, at the rate of one-half of the
    after-tax value to Mr. Wood of such amounts.
    
 
   
(3) In January 1995, a loan was made to Mr. Smrke by Arctic Precious Metals,
    Inc. The loan does not bear interest and will be secured by a mortgage on
    real property owned by Mr. Smrke. The loan is repayable from future bonus
    amounts earned by Mr. Smrke and from the aggregate net value of any stock
    options exercised by Mr. Smrke, at the rate of one-half of the after-tax
    value to Mr. Smrke of such amounts.
    
 
                               SECURITY OWNERSHIP
 
     To the knowledge of the directors and officers of the Company, no person or
corporation beneficially owns, directly or indirectly, or exercises control or
direction over shares carrying more than 5% of the voting rights attached to the
Company's common shares. The Company's class of common shares is the only class
of shares outstanding.
 
                         DESCRIPTION OF CREDIT FACILITY
 
     Currently, the Company has a $28 million unsecured, revolving term credit
facility (the "Credit Facility") with The Bank of Nova Scotia ("BNS"). As of
August 27, 1996, the Company had outstanding under the Credit Facility letters
of credit in the aggregate amount of $1,940,000. The Credit Facility was
established for the Company's general corporate purposes, matures on February
14, 1997 and is renewable annually at the discretion of BNS. At the Company's
option, loans under the Credit Facility will bear interest at either the
lender's prime rate ("Prime Rate Loans"), the lender's base rate ("Base Rate
Loans") or the lender's reserve adjusted LIBOR rate ("LIBOR Loans"), plus the
applicable margin. The applicable margin for Base Rate Loans and LIBOR Loans is
 1/2% and  3/4%, respectively. No margins are applicable to Prime Rate Loans.
 
     The Credit Facility requires the Company to meet certain financial tests
which, among other things, limit the incurrence of additional indebtedness. The
Credit Facility contains customary representations, warranties, covenants and
events of default, including payment defaults, incorrectness of representations
and warranties, covenant defaults, cross-defaults to certain other indebtedness
and certain events relating to bankruptcy and insolvency.
 
                                       72
<PAGE>   79
 
                         DESCRIPTION OF EXCHANGE NOTES
 
     The Exchange Notes will be issued under the same Indenture, dated as of
August 12, 1996, by and among the Company, the Guarantor and Mellon Bank,
F.S.B., as Trustee (the "Trustee"), under which the Notes were issued. The
following summary of certain provisions of the Indenture, the Exchange Notes and
the Guarantee does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the United States Trust Indenture Act
of 1939, as amended, (the "TIA") and to all of the provisions of the Indenture
(a copy of which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part, and is incorporated by reference herein), including
the definitions of certain terms therein and those terms made a part of the
Indenture by reference to the TIA as in effect on the date of the Indenture. The
definitions of certain capitalized terms used in the following summary are set
forth under "-- Certain Definitions."
 
     The Exchange Notes will be issued in fully registered form only, without
coupons, in denominations of US$1,000 and integral multiples thereof. Initially,
the Trustee will act as Paying Agent and Registrar for the Notes. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar, which initially will be the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to holders of
the Exchange Notes. The Company will pay principal (and premium, if any) on the
Exchange Notes at the Trustee's corporate office in New York, New York. At the
Company's option, interest may be paid at the Trustee's corporate trust office
or by check mailed to the registered addresses of holders.
 
PRINCIPAL, MATURITY AND INTEREST
 
     The Exchange Notes will be general unsecured obligations of the Company
limited in aggregate principal amount to US$175,000,000 and will mature on
August 15, 2006. Interest on the Exchange Notes will accrue at the rate per
annum set forth on the cover page of this Prospectus and will be payable
semi-annually on each of February 15 and August 15 in each year commencing on
February 15, 1997, to the persons who are registered holders thereof at the
close of business on the February 1 and August 1 immediately preceding the
applicable interest payment date. Interest on the Exchange Notes will accrue
from and including the most recent date to which interest has been paid or, if
no interest has been paid, from and including the Issue Date. The Company will
pay interest on overdue principal and on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate of 2% per annum in excess of the rate shown on the cover page of this
Prospectus. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
 
OPTIONAL REDEMPTION
 
     The Exchange Notes will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after August 15, 2001, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on August 15 of the year
set forth below, plus, in each case, accrued interest thereon to the date of
redemption:
 
<TABLE>
<CAPTION>
                                       YEAR                                     PERCENTAGE
    --------------------------------------------------------------------------  ----------
    <S>                                                                         <C>
    2001......................................................................        105.500%
    2002......................................................................        103.667%
    2003......................................................................        101.833%
    2004 and thereafter.......................................................        100.000%
</TABLE>
 
     Notwithstanding the foregoing, at any time prior to August 15, 1999, the
Company may redeem up to 35% of the aggregate principal amount of the Notes and
the Exchange Notes with the net proceeds from one or more Public Equity
Offerings of the Company at the following redemption prices (expressed as
percentages of the principal amount) if redeemed during the twelve-month period
commencing on August 15 of the year set forth below, plus, in each case, accrued
interest thereon to the date of redemption:
 
                                       73
<PAGE>   80
 
<TABLE>
<CAPTION>
                                       YEAR                                     PERCENTAGE
    --------------------------------------------------------------------------  ----------
    <S>                                                                         <C>
    1996......................................................................        111.000%
    1997......................................................................        109.778%
    1998......................................................................        108.556%
</TABLE>
 
     Any such redemption must occur on or prior to 120 days after the receipt of
such net proceeds.
 
     In addition, the Notes and the Exchange Notes are redeemable, as a whole
but not in part, at the option of the Company at any time upon not less than 30
nor more than 60 days' notice at a redemption price equal to 100% of the
aggregate principal amount so redeemed, plus accrued and unpaid interest thereon
to the date of redemption, if the Company has become or would become obligated
to pay, on the next date on which any amount would be payable under or with
respect to the Notes or Exchange Notes, any additional amounts ("Additional
Amounts") as a result of any change in, or amendment to, the laws (or any
regulations promulgated thereunder) of Canada (or any political subdivision or
taxing authority thereof or therein), or any change in, or amendment to, any
official position regarding the application or interpretation of such laws or
regulations, which change or amendment is announced or becomes effective on or
after August 5, 1996.
 
ADDITIONAL AMOUNTS
 
     The Indenture provides that if the Company is required to make any
withholding or deduction for or on account of any Canadian taxes from any
payment made under or with respect to the Exchange Notes, the Company will pay
such Additional Amounts as may be necessary so that the net amount received by
each holder of the Exchange Notes (including Additional Amounts) will not be
less than the amount such holder would have received had such Canadian taxes not
been withheld or deducted; provided that no Additional Amounts will be payable
with respect to a payment made to a holder (an "Excluded Holder") (i) with which
the Company does not deal at arm's length (within the meaning of the Income Tax
Act (Canada)) at the time of making such payment, or (ii) which is subject to
such Canadian taxes by reason of its being connected with Canada otherwise than
by the mere holding of the Exchange Notes or the receipt of payments thereunder.
 
     The Company will also (i) make such withholding or deduction and (ii) remit
the full amount deducted or withheld to the relevant authority in accordance
with applicable law. The Company will furnish, within 30 days after the date the
payment of any Canadian taxes is due pursuant to applicable law, to the holders
of Exchange Notes that are outstanding on the date of the withholding or
deduction copies of tax receipts evidencing that such payment has been made by
the Company. The Company will indemnify and hold harmless each holder of
Exchange Notes that are outstanding on the date of the withholding or deduction
(other than an Excluded Holder) and upon written request reimburse each such
holder for the amount of (i) any Canadian taxes so levied or imposed and paid by
such holder as a result of payments made under or with respect to the Exchange
Notes, (ii) any liability (including penalties, interest and expense) arising
therefrom or with respect thereto, and (iii) any Canadian taxes imposed with
respect to any reimbursement under clause (i) or (ii) above.
 
     At least 30 days prior to each date on which any payment under or with
respect to the Exchange Notes is due and payable, if the Company becomes
obligated to pay Additional Amounts with respect to such payment, the Company
will deliver to the Trustee an Officers' Certificate stating the fact that such
Additional Amounts will be payable, and the amounts so payable and will set
forth such other information as is necessary to enable the Trustee to pay such
Additional Amounts to the holders of Exchange Notes on the payment date.
Whenever in the Indenture there is mentioned, in any context, (a) the payment of
principal (and premium, if any), (b) purchase prices in connection with a
repurchase of Exchange Notes, (c) interest, or (d) any other amount payable on
or with respect to any of the Exchange Notes, such mention shall be deemed to
include mention of the payment of Additional Amounts provided for in this
section to the extent that, in such context, Additional Amounts are, were or
would be payable in respect thereof.
 
     For a discussion of the exemption from Canadian withholding taxes
applicable to payments under or with respect to the Exchange Notes, see "Certain
Income Tax Considerations -- Certain Canadian Federal Income Tax
Considerations." If, as a result of a change to Canadian withholding tax laws,
the Company has
 
                                       74
<PAGE>   81
 
become or would become obligated to pay, on the next date on which any amount
would be payable under or with respect to the Notes or the Exchange Notes, any
Additional Amounts, the Company may redeem all, but not less than all, the Notes
and the Exchange Notes at a redemption price equal to 100% of the aggregate
principal amount so redeemed, plus accrued and unpaid interest thereon to the
date of redemption. See "-- Optional Redemption."
 
SINKING FUND
 
     There will be no mandatory sinking fund payments for the Exchange Notes.
 
SELECTION AND NOTICE OF REDEMPTION
 
     In the event that less than all of the Exchange Notes are to be redeemed at
any time, selection of such Exchange Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Exchange Notes are listed or, if such Exchange
Notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
provided, however, that no Exchange Notes of a principal amount of US$1,000 or
less shall be redeemed in part. Notice of redemption shall be mailed by
first-class mail at least 30 but not more than 60 days before the redemption
date to each holder of Exchange Notes to be redeemed at its registered address.
If any Exchange Note is to be redeemed in part only, the notice of redemption
that relates to such Exchange Note shall state the portion of the principal
amount thereof to be redeemed. A new Exchange Note in a principal amount equal
to the unredeemed portion thereof will be issued in the name of the holder
thereof upon cancellation of the original Exchange Note. On and after the
redemption date, interest will cease to accrue on Exchange Notes or portions
thereof called for redemption.
 
SUBORDINATION
 
     The payment of the principal of, premium, if any, and interest on, the
Exchange Notes will be subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Indebtedness, whether
outstanding on the Issue Date or thereafter incurred, including, without
limitation, any interest accruing subsequent to a bankruptcy or other similar
proceeding whether or not such interest is an allowed claim enforceable against
the Company in a bankruptcy case under applicable law.
 
     Upon any distribution of assets of the Company of any kind or character,
whether in cash, property or securities upon any dissolution, winding up, total
or partial liquidation or reorganization of the Company (including, without
limitation, in bankruptcy, insolvency, or receivership proceedings or upon any
assignment for the benefit of creditors or any other marshalling of the
Company's assets and liabilities), the holders of Senior Indebtedness shall
first be entitled to receive payment in full of all amounts payable under Senior
Indebtedness (including, without limitation, interest after the commencement of
any such proceeding at the rate specified in the applicable Senior Indebtedness
whether or not interest is an allowed claim enforceable against the Company in
any such proceeding) before the holders will be entitled to receive any payment
with respect to the Exchange Notes, and until all Obligations with respect to
Senior Indebtedness are paid in full, any distribution to which the holders
would be entitled shall be made to the holders of Senior Indebtedness.
 
     No direct or indirect payment by or on behalf of the Company of principal
of, premium, if any, or interest on, the Exchange Notes whether pursuant to the
terms of the Exchange Notes or upon acceleration or otherwise shall be made if,
at the time of such payment, there exists a default in the payment of all or any
portion of principal of, premium, if any, or interest on, any Senior
Indebtedness with a principal amount in excess of US$5.0 million (and the
Trustee has received written notice thereof), and such default shall not have
been cured or waived or the benefits of this sentence waived by or on behalf of
the holders of Senior Indebtedness. In addition, during the continuance of any
other event of default with respect to any Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated, upon the occurrence
of (a) receipt by the Trustee of written notice from the holders of a majority
of the outstanding principal amount of the Designated Senior Indebtedness or
their representative, or (b) if such event of default results from the
acceleration of the Exchange Notes, the date of such acceleration, no such
payment may be made by the
 
                                       75
<PAGE>   82
 
Company upon or in respect of the Exchange Notes for a period ("Payment Blockage
Period") commencing on the earlier of the date of receipt of such notice or the
date of such acceleration and ending 179 days thereafter (unless such Payment
Blockage Period shall be terminated by written notice to the Trustee from the
holders of a majority of the outstanding principal amount of such Designated
Senior Indebtedness or their representative who delivered such notice).
Notwithstanding anything herein to the contrary, in no event will a Payment
Blockage Period extend beyond 179 days from the date on which such Payment
Blockage Period was commenced. Not more than one Payment Blockage Period may be
commenced with respect to the Exchange Notes during any period of 360
consecutive days. For all purposes of this paragraph, no event of default which
existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis for the
commencement of a second Payment Blockage Period by the holders of such
Designated Senior Indebtedness or their representative whether or not within a
period of 360 consecutive days unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days.
 
     In the event that, notwithstanding the foregoing, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or the
holders of the Exchange Notes or any Paying Agent (or, if the Company is acting
as its own Paying Agent, money for any such payment or distribution shall be
segregated or held in trust) on account of principal of, premium, if any, or
interest on, the Exchange Notes before all Senior Indebtedness is paid in full,
such payment or distribution shall be received and held in trust by the Trustee
or such holder or Paying Agent for the benefit of the holders of the Senior
Indebtedness, or their respective representative, ratably according to the
respective amounts of Senior Indebtedness held or represented by each, and shall
be paid over or delivered to the holders of the Senior Indebtedness remaining
unpaid to the extent necessary to make payment in full of all Senior
Indebtedness remaining unpaid after giving effect to all concurrent payments and
distributions to or for the holders of such Senior Indebtedness.
 
     As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of the Exchange Notes may recover less
ratably than creditors of the Company who are holders of Senior Indebtedness or
trade creditors. The Indenture limits, subject to certain financial tests, the
amount of additional Indebtedness, including Senior Indebtedness, that the
Company and its Subsidiaries can incur. See "-- Certain Covenants -- Limitation
on Indebtedness."
 
SUBSIDIARY GUARANTEE
 
     Each Guarantor unconditionally guarantees, jointly and severally, on a
senior subordinated basis to each Holder and the Trustee, the full and prompt
performance of the Company's obligations under the Indenture and the Exchange
Notes, including the payment of principal of, and interest on, the Exchange
Notes. As of the date of this Prospectus, there is a single Guarantor, Kemess
Mines Inc., a wholly owned subsidiary of the Company. The obligations of each
Guarantor are limited to the maximum amount which, after giving effect to all
other contingent and fixed liabilities of such Guarantor and after giving effect
to any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to its contribution obligations under the Indenture, will result in the
obligations of such Guarantor under the Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law. Each Guarantor
that makes a payment or distribution under a Guarantee shall be entitled to a
contribution from each other Guarantor in a pro rata amount, based on the net
assets of each Guarantor, determined in accordance with GAAP.
 
     Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a wholly owned Restricted Subsidiary of the
Company without limitation, or with other Persons upon the terms and conditions
set forth in the Indenture. See "-- Certain Covenants -- Mergers, Consolidations
and Sale of Assets." In the event all of the capital stock of a Guarantor is
sold by the Company and the sale complies with the provisions set forth in "--
Certain Covenants -- Limitation on Sale of Assets," the Guarantor's Guarantee
will be released.
 
                                       76
<PAGE>   83
 
     Separate financial statements of the Guarantor are not included herein
because the aggregate net assets, earnings and equity of the Guarantor and the
Company are substantially equivalent to the net assets, earnings and equity of
the Company on a consolidated basis.
 
CHANGE OF CONTROL
 
     The Indenture provides that upon the occurrence of a Change of Control
Triggering Event, the Company will be required to offer to repurchase (the
"Change of Control Offer") all of the outstanding Notes and Exchange Notes
pursuant to the offer described below, at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase.
 
     Within 30 days following the date upon which the Change of Control
Triggering Event occurred, the Company must send, by first class mail, a notice
to each holder of Exchange Notes, with a copy to the Trustee, which notice shall
govern the terms of the Change of Control Offer. Such notice will state, among
other things, the purchase date, which must be no earlier than 30 days nor later
than 60 days from the date such notice is mailed, other than as may be required
by law (the "Change of Control Payment Date"). The Change of Control Offer is
required to remain open for at least 20 Business Days and until the close of
business on the Change of Control Payment Date.
 
     A Change of Control Triggering Event requires both the occurrence of a
Change of Control and a Rating Event. A Rating Event will occur if the rating on
the Notes or Exchange Notes is downgraded by one or more Gradations at any time
within a specified 90-day period (subject to extension under certain
circumstances). See "-- Certain Definitions -- Change of Control," "-- Certain
Definitions -- Change of Control Triggering Event" and "-- Certain Definitions
- -- Rating Event."
 
     If a Change of Control Triggering Event were to occur, there can be no
assurance that the Company would have sufficient funds to pay the repurchase
price for all Notes and Exchange Notes that the Company is required to
repurchase. In the event that the Company were required to repurchase
outstanding Notes and Exchange Notes pursuant to a Change of Control Offer, the
Company expects that it would need to seek third-party financing to the extent
it does not have available funds to meet its repurchase obligations. However,
there can be no assurance that the Company would be able to obtain such
financing.
 
     If an offer is made to repurchase the Notes and Exchange Notes pursuant to
a Change of Control Offer, the Company will comply with all tender offer rules
under state and Federal securities laws, including, but not limited to, Section
14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent applicable
to such offer.
 
CERTAIN COVENANTS
 
     The Indenture contains, among others, the following covenants.
 
     Limitation on Indebtedness.  (a) The Indenture provides that neither the
Company nor any of its Restricted Subsidiaries will, directly or indirectly,
Incur any Indebtedness, including, without limitation, any Acquired Indebtedness
(other than Permitted Indebtedness).
 
     (b) Notwithstanding the foregoing limitations, in addition to Permitted
Indebtedness, the Company may Incur Indebtedness (including, without limitation,
Acquired Indebtedness) and Restricted Subsidiaries of the Company may Incur
Acquired Indebtedness, in each case, if (i) no Default or Event of Default shall
have occurred and be continuing on the date of the proposed Incurrence thereof
or would result as a consequence of such proposed Incurrence and (ii)
immediately after giving effect to such proposed Incurrence, (x) the
Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to 2.0
to 1.0 if such proposed Incurrence is on or prior to December 31, 1998, at least
equal to 2.5 to 1.0 if such proposed Incurrence is after December 31, 1998 and
on or prior to December 31, 1999, and at least equal to 2.75 to 1.0 if such
proposed Incurrence occurs after December 31, 1999 and (y) the Adjusted
Consolidated Net Tangible Assets of the Company are at least equal to 150% of
the aggregate consolidated Indebtedness of the Company.
 
                                       77
<PAGE>   84
 
     (c) The Company will not, directly or indirectly, in any event Incur any
Indebtedness which by its terms (or by the terms of any agreement governing such
Indebtedness) is subordinated to any other Indebtedness of the Company ranking
pari passu with the Notes or the Exchange Notes unless such Indebtedness is also
by its terms (or by the terms of any agreement governing such Indebtedness) made
expressly subordinate to the Notes and the Exchange Notes to the same extent and
in the same manner as such Indebtedness is subordinated to such pari passu
Indebtedness pursuant to the subordination provisions that are most favorable to
the holders of any such pari passu Indebtedness of the Company.
 
     "Permitted Indebtedness" means, without duplication, each of the following:
 
          (i) Indebtedness under the Notes, the Exchange Notes, the Indenture
     and the Guarantee;
 
          (ii) Commodity Agreements of the Company; provided, however, that such
     Commodity Agreements are entered into to reduce the exposure of the Company
     and its Restricted Subsidiaries to fluctuations in the prices of
     commodities, in each case consistent with past practice of the Company;
 
          (iii) Interest Swap Obligations and Foreign Exchange Obligations of
     the Company; provided, however, that such Interest Swap Obligations and
     Foreign Exchange Obligations are entered into to protect the Company and
     its Restricted Subsidiaries from fluctuations in interest or exchange rates
     on Indebtedness Incurred in accordance with the Indenture to the extent the
     notional principal amount of such Interest Swap Obligation or Foreign
     Exchange Obligation does not exceed the principal amount of the
     Indebtedness to which such Obligation relates; and provided, further, that
     the Company may enter into Foreign Exchange Obligations to protect the
     Company and its Restricted Subsidiaries from fluctuations in exchange rates
     related to the operating costs of the Company and its Restricted
     Subsidiaries, in each case consistent with past practice of the Company;
 
          (iv) Indebtedness under the Working Capital Facility not to exceed $28
     million, less any amounts repaid from Net Cash Proceeds pursuant to the
     "Limitation on Asset Sales" covenant;
 
          (v) Capitalized Lease Obligations and Purchase Money Obligations of
     the Company or any Restricted Subsidiary not to exceed US$20 million
     outstanding at any one time;
 
          (vi) additional Indebtedness Incurred by the Company not to exceed
     US$25 million outstanding at any time;
 
          (vii) Indebtedness of a direct or indirect Restricted Subsidiary of
     the Company to the Company or to a direct or indirect wholly owned
     Restricted Subsidiary of the Company for so long as such Indebtedness is
     held by the Company or a direct or indirect wholly owned Restricted
     Subsidiary of the Company in each case subject to no Lien held by a Person
     other than the Company or a direct or indirect wholly owned Restricted
     Subsidiary of the Company; provided that if as of any date any Person other
     than the Company or a direct or indirect wholly owned Restricted Subsidiary
     of the Company owns or holds any such Indebtedness or holds a Lien in
     respect of such Indebtedness, such date shall be deemed the Incurrence of
     Indebtedness not constituting Permitted Indebtedness by the issuer of such
     Indebtedness;
 
          (viii) Indebtedness of the Company to a direct or indirect wholly
     owned Restricted Subsidiary of the Company for so long as such Indebtedness
     is held by a direct or indirect wholly owned Restricted Subsidiary of the
     company in each case subject to no Lien; provided that (a) any Indebtedness
     of the Company to any direct or indirect Restricted Subsidiary of the
     Company is unsecured and subordinated, pursuant to a written agreement, to
     the Company's obligations under the Indenture and the Exchange Notes, and
     (b) if as of any date any Person other than a direct or indirect wholly
     owned Restricted Subsidiary of the Company owns or holds any such
     Indebtedness or any Person holds a Lien in respect of such Indebtedness,
     such date shall be deemed the Incurrence of Indebtedness not constituting
     Permitted Indebtedness under this clause (viii) by the issuer of such
     Indebtedness;
 
          (ix) guarantees by Restricted Subsidiaries of the Company of
     Indebtedness of the Company (other than Permitted Indebtedness) Incurred on
     or after the Issue Date; provided that such Indebtedness was Incurred in
     compliance with the covenant " -- Limitation on Indebtedness"; and
 
                                       78
<PAGE>   85
 
          (x) Refinancing Indebtedness.
 
     Limitation on Restricted Payments.  The Indenture provides that neither the
Company nor any of its Restricted Subsidiaries will, directly or indirectly (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable solely in Qualified Capital Stock of the Company) on
shares of the Company's Capital Stock to holders of such Capital Stock, (b)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Company, or any warrants, rights or options to acquire shares of any class
of such Capital Stock, other than through the exchange therefor solely of
Qualified Capital Stock of the Company or warrants, rights or options to acquire
Qualified Capital Stock of the Company, (c) make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for
value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes or the Exchange Notes or (d) make any
Investment (other than Permitted Investments) in any Person (each of the
foregoing prohibited actions set forth in clauses (a), (b), (c) and (d) being
referred to as a "Restricted Payment"), if at the time of such proposed
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default has occurred and is continuing or would result therefrom, or
(ii) the Company is not able to Incur at least US$1.00 of additional
Indebtedness in accordance with paragraph (b) of "-- Limitation on Indebtedness"
above (as if such Restricted Payment had been made as of the last day of the
Four Quarter Period), or (iii) the aggregate amount of Restricted Payments
(including such proposed Restricted Payment) made subsequent to the Issue Date
(the amount expended for such purposes, if other than in cash, being the fair
market value of such property as determined reasonably and in good faith by the
board of directors of the Company) exceeds or would exceed the sum of: (x) 50%
of the cumulative Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company during the
period (treating such period as a single accounting period) subsequent to the
Issue Date and prior to the date of the making of such Restricted Payment; and
(y) 100% of the aggregate Net Equity Proceeds received by the Company from any
Person (other than from a Subsidiary of the Company) from the issuance and sale
subsequent to the Issue Date of Qualified Capital Stock of the Company
(excluding (A) any Qualified Capital Stock of the Company paid as a dividend on
any Capital Stock of the Company and (B) any Qualified Capital Stock of the
Company with respect to which the purchase price thereof has been financed
directly or indirectly using funds (i) borrowed from the Company or from any of
its Subsidiaries, unless and until and to the extent such borrowing is repaid,
or (ii) contributed, extended, guaranteed or advanced by the Company or by any
of its Subsidiaries (including, without limitation, in respect of any employee
stock ownership or benefit plan)).
 
     Notwithstanding the foregoing, these provisions do not prohibit: (1) the
payment of any dividend or making of any distribution within 60 days after the
date of its declaration if the dividend or distribution would have been
permitted on the date of declaration; (2) the acquisition of Capital Stock of
the Company or warrants, rights or options to acquire Capital Stock of the
Company either (i) solely in exchange for shares of Qualified Capital Stock of
the Company or warrants, rights or options to acquire Qualified Capital Stock of
the Company, or (ii) through the application of net proceeds of a substantially
concurrent sale for cash (other than to a Subsidiary of the Company) of shares
of Qualified Capital Stock of the Company or warrants, rights or options to
acquire Qualified Capital Stock of the Company; and (3) the acquisition of any
Indebtedness of the Company that is subordinate or junior in right of payment to
the Notes and the Exchange Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a Subsidiary
of the Company) of (A) shares of Qualified Capital Stock of the Company or
warrants, rights or options to acquire Qualified Capital Stock of the Company or
(B) Refinancing Indebtedness; provided, however, that in the case of clauses (2)
and (3) of this paragraph, no Default or Event of Default shall have occurred
and be continuing at the time of such payment or as a result thereof. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date, amounts expended pursuant to clauses (1) and (2) shall, in each
case, be included in such calculation.
 
     Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment complies with the Indenture and setting forth in
 
                                       79
<PAGE>   86
 
reasonable detail the basis upon which the required calculations were computed,
which calculations may be based upon the Company's latest available internal
quarterly financial statements.
 
     Limitation on Sale of Assets.  Neither the Company nor any of its
Restricted Subsidiaries will consummate any Asset Sale unless (i) such Asset
Sale is for at least fair market value, (ii) at least 85% of the consideration
therefrom received by the Company or such Restricted Subsidiary is in the form
of cash or Cash Equivalents, and (iii) the Company or such Subsidiary shall
apply the Net Cash Proceeds of such Asset Sale within 180 days of receipt
thereof as follows:
 
          (a) to repay any Indebtedness secured by the assets involved in such
     Asset Sale together with a concomitant permanent reduction in the amount of
     such Indebtedness (including a permanent reduction in committed amounts
     therefor in the case of any revolving credit facility so repaid); and
 
          (b) with respect to any Net Cash Proceeds remaining after application
     pursuant to the preceding paragraph (a) (the "Available Proceeds Amount"),
     the Company shall make an offer to purchase (the "Asset Sale Offer") from
     all holders of Notes and Exchange Notes up to a maximum principal amount
     (expressed as an integral multiple of US$1,000) of Notes and Exchange Notes
     equal to the Available Proceeds Amount at a purchase price equal to 100% of
     the principal amount thereof plus accrued and unpaid interest thereon, if
     any, to the date of purchase; provided, that the Company will not be
     required to apply pursuant to this paragraph (b) Net Cash Proceeds received
     from any Asset Sale if, and only to the extent that, such Net Cash Proceeds
     are (i) applied to or invested in Mining Related Assets, within 180 days of
     such Asset Sale or (ii) applied on or prior to the date of such Asset Sale,
     to the purchase, redemption, payment or other permanent reduction of then
     outstanding Senior Indebtedness. If at any time any non-cash consideration
     received by the Company or any Restricted Subsidiary of the Company, as the
     case may be, in connection with any Asset Sale is converted into or sold or
     otherwise disposed of for cash, then such conversion or disposition shall
     be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds
     thereof shall be applied in accordance with this "Limitation on Sale of
     Assets" covenant. The Company may defer the Asset Sale Offer until there is
     an aggregate unutilized Available Proceeds Amount equal to or in excess of
     US$10 million resulting from one or more Asset Sales (at which time, the
     entire unutilized Available Proceeds Amount, and not just the amount in
     excess of US$10 million, shall be applied as required pursuant to this
     paragraph).
 
     In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Mergers,
Consolidations and Sale of Assets," the successor corporation shall be deemed to
have sold the properties and assets of the Company and its Restricted
Subsidiaries not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale. In addition, the fair market value of such properties and
assets of the Company or its Restricted Subsidiaries deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this covenant.
 
     Notice of an Asset Sale Offer will be mailed to the holders of Exchange
Notes as shown on the register of such holders not less than 30 days nor more
than 60 days before the payment date for the Asset Sale Offer, with a copy to
the Trustee, and shall comply with the procedures set forth in the Indenture.
Upon receiving notice of the Asset Sale Offer, such holders may elect to tender
their Exchange Notes in whole or in part in integral multiples of US$1,000
principal amount at maturity in exchange for cash. To the extent holders thereof
properly tender Exchange Notes and Notes in an amount exceeding the Available
Proceeds Amount, Exchange Notes and Notes of such tendering holders will be
repurchased on a pro rata basis (based on the aggregate amount tendered). An
Asset Sale Offer shall remain open for a period of 20 Business Days or such
longer periods as may be required by law.
 
     Notwithstanding the foregoing, the Company shall not be obligated to
purchase Notes or Exchange Notes pursuant to an Asset Sale Offer on or prior to
the fifth anniversary of the Issue Date to the extent that such purchase would
result in the aggregate of the principal amount of Exchange Notes and Notes
purchased pursuant thereto or prior thereto being in excess of 25% of the
principal amount of Notes originally issued; provided, however, that to the
extent that the Available Proceeds Amount is not required to be applied to
purchase Exchange Notes or Notes pursuant to an Asset Sale Offer, the Company
shall apply such proceeds
 
                                       80
<PAGE>   87
 
to make an Asset Sale Offer immediately after the fifth anniversary of the Issue
Date. The Company has no present intention to trigger an Asset Sale Offer on or
prior to the fifth anniversary of the Issue Date which would result in a
purchase of the aggregate of the principal amount of Exchange Notes and Notes
purchased pursuant thereto or prior thereto being in excess of 25% of the
principal amount of Notes originally issued.
 
     If an offer is made to repurchase the Exchange Notes or Notes pursuant to
an Asset Sale Offer, the Company will and will cause its Subsidiaries to comply
with all tender offer rules under state and federal securities laws, including,
but not limited to, Section 14(e) under the Exchange Act and Rule 14e-1
thereunder, to the extent applicable to such offer.
 
     Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries.  The Indenture provides that neither the Company nor any of its
Restricted Subsidiaries will, directly or indirectly, create or otherwise cause
or permit or suffer to exist or become effective any encumbrance or restriction
on the ability of any Restricted Subsidiary to (a) pay dividends or make any
other distributions on its Capital Stock; (b) make loans or advances or pay any
Indebtedness or other obligation owed to the Company or to any Restricted
Subsidiary of the Company; or (c) transfer any of its property or assets to the
Company or to any Restricted Subsidiary of the Company (each such encumbrance or
restriction in clause (a), (b), or (c) a "Payment Restriction"), except for such
encumbrances or restrictions existing under or by reason of: (1) applicable law;
(2) the Indenture; (3) customary non-assignment provisions of any lease
governing a leasehold interest of any Restricted Subsidiary of the Company; (4)
any instrument governing Acquired Indebtedness Incurred in accordance with
paragraph (b) of the covenant "-- Limitation on Indebtedness," provided that
such encumbrance or restriction is not, and will not be, applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or asset of the Person, becoming a Restricted Subsidiary of the
Company; (5) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date; (6) restrictions imposed
by Liens granted pursuant to clauses (v) and (vii) - (ix) of the definition of
Permitted Liens solely to the extent such Liens encumber the transfer or other
disposition of the assets subject to such Liens; (7) any restriction or
encumbrance contained in contracts for the sale of assets to be consummated in
accordance with the Indenture solely in respect of the assets to be sold
pursuant to such contract; or (8) any encumbrance or restriction contained in
Refinancing Indebtedness Incurred to Refinance the Indebtedness issued, assumed
or Incurred pursuant to an agreement referred to in clause (2), (4) or (5)
above; provided that the provisions relating to such encumbrance or restriction
contained in any such Refinancing Indebtedness are no less favorable to the
Company or to the holders of Exchange Notes and Notes in any material respect in
the reasonable and good faith judgment of the board of directors of the Company
than the provisions relating to such encumbrance or restriction contained in
agreements referred to in such clause (2), (4) or (5).
 
     Limitation on Preferred Stock of Restricted Subsidiaries.  The Indenture
provides that the Company will not cause or permit any of its Restricted
Subsidiaries to issue any Preferred Stock (other than to the Company or to a
wholly owned Restricted Subsidiary of the Company) or permit any Person (other
than the Company or a wholly owned Restricted Subsidiary of the Company) to own
or hold any Preferred Stock of any Restricted Subsidiary of the Company or any
Lien or security interest therein.
 
     Limitation on Liens.  The Indenture provides that the Company will not, and
will not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or permit or suffer to exist or remain in
effect any Liens (other than Permitted Liens) upon any properties or assets of
the Company or of any of its Restricted Subsidiaries whether owned on the Issue
Date or acquired after the Issue Date, or on any income or profits therefrom, or
assign or otherwise convey any right to receive income or profits thereon;
provided that in addition to creating Permitted Liens on its properties or
assets, (i) the Company may create any Lien upon any of its properties or assets
(including, but not limited to, any Capital Stock of its Subsidiaries) if the
Notes and the Exchange Notes are equally and ratably secured thereby, and (ii) a
Guarantor may create any Lien upon any of its properties or assets (including,
but not limited to, any Capital Stock of its Subsidiaries) if its Subsidiary
Guarantee is equally and ratably secured thereby; and provided, further, that if
(a) the Company creates any Lien on its assets to secure any Indebtedness of the
Company subordinated to the Notes and the Exchange Notes, the Lien securing such
Indebtedness shall be subordinated and junior to the Lien securing the Notes and
the Exchange Notes with the same or lesser
 
                                       81
<PAGE>   88
 
priorities as the subordinated Indebtedness shall have with respect to the Notes
and the Exchange Notes, and (b) a Guarantor creates any Lien on its assets to
secure any Indebtedness of such Guarantor subordinated to the Notes and the
Exchange Notes, the Lien securing such subordinated Indebtedness shall be
subordinated and junior to the Lien securing the Guarantee of such Guarantor
with the same or lesser priorities as the subordinated Indebtedness shall have
with respect to the Guarantee.
 
     Mergers, Consolidations and Sale of Assets. The Indenture provides that the
Company will not, in a single transaction or series of related transactions,
consolidate or merge with or into any Person, or sell, assign, transfer, lease,
convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of
the Company to sell, assign, transfer, lease, convey or otherwise dispose of)
all or substantially all of the Company's assets (determined on a consolidated
basis for the Company and the Company's Restricted Subsidiaries) whether as an
entirety or substantially as an entirety to any Person unless: (i) either (1)
the Company shall be the surviving or continuing corporation or (2) the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or the Person which acquires by sale, assignment, transfer,
lease, conveyance or other disposition the properties and assets of the Company
and of the Company's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity") (x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia or Canada or any province thereof and (y) shall expressly assume, by
supplemental indenture (in form and substance satisfactory to the Trustee),
executed and delivered to the Trustee, the due and punctual payment of the
principal of, and premium, if any, and interest on all of the Notes and the
Exchange Notes and the performance of every covenant of the Notes and the
Exchange Notes, the Indenture and the Registration Rights Agreement on the part
of the Company to be performed or observed; (ii) immediately after giving effect
to such transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness Incurred
or anticipated to be Incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall be
able to Incur at least US$1.00 of additional Indebtedness pursuant to paragraph
(b) of " -- Limitation on Indebtedness"; provided that in determining the
Consolidated Fixed Charge Coverage Ratio of the resulting, transferee or
surviving Person, such ratio shall be calculated as if the transaction
(including the Incurrence of any Indebtedness or Acquired Indebtedness) took
place on the first day of the Four Quarter Period; (iii) immediately before and
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness Incurred or anticipated to
be Incurred and any Lien granted in connection with or in respect of the
transaction), no Default and no Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity shall have delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease, conveyance
or other disposition and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply with the applicable
provisions of the Indenture and that all conditions precedent in the Indenture
relating to such transaction have been satisfied, which Opinion of Counsel may
rely, as to factual matters, upon an Officer's Certificate.
 
     For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
 
     Upon any such consolidation, merger, conveyance, lease or transfer in
accordance with the foregoing, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, lease or
transfer is made will succeed to, and be substituted for, and may exercise every
right and power of, the Company under the Indenture with the same effect as if
such successor had been named as the Company therein, and thereafter (except in
the case of a sale, assignment, transfer, lease, conveyance or other
disposition) the predecessor corporation will be relieved of all further
obligations and covenants under the Indenture, the Notes and the Exchange Notes.
 
                                       82
<PAGE>   89
 
     Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and the Indenture in connection
with any transaction complying with the provisions of " -- Limitation on Sale of
Assets") will not, and the Company will not cause or permit any Guarantor to,
consolidate with or merge with or into any Person other than the Company or any
other Guarantors unless: (i) the entity formed by or surviving any such
consolidation or merger (if other than the Guarantor), or to which sale, lease,
conveyance or other disposition shall have been made, is a corporation organized
and existing under the laws of the United States, any state thereof or the
District of Columbia, or under the laws of Canada or any province thereof; (ii)
such entity assumes by supplemental indenture all of the obligations of the
Guarantor on the Guarantee; (iii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and (iv) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Company could
satisfy the provisions of clause (ii) of the first paragraph of this covenant.
Any merger or consolidation of a Guarantor with and into the Company (with the
Company being the surviving entity) or another Guarantor that is a wholly owned
Restricted Subsidiary of the Company need only comply with clause (iv) of the
first paragraph of this covenant.
 
     Limitation on Transactions with Affiliates.  The Indenture provides that
neither the Company nor any Subsidiary of the Company will conduct any business
or enter into any transaction or series of transactions with or for the benefit
of any of their Affiliates (each an "Affiliate Transaction"), except in good
faith and on terms that are no less favorable to the Company or such Subsidiary,
as the case may be, than those that could have been obtained in a comparable
transaction on an arm's-length basis from a Person not an Affiliate of the
Company or such Subsidiary. All Affiliate Transactions (and each series of
related Affiliate Transactions which are similar or part of a common plan)
involving aggregate payments or other property with a fair market value in
excess of US$5 million shall be approved by the board of directors of the
Company, such approval to be evidenced by a Board Resolution stating that such
board of directors has determined that such transaction complies with the
foregoing provisions. If the Company or any Subsidiary of the Company enters
into an Affiliate Transaction (or a series of related Affiliate Transactions
related to a common plan) that involves an aggregate fair market value of more
than US$15 million, the Company or such Subsidiary shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
Notwithstanding the foregoing, the restrictions set forth in this covenant shall
not apply to customary directors' fees, indemnification and similar
arrangements.
 
     Additional Subsidiary Guarantees.  The Indenture provides that in the event
that any Subsidiary, directly or indirectly, guarantees any Indebtedness of the
Company other than the Notes or the Exchange Notes (the "Other Indebtedness")
the Company shall cause such Subsidiary (an "Additional Guarantor") to
concurrently guarantee (an "Additional Guarantee") the Company's Obligations
under the Indenture, the Notes and the Exchange Notes to the same extent that
such Subsidiary guaranteed the Company's Obligations under the Other
Indebtedness (including waiver of subrogation, if any); provided that if such
Other Indebtedness is (i) Senior Indebtedness, the Additional Guarantee shall be
subordinated in right of payment to the guarantee of such Other Indebtedness on
the same basis that the Notes and the Exchange Notes are subordinated to such
Other Indebtedness, (ii) pari passu Indebtedness, the Additional Guarantee shall
be pari passu in right of payment to the guarantee of such Other Indebtedness or
(iii) subordinated Indebtedness, the Additional Guarantee shall be senior in
right of payment with respect to the guarantee of the Other Indebtedness,
provided, however, that each Additional Guarantor will be automatically and
unconditionally released and discharged from its obligations under such
Additional Guarantee upon the release or discharge of the guarantee of the Other
Indebtedness that resulted in the creation of such Additional Guarantee, except
(i) a discharge or release by, or as a result of, any payment under the
guarantee of such Other Indebtedness by such Additional Guarantor or (ii) a
discharge or release of an initial Guarantee.
 
                                       83
<PAGE>   90
 
     Limitation on Conduct of Business.  The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, engage in
the conduct of any business other than the Mining Business on a basis congruent
with the conduct of such business as conducted on the Issue Date.
 
     Senior Subordinated Indebtedness.  The Company shall not incur or suffer to
exist any Indebtedness that is senior in right of payment to the Exchange Notes
and subordinate in right of payment to any other Indebtedness of the Company.
 
     Reports to Holders.  The Company will file with the Commission all
information, documents and reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company
is then subject to such filing requirements. The Company will file with the
Trustee, within 15 days after it files them with the Commission, copies of the
annual reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Company files with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. Regardless of whether the Company is
required to furnish such reports to its stockholders pursuant to the Exchange
Act, the Company will cause its consolidated financial statements, comparable to
that which would have been required to appear in annual or quarterly reports, to
be delivered to the Trustee and the holders of the Exchange Notes. The Company
will also make such reports available to prospective investors, securities
analysts and broker-dealers upon their request. In addition, the Indenture
requires that the Company provide on request to any holder of the Exchange Notes
any information reasonably requested concerning the Company necessary to permit
such holder to sell or transfer Exchange Notes in compliance with Rule 144A
under the Securities Act.
 
EVENTS OF DEFAULT
 
     The following events are defined in the Indenture as "Events of Default":
 
          (i) the failure to pay interest on any Note or Exchange Note for a
     period of 30 days or more after such interest becomes due and payable; or
 
          (ii) the failure to pay the principal on any Note or Exchange Note,
     when such principal becomes due and payable, at maturity, upon redemption,
     pursuant to an Asset Sale Offer or a Change of Control Offer or otherwise;
     or
 
          (iii) (x) the failure of the Company or any Guarantor to comply with
     any of the terms or provisions described under "-- Certain Covenants --
     Mergers, Consolidations and Sale of Assets" or (y) a default in the
     observance or performance of any other covenant or agreement contained in
     the Indenture which default continues for a period of 30 days after the
     Company receives written notice specifying the default from the Trustee or
     from Holders of at least 25% in aggregate principal amount of outstanding
     Notes and Exchange Notes; or
 
          (iv) default under any mortgage, indenture or instrument under which
     there may be issued or by which there may be secured or evidenced any
     Indebtedness of the Company or of any Restricted Subsidiary of the Company
     (or the payment of which is guaranteed by the Company or any Restricted
     Subsidiary of the Company) which default (a) is caused by a failure to pay
     principal of or premium, if any, or interest on such Indebtedness after any
     applicable grace period provided in such Indebtedness on the date of such
     default (a "payment default") or (b) results in the acceleration of such
     Indebtedness prior to its express maturity and, in each case, the principal
     amount of any such Indebtedness, together with the principal amount of any
     other such Indebtedness under which there has been a payment default or the
     maturity of which has been so accelerated, aggregates US$10 million; or
 
          (v) one or more judgments in an aggregate amount in excess of US$10
     million (which are not covered by third-party insurance as to which a
     financially sound insurer has not disclaimed coverage) being rendered
     against the Company or any of its Subsidiaries and such judgments remain
     undischarged, or unstayed or unsatisfied for a period of 60 days after such
     judgment or judgments become final and non-appealable; or
 
                                       84
<PAGE>   91
 
          (vi) certain events of bankruptcy, insolvency or reorganization
     affecting the Company or any of its Restricted Subsidiaries; or
 
          (vii) any of the Guarantees cease to be in full force and effect or
     any of the Guarantees are declared to be null and void and unenforceable or
     any of the Guarantees are found to be invalid or any of the Guarantors
     denies its liability under its Guarantee (other than by reason of release
     of a Guarantor in accordance with the terms of the Indenture).
 
     If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) occurs and is continuing, then and in
every such case the Trustee or the holders of not less than 25% in aggregate
principal amount of the then outstanding Notes and Exchange Notes may declare
the unpaid principal of, premium, if any, and accrued and unpaid interest on,
all the Notes and Exchange Notes then outstanding to be due and payable, by a
notice in writing to the Company (and to the Trustee, if given by such holders)
and upon such declaration such principal amount, premium, if any, and accrued
and unpaid interest will become immediately due and payable. If an Event of
Default with respect to the Company specified in clause (vi) above occurs, all
unpaid principal of, and premium, if any, and accrued and unpaid interest on,
the Notes and Exchange Notes then outstanding will ipso facto become due and
payable without any declaration or other act on the part of the Trustee or any
such holder.
 
     The holders of a majority in aggregate principal amount of the Notes and
Exchange Notes then outstanding by notice to the Trustee may rescind an
acceleration and its consequences if all existing Events of Default (other than
the nonpayment of principal of and premium, if any, and interest on the Notes
and Exchange Notes which has become due solely by virtue of such acceleration)
have been cured or waived and if the rescission would not conflict with any
judgment or decree. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
 
     The holders of a majority in aggregate principal amount of the Notes and
Exchange Notes may waive any existing Default or Event of Default under the
Indenture, and its consequences, except a Default in the payment of the
principal of or interest on any Notes or Exchange Notes or a Default in respect
of any term or provision of the Notes or Exchange Notes or the Indenture that
cannot be modified or amended without the consent of all holders.
 
     Holders of the Exchange Notes may not enforce the Indenture or the Exchange
Notes except as provided in the Indenture and under the TIA. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the holders of the
Exchange Notes, unless such holders have offered to the Trustee reasonable
indemnity. Subject to all provisions of the Indenture and applicable law, the
holders of a majority in aggregate principal amount of the then outstanding
Notes and Exchange Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee.
 
     Under the Indenture, the Company is required to provide an Officers'
Certificate to the Trustee promptly upon any such officer obtaining knowledge of
any Default or Event of Default (provided that such officers shall provide such
certification at least annually whether or not they know of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
 
DEFEASANCE
 
     The Indenture provides that the Company may, at its option and at any time,
elect to have the obligations of the Company and the Guarantors discharged in
accordance with the provisions set forth below with respect to the Exchange
Notes then outstanding. Such defeasance means that the Company shall be deemed
to have paid and discharged the entire indebtedness represented by such
outstanding Exchange Notes and the Company and the Guarantors shall be deemed to
have satisfied all their respective other obligations under the Exchange Notes,
the Guarantees and the Indenture, except for (i) the rights of holders of such
outstanding Exchange Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Exchange Notes when such payments are due,
(ii) the Company's and the Guarantors' respective obligations
 
                                       85
<PAGE>   92
 
with respect to the Exchange Notes concerning issuing temporary Exchange Notes,
registration of Exchange Notes, mutilated, destroyed, lost or stolen Exchange
Notes and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
respective obligations of the Company and the Guarantors released with respect
to certain covenants in the Indenture ("covenant defeasance"), and any omission
to comply with such obligations shall not constitute a Default or an Event of
Default with respect to the Exchange Notes. In order to exercise either
defeasance or covenant defeasance, (i) the Company must irrevocably deposit with
the Trustee, in trust, for the benefit of the holders of the Notes and Exchange
Notes, cash in U.S. dollars, U.S. Government Obligations, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest on such outstanding Notes and Exchange Notes on
the stated maturity of such principal and each installment of interest; (ii) in
the case of defeasance, the Company shall have delivered to the Trustee an
opinion of counsel stating that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since the Issue
Date, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the holders of the outstanding Notes and Exchange Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred; (iii) in the case of covenant defeasance, the
Company shall have delivered to the Trustee an opinion of counsel to the effect
that the holders of the outstanding Notes and Exchange Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such covenant defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit; (v) such
defeasance or covenant defeasance shall not result in a breach or violation of,
or constitute a default under, the Indenture or any other material agreement or
instrument to which the Company is a party or by default under, the Indenture or
any other material agreement or instrument to which the Company is a party or by
which it is bound; (vi) in the case of defeasance or covenant defeasance, the
Company shall have delivered to the Trustee an opinion of counsel to the effect
that, assuming no intervening bankruptcy of the Company between the date of
deposit and the 91st day following the deposit, after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar law affecting creditors'
rights generally and that such defeasance or covenant defeasance will not result
in the Trustee or the trust arising from such deposit constituting an Investment
Company as defined in the Investment Company Act of 1940, as amended; and (vii)
the Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel each stating that all conditions precedent provided for
relating to either the defeasance or the covenant defeasance, as the case may
be, have been complied with.
 
MODIFICATION OF THE INDENTURE
 
     From time to time, the Company and the Trustee, without the consent of the
holders of the Notes or Exchange Notes, may amend the Indenture for certain
specified purposes, including curing ambiguities, defects or inconsistencies, so
long as such change does not, in the opinion of the Trustee, adversely affect
the rights of any of such holders. In formulating its opinion on such matters,
the Trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an Opinion of Counsel. Other
modifications and amendments of the Indenture may be made with the consent of
the holders of a majority in aggregate principal amount of the then outstanding
Notes and Exchange Notes issued under the Indenture, except that, without the
consent of each holder of Notes or Exchange Notes affected thereby, no amendment
may, directly or indirectly: (i) reduce the amount of Notes or Exchange Notes
whose Holders must consent to an amendment; (ii) reduce the rate of or change
the time for payment of interest, including defaulted interest, on any Notes or
Exchange Notes; (iii) reduce the principal of or change the fixed maturity of
any Notes or Exchange Notes, or change the date on which any Notes or Exchange
Notes may be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor; (iv) make any Notes or Exchange Notes
 
                                       86
<PAGE>   93
 
payable in money other than that stated in such Notes or Exchange Notes; (v)
make any change in provisions of the Indenture protecting the right of each
holder of Notes or Exchange Notes to receive payment of principal of and
interest on such Notes or Exchange Notes on or after the due date thereof or to
bring suit to enforce such payment, or permitting holders of a majority in
aggregate principal amount of the Notes and Exchange Notes to waive Defaults or
Events of Default; (vi) amend, modify or change the obligation of the Company to
make or consummate a Change of Control Offer, an Asset Sale Offer or waive any
default in the performance thereof or modify any of the provisions or
definitions with respect to any such offers; (vii) adversely affect the ranking
of the Notes, Exchange Notes or the corresponding Guarantees; or (viii) release
any Guarantor from any of its obligations under its Guarantee or the Indenture
otherwise than in accordance with the terms of the Indenture.
 
GOVERNING LAW
 
     The Indenture provides that it and the Exchange Notes will be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
 
THE TRUSTEE
 
     The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent person would exercise or
use under the circumstances in the conduct of such person s own affairs.
 
     The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
 
CERTAIN DEFINITIONS
 
     Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
 
     "Acquired Indebtedness" of any Person means Indebtedness of another Person
and any of its Subsidiaries existing at the time such other Person becomes a
Restricted Subsidiary of such Person or at the time it merges or consolidates
with such Person or any of such Person's Restricted Subsidiaries or is assumed
by such Person or any Restricted Subsidiary of such Person in connection with
the acquisition of assets from such other Person and in each case not Incurred
by such Person or any Restricted Subsidiary of such Person or such other Person
in connection with, or in anticipation or contemplation of, such other Person
becoming a Restricted Subsidiary of such Person or such acquisition, merger or
consolidation, and which Indebtedness is without recourse to the Company or any
of its Restricted Subsidiaries or to any of their respective properties or
assets other than the Person or the assets to which such Indebtedness related
prior to the time such Person becomes a Restricted Subsidiary of the Company or
the time of such acquisition, merger or consolidation.
 
     "Adjusted Consolidated Net Tangible Assets" means the total amount of
consolidated assets of the Company and its Restricted Subsidiaries (net of
applicable depletion, depreciation, amortization and other valuation reserves),
except to the extent resulting from write-ups of capital assets (excluding
write-ups in connection with accounting for acquisitions in conformity with
GAAP), after deducting therefrom (i) all current liabilities of the Company and
its Restricted Subsidiaries (excluding intercompany items) and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all as set forth on the most recently
available quarterly or annual consolidated balance sheet of the Company and its
Restricted Subsidiaries, prepared in conformity with GAAP.
 
                                       87
<PAGE>   94
 
     "Affiliate" means, when used with reference to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For the purposes of this definition, "control"
when used with respect to any specified Person means the power to direct or
cause the direction of management or policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.
 
     "Affiliate Transaction" has the meaning set forth in "-- Certain Covenants
- -- Limitation on Transactions with Affiliates."
 
     "Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
with or into the Company or any Restricted Subsidiary of the Company or (ii) the
acquisition by the Company or any Restricted Subsidiary of the Company of assets
of any Person comprising a division or line of business of such Person.
 
     "Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value by the Company or by any
of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than to the Company or to a direct or indirect wholly owned
Restricted Subsidiary of the Company of (i) any Capital Stock of any Restricted
Subsidiary of the Company or (ii) any other property or assets of the Company or
of any Restricted Subsidiary of the Company, other than with respect to this
clause (ii) any disposition of mineral products for value in the ordinary course
of business.
 
     "Asset Sale Offer" has the meaning set forth in "-- Certain Covenants --
Limitation on Sale of Assets."
 
     "Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the board of directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
 
     "Business Day" means any day other than a Saturday, Sunday or any other day
on which banking institutions in the City of New York are required or authorized
by law or other governmental action to be closed.
 
     "Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
 
     "Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease that are required to be
classified and accounted for as capital lease obligations under GAAP and, for
purposes of this definition, the amount of such obligations at any date shall be
the capitalized amount of such obligations at such date, determined in
accordance with GAAP. The stated maturity of such obligations shall be the date
of the last payment of rent or any other amount due under such lease prior to
the first date upon which such lease may be terminated by the lessee without
payment of a penalty.
 
     "Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or Canadian
Government or issued by any agency thereof and backed by the full faith and
credit of the United States or Canada, in each case maturing within one year
from the date of acquisition thereof; (ii) marketable direct obligations issued
by any state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof or any province of Canada or
any political subdivision of any such province or any public instrumentality
thereof maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either S&P or Moody's; (iii) commercial paper maturing no more than one year
from the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates
of deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof issued by any commercial bank organized under the laws of
the United States of America
 
                                       88
<PAGE>   95
 
or any state thereof or the District of Columbia or Canada or any province
thereof or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than US$250 million; and (v)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (iv) above.
 
     "Change of Control" means the occurrence of one or more of the following
events (whether or not approved by the board of directors of the Company): (i)
the Company or any of its Restricted Subsidiaries, directly or indirectly,
sells, assigns, conveys, transfers, leases or otherwise disposes of, in one
transaction or a series of related transactions, all or substantially all of the
property or assets of the Company and its Restricted Subsidiaries (determined on
a consolidated basis) to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act other than the Company or a Person which is a
Restricted Subsidiary (a "Group of Persons"); or (ii) the adoption of any plan
of liquidation or dissolution of the Company; or (iii) any Person or Group of
Persons is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 30% or more of the Voting Stock of the
Company; or (iv) the first day on which a majority of the members of the Board
of Directors of the Company are not Continuing Directors. See "Risk Factors --
Change of Control."
 
     "Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Event.
 
     "Commodity Agreement" of any Person means any option or futures contract
or similar agreement or arrangement.
 
     "Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
 
     "Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income plus (ii) to the
extent that any of the following shall have been taken into account in
determining Consolidated Net Income, (A) all income taxes of such Person and its
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or non-recurring
gains or losses or taxes attributable to sales or dispositions of assets outside
the ordinary course of business), Consolidated Interest Expense, amortization
expense and depreciation expense, and (B) other non-cash items (other than
non-cash interest) reducing Consolidated Net Income, other than any non-cash
item which requires the accrual of or a reserve for cash charges for any future
period and other than any non-cash charge constituting an extraordinary item of
loss, less other non-cash items increasing Consolidated Net Income, all as
determined on a consolidated basis for such Person and its Restricted
Subsidiaries in conformity with GAAP.
 
     "Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction or event giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed
Charges of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect
on a pro forma basis for the period of such calculation to (i) the Incurrence or
repayment of any Indebtedness of such Person or any of its Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any Incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
Incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, at any time
subsequent to the first day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Incurrence or repayment, as the case may be (and
the application of the proceeds thereof), occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted Subsidiaries
(including
 
                                       89
<PAGE>   96
 
any Person who becomes a Restricted Subsidiary as a result of any such Asset
Acquisition) Incurring, assuming or otherwise being liable for Acquired
Indebtedness at any time subsequent to the first day of the Four Quarter Period
and on or prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the Incurrence, assumption or liability for any such
Indebtedness or Acquired Indebtedness) and also including any Consolidated
EBITDA associated with such Asset Acquisition) occurred on the first day of the
Four Quarter Period; provided that the Consolidated EBITDA of any Person
acquired shall be included only to the extent includable pursuant to the
definition of "Consolidated Net Income." If such Person or any of its Restricted
Subsidiaries directly or indirectly guarantees Indebtedness of a third person,
the preceding sentence shall give effect to the Incurrence of such guaranteed
Indebtedness as if such Person or any Restricted Subsidiary of such Person had
directly Incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on Indebtedness determined on a fluctuating
basis as of the Transaction Date (including Indebtedness actually Incurred on
the Transaction Date) and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date; and (2)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Swap Obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
 
     "Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(including amortization or write-off of deferred financing costs of such Person
and its consolidated Restricted Subsidiaries during such period and any premium
or penalty paid in connection with redeeming or retiring Indebtedness of such
Person and its consolidated Restricted Subsidiaries prior to the stated maturity
thereof pursuant to the agreements governing such Indebtedness) and (ii) the
product of (x) the amount of all dividend payments on any series of Preferred
Stock of such Person (other than dividends paid in Common Stock) paid, accrued
or scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
 
     "Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense (without deduction of interest
income) of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, as determined in accordance with GAAP, and including (a) all
amortization of original issue discount; (b) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period; (c)
net cash costs under all Interest Swap Obligations (including amortization of
fees); (d) all capitalized interest; and (e) the interest portion of any
deferred payment obligations for such period.
 
     "Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or non-recurring gains, (c) the net income of
any Person acquired in a "pooling of interests" transaction accrued prior to the
date it becomes a Restricted Subsidiary of the referent Person or is merged or
consolidated with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any Restricted Subsidiary
of the referent Person to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is restricted
by a contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary of the referent Person, except to the extent
of cash dividends or distributions paid to the referent Person or to a wholly
owned Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a
 
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<PAGE>   97
 
transferee of the referent Person's assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets.
 
     "Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its consolidated Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP, less
(without duplication) amounts attributable to Disqualified Capital Stock of such
Person.
 
     "Continuing Director" means, as of the date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of a majority of
the Continuing Directors who were members of such Board at the time of such
election or nomination; provided, however, that in the event of a business
combination involving the Company, by merger or consolidation or otherwise, from
the time of effectiveness of such business combination until the next annual
general meeting of the shareholders of the surviving entity, Continuing
Directors shall only be directors of the Company not elected in anticipation of,
or in connection with, any such transaction who are also directors of the
surviving entity.
 
     "Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of Default.
 
     "Designated Senior Debt" means Indebtedness constituting Senior
Indebtedness which, at the time of designation, has an aggregate principal
amount of at least US$25 million and is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.
 
     "Disqualified Capital Stock" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof, in whole or in part, on or prior to
the final maturity date of the Exchange Notes.
 
     "Events of Default" has the meaning set forth in "Events of Default."
 
     "Exchange Act" means the Securities Exchange Act of 1934, as amended or
any successor statute or statutes thereto.
 
     "fair market value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between an informed and willing seller and an informed
and willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction. Fair market value shall be determined by
the board of directors of the Company acting reasonably and in good faith and
shall be evidenced by a Board Resolution delivered to the Trustee; provided,
however, that if the aggregate non-cash consideration to be received by the
Company or any of its Restricted Subsidiaries from any Asset Sale could be
reasonably likely to exceed US$15 million the fair market value shall be
determined by an Independent Financial Advisor.
 
     "Financial Advisor" means an accounting, appraisal or investment banking
firm of nationally recognized standing that is, in the reasonable and good faith
judgment of the board of directors of the Company, qualified to perform the task
for which such firm has been engaged.
 
     "Foreign Exchange Obligations" means the obligations of any Person under
any foreign currency future, option, swap or cap or other foreign currency hedge
or arrangement.
 
     "Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
 
     "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
 
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<PAGE>   98
 
     "Gradation" means a gradation within a Rating Category, which shall be "+"
and "-", in the case of S&P's current Rating Categories (e.g., a decline from
BB+ to BB would constitute a decrease of one gradation); "1", "2" and "3", in
the case of Moody's current Rating Categories (e.g., a decline from B1 to B2
would constitute a decrease of one gradation); or the equivalent in respect of
successor Rating Categories of S&P or Moody's or Rating Categories used by
Rating Agencies other than S&P and Moody's.
 
     "Guarantor" means (i) Kemess Mines Inc. and (ii) each of the Company's
Subsidiaries that in the future executes a supplemental indenture in which such
Subsidiary agrees to be bound by the terms of the Indenture as a Guarantor;
provided that any Person constituting a Guarantor as described above shall cease
to constitute a Guarantor when its respective Guarantee is released in
accordance with the terms of the Indenture.
 
     "Holder" or "Noteholder" means the Person in whose name a Note or
Exchange Note is registered on the Registrar's books.
 
     "Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the initial recording, as required pursuant to GAAP or otherwise,
of any such Indebtedness or other obligation on the balance sheet of such Person
(and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that (A) any Indebtedness
assumed in connection with an acquisition of assets and any Indebtedness of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) of the Company or at the
time such Person is merged or consolidated with the Company or any Restricted
Subsidiary of the Company shall be deemed to be Incurred at the time of the
acquisition of such assets or by such Restricted Subsidiary at the time it
becomes, or is merged or consolidated with, a Restricted Subsidiary of the
Company or by the Company at the time of such merger or consolidation, as the
case may be, and (B) any amendment, modification or waiver of any document
pursuant to which Indebtedness was previously Incurred shall be deemed to be an
Incurrence of Indebtedness unless such amendment, modification or waiver does
not (i) increase the principal or premium thereof or interest rate thereon
(including by way of original issue discount) or (ii) change to an earlier date
the stated maturity thereof or the date of any scheduled or required principal
payment thereon or the time or circumstances under which such Indebtedness shall
be redeemed.
 
     "Indebtedness" means, with respect to any Person, any liability of such
Person or such Person's Restricted Subsidiaries, without duplication, (i) for
borrowed money, (ii) evidenced by bonds, debentures, notes or other similar
instruments, (iii) for Capitalized Lease Obligations, (iv) issued or assumed as
the deferred purchase price of property, all conditional sale obligations and
under any title retention agreement (but excluding trade accounts payable and
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) for all Indebtedness of others (including all
dividends of other Persons for the payment of which is) guaranteed, directly or
indirectly, by such Person or its Restricted Subsidiaries or that is otherwise
its legal liability or which such Person or its Restricted Subsidiaries has
agreed to purchase or repurchase or in respect of which such Person or its
Restricted Subsidiaries has agreed contingently to supply or advance funds,
(vii) comprising net liabilities under Interest Swap Obligations and Commodity
Agreements, (viii) for all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on any asset or property (including, without limitation,
leasehold interests and any other tangible or intangible property) of such
Person or its Restricted Subsidiaries, whether or not such Indebtedness is
assumed by such Person or its Restricted Subsidiaries or is not otherwise such
Person's or its Restricted Subsidiaries' legal liability; provided that if the
Obligations so secured have not been assumed by such Person or its Restricted
Subsidiaries or are otherwise not such Person's or its Restricted Subsidiaries'
legal liability, the amount of such Indebtedness for the purposes of this
definition shall be limited to the lesser of the amount of such Indebtedness
secured by such Lien or the fair market value of the assets or property securing
such Lien, and (ix) all Disqualified Capital Stock issued by such Person with
the amount of Indebtedness represented by such Disqualified
 
                                       92
<PAGE>   99
 
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends if any. The amount of Indebtedness of any Person or its
Restricted Subsidiaries at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date; provided that the amount outstanding
at any time of any Indebtedness issued with original issue discount is the full
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP.
 
     "Independent" means, when used with respect to any specified Person, such
a Person who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in the Company or any of
its Subsidiaries, or in any Affiliate of the Company or any of its Subsidiaries
and (c) is not an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions for the Company or any of its
Subsidiaries. Whenever it is provided in the Indenture that any Independent
Person's opinion or certificate shall be furnished to the Trustee, such Person
shall be appointed by the Company and approved by the Trustee in the exercise of
reasonable care, and such opinion or certificate shall state that the signer has
read this definition and that the signer is Independent within the meaning
thereof.
 
     "Interest Swap Obligations" means the obligations of any Person under any
interest rate protection agreement, interest rate future, interest rate option,
interest rate swap, interest rate cap or other interest rate hedge or
arrangement.
 
     "Investment" by any Person means any direct or indirect (i) loan, advance
or other extension of credit or capital contribution (by means of transfers of
cash or other property (valued at the fair market value thereof as of the date
of transfer) to others or payments for property or services for the account or
use of others, or otherwise); (ii) purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by any other Person; (iii) guarantee or assumption of any Indebtedness or any
other obligation of any other Person (except for an assumption of Indebtedness
for which the assuming Person receives consideration at the time of such
assumption in the form of property or assets with a fair market value at least
equal to the principal amount of the Indebtedness assumed); and (iv) all other
items that would be classified as investments (including, without limitation,
purchases of assets outside the ordinary course of business) on a balance sheet
of such Person prepared in accordance with GAAP. The amount of any Investment
shall not be adjusted for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Common
Stock of any direct or indirect Restricted Subsidiary of the Company such that,
after giving effect to any such sale or disposition, the Company no longer owns,
directly or indirectly, greater than 50% of the outstanding Common Stock of such
Restricted Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Common Stock of such Subsidiary not sold or disposed of.
 
     "Issue Date" means the date of original issuance of the Notes.
 
     "Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction other than to reflect ownership by a
third party of property leased to the referent Person or any of its Subsidiaries
under a lease that is not in the nature of a conditional sale or title retention
agreement).
 
     "Mining Business" means (i) the acquisition, exploration, development,
operation and disposition of mineral interests, (ii) the gathering, marketing,
treating, processing, storage, selling and transporting of any production from
such interests and (iii) ancillary activities that are directly related to, and
necessary in connection with, the activities described in clauses (i) and (ii)
above.
 
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<PAGE>   100
 
     "Mining Related Assets Investment" means any Investment or capital
expenditure (but not including additions to working capital or repayments of any
revolving credit or working capital borrowings) by the Company or any Restricted
Subsidiary of the Company which is related to the business of the Company and
its Restricted Subsidiaries as it is conducted on the date of the Asset Sale
giving rise to the Net Cash Proceeds to be reinvested.
 
     "Moody's" means Moody's Investors Service, Inc. and its successors.
 
     "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents (including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, brokerage, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable ((1)
including, without limitation, income taxes reasonably estimated to be actually
payable as a result of any disposition of property within two years of the date
of disposition and (2) after taking into account any reduction in tax liability
due to available tax credits or deductions and any tax sharing arrangements) and
(c) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
 
     "Net Equity Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock of the Company, the aggregate net cash proceeds received
by the Company, after payment of expenses, commissions and the like (including,
without limitation, brokerage, legal, accounting and investment banking fees and
commissions) incurred in connection therewith, and (b) in the case of any
exchange, exercise, conversion or surrender of any outstanding Indebtedness of
the Company or any Restricted Subsidiary issued after the Issue Date for or into
shares of Qualified Capital Stock of the Company, the amount of such
Indebtedness (or, if such Indebtedness was issued at an amount less than the
stated principal amount thereof, the accrued amount thereof as determined in
accordance with GAAP) as reflected in the consolidated financial statements of
the Company prepared in accordance with GAAP as of the most recent date next
preceding the date of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder of such Indebtedness to the
Company or to any wholly owned Restricted Subsidiary of the Company upon such
exchange, exercise, conversion or surrender and less any and all payments made
to the holders of such Indebtedness, and all other expenses incurred by the
Company in connection therewith), in each case (a) and (b) to the extent
consummated after the Issue Date.
 
     "Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
 
     "Officers' Certificate" means a certificate signed by two officers of the
Company.
 
     "Opinion of Counsel" means a written opinion from legal counsel which and
who are acceptable to the Trustee.
 
     "Paying Agent" shall initially be Mellon Securities Trust Co., a New York
chartered trust company, until a successor paying agent for the Notes is
selected in accordance with the Indenture.
 
     "payment default" has the meaning set forth in "Events of Default."
 
     "Permitted Investments" means (a) investments in cash and Cash Equivalents;
(b) Investments by the Company or by any Restricted Subsidiary of the Company in
any Person (i) that is or will become immediately after such Investment a direct
or indirect Restricted Subsidiary of the Company, or (ii) such that such
Investment, when combined with all other outstanding Investments of the Company
permitted pursuant to this clause (ii) would not exceed, in the aggregate, 5% of
the Company's Adjusted Consolidated Net Tangible Assets; (c) any Investments in
the Company by any Restricted Subsidiary of the Company; provided that any
Indebtedness evidencing such Investment is unsecured and subordinated, pursuant
to a written
 
                                       94
<PAGE>   101
 
agreement, to the Company's obligations in respect of the Notes and the
Indenture; and (d) Investments made by the Company or by its Restricted
Subsidiaries as a result of an Asset Sale made in compliance with the covenant
described under "-- Certain Covenants -- Limitation on Sale of Assets".
 
     "Permitted Liens" means (i) Liens on assets or property of the Company
that secure Senior Indebtedness of the Company and Liens on assets or property
of a Restricted Subsidiary that secure Senior Indebtedness of such Restricted
Subsidiary, in each case to the extent such Senior Indebtedness is permitted
under paragraph (b) of the covenant described under "-- Certain Covenants --
Limitation on Indebtedness" or clause (vi) of the definition of Permitted
Indebtedness; (ii) Liens securing Indebtedness permitted under clause (iv) of
the definition of Permitted Indebtedness; (iii) Liens securing Indebtedness of a
Person existing at the time that such Person is merged into or consolidated with
the Company or a Restricted Subsidiary, provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of such Person; (iv) Liens on property
acquired by the Company or a Restricted Subsidiary, provided that such Liens
were in existence prior to the contemplation of such acquisition and do not
extend to any other property; (v) Liens relating to royalty payments to be made
by the Company to the British Columbia provincial government in respect of
copper extracted and processed from the Kemess South property; (vi) Liens in
respect of Interest Swap Obligations, Commodity Agreements, Capitalized Lease
Obligations or Purchase Money Obligations, in each case permitted under the
Indenture; (vii) Liens in favor of the Company or any Restricted Wholly Owned
Subsidiary; (viii) Liens incurred, or pledges and deposits in connection with,
workers' compensation, unemployment insurance and other social security
benefits, and leases, appeal bonds and other obligations of like nature incurred
by the Company or any Restricted Subsidiary in the ordinary course of business;
(ix) Liens imposed by law, including, without limitation, mechanics', carriers',
warehousemen's, materialmen's, suppliers' and vendors' Liens, incurred by the
Company or any Restricted Subsidiary in the ordinary course of business; and (x)
Liens for ad valorem, income or property taxes or assessments and similar
charges which either are not delinquent or are being contested in good faith by
appropriate proceedings for which the Company has set aside on its books
reserves to the extent required by GAAP.
 
     "Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
 
     "Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
 
     "Public Equity Offering" means a public offering of Common Stock of the
Company resulting in net proceeds to the Company in excess of US$20 million.
 
     "Purchase Money Obligations" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in connection with the purchase of property or
assets of the business of the Company; provided that any Lien so created in
connection with such incurrence is limited solely to the property or assets so
purchased.
 
     "Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
 
     "Rating Agencies" mean (i) S&P and (ii) Moody's or (iii) if S&P or Moody's
or both of them are not making publicly available ratings of the Notes, a
nationally recognized U.S. rating agency or agencies, as the case may be,
selected by the Company, which will be substituted for S&P or Moody's or both,
as the case may be.
 
     "Rating Category" means (i) with respect to S&P, any of the following
categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor
categories); (ii) with respect to Moody's, any of the following categories: Aaa,
Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories); and
(iii) the equivalent of any such categories of S&P or Moody's used by another
Rating Agency, if applicable.
 
     "Rating Event" means that at any time within 90 days (which period shall
be extended so long as the rating of the Notes or the Exchange Notes is under
publicly announced consideration for possible downgrade or for review without
indication of direction by any Rating Agency) after the earlier of the date of
public
 
                                       95
<PAGE>   102
 
notice of a Change of Control or of the intention of the Company or of any
Person to effect a Change of Control, the rating of the Notes is decreased by
any Rating Agency by one or more Gradations.
 
     "Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
 
     "Refinancing Indebtedness" means any Refinancing by the Company of
Indebtedness Incurred in accordance with "-- Certain Covenants -- Limitation on
Indebtedness" (other than pursuant to clause (iv), (v), (vi), (vii) or (viii) of
the definition of Permitted Indebtedness), in each case that does not (1) result
in an increase in the aggregate principal amount of Indebtedness of such Person
as of the date of such proposed Refinancing (plus the amount of any premium
required to be paid under the terms of the instrument governing such
Indebtedness and plus the amount of reasonable expenses incurred by the Company
in connection with such Refinancing) or (2) create Indebtedness with (A) a
Weighted Average Life to Maturity that is less than the Weighted Average Life to
Maturity of the Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced; provided that (x)
if such Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company, and (y) if
such Indebtedness being Refinanced is subordinate or junior to the Notes and the
Exchange Notes, then such Refinancing Indebtedness shall be subordinate to the
Notes and the Exchange Notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
 
     "Registrar" shall initially mean the Trustee, as the registration agent for
the Exchange Notes, until a successor registrar for the Exchange Notes is
appointed in accordance with the Indenture.
 
     "Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
 
     "S&P" means Standard & Poor's Corporation and its successors.
 
     "Senior Indebtedness" means any Indebtedness of the Company (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law), whether outstanding on the
Issue Date or thereafter created, incurred or assumed, unless, in the case of
any particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Exchange Notes.
Notwithstanding the foregoing, Senior Indebtedness shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company, (ii) Indebtedness
to, or guaranteed on behalf of, any shareholder, director, officer or employee
of the Company or any Subsidiary (including, without limitation, amounts owed
for compensation), (iii) Indebtedness and other amounts incurred in connection
with obtaining goods, materials or services owing to trade creditors, (iv)
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owed or owing by the Company, (vi) Indebtedness incurred in violation of
the covenant described in "-- Certain Covenants -- Limitation on Indebtedness"
and (vii) any Indebtedness which is, by its express terms, subordinated in right
of payment to any other Indebtedness of the Company.
 
     "Subsidiary", with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
 
     "Unrestricted Subsidiary" means any Subsidiary of the Company designated as
an Unrestricted Subsidiary by the Board of Directors of the Company; provided,
however, that (i) the Subsidiary to be so designated (x) (I) has total assets
with a fair market value at the time of such designation of US$1,000 or less or
(II) is being so designated prior to the acquisition by the Company of such
Subsidiary by merger or consolidation with an Unrestricted Subsidiary, and (y)
does not own any Capital Stock of the Company or any Restricted Subsidiary, (ii)
if such Subsidiary is acquired by the Company, such Subsidiary is designated as
an Unrestricted Subsidiary prior to the consummation of such acquisition, (iii)
no Default or Event of Default
 
                                       96
<PAGE>   103
 
shall have occurred and be continuing, (iv) no portion of any Indebtedness or
any other obligation (contingent or otherwise) of such Subsidiary (a) is
guaranteed by, or is otherwise the subject of credit support provided by the
Company or any of its Restricted Subsidiaries, (b) is recourse to or obligates
the Company or any of its Restricted Subsidiaries in any way, or (c) subjects
any property or asset of the Company or any of its Restricted Subsidiaries
directly or indirectly, contingently or otherwise, to the satisfaction of such
Indebtedness or other obligation, (v) neither the Company nor any of its
Restricted Subsidiaries has any contract, agreement, arrangement or
understanding with such Subsidiary other than on terms as favorable to the
Company or such Restricted Subsidiary as those that might be obtained at the
time from Persons that are not Affiliates of the Company, and (vi) neither the
Company nor any of its Restricted Subsidiaries has any obligations (a) to
subscribe for additional shares of Capital Stock of such Subsidiary, or (b) to
maintain or preserve such Subsidiary's financial condition or to cause such
Subsidiary to achieve certain levels of operating results. Any such designation
by the Company's Board of Directors shall be evidenced to the Trustee by filing
with the trustee a certified certificate stating that such designation complies
with the foregoing conditions. The Company's Board of Directors may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however,
that immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing, including, without limitation,
under the covenants described under "-- Certain Covenants -- Limitation on
Indebtedness" and "-- Certain Covenants -- Limitation on Liens," assuming the
incurrence by the Company and its Restricted Subsidiaries at the time of such
designation of all existing Indebtedness and Liens of the Unrestricted
Subsidiary to be so designated as a Restricted Subsidiary. In the event of any
Disposition involving the Company in which the Company is not the Surviving
Person, the Board of Directors of the Surviving Person may (x) prior to such
Disposition, designate any of its Subsidiaries, and any of the Company's
Subsidiaries being acquired pursuant to such Disposition that are not Restricted
Subsidiaries, as Unrestricted Subsidiaries, and (y) after such Disposition,
designate any of its direct or indirect Subsidiaries as an Unrestricted
Subsidiary under the same conditions and in the same manner as the Company under
the terms of the Indenture.
 
   
     "Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
    
 
     "Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
 
     "wholly owned Subsidiary" of any Person means any Subsidiary of such Person
of which all the outstanding voting securities (other than directors' qualifying
shares or similar legally required de minimis holdings) which normally have the
right to vote in the election of directors are owned by such Person or any
wholly owned Subsidiary of such Person.
 
     "Working Capital Facility" means the existing working capital facility
provided to the Company pursuant to a credit agreement between BNS and the
Company dated February 15, 1996, and any agreement, as the same may be amended
from time to time, and any agreement evidencing the refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension, substitution,
supplement, reissuance or resale thereof.
 
                              DESCRIPTION OF NOTES
 
     The Notes evidence the same indebtedness as that which will be evidenced by
the Exchange Notes and are entitled to the benefits of the Indenture. The form
and terms of the Notes are the same as the form and terms of the Exchange Notes
(which replace the Notes) except that none of the Notes (or the related
guarantees) was registered under the Securities Act. Therefore, the Notes may
not be offered or sold within
 
                                       97
<PAGE>   104
 
the United States or to, or for the account or benefit of, U.S. persons except
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. Accordingly, the Notes bear
legends restricting the transfer thereof. In addition, with certain exceptions,
the Notes may not be sold or transferred to, or acquired on behalf of, any
pension or welfare plan (as described in Section 3 of the Employee Retirement
Income Security Act of 1974). For a description of the terms of the Exchange
Notes, see "Description of Exchange Notes."
 
                     EXCHANGE OFFER AND REGISTRATION RIGHTS
 
     The Company, the Guarantor and the Initial Purchasers entered into the
Registration Rights Agreement on August 12, 1996 pursuant to which each of the
Company and the Guarantor agreed, for the benefit of the Holders, that it would,
at its own cost (i) within 45 days after the Issue Date (September 26, 1996),
file a registration statement under the Securities Act with the Commission with
respect to the Exchange Notes (which obligation has been satisfied by the filing
of the Registration Statement of which this Prospectus is a part) and (ii) use
its best efforts to cause such registration statement to be declared effective
under the Securities Act within 120 days after the Issue Date (December 10,
1996). Upon the Registration Statement being declared effective, the Company and
the Guarantor will offer the Exchange Notes (and the related guarantees) in
exchange for surrender of the Notes and the related guarantees. The Company and
the Guarantor will keep the Exchange Offer open for not less than 20 business
days (or longer if required by applicable law) after the date notice of the
Exchange Offer is mailed to the Holders of the Notes. For each of the Notes
surrendered pursuant to the Exchange Offer, the Holder who has surrendered such
Note will receive an Exchange Note having a principal amount equal to that of
the surrendered Note and a related guarantee. Interest on each Exchange Note
will accrue from the last interest payment date on which interest was paid on
the Note surrendered in exchange therefor or, if no interest has been paid on
such Note, from the original issue date of the Note. Under existing Commission
interpretations, the Exchange Notes (and the related guarantees) would be freely
transferable by Holders thereof, other than affiliates of the Company and the
Guarantor, after the Exchange Offer, without further registration under the
Securities Act, if the Holder of the Exchange Notes represents that it is
acquiring the Exchange Notes in the ordinary course of business, that it has no
arrangement or understanding with any person to participate in the distribution
of the Exchange Notes and that it is not an affiliate of any of the Company and
the Guarantor, as such terms are interpreted by the Commission; provided that
broker-dealers ("Participating Broker-Dealers") receiving Exchange Notes in the
Exchange Offer will have a prospectus delivery requirement with respect to
resales of such Exchange Notes. The Commission has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes (other than a resale of an unsold allotment
from the original sale of the Notes) with the prospectus contained in the
Registration Statement. The Company and the Guarantor have agreed for a period
of 180 days after consummation of the Exchange Offer (or such longer period as
may be required under the Securities Act) to make available a prospectus meeting
requirements of the Securities Act to Participating Broker-Dealers and other
persons, if any, with similar prospectus delivery requirements for use in
connection with any resale of such Exchange Notes.
 
     Each Holder who wishes to exchange its Notes for Exchange Notes in the
Exchange Offer will be required to represent that any Exchange Notes to be
received by it will be acquired in the ordinary course of its business and that
at the time of the commencement of the Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
affiliate of any of the Company or the Guarantor.
 
     If the Holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
applicable Exchange Notes. If the Holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes.
 
     In the event that applicable interpretations of the staff of the Commission
do not permit the Company and the Guarantor to effect such an Exchange Offer, or
if for any other reason the Exchange Offer is not
 
                                       98
<PAGE>   105
 
consummated within 180 days after the original issue date of the Notes (February
8, 1997), or, under certain circumstances, if the Initial Purchasers shall so
request, each of the Company and the Guarantor, jointly and severally, will, at
its cost, (a) as promptly as practicable, file a shelf registration statement
covering resales of the Notes (a "Shelf Registration Statement"), (b) use its
best efforts to cause such Shelf Registration Statement to be declared effective
under the Securities Act and (c) use its best efforts to keep effective such
Shelf Registration Statement until the earlier of three years after the Issue
Date and such time as all of the applicable Notes have been sold thereunder. The
Company will, in the event of the filing of a Shelf Registration Statement,
provide to each Holder of the Notes copies of the prospectus which is a part of
such Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Notes (and the related
guarantees). A Holder that sells its Notes pursuant to a Shelf Registration
Statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such Holder (including
certain indemnification obligations).
 
     Although the Company and the Guarantor have filed the registration
statement described above, there can be no assurance that such registration
statement will become effective. If the Company and the Guarantor fail to comply
with the above provisions or if such registration statement fails to become
effective, then the Company shall pay, as liquidated damages, additional
interest ("Liquidated Damages"), to the Holders of the Notes as follows:
 
          (i) if the Registration Statement or Shelf Registration Statement is
     not filed within 45 days following the Issue Date (which requirement has
     been satisfied by the filing with the Commission of the Registration
     Statement of which this Prospectus is a part), Liquidated Damages shall
     accrue at a rate of 0.50% per annum of the principal amount of the Notes
     for the first 90 days commencing on the 46th day after the Issue Date, such
     Liquidated Damages rate increasing by an additional 0.50% per annum of the
     principal amount of the Notes at the beginning of each subsequent 90-day
     period;
 
          (ii) if the Registration Statement or Shelf Registration Statement is
     not declared effective within 120 days following the Issue Date, then,
     commencing on the 121st day after the Issue Date, Liquidated Damages shall
     accrue at a rate of 0.50% per annum of the principal amount of the Notes
     for the first 90 days immediately following the 121st day after the Issue
     Date, such Liquidated Damages rate increasing by an additional 0.50% per
     annum of the principal amount of the Notes at the beginning of each
     subsequent 90-day period; or
 
          (iii) if (A) the Company and the Guarantor have not exchanged Notes
     validly tendered in accordance with the terms of the Exchange Offer on or
     prior to 180 days after the Issue Date or (B) if applicable, the Shelf
     Registration Statement has been declared effective and such Shelf
     Registration Statement ceases to be effective at any time prior to the time
     prior to the third anniversary of the Issue Date (unless all the Notes have
     been sold thereunder), then Liquidated Damages shall accrue at a rate of
     0.50% per annum of the principal amount of the Notes for the first 90 days
     commencing on (x) the 181st day after the Issue Date, in the case of (A)
     above, or (y) the day such Shelf Registration Statement ceases to be
     effective in the case of (B) above, such Liquidated Damages rate increasing
     by an additional 0.50% per annum of the principal amount of the Notes at
     the beginning of each subsequent 90-day period;
 
provided, however, that the Liquidated Damages rate may not exceed in the
aggregate 2.0% per annum of the principal amount of the Notes; and provided,
further, that (1) upon the filing of the Registration Statement or Shelf
Registration Statement (in the case of clause (i) above), (2) upon the
effectiveness of the Registration Statement or Shelf Registration Statement (in
the case of (ii) above), or (3) upon the exchange of Notes for all Notes
tendered (in the case of clause (iii)(A) above), or upon the effectiveness of
the Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii)(B) above), Liquidated Damages as a result of such clause
(or the relevant subclause thereof), as the case may be, shall cease to accrue.
 
                                       99
<PAGE>   106
 
     Any amounts of Liquidated Damages due pursuant to clauses (i), (ii) or
(iii) above will be payable in cash, on the same original interest payment dates
as the Notes. The amount of Liquidated Damages will be determined by multiplying
the applicable Liquidated Damages rate by the principal amount of the Notes
multiplied by a fraction, the numerator of which is the number of days such
Liquidated Damages rate was applicable during such period (determined on the
basis of a 360-day year comprised of 12 30-day months), and the denominator of
which is 360.
 
     The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which will be available upon request to the Company.
 
                       CERTAIN INCOME TAX CONSIDERATIONS
 
     THE DISCUSSION BELOW IS INTENDED TO BE A GENERAL DESCRIPTION OF THE
CANADIAN AND UNITED STATES TAX CONSIDERATIONS MATERIAL TO AN INVESTMENT IN THE
EXCHANGE NOTES AND THE NOTES. IT DOES NOT TAKE INTO ACCOUNT THE INDIVIDUAL
CIRCUMSTANCES OF ANY PARTICULAR INVESTOR. THEREFORE, PROSPECTIVE INVESTORS
SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF AN
INVESTMENT IN THE EXCHANGE NOTES.
 
     FOR INFORMATION WITH RESPECT TO THE TAX CONSEQUENCES OF THE EXCHANGE OFFER,
SEE "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER."
 
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
 
     The following is a summary of the principal Canadian federal income tax
considerations generally applicable to a person (a "United States holder") who
becomes a beneficial owner of Exchange Notes pursuant to this Exchange Offer (or
who acquired Notes in the Offering) and who, for the purposes of the Income Tax
Act (Canada) (the "Canadian Tax Act") and at all relevant times, is not resident
in Canada, deals at arm's length with the Company and does not use or hold (and
is not deemed or considered to use or hold) the Notes or Exchange Notes in
carrying on a business in Canada. Special rules which are not discussed in this
summary, may apply to a United States holder that is an insurer that carries on
an insurance business in Canada and elsewhere. For purposes of the Canadian Tax
Act, related persons (as therein defined) are deemed not to deal at arm's length
and it is a question of fact whether persons not related to each other deal at
arm's length.
 
     This summary is based on the current provisions of the Canadian Tax Act,
the regulations thereunder (the "Canadian Regulations") in force on the date
hereof, all specific proposals to amend the Canadian Tax Act and the Canadian
Regulations publicly announced by the Minister of Finance (Canada) prior to the
date hereof and counsel's understanding of the published administrative
practices of Revenue Canada, Customs, Excise & Taxation ("Revenue Canada"). This
summary does not take into account or anticipate any other changes in law or
administrative practice, whether by legislative, governmental or judicial
decision or action, nor does it take into account provincial, territorial or
foreign income tax legislation or considerations.
 
     Under the Canadian Tax Act, payments by the Company to a United States
holder of interest, principal or premium, if any, on the Notes should not be
subject to Canadian withholding tax. Under the Canadian Tax Act, payments by the
Company to a United States holder of interest, principal or premium, if any, on
the Exchange Notes will not be subject to Canadian withholding tax.
 
     No other taxes on income (including taxable capital gains) will be payable
by a United States holder solely as a consequence of the ownership, acquisition
or disposition of the Exchange Notes.
 
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
 
     The following is a summary of the material United States federal income tax
consequences of the acquisition, ownership and disposition of the Notes or the
Exchange Notes by a United States Holder (as defined below). This summary deals
only with United States Holders that will hold the Notes or the Exchange Notes
as capital assets. The discussion does not cover all aspects of federal taxation
that may be relevant to, or
 
                                       100
<PAGE>   107
 
the actual tax effect that any of the matters described herein will have on, the
acquisition, ownership or disposition of the Notes or the Exchange Notes by
particular investors, and does not address state, local, foreign or other tax
laws. In particular, this summary does not discuss all of the tax considerations
that may be relevant to certain types of investors subject to special treatment
under the federal income tax laws (such as banks, insurance companies, investors
liable for the alternative minimum tax, individual retirement accounts and other
tax-deferred accounts, tax-exempt organizations, dealers in securities or
currencies, investors that will hold the Notes or the Exchange Notes as part of
straddles, hedging transactions or conversion transactions for federal tax
purposes or investors whose functional currency is not the United States
Dollars).
 
     As used herein, the term "United States Holder" means a beneficial owner of
the Notes or the Exchange Notes that is (i) a citizen or resident of the United
States for United States federal income tax purposes, (ii) a corporation created
or organized under the laws of the United States or any State thereof, (iii) a
person or entity that is otherwise subject to United States federal income tax
on a net income basis in respect of income derived from the Notes or the
Exchange Notes, or (iv) a partnership to the extent the interest therein is
owned by a person who is described in clause (i), (ii) or (iii) of this
paragraph.
 
     The following discussion assumes that the payment of Additional Amounts or
Liquidated Damages are remote contingencies, which the Company believes to be
the case. The summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), existing and proposed regulations thereunder, published rulings
and court decisions, all as currently in effect and all subject to change at any
time, perhaps with retroactive effect.
 
INTEREST
 
     Interest (including any Additional Amounts and any Liquidated Damages) paid
on a Note or an Exchange Note will be taxable to a United States Holder as
ordinary income at the time it is received or accrued, depending on the holder's
method of accounting for tax purposes. Interest paid by the Company on the Notes
or the Exchange Notes generally will constitute income from sources outside the
United States. Prospective investors should consult their tax advisers
concerning the applicability of the source of income rules to income
attributable to the Notes or the Exchange Notes.
 
ACQUISITION PREMIUM
 
     If a United States Holder acquires an Exchange Note or has acquired a Note,
in each case, for an amount more than its redemption price, the Holder may elect
to amortize such bond premium on a yield to maturity basis.
 
EFFECT OF CANADIAN WITHHOLDING TAXES
 
     For United States federal income tax purposes, if payments on the Notes or
the Exchange Notes were subject to Canadian withholding taxes, United States
Holders will be treated as having actually received the amount of Canadian taxes
withheld by the Company with respect to a Note or an Exchange Note, as the case
may be, and then having paid over such withheld taxes to the Canadian taxing
authorities. Such treatment will be required regardless of whether the Company
is required to pay Additional Amounts so that the amount of Canadian withholding
taxes does not reduce the net amount actually received by the holder of such
Note or Exchange Note. As a result of this rule, the amount of interest income
included in gross income for United States federal income tax purposes by a
United States Holder with respect to a payment of interest may be greater than
the amount of cash actually received (or receivable) by the United States Holder
from the Company with respect to such payment.
 
     Subject to certain limitations, a United States Holder will generally be
entitled to a credit against the United States federal income tax liability, or
a deduction in computing its United States federal taxable income, for Canadian
income taxes withheld by the Company (which, as described above, will include
Additional Amounts paid by the Company with respect to such taxes). Prospective
participants should consult their tax advisors as to the United States federal
income tax consequences of Canadian withholding taxes and the availability of a
foreign tax credit or deduction.
 
                                       101
<PAGE>   108
 
PURCHASE, SALE, EXCHANGE, RETIREMENT AND REDEMPTION OF THE EXCHANGE NOTES
 
     In general, a United States Holder's tax basis in an Exchange Note will
equal the price paid for the Note for which such Exchange Note was exchanged
pursuant to the Exchange Offer. A United States Holder generally will recognize
gain or loss on the sale, exchange, retirement, redemption or other disposition
of a Note or an Exchange Note (or portion therof) equal to the difference
between the amount realized on such disposition and the United States Holder's
tax basis in the Note or the Exchange Note (or portion thereof). Except to the
extent attributable to accrued but unpaid interest, gain or loss recognized on
such disposition of a Note or an Exchange Note will be capital gain or loss and
will be longterm capital gain or loss if such Note or Exchange Note was held for
more than one year. Any such gain will generally be United States source gain.
 
     A purchase of an Exchange Note or Note in a subsequent resale may be
affected by the market discount provisions of the Code. These rules generally
provide that subject to a statutorily defined de minimis exception, if a United
States Holder purchases an Exchange Note (or purchased a Note) at a "market
discount," as defined below, and thereafter recognizes gain upon a disposition
of the Exchange Note (including dispositions by gift or redemption), the lesser
of such gain (or appreciation, in the case of gift) or the portion of the market
discount that has accrued ("accrued market discount") while the Exchange Note
(and its predecessor Note, if any) was held by such United States Holder will be
treated as ordinary interest income at the time of disposition rather than as
capital gain. For an Exchange Note or a Note, "market discount" is the excess of
the stated redemption price at maturity over the tax basis immediately after its
acquisition by a United States Holder. Market discount generally will accrue
ratably during the period from the date of acquisition to the maturity date of
the Exchange Note, unless the United States Holder elects to accrue such
discount on the basis of the constant yield method.
 
     In lieu of including the accrued market discount in income at the time of
disposition, a United States Holder of an Exchange Note acquired at a market
discount (or acquired in exchange for a Note acquired at a market discount) may
elect to include the accrued market discount in income currently either ratably
or using the constant yield method. Once made, such an election applies to all
other obligations that the United States Holder purchases at a market discount
during the taxable year for which the election is made and in all subsequent
taxable years of the United States Holder, unless the Internal Revenue Service
consents to a revocation of the election. If an election is made to include
accrued market discount in income currently, the basis of an Exchange Note in
the hands of the United States Holder will be increased by the accrued market
discount thereon as it is includible in income.
 
BACKUP WITHHOLDING AND INFORMATION REPORTING
 
     Payments of interest (including any Additional Amounts and any Liquidated
Damages) and principal on, and the proceeds of sale or other disposition of the
Notes or the Exchange Notes payable to a United States Holder may be subject to
information reporting requirements, and backup withholding at a rate of 31% will
apply to such payments if the United States Holder fails to provide an accurate
taxpayer identification number or to report all interest and dividends required
to be shown on its federal income tax returns. Certain United States Holders
(including, among others, corporations) are not subject to backup withholding.
United States Holders should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
 
                         BOOK-ENTRY; DELIVERY AND FORM
 
     The Exchange Notes issued in exchange for the Notes (and the related
guarantees) initially will be represented by a single permanent global
certificate in definitive, fully registered form (the "Global Exchange Note").
Notwithstanding the foregoing, Notes held in certificated form, if any, will be
exchanged solely for Exchange Notes in certificated form. As of the date of this
Prospectus, no Notes were held in certificated form. The Global Exchange Note
will be deposited upon issuance with, or on behalf of, the Depository Trust
Company, New York, New York and registered in the name of a nominee of DTC. The
Global Exchange Note will be subject to certain restrictions on transfer set
forth therein.
 
                                       102
<PAGE>   109
 
   
     The Global Exchange Note.  The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Exchange Note, DTC or its
custodian will credit, on its internal system, the principal amount of Exchange
Notes of the individual beneficial interests represented by such Global Exchange
Note to the respective accounts of persons who have accounts with such
depositary and (ii) ownership of beneficial interests in the Global Exchange
Note will be shown on, and the transfer of such ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
    
 
     So long as DTC, or its nominee, is the registered owner or holder of the
Exchange Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Exchange
Note for all purposes under the Indenture. No beneficial owner of an interest in
the Global Exchange Note will be able to transfer that interest except in
accordance with DTC's procedures, in addition to those provided for under the
Indenture with respect to the Exchange Notes.
 
     Payments of the principal of, premium, if any, interest, Additional Amounts
and Liquidated Damages, if any, on the Global Exchange Note will be made to DTC
or its nominee, as the case may be, as the registered owner thereof. None of the
Company, the Trustee or any Paying Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Exchange Note or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interest.
 
     The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, interest, Additional Amounts or Liquidated Damages,
if any, in respect of the Global Exchange Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Exchange Note as shown on the
records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in the Global Exchange Note held
through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
 
     Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery in definitive
form of a Security for any reason, including to sell Exchange Notes to persons
in states which require physical delivery of the Exchange Notes, or to pledge
such securities, such holder must transfer its interest in the Global Exchange
Note, in accordance with the normal procedures of DTC and with the procedures
set forth in the Indenture.
 
     DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global Exchange Note are
credited and only in respect of such portion of the aggregate principal amount
of Exchange Notes as to which such participant has or participants have given
such direction. However, if there is an Event of Default under the Indenture,
DTC will exchange the Global Exchange Note for Certificated Securities, which it
will distribute to its participants.
 
     DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
 
                                       103
<PAGE>   110
 
     Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Exchange Notes among participants of DTC,
it is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
 
     Certificated Securities.  If DTC is at any time unwilling or unable to
continue as a depositary for the Global Exchange Note and a successor depositary
is not appointed by the Company within 90 days, certificated securities will be
issued in exchange for the Global Exchange Note.
 
                              PLAN OF DISTRIBUTION
 
   
     Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Prospectus,
as it may be amended or supplemented from time to time, may be used by any
person subject to the prospectus delivery requirements of the Securities Act,
including a broker-dealer in connection with resales of Exchange Notes received
in exchange for Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Company and the
Guarantor have agreed that, for a period of 180 days after the Expiration Date,
they will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
January 6, 1997 (90 days after commencement of the Exchange Offer), all dealers
effecting transactions in the Exchange Notes may be required to deliver a
Prospectus.
    
 
     Neither the Company nor the Guarantor will receive any proceeds from any
sales of the Exchange Notes by broker-dealers. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to the purchaser or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells the Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
 
     For a period of 180 days after the Expiration Date, the Company or the
Guarantor will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company and the Guarantor have
agreed to pay certain expenses incident to the Exchange Offer, other than
commission or concessions of any brokers or dealers, and will indemnify the
holders of the Exchange Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
 
     By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer agrees that,
upon receipt of notice from the Company or the Guarantor of the happening of any
event which makes any statement in the Prospectus untrue in any material respect
or which requires the making of any changes in the Prospectus in order to make
the statements therein not misleading (which notice the Company and the
Guarantor agree to deliver promptly to such broker-dealer), such broker-dealer
will suspend use of the Prospectus until the Company or the Guarantor have
amended or supplemented the Prospectus to correct such misstatement or omission
and have furnished copies of the amended or supplemental Prospectus to such
broker-dealer.
 
                                       104
<PAGE>   111
 
                           VALIDITY OF EXCHANGE NOTES
 
     Certain legal matters relating to validity of the Exchange Notes will be
passed upon for the Company by Lang Michener, Toronto, Ontario with respect to
matters of Canadian law and by Wachtell, Lipton, Rosen & Katz, New York, New
York with respect to matters of United States law. William J.V. Sheridan, a
director and the Secretary of the Company, is a partner of Lang Michener.
 
                                    EXPERTS
 
     The financial statements for each of the three fiscal years in the period
ended December 31, 1995 included in this Prospectus have been audited by Arthur
Andersen & Co., independent chartered accountants, as stated in their report
herein with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving such
report.
 
                                       105
<PAGE>   112
 
                        GLOSSARY OF CERTAIN MINING TERMS
 
ASSAY -- The testing of a rock sample to determine its mineral content.
 
CASH COST PER OUNCE -- Includes all site operating expenses but excludes capital
     and exploration expenditures, depreciation, post-closure restoration
     accruals, finance and corporate administrative expenses; divided by units
     produced. Cash costs has the same meaning, except not on a unit production
     basis.
 
CHALCOPYRITE -- A sulphide mineral of copper and iron, a common ore of copper.
 
CIP -- Carbon-in-pulp.
 
CONCENTRATE -- A fine powdery product containing the valuable metal from which
     most of the waste material in the ore has been eliminated and discarded.
 
CONTAINED OUNCES -- Reserves are estimated to encompass a stated number of
     ounces of gold in place. The number of ounces ultimately recovered and
     available depends upon mining efficiency and processing efficiency.
 
CONTANGO -- Contango on gold is the positive difference between the spot market
     gold price and the forward market gold price. It is often expressed as an
     interest rate and is the difference between inter-bank deposit rates and
     gold lending rates.
 
CYANIDATION -- A method of extracting gold or silver by dissolving it in a weak
     solution of sodium or potassium cyanide.
 
DECLINE -- A sloping underground opening for machine access from level to level
     or from surface; also called a "ramp."
 
DILUTION -- The effect of waste or low grade ore being included and removed
     along with the ore in the mining process, subsequently lowering the grade
     of the ore.
 
DORE -- Unrefined gold consisting of 60% to 90% gold which will be further
     refined to almost pure gold by a smelter or refinery.
 
DRILLING --
 
     Blasthole: Drilling holes deep into rock to place an explosive charge that
     breaks up the rock.
 
     Diamond: Drilling with a hollow bit with a diamond cutting rim to produce a
     cylindrical core that is used for geological study and assays. Used in mine
     exploration.
 
DYKE -- A tabular intrusive igneous rock that cuts across or along pre-existing
     country rock.
 
EN ECHELON -- Refers to geological features that are in an overlapping or
     staggered arrangement and collectively form a linear zone.
 
FELDSPAR -- A group of abundant rock-forming minerals of the general formula, M
     Al (Al, Si3) where M can be K, Na, Ca, Ba or Fe. Feldspars are the most
     widespread of any mineral group and constitute 60% of the earth's crust.
 
FLOTATION -- A milling process by which some mineral particles are induced to
     become attached to bubbles of froth and float, and others to sink so that
     the valuable minerals are concentrated and separated from the worthless
     gangue.
 
FLUID BED ROASTER -- The use of a rising current of hot air (or other gas) to
     suspend finely ground particles of concentrate. The hot gases react with
     the material to oxidize sulphide mineralization.
 
FOOTWALL -- The mass of rock beneath a geological structure (ore body, fault,
     etc.).
 
FORWARD SELLING -- An agreement to sell a certain quantity of future production
     at a set future date at a predetermined price.
 
GANGUE -- Valueless rock or mineral aggregates in an ore that cannot be avoided
     in mining.
 
                                       106
<PAGE>   113
 
GRADE -- The amount of valuable mineral in each ton of ore, expressed as troy
     ounces per ton for precious metals and as a percentage for other metals.
 
     Cut-off grade: The minimum content level at which an ore body can be
     economically mined.
 
HEAP LEACHING -- A low-cost process in which ore is placed in a large heap on an
     impermeable pad. A weak cyanide solution is sprinkled or dripped over the
     heap and is collected at the bottom after percolating through the ore and
     dissolving the metals.
 
HYPOGENE ZONE -- Ores, or mineralized material, formed by an upward moving
     enrichment process, typically found beneath the supergene.
 
JURASSIC -- A geological period which identifies the formation date of the
     strata. Jurassic is in the Mesozoic era.
 
MILL -- A plant where ore is ground fine and undergoes physical or chemical
     treatment to extract the valuable metals.
 
MILL FEED GRADES -- The average grade of ore processed in a mill over a given
     period of time.
 
MINEABLE ORE RESERVES -- Ore reserves which include allowances for dilution in
     mining and take into account losses which are likely to occur in mining.
     All ore reserves reported by Royal Oak are mineable ore reserves.
 
MINERAL DEPOSIT -- A deposit of mineralization which may or may not be ore, the
     determination of which requires a comprehensive feasibility study.
 
MINERALIZATION -- Rock containing minerals or metals of economic interest.
 
MINERALIZED MATERIAL -- A natural aggregate of one or more minerals which either
     is not sufficiently delineated as to size, tonnage and grade or, even if so
     delineated, cannot be economically extracted at the time of the reserve
     determination and, accordingly, cannot be classified as mineable ore
     reserves.
 
NET PROFIT INTEREST -- The excess of gross income from the sale of minerals over
     all expenses properly incurred with respect to production of such mineral
     products in accordance with GAAP, excluding taxes on income.
 
NET SMELTER RETURN -- Cash or actual metal recoveries per ton of concentrate
     delivered to the smelter net of metallurgical recovery losses,
     transportation costs and smelter treatment-refining charges and deductions.
 
ORE -- Mineralization that can be mined at a profit.
 
ORE BODY -- A mineral deposit that can be mined at a profit under existing
     economic conditions.
 
ORE RESERVES -- The tonnage and grade of an economically and legally extractable
     ore body.
 
PORPHYRY -- An igneous rock in which a number of mineral crystals are
     conspicuously much larger than the majority of the crystals which make up
     the rock. These large crystals are often of the mineral feldspar. Porphyry
     copper and gold deposits are mineral deposits hosted in large intrusive
     igneous bodies made up of porphyritic rock. These deposits usually contain
     very fine disseminations of minerals containing gold and copper.
 
PROBABLE ORE RESERVES -- Ore reserves that have reasonable geologic continuity
     but cannot be considered proven because inspection and measurement
     locations are not detailed enough to estimate accurately the size, shape,
     and mineral content of the body. The degree of assurance, although lower
     than that for proven reserves, is high enough to assume continuity between
     points of observation.
 
PROVEN ORE RESERVES -- Ore reserves that can be accurately estimated by
     establishing the size, shape, and mineral content of an ore body by
     inspection and closely spaced samples.
 
PYRITE -- A common sulfide mineral, shiny and yellow in color and composed of
     sulphur and iron, sometimes known as "fool's gold."
 
                                       107
<PAGE>   114
 
RAISE -- A vertical hole between mine levels used to move ore or waste rock or
     to provide ventilation.
 
RAMP -- An inclined underground tunnel which provides access for exploration or
     a connection between levels or a mine.
 
REFINING -- The final stage of metal production in which impurities are removed
     from the molten metal.
 
RESOURCE -- Mineralization based on geological evidence and assumed continuity.
     May or may not be supported by samples but is supported by geological,
     geochemical, geophysical or other data.
 
REVERSE CIRCULATION DRILLING -- A process that uses a drill with a dual-wall
     pipe through which compressed air travels down the outside channel,
     returning bit-cut chips up the interior channel for sampling.
 
SAG OR SEMI-AUTOGENOUS GRINDING MILL -- A large diameter grinding mill utilizing
     steel balls and large rock pieces to grind ore from a coarse feed size to a
     relatively small particle size.
 
SHAFT -- A vertical or steeply inclined opening providing access to a mine for
     equipment, personnel and supplies and to hoist out ore and waste. It can
     also be used for ventilation and as an auxiliary exit from the mine.
 
SPOT DEFERRED CONTRACT -- A spot deferred contract is like a forward sale except
     Royal Oak has the option to extend the contract (roll it over). The
     ultimate delivery date and sale price are not fixed on the contract. It is
     rolled over, the new contract price is based on the price at maturity in
     the old contract plus a contango premium on the rollover date.
 
STOPE -- An excavation in a mine from which ore is being, or has been,
     extracted.
 
STRIP RATIO -- The ratio of waste tons mined to total tons mined.
 
SULPHIDES -- Compounds of sulphur with other metallic elements.
 
SUPERGENE -- Ores or mineralized material formed by downward moving enrichment
     process.
 
TAILINGS -- The material that remains after all metals considered economical
     have been removed from ore during milling.
 
TONNE -- One metric ton or 2,204.62 pounds.
 
TONS -- Short tons. Two thousand pounds.
 
WASTE ROCK -- Barren rock in a mine, or mineralized material, that is too low in
     grade to be economically mined and milled.
 
                                       108
<PAGE>   115
 
                              ROYAL OAK MINES INC.
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
Report of Independent Chartered Accountants...........................................   F-2
Audited Consolidated Financial Statements:
  Consolidated Balance Sheets as of December 31, 1994 and 1995........................   F-3
  Consolidated Statements of Income and Retained Earnings for the years ended December
     31, 1993, 1994 and 1995..........................................................   F-4
  Consolidated Statements of Cash Flow for the years ended December 31, 1993, 1994 and
     1995.............................................................................   F-5
  Notes to the Annual Consolidated Financial Statements...............................   F-6
Unaudited Consolidated Financial Statements (except for the December 31, 1995
  Consolidated Balance Sheet, which has been audited):
  Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995...............  F-22
  Consolidated Statements of Income and Retained Earnings for the periods ended June
     30, 1996 and 1995................................................................  F-23
  Consolidated Statements of Cash Flow for the periods ended June 30, 1996 and 1995...  F-24
  Notes to the Unaudited Consolidated Financial Statements............................  F-25
</TABLE>
 
                                       F-1
<PAGE>   116
 
                  REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
 
To the Shareholders of Royal Oak Mines Inc.:
 
     We have audited the consolidated balance sheets of Royal Oak Mines Inc. as
at December 31, 1995 and 1994 and the consolidated statements of income and
retained earnings and cash flow for the years ended December 31, 1995, 1994 and
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
 
     In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
1995 and 1994 and the results of its operations and its cash flows for the years
ended December 31, 1995, 1994 and 1993 in accordance with generally accepted
accounting principles.
 
Arthur Andersen & Co.
Chartered Accountants
 
Vancouver, British Columbia
February 16, 1996
(except as to note 14(b), which is as of February 27, 1996)
 
                                       F-2
<PAGE>   117
 
                              ROYAL OAK MINES INC.
 
                          CONSOLIDATED BALANCE SHEETS
                       (in thousands of Canadian dollars)
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 31
                                                                         ---------------------
                                                                           1995         1994
                                                                         --------     --------
<S>                                                                      <C>          <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents............................................  $139,410     $148,524
  Short-term investments (note 2)......................................     2,971       30,413
  Receivables..........................................................     7,138        6,842
  Inventories (note 3).................................................    46,136       36,250
  Prepaid expenses.....................................................     5,620        4,821
                                                                         --------     --------
                                                                          201,275      226,850
PROPERTY, PLANT AND EQUIPMENT (note 4).................................   191,381      137,954
LONG-TERM INVESTMENTS (note 5).........................................    36,307       19,270
                                                                         --------     --------
                                                                         $428,963     $384,074
                                                                         ========     ========
LIABILITIES
CURRENT LIABILITIES
  Accounts payable.....................................................  $ 13,640     $ 12,654
  Accrued payroll costs................................................     5,267        5,650
  Deferred revenue (note 6)............................................     4,523        1,282
  Income taxes payable (note 8)........................................     3,350        2,415
  Other current liabilities............................................    15,654       13,799
                                                                         --------     --------
                                                                           42,434       35,800
DEFERRED REVENUE AND OTHER LIABILITIES (note 6)........................    40,800       39,742
DEFERRED INCOME TAXES (note 8).........................................     5,064        5,064
MINORITY INTEREST IN SUBSIDIARY COMPANIES..............................       170          737
                                                                         --------     --------
                                                                           88,468       81,343
                                                                         --------     --------
CONTINGENCIES AND COMMITMENTS (note 11)
SHAREHOLDERS' EQUITY
CAPITAL STOCK (note 7)
  Common stock
     Authorized -- unlimited
     Outstanding -- 119,118,714; (1994 -- 114,494,747).................   261,957      247,362
RETAINED EARNINGS......................................................    78,538       55,369
                                                                         --------     --------
                                                                          340,495      302,731
                                                                         --------     --------
                                                                         $428,963     $384,074
                                                                         ========     ========
</TABLE>
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
 
                                       F-3
<PAGE>   118
 
                              ROYAL OAK MINES INC.
 
            CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
          (in thousands of Canadian dollars except per share amounts)
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31
                                                             ----------------------------------
                                                               1995         1994         1993
                                                             --------     --------     --------
<S>                                                          <C>          <C>          <C>
REVENUE....................................................  $208,311     $162,111     $135,326
                                                             --------     --------     --------
EXPENSES
  Operating................................................   182,214      117,790      110,258
  Royalties and marketing..................................     2,535        2,490        1,248
  Administrative and corporate.............................     8,549        5,271        3,411
  Depreciation and amortization............................    14,895        8,525        4,998
  Provision for (Recovery of) loss on foreign currency
     contracts (note 6(b)).................................    (5,244)      15,267           --
                                                             --------     --------     --------
                                                              202,949      149,343      119,915
                                                             --------     --------     --------
OPERATING INCOME...........................................     5,362       12,768       15,411
OTHER INCOME (EXPENSES)
  Interest and other income, net (note 9)..................    20,902        7,074        2,289
  Write-down of resource properties and other assets.......      (891)          --         (388)
  Gain on issuance of shares by associated company (note
     5)....................................................        --        3,020           --
  Other....................................................      (619)         (85)      (1,508)
                                                             --------     --------     --------
NET INCOME BEFORE UNDERNOTED...............................    24,754       22,777       15,804
  Income taxes (note 8)....................................    (1,542)        (636)        (215)
  Minority interest........................................       594           --          136
  Equity in income (loss) of associated companies..........      (637)          25         (102)
                                                             --------     --------     --------
NET INCOME.................................................    23,169       22,166       15,623
RETAINED EARNINGS -- BEGINNING OF YEAR.....................    55,369       33,203       17,580
                                                             --------     --------     --------
RETAINED EARNINGS -- END OF YEAR...........................  $ 78,538     $ 55,369     $ 33,203
                                                             ========     ========     ========
EARNINGS PER SHARE -- BASIC (note 7).......................  $   0.20     $   0.22     $   0.19
                                                             ========     ========     ========
EARNINGS PER SHARE -- FULLY DILUTED........................  $   0.20     $   0.22     $   0.18
                                                             ========     ========     ========
</TABLE>
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
 
                                       F-4
<PAGE>   119
 
                              ROYAL OAK MINES INC.
 
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                       (in thousands of Canadian dollars)
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31
                                                             ----------------------------------
                                                               1995         1994         1993
                                                             --------     --------     --------
<S>                                                          <C>          <C>          <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income for the year....................................  $ 23,169     $ 22,166     $ 15,623
Items not affecting cash:
  Depreciation and amortization............................    14,895        8,525        4,998
  Provision for (Recovery of) loss on foreign currency
     contracts.............................................    (5,244)      15,267           --
  Write-down of resource properties and other assets.......       891           --          388
  Gain on issuance of shares by associated company.........        --       (3,020)          --
  Other....................................................        43          187         (595)
                                                             --------     --------      -------
                                                               33,754       43,125       20,414
Net change in non-cash working capital (note 12)...........    (7,588)      (9,914)      (1,571)
                                                             --------     --------      -------
CASH FLOW FROM OPERATIONS..................................    26,166       33,211       18,843
                                                             --------     --------      -------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
  Increase in deferred revenue, net........................     5,593       22,768           78
  Issue of common shares (note 7(a)).......................    14,595       95,203       87,804
  Accrued reclamation on acquisition (note 4)..............     3,000           --           --
  Other....................................................      (300)       1,037           --
                                                             --------     --------      -------
                                                               22,888      119,008       87,882
                                                             --------     --------      -------
CASH USED IN INVESTING ACTIVITIES:
  Net additions to property, plant and equipment...........   (66,018)     (52,461)     (26,803)
  Investments, net of sales................................   (19,025)        (415)     (12,746)
  Other....................................................      (567)         (50)        (251)
                                                             --------     --------      -------
                                                              (85,610)     (52,926)     (39,800)
                                                             --------     --------      -------
INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS
  DURING THE YEAR..........................................   (36,556)      99,293       66,925
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF YEAR.......   178,937       79,644       12,719
                                                             --------     --------      -------
CASH AND SHORT-TERM INVESTMENTS AT END OF YEAR.............  $142,381     $178,937     $ 79,644
                                                             ========     ========      =======
Cash paid for:
  Income taxes.............................................  $  1,542     $    636     $    215
  Interest expense.........................................  $    298     $     62     $     97
</TABLE>
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
 
                                       F-5
<PAGE>   120
 
                              ROYAL OAK MINES INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     The consolidated financial statements of Royal Oak Mines Inc. (the
"Company"), amalgamated under the laws of Ontario, have been prepared by
management in Canadian dollars in accordance with accounting principles
generally accepted in Canada. In all material respects, these accounting
policies are in conformity with accounting policies generally accepted in the
United States except as disclosed in note 13.
 
Basis of consolidation
 
     The consolidated financial statements include the accounts of the Company
and its subsidiaries. The Company's principal subsidiaries include: Arctic
Precious Metals, Inc., Beaverhouse Resources Ltd., 934962 Ontario Inc. and
Witteck Development Inc. (all 100% owned); Ronnoco Gold Mines Limited (87%
owned).
 
     Joint ventures are accounted for on the proportionate consolidation method.
 
Cash equivalents
 
     The Company defines cash equivalents as highly liquid financial instruments
purchased with a maturity of ninety days or less.
 
Short-term investments
 
     Short-term investments are recorded at the lower of cost or quoted market
value.
 
Inventories
 
     Bullion which is in process but not yet in deliverable form is recorded at
estimated realizable value. Stores and operating supplies are recorded at the
lower of average cost or replacement cost.
 
Property, plant and equipment
 
(i)   Plant and equipment and mining properties are recorded at cost.
 
(ii)  For underground operations, development expenditures incurred to expose
     ore, increase production or extend the life of a mine which is currently in
     production are capitalized.
 
(iii) For open pit operations, mining costs are deferred when the ratio of waste
     tons mined to ore tons mined exceeds the estimated life-of-mine strip
     ratio. These deferred costs are charged to operating costs when the actual
     ratio is below the life-of-mine strip ratio.
 
(iv) Exploration, development and other pre-production expenditures incurred on
     projects under development are capitalized.
 
(v)  Costs relating to the acquisition and exploration of non-producing
     properties on which economically recoverable ore reserves have yet to be
     identified are capitalized. The ultimate recovery of these costs depends
     upon the discovery and development of economic ore reserves or the sale of
     the mineral rights. When it has been established that a mineral property
     has development potential, the exploration costs incurred are reclassified
     to the category of mining properties. If an exploration property is
     abandoned, the capitalized costs for that property are charged to income.
     The amounts shown for non-producing properties do not necessarily reflect
     present or future values.
 
                                       F-6
<PAGE>   121
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
(vi) Depreciation and amortization of plant and equipment, mining properties and
     capitalized expenditures are provided on the unit-of-production method
     based upon estimated total mineral inventory.
 
(vii) Reviews are undertaken regularly to evaluate the carrying values of
     operating mines and development properties. If it is determined that the
     net recoverable amount is significantly less than the carrying value and
     the impairment in value is permanent, a write-down is made with a charge to
     income.
 
Investments in associated companies
 
     Investments in associated companies in which the Company has significant
influence are accounted for by the equity method.
 
Reclamation and site restoration costs
 
     Estimated reclamation and site restoration costs are charged against income
on the unit-of-production method based upon estimated total mineral inventory.
Ongoing reclamation activities are charged against income as incurred.
 
Revenue recognition
 
     Revenue from gold production is recognized when the ore is mined and
processed at the on-site facility. Revenue is subject to adjustment on final
settlement to reflect changes in metal prices, weights and assays.
 
Hedging transactions
 
     Hedging transactions include spot deferred contracts, forward sale
contracts and option contracts. Contracted prices on spot deferred and forward
sales contracts are recognized in revenue as production is delivered against the
commitment. If actual delivery is not made against a particular spot deferred
contract at the time of maturity, losses, if any, are recognized at that time.
 
     Gains arising from the early liquidation of hedges are deferred and are
recognized in revenue when the original contract would have matured.
 
     Net proceeds realized on the sale of options are deferred and are
recognized in revenue on the expiry date for options which expire or are
repurchased, or on the delivery date for options which have been exercised and
for which the settlement of the underlying ounces has been deferred.
 
Income taxes
 
     The Company follows the deferral method of applying the tax allocation
basis of accounting for income taxes. Under this method, timing differences
between the period when income or expenses are reported for tax purposes and the
period when they are recorded for accounting purposes result in provisions or
recoveries of deferred income taxes.
 
Foreign currency translation
 
     Financial statements of the Company's principal United States subsidiary,
Arctic Precious Metals, Inc., are translated into Canadian dollars using the
temporal method. Under this method, monetary assets and liabilities are
translated at the year-end exchange rate and non-monetary assets and liabilities
and operating results are translated at the historical exchange rate prevailing
at the date of the transaction. Gains and losses arising from the translation of
the financial statements are included in the results of operations.
 
                                       F-7
<PAGE>   122
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
Segmented information
 
     The Company operates within one dominant industry segment, gold mining,
carried out in the Northwest Territories, Newfoundland, and Ontario, Canada.
 
Comparative figures
 
     Certain of prior years' amounts have been reclassified to conform with the
current year's presentation.
 
2.   FAIR VALUES OF CERTAIN FINANCIAL INSTRUMENTS
 
     The carrying amount and fair value of the following financial instruments
are:
 
<TABLE>
<CAPTION>
                                                                     DECEMBER 31
                                                     --------------------------------------------
                                                             1995                    1994
                                                     --------------------    --------------------
                                                     CARRYING      FAIR      CARRYING      FAIR
                                                      AMOUNT      VALUE       AMOUNT      VALUE
                                                     --------    --------    --------    --------
<S>                                                  <C>         <C>         <C>         <C>
Cash and cash equivalents.........................   $139,410    $139,410    $148,524    $148,524
Short-term investments............................   $  2,971    $  4,536    $ 30,413    $ 30,594
</TABLE>
 
     The fair value of short-term investments is based on quoted market values.
 
3.   INVENTORIES
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                                           -------------------
                                                                            1995        1994
                                                                           -------     -------
<S>                                                                        <C>         <C>
Bullion in process.....................................................    $18,574     $16,386
Stores and operating supplies..........................................     27,562      19,864
                                                                           -------     -------
                                                                           $46,136     $36,250
                                                                           =======     =======
</TABLE>
 
4.   PROPERTY, PLANT AND EQUIPMENT
 
<TABLE>
<CAPTION>
                                                                                  DECEMBER 31
                                                                              --------------------
                                                                  1995                      1994
                                                   -----------------------------------    --------
                                                                                NET         NET
                                                               ACCUMULATED      BOOK        BOOK
                                                     COST      AMORTIZATION    VALUE       VALUE
                                                   --------    -----------    --------    --------
<S>                                                <C>         <C>            <C>         <C>
Plant and Equipment............................... $ 75,391     $  14,570     $ 60,821    $ 53,500
Mining Properties and Deferred Development........  127,058        22,061      104,997      62,732
Exploration Costs and other Non-producing
  Properties......................................   25,563            --       25,563      21,722
                                                   --------       -------     --------    --------
                                                   $228,012     $  36,631     $191,381    $137,954
                                                   ========       =======     ========    ========
</TABLE>
 
     Mining Properties and Deferred Development includes $20,890,000 (1994 --
$5,898,000) which comprises mining properties that are under development and are
expected to be put into production over the next five years. Depreciation and
amortization of these costs will be provided in the future based on the unit-
of-production method.
 
                                       F-8
<PAGE>   123
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
     The following is a summary of the net book value of the Property, Plant and
Equipment by location:
 
<TABLE>
<CAPTION>
                                                        MINING
                                                      PROPERTIES                        DECEMBER 31
                                        PLANT AND    AND DEFERRED    EXPLORATION    --------------------
                                        EQUIPMENT    DEVELOPMENT      AND OTHER       1995        1994
                                        ---------    ------------    -----------    --------    --------
<S>                                     <C>          <C>             <C>            <C>         <C>
Division
NWT -- Giant.........................    $18,258       $ 17,458        $14,220      $ 49,936    $ 38,384
NWT -- Colomac.......................     15,630         29,692            596        45,918      44,121
Ontario..............................     13,376         39,735          4,106        57,217      33,881
Newfoundland.........................      8,420          9,228          2,049        19,697      18,983
British Columbia.....................        850          8,884            996        10,730          --
U.S..................................      4,287             --          3,596         7,883       2,585
                                         -------       --------        -------      --------    --------
                                         $60,821       $104,997        $25,563      $191,381    $137,954
                                         =======       ========        =======      ========    ========
</TABLE>
 
     During fiscal 1995, the Company acquired 100% of the Red Mountain property
located in northwestern British Columbia for $1. The Company assumed the
environmental liabilities, estimated at $3.0 million, as part of this purchase.
The Company is committed to spend $3.0 million in exploration and development on
the Red Mountain property over three years. The vendor will receive a 1% net
smelter return royalty on all production from the property and on production
over 1.85 million ounces, an additional $10.00 per ounce is payable.
 
5.   LONG-TERM INVESTMENTS
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                                            ------------------
                                                                             1995       1994
                                                                            -------    -------
<S>                                                                         <C>        <C>
Partially-owned companies fully acquired subsequent to year end (note
  14):
  Geddes Resources Limited...............................................   $12,143    $ 9,769
  El Condor Resources Ltd................................................     7,408         --
  St. Philips Resources Inc..............................................     7,331         --
                                                                            -------    -------
                                                                             26,882      9,769
Mountain Minerals Co. Ltd................................................     7,056      6,419
Other....................................................................     2,369      3,082
                                                                            -------    -------
                                                                            $36,307    $19,270
                                                                            =======    =======
</TABLE>
 
     In 1994, Mountain Minerals Co. Ltd. ("Mountain Minerals") issued additional
share capital which reduced the Company's equity interest from 51% to 41%. As a
result of this share issuance by Mountain Minerals, the Company recorded a gain
on dilution of $3,020,000. During 1995, the Company increased its interest in
Mountain Minerals to 45% by way of open market purchases.
 
                                       F-9
<PAGE>   124
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
6.   DEFERRED REVENUE AND OTHER LIABILITIES
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31
                                                                            ------------------
                                                                             1995       1994
                                                                            -------    -------
<S>                                                                         <C>        <C>
Deferred revenue.........................................................   $29,711    $24,118
Provision for loss on foreign currency contracts.........................    10,023     15,267
Accrued reclamation costs................................................     4,852        602
Other....................................................................       737      1,037
                                                                            -------    -------
                                                                             45,323     41,024
Less current portion.....................................................     4,523      1,282
                                                                            -------    -------
                                                                            $40,800    $39,742
                                                                            =======    =======
</TABLE>
 
(a) Deferred Revenue
 
     The following table summarizes the years in which the deferred revenue is
expected to be recorded in income.
 
<TABLE>
<CAPTION>
              YEAR                                                          AMOUNT
              ----------------------------------------------------------    -------
              <S>                                                           <C>
              1996......................................................    $ 4,523
              1997......................................................      7,293
              1998......................................................      7,612
              1999......................................................     10,283
                                                                            -------
                                                                            $29,711
                                                                            =======
</TABLE>
 
(b) Provision for loss on foreign currency contracts
 
     In prior years, to protect the Company from foreign currency fluctuations
and to provide a minimum Canadian dollar conversion rate for its U.S. dollar
gold sales revenue, the Company entered into foreign currency contracts for
conversion into Canadian dollars. These contracts were associated with the
Company's contractual obligation to deliver future gold production at specified
prices in U.S. dollars. At the end of 1995, the Company had contracts to deliver
approximately US$116 million (1994 -- US$119 million) at an average exchange
rate of 1.2806 (1994 -- 1.2744) Cdn $/US$. In 1994, the Company began marking to
market these foreign currency contracts because of the significant weakening of
the Canadian dollar since the time these contracts had first been entered into.
The Company follows a policy of rolling forward these contracts as they mature
and expects to delay delivery of U.S. dollars against these contracts.
 
7.   CAPITAL STOCK
 
(a) Changes in Capital Stock
 
     Authorized: An unlimited number of special shares issuable in series and an
unlimited number of common shares.
 
     Issued, outstanding and fully paid -- special: nil (1994 -- nil)
 
                                      F-10
<PAGE>   125
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
     Issued, outstanding and fully paid -- common:
 
<TABLE>
<CAPTION>
                                                                      NUMBER OF
                                                                        SHARES        AMOUNT
                                                                      ----------     --------
<S>                                                                   <C>            <C>
BALANCE, DECEMBER 31, 1992.........................................   69,946,751     $ 64,355
Issued via special warrants........................................    9,000,000       25,200
Acquisition of Colomac Mine........................................    3,500,000        7,875
Acquisition of gross production royalty on Colomac property........    1,000,000        4,000
Issued via unit offering...........................................    6,000,000       42,000
Exercise of warrants -- Series 1...................................    6,941,393       11,453
Exercise of warrants -- Series 2...................................        5,000           16
Employee gain sharing program......................................       78,102          152
Issued for share purchase options..................................      484,967          600
Share issue costs..................................................                    (3,492)
                                                                      -----------    --------
BALANCE, DECEMBER 31, 1993.........................................   96,956,213      152,159
Issued via public offering.........................................   17,400,000      100,050
Exercise of warrants -- Series 2...................................       19,000           61
Issued for share purchase options..................................      119,534          132
Share issue costs..................................................           --       (5,040)
                                                                      -----------    --------
BALANCE, DECEMBER 31, 1994.........................................   114,494,747     247,362
Exercise of warrants -- Series 2...................................    4,475,300       14,545
Issued for share purchase options..................................      148,667          190
Issued to acquire Witteck Development Inc..........................    1,924,816        8,854
Share issue costs..................................................           --         (140)
                                                                      -----------    --------
BALANCE, DECEMBER 31, 1995
Issued and outstanding.............................................   121,043,530     270,811
Company shares held by Witteck Development Inc. (note 7(b))........   (1,924,816)      (8,854)
                                                                      -----------    --------
Balance, December 31, 1995 for financial reporting purposes........   119,118,714    $261,957
                                                                      ===========    ========
</TABLE>
 
(b) Acquisition of Witteck Development Inc.
 
     During 1995, the Board of Directors and the shareholders approved the
acquisition of all of the shares of Witteck Development Inc. ("Witteck") whose
sole asset is an investment in the Company of 1,924,816 shares. This investment
has been recorded as a reduction of capital stock on the balance sheet.
Consequently, the shares of the Company that are held by Witteck have been
excluded from the determination of earnings per share information.
 
(c) Warrants
 
     During the year, 4,475,300 Series 2 warrants were exercised and converted
into common shares at a price of $3.25 per share.
 
     At December 31, 1995, the Company had 3,000,000 Series 3 warrants
outstanding which were issued in 1993. Each warrant entitles the holder to
purchase one common share of the Company at a price of $8.75 per share until May
30, 1996.
 
                                      F-11
<PAGE>   126
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
(d) Weighted Average Number of Common Shares
 
     Earnings per share has been calculated on the basis of the weighted average
number of common shares outstanding for the year which was 117,900,306 shares
(1994 -- 101,399,347; 1993 -- 84,073,179).
 
(e) Stock Options
 
     The Company grants stock options to employees and directors in recognition
of their service to the Company.
 
     The following table outlines activity with respect to the Company's stock
options:
 
<TABLE>
<CAPTION>
                                                                NUMBER OF SHARES     PRICE PER SHARE
                                                                ----------------     ---------------
<S>                                                             <C>                  <C>
OUTSTANDING, DECEMBER 31, 1992...............................      1,103,834          $0.48 - $2.04
Granted......................................................      1,360,000
Exercised....................................................       (484,967)         $0.48 - $3.95
Cancelled/Expired............................................       (572,500)
                                                                   ---------
OUTSTANDING, DECEMBER 31, 1993...............................      1,406,367          $0.48 - $6.25
Granted......................................................      1,100,000
Exercised....................................................       (119,534)         $0.48 - $2.85
Cancelled/Expired............................................       (166,000)
                                                                   ---------
OUTSTANDING, DECEMBER 31, 1994...............................      2,220,833          $0.48 - $6.25
Granted......................................................        605,000
Exercised....................................................       (148,667)         $0.90 - $2.85
Cancelled/Expired............................................       (215,000)
                                                                   ---------
OUTSTANDING, DECEMBER 31, 1995...............................      2,462,166          $0.48 - $6.25
                                                                   =========
</TABLE>
 
                                      F-12
<PAGE>   127
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
8.   INCOME TAXES
 
     The provisions for income tax are analyzed in the following table to show
the taxes that would be payable by applying statutory tax rates to the Company's
pre-tax earnings, and the taxes actually provided in the accounts:
 
<TABLE>
<CAPTION>
                                                                          DECEMBER 31
                                                                -------------------------------
                                                                 1995        1994        1993
                                                                -------     -------     -------
<S>                                                             <C>         <C>         <C>
Pre-tax income, as reported.................................    $24,754     $22,777     $15,804
Combined statutory tax rates................................        43%         43%         44%
Tax at combined statutory rates.............................    $10,644     $ 9,794     $ 6,954
Adjust for tax effect of:
  Resource allowance........................................       (771)     (3,782)     (2,233)
  Non-taxable portion of capital gains......................       (829)       (547)         --
  Deductible financing costs................................     (1,152)       (860)       (393)
  Other.....................................................         43          --          --
Utilization of previously unrecognized deferred tax assets
  and net adjustment to deferred taxes......................     (7,157)     (4,605)     (4,328)
Foreign earnings subject to different tax rates.............       (117)         --          --
Large corporation capital tax...............................        639         336         215
Corporate minimum tax.......................................        242         300          --
                                                                -------     -------     -------
                                                                $ 1,542     $   636     $   215
                                                                =======     =======     =======
</TABLE>
 
     For income tax purposes, the Company has tax deductions available to be
utilized in future years totalling $167 million. When claimed, a substantial
portion of these tax deductions will result in the creation of deferred income
tax liabilities.
 
     The Company also has $16 million of earned depletion and mining exploration
depletion base carry forward available to be deducted against certain future
resource profits.
 
     Because of reorganizations undertaken by the Company, utilization of tax
deductions and earned depletion base may be restricted.
 
9.   INTEREST AND OTHER INCOME, NET
 
     Interest and other income is comprised of:
 
<TABLE>
<CAPTION>
                                                                           DECEMBER 31
                                                                  -----------------------------
                                                                   1995        1994       1993
                                                                  -------     ------     ------
<S>                                                               <C>         <C>        <C>
Interest income...............................................    $10,640     $4,078     $2,194
Gain on sale of securities....................................      8,309      1,290         19
Other, net....................................................      1,953      1,706         76
                                                                  -------     ------     ------
                                                                  $20,902     $7,074     $2,289
                                                                  =======     ======     ======
</TABLE>
 
10. EMPLOYEE BENEFIT PLANS
 
     The Company has defined benefit and defined contribution pension plans
covering substantially all of its regular full-time employees. Pension benefits
are based, in defined benefit plans, on employees' earnings and
 
                                      F-13
<PAGE>   128
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
years of service. Most of the plans are funded currently by contributions from
the Company, based on periodic actuarial valuations. Contributions to its
defined contribution plan are based on a specific percentage of base earnings.
The market related value of the defined benefit pension plans' assets was
$35,359,000 at December 31, 1995 (1994 -- $32,226,000) and the actuarial present
value of accrued pension benefits was $31,321,000 at December 31, 1995 (1994 --
$30,789,000). The total pension expense for the year was $1,324,000 (1994 --
$1,163,000; 1993 -- $908,000).
 
11. CONTINGENCIES AND COMMITMENTS
 
(a) Legal Claim
 
     On September 18, 1992, nine miners were murdered in an underground
explosion at the Company's Giant Mine. A member of the union which was on strike
at the time was charged and convicted of nine counts of second degree murder. In
September, 1994, dependents of the deceased miners sued the Company and two of
its officers and directors, along with 23 other named defendants including
Procon Miners Inc., Pinkerton's of Canada Limited, the Government of the
Northwest Territories, and National Automobile, Aerospace and Agricultural
Implement Workers Union of Canada, for losses allegedly suffered as a result of
the explosion. The claim against the Company and all defendants but one, totals
approximately $10.8 million plus taxes, interest and costs. The claim against
the two officers and directors and all other defendants, excluding the Company,
totals approximately $33.65 million plus taxes, interest and costs.
 
     The claim is being vigorously defended. Counsel for the Company's insurer
has stated that, based on allegations in the amended Statement of Claim -- being
the only pleading filed to date -- any liability that might be imposed would be
within the Company's liability insurance coverage. The Company believes that the
claim is without merit.
 
(b) Laws and Regulations
 
     The Company's current and proposed mining and exploration activities are
subject to various laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and are
generally becoming more restrictive. The Company conducts its operations so as
to protect its employees, the general public and the environment and believes
its operations are in compliance with all applicable laws and regulations, in
all material respects. The Company has made, and expects to make in the future,
submissions and expenditures to comply with such laws and regulations.
 
     Where estimated reclamation and closure costs are reasonably determinable,
the Company has recorded a provision for environmental liabilities based on
management's estimate of these costs. Such estimates are subject to adjustment
based on changes in laws and regulations and as new information becomes
available.
 
     The Company is from time to time involved in various claims, legal
proceedings and complaints arising in the ordinary course of business. The
Company is also subject to reassessment for income and mining taxes for certain
years. It does not believe that adverse decisions in any potential tax
reassessments or any amount which it may be required to pay by reason thereof
will have a material adverse effect on the financial condition or future results
of operations of the Company.
 
(c) Forward Sales and Hedging Contracts
 
     The Company engages in hedging transactions to minimize the impact of
fluctuations in gold, oil and foreign currency prices.
 
                                      F-14
<PAGE>   129
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
     The credit risk related to hedging activities is limited to the unrealized
gains on outstanding contracts based on current market prices. The Company
believes it has minimized credit risk by dealing with large credit-worthy
institutions and by limiting credit exposure to each.
 
     (i)   At December 31, 1995 the Company had contractual arrangements, in
        U.S. and Canadian dollars, to deliver the following ounces of gold:
 
<TABLE>
<CAPTION>
                                                           GOLD FORWARD SALES    PRICE OF FORWARD SALES
                              YEAR                               (OZ.)                 (PER OZ.)
         -----------------------------------------------   ------------------    ----------------------
         <S>                                               <C>                   <C>
         1996...........................................          39,028             US$385
         1997...........................................         140,000            Cdn $614
         1998...........................................         140,000            Cdn $629
         1999...........................................         140,000            Cdn $654
         2000...........................................              --               --
                                                                 -------
                                                                 459,028
                                                                 =======
</TABLE>
 
     Delivery under these contracts can be deferred at the Company's option for
up to five years depending on the individual contract.
 
     (ii)  The Company's call option position as at December 31, 1995 was as
        follows:
 
<TABLE>
<CAPTION>
                                                                        GOLD CALL
                                                                       OPTIONS SOLD    STRIKE PRICE
                                    YEAR                                  (OZ.)         (PER OZ.)
         -----------------------------------------------------------   ------------    ------------
         <S>                                                           <C>             <C>
         1996.......................................................      305,000        US$410
         1997.......................................................      187,792       Cdn $624
         1998.......................................................      200,000       Cdn $639
         1999.......................................................      200,000       Cdn $664
         2000.......................................................           --          --
                                                                          -------
                                                                          892,792
                                                                          =======
</TABLE>
 
     If called, the Company has the ability to delay delivery of these ounces by
entering into fixed forward or spot deferred contracts originating with the same
number of ounces and strike prices as in the exercised option.
 
     (iii) At December 31, 1995, the Company's obligations to sell U.S. dollars
        were as follows:
 
<TABLE>
<CAPTION>
                                                                 EXCHANGE
                                                U.S. DOLLARS     RATE (CDN     CARRYING      FAIR
                         YEAR                     (000'S)         $/US$)        AMOUNT      VALUE
         ------------------------------------   ------------    -----------    --------    --------
         <S>                                    <C>             <C>            <C>         <C>
         1996................................    US$ 106,229       1.2807      $ (9,190)   $ (9,190)
         1997................................    US$   9,636       1.2801          (833)       (833)
         1998-2000...........................             --           --            --          --
                                                  ----------       ------      --------    --------
                                                 US$ 115,865       1.2806      $(10,023)   $(10,023)
                                                  ==========       ======      ========    ========
</TABLE>
 
                                      F-15
<PAGE>   130
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
     The Company marks to market these contracts based on the applicable
exchange rate at the date of the balance sheet. See note 6(b).
 
     (iv) At December 31, 1995 the Company had oil swap agreements to hedge the
        cost of Western Texas Intermediate ("WTI") crude oil to be used for the
        operations of the Colomac Mine. These agreements call for settlement as
        follows:
 
<TABLE>
<CAPTION>
                             YEAR                         BARRELS OF WTI PURCHASED     PRICE PER BARREL
         ---------------------------------------------    ------------------------     ----------------
         <S>                                              <C>                          <C>
         1996.........................................             200,000                 US$17.40
         1997.........................................             200,000                 US$16.85
         1998-2000....................................                  --                       --
                                                                   -------
                                                                   400,000
                                                                   =======
</TABLE>
 
(d) Operating Royalties
 
     (i)   Under the terms of the Hope Brook Mine Asset Purchase Agreement, the
        Company is obligated to pay an operating royalty when the average price
        of gold exceeds US$380 per ounce. Amounts payable vary between
        $1,300,000 and $3,300,000 annually depending on the average price of
        gold. In respect of 1995, the Company was obligated to pay $1,300,000
        (1994 -- $1,300,000; 1993 -- nil). Obligations under this agreement
        expire in 1996.
 
     (ii)  Under the terms of the Colomac Mine Asset Purchase Agreement, the
        Company is obligated to pay an operating royalty when the average price
        of gold exceeds US$400 per ounce. Amounts payable vary between $1.0
        million and $2.0 million annually depending on the average price of
        gold. In respect of 1995, no amount was payable under this royalty (1994
        -- nil; 1993 -- nil). Obligations under this agreement are expected to
        expire in 1999.
 
12. NET CHANGE IN NON-CASH WORKING CAPITAL
 
<TABLE>
<CAPTION>
                                                                         DECEMBER 31
                                                               --------------------------------
                                                                1995         1994        1993
                                                               -------     --------     -------
<S>                                                            <C>         <C>          <C>
Cash provided by (used for):
  Receivables..............................................    $  (296)    $ (3,905)    $ 2,973
  Inventories..............................................     (9,886)     (17,530)     (6,862)
  Prepaid expenses.........................................       (799)      (1,533)       (427)
  Accounts payable.........................................        986       (1,498)      2,922
  Accrued payroll costs....................................       (383)       1,717         (63)
  Income taxes payable.....................................        935          802        (115)
  Other current liabilities................................      1,855       12,071           1
  Mountain Minerals deconsolidation........................         --          (38)         --
                                                               -------      -------     -------
                                                               $(7,588)    $ (9,914)    $(1,571)
                                                               =======      =======     =======
</TABLE>
 
                                      F-16
<PAGE>   131
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
13. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
 
     Reconciliation of net income in accordance with Canadian generally accepted
accounting principles ("Canadian GAAP") to net income in accordance with United
States generally accepted accounting principles ("U.S. GAAP") is as follows:
 
<TABLE>
<CAPTION>
                                                                           DECEMBER 31
                                                                  -----------------------------
                                                                   1995       1994       1993
                                                                  -------    -------    -------
<S>                                                               <C>        <C>        <C>
Net income in accordance with Canadian GAAP....................   $23,169    $22,166    $15,623
Decrease:
  Depreciation and amortization................................    (5,633)    (2,188)    (1,683)
  Employee benefit plans.......................................      (359)        --         --
                                                                  -------    -------    -------
Net income in accordance with U.S. GAAP........................   $17,177    $19,978    $13,940
                                                                  =======    =======    =======
Earnings per share in accordance with U.S. GAAP:
  Primary earnings.............................................   $  0.15    $  0.19    $  0.17
  Fully diluted earnings.......................................   $  0.15    $  0.19    $  0.16
</TABLE>
 
     The effects on the balance sheets of the Company at December 31, prepared
in accordance with U.S. GAAP, are:
 
<TABLE>
<CAPTION>
                                                                            DECEMBER 31
                                                                    ---------------------------
                                                                     1995       1994      1993
                                                                    -------    ------    ------
<S>                                                                 <C>        <C>       <C>
Decrease:
  Property, plant and equipment..................................   $11,794    $6,161    $3,973
  Prepaid expenses (pension asset)...............................       359        --        --
                                                                    -------    ------    ------
  Retained earnings..............................................   $12,153    $6,161    $3,973
                                                                    =======    ======    ======
</TABLE>
 
(a) Depreciation and Amortization
 
     Under U.S. GAAP, depreciation and amortization are calculated on the
unit-of-production method based upon proven and probable reserves, whereas under
Canadian GAAP, total mineral inventory may be used in the calculations.
 
(b) Employee Benefit Plans
 
     Under U.S. GAAP, for defined benefit pension plans, the projected benefit
obligation should be discounted using interest rates at which the obligation
could be effectively settled whereas under Canadian GAAP, the projected benefit
obligation may be discounted using interest rates which are consistent with
long-term assumptions. Also, under U.S. GAAP, experience gains and losses as
well as adjustments arising from changes in assumptions must be amortized only
if it exceeds a specified range. Under Canadian GAAP, these amounts must be
amortized over the expected average remaining service life of the employee group
regardless of the amount.
 
     Pension expense is determined each year based on actuarial recommendations.
The actuarial assumptions applied in determining the expense in accordance with
U.S. GAAP include a discount rate on the benefit obligation, rate of
compensation increases and long-term rate of return on the plan assets of 8.5%,
7.0% and 8.5%, respectively. Assets of the plans are held in a range of
investments, which include fixed-income securities, equities and money market
securities. At January 1, 1987, as a result of an actuarial valuation of the
plans, a surplus was identified which is being amortized over the estimated
average remaining service lives of the employees (EARSL) which, for the
Company's defined benefit pension plans, ranges from 12 to 18 years.
 
                                      F-17
<PAGE>   132
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
     The components of pension expense, for the Company's defined benefit
pension plans, calculated in accordance with U.S. GAAP are as follows:
 
<TABLE>
<CAPTION>
                                                                           DECEMBER 31
                                                                  -----------------------------
                                                                   1995       1994       1993
                                                                  -------    -------    -------
<S>                                                               <C>        <C>        <C>
Service cost -- benefits earned during the year................   $ 1,374    $ 1,292    $   944
Interest cost on projected benefit obligation..................     2,541      2,445      2,267
Return on assets...............................................    (4,999)      (169)    (2,448)
Other..........................................................     2,575     (2,586)       (92)
                                                                  -------    -------    -------
                                                                  $ 1,491    $   982    $   671
                                                                  =======    =======    =======
</TABLE>
 
     The funded status and differences between amounts expensed and amounts
funded calculated under U.S. GAAP for the Company's defined benefit pension
plans are as follows:
 
<TABLE>
<CAPTION>
                                                                           DECEMBER 31
                                                -----------------------------------------------------------------
                                                             1995                              1994
                                                -------------------------------   -------------------------------
                                                 PLANS WHERE      PLAN WHERE       PLANS WHERE      PLAN WHERE
                                                ASSETS EXCEED     ACCUMULATED     ASSETS EXCEED     ACCUMULATED
                                                 ACCUMULATED    BENEFITS EXCEED    ACCUMULATED    BENEFITS EXCEED
                                                  BENEFITS          ASSETS          BENEFITS          ASSETS
                                                -------------   ---------------   -------------   ---------------
<S>                                             <C>             <C>               <C>             <C>
Plans' assets at market value..................    $29,912          $ 8,743          $27,070          $ 7,657
                                                   -------           ------          -------           ------
Projected benefits based on:
  Employment service to date and present pay
     levels
     Vested....................................     20,144            8,787           18,731            8,323
     Non-vested................................         68               42              983               40
  Additional amount related to compensation
     increases.................................      3,246               --            2,712               --
                                                   -------           ------          -------           ------
Projected benefit obligations..................     23,458            8,829           22,426            8,363
                                                   -------           ------          -------           ------
Plans' assets in excess of (less than)
  projected benefit obligations................      6,454              (86)           4,644             (706)
Unamortized January 1, 1987 surplus, net.......     (1,932)            (774)          (2,148)            (863)
Unamortized net experience (gains) losses......     (3,055)           1,029           (1,243)           1,320
Unamortized prior service cost.................         --            1,408               --            1,515
                                                   -------           ------          -------           ------
                                                   $ 1,467          $ 1,577          $ 1,253          $ 1,266
                                                   =======           ======          =======           ======
Difference between amounts charged to
  operations and amounts funded................             $3,044                            $2,519
                                                            -------                           -------
                                                            -------                           -------
</TABLE>
 
     In addition to the defined benefit pension plans noted above, the Company
maintains a defined contribution pension plan for certain of its hourly
employees. Under this plan, the Company contributes 2.5% of each member's base
earnings to the pension plan. The pension expense for the year under this
pension plan was $192,000 (1994 -- $181,000; 1993 -- $237,000).
 
                                      F-18
<PAGE>   133
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
(c) Income Taxes
 
     In accordance with the Financial Accounting Standards Board Statement No.
109 ("SFAS 109"), U.S. GAAP requires that income taxes be accounted for by the
liability method. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial statement reporting and
the tax bases of the assets and liabilities and are measured at the enacted tax
rates that will be in effect when the differences are expected to reverse. Such
differences principally arise from the timing of income and expense recognition
for accounting and tax purposes. The application of SFAS 109 would have no
material effect on the assets, liabilities or operations for the years presented
in these consolidated financial statements as additional deferred tax assets
arising from the table of reconciling items have been offset by the recording of
an additional valuation allowance. The following additional disclosures with
respect to income taxes are required by U.S. GAAP:
 
<TABLE>
<CAPTION>
                                                                          DECEMBER 31
                                                                -------------------------------
                                                                 1995        1994        1993
                                                                -------     -------     -------
<S>                                                             <C>         <C>         <C>
Deferred Tax Liabilities:
  Exploration expenditures...................................   $ 4,643     $ 5,519     $ 5,985
  Mining properties and deferred development.................     6,979         941        (835)
  Pension asset..............................................       985         997         957
  Investments................................................     1,057       1,057          --
  Other......................................................        --          58          --
                                                                -------     -------     -------
                                                                $13,664     $ 8,572     $ 6,107
                                                                =======     =======     =======
Deferred Tax Assets:
  Provision for loss on foreign currency contracts...........   $ 3,567     $ 5,343     $    --
  Operating losses...........................................        --          --       1,043
  Property, plant and equipment..............................     7,670       6,126      10,569
  Accrued reclamation costs..................................       648         163          49
  Other......................................................     1,030         571         595
  Valuation allowance........................................    (2,134)     (4,838)     (9,034)
                                                                -------     -------     -------
                                                                $10,781     $ 7,365     $ 3,222
                                                                =======     =======     =======
</TABLE>
 
     The net change in the valuation allowance from 1994 to 1995 was a decrease
of $2,704,000. The Company decreased its beginning-of-the-year balance of the
valuation allowance by approximately $3,063,000 to reflect changes in
circumstances.
 
14. SUBSEQUENT ACQUISITIONS
 
(a) Acquisition of Geddes Resources Limited, El Condor Resources Ltd. and St.
Philips Resources Inc.
 
     On January 11, 1996, the Company acquired all of the outstanding shares of
Geddes Resources Limited ("Geddes"), El Condor Resources Ltd. ("El Condor") and
St. Philips Resources Inc. ("St. Philips") not already owned by the Company
pursuant to a series of signed agreements (the "Plan of Arrangement") on the
following terms:
 
Geddes:         0.30 shares of the Company for each share of Geddes.
 
El Condor:      0.95 shares of the Company plus $2.00 cash for each share of El
Condor.
 
St. Philips:     $3.40 cash for each share of St. Philips.
 
                                      F-19
<PAGE>   134
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
     The Company issued 19,011,883 common shares and paid approximately $56
million in cash pursuant to the Plan of Arrangement. The January 11, 1996
closing price on the Toronto Stock Exchange for the Company's common shares was
$6.00. This price was used to value the common shares issued under the Plan of
Arrangement.
 
     The following outlines the details of the purchase price and its allocation
to the assets and liabilities acquired:
 
<TABLE>
<CAPTION>
                                                      GEDDES     EL CONDOR    ST. PHILIPS     TOTAL
                                                      -------    ---------    -----------    --------
<S>                                                   <C>        <C>          <C>            <C>
Purchase price:
  Cash paid, including open market purchases.......   $ 3,220    $  34,222      $38,562      $ 76,004
  Issue of common shares...........................    37,650       76,421           --       114,071
                                                      -------     --------      -------      --------
                                                      $40,870    $ 110,643      $38,562      $190,075
                                                      =======     ========      =======      ========
Allocated to:
  Cash and cash equivalents........................   $   561    $       1      $   378      $    940
  Property, plant and equipment....................    40,619      111,407       38,336       190,362
  Other assets.....................................        31          151            9           191
  Total liabilities................................      (341)        (916)        (161)       (1,418)
                                                      -------     --------      -------      --------
                                                      $40,870    $ 110,643      $38,562      $190,075
                                                      =======     ========      =======      ========
</TABLE>
 
     The Company incurred transaction and other costs totaling $3,649,000. In
May 1993, the Company had purchased an approximate 39% interest in Geddes. See
note 5 for the year-end carrying amount. These transaction and other costs
together with the carrying amount of the initial purchase of Geddes have been
allocated to property, plant and equipment.
 
     The following is a condensed consolidated balance sheet of the Company as
at January 11, 1996, after giving effect to the acquisitions:
 
<TABLE>
<CAPTION>
                                                                       JANUARY 11,    DECEMBER 31,
                                                                          1996            1995
                                                                       -----------    ------------
<S>                                                                    <C>            <C>
Cash and cash equivalents...........................................    $  79,982       $139,410
Other current assets................................................       62,057         61,865
                                                                         --------       --------
                                                                          142,039        201,275
Property, plant and equipment.......................................      394,583        191,381
Long-term investments...............................................        9,445         36,307
                                                                         --------       --------
                                                                          546,067        428,963
                                                                         ========       ========
Current liabilities.................................................    $  43,852       $ 42,434
Long-term liabilities and other.....................................       47,649         46,034
                                                                         --------       --------
                                                                           91,501         88,468
Capital stock
  (Outstanding: January 11, 1996 -- 138,130,597)....................      376,028        261,957
Retained earnings(a)................................................       78,538         78,538
                                                                         --------       --------
                                                                        $ 546,067       $428,963
                                                                         ========       ========
</TABLE>
 
                                      F-20
<PAGE>   135
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
(a) Income for the interim period has been ignored for the purposes of this
comparative balance sheet.
 
     These acquisitions were linked to the resolution of the claim for
compensation from the Government of British Columbia (the "B.C. Government")
which, in 1993, appropriated the Windy Craggy property from Geddes and declared
the area a provincial park. Under the terms of an agreement among the B.C.
Government, the Company and Geddes, the B.C. Government has agreed to an
economic assistance package and compensation valued at $166 million. The
majority of these funds are payable to the Company over the next three years.
 
(b) Offer to Purchase Consolidated Professor Mines Limited
 
     On February 5, 1996, the Company made a public offer to purchase all of the
outstanding common shares of Consolidated Professor Mines Limited ("Consolidated
Professor") at a cash price of $0.80 per share for a total purchase price of
approximately $16 million. On February 27, 1996 the Company acquired 16,135,891
common shares of Consolidated Professor representing 81.2% of the outstanding
common shares and extended its offer to purchase all of the common shares until
March 29, 1996.
 
                                      F-21
<PAGE>   136
 
                              ROYAL OAK MINES INC.
 
                          CONSOLIDATED BALANCE SHEETS
                            (unaudited -- Cdn$ 000s)
 
<TABLE>
<CAPTION>
                                                                        JUNE 30,    DECEMBER 31,
                                                                          1996          1995
                                                                        --------    ------------
<S>                                                                     <C>         <C>
                                             ASSETS
Current Assets
  Cash and cash equivalents..........................................   $ 14,797      $139,410
  Short-term investments.............................................     24,886         2,971
  Receivables........................................................      7,505         7,138
  Inventories (note 4)...............................................     72,829        46,136
  Prepaid expenses...................................................      8,525         5,620
                                                                        --------      --------
     Total Current Assets............................................    128,542       201,275
Property, Plant and Equipment, net...................................    435,690       191,381
Long-term Investments................................................     15,886        36,307
                                                                        --------      --------
TOTAL ASSETS.........................................................   $580,118      $428,963
                                                                        ========      ========
                                          LIABILITIES
Current Liabilities
  Accounts payable...................................................   $  9,585      $ 13,640
  Accrued payroll....................................................      3,870         5,267
  Current portion of deferred revenue................................     16,491         4,523
  Income taxes payable...............................................      3,751         3,350
  Other current liabilities..........................................     23,537        15,654
                                                                        --------      --------
     Total Current Liabilities.......................................     57,234        42,434
Deferred Revenue.....................................................     38,318        25,188
Other Liabilities....................................................     17,397        15,612
Deferred Income Taxes................................................      7,070         5,064
Minority Interest in Subsidiary Companies............................        140           170
                                                                        --------      --------
TOTAL LIABILITIES....................................................    120,159        88,468
                                                                        --------      --------
                                      SHAREHOLDERS' EQUITY
Capital Stock (note 11)
  Common stock
     Authorized -- unlimited
     Outstanding -- 138,218,430 (Dec. 31, 1995 -- 119,118,714).......    376,316       261,957
Retained Earnings....................................................     83,643        78,538
                                                                        --------      --------
TOTAL SHAREHOLDERS' EQUITY...........................................    459,959       340,495
                                                                        --------      --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...........................   $580,118      $428,963
                                                                        ========      ========
</TABLE>
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
 
                                      F-22
<PAGE>   137
 
                              ROYAL OAK MINES INC.
 
            CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
               (unaudited -- Cdn$ 000s except per share amounts)
 
<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED       SIX MONTHS ENDED
                                                            JUNE 30                JUNE 30
                                                      -------------------    --------------------
                                                        1996       1995        1996        1995
                                                      --------    -------    --------    --------
<S>                                                   <C>         <C>        <C>         <C>
REVENUE............................................   $ 54,797    $53,453    $105,846    $100,839
                                                       -------    -------    --------    --------
EXPENSES
  Operating........................................     39,354     45,650      81,383      89,714
  Royalties and marketing..........................        846        889       1,408       1,108
  Administrative and corporate.....................      2,712      3,323       4,861       4,945
  Depreciation and amortization....................      6,131      2,988      11,366       6,270
  Exploration......................................      1,449        141       2,409         254
  Recovery of loss on foreign currency contracts...       (209)    (3,772)       (976)     (3,772)
                                                       -------    -------    --------    --------
     Total operating expenses......................     50,283     49,219     100,451      98,519
                                                       -------    -------    --------    --------
OPERATING INCOME...................................      4,514      4,234       5,395       2,320
Interest and other income, net (note 3)............      1,119      6,357       2,462      12,135
                                                       -------    -------    --------    --------
NET INCOME BEFORE UNDERNOTED.......................      5,633     10,591       7,857      14,455
  Income and mining taxes -- current...............       (368)      (653)       (723)       (969)
  Income and mining taxes -- deferred..............     (1,466)        --      (2,006)         --
  Minority interest................................        (80)         9         (53)          9
  Equity in income (loss) of associated
     companies.....................................         30       (199)         30        (244)
                                                       -------    -------    --------    --------
NET INCOME.........................................      3,749      9,748       5,105      13,251
RETAINED EARNINGS -- BEGINNING OF PERIOD...........     79,894     58,872      78,538      55,369
                                                       -------    -------    --------    --------
RETAINED EARNINGS -- END OF PERIOD.................   $ 83,643    $68,620    $ 83,643    $ 68,620
                                                       =======    =======    ========    ========
EARNINGS PER SHARE.................................      $0.03      $0.08       $0.04       $0.11
                                                       =======    =======    ========    ========
Weighted average number of common shares
  outstanding (000s)...............................    138,196    119,021     135,006     116,754
                                                       =======    =======    ========    ========
</TABLE>
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
 
                                      F-23
<PAGE>   138
 
                              ROYAL OAK MINES INC.
 
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                            (unaudited -- Cdn$ 000s)
 
<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED       SIX MONTHS ENDED
                                                          JUNE 30                  JUNE 30
                                                    --------------------    ---------------------
                                                      1996        1995        1996         1995
                                                    --------    --------    ---------    --------
<S>                                                 <C>         <C>         <C>          <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
  Consolidated net income for the period..........  $  3,749    $  9,748    $   5,105    $ 13,251
  Items not affecting cash:
     Depreciation and amortization................     6,131       2,988       11,366       6,270
     Deferred income tax..........................     1,466          --        2,006          --
     Recovery of loss on foreign currency
       contracts..................................      (209)     (3,772)        (976)     (3,772)
     Other........................................        51         596          169         235
                                                    --------    --------    ---------    --------
CASH FLOW.........................................    11,188       9,560       17,670      15,984
Net change in non-cash working capital (note 5)...   (10,999)     (3,265)     (27,132)     (8,302)
                                                    --------    --------    ---------    --------
Net cash provided by (used in) operating
  activities......................................       189       6,295       (9,462)      7,682
                                                    --------    --------    ---------    --------
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
  Increase in deferred revenue, net...............    19,112       2,267       25,097       6,692
  Issue of common shares (note 11)................       359          69      114,359      14,575
  Other...........................................       994         (74)       2,424        (146)
                                                    --------    --------    ---------    --------
Net cash provided by financing activities.........    20,465       2,262      141,880      21,121
                                                    --------    --------    ---------    --------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
  Investment in Kemess capital assets through
     purchase of companies (note 8)...............        --          --     (201,976)         --
  Decrease in long-term investments (note 8)......        --          --       26,882          --
  Investment in capital assets through purchase of
     Consolidated Professor Mines Limited (note
     9)...........................................    (2,592)         --      (15,844)         --
  Investment in other capital assets, net.........   (12,788)     (9,591)     (32,216)    (17,288)
  Investment in exploration and non-producing
     properties, net..............................    (3,626)     (3,432)      (5,692)     (5,655)
  Change in other assets..........................    (3,027)     (1,364)      (6,270)     (1,684)
                                                    --------    --------    ---------    --------
Net cash used in investing activities.............   (22,033)    (14,387)    (235,116)    (24,627)
                                                    --------    --------    ---------    --------
INCREASE (DECREASE) IN CASH AND SHORT-TERM
  INVESTMENTS DURING PERIOD.......................    (1,379)     (5,830)    (102,698)      4,176
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF
  PERIOD..........................................    41,062     188,943      142,381     178,937
                                                    --------    --------    ---------    --------
CASH AND SHORT-TERM INVESTMENTS AT END OF
  PERIOD..........................................  $ 39,683    $183,113    $  39,683    $183,113
                                                    ========    ========    =========    ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
     Interest.....................................       $47         $44          $86         $96
     Income taxes.................................      $175        $110         $530        $426
</TABLE>
 
Cash consists of cash and short-term investments.
 
   The accompanying notes are an integral part of the Consolidated Financial
                                  Statements.
 
                                      F-24
<PAGE>   139
 
                              ROYAL OAK MINES INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (unaudited)
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
1.   INTERIM FINANCIAL STATEMENTS ACCOUNTING POLICIES
 
     The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with Canadian generally accepted accounting
principles ("Canadian GAAP") which, in the case of Royal Oak Mines Inc. (the
"Company"), differ in certain material respects from United States generally
accepted accounting principles ("U.S. GAAP"), as described in Note 7. Also, such
statements do not include all of the disclosures required by generally accepted
accounting principles for annual statements. In the opinion of management all
adjustments considered necessary for fair presentation have been included in
these statements. Operating results for the three and six months ended June 30,
1996, are not necessarily indicative of the results that may be expected for the
full year ending December 31, 1996. For further information, see the Company's
Consolidated Financial Statements, including the accounting policies and notes
thereto, included in the Annual Report to Shareholders and Annual Report on Form
10-K for the year ended December 31, 1995.
 
     The calculations of net earnings per share are based upon the weighted
average number of common shares of the Company outstanding during each period
(except as set forth in Note 11(b)). When outstanding convertible instruments
materially dilute earnings per share, fully diluted earnings per share are
disclosed.
 
2.   PRESENTATION
 
     Certain amounts for 1995 have been reclassified to conform with the current
year's presentation.
 
3.   INTEREST AND OTHER INCOME, NET
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS      SIX MONTHS ENDED
                                                             ENDED JUNE 30           JUNE 30
                                                            ----------------    -----------------
                                                             1996      1995      1996      1995
                                                            ------    ------    ------    -------
<S>                                                         <C>       <C>       <C>       <C>
Interest income..........................................   $  336    $2,470    $1,360    $ 4,988
Gain on sale of securities and other.....................      783     3,887     1,102      7,147
                                                            ------    ------    ------    -------
Interest and other income, net...........................   $1,119    $6,357    $2,462    $12,135
                                                            ======    ======    ======    =======
</TABLE>
 
4.   INVENTORIES
 
<TABLE>
<CAPTION>
                                                                         JUNE 30,   DECEMBER 31,
                                                                          1996          1995
                                                                         -------    -----------
<S>                                                                      <C>        <C>
Bullion in process....................................................   $20,879      $ 18,574
Stores and operating supplies.........................................    51,950        27,562
                                                                         -------
Inventories...........................................................   $72,829      $ 46,136
                                                                         =======    ===========
</TABLE>
 
     The increase in stores and operating supplies resulted from the need to
bring in up to one year's supply of operating and maintenance materials over a
winter road to the Colomac mine site during the first quarter. Due to the remote
nature of the Colomac mine, the most effective way to manage the stores and
operating supplies inventory is to transport them over a winter ice road from
January to March. The freight costs associated with this inventory have been
included in the cost of the inventory and will be charged to operations
throughout the year as the inventory is utilized.
 
                                      F-25
<PAGE>   140
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (unaudited)
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
5.   NET CHANGE IN NON-CASH WORKING CAPITAL
 
<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED       SIX MONTHS ENDED
                                                           JUNE 30                 JUNE 30
                                                     --------------------    --------------------
                                                       1996        1995        1996        1995
                                                     --------    --------    --------    --------
<S>                                                  <C>         <C>         <C>         <C>
Cash provided by (used in):
  Receivables.....................................   $    (96)   $  1,763    $   (366)   $  1,727
  Inventories.....................................      1,733      10,368     (26,693)    (14,670)
  Prepaid expenses................................     (2,059)     (1,198)     (2,904)     (1,819)
  Accounts payable, accrued payroll and other
     current liabilities..........................    (10,815)    (15,461)      2,431       5,410
  Income taxes payable............................        238       1,263         400       1,050
                                                     --------    --------    --------    --------
Net change in non-cash working capital............   $(10,999)   $ (3,265)   $(27,132)   $ (8,302)
                                                     ========    ========    ========    ========
</TABLE>
 
6.   RECLAMATION AND ENVIRONMENTAL REMEDIATION
 
     The Company's current and proposed mining and exploration activities are
subject to various laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and are
generally becoming more restrictive. The Company conducts its operations so as
to protect its employees, the general public and the environment and believes
its operations are in compliance with all applicable laws and regulations, in
all material respects. The Company has, and expects to in the future, comply
with such laws and regulations, including making all required expenditures.
 
     Where estimated reclamation and closure costs are reasonably determinable,
the Company has recorded a provision for environmental liabilities, using the
unit-of-production method, based on management's estimate of these costs. Such
estimates are subject to adjustment based on changes in laws and regulations and
as new information becomes available.
 
7.   RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
 
     Reconciliation of net income in accordance with Canadian GAAP to net income
in accordance with U.S. GAAP is as follows:
 
<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED     SIX MONTHS ENDED
                                                              JUNE 30               JUNE 30
                                                         ------------------    ------------------
                                                          1996       1995       1996       1995
                                                         -------    -------    -------    -------
<S>                                                      <C>        <C>        <C>        <C>
Net income in accordance with Canadian GAAP...........   $ 3,749    $ 9,748    $ 5,105    $13,251
Adjustments:
  Depreciation and amortization.......................    (1,517)    (2,547)    (2,233)    (3,489)
  Income taxes........................................       531         --        782         --
                                                         -------    -------    -------    -------
Net income in accordance with U.S. GAAP...............   $ 2,763    $ 7,201    $ 3,654    $ 9,762
                                                         =======    =======    =======    =======
Earnings per share in accordance with U.S. GAAP.......   $  0.02    $  0.06    $  0.03    $  0.08
                                                         =======    =======    =======    =======
</TABLE>
 
                                      F-26
<PAGE>   141
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (unaudited)
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
     The effects on the balance sheets of the Company at June 30, prepared in
accordance with U.S. GAAP, are:
 
<TABLE>
<CAPTION>
                                                                                JUNE 30
                                                                          --------------------
                                                                            1996        1995
                                                                          --------     -------
<S>                                                                       <C>          <C>
Increase (decrease):
  Property, plant and equipment........................................   $ 66,877     $(9,650)
  Prepaid expenses (pension asset).....................................   $   (359)         --
  Deferred income taxes................................................   $ 80,122          --
  Retained earnings....................................................   $(13,604)    $(9,650)
</TABLE>
 
     Statement of Financial Accounting Standards No. 109 requires that a
deferred tax liability be recognized for differences between the assigned values
and the tax bases of the assets and liabilities recognized in a business
combination involving a purchase of stock. Canadian GAAP does not require
similar recognition. Accordingly, during the six months ended June 30, 1996, a
difference between U.S. GAAP and Canadian GAAP arose for the deferred tax
liabilities associated with the excess of the assigned values and the tax bases
of assets acquired in the acquisition of Geddes Resources Limited ("Geddes"), El
Condor Resources Ltd. ("El Condor"), St. Philips Resources Inc. ("St. Philips")
and Consolidated Professor Mines Limited ("Consolidated Professor"). The effect
of these differences is to increase property, plant and equipment and deferred
income taxes by $80.9 million as of June 30, 1996.
 
8.   ACQUISITION OF GEDDES RESOURCES LIMITED, EL CONDOR RESOURCES LTD. AND ST.
PHILIPS RESOURCES INC.
 
     On January 11, 1996, the Company acquired all of the outstanding shares of
Geddes, El Condor and St. Philips not already owned by the Company pursuant to
an agreement (the "Plan of Arrangement") on the following terms:
 
<TABLE>
<S>             <C>
Geddes:         0.30 shares of the Company for each share of Geddes.
El Condor:      0.95 shares of the Company plus $2.00 cash for each share of El Condor.
St. Philips:    $3.40 cash for each share of St. Philips.
</TABLE>
 
     As a result of these transactions, the Company issued 19,011,883 common
shares of the Company and paid approximately $56 million in cash pursuant to the
Plan of Arrangement. The January 11, 1996 closing price on The Toronto Stock
Exchange for the Company's common shares was $6.00. This price was used to value
the common shares issued under the Plan of Arrangement. At the time of
acquisition, St. Philips, with its wholly owned subsidiary, and El Condor
jointly owned the Kemess South property. El Condor owned 100% of the Kemess
North property.
 
     As at December 31, 1995, the Company's investment in Geddes, El Condor and
St. Philips amounted to approximately $26.9 million and was included in
long-term investments.
 
                                      F-27
<PAGE>   142
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (unaudited)
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
     The following outlines the details of the purchase price and its allocation
to the assets and liabilities acquired:
 
<TABLE>
<CAPTION>
                                                      GEDDES     EL CONDOR    ST. PHILIPS     TOTAL
                                                      -------    ---------    -----------    --------
<S>                                                   <C>        <C>          <C>            <C>
Purchase price:
  Cash paid, including open market purchases.......   $ 3,220    $  34,222      $38,562      $ 76,004
  Issue of common shares...........................    37,650       76,421           --       114,071
                                                      -------     --------      -------      --------
                                                       40,870      110,643       38,562       190,075
  Initial carrying value of Geddes.................     9,192           --           --         9,192
  Transaction and other costs......................     2,290          680          679         3,649
                                                      -------     --------      -------      --------
                                                       52,352      111,323       39,241       202,916
  Cash and cash equivalents acquired from
     companies.....................................      (561)          (1)        (378)         (940)
                                                      -------     --------      -------      --------
Total..............................................   $51,791    $ 111,322      $38,863      $201,976
                                                      =======     ========      =======      ========
Allocated to:
  Property, plant and equipment....................   $52,101    $ 112,087      $39,015      $203,203
  Other assets.....................................        31          151            9           191
  Total liabilities................................      (341)        (916)        (161)       (1,418)
                                                      -------     --------      -------      --------
Total..............................................   $51,791    $ 111,322      $38,863      $201,976
                                                      =======     ========      =======      ========
</TABLE>
 
     These transactions were linked to the resolution of the claim by Geddes for
compensation from the Government of British Columbia (the "B.C. Government")
which, in 1993, declared the area, including the Windy Craggy property, a
provincial park. Under the terms of an agreement among the B.C. Government, the
Company and Geddes, the B.C. Government has agreed to an economic assistance and
investment package and to compensation valued, in the aggregate, at up to $166
million. The majority of these funds are payable to the Company over the next
three years.
 
     The following shows pro forma what the results of operations would have
been if the acquisition had occurred at the beginning of the period:
 
<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED
                                                                               JUNE 30
                                                                        ----------------------
                                                                          1996          1995
                                                                        --------      --------
<S>                                                                     <C>           <C>
Revenue..............................................................   $105,846      $100,839
Net income...........................................................   $  5,105      $ 10,976
Earnings per share -- basic..........................................   $   0.04      $   0.08
Earnings per share -- fully diluted..................................   $   0.04      $   0.08
</TABLE>
 
     On April 29, 1996, the Project Approval Certificate (formerly known as the
Mine Development Certificate) for the Kemess South project was received from the
B.C. Government following resolution of provincial environmental assessment
matters. Federal approval under the Environmental Assessment Act (Canada) and
the Fisheries Act (Canada) is expected shortly and will facilitate completion of
all infrastructure impacting on viable lakes and streams in the project area.
The Kemess South gold-copper project in north central British Columbia is
scheduled to commence production in the first half of 1998. The mineable ore
reserves at year-end 1995 at Kemess South contained approximately 4.1 million
ounces of gold and one billion pounds of copper.
 
                                      F-28
<PAGE>   143
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (unaudited)
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
     The Company is proceeding with the development and construction of the
Kemess South project. Engineering on the project is estimated to be 65%
complete. Certain of the construction contracts for the plant and infrastructure
facilities have been awarded and the remainder are expected to be awarded in the
next few months.
 
     Construction on the project commenced in early July. As of July 31, 1996,
approximately $122.0 million has been committed on the project.
 
     The capital cost of the Kemess South project has been estimated at $390
million, including contingency and start-up costs but excluding the cost of
acquisition of the property. Financing for the Kemess South project will include
up to $166 million by way of an economic assistance and investment package and
compensation from the B.C. Government. The Company's wholly owned subsidiary,
Kemess Mines Inc. (formerly Geddes Resources Limited) has already received the
first of two equal payments of compensation from the B.C. Government in the sum
of $14.5 million in April 1996, the final compensation payment being due in
April 1997. The Company will fund the balance of the capital cost from cash in
treasury, future operating cash flow and debt. At this time, the Company has no
plans to issue any new equity in connection with this project.
 
     The Company will apply for and seek to obtain all necessary permits,
licences, approvals and other authorizations for the Kemess South project as
project development continues.
 
9.   ACQUISITION OF CONSOLIDATED PROFESSOR MINES LIMITED
 
     On February 5, 1996, the Company made a public offer to purchase all of the
outstanding common shares of Consolidated Professor consisting of approximately
20 million common shares, at a cash price of $0.80 per share. By June 30, 1996,
the Company had purchased all shares tendered and acquired all remaining shares
in accordance with compulsory acquisition procedures, for a total purchase price
of $16.2 million. The purchase price, net of cash acquired on the acquisition of
$0.3 million, has been assigned as follows:
 
<TABLE>
<CAPTION>
                                                                         (MILLION)
            <S>                                                          <C>
            Capital assets............................................     $15.8
            Miscellaneous net assets..................................       0.1
                                                                           -----
            Purchase price, net of cash acquired......................     $15.9
                                                                           =====
</TABLE>
 
     The acquisition is part of the Company's strategic plan to increase ore
reserves and production at its Ontario Division. Consolidated Professor has a
100% interest in the Duport Gold project in the Kenora mining district in
northwestern Ontario. The Company intends to review production plans and
continue the mine permitting process initiated by the former owners of
Consolidated Professor.
 
10. CREDIT LINE
 
     The Company entered into a $28 million unsecured, revolving line of credit
with a major Canadian bank in the first quarter of 1996. This line will be used
as necessary to finance working capital for current operations. At June 30,
1996, no amounts were outstanding under this facility.
 
                                      F-29
<PAGE>   144
 
                              ROYAL OAK MINES INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (unaudited)
   (tabular amounts in thousands of Canadian dollars unless otherwise stated)
 
11. CAPITAL STOCK
 
(a) Changes in capital
 
<TABLE>
<CAPTION>
                                                                        NUMBER OF
                                                                          SHARES      AMOUNT
                                                                        ----------   --------
<S>                                                                     <C>          <C>
Balance, December 31, 1994............................................  114,494,747  $247,362
Exercise of warrants Series 2.........................................   4,475,300     14,545
Issued for share purchase options.....................................      50,667         78
Share issue and other related costs...................................      --            (48)
                                                                        -----------  --------
Balance, June 30, 1995 issued and outstanding.........................  119,020,714  $261,937
                                                                        ===========  ========
Balance, December 31, 1995............................................  121,043,530  $270,811
Issued to acquire Geddes and El Condor (See note 8)...................  19,011,883    114,071
Issued for share purchase options.....................................      87,833        288
                                                                        -----------  --------
Balance, June 30, 1996 issued and outstanding.........................  140,143,246   385,170
Company shares held by Witteck Development Inc. (see note 11(b))......  (1,924,816)    (8,854)
                                                                        -----------  --------
Balance, June 30, 1996 for financial reporting purposes...............  138,218,430  $376,316
                                                                        ===========  ========
</TABLE>
 
(B) COMPANY SHARES HELD BY WITTECK DEVELOPMENT INC.
 
     During 1995, the Board of Directors and the shareholders approved the
acquisition of all of the shares of Witteck Development Inc. ("Witteck") whose
sole asset is an investment in the Company of 1,924,816 common shares of the
Company. This investment has been recorded as a reduction of capital stock on
the balance sheet. Consequently, the common shares of the Company that are held
by Witteck may not be voted and have been excluded from the determination of
earnings per share information.
 
                                      F-30
<PAGE>   145
 
- ------------------------------------------------------
- ------------------------------------------------------
 
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AS
AMENDED OR SUPPLEMENTED AT THE TIME OF DELIVERY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY ROYAL OAK MINES INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION NOR TO ANY PERSON WHO HAS NOT RECEIVED A COPY OF EACH CURRENT
AMENDMENT OR SUPPLEMENT HERETO. NEITHER THE DELIVERY OF THIS PROSPECTUS OR OF
ANY AMENDMENT OR SUPPLEMENT HERETO, NOR ANY SALE MADE HEREUNDER AND THEREUNDER,
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ROYAL OAK MINES INC.
SINCE SUCH RESPECTIVE DATES.
 
                               ------------------
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                       ------
<S>                                    <C>
Available Information..................      2
Information Incorporated by
  Reference............................      3
Exchange Rate Data.....................      3
Prospectus Summary.....................      4
Risk Factors...........................     16
The Exchange Offer.....................     23
Certain Federal Income Tax Consequences
  of the Exchange Offer................     30
Capitalization.........................     31
Selected Historical Consolidated
  Financial and Operating Data.........     32
Management's Discussion and Analysis of
  Financial Condition and Results of
  Operations...........................     34
Business...............................     42
Management.............................     63
Description of Share Capital...........     69
Certain Relationships and Related
  Transactions.........................     71
Security Ownership.....................     72
Description of Credit Facility.........     72
Description of Exchange Notes..........     73
Description of Notes...................     97
Exchange Offer and Registration
  Rights...............................     98
Certain Income Tax Considerations......    100
Book-Entry; Delivery and Form..........    102
Plan of Distribution...................    104
Validity of Exchange Notes.............    105
Experts................................    105
Glossary of Certain Mining Terms.......    106
Index to Consolidated Financial
  Statements...........................    F-1
</TABLE>
    
 
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
 
                              ROYAL OAK MINES INC.
                               OFFER TO EXCHANGE
 
                                 US$175,000,000
                            11% SENIOR SUBORDINATED
                                 NOTES DUE 2006
 
                                      FOR
 
                        SERIES B 11% SENIOR SUBORDINATED
                                 NOTES DUE 2006
 
                                      LOGO
 
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE>   146
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
     Under the Ontario Business Corporations Act, each of the Company and the
Guarantor may indemnify a present or former director or officer or a person who
acts or acted at such corporation's request as a director or officer of another
corporation of which the Company or the Guarantor, as the case may be, is or was
a shareholder or creditor, and his heirs and legal representatives, against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by him in respect of any civil, criminal
or administrative action or proceeding to which he is made a party by reason of
his position with the Company or the Guarantor, as the case may be, and provided
that the director or officer acted honestly and in good faith with a view to the
best interests of the Company or the Guarantor, as the case may be, and, in the
case of a criminal or administrative action or proceeding that is enforced by a
monetary penalty, had reasonable grounds for believing that his conduct was
lawful. Such indemnification may be made in connection with a derivative action
only with court approval. A director or officer is entitled to indemnification
from the Company or the Guarantor as a matter of right if he was substantially
successful on the merits and fulfilled the conditions set forth above.
 
     In accordance with the Ontario Business Corporations Act, the By-laws of
each of the Company and the Guarantor provide for indemnification of a director
or officer, a former director or officer, or a person who acts or acted at such
corporation's request as a director or officer of a corporation of which Company
or the Guarantor, as the case may be, is or was a shareholder or creditor and
his heirs and legal representatives against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal or administrative proceeding
to which he is made a party by reason of being or having been a director or
officer of the Company or the Guarantor or such other corporation if he acted
honestly and in good faith with a view to the best interests of the Company or
the Guarantor, as the case may be, or, in the case of a criminal or
administrative action or proceeding that is enforced by monetary penalty, he had
reasonable grounds in believing that his conduct was lawful.
 
     A policy of directors' and officers' liability insurance is maintained by
the Company which insures the directors and officers of the Company and its
subsidiaries, including the Guarantor, for losses as a result of claims based
upon the acts or omissions of such individuals as directors and officers of the
Company or its subsidiaries (including the Guarantor), including liabilities
arising under the Securities Act, and also reimburses the Company for payments
made pursuant to the indemnity provisions under the Ontario Business
Corporations Act.
 
   
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company or
the Guarantor pursuant to the foregoing provision, the Company and the Guarantor
have been informed that in the opinion of the U.S. Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
    
 
ITEM 21.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
     (a)  Exhibits.
 
   
<TABLE>
    <C>    <S>
     3.1   Certificate of Amalgamation of the Company dated January 1, 1992 (incorporated by
           reference to the Company's Form 20-F for the year ended December 31, 1991).
     3.2   General By-Law No. 3 of the Company dated July 23, 1991 (incorporated by reference
           to the Company's Form 20-F for the year ended December 31, 1991).
     3.3   Constituting documents of the Guarantor.
     3.4   By-Law Number 8 of the Guarantor.
     4.1   Indenture, dated as of August 12, 1996, by and among the Company, the Guarantor
           and Mellon Bank, F.S.B.
</TABLE>
    
 
                                      II-1
<PAGE>   147
 
   
<TABLE>
    <C>    <S>
     4.2   Form of Exchange Note (contained in Exhibit 4.1 as Exhibit B thereto).
     5.1   Opinion of Wachtell, Lipton, Rosen & Katz.
     5.2   Opinion of Lang Michener.
    10.1   Registration Rights Agreement, dated as of August 12, 1996, by and among the
           Company, the Guarantor, BT Securities Corporation and Scotia Capital Markets (USA)
           Inc.*
    10.2   Credit Agreement, dated as of February 15, 1996 by and between the Company and The
           Bank of Nova Scotia.*
    10.3   Amending Agreement, dated as of August 5, 1996, by and between the Company and The
           Bank of Nova Scotia.*
    10.4   Employment Agreement, dated as of July 21, 1995, between Margaret K. Witte, Arctic
           Precious Metals, Inc. and Royal Oak Mines Inc. (incorporated by reference to the
           Annual Report on Form 10-K of the Company for the fiscal year ended December 31,
           1995).
    10.5   Employment Agreement, dated as of July 21, 1995, between Ross F. Burns, Arctic
           Precious Metals, Inc. and Royal Oak Mines Inc. (incorporated by reference to the
           Annual Report on Form 10-K of the Company for the fiscal year ended December 31,
           1995).
    10.6   Employment Agreement, dated as of July 21, 1995, between J. Graham Eacott, Arctic
           Precious Metals, Inc. and Royal Oak Mines Inc. and amendment dated February 16,
           1996 (incorporated by reference to the Annual Report on Form 10-K of the Company
           for the fiscal year ended December 31, 1995)
    10.7   Employment Agreement, dated as of July 21, 1995, between John R. Smrke, Arctic
           Precious Metals, Inc. and Royal Oak Mines Inc. and amendment dated February 16,
           1995 (incorporated by reference to the Annual Report on Form 10-K of the Company
           for the fiscal year ended December 31, 1995).
    10.8   Employment Agreement, dated as of July 21, 1995, between Edmund Szol, Arctic
           Precious Metals, Inc. and Royal Oak Mines Inc. and amendment dated February 16,
           1995 (incorporated by reference to the Annual Report on Form 10-K of the Company
           for the fiscal year ended December 31, 1995).
    10.9   Employment Agreement, dated as of July 21, 1995, between James H. Wood, Arctic
           Precious Metals, Inc. and Royal Oak Mines Inc. and amendment dated February 16,
           1995 (incorporated by reference to the Annual Report on Form 10-K of the Company
           for the fiscal year ended December 31, 1995).
    12.1   Statements re computation of ratios.*
    21.1   Subsidiaries of the Company.*
    23.1   Consent of Arthur Andersen & Co.
    23.2   Consent of Wachtell, Lipton, Rosen & Katz (contained in Exhibit 5.1).
    23.3   Consent of Lang Michener (contained in Exhibit 5.2).
    24.1   Powers of Attorney of Directors and Officers of Royal Oak Mines Inc. (incorporated
           by reference to the signature pages of the Registration Statement on Form S-4,
           registration no. 333-11117, filed with the Commission on August 30, 1996).
    24.2   Powers of Attorney of Directors and Officers of Kemess Mines Inc. (incorporated by
           reference to the signature pages of the Registration Statement on Form S-4,
           registration no. 333-11117, filed with the Commission on August 30, 1996).
    25.1   Statement of Eligibility and Qualification of Trustee on Form T-1 of Mellon Bank,
           F.S.B. under the Trust Indenture Act of 1939.*
    99.1   Form of Letter of Transmittal for the 11% Senior Subordinated Notes due 2006.
    99.2   Guidelines for Certification of Taxpayer Identification Number on Substitute Form
           W-9.*
    99.3   Form of Notice of Guaranteed Delivery.
</TABLE>
    
 
- ---------------
 
   
*   Included as an exhibit to the Registration Statement on Form S-4,
     registration no. 333-11117, filed with the Commission on August 30, 1996.
    
 
                                      II-2
<PAGE>   148
 
   
22. UNDERTAKINGS.
    
 
1. The undersigned Registrant hereby undertakes:
 
     (a)(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
 
             (i) To include any prospectus required by Section 10 (a) (3) of the
        Securities Act of 1933;
 
             (ii) To reflect in the prospectus any facts or events arising after
        the effective date of the registration statement (or most recent
        post-effective amendment thereof) which, individually or in the
        aggregate, represent a fundamental change in the information set forth
        in the registration statement. Notwithstanding the foregoing, any
        increase or decrease in volume of securities offered (if the total
        dollar value of securities offered would not exceed that which was
        registered) and any deviation from the low or high end of the estimated
        maximum offering range may be reflected in the form of prospectus filed
        with the Commission pursuant to Rule 424(b) if, in the aggregate, the
        changes in volume and price represent no more than 20 percent change in
        the maximum aggregate offering price set forth in the "Calculation of
        Registration Fee" table in the effective registration statement.
 
             (iii) To include any material information with respect to the plan
        of distribution not previously disclosed in the registration statement
        or any material change to such information in the registration
        statement.
 
          (2) That, for the purpose of determining any liability under the
     Securities Act of 1933, each such post-effective amendment shall be deemed
     to be a new registration statement relating to the securities offered
     therein, and the offering of such securities at that time shall be deemed
     to be the initial bona fide offering thereof.
 
          (3) To remove from registration by means of a post-effective amendment
     any of the securities being registered which remain unsold at the
     termination of the offering.
 
     (b) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
 
     (c) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
 
2. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of an action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
                                      II-3
<PAGE>   149
 
                                   SIGNATURES
 
   
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Kirkland,
State of Washington, on October 7, 1996.
    
 
                                          ROYAL OAK MINES INC.
 
   
                                          By:        /s/ MARGARET K. WITTE
    
                                              ---------------------------------
                                                      Margaret K. Witte,
                                                President and Chief Executive
                                                         Officer
 
   
     Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the indicated capacities on October 7, 1996.
    
 
   
<TABLE>
<CAPTION>
                 SIGNATURES                                         TITLE
- ---------------------------------------------   ----------------------------------------------
<C>                                             <S>
                          *                     Director and Vice President, Exploration
- ---------------------------------------------
                Ross F. Burns

                          *                     Director
- ---------------------------------------------
             Matthew Gaasenbeek

                          *                     Director
- ---------------------------------------------
              J. Conrad Lavigne

                          *                     Director
- ---------------------------------------------
                 John L. May

                          *                     Director
- ---------------------------------------------
             George W. Oughtred

                          *                     Director and Secretary
- ---------------------------------------------
            William J.V. Sheridan

                  /S/ MARGARET K. WITTE         Director, Chairman of the Board, President and
- ---------------------------------------------   Chief Executive Officer
              Margaret K. Witte

                          *                     Chief Financial Officer (principal financial
- ---------------------------------------------   and accounting officer)
                James H. Wood
 
       *By:  /s/ WILLIAM J.V. SHERIDAN
           ----------------------------------
                   Attorney-in-Fact
</TABLE>
    
 
                                      II-4
<PAGE>   150
 
                                   SIGNATURES
 
   
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Kirkland,
State of Washington, on October 7, 1996.
    
 
                                          KEMESS MINES INC.
 
   
                                          By:        /s/ MARGARET K. WITTE
                                             
                                              ---------------------------------
 
                                                      Margaret K. Witte,
                                                 Chairman and Chief Executive
                                                         Officer
 
   
     Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed below by the following persons in
the indicated capacities on October 7, 1996.
    
 
   
<TABLE>
<CAPTION>
                  SIGNATURE                                         TITLE
- ---------------------------------------------   ----------------------------------------------
<C>                                             <S>
                          *                     Vice President, Exploration
- ---------------------------------------------
                Ross F. Burns

                          *                     Director
- ---------------------------------------------
                Nancy Deshaw

                          *                     Director and Secretary
- ---------------------------------------------
            William J.V. Sheridan

                          *                     President
- ---------------------------------------------
                John R. Smrke

            /s/ MARGARET K. WITTE               Director, Chairman of the Board and Chief
- ---------------------------------------------   Executive Officer
              Margaret K. Witte

                          *                     Chief Financial Officer (principal financial
- ---------------------------------------------   and accounting officer)
                James H. Wood

*By:    /s/ WILLIAM J.V. SHERIDAN
     ----------------------------------------
             Attorney-in-Fact
</TABLE>
    
 
                                      II-5
<PAGE>   151
 
   
     Pursuant to the requirements of the Securities Act of 1933, the undersigned
has signed this amendment to the registration statement solely in the capacity
of the duly authorized representative of each of Royal Oak Mines Inc. and Kemess
Mines Inc. in the United States, in the City of Toronto, Country of Canada on
October 7, 1996.

 
                                          ARCTIC PRECIOUS METALS INC.
 


                                          By:   /s/ WILLIAM J.V. SHERIDAN
                                             ---------------------------------
                                                    William J.V. Sheridan
                                                          Director

    
 
                                      II-6
<PAGE>   152
 
                                 EXHIBIT INDEX
 
   
<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                 DESCRIPTION
    -----  ---------------------------------------------------------------------------
    <C>    <S>                                                                        <C>
     3.1   Certificate of Amalgamation of the Company dated January 1, 1992
           (incorporated by reference to the Company's Form 20-F for the year ended
           December 31, 1991).
     3.2   General By-Law No. 3 of the Company dated July 23, 1991 (incorporated by
           reference to the Company's Form 20-F for the year ended December 31, 1991).
     3.3   Constituting documents of the Guarantor.
     3.4   By-Law Number 8 of the Guarantor.
     4.1   Indenture, dated as of August 12, 1996, by and among the Company, the
           Guarantor and Mellon Bank, F.S.B.
     4.2   Form of Exchange Note (contained in Exhibit 4.1 as Exhibit B thereto).
     5.1   Opinion of Wachtell, Lipton, Rosen & Katz.
     5.2   Opinion of Lang Michener.
    10.1   Registration Rights Agreement, dated as of August 12, 1996, by and among
           the Company, the Guarantor, BT Securities Corporation and Scotia Capital
           Markets (USA) Inc.*
    10.2   Credit Agreement, dated as of February 15, 1996, by and between the Company
           and The Bank of Nova Scotia.*
    10.3   Amending Agreement, dated as of August 5, 1996, by and between the Company
           and The Bank of Nova Scotia.*
    10.4   Employment Agreement, dated as of July 21, 1995, between Margaret K. Witte,
           Arctic Precious Metals, Inc. and Royal Oak Mines Inc. (incorporated by
           reference to the Annual Report on Form 10-K of the Company for the fiscal
           year ended December 31, 1995).
    10.5   Employment Agreement, dated as of July 21, 1995, between Ross F. Burns,
           Arctic Precious Metals, Inc. and Royal Oak Mines Inc. (incorporated by
           reference to the Annual Report on Form 10-K of the Company for the fiscal
           year ended December 31, 1995).
    10.6   Employment Agreement, dated as of July 21, 1995, between J. Graham Eacott,
           Arctic Precious Metals, Inc. and Royal Oak Mines Inc. and amendment dated
           February 16, 1996 (incorporated by reference to the Annual Report on Form
           10-K of the Company for the fiscal year ended December 31, 1995).
    10.7   Employment Agreement, dated as of July 21, 1995, between John R. Smrke,
           Arctic Precious Metals, Inc. and Royal Oak Mines Inc. and amendment dated
           February 16, 1995 (incorporated by reference to the Annual Report on Form
           10-K of the Company for the fiscal year ended December 31, 1995).
    10.8   Employment Agreement, dated as of July 21, 1995, between Edmund Szol,
           Arctic Precious Metals, Inc. and Royal Oak Mines Inc. and amendment dated
           February 16, 1995 (incorporated by reference to the Annual Report on Form
           10-K of the Company for the fiscal year ended December 31, 1995).
    10.9   Employment Agreement, dated as of July 21, 1995, between James H. Wood,
           Arctic Precious Metals, Inc. and Royal Oak Mines Inc. and amendment dated
           February 16, 1995 (incorporated by reference to the Annual Report on Form
           10-K of the Company for the fiscal year ended December 31, 1995).
    12.1   Statements re computation of ratios.*
    21.1   Subsidiaries of the Company.*
    23.1   Consent of Arthur Andersen & Co.
    23.2   Consent of Wachtell, Lipton, Rosen & Katz (contained in Exhibit 5.1).
    23.3   Consent of Lang Michener (contained in Exhibit 5.2).
    24.1   Powers of Attorney of Directors and Officers of Royal Oak Mines Inc.
           (incorporated by the reference to the signature pages of the Registration
           Statement on Form S-4, registration no. 333-11117, filed with the
           Commission on August 30, 1996).
</TABLE>
    
<PAGE>   153
 
   
<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                                 DESCRIPTION
    -----  ---------------------------------------------------------------------------
    <C>    <S>                                                                        <C>
    24.2   Powers of Attorney of Directors and Officers of Kemess Mines Inc.
           (incorporated by the reference to the signature pages of the Registration
           Statement on Form S-4, registration no. 333-11117, filed with the
           Commission on August 30, 1996).
    25.1   Statement of Eligibility and Qualification of Trustee on Form T-1 of Mellon
           Bank, F.S.B. under the Trust Indenture Act of 1939.*
    99.1   Form of Letter of Transmittal for the 11% Senior Subordinated Notes due
           2006.
    99.2   Guidelines for Certification of Taxpayer Identification Number on
           Substitute Form W-9.*
    99.3   Form of Notice of Guaranteed Delivery.
</TABLE>
    
 
- ---------------
 
   
* Included as an exhibit to the Registration Statement on Form S-4, registration
  no. 333-11117, filed with the Commission on August 30, 1996.
    

<PAGE>   1

                                                 ONTARIO CORPORATION NUMBER
                                                            481860

                           ARTICLES OF INCORPORATION

                                                                    EXHIBIT 3.3

               1. THE NAME OF THE CORPORATION IS

                  G E D D E S  R E S O U R C E S  L I M I T E D


              2. THE ADDRESS OF THE HEAD OFFICE IS

                 7 King Street East, Suite 1604
                 --------------------------------------------------
                 (Street & Number or R.R. Number & if Multi-Office
                 Building give Room No.)

                 Toronto, Ontario M 5 C 1 A 2
                 --------------------------------------------------
                 (Name of Municipality or Post Office)(Postal Code)


                 ______________________ in the ______________________
                 (Name of Municipality         (County, District,
                 Geographical Township)        Regional Municipality)


              3. THE NUMBER OF DIRECTORS IS         ONE

              4. THE FIRST DIRECTOR(S) IS/ARE

                 NAME IN FULL, INCLUDING         RESIDENCE ADDRESS, GIVING
                 ALL GIVEN NAMES                 STREET & NO. OR R.R. NO. &
                                                 MUNICIPALITY OR POST OFFICE
                                                 AND POSTAL CODE


                  Warren Stephen                15 Clarendon Avenue
                    Richard Seyffert            Toronto, Ontario  M4V 1H8












<PAGE>   2


5.  THE OBJECTS FOR WHICH THE CORPORATION IS INCORPORATED ARE

(a) To acquire, own, lease, prospect for, open, drill, explore, develop, work,
improve, maintain and manage mines and resource lands and mineral deposits,
including oil and gas lands, pipelines and deposits, and to dig for, raise,
crush, wash, smelt, assay, analyze, reduce, amalgamate, refine, pipe, convey
and otherwise treat, handle and market ores, metals, minerals and commodities,
including oil and gas, ocean deposits, forests, surface rights, land
development and improvements whether belonging to the Corporation or not, and
to render the same merchantable and to sell or otherwise dispose of the same or
any part thereof or interest therein;

(b) To take, acquire and hold as consideration for ores, metals, minerals or
commodities, including oil and gas, sold or otherwise disposed of or for goods
supplied or for work done by contract or otherwise, shares, debentures or other
securities of or in any other company having objects similar, in whole or in
part, to those of the Corporation hereby incorporated and to sell and otherwise
dispose of the same;

(c) To trade in, invest in, prospect, examine, explore, survey and develop the
resources of any territories, estates or properties and with a view thereto to
finance, organize, employ, equip and dispatch expeditions, commissions,


<PAGE>   3

                                                                             2a

engineering, mining, geological and other experts and agents, and to collect,
process, prepare or cause to be prepared or assist in or subscribe towards the
preparation of any plans, examinations, data, surveys, reports and
specifications of any kind and nature;

(d) To negotiate or enter into any agreements or arrangements with any person,
form or corporation or with any government, authority or power for any purpose,
and in particular for the grant or transfer to the Corporation or to any
company promoted, formed or registered by the Corporation or in which the
Corporation may be interested or to any person, firm, or corporation of any
leases, concessions, concessions, options, rights, licences, permits or other
authorization for or relating to the exploration, development, acquisition or
working of any lands;

(e) To search for, acquire, work and dispose of and deal in any mines, metals,
minerals, oil and gas, salts, chemicals, clay and other like substances as well
as renewable resources such as forest products;

(f) To search for, obtain, produce, work, exploit, develop, purchase, store,
manufacture, treat, render suitable for market or trade, smelt, calcine,
refine, handle, carry away, sell, dispose of and deal in or otherwise turn to
account petroleum and other minerals, oils, natural gas, asphalt and
hydrocarbons of all kinds and their products or substances of every
description;


<PAGE>   4

                                                                             2b

(g) To bore, drill, open, explore, develop, work, improve, maintain, manage and
operate mines, mills, smelters, refineries, fabricators, oil wells, quarries
and mineral lands and deposits of all classes and descriptions, whether
belonging to the Corporation or not; and

(h) To evaluate, test, estimate, consult, manage, advise, share, design,
install, operate, finance in any related processing plants, operations,
development of sea, air or land resources.


<PAGE>   5

6. THE AUTHORIZED CAPITAL IS divided into 10,000,000 Class A Preferred Shares
with a par value of $10 each and 10,000,000 Common Shares without par value.


<PAGE>   6


7.   THE DESIGNATIONS, PREFERENCES, RIGHTS, CONDITIONS, RESTRICTIONS,
     LIMITATIONS OR PROHIBITIONS ATTACHING TO THE SPECIAL SHARES, IF ANY, ARE


1. The special shares with a par value of ten dollars ($10) each shall be
designated as non-cumulative redeemable non-voting Class A preference shares
with a par value of $10 each (hereinafter called "Class A Preference Shares").

2. The holders of the Class A Preference Shares, in priority, to the common
shares without par value (hereinafter called the "Common Shares") and any other
shares ranking junior to the Class A Preference Shares, shall be entitled to
receive and the Corporation shall pay thereon, as and when declared by the
board of directors of the Corporation out of the moneys of the Corporation
properly applicable to the payment of dividends, fixed preferential
non-cumulative cash dividends determined solely by the board of directors.  If
the board of directors in its discretion shall not declare a dividend on the
Class A Preference Shares for a fiscal year, then the rights of the holders of
the Class A Preference Shares to such dividend for such fiscal year shall be
forever extinguished.  The holders of the Class A Preference Shares shall not
be entitled to any dividends other than or in excess of the preferential
non-cumulative cash dividends hereinbefore provided for.

3. Except with the approval of the holders of all the Class A Preference Shares
outstanding given by at least two-thirds (2/3) of the votes cast at a meeting
of the


<PAGE>   7

                                                                            4a

holders of the Class A Preference Shares at a meeting duly called for that
purpose as described in paragraph 9 hereof, no dividend shall at any time be
declared and paid on or set apart for payment on the Common Shares or any other
shares of the Corporation ranking junior to the Class A Preference Shares in
any fiscal year unless and until the preferential non-cumulative cash dividend
on all the Class A Preference Shares outstanding in respect of such fiscal year
has been declared and paid or set apart for payment.

4. In the event of the liquidation, dissolution or winding-up of the
Corporation or other distribution of assets or property of the Corporation
among shareholders for the purpose of winding up its affairs, the holders of
the Class A Preference Shares shall be entitled to receive from the assets and
property of the Corporation a sum equivalent to the aggregate par value of the
Class A Preference Shares held by them respectively together with all declared
and unpaid preferential non-cumulative cash dividends thereon before any amount
shall be paid or any property or assets of the Corporation distributed to the
holders of any Common Shares or shares of any other class ranking junior to the
Class A Preference Shares.  After payment to the holders of the Class A
Preference Shares of the amount so payable to them as above provided they shall
not be entitled to share in any further distribution of the assets or property
of the Corporation.


<PAGE>   8

                                                                         4b

5. The Corporation may at any time or from time to time purchase for
cancellation all or part of the outstanding Class A Preference Shares at the
lowest price at which, in the opinion of the directors, such shares are
obtainable but not exceeding an amount equal to the aggregate par value
thereof.  Except where the purchase for cancellation is made on the open market
or all the holders of the Class A Preference Shares consent to the purchase,
the Corporation may purchase such shares only pursuant to tenders received by
the Corporation upon request for tenders addressed to all the holders of the
Class A Preference Shares and the Corporation shall accept only the lowest
tenders.  Where, in response to the invitation for tenders, two or more
shareholders submit tenders at the same price and the tenders are accepted by
the Corporation as to part only of the Class A Preference Shares offered, the
Corporation shall accept part of the Class A Preference Shares offered in each
tender in proportion as nearly as may be to the total number of Class A
Preference Shares offered in each tender (disregarding fractions).

6. The Corporation may, upon giving notice as hereinafter provided, redeem at
any time the whole or from time to time any part of the then outstanding Class
A Preference Shares on payment for each share to be redeemed of the par value
thereof together with all declared and unpaid preferential non-cumulative cash
dividends thereon.


<PAGE>   9


                                                                              4c

7. In the case of redemption of Class A Preference Shares under the provisions
of clause 6 hereof, the Corporation shall at least thirty (30) days before the
date specified for redemption mail to each person who at the date of mailing is
a registered holder of Class A Preference Shares to be redeemed a notice in
writing of the intention of the Corporation to redeem such Class A Preference
Shares.  Such notice shall be mailed by letter, postage prepaid, addressed to
each such shareholder at his address as it appears on the records of the
Corporation or in the event of the address of any such shareholder not so
appearing then to the last known address of such shareholder; provided,
however, that accidental failure to give any such notice to one (1) or more of
such shareholders shall not affect the validity of such redemption.  Such
notice shall set out the redemption price and the date on which redemption is
to take place and, if part only of the shares held by the person to whom it is
addressed is to be redeemed, the number thereof so to be redeemed.  On or after
the date so specified for redemption, the Corporation shall pay or cause to be
paid to or to the order of the registered holders of the Class A Preference
Shares to be redeemed the redemption price thereof on presentation and
surrender, at the head office of the transfer agent of the Corporation located
in the City of Toronto, Ontario or any other place designated in such notice,
of the certificates representing the Class A Preference Shares called for
redemption.  If a part only of the


<PAGE>   10

                                                                             4d

shares represented by any certificate be redeemed a new certificate for the
balance shall be issued at the expense of the Corporation.  From and after the
date specified for redemption in any such notice the Class A Preference Shares
called for redemption shall cease to be entitled to dividends and the holders
thereof shall not be entitled to exercise any of the rights of shareholders in
respect thereof unless payment of the redemption price shall not be made upon
presentation of certificates in accordance with the foregoing provisions, in
which case the rights of the shareholders shall remain unaffected.  The
Corporation shall have the right at any time after the mailing of notice of its
intention to redeem any Class A Preference Shares to deposit the redemption
price of the shares so called for redemption or of such of the said shares so
called for redemption or of such of the said shares represented by certificates
as have not at the date of such deposit been surrendered by the holders thereof
in connection with such redemption to a special trust account with the transfer
agent, to be paid without interest to or to the order of the respective holders
of such Class A Preference Shares called for redemption upon presentation and
surrender to the transfer agent of the certificates representing the same, and
upon such deposit being made or upon the date specified for redemption in such
notice, whichever the later, the Class A Preference Shares in respect whereof
such deposit shall have been made shall be redeemed and the rights of the
holders thereof after such deposit or such


<PAGE>   11

                                                                           4e

redemption date, as the case may be, shall be limited to receiving without
interest their proportionate part of the total redemption price so deposited
against presentation and surrender of the said certificates held by them
respectively.

8. The holders of the Class A Preference Shares shall not be entitled as such
(except as hereinafter specifically provided) to receive notice of or to attend
any meeting of the shareholders of the Corporation and shall not be entitled to
vote at any such meeting.  The holders of the Class A Preference Shares shall,
however, be entitled to notice of meetings of the shareholders called for the
purpose of authorizing the dissolution of the Corporation or the sale of its
undertaking or a substantial part thereof.

9. The confirmation required by subsection 4 of section 189 of The Business
Corporations Act, as now enacted or as the same may from time to time be
amended, re-enacted or replaced (and in the case of such amendment,
re-enactment or replacement, any reference herein shall be read as referring to
the amended, re-enacted or replaced provisions), of a resolution authorizing an
amendment to the articles deleting or varying a preference, right, condition,
restriction, limitation or prohibition attaching to the Class A Preference
Shares or creating special shares ranking in any respect in


<PAGE>   12

                                                                             4f

priority to or on a parity with the Class A Preference Shares may be given by
at least two-thirds (2/3) of the votes cast at a meeting of the holders of the
Class A Preference Shares duly called for that purpose and held upon at least
twenty-one (21) days notice at which the holders of at least ten per cent (10%)
of the then outstanding Class A Preference Shares are present or represented by
proxy.  If at any such meeting the holders of ten per cent (10%) of the
outstanding Class A Preference Shares are not present or represented by proxy
within half an hour after the time appointed for the meeting, then the meeting
shall be adjourned to such date not being less than fourteen (14) days later
and to such time and place as may be appointed by the chairman and at least ten
(10) days' notice shall be given of such adjourned meeting but it shall not be
necessary in such notice to specify the purpose for which the meeting was
originally called.  At such adjourned meeting the holders of Class A Preference
Shares present or represented by proxy may transact the business for which the
meeting was originally called and the confirmation of the holders of Class A
Preference Shares referred to above may be given by at least two-thirds (2/3)
of the votes cast at such adjourned meeting.  The formalities to be observed
with respect to the giving of notice of any such meeting and the conduct
thereof shall be those from time to time prescribed in the by-laws of the
Corporation with respect to meetings of shareholders.  On every poll taken at
every such


<PAGE>   13

                                                                             4g

meeting every holder of Class A Preference Shares shall be entitled to one (1)
vote in respect of each Class A Preference Share held.

10. The Common Shares shall rank junior to the Class A Preference Shares and
shall be subject in all respects to the Class A preferences, rights,
conditions, restrictions, limitations and prohibitions attaching to the Class A
Preference Shares.


<PAGE>   14


8. THE RESTRICTIONS, IF ANY, ON THE ALLOTMENT, ISSUE OR TRANSFER OF SHARES ARE
   None


<PAGE>   15


                                                                              6A
9.  THE SPECIAL PROVISIONS, IF ANY, ARE
   (a)  Subject to the provisions of The Business Corporations Act, the
        Corporation may purchase any of its common shares;
   (b)  The board of directors of the Corporation may, without
        authorization of the shareholders, from time to time, in such amounts
        and on such terms as it deems expedient:

        (i) borrow money on the credit of the Corporation;

        (ii) issue, reissue, sell or pledge debt obligations of the Corporation;
              or

        (iii) charge, mortgage, hypothecate, pledge or otherwise create a
              security interest in all or currently owned or subsequently
              acquired real or personal, movable or immovable property of the
              Corporation, including book debts, rights, powers, franchises and
              undertaking to secure any debt obligation or any money borrowed,
              or other debt or liability of the Corporation;

              For greater certainty the foregoing powers conferred on the
              directors shall be deemed to include the powers conferred on a
              company by Division VI of the Special Corporate Powers Act, being
              chapter 275 of the Revised Statutes of Quebec, 1964, and every
              statutory provision that may be substituted therefor or for any
              provision therein.


<PAGE>   16


     The board of directors may from time to time delegate to such one or more
of the directors and officers of the Corporation as may be designated by the
board all or any of the powers hereby conferred on the board above to such
extent and in such manner as the board shall determined at the time of each
such delegation.


<PAGE>   17


10.  THE SHARES, IF ANY, TO BE TAKEN BY THE INCORPORATORS ARE

<TABLE>
<CAPTION>
  INCORPORATORS FULL NAMES,        NUMBER OF                        AMOUNT
  INCLUDING ALL GIVEN NAMES          SHARES    CLASS DESIGNATION  TO BE PAID
  -------------------------        ----------  -----------------  -----------
  <S>                              <C>         <C>                <C>

  Warren Stephen Richard Seyffert     One           Common           $1
</TABLE>




11.  THE NAMES AND RESIDENCE ADDRESSES OF THE INCORPORATORS ARE


<TABLE>
<S>                                         <C>
                                            FULL RESIDENCE ADDRESS GIVING
                                               STREET & NO. OR R.R. NO.,
                                                 MUNICIPALITY OR POST
FULL NAMES, INCLUDING ALL GIVEN NAMES           OFFICE AND POSTAL CODE

- ---------------------------------------     --------------------------------



Warren Stephen Richard Seyffert             15 Clarendon Avenue, Toronto
                                            Ontario      M4V 1H8
</TABLE>




THESE ARTICLES ARE EXECUTED IN DUPLICATE FOR DELIVERY TO THE MINISTER

                    SIGNATURES OF INCORPORATORS

                                          /s/ Warren S.R. Seyffert
                                          -------------------------------
                                          Warren Stephen Richard Seyffert



<PAGE>   18


                                                Ontario Corporation Number
                                             Numero de la compagnie en Ontario
                                                            481860


                             ARTICLES OF AMENDMENT
                            STATUTS DE MODIFICATION



          1.   The present name of the     Denomination sociale actuelle
               corporation is:             de la compagnie:



               G E D D E S  R E S O U R C E S  L I M I T E D



          2.   The name of the corpora-    Nouvelle denomination sociale
               tion is changed to (if      de la compagnie (s'il y a lieu):
               applicable):




          3.   Date of incorporation/      Date de la constitution ou de
               amalgamation:               la fusion:

               3    June 1981
               ----------------------------------------------------------
                                 (Day, Month, Year)
                                (jour, mois, annee)


           4.   The articles of the        Les statuts de la compagnie
                corporation are amended    sont modifies de la faccon
                as follows:                suivante:



                  "WHEREAS Geddes Resources Limited (the "Corporation") was
             incorporated under the laws of the Province of Ontario by Articles
             of Incorporation dated June 3, 1981;

                  AND WHEREAS the authorized capital of the Corporation is
             divided into 10,000,000 Class A Preferred Shares with a par
             value of $10 each and 10,000,000 Common Shares without par
             value;

                  NOW THEREFORE BE IT RESOLVED THAT:

       A. The Articles of Incorporation be amended by deleting all of Item 7
       setting forth the designations, preferences, rights, conditions,
       restrictions, limitations or prohibiitons attaching to the Class A
       Preferred Shares and substituting the following therefor:


<PAGE>   19


                                                                              1A
Designation

1.1  The preferred shares with a par value of ten dollars ($10) each shall be
     designated as non-cumulative, convertible, redeemable, non-voting Class A
     preferred shares with a par value of $10 each (hereinafter called "Class A
     Shares").

Dividends


2.1  For the purpose of this clause 2:

     "Common Shares" shall mean common shares without par value in the capital
     of the Corporation as such shares were constituted on December 11, 1981
     and shares of any other class resulting from the reclassification or
     change of such common shares.  In the event of any adjustment of the
     conversion rights herein granted pursuant to subclause 6.8, "Common
     Shares" shall thereafter mean the shares or other securities or property
     resulting after such adjustment;

     "Equivalent Dividend Basis" at any time shall mean the quotient obtained
     when the dividend payable on a Class A Share is divided by the dividend
     payable on a Common Share which, until adjusted pursuant to subclause 2.3
     hereof, shall equal one (1);

     "Current Market Price" means at any date the weighted average price at
     which the Common Shares of the Corporation have traded on The Toronto
     Stock Exchange, or, if the Common Shares are not then listed on The
     Toronto Stock Exchange, on such stock exchange on which such shares are
     listed as may be selected for such purpose by the Board of Directors of
     the Corporation (the "Board") during a period of 30 consecutive trading
     days, selected for such purpose by the Board, commencing not more than 45
     trading days before such date, or if the Common Shares are not listed on
     any stock exchange in Canada, as determined by the Board.


2.2  The Class A Shares shall rank equally with the Common Shares with respect
     to the payment of dividends and the holders of the Class A Shares shall be
     entitled to receive and the Corporation shall pay thereon, as and when
     declared by the Board out of the moneys of the Corporation properly
     applicable to the payment of dividends, a dividend on each Class A Share
     equal to the product obtained when the dividend payable on each Common
     Share is multiplied by the Equivalent Dividend Basis.  The dividend
     payable on the Common Shares shall be payable in such amounts and at such


<PAGE>   20

                                                                            1B
times as the Board may, in its discretion, from time to time determine.

2.3 The Equivalent Dividend Basis shall be subject to adjustment from time to
time in the events and in the manner following:

       (i)  if the Corporation shall (a) issue Common Shares to all or
            substantially all the holders of the Common Shares as a stock
            dividend, or (b) make a distribution on its outstanding Common
            Shares payable in Common Shares or securities exchangeable for or
            convertible into Common Shares, or (c) subdivide its outstanding
            Common Shares, or (d) consolidate its outstanding Common Shares
            into a smaller number of shares (any of such events being called a
            "Common Share Reorganization"), the Equivalent Dividend Basis shall
            be adjusted effective immediately after the record date at which
            the holders of Common Shares are determined for the purposes of the
            Common Share Reorganization to an Equivalent Dividend Basis equal
            to the product obtained when the Equivalent Dividend Basis in
            effect on such record date is multiplied by a fraction the
            denominator of which shall be the number of Common Shares
            outstanding on such record date, and the numerator of which shall
            be the number of Common Shares outstanding after the completion of
            such Common Share Reorganization, including in the case where
            securities exchangeable for or convertible into Common Shares are
            distributed, the number of Common Shares that would have been
            outstanding had such securities been exchanged for or converted
            into Common Shares on such record date; and

      (ii)  if the Corporation shall issued rights, options or warrants
            to all or substantially all of the holders of the Common Shares
            under which such holders are entitled, during a period expiring not
            more than forty-five (45) days after the record date for such issue,
            to subscribe for or purchase Common Shares or securities
            exchangeable for or convertible into Common Shares at a price per
            share (or at an exchange or conversion price per share in the case
            of securities exchangeable for or convertible into Common Shares)
            less than 95% of the Current Market Price of the Common Shares on
            such record date (any of such events being called a "Rights
            Offering"), the


<PAGE>   21

                                                                              1C

               Equivalent Dividend Basis shall be adjusted effective
               immediately after such record date to an Equivalent Dividend
               Basis equal to the product obtained when the Equivalent Dividend
               Basis in effect on such record date is multiplied by a fraction:

               (a)   the denominator of which shall be the aggregate of:

                     (A)  the number of Common Shares outstanding on such
                          record date; and

                     (B)  the number determined by
                          dividing (1) either, as the case may be, (AA) the
                          product of (i) the number of Common Shares so
                          offered, and (ii) the price at which such shares are
                          offered, or (BB) the product of (iii) the exchange or
                          conversion price thereof, and (iv) the maximum number
                          of Common Shares for or into which the securities so
                          offered pursuant to the Rights Offering may be
                          exchanged or converted, by (2) the Current Market
                          Price of the Common Shares on such record date, and

               (b)   the numerator of which shall be the aggregate of (A) the
                     number of Common Shares outstanding on such record date,
                     and (B) the number of Common Shares offered pursuant to
                     the Rights Offering (or the maximum number of Common
                     Shares for or into which the securities so offered
                     pursuant to the Rights Offering may be exchanged or 
                     converted).

                     To the extent that such options, rights or warrants are not
                     exercised prior to the expiry date thereof, the Equivalent
                     Dividend Basis shall be readjusted effective immediately
                     after such expiry date to the Equivalent Dividend Basis
                     which would then have been in effect based upon the number
                     of Common Shares or securities exchangeable for or
                     convertible into Common Shares actually delivered on the
                     exercise of such options, rights or warrants.


<PAGE>   22



                                                                              1D
2.4 For the purpose of this clause 2:

          (i)   no adjustment in the Equivalent Dividend Basis shall be required
                if any of the events described in subclause 2.3(ii) shall occur
                so long as the holders of Class A Shares are allowed to
                participate with the holders of Common Shares as though they had
                converted their Class A Shares into Common Shares prior to the
                record date for such event;

          (ii)  no adjustment in the Equivalent Dividend Basis shall be made in
                respect of the issue from time to time of shares to holders of
                Common Shares who exercise an option to receive substantially
                equivalent dividends in shares in lieu of receiving cash
                dividends paid in the ordinary course;

          (iii) if a dispute shall at any time arise with respect to adjustments
                in the Equivalent Dividend Basis such disputes shall be
                conclusively determined by the auditors of the Corporation or if
                they are unable or unwilling to act, by such other firm of
                independent chartered accountants as may be selected by the
                Board and any such determination shall be binding upon the
                Corporation and all holders of Class A Shares; and

          (iv)  in any case in which subclause 2.3 shall require that an
                adjustment shall become effective immediately after a record
                date for an event referred to therein, the Corporation may
                defer, until the occurrence of such event, paying to the holders
                of Class A Shares a dividend which has been declared, provided
                that any dividend payable on the Common Shares shall also be
                deferred in the same manner.

Dissolution

3.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or other distribution of assets or property of the Corporation
among shareholders for the purpose of winding up its affairs, the holders of
the Class A Shares shall be entitled to receive from the assets and property of
the Corporation a sum equivalent to the aggregate par value of the Class A
Shares held by them respectively together with all declared and unpaid
dividends thereon before any amount shall be paid or any property or assets of
the Corporation distributed to the holders of any Common Shares or shares of
any other class ranking junior to


<PAGE>   23



                                                                             1E

the Class A Shares.  After payment to the holders of the Class A Shares of the
amount so payable to them as above provided they shall not be entitled to share
in any further distribution of the assets or property of the Corporation.

Purchase for Cancellation

4.1 The Corporation may at any time or from time to time purchase for
cancellation all or part of the outstanding Class A Shares at the lowest price
at which, in the opinion of the directors, such shares are obtainable but not
exceeding an amount equal to the aggregate par value thereof together with all
declared and unpaid dividends thereon.  Except where the purchase for
cancellation is made on the open market or all the holders of the Class A
shares consent to the purchase, the Corporation may purchase such shares only
pursuant to tenders received by the Corporation upon request for tenders
addressed to all the holders of the Class A Shares and the Corporation shall
accept only the lowest tenders.  Where, in response to the invitation for
tenders, two or more shareholders submit tenders at the same price and the
tenders are accepted by the Corporation as to part only of the Class A Shares
offered, the Corporation shall accept part of the Class A Shares offered in
each tender in proportion as nearly as may be to the total number of Class A
Shares offered in each tender (disregarding fractions).

Redemption

5.1 From and after January 1, 1984, the Corporation may, upon giving notice as
hereinafter provided, redeem at any time the whole or from time to time any
part of the then outstanding Class A Shares on payment for each share to be
redeemed of the par value thereof together will all declared and unpaid
dividends thereon.

5.2 In the case of redemption of Class A  Shares under the provisions of
subclause 5.1, the Corporation shall at least thirty (30) days before the date
specified for redemption mail to each person who at the date of mailing is a
registered holder of Class A Shares to be redeemed a notice in writing of the
intention of the Corporation to redeem such Class A Shares.  Such notice shall
be mailed by letter, postage prepaid, addressed to each such shareholder at his
address as it appears on the records of the Corporation or in the event of the
address of any such shareholder not so appearing then to the last known address
of such shareholder; provided, however, that accidental failure to give any
such notice to one (1) or more of such shareholders shall not affect the
validity of such redemption.  Such notice shall set out the redemption price
and the date on which


<PAGE>   24



redemption is to take place and, if part only of the shares held by the person
to whom it is addressed is to be


<PAGE>   25

                                                                              1F

redeemed, the number thereof so to be redeemed.  On or after the date so
specified for redemption, the Corporation shall pay or cause to be paid to or
to the order of the registered holders of the Class A Shares to be redeemed the
redemption price thereof on presentation and surrender, at the principal office
of the transfer agent of the Corporation located in the Cities of Toronto,
Calgary or Vancouver or any other place or places designated in such notice, of
the certificates representing the Class A Shares called for redemption.  If a
part only of the shares represented by any certificate be redeemed a new
certificate for the balance shall be issued at the expense of the Corporation.
From and after the date specified for redemption in any such notice the Class A
Shares called for redemption shall cease to be entitled to dividends, and the
holders thereof shall not be entitled to exercise any of the rights of
shareholders in respect thereof unless payment of the redemption price shall
not be made upon presentation of certificates in accordance with the foregoing
provisions, in which case the rights of the shareholders shall remain
unaffected.  The Corporation shall have the right at any time after the mailing
of notice of its intention to redeem any Class A Shares to deposit the
redemption price of the shares so called for redemption or of such of the said
shares represented by certificates as have not at the date of such deposit been
surrendered by the holders thereof in connection with such redemption to a
special trust account with the transfer agent, to be paid without interest to
or to the order of the respective holders of such Class A Shares called for
redemption upon presentation and surrender to the transfer agent of the
certificates representing the same, and upon such deposit being made or upon
the date specified for redemption in such notice, whichever be the later, the
Class A Shares in respect whereof such deposit shall have been made shall be
redeemed and the rights of the holders thereof after such deposit or such
redemption date, as the case may be, shall be limited to receiving without
interest their proportionate part of the total redemption price so deposited
against presentation and surrender of the said certificates held by them
respectively.

Conversion


6.1   For the purpose of this clause 6:

      "business day" shall mean any day other than Saturdays, Sundays and
      statutory holidays in the Province of Ontario; 


       "Common Shares" shall mean common shares without par value in the capital
       of the Corporation as such shares were constituted on


<PAGE>   26

                                                                             1G

       December 11, 1981 and shares of any other class resulting from the
       reclassification or change of such common shares.  In the event of any
       adjustment of the conversion rights herein granted pursuant to subclause
       6.8, "Common Shares" shall thereafter mean the shares or other securities
       or property resulting after such adjustment;

       "Conversion Basis" at any time shall mean the number of Common Shares
       into which at such time one (1) Class A Share shall be convertible in
       accordance with the provisions of this clause 6 which initially shall be
       one (1) Common Share for each Class A Share subject to adjustment as
       described in subclause 6.8;

       "Current Market Price" means at any date the weighted average price at
       which the Common Shares have traded on The Toronto Stock Exchange, or, if
       the Common Shares are not then listed on The Toronto Stock Exchange, on
       such stock exchange on which such shares are listed as may be selected
       for such purpose by the Board of Directors of the Corporation (the
       "Board"), during a period of 30 consecutive trading days, selected for
       such purpose by the Board, commencing not more than 45 trading days
       before such date, or if the Common Shares are not listed on any stock
       exchange in Canada, as determined by the Board;

6.2    Holders of Class A Shares shall have the right at any time from and after
       January 1, 1984 and prior to the earlier of:

       (i)  the close of business on January 4, 1988; and

       (ii) in respect of Class A Shares previously called for redemption, the
            business day immediately preceding the date fixed for redemption of
            such Class A Shares (the "Time of Expiry") to convert Class A Shares
            into Common Shares on the Conversion Basis.

6.3    The conversion right herein provided for may be exercised by notice in
       writing given to the transfer agent for the Class A Shares at its
       principal office in any of the Cities of Toronto, Calgary and Vancouver
       or at such other place or places as the Corporation may from time to time


<PAGE>   27



                                                                             1H

appoint, accompanied by the certificate or certificates representing Class A
Shares in respect of which the holder thereof desires to exercise such right of
conversion. Such notice shall be signed by such holder or his duly authorized
attorney and shall specify the number of Class A Shares which the holder
desires to have converted.  The transfer form in the certificate or
certificates in question need not be endorsed, except in the circumstances
contemplated by subclause 6.5.  If less than all the Class A Shares represented
by a certificate or certificates accompanying any such notice are to be
converted, the holder shall be entitled to receive, at the expense of the
Corporation, a new certificate representing the Class A Shares comprised in the
certificate or certificates surrendered as aforesaid which are not to be
converted.

6.4 In the case of any Class A Shares which may be called for redemption, the
right of conversion thereof shall, notwithstanding anything herein contained,
cease and terminate at the close of business on the last business day next
preceding the date fixed for redemption, provided, however, that if the
Corporation shall fail to redeem such Class A Shares in accordance with the
notice of redemption the right of conversion shall thereupon be restored.

6.5 On any conversion of Class A Shares the share certificates for Common
Shares resulting therefrom shall be issued in the name of the registered holder
of the Class A Shares converted or in such name or names as such registered
holder may direct in writing either in the notice referred to in subclause 6.3
or otherwise, provided that such registered holder shall pay any applicable
security transfer taxes; in any such case the transfer form on the back of the
certificates in question shall be endorsed by the registered holder of the
Class A Shares or his duly authorized attorney, with signature guaranteed in a
manner satisfactory to the transfer agent.

6.6 Subject as hereinafter provided in this subclause 6.6, the right of a
holder of Class A Shares to convert the same into Common Shares shall be deemed
to have been exercised, and the registered holders of Class A Shares to be
converted (or any person or persons in whose name or names any such registered
holder of Class A Shares shall have directed certificates representing Common
Shares to be issued as provided in subclause 6.5) shall be deemed to have
become a holder of Common Shares of record of the Corporation for all purposes
on the date of receipt by the transfer agent of certificates representing the
Class A Shares to be converted accompanied by notice in writing as provided in
subclause 6.3, notwithstanding any delay in the delivery of


<PAGE>   28



                                                                             1I

certificates representing the Common Shares into which such Class A Shares have
been converted.

6.7  (a)  At the close of business on January 4, 1988, the holders of the Class
          A Shares then outstanding shall be deemed (without any action required
          on their part) to have exercised the right of conversion described in
          subclause 6.2 and all of the Class A Shares then outstanding shall be
          automatically converted into Common Shares on the Conversion Basis and
          thereafter the former holders of Class A Shares shall be deemed to be
          holders of Common Shares and shall be entitled to all of the rights
          thereof.

     (b)  At any time thereafter, holders will be entitled to receive
          certificates representing Common Shares upon presentation and
          surrender of their certificates representing Class A Shares to the
          transfer agent for the Common Shares at its principal office in any of
          the Cities of Toronto, Calgary and Vancouver and such other place or
          places as the Corporation may from time to time appoint.

     (c)  The Corporation shall give notice of the conversion provided for in
          this subclause 6.7 as promptly as possible after January 4, 1988 in
          the manner specified in subclause 5.2 to holders of Class A Shares who
          pursuant to this subclause 6.7 are deemed to have converted their
          shares.

6.8 The Conversion Basis shall be subject to adjustment from time to time in
the events and in the manner following:

          (i)  if at any time prior to the Time of Expiry the Corporation shall
               (a) issue Common Shares to all or substantially all the holders
               of the Common Shares as a stock dividend, or (b) make a
               distribution on its outstanding Common Shares payable in Common
               Shares or securities exchangeable for or convertible into Common
               Shares, or (c) subdivide its outstanding Common Shares, or (d)
               consolidate its outstanding Common Shares into a smaller number
               of shares (any of such events being called a


<PAGE>   29



                                                                            1J

               "Common Share Reorganization"), the Conversion Basis shall be
               adjusted effective immediately after the record date at which
               the holders of Common Shares are determined for the purposes of
               the Common Share Reorganization to a Conversion Basis equal to
               the product obtained when the Conversion Basis in effect on such
               record date is multiplied by a fraction the denominator of which
               shall be the number of Common Shares outstanding on such record
               date, and the numerator of which shall be the number of Common
               Shares outstanding after the completion of such Common Share
               Reorganization, including in the case where securities
               exchangeable for or convertible into Common Shares are
               distributed, the number of Common Shares that would have been
               outstanding had such securities been exchanged for or converted
               into Common Shares on such record date;

         (ii) if at any time prior to the Time of Expiry, the
              Corporation shall issue rights, options or warrants to all or
              substantially all of the holders of the Common Shares under which
              such holders are entitled, during a period expiring not more than
              forty-five (45) days after the record date for such issue, to
              subscribe for or purchase Common Shares or securities
              exchangeable for or convertible into Common Shares at a price per
              share (or at an exchange or conversion price per share in the
              case of securities exchangeable for or convertible into Common
              Shares) less than 95% of the Current Market Price of the Common
              Shares on such record date (any of such events being called a
              "Rights Offering"), the Conversion Basis shall be adjusted
              effective immediately after the record date at which holders of
              Common Shares are determined for the purposes of the Rights
              Offering to a Conversion Basis equal to the product obtained when
              the Conversion Basis in effect on such record date is multiplied
              by a fraction:

               (a) the denominator of which shall be the aggregate of:

                      (A)  the number of Common Shares
                           outstanding on such record date; and


<PAGE>   30




                                                                              1K

                    (B)  the number determined by dividing (1) either, as the
                         case may be, (AA) the product of (i) the number of
                         Common Shares so offered, and (ii) the price at which
                         such shares are offered, or (BB) the product of (iii)
                         the exchange or conversion price thereof, and (iv) the
                         maximum number of Common Shares for or into which the
                         securities so offered pursuant to the Rights Offering
                         may be exchanged or converted, by (2) the Current
                         Market Price of the Common Shares on such record date,
                         and

               (b)  the numerator of which shall be the aggregate of (A) the
                    number of Common Shares outstanding on such record date, and
                    (B) the number of Common Shares offered pursuant to the
                    Rights Offering (or the maximum number of Common Shares for
                    or into which the securities so offered pursuant to the
                    Rights Offering may be exchanged or converted).

                    To the extent that such options, rights or warrants are not
                    exercised prior to the expiry date thereof, the Conversion
                    Basis shall be readjusted effective immediately after such
                    expiry date to the Conversion Basis which would then have
                    been in effect based upon the number of Common Shares or
                    securities exchangeable for or convertible into Common
                    Shares actually delivered on the exercise of such options,
                    rights or warrants;

          (iii) if at any time prior to the Time of Expiry the Corporation shall
                distribute to all or substantially all holders of the Common
                Shares (a) shares of any class other than Common Shares or of
                shares of any other body corporate, or (b) rights, options or
                warrants to acquire Common Shares or securities exchangeable for
                or convertible into Common Shares (other than rights, options or
                warrants to acquire within a period of forty-five (45) days at a
                price at least 95% of the Current Market Price of the Common
                Shares on the record date for such distribution), or (c)
                evidences of indebtedness, or (d) any


<PAGE>   31




                                                                              1L

                 other assets (excluding cash dividends paid in the ordinary
                 course), and such issuance or distribution does not constitute
                 a Common Share Reorganization or a Rights Offering (any of
                 such events being herein called a "Special Distribution"), the
                 Conversion Basis shall be adjusted effective immediately after
                 the record date at which the holders of Common Shares are
                 determined for purposes of the Special Distribution to a
                 Conversion Basis equal to the product obtained when the
                 Conversion Basis in effect on such record date is multiplied
                 by a fraction:

                 (A)  the denominator of which shall be the
                      difference between:

                     (I) the product of (1) the number of Common Shares
                     outstanding on such record date, and (2) the Current
                     Market Price of the Common Shares on such date; and (II)
                     the aggregate fair value, as determined by the Board
                     (whose determination shall be conclusive) to the holders
                     of the Common Shares of the shares, rights, options,
                     warrants, evidences of indebtedness or other assets issued
                     or distributed in the Special Distribution, and

                 (B)  the numerator of which shall be the
                      number of Common Shares outstanding on such record date
                      multiplied by the Current Market Price of the Common
                      Shares on such date;

          (iv) if and whenever prior to the Time of Expiry there is
               a capital reorganization of the Corporation not otherwise
               provided for in this subclause 6.8 or a consolidation, merger or
               amalgamation of the Corporation with or into another body
               corporate (any such event being called a "Capital
               Reorganization"), any holder of Class A Shares entitled to
               receive Common Shares on the conversion of his Class A Shares
               and whose Class A Shares have not been converted into Common
               Shares shall be entitled to receive and shall accept, upon the
               conversion of such Class A Shares at any time after the
               effective date of such Capital Reorganization, in lieu of the
               number of Common Shares to which he was theretofore


<PAGE>   32



                                                                            1M

                 entitled on conversion, the kind and aggregate number of
                 shares or other securities of the Corporation or of the body
                 corporate resulting from the Capital Reorganization that such
                 holder would have been entitled to receive as a result of such
                 Capital Reorganization 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 conversion, subject
                 to adjustment thereafter in accordance with provisions the
                 same, as nearly as may be possible, as those contained in this
                 clause 6; provided that no such Capital Reorganization shall
                 be carried into effect unless all necessary steps shall have
                 been taken so that the holders of Class A Shares shall
                 thereafter be entitled to receive such number of shares or
                 other securities of the Corporation or of the body corporate
                 resulting from the Capital Reorganization; and

           (v)  if the Corporation shall reclassify the outstanding
                Common Shares, the Conversion Basis shall be adjusted effective
                immediately after the record date of such reclassification so
                that holders of Class A Shares surrendered for conversion after
                such date shall be entitled to receive such shares as they
                would have received had such Class A Shares been converted
                immediately prior to such record date, subject to adjustment
                thereafter in accordance with provisions the same, as nearly as
                may be possible, as those contained in this clause 6 hereof.

6.9 For the purposes of this clause 6:

            (i)   no adjustment in the Conversion Basis shall be required if any
                  of the events described in subclause 6.8(ii), (iii) and (iv)
                  shall occur so long as the holders of Class A Shares are
                  allowed to participate with the holders of Common Shares as
                  though they had converted their Class A Shares into Common
                  Shares prior to the record date for such event;

            (ii)  no adjustment in the Conversion Basis shall be required unless
                  such adjustment would result in a change of at least 1% in the
                  Conversion Basis then prevailing, provided, however, that any
                  adjustments which, except for


<PAGE>   33



                                                                            1N

                  the provisions of this subclause 6.9(ii) would otherwise have
                  been required to be made, shall be carried forward and taken
                  into account in any subsequent adjustment;

            (iii) no adjustment in the Conversion Basis shall be made in respect
                  of the issue from time to time of shares to holders of Common
                  Shares who exercise an option to receive substantially
                  equivalent dividends in shares in lieu of receiving cash
                  dividends paid in the ordinary course, and any such issue
                  shall be deemed not to be a Common Share Reorganization;

            (iv)  subject to subclause 6.8(iii) of this clause 6, if a dispute
                  shall at any time arise with respect to adjustments of the
                  Conversion Basis such disputes shall be conclusively
                  determined by the auditors of the Corporation or if they are
                  unable or unwilling to act, by such other firm of independent
                  chartered accountants as may be selected by the Board and any
                  such determination shall be binding upon the Corporation and
                  all holders of Class A Shares; and

            (v)   in any case which this subclause 6.8 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 Class A Shares exercising his right to convert
                  after such record date and before the occurrence of such event
                  the Common Shares 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
                  Common Shares upon the occurrence of the event requiring such
                  adjustment and the right to receive any distributions made on
                  such Common Shares declared in favor of holders of record of
                  Common Shares on and after the date that such holder would,
                  but for the provisions of this subsection, have become the
                  holder of record of such Common Shares pursuant to subclause
                  6.6.


<PAGE>   34




                                                                              1O

6.10 The Corporation shall give at least fourteen (14) days prior written
notice in the manner specified in subclause 5.2 hereof to the holders of Class
A Shares then outstanding of the record date of any of the events specified in
subclause 6.8 hereof other than events described in subclause 6.8(i)(c) and (d)
and subclause 6.8(v).  The notice shall specify in reasonable detail the event
that will cause an adjustment to the Conversion Basis, the Conversion Basis to
be in effect following the adjustment and the manner of determining the same.

6.11 A holder of Class A Shares on the record date for any dividend declared
payable on such shares will be entitled to such dividend notwithstanding that
such shares are converted after such record date and before the payment date of
such dividend, and the registered holder of any Common Share resulting from any
conversion shall be entitled to rank equally with the registered holders of all
other Common Shares in respect of all dividends declared payable to holders of
Common Shares of record on any date after the date of conversion.  Subject as
aforesaid, no payment or adjustment will be made on account of any dividend,
accrued or otherwise, on the Class A Shares converted or the Common Shares
resulting from any conversion.

6.12 The Corporation shall not issue fractional shares upon any conversion of
Class A Shares.  If a fractional interest in a Common Share would, except for
the provisions of this subparagraph, be deliverable upon conversion of a Class
A Share the Corporation shall issue a non-voting and non-dividend bearing
bearer scrip certificate of the Corporation in respect of such fractional
interest, which scrip certificate, when surrendered to the transfer agent for
the Common Shares at any office for the transfer of Common Shares of the
Corporation, together with similar scrip certificates representing in the
aggregate the right to receive at least one whole Common Share, shall be
exchangeable for a share certificate or certificates for the full number of
Common Shares called for by all the scrip certificates so surrendered and a new
scrip certificate in respect of any remaining fractional interest in a Common
Share called for thereby.  Such scrip certificate shall become void on such
date, not less than two years after the date of issuance thereof, as shall be
determined by the directors of the Corporation and stated in such scrip
certificate and on such date each such scrip certificate which has become void
and the fractional interest represented thereby shall be deemed to have been
purchased by the Corporation.  Such scrip certificate shall be in such form and
contain such reasonable terms and provisions as the directors shall at any time
or from time to time determine.


<PAGE>   35




                                                                              1P

Voting Rights

7.1 Except as required by the Business Corporations Act, as now enacted or as
the same may from time to time be amended, re-enacted or replaced (and in the
case of such amendment, re-enactment or replacement, any reference herein shall
be read as referring to the amended, re-enacted or replaced provisions) (the
"Act"), the holders of the Class A Shares shall not be entitled as such (except
as hereinafer specifically provided) to receive notice of or to attend any
meeting of the shareholders of the Corporation and shall not be entitled to
vote at any such meeting.  The holders of the Class A Shares shall, however, be
entitled to notice of meetings of the shareholders called for the purpose of
authorizing the dissolution of the Corporation or the sale of its undertaking
or a substantial part thereof.

General

8.1 The confirmation described in section 180 of the Act, of a resolution
authorizing an amendment to the articles deleting or varying a preference,
right, condition, restriction, limitation or prohibition attaching to the Class
A Shares or creating special shares ranking in any respect in priority to or on
a parity with the Class A Shares may be given by at least two-thirds (2/3) of
the votes cast at a meeting of the holders of the Class A Shares duly called
for that purpose and held upon at least twenty-one (21) days notice at which
the holders of at least ten per cent (10%) of the then outstanding Class A
Shares are present or represented by proxy.  If at any such meeting the holders
of ten per cent (10%) of the outstanding Class A Shares are not present or
represented by proxy within half an hour after the time appointed for the
meeting, then the meeting shall be adjourned to such date not being less than
fourteen (14) days later and to such time and place as may be appointed by the
chairman and at least ten (10) days' notice shall be given of such adjourned
meeting but it shall not be necessary in such notice to specify the purpose for
which the meeting was originally called.  At such adjourned meeting the holders
of Class A Shares present or represented by proxy may transact the business for
which the meeting was originally called and the confirmation of the holders of
Class A Shares referred to above may be given by at least two-thirds (2/3) of
the votes cast at such adjourned meeting.  The formalities to be observed with
respect to the giving of notice of any such meeting and the conduct thereof
shall be those from time to time prescribed in the by-laws of the Corporation
with respect to meetings of shareholders.  On every poll taken at every such
meeting


<PAGE>   36




                                                                               2

every holder of Class A Shares shall be entitled to one (1) vote in respect of
each Class A Share held.

8.2 Save and except with respect to dividends, the Common Shares shall rank
junior to the Class A Shares and shall be subject in all respects to the
preferences, rights, conditions, restrictions, limitations and prohibitions
attaching to the Class A Shares.

B. Any two officers or directors of the Corporation be and they are hereby
authorized and directed on behalf of the Corporation to deliver Articles of
Amendment in duplicate to the Minister of Consumer and Commercial Relations and
to sign and execute all documents and to do all things necessary or advisable
in connection with the foregoing."


5.  The amendment has been duly authorized    La modification a ete dument
    as required by Sections 167 and 169       autorisee conformement a 
    (as applicable) of the Business           l'article 167 et, s'il y a
    Corporations Act.                         lieu, a l'article 169 de la
                                              Loi sur les compagnies.

6.  The resolution authorizing the            Les actionnaires ou les
    amendment was approved by the             administrateurs (le cas
    shareholders/directors (as                echeant) de la compagnie ont
    applicable) of the corporation on         approuve la resolution
                                              autorisant la modification

                                11 December 1981
- -------------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)

These articles are signed in duplicate.      Les presents statuts sont 
                                             signes en double
                                             exemplaire.


                                             GEDDES RESOURCES LIMITED
                                      --------------------------------------
                                              (Name of Corporation)
                                      (Denomination sociale de la compagnie)


<PAGE>   37




                                                     ONTARIO CORPORATION NUMBER
                                                               481860         


                             ARTICLES OF AMENDMENT



               1. THE NAME OF THE CORPORATION IS
               G E D D E S  R E S O U R C E S  L I M I T E D



               2.   DATE OF INCORPORATION/AMALGAMATION  June 3, 1981
                                                      ---------------
                                                      (DAY, MONTH AND
                                                           YEAR)

               3.   THE FOLLOWING IS A CERTIFIED COPY OF THE RESOLUTION AMENDING
                    THE ARTICLES OF THE CORPORATION:

                         WHEREAS Geddes Resources Limited (the "Corporation")
                    was incorporated under the Laws of the Province of Ontario
                    by Articles of Incorporation dated June 3, 1981;

                         AND WHEREAS the authorized capital of the Corporation
                    is divided into 10,000,000 non-cumulative, convertible,
                    redeemable, non-voting Class A preferred shares with a par
                    value of $10.00 each (hereinafter called "Class A Shares")
                    and 10,000,000 Common Shares without par value;

                         AND WHEREAS 74,910 of the said Class A shares and
                    909,910 Common Shares without par value are outstanding as
                    fully paid and non-assessable;

                         NOW THEREFORE BE IT RESOLVED AS A SPECIAL RESOLUTION
                    THAT the Articles of the Corporation are hereby amended to:

                         (a) decrease the authorized capital of the corporation
                    by cancelling the 9,925,190 unissued Class A shares; and


<PAGE>   38




                         (b) reclassify, change and subdivide the 74,910 issued
                    Class A shares of the Corporation into 374,550 shares
                    without par value on the basis of 5 shares without par
                    value for each issued Class A share, the said shares
                    without par value to rank on a parity with the 909,910
                    issued and outstanding shares without par value so that the
                    authorized capital of the corporation shall consist of
                    10,000,000 shares without par value of which 1,284,460 of
                    the said shares are declared to be issued and outstanding
                    as fully paid and non-assessable.


               4.   THE AMENDMENT HAS BEEN DULY AUTHORIZED AS REQUIRED
                    BY SUBSECTIONS 2, 3 AND 4 (AS APPLICABLE) OF
                    SECTION 189 OF THE BUSINESS CORPORATIONS ACT.

               5.   THE RESOLUTION AUTHORIZING THE AMENDMENT WAS
                    CONFIRMED BY THE SHAREHOLDERS OF THE CORPORATION ON
                    June 30, 1982
                    -------------

               6.   THESE ARTICLES ARE EXECUTED IN DUPLICATE FOR
                    DELIVERY TO THE MINISTER.

               CERTIFIED

                    GEDDES RESOURCES LIMITED
                    ------------------------
                     (NAME OF CORPORATION)

               (CORPORATE SEAL)  BY  /s/            President
                                     -------------------------------            
                                     (SIGNATURE) (DESCRIPTION OF
                                                     OFFICE)


                                BY  /s/              Secretary
                                    ---------------------------------    
                                    (SIGNATURE)  (DESCRIPTION OF
                                                     OFFICE)


<PAGE>   39





                           Ontario Corporation Number
                       Numero de la compagnie en Ontario
                                     481860

                             ARTICLES OF AMENDMENT
                            STATUTS DE MODIFICATION


          1.    The present name of the       Denomination sociale
                corporation is:               actuelle de la compagnie:

                G E D D E S  R E S O U R C E S  L I M I T E D


          2.    The name of the corporation   Nouvelle denomination
                is changed to (if applica-    sociale de la compagnie
                ble):                         (s'il y a lieu):



          3.    Date of incorporation         Date de la constitution ou
                amalgamation:                 de la fusion:
                                    3 June 1981
                                    ----------------------
                                    (Day, Month, Year,)
                                    (jour, mois, annee)


          4.   The articles of the corpora-   Les statuts de la compagnie
               tion are amended as follows:   sont modifies de la facon
                                              suivante:


                    RESOLVED that the articles of the Corporation be amended
               to provide that the Corporation shall have a minimum of four
               and a maximum of twelve directors.


<PAGE>   40














          5.   The amendment has been duly     La modification a ete
               authorized as required by       dument autorisee conformement
               Sections 167 and 169 (as        a l'article 167 et, s'il y
               applicable) of the Business     a lieu, a l'article 169 de la
               Corporations Act.               Loi sur les compagnies.

          6.   The resolution authorizing      Les actionnaires ou les
               the amendment was approved      administrateurs (le cas
               by the shareholders/            echeant) de la compagnie
               directors (as applicable)       ont approuve la resolution
               of the corporation on           autorisant la modification


                                 28 April 1987
- -----------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)


            These articles are signed          Les presents statuts sont
            in duplicate.                      signes en double
                                               exemplaire.

                            GEDDES RESOURCES LIMITED
                            ------------------------
                             (Name of Corporation)
                     (Denomination sociale de la compagnie)


                By/Par: /s/                  Secretary-Treasurer
                        -----------------------------------------------
                        (Signature)          (Description of Office)
                        (Signature)          (Fonction)

<PAGE>   41





                           Ontario Corporation Number
                       Numero de la compagnie en Ontario

                                     481860



                             ARTICLES OF AMENDMENT
                            STATUTS DE MODIFICATION


1.   The present name of the         Denomination sociale actuelle de
     corporation is:                 la compagnie:


     G E D D E S  R E S O U R C E S  L I M I T E D

2.   The name of the corporation is   Nouvelle denomination sociale de la
     changed to (if applicable):      compagnie (s'il y a lieu)

3.   Date of incorporation/           Date de la constitution ou de
     amalgamation                     la fusion:

                                  3 June 1981
- -----------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)

4.   The articles of the corporation  Les statuts de la compagnie sont
     are amended as follows:          modifies de la facon suivante:



     WHEREAS the authorized capital of the Corporation consists of 10,000,000
shares without par value;

     AND WHEREAS it is considered necessary and expedient in the interests of
the Corporation to amend its articles of incorporation as hereinafter provided;

     BE IT RESOLVED as a special resolution that the articles of the
Corporation be amended as follows:



<PAGE>   42




(a) to redesignate the 10,000,000 shares of the Corporation, both issued and
unissued, as common shares;


<PAGE>   43




(b)  to delete the number of shares without par value that the Corporation is
     authorized to issue and to provide that the Corporation may henceforth
     issue an unlimited number of common shares without par value;

(c)  to declare that, after giving effect to the foregoing, the classes and
     maximum number of shares that the Corporation is authorized to issue shall
     be an unlimited number of common shares without par value.








5.   The amendment has been duly authorized     La modification a ete dument
     as required by Sections 167 and 169        autorisee conformement a 
     (as applicable) of the Business            l'article 167 et, s'il y a
     Corporations Act.                          lieu, a l'article 169 de 
                                                la Loi sur les compagnies.

6.   The resolution authorizing the             Les actionnaires ou les
     amendment was approved by the              adminstrateurs (le cas
     shareholders/directors (as                 echeant) de la compagnie ont
     applicable) of the corporation on          approuve la resolution
                                                autorisant la modification

                                 30 March 1988
- --------------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)


These articles are signed in .                  Les presents statuts sont
duplicate                                       signes en double exemplaire.


                                            GEDDES RESOURCES LIMITED
                                     -------------------------------------
                                              (Name of Corporation)
                                       (Denomination sociale de compagnie)


            G. Samuel Carpenter, Secretary - By/Par. /s/ G.S. Carpenter
                                                     ---------------------------
                                 Treasurer (Signature) (Description of Office)


<PAGE>   44




                                                  Ontario Corporation Number
                                               Numero de la compagnie en Ontario

                                                481860



                             ARTICLES OF AMENDMENT
                            STATUTS DE MODIFICATION


1.   The present name of the corporation        Denomination sociale 
     is:                                        actuelle de la compagnie:

     G E D D E S  R E S O U R C E S  L I M I T E D



2.   The name of the corporation is             Nouvelle denomination sociale
     changed to (if applicable):  N/A           de la compagnie (s'il y a lieu):



3.   Date of incorporation/amalgamation:        Date de la constitution
                                                ou de la fusion:


                                   03/06/81
- --------------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)

4.   The articles of the corporation            Les statuts de la
     are amended as follows:                    compagnie sont modifies
                                                de la facon suivante:


    RESOLVED AS A SPECIAL RESOLUTION THAT the Articles of the Corporation be
    amended to provide that the number of directors of the Corporation shall
    consist of a minimum of three (3) and a maximum of twelve (12) and that:


    (i)  until otherwise determined, the number of directors of the Corporation
         shall be 3; and

    (ii) having regard to such minimum and maximum numbers, the directors of the
         Corporation are hereby empowered to determine the number of directors
         of the Corporation hereafter from time to time.


<PAGE>   45








5.   The amendment has been duly             La modification a ete
     authorized as required by               dument autorisee
     Sections 168 & 170 (as applicable)      conformement a
     of the Business Corporations            l'article 168 et, s'il y
     Act.                                    a lieu, a l'article 170
                                             de la Loi sur les
                                             compagnies.

6.   The resolution authorizing the          Les actionnaires ou les
     amendment was approved by the           administrateurs (le cas
     shareholders/directors (as applicable)  echeant) de la compagnie of
     of the corporation on                   ont approuve la resolution
                                             autorisant la modifica-
                                             tion


                                    29/06/93
- -------------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)


These articles are signed in duplicate.      Les presents statuts sont
                                             signes en double
                                             exemplaire


                            GEDDES RESOURCES LIMITED
                     --------------------------------------
                             (Name of Corporation)
                     (Denomination sociale de la compagnie)

               By/Par:   /s/                           Secretary
                      ----------------------------------------------------
                                (Signature)            (Description of
                                                       Office)
                                (Signature)            (Fonction)
<PAGE>   46



                                                    Ontario Corporation Number
                                                    Numero de la compagnie en
                                                    Ontario
                                                    
                                                             481860




                            ARTICLES OF ARRANGEMENT
                              STATUS D'ARRANGEMENT


1. The name of the corporation is:                 Denomination sociale de
                                                   la compagnie:

   G E D D E S  R E S O U R C E S  L I M I T E D



2. The new name of the corporation                 Nouvelle denomination sociale
   (if changed by the arrangement:)                de la compagnie si elle
                                                   est modifiee par suite de
                                                   l'arrangement:



3. Date of incorporation/amalgamation:             Date de la constitution
                                                   ou de la fusion:

                                 03 JUNE 1981
- ------------------------------------------------------------------------------
                              (Day, Month, Year)
                              (jour, mois, annee)


4. The arrangement has been approved               Les actionnaires de la
   by the shareholders of the                      compagnie ont approuve
   corporation in accordance with                  l'arrangement conforme-
   section 182 of the Business                     ment a l'article 182 de
   Corporations Act.                               la Loi sur les
                                                   compagnies.

5. A copy of the arrangement is                    Une copie de l'arrange-
   attached to these articles as                   ment constitue l'annexe
   Exhibit "A".                                    "A".



<PAGE>   47



        6.   The arrangement was approved by the    La cour a approuve
             court on                               l'arrangement le

                                24 OCTOBER 1995
   -----------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)

             and a certified copy of the Order      une copie certifiee
             of the court is attached to these      conforme de l'ordonnance de
             articles as Exhibit "B".               la cour constitue l'annexe
                                                    "B".

       7.   The terms and conditions to which       Les conditions que
            the scheme is made subject by the       l'ordonnance impose au
            Order have been complied with.          plan en vertu de
                                                    l'ordonnance ont
                                                    ete respectees.

     These articles are signed in                   Les presents statuts sont
     duplicate.                                     signes en double
                                                    exemplaire.


                                              GEDDES RESOURCES LIMITED
                                       --------------------------------------
                                               (Name of Corporation)
                                       (Denomination sociale de la compagnie)


                                        By/Par:  /s/                Secretary
                                       --------------------------------------




<PAGE>   48




                                  EXHIBIT "A"

                             ARRANGEMENT AGREEMENT

THIS ARRANGEMENT AGREEMENT is dated as of the 29th day of August, 1995.

BETWEEN:
                 ROYAL OAK MINES INC., a corporation amalgamated
                 pursuant to the provisions of the Business
                 Corporations Act (Ontario)

                 (hereinafter referred to as "Royal Oak")

                                                              OF THE FIRST PART,

                      - and -

                 EL CONDOR RESOURCES LTD., a corporation
                 amalgamated pursuant to the provisions of the
                 British Columbia Company Act

                 (hereinafter referred to as "El Condor")

                                                             OF THE SECOND PART,

                      - and -

                 ST. PHILIPS RESOURCES INC., a corporation
                 incorporated pursuant to the provisions of the
                 British Columbia Company Act

                 (hereinafter referred to as "St. Philips")

                                                              OF THE THIRD PART,

                      - and -

                 GEDDES RESOURCES LIMITED, a corporation
                 incorporated pursuant to the provisions of the
                 Business Corporation Act (Ontario)

                 (hereinafter referred to as "Geddes")

                                                             OF THE FOURTH PART.

     WHEREAS El Condor and St. Philips propose to convene meetings of their
members to, among other things, authorize their continuance under the OBCA and
to approve the Arrangement in accordance with the provisions of the OBCA;


<PAGE>   49







     AND WHEREAS Geddes proposes to convene a meeting of its shareholders to,
among other things, approve the Arrangement in accordance with the provisions
of the OBCA;

     AND WHEREAS, upon the Arrangement becoming effective, the common shares of
each of El Condor, St. Philips and Geddes will be exchanged for Royal Oak
Common Shares and/or cash in accordance with the provisions of this Agreement
and the Plan of Arrangement;

     NOW THEREFORE, in consideration of the premises and the respective
covenants and agreements herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
each of the parties hereto, the parties hereto hereby covenant and agree as
follows:

                                       1


<PAGE>   50




                                  ARTICLE ONE
                         DEFINITIONS AND INTERPRETATION

     Section 1.01  Definitions:  In this Agreement, unless there is something
in the subject matter or context inconsistent therewith, the following
capitalized words and terms shall have the following meanings:

"Agreement" means this arrangement agreement as the same may be supplemented or
amended from time to time;

"Arrangement" means the arrangement pursuant to section 182 of the OBCA, on the
terms and conditions set forth herein and in the Plan of Arrangement;

"BCCA" means the British Columbia Company Act, R.S.B.C. 1979, c.59, as amended;

"Business Day" means a day which is not a Saturday, Sunday or statutory holiday
in Canada;

"Charter Documents" means memorandum and articles or articles and by-laws, as
applicable;

"Court" means the Ontario Court of Justice (General Division);

"Director" means the Director under the OBCA;

"Dissenting Shareholders" means holders of El Condor Common Shares, St. Philips
Common Shares or Geddes Common Shares who exercise in accordance with
applicable statutory provisions the right of dissent available to such holders
in respect of the continuance of El Condor and St. Philips under the OBCA
and/or the Arrangement and do not withdraw such dissent;

"Effective Date" means the date set forth in the certificates of arrangement
issued by the Director to each of El Condor, St. Philips and Geddes under the
OBCA giving effect to the Arrangement;

"El Condor" means El Condor Resources Ltd., a corporation amalgamated under the
BCCA;

"El Condor Common Shares" means the common shares in the capital of El Condor,
as the same are constituted on the date hereof;

"El Condor Financial Statements" means the audited financial statements of El
Condor for the year ended December 31, 1994 and the unaudited financial
statements of El Condor for the six months ended June 30, 1995;



<PAGE>   51
"El Condor Lock-Up Agreement" means the agreement made the 16th day of August,
1995 among Royal Oak, El Condor and the El Condor Principal Shareholders;

"El Condor Meeting" means the extraordinary general meeting of shareholders of
El Condor to be held to consider, among other things, the Arrangement, and any
adjournment thereof;

"El Condor Principal Shareholders" means Robert G. Hunter, Robert A. Dickinson,
David J. Copeland, Ronald W. Thiessen and Douglas B. Forster;

"Final Order" means the final order of the Court approving the Arrangement;

"Geddes" means Geddes Resources Limited, a corporation incorporated under the
OBCA;

"Geddes Common Shares" means the common shares in the capital of Geddes, as the
same are constituted on the date hereof;

"Geddes Financial Statements" means the audited consolidated financial
statements of Geddes for the year ended December 31, 1994 and the unaudited
consolidated financial statements of Geddes for the six months ended June 30,
1995;

"Geddes Meeting" means the special meeting of shareholders of Geddes to be held
to consider the Arrangement and any adjournment thereof;

"Interim Order" means the interim order of the Court concerning the Arrangement
pursuant to the application therefor contemplated by section 2.01 hereof;

"Meetings" means the El Condor Meeting, the St. Philips Meeting and the Geddes
Meeting;

"OBCA" means the Business Corporations Act, R.S.O. 1990, c. B.16, as amended;

"Person" includes an individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, trustee, executor, administrator or other
legal representative of the Crown or any agency or instrumentality thereof;

                                       2

"Plan of Arrangement" means the plan of arrangement attached to this Agreement
as Exhibit 1, as amended from time to time;

"Prior Valuation" means an existing independent appraisal or valuation or any
material non-independent appraisal or valuation in respect of a company, its
material assets or its securities;



<PAGE>   52




"Proxy Circular" means the joint management proxy circular of El Condor, St.
Philips and Geddes to be sent to the shareholders of each of El Condor, St.
Philips and Geddes in connection with the Meetings;

"Royal Oak" means Royal Oak Mines Inc., a corporation amalgamated under the
OBCA;

"Royal Oak Common Shares" means the common shares in the capital of Royal Oak,
as the same are constituted on the date hereof;

"Royal Oak Financial Statements" means the audited consolidated financial
statements of Royal Oak for the year ended December 31, 1994 and the unaudited
consolidated financial statements of Royal Oak for the six months ended June
30, 1995;

"St. Philips" means St. Philips Resources Inc., a corporation incorporated
under the BCCA;

"St. Philips Common Shares" means the common shares in the capital of St.
Philips, as the same are constituted on the date hereof;

"St. Philips Financial Statements" means the audited consolidated financial
statements of St. Philips for the year ended December 31, 1994 and the
unaudited consolidated financial statements of St. Philips for the six months
ended June 30, 1995;

"St. Philips Directors" means John Ivany, Jim Heras, James S. Kermeen and
Evangelos Catevatis;

"St. Philips Lock-Up Agreement" means the agreement made the 18th day of
August, 1995 among Royal Oak, St. Philips and the St. Philips Directors;

"St. Philips Meeting" means the extraordinary general meeting of shareholders
of St. Philips to be held to consider, among other things, the Arrangement, and
any adjournment thereof; and

"Subsidiary" means a subsidiary as defined in the OBCA.

     Section 1.02  Currency:  All amounts of money which are referred to in
this Agreement are expressed in lawful money of Canada unless otherwise
specified.

     Section 1.03  Interpretation Not Affected by Heading:  The division of
this Agreement into articles, sections, subsections, paragraphs and
subparagraphs and the insertion of headings are for convenience of reference
only and shall not affect the construction or interpretation of the provisions
of this Agreement.  The terms "this Agreement", "hereof", "herein", "hereunder"
and similar expressions refer to this Agreement and


<PAGE>   53



the exhibit hereto as a whole and not to any particular article, section,
subsection, paragraph or subparagraph hereof and include any agreement or
instrument supplementary or ancillary hereto.

     Section 1.04  Number and Gender:  Unless the context otherwise requires,
words importing the singular number only shall include the plural and vice
versa and words importing the use of either gender shall include both genders
and neuter.

     Section 1.05  Date for Any Action:  In the event that any date on which
any action is required to be taken hereunder by any of the parties hereto is
not a Business Day in the place where the action is required to be taken, such
action shall be required to be taken on the next succeeding day which is a
Business Day in such place.

     Section 1.06  Meaning:  Words and phrases used herein and defined in the
OBCA shall have the same meaning herein as in the OBCA unless the context
otherwise requires.

                                  ARTICLE TWO

                                  ARRANGEMENT

     Section 2.01  Arrangement:  As soon as reasonably practicable, El Condor,
St. Philips and Geddes shall apply to the Court pursuant to section 182 of the
OBCA for an order approving the Arrangement and in connection with such
application shall:

                                       3



<PAGE>   54




     (a)  forthwith file, proceed with and diligently prosecute an
          application for an Interim Order under section 182 of the OBCA
          providing for, among other things, the calling and holding of the
          Meetings; and

     (b)  subject to obtaining such approval of the shareholders of El
          Condor, St. Philips and Geddes as contemplated in the Interim Order
          as may be directed by the Court in the Interim Order, take the steps
          necessary  to submit the Arrangement to the Court and apply for the
          Final Order,

and, subject to the fulfilment of the conditions set forth in Article Five, El
Condor, St. Philips and Geddes shall deliver to the Director articles of
arrangement and such other documents as may be required to give effect to the
Arrangement.

     Section 2.02  Effective Date:  The Arrangement shall become effective on
the Effective Date, which shall not be more than ten Business Days after the
date of the Final Order unless otherwise agreed to in writing by Royal Oak, El
Condor, St. Philips and Geddes.

                                 ARTICLE THREE

                         REPRESENTATIONS AND WARRANTIES

     Section 3.01  Representations and Warranties of Royal Oak:  Royal Oak
hereby represents and warrants to and in favour of the other parties hereto and
acknowledges that such parties are relying upon such representations and
warranties in connection with the matters contemplated by this Agreement, that:

     (a)  Royal Oak has been duly amalgamated and is a valid and
          subsisting corporation under the provisions of the OBCA, has all
          requisite corporate power and authority to carry on its business as
          now being carried on by it and owns or leases and operates its
          properties and assets and is duly licensed or otherwise qualified to
          carry on business in each jurisdiction in which a material amount of
          its business is conducted or wherein the character of the properties
          and assets now owned by it makes such qualification necessary;

     (b)  Royal Oak has no Subsidiaries which are material to its
          business or operations;

     (c)  the authorized capital of Royal Oak consists of an unlimited
          number of common shares and an unlimited number of special shares,
          issuable in series, of which as of the date hereof, 119,020,714
          common shares and no special shares were issued and outstanding;



<PAGE>   55




     (d)  the execution, delivery and performance of this Agreement and
          the agreements, documents and transactions contemplated herein are
          within the corporate power and authority of Royal Oak and have been
          duly authorized by all necessary corporate action and this Agreement
          constitutes a valid and binding obligation of Royal Oak enforceable
          in accordance with its terms;

     (e)  Royal Oak does not have any outstanding agreements,
          subscriptions, warrants, options or commitments, nor has it granted
          any rights or privileges capable of becoming an agreement,
          subscription, warrant, option or commitment, obligating Royal Oak to
          issue any additional shares or other securities, except for options
          granted to directors, officers and employees of Royal Oak to purchase
          an aggregate of 2,380,166 Royal Oak Common Shares and warrants to
          purchase an aggregate of 3,000,000 Royal Oak Common Shares;

     (f)  the Royal Oak Financial Statements present fairly the
          consolidated financial condition and results of operations of Royal
          Oak as at the respective dates and for the respective periods
          indicated in such consolidated financial statements and have been
          prepared in accordance with Canadian generally accepted accounting
          principles applied on a consistent basis, except as otherwise stated
          in the notes to such consolidated financial statements;

     (g)  since June 30, 1995, there has been no material adverse change
          in the business, operations, properties, assets or condition,
          financial or otherwise, of Royal Oak on a consolidated basis from
          that shown in the unaudited consolidated financial statements of
          Royal Oak as at and for the six months ended June 30, 1995;

     (h)  Royal Oak is the beneficial owner of the properties and assets
          described as being owned by it in the Royal Oak Financial Statements
          free and clear of material encumbrances, except as disclosed in the
          Royal Oak Financial Statements;


                                       4

     (i)  Royal Oak has no liability or obligation including, without
          limitation, tax liabilities, whether accrued, absolute, contingent or
          otherwise, not reflected in the Royal Oak Financial Statements,
          except liabilities and obligations incurred in the ordinary course of
          business since June 30, 1995, which liabilities and obligations are
          not materially adverse in the aggregate;


<PAGE>   56




     (j)  except as described in the Royal Oak Financial Statements,
          there are no actions, suits, proceedings, investigations or
          outstanding claims or demands, whether or not purportedly on behalf
          of Royal Oak, pending, or, to the knowledge of Royal Oak, threatened
          against or affecting Royal Oak at law or in equity or before or by
          any governmental department, commission, board, bureau, agency or
          instrumentality, domestic or foreign, or before any arbitrator, nor
          is there any judgment, order, decree or award of any court or other
          governmental authority having jurisdiction, obtained, pending or to
          the knowledge of Royal Oak, threatened, against Royal Oak, which
          would prevent or materially hinder the consummation of the
          Arrangement or the other transactions contemplated by this Agreement
          or which would involve the reasonable possibility of any material
          judgment or liability, whether or not covered by insurance, which
          could prevent or materially hinder the consummation of the
          Arrangement and the timely completion of Royal Oak's obligations
          pursuant to the Arrangement or which in the aggregate would have a
          material adverse effect on the business, operations, properties,
          assets or condition, financial or otherwise, of Royal Oak;

     (k)  since June 30, 1995 Royal Oak has not declared or paid any
          dividends or made any distribution of its properties or assets to its
          shareholders and Royal Oak has not disposed of any of its properties
          or assets or incurred any material indebtedness;

     (l)  the business of Royal Oak is being conducted in all material
          respects in compliance with all applicable laws, regulations and
          ordinances of all authorities having jurisdiction;

     (m)  each contract or agreement with Royal Oak and any other Person
          which is material to the ownership, use or operation of a material
          portion of the business, properties or assets of Royal Oak is in full
          force and effect and, to the best of the knowledge and belief of
          Royal Oak, is valid, binding and enforceable against each of the
          parties thereto in accordance with its terms and no material breach
          or default exists in respect thereof on the part of any party thereto
          and no event has occurred which, with the giving of notice or the
          lapse of time or both, would constitute such a material breach or
          default;

     (n)  none of the execution and delivery of this Agreement, the
          consummation of the transactions contemplated hereby


<PAGE>   57



           or the fulfillment of or compliance with the terms and provisions
           hereof do or will, nor will they with the giving of notice or the
           lapse of time or both:

           (i)   violate any provision of any law or administrative
                 regulation or any judicial or administrative order, award,
                 judgment or decree applicable to Royal Oak,

           (ii)  conflict with any of the terms, conditions or
                 provisions of the Charter Documents of Royal Oak,

           (iii) conflict with, result in a breach of, constitute a
                 default under, or accelerate or permit the acceleration of the
                 performance required by, any material agreement, covenant,
                 undertaking, commitment, instrument, judgment, order, decree
                 or award to which Royal Oak is a party or by which it is bound
                 or to which its property is subject, all as of the Effective
                 Date, or

           (iv)  result in the cancellation, suspension or material
                 alteration in the terms of any material licence, permit or
                 authority held by Royal Oak or in the creation of any lien,
                 charge, security interest or encumbrance upon any of the
                 material assets of Royal Oak under any such material agreement,
                 covenant, undertaking, commitment, instrument, judgment, order,
                 decree or award or give to any other Person any material
                 interest or rights, including rights of purchase, termination,
                 cancellation or acceleration, under any such material
                 agreement, covenant, undertaking, commitment, instrument,
                 judgment, order, decree or award;

     (o)  the Form 20-F of Royal Oak dated May 19, 1995, together with
          the Royal Oak Financial Statements, the 1994 Annual Report of Royal
          Oak and other public filings made by Royal Oak under applicable
          Canadian disclosure laws since May 19, 1995, when taken together
          constitute full, true and plain disclosure of all material facts
          relating to the business, operations and capital of Royal Oak and the
          other matters therein and do not contain any untrue statement of a
          material fact or omit to state any material

                                       5


<PAGE>   58






           fact required to be stated therein or necessary in order to make the
           statements made therein not misleading in light of the circumstances
           under which they were made and, in particular, no material fact
           exists on the date hereof which was not disclosed in such public
           filings and which if publicly disclosed would reflect that a
           material adverse change (or an event, condition or state of facts
           which might reasonably have been expected to give rise to any such
           change) had occurred in the assets, liabilities, business,
           operations or capital of Royal Oak; and

     (p)  there have been no Prior Valuations with respect to Royal Oak
          prepared within the previous 24 months, except as have been disclosed
          to each of the parties hereto.

     Section 3.02  Representations and Warranties of El Condor:  El Condor
hereby represents and warrants to and in favour of the other parties hereto and
acknowledges that such parties are relying upon such representations and
warranties in connection with the matters contemplated by this Agreement, that:

     (a)  El Condor has been duly amalgamated and is a valid and
          subsisting corporation under the provisions of the BCCA, has all
          requisite corporate power and authority to carry on its business as
          now being carried on by it and owns or leases and operates its
          properties and assets and is duly licensed or otherwise qualified to
          carry on business in each jurisdiction in which a material amount of
          its business is conducted or wherein the character of the properties
          and assets now owned by it makes such qualification necessary;

     (b)  El Condor has no Subsidiaries;

     (c)  the authorized capital of El Condor consists of 100,000,000
          common shares, of which as of the date hereof, 14,503,903 common
          shares were issued and outstanding;

     (d)  the execution, delivery and performance of this Agreement and
          the agreements, documents and transactions contemplated herein are
          within the corporate power and authority of El Condor and have been
          duly authorized by all necessary corporate action and this Agreement
          constitutes a valid and binding obligation of El Condor enforceable
          in accordance with its terms;

     (e)  El Condor does not have any outstanding agreements,
          subscriptions, warrants, options or commitments, nor has


<PAGE>   59



          it granted any rights or privileges capable of becoming an agreement,
          subscription, warrant, option or commitment, obligating El Condor to
          issue any additional shares or other securities;

     (f)  the El Condor Financial Statements present fairly the financial
          condition and results of operations of El Condor as at the respective
          dates and for the respective periods indicated in such financial
          statements and have been prepared in accordance with Canadian
          generally accepted accounting principles applied on a consistent
          basis, except as otherwise stated in the notes to such financial
          statements;

     (g)  since June 30, 1995, there has been no material adverse change
          in the business, operations, properties, assets or condition,
          financial or otherwise, of El Condor from that shown in the unaudited
          financial statements of El Condor as at and for the six months ended
          June 30, 1995;

     (h)  El Condor is the beneficial owner of the properties and assets
          described as being owned by it in the El Condor Financial Statements
          free and clear of material encumbrances, except as disclosed in the
          El Condor Financial Statements;

     (i)  El Condor has no liability or obligation including, without
          limitation, tax liabilities, whether accrued, absolute, contingent or
          otherwise, not reflected in the El Condor Financial Statements,
          except liabilities and obligations incurred in the ordinary course of
          business since June 30, 1995, which liabilities and obligations are
          not materially adverse in the aggregate and except for El Condor's
          engagement of TD Securities as its financial advisor and the
          obligation to remunerate TD Securities in connection with its
          services to be provided to El Condor pursuant to the Arrangement and
          except as contemplated in the El Condor Lock-Up Agreement;

     (j)  except as described in the El Condor Financial Statements,
          there are no actions, suits, proceedings, investigations or
          outstanding claims or demands, whether or not purportedly on behalf
          of El Condor, pending, or, to the knowledge of El Condor, threatened
          against or affecting El Condor at law or in equity or before or by
          any governmental department, commission, board, bureau, agency or
          instrumentality, domestic or foreign, or before any arbitrator, nor
          is there any judgment, order, decree or award of any court or other
          governmental authority having jurisdiction, obtained, pending or to
          the knowledge of El Condor, threatened, against El


<PAGE>   60



           Condor, which would prevent or materially hinder the consummation

                                       6



<PAGE>   61




          of the Arrangement or the other transactions contemplated by this
          Agreement or which would involve the reasonable possibility of any
          material judgment or liability, whether or not covered by insurance,
          which could prevent or materially hinder the consummation of the
          Arrangement and the timely completion of El Condor's obligations
          pursuant to the Arrangement or which in the aggregate would have a
          material adverse effect on the business, operations, properties,
          assets or condition, financial or otherwise, of El Condor;

     (k)  since June 30, 1995 El Condor has not declared or paid any dividends
          or made any distribution of its properties or assets to its
          shareholders and El Condor has not disposed of any of its properties
          or assets or incurred any material indebtedness;

     (l)  the business of El Condor is being conducted in all material
          respects in compliance with all applicable laws, regulations and
          ordinances of all authorities having jurisdiction;

     (m)  each contract or agreement with El Condor and any other Person
          which is material to the ownership, use or operation of a material
          portion of the business, properties or assets of El Condor is in full
          force and effect and, to the best of the knowledge and belief of El
          Condor, is valid, binding and enforceable against each of the parties
          thereto in accordance with its terms and no material breach or
          default exists in respect thereof on the part of any party thereto
          and no event has occurred which, with the giving of notice or the
          lapse of time or both, would constitute such a material breach or
          default;

     (n)  none of the execution and delivery of this Agreement, the
          consummation of the transactions contemplated hereby or the
          fulfillment of or compliance with the terms and provisions hereof do
          or will, nor will they with the giving of notice or the lapse of time
          or both:

           (i)   violate any provision of any law or administrative
                 regulation or any judicial or administrative order, award,
                 judgment or decree applicable to El Condor,

           (ii)  conflict with any of the terms, conditions or provisions
                 of the Charter Documents of El Condor,

           (iii) conflict with, result in a breach of, constitute a  default
                 under, or accelerate or permit the acceleration of the
                 performance required by, any


<PAGE>   62



                material agreement, covenant, undertaking, commitment,
                instrument, judgment, order, decree or award to which El
                Condor is a party or by which it is bound or to which its
                property is subject, all as of the Effective Date, or

           (iv) result in the cancellation, suspension or material
                alteration in the terms of any material licence, permit or
                authority held by El Condor or in the creation of any lien,
                charge, security interest or encumbrance upon any of the
                material assets of El Condor under any such material agreement,
                covenant, undertaking, commitment, instrument, judgment, order,
                decree or award or give to any other Person any material
                interest or rights, including rights of purchase, termination,
                cancellation or acceleration, under any such material
                agreement, covenant, undertaking, commitment, instrument,
                judgment, order, decree or award;

     (o)  the Form 20-F of El Condor dated June 28, 1995, together with
          the El Condor Financial Statements, the Information Circular for the
          Annual General Meeting of Shareholders of El Condor held on June 15,
          1995 and other public filings made by El Condor under applicable
          Canadian disclosure laws since June 28, 1995, when taken together
          constitute full, true and plain disclosure of all material facts
          relating to the business, operations and capital of El Condor and the
          other matters therein and do not contain any untrue statement of a
          material fact or omit to state any material fact required to be
          stated therein or necessary in order to make the statements made
          therein not misleading in light of the circumstances under which they
          were made and, in particular, no material fact exists on the date
          hereof which was not disclosed in such public filings and which if
          publicly disclosed would reflect that a material adverse change (or
          an event, condition or state of facts which might reasonably have
          been expected to give rise to any such change) had occurred in the
          assets, liabilities, business, operations or capital of El Condor;
          and

     (p)  there have been no Prior Valuations with respect to El Condor
          prepared within the previous 24 months, except as have been disclosed
          to each of the parties hereto.

     Section 3.03  Representations and Warrants of St. Philips:  St. Philips
hereby represents and warrants to and in favour of the other parties hereto and
acknowledges that such parties are


<PAGE>   63



relying upon such representations and warranties in connection with the matters
contemplated by this Agreement, that:

                                       7


<PAGE>   64




     (a)  each of St. Philips and Stork Ventures Ltd. ("Stork") has been
          duly incorporated and is a valid and subsisting corporation under the
          provisions of the BCCA, has all requisite corporate power and
          authority to carry on its business as now being carried on by it and
          owns or leases and operates its properties and assets and is duly
          licensed or otherwise qualified to carry on business in each
          jurisdiction in which a material amount of its business is conducted
          or wherein the character of the properties and assets now owned by it
          makes such qualification necessary;

     (b)  St. Philips has no Subsidiaries which are material to its
          business or operations other than Stork, all of the issued shares of
          which are beneficially owned by St. Philips;

     (c)  the authorized capital of St. Philips consists of 20,000,000
          common shares, of which as of the date hereof, 11,342,475 common
          shares were issued and outstanding;

     (d)  the execution, delivery and performance of this Agreement and
          the agreements, documents and transactions contemplated herein are
          within the corporate power and authority of St. Philips and have been
          duly authorized by all necessary corporate action and this Agreement
          constitutes a valid and binding obligation of St. Philips enforceable
          in accordance with its terms;

     (e)  St. Philips does not have any outstanding agreements,
          subscriptions, warrants, options or commitments, nor has it granted
          any rights or privileges capable of becoming an agreement,
          subscription, warrant, option or commitment, obligating St. Philips
          to issue any additional shares or other securities, except for
          options granted to directors, officers and employees of St. Philips
          to purchase an aggregate of 100,000 St. Philips Common Shares;

     (f)  the St. Philips Financial Statements present fairly the
          consolidated financial condition and results of operations of St.
          Philips as at the respective dates and for the respective periods
          indicated in such consolidated financial statements and have been
          prepared in accordance with Canadian generally accepted accounting
          principles applied on a consistent basis, except as otherwise stated
          in the notes to such consolidated financial statements;

     (g)  since June 30, 1995, there has been no material adverse change
          in the business, operations, properties, assets


<PAGE>   65

          or condition, financial or otherwise, of St. Philips on a
          consolidated basis from that shown in the unaudited consolidated
          financial statements of St. Philips as at and for the six months
          ended June 30, 1995;

     (h)  St. Philips is the beneficial owner of the properties and
          assets described as being owned by it in the St. Philips Financial
          Statements free and clear of material encumbrances, except as
          disclosed in the St. Philips Financial Statements;

     (i)  neither St. Philips nor Stork has any liability or obligation
          including, without limitation, tax liabilities, whether accrued,
          absolute, contingent or otherwise, not reflected in the St. Philips
          Financial Statements, except liabilities and obligations incurred in
          the ordinary course of business since June 30, 1995, which
          liabilities and obligations are not materially adverse in the
          aggregate and except for St. Philips' engagement of Nesbitt Burns as
          its financial advisor and the obligation to remunerate Nesbitt Burns
          in connection with its services to be provided to St. Philips
          pursuant to the Arrangement and except as contemplated in the St.
          Philip's Lock-Up Agreement;

     (j)  except as described in the St. Philips Financial Statements,
          there are no actions, suits, proceedings, investigations or
          outstanding claims or demands, whether or not purportedly on behalf
          of St. Philips or Stork, pending, or, to the knowledge of St.
          Philips, threatened against or affecting St. Philips or Stork at law
          or in equity or before or by any governmental department, commission,
          board, bureau, agency or instrumentality, domestic or foreign, or
          before any arbitrator, nor is there any judgment, order, decree or
          award of any court or other governmental authority having
          jurisdiction, obtained, pending or to the knowledge of St. Philips,
          threatened, against St. Philips or Stork, which would prevent or
          materially hinder the consummation of the Arrangement or the other
          transactions contemplated by this Agreement or which would involve
          the reasonable possibility of any material judgment or liability,
          whether or not covered by insurance, which could prevent or
          materially hinder the consummation of the Arrangement and the timely
          completion of St. Philips' obligations pursuant to the Arrangement or
          which in the aggregate would have a material adverse effect on the
          business, operations, properties, assets or condition, financial or
          otherwise, of St. Philips and its Subsidiaries on a consolidated
          basis;

                                       8


<PAGE>   66




     (k)  since June 30, 1995 St. Philips has not declared or paid any
          dividends or made any distribution of its properties or assets to its
          shareholders and neither St. Philips nor Stork has disposed of any of
          its properties or assets or incurred any material indebtedness save
          and except to Nesbitt Burns as contemplated in subsection 3.03(i);

     (l)  the business of St. Philips and Stork is being conducted in all
          material respects in compliance with all applicable laws, regulations
          and ordinances of all authorities having jurisdiction;

     (m)  each contract or agreement with St. Philips, Stork and any
          other Person which is material to the ownership, use or operation of
          a material portion of the business, properties or assets of St.
          Philips and its Subsidiaries on a consolidated basis is in full force
          and effect and, to the best of the knowledge and belief of St.
          Philips, is valid, binding and enforceable against each of the
          parties thereto in accordance with its terms and no material breach
          or default exists in respect thereof on the part of any party thereto
          and no event has occurred which, with the giving of notice or the
          lapse of time or both, would constitute such a material breach or
          default;

     (n)  none of the execution and delivery of this Agreement, the
          consummation of the transactions contemplated hereby or the
          fulfillment of or compliance with the terms and provisions hereof do
          or will, nor will they with the giving of notice or the lapse of time
          or both:

           (i)  violate any provision of any law or administrative
                regulation or any judicial or administrative order, award,
                judgment or decree applicable to St. Philips or Stork,

           (ii) conflict with any of the terms, conditions or
                provision of the Charter Documents of St. Philips or Stork.

           (iii) conflict with, result in a breach of, constitute a
                default under, or accelerate or permit the acceleration of the
                performance required by, any material agreement, covenant,
                undertaking, commitment, instrument, judgment, order, decree or
                award to which St. Philips or Stork is a party or by which
                either of them is bound or to which their property is subject,
                all as of the Effective Date, or



<PAGE>   67




           (iv) result in the cancellation, suspension or material
                alteration in the terms of any material licence, permit or
                authority held by St. Philips or Stork or in the creation of
                any lien, charge, security interest or encumbrance upon any of
                the material assets of St. Philips or Stork under any such
                material agreement, covenant, under-taking, commitment,
                instrument, judgment, order, decree or award or give to any
                other Person any material interest or rights, including rights
                of purchase, termination, cancellation or acceler-ation, under
                any such material agreement, covenant, undertaking, commitment,
                instrument, judgment, order, decree or award;

     (o)  the Listing Application of St. Philips to The Toronto Stock
          Exchange dated September 15, 1994 together with the St. Philips
          Financial Statements, the 1994 Annual Report of St. Philips and other
          public filings made by St. Philips under applicable Canadian
          disclosure laws since September 15, 1994, when taken together
          constitute full, true and plain disclosure of all material facts
          relating to the business, operations and capital of St. Philips and
          the other matters therein and do not contain any untrue statement of
          a material fact or omit to state any material fact required to be
          stated therein or necessary in order to make the statements made
          therein not misleading in light of the circumstances under which they
          were made and, in particular, no material fact exists on the date
          hereof which was not disclosed in such public filings and which if
          publicly disclosed would reflect that a material adverse change (or
          an event, condition or state of facts which might reasonably have
          been expected to give rise to any such change) had occurred in the
          assets, liabilities, business, operations or capital of St. Philips;
          and

     (p)  there have been no Prior Valuations with respect to St. Philips
          prepared within the previous 24 months except as have been disclosed
          to each of the parties hereto.

     Section 3.04  Representations and Warranties of Geddes:  Geddes hereby
represents and warrants to and in favour of the other parties hereto and
acknowledges that such parties are relying upon such representations and
warranties in connection with the matters contemplated by this Agreement, that:

     (a)  Geddes has been duly incorporated and is a valid and subsisting
          corporation under the provisions of the OBCA, has all requisite
          corporate power and authority to carry on its business as now being
          carried on by


                                       9


<PAGE>   68
          it and owns or leases and operates its properties and assets and is
          duly licensed or otherwise qualified to carry on business in each
          jurisdiction in which a material amount of its business is conducted
          or wherein the character of the properties and assets now owned by
          it makes such qualification necessary;

     (b)  Geddes has no Subsidiaries which are material to its business
          or operations;

     (c)  the authorized capital of Geddes consists of an unlimited
          number of common shares and an unlimited number of special shares,
          issuable in series, of which as of the date hereof, 36,693,721 common
          shares were issued and outstanding;

     (d)  the execution, delivery and performance of this Agreement and
          the agreements, documents and transactions contemplated herein are
          within the corporate power and authority of Geddes and have been duly
          authorized by all necessary corporate action and this Agreement
          constitutes a valid and binding obligation of Geddes enforceable in
          accordance with its terms;

     (e)  Geddes does not have any outstanding agreements, subscriptions,
          warrants, options or commitments, nor has it granted any rights or
          privileges capable of becoming an agreement, subscription, warrant,
          option or commitment, obligating Geddes to issue any additional
          shares or other securities, except for options granted to directors,
          officers, employees, and consultants to, Geddes to purchase an
          aggregate of 1,940,000 Geddes Common Shares;

     (f)  the Geddes Financial Statements present fairly the consolidated
          financial condition and results of operations of Geddes as at the
          respective dates and for the respective periods indicated in such
          consolidated financial statements and have been prepared in
          accordance with Canadian generally accepted accounting principles
          applied on a consistent basis, except as otherwise stated in the
          notes to such consolidated financial statements;

     (g)  since June 30, 1995, there has been no material adverse change
          in the business, operations, properties, assets or condition,
          financial or otherwise, of Geddes on a consolidated basis from that
          shown in the unaudited consolidated financial statements of Geddes as
          at and for the six months ended June 30, 1995;



<PAGE>   69




     (h)  Geddes is the beneficial owner of the properties and assets
          described as being owned by it in the Geddes Financial Statements
          free and clear of material encumbrances, except as disclosed in the
          Geddes Financial Statements;

     (i)  Geddes has no liability or obligation including, without
          limitation, tax liabilities, whether accrued, absolute, contingent or
          otherwise, not reflected in the Geddes Financial Statements, except:
          (i) liabilities and obligations incurred in the ordinary course of
          business since June 30, 1995, which liabilities and obligations are
          not materially adverse in the aggregate; (ii) an agreement to
          indemnify the Government of British Columbia from any claims made by
          Falconbridge Limited and/or any shareholder of Geddes as a result of
          the enactment of Order in Council No. 1439; (iii) the obligation to
          carry out its current remediation/closure program on the Windy Craggy
          Property; (iv) an indemnity to the members of the special committee
          of the board of directors of Geddes established to consider and
          report to the board with respect to the Arrangement and to the
          special committee's professional advisors; and (v) the special
          committee of the board of directors of Geddes' engagement of Gordon
          Capital Corporation as its financial advisor and the obligation to
          remunerate Gordon Capital in connection with its services to be
          provided pursuant to the Arrangement;

     (j)  except as described in the Geddes Financial Statements, there
          are no actions, suits, proceedings, investigations or outstanding
          claims or demands, whether or not purportedly on behalf of Geddes,
          pending, or, to the knowledge of Geddes, threatened against or
          affecting Geddes at law or in equity or before or by any governmental
          department, commission, board, bureau, agency or instrumentality,
          domestic or foreign, or before any arbitrator, nor is there any
          judgment, order, decree or award of any court or other governmental
          authority having jurisdiction, obtained, pending or to the knowledge
          of Geddes, threatened, against Geddes, which would prevent or
          materially hinder the consummation of the Arrangement or the other
          transactions contemplated by this Agreement or which would involve
          the reasonable possibility of any material judgment or liability,
          whether or not covered by insurance, which could prevent or
          materially hinder the consummation of the Arrangement and the timely
          completion of Geddes' obligations pursuant to the Arrangement, or
          which in the aggregate would have a material



                                       10

<PAGE>   70




          adverse effect on the business, operations, properties, assets or
          condition, financial or otherwise, of Geddes;

     (k)  since June 30, 1995 Geddes has not declared or paid any
          dividends or made any distribution  of its properties or assets to
          its shareholders and Geddes has not disposed of any of its properties
          or assets or incurred any material indebtedness;

     (l)  the business of Geddes is being conducted in all material
          respects in compliance with all applicable laws, regulations and
          ordinances of all authorities having jurisdiction;

     (m)  each contract or agreement with Geddes and any other Person
          which is material to the ownership, use or operation of a material
          portion of the business, properties or assets of Geddes is in full
          force and effect and, to the best of the knowledge and belief of
          Geddes, is valid, binding and enforceable against each of the parties
          thereto in accordance with its terms and no material breach or
          default exists in respect thereof on the part of any party thereto
          and no event has occurred which, with the giving of notice or the
          lapse of time or both, would constitute such a material breach or
          default;

     (n)  none of the execution and delivery of this Agreement, the
          consummation of the transactions contemplated hereby or the
          fulfilment of or compliance with the terms and provisions hereof do
          or will, nor will they with the giving of notice or the lapse of time
          or both:

          (i)   violate any provision of any law or administrative
                regulation or any judicial or administrative order, award,
                judgment or decree applicable to Geddes,

          (ii)  conflict with any of the terms, conditions or
                provisions of the Charter Documents of Geddes,

          (iii) conflict with, result in a breach of, constitute a
                default under, or accelerate or permit the acceleration of the
                performance required by, any material agreement, covenant,
                undertaking, commitment, instrument, judgment, order, decree or
                award to which Geddes is a party or by which it is bound or to
                which its property is subject, all as of the Effective Date, or

          (iv)  result in the cancellation, suspension or material
                alteration in the terms of any material licence, permit or
                authority held by Geddes or in the


<PAGE>   71



                 creation of any lien, charge, security interest or encumbrance
                 upon any of the material assets of Geddes under any such
                 material agreement, covenant, undertaking, commitment,
                 instrument, judgment, order, decree or award or give to any
                 other Person any material interest or rights, including rights
                 of purchase, termination, cancellation or acceleration, under
                 any such material agreement, covenant, undertaking,
                 commitment, instrument, judgment, order, decree or award;

     (o)  the Geddes Financial Statements, together with the 1994 Annual
          Report of Geddes and other public filings made by Geddes under
          applicable Canadian disclosure laws since January 1, 1995, when taken
          together constitute full, true and plain disclosure of all material
          facts relating to the business, operations and capital of Geddes and
          the other matters therein and do not contain any untrue statement of
          a material fact or omit to state any material fact required to be
          stated therein or necessary in order to make the statements made
          therein not misleading in light of the circumstances under which they
          were made and, in particular, no material fact exists on the date
          hereof which was not disclosed in such public filings and which if
          publicly disclosed would reflect that a material adverse change (or
          an event, condition or state of facts which might reasonably have
          been expected to give rise to any such change) had occurred in the
          assets, liabilities, business, operations or capital of Geddes; and

     (p)  there have been no Prior Valuations with respect to Geddes
          prepared within the previous 24 months except as have been disclosed
          to each of the parties hereto.

                                  ARTICLE FOUR

                                   COVENANTS

     Section 4.01  Covenants of Royal Oak:  Royal Oak hereby covenants and
agrees with each of the other parties hereto that prior to the Effective Date,
it shall take or perform or refrain from doing, taking and performing such
actions and steps as may be necessary or advisable to ensure compliance with
the following:

                                       11


<PAGE>   72




     (a)  Royal Oak will carry on business in the ordinary course and
          will not, without the prior written consent of the other parties
          hereto (acting reasonably), enter into any transaction or incur any
          obligation or liability out of the ordinary course of business,
          except as contemplated in this Agreement and except for purposes of
          providing financing for work to be conducted on the Kemess property;

     (b)  Royal Oak will not merge into or with, or amalgamate or
          consolidate with, or enter into any other corporate reorganization
          with, any other Person or perform any act or enter into any
          transaction or negotiation which interferes or is inconsistent with
          the completion of the transactions contemplated hereby or would
          render inaccurate in any material way any of the representations and
          warranties set forth in section 3.01 hereof as if such
          representations and warranties were made at a date subsequent to such
          act, negotiation or transaction and all references to the date of
          this Agreement were deemed to be such later date, except as
          contemplated in this Agreement, and, without limiting the generality
          of the foregoing, Royal Oak will not:

           (i)  make any distribution by way of dividend, return of
                capital or otherwise to or for the benefit of its shareholders,

           (ii) without the prior written consent of the other
                parties hereto (acting reasonably), issue any shares or other
                securities convertible into or exchangeable for shares except
                pursuant to agreements existing at the date hereof or enter
                into any commitment or agreement therefor, except for purposes
                of providing financing for work to be conducted on the Kemess
                property, or

           (iii) increase or decrease its paid-up capital;

     (c)  prior to the Effective Date, Royal Oak will use all reasonable
          efforts to do all acts and things as may be necessary or desirable to
          ensure the successful implementation of the Arrangement and, without
          limiting the generality of the foregoing:

           (i)  Royal Oak will apply for and use all reasonable
                efforts to obtain the listing on The Toronto Stock Exchange and
                the American Stock Exchange, as of the Effective Date, of the
                Royal Oak Common Shares which are to be issued pursuant to the
                Arrangement;



<PAGE>   73




           (ii) Royal Oak will cooperate in obtaining the Interim
                Order and the Final Order; and

           (iii) Royal Oak will use all reasonable efforts to cause
                each of the conditions precedent set forth in Article Five to
                be complied with;

     (d)  Royal Oak will provide El Condor, St. Philips and Geddes in a
          timely and expeditious manner with all information relating to Royal
          Oak required to be included in the Proxy Circular in order for the
          Proxy Circular to comply with all applicable disclosure laws and the
          Interim Order, and Royal Oak will indemnify and save harmless El
          Condor, St. Philips and Geddes and the directors and officers of each
          of them from and against any and all claims, suits, actions, causes
          of action, liabilities, damages, costs, charges and expenses of every
          nature and kind whatsoever for which the directors and officers of El
          Condor, St. Philips or Geddes may become personally liable by virtue
          of the inclusion of such information in the Proxy Circular, provided
          such information was included in full and in the form provided by
          Royal Oak, with only such amendments as shall be approved by Royal
          Oak;

     (e)  Royal Oak will pay the cash consideration, in accordance with
          the terms of the Plan of Arrangement, to those holders of shares of
          El Condor and St. Philips who are entitled to receive cash for their
          shares pursuant to the Arrangement;

     (f)  Royal Oak will issue Royal Oak Common Shares, in accordance
          with the terms of the Plan of Arrangement, to those holders of shares
          of El Condor and Geddes who are entitled to receive Royal Oak Common
          Shares pursuant to the Arrangement; and

     (g)  after the Effective Date, Royal Oak will cause El Condor, St.
          Philips and Geddes to satisfy any obligations which any of them may
          have to Dissenting Shareholders.

     Section 4.02  Covenants of El Condor:  El Condor hereby covenants and
agrees with each of the other parties hereto that prior to the Effective Date,
it shall take or perform or refrain from doing, taking and performing such
actions and steps as may be necessary or advisable to ensure compliance with
the following:

                                       12



<PAGE>   74




     (a)  El Condor will carry on business in the ordinary course and
          will not, without the prior written consent of the other parties
          hereto (acting reasonably), enter into any transaction or incur any
          obligation or liability out of the ordinary course of business,
          except as contemplated in this Agreement;

     (b)  El Condor will not merge into or with, or amalgamate or
          consolidate with, or enter into any other corporate reorganization
          with, any other Person or perform any act or enter into any
          transaction or negotiation which interferes or is inconsistent with
          the completion of the transactions contemplated hereby or would
          render inaccurate in any material way any of the representations and
          warranties set forth in section 3.02 hereof as if such
          representations and warranties were made at a date subsequent to such
          act, negotiation or transaction and all references to the date of
          this Agreement were deemed to be such later date, except as
          contemplated in this Agreement, and, without limiting the generality
          of the foregoing, El Condor will not

           (i)  directly or indirectly solicit, initiate or
                encourage proposals or offers from, or negotiations  with, any
                person, or provide information to any Person relating to any
                other potential transaction with respect to, or assist or
                participate in or facilitate any effort or attempt with respect
                to, the disposition of all or a material portion of its
                business or assets or its outstanding securities;

           (ii) make any distribution by way of dividend, return of
                capital or otherwise to or for the benefit of its shareholders,

           (iii) without the prior written consent of the other
                parties hereto (acting reasonably), issue any shares or other
                securities convertible into or exchangeable for shares or enter
                into any commitment or agreement therefor, or

           (iv) increase or decrease its paid-up capital;

           provided that, in the event that any Person proposes an unsolicited
           bona fide share acquisition or merger transaction which, in the
           opinion of the board of directors of El Condor, offers terms that
           are more favourable to El Condor's shareholders than pursuant to
           this Agreement, nothing in this Agreement shall limit the power of
           the El Condor board of directors to withdraw or modify any
           recommendation with respect to


<PAGE>   75



           the Arrangement or to otherwise fulfil their fiduciary duties to El
           Condor and its shareholders in relation to such transaction if to do
           so would, in the opinion of the board of directors (having consulted
           outside counsel), be a proper exercise of such directors' fiduciary
           duties; but nothing referred to in this proviso shall entitle El
           Condor to terminate this Agreement, to not proceed with the El
           Condor Meeting as contemplated herein or to withdraw from El
           Condor's shareholders the vote on the Arrangement;

     (c)  in the event that El Condor receives any proposal or offer
          referred to in subclause 4.02(b)(i) or any enquiry with respect
          thereto, El Condor will promptly notify Royal Oak in writing of all
          relevant details relating thereto;

     (d)  El Condor will use all reasonable efforts to do all acts and
          things as may be necessary or desirable to ensure the successful
          implementation of the Arrangement and, without limiting the
          generality of the foregoing:

           (i)  subject to the granting of the Interim Order, El
                Condor will use all reasonable efforts to, as soon as
                practicable and in any event on or before September 6, 1995,
                complete the preparation of the Proxy Circular and mail to its
                shareholders and file in all jurisdictions where required for
                the Proxy Circular and other documentation required in
                connection with the El Condor Meeting, all in accordance with
                National Policy No. 41 of the Canadian Securities
                Administrators, the Interim Order and applicable law, and El
                Condor will use all reasonable efforts to, as soon as
                practicable and in any event on or before October 16, 1995,
                convene the El Condor Meeting for the purpose of approving the
                Arrangement in accordance with the Interim Order,

           (ii) El Condor will cause a list of El Condor
                shareholders as of the record date for the El Condor Meeting,
                in a form suitable for soliciting of El Condor shareholders and
                prepared by the transfer agent of El Condor, to be delivered to
                Royal Oak no later than the second Business Day after such
                record date, and

           (iii) El Condor will use all reasonable efforts to cause
                each of the conditions precedent set forth in Article Five
                which is within its control to be complied with, provided that
                nothing in this



                                       13


<PAGE>   76




                 Agreement will obligate El Condor to make any recommendation
                 to its shareholders except as expressly authorized by the El
                 Condor board of directors or to engage proxy solicitors to
                 solicit proxies in favour of the Arrangement;

     (e)  subject to compliance by Royal Oak with clause 4.01(d), El
          Condor will ensure that the Proxy Circular, insofar as it contains
          disclosure with respect to El Condor and the Arrangement, complies
          with all applicable disclosure laws and, without limiting the
          generality of the foregoing, provides El Condor shareholders to which
          such circular is sent with information in sufficient detail to permit
          them to form a reasoned judgment concerning the matters before them.

     Section 4.03  Covenants of St. Philips:  St. Philips hereby covenants and
agrees with each of the other parties hereto that prior to the Effective Date,
it shall take or perform or refrain from doing, taking and performing such
actions and steps as may be necessary or advisable to ensure compliance with
the following:

     (a)  St. Philips will carry on business in the ordinary course and
          will not, without the prior written consent of the other parties
          hereto (acting reasonably), enter into any transaction or incur any
          obligation or liability out of the ordinary course of business,
          except as contemplated in this Agreement;

     (b)  St. Philips will not merge into or with, or amalgamate or
          consolidate with, or enter into any other corporate reorganization
          with, any other Person or perform any act or enter into any
          transaction or negotiation which interferes or is inconsistent with
          the completion of the transactions contemplated hereby or would
          render inaccurate in any material way any of the representations and
          warranties set forth in section 3.03 hereof as if such
          representations and warranties were made at a date subsequent to such
          act, negotiation or transaction and all references to the date of
          this Agreement were deemed to be such later date, except as
          contemplated in this Agreement, and, without limiting the generality
          of the foregoing, St. Philips will not

           (i)  directly or indirectly solicit, initiate or
                encourage proposals or offers from, or negotiations with, any
                person, or provide information to any Person relating to any
                other potential transaction with respect to, or assist or
                participate in or facilitate any effort or attempt with respect
                to, the disposition of all or


<PAGE>   77



                  a material portion of its business or assets or its
                  outstanding securities;

           (ii) make any distribution by way of dividend, return of
                capital or otherwise to or for the benefit of its shareholders,

           (iii) without the prior written consent of the other
                parties hereto (acting reasonably), issue any shares or other
                securities convertible into or exchangeable for shares except
                pursuant to agreements existing at the date hereof or enter
                into any commitment or agreement therefor, or

           (iv) increase or decrease its paid-up capital;

           provided that, in the event that any person proposes an unsolicited
           bona fide share acquisition or merger transaction which, in the
           opinion of the board of directors of St. Philips, offers terms that
           are more favourable to St. Philips' shareholders than pursuant to
           this Agreement, nothing in this Agreement shall limit the power of
           the St. Philips board of directors to withdraw or modify any
           recommendation with respect to the Arrangement or to otherwise
           fulfil their fiduciary duties to St. Philips and its shareholders in
           relation to such transaction if to do so would, in the opinion of
           the board of directors (having consulted counsel), be a proper
           exercise of such directors' fiduciary duties; but nothing referred
           to in this proviso shall entitle St. Philips to terminate this
           Agreement, to not proceed with the St. Philips Meeting as
           contemplated herein or to withdraw from St. Philips' shareholders
           the vote on the Arrangement;

     (c)  in the event that St. Philips receives any proposal or offer
          referred to in subclause 4.03(b)(i) or any enquiry with respect
          thereto, St. Philips will promptly notify Royal Oak in writing of all
          relevant details relating thereto;

     (d)  St. Philips will use all reasonable efforts to do all acts and
          things as may be necessary or desirable to ensure the successful
          implementation of the Arrangement and, without limiting the
          generality of the foregoing:

           (i)  subject to the granting of the Interim Order, St.
                Philips will use all reasonable efforts to, as soon as
                practicable and in any event on or before September 6, 1995,
                complete the preparation of the Proxy Circular and mail to


<PAGE>   78



                    its shareholders and file in all jurisdictions where
                    required for the Proxy

                                       14


<PAGE>   79




                    Circular and other documentation required in connection
                    with the St. Philips Meeting, all in accordance with
                    National Policy No. 41 of the Canadian Securities
                    Administrators, the Interim Order and applicable law, and
                    St. Philips will use all reasonable efforts to, as soon as
                    practicable and in any event on or before October 16, 1995,
                    convene the St. Philips Meeting for the purpose of
                    approving the Arrangement in accordance with the Interim
                    Order;

           (ii) St. Philips will cause a list of St. Philips
                shareholders as of the record date for the St. Philips Meeting,
                in a form suitable for soliciting of St. Philips shareholders
                and prepared by the transfer agent of St. Philips, to be
                delivered to Royal Oak no later than the second Business Day
                after such record date, and

           (iii) St. Philips will use all reasonable efforts to
                cause each of the conditions precedent set forth in Article
                Five which is within its control to be complied with, provided
                that nothing in this Agreement will obligate St. Philips to
                make any recommendation to its shareholders except as expressly
                authorized by the St. Philips board of directors or to engage
                proxy solicitors to solicit proxies in favour of the
                Arrangement;

     (e)  subject to compliance by Royal Oak with clause 4.01(d), St.
          Philips will ensure that the Proxy Circular, insofar as it contains
          disclosure with respect to St. Philips and the Arrangement, complies
          with all applicable disclosure laws and, without limiting the
          generality of the foregoing, provides St. Philips shareholders to
          which such circular is sent with information in sufficient detail to
          permit them to form a reasoned judgment concerning the matters before
          them.

     Section 4.04  Covenants of Geddes:  Geddes hereby covenants and agrees
with each of the other parties hereto that prior to the Effective Date, it
shall take or perform or refrain from doing, taking and performing such actions
and steps as may be necessary or advisable to ensure compliance with the
following:

     (a)  Geddes will carry on business in the ordinary course and will
          not, without the prior written consent of the other parties hereto
          (acting reasonably), enter into any transaction or incur any
          obligation or liability out of the ordinary course of business,
          except as contemplated in this Agreement;


<PAGE>   80





     (b)  Geddes will not merge into or with, or amalgamate or
          consolidate with, or enter into any other corporate reorganization
          with, any other Person or perform any act or enter into any
          transaction or negotiation which interferes or is inconsistent with
          the completion of the transactions contemplated hereby or would
          render inaccurate in any material way any of the representations and
          warranties set forth in section 3.04 hereof as if such
          representations and warranties were made at a date subsequent to such
          act, negotiation or transaction and all references to the date of
          this Agreement were deemed to be such later date, except as
          contemplated in this Agreement, and, without limiting the generality
          of the foregoing, Geddes will not

           (i)  directly or indirectly solicit, initiate or
                encourage proposals of offers from, or negotiations with, any
                person, or provide information to any Person relating to any
                other potential transaction with respect to, or assist or
                participate in or facilitate any effort or attempt with respect
                to, the disposition of all or a material portion of its
                business or assets or its outstanding securities;

           (ii) make any distribution by way of dividend, return of
                capital or otherwise to or for the benefit of its shareholders,

          (iii) without the prior written consent of the other
               parties hereto (acting reasonably), issue any shares or other
               securities convertible into or exchangeable for shares except
               pursuant to agreements existing at the date hereof or enter into
               any commitment or agreement therefor, or

           (iv) increase or decrease its paid-up capital;

           provided that, in the event that any person proposes an unsolicited
           bona fide share acquisition or merger transaction which, in the
           opinion of the board of directors of Geddes, offers terms that are
           more favourable to Geddes' shareholders than pursuant to this
           Agreement, nothing in this Agreement shall limit the power of the
           Geddes board of directors to withdraw or modify any recommendation
           with respect to the Arrangement or to otherwise fulfil their
           fiduciary duties to Geddes and its shareholders in relation to such
           transaction if to do so would, in the opinion of the board of
           directors (having consulted outside counsel), be a proper exercise
           of such directors'


<PAGE>   81



           fiduciary duties; but nothing referred to in this proviso

                                       15


<PAGE>   82




           shall entitle Geddes to terminate this Agreement, to not proceed
           with the Geddes Meeting as contemplated herein or to withdraw from
           Geddes' shareholders the vote on the Arrangement;

     (c)  in the event that Geddes receives any proposal or offer
          referred to in subclause 4.04(b)(i) or any enquiry with respect
          thereto, Geddes will promptly notify Royal Oak in writing of all
          relevant details relating thereto;

     (d)  Geddes will use all reasonable efforts to do all acts and
          things as may be necessary or desirable to ensure the successful
          implementation of the Arrangement and, without limiting the
          generality of the foregoing:

           (i)  subject to the granting of the Interim Order,
                Geddes will use all reasonable efforts to, as soon as
                practicable and in any event on or before September 6, 1995,
                complete the preparation of the Proxy Circular and mail to its
                shareholders and file in all jurisdictions where required for
                the Proxy Circular and other documentation required in
                connection with the Geddes Meeting, all in accordance with
                National Policy No. 41 of the Canadian Securities
                Administrators, the Interim Order and applicable law, and
                Geddes will use all reasonable efforts to, as soon as
                practicable and in any event on or before October 16, 1995,
                convene the Geddes Meeting for the purpose of approving the
                Arrangement in accordance with the Interim Order;

           (ii) Geddes will cause a list of Geddes shareholders as
                of the record date for the Geddes Meeting, in a form suitable
                for soliciting of Geddes shareholders and prepared by the
                transfer agent of Geddes, to be delivered to Royal Oak no later
                than the second Business Day after such record date, and

           (iii) Geddes will use all reasonable efforts to cause
                each of the conditions precedent set forth in Article Five
                which is within its control to be complied with, provided that
                nothing in this Agreement will obligate Geddes to make any
                recommendation to its shareholders except as expressly
                authorized by the Geddes board of directors or to engage proxy
                solicitors to solicit proxies in favour of the Arrangement;



<PAGE>   83




     (e)  subject to compliance by Royal Oak with clause 4.01(d), Geddes
          will ensure that the Proxy Circular, insofar as it contains
          disclosure with respect to Geddes and the Arrangement, complies with
          all applicable disclosure laws and, without limiting the generality
          of the foregoing, provides Geddes shareholders to which such circular
          is sent with information in sufficient detail to permit them to form
          a reasoned judgment concerning the matters before them.

     Section 4.05  Mutual Covenants of Royal Oak, El Condor, St. Philips and
Geddes:  Each of Royal Oak, El Condor, St. Philips and Geddes covenants in
favour of the others that prior to the Effective Date, it shall take or perform
or refrain from doing, taking and performing such actions and steps as may be
necessary or advisable to ensure compliance with the following:

     (a)  Each of Royal Oak, El Condor, St. Philips and Geddes will use
          all reasonable efforts to satisfy (or cause the satisfaction of) the
          conditions precedent to its obligations hereunder and to take, or
          cause to be taken, all other action and to do, or cause to be done,
          all other things necessary, proper or advisable under applicable laws
          and regulations to complete the Arrangement, including using all
          reasonable efforts to:

           (i)  obtain all necessary waivers, consents and
                approvals required to be obtained by it from other parties to
                loan agreements, leases and other contracts;

           (ii) obtain all necessary consents, approvals and
                authorizations as are required to be obtained by it under any
                Canadian or foreign law or regulation; and

           (iii) effect all necessary registrations and filing and
                submissions of information requested by governmental
                authorizations required to be effected by it in connection with
                the Arrangement;

           and each of Royal Oak, El Condor, St. Philips and Geddes will use
           all reasonable efforts to cooperate with the others in connection
           with the performance by the others of their obligations under this
           Agreement including, without limitation, the preparation and mailing
           of the Proxy Circular and continuing to provide reasonable access to
           information and to maintain ongoing communications as between
           representatives of Royal Oak, El Condor, St. Philips and Geddes; and



<PAGE>   84




     (b)  Each of Royal Oak, El Condor, St. Philips and Geddes will as
          soon as reasonably practicable notify the others of any actual,
          imminent or incipient material adverse change referred to in clause
          3.01(g) in the

                                       16


<PAGE>   85




           case of Royal Oak, clause 3.02(g) in the case of El Condor, clause
           3.03(g) in the case of St. Philips and clause 3.04(g) in the case of
           Geddes.


                                  ARTICLE FIVE

                                   CONDITIONS

     Section 5.01  Mutual Conditions Precedent:  The respective obligations of
Royal Oak, El Condor, St. Philips and Geddes to complete the transactions
contemplated by this Agreement shall be subject to the satisfaction of the
following conditions:

     (a)  El Condor and St. Philips shall have been continued under the
          OBCA in accordance with the provisions of the OBCA;

     (b)  the Arrangement, with or without amendment, shall have been
          approved at the Meetings in accordance with the Interim Order and the
          Arrangement shall have otherwise been approved and adopted by the
          requisite majorities of the shares entitled or required to vote
          thereon as determined by the Court and as required pursuant to the
          provisions of Policy Statement 9.1 of the Ontario Securities
          Commission and any other applicable policies of the Canadian
          provincial securities administrators;

     (c)  the Interim Order and Final Order shall have been obtained in
          form and substance satisfactory to Royal Oak, El Condor, St. Philips
          and Geddes;

     (d)  The Toronto Stock Exchange and the American Stock Exchange
          shall have conditionally approved the listing thereon of the Royal
          Oak Common Shares to be issued pursuant to the Arrangement, subject
          to compliance with the usual requirements of such exchanges;

     (e)  all other consents, orders, regulations and approvals,
          including regulatory and judicial approvals and orders (including,
          without limitation, the consent of la Commission des valeurs
          mobilieres du Quebec under Section 50 of the Securities Act
          (Quebec)), required or necessary or desirable for the completion of
          the transactions provided for in this Agreement and the Arrangement
          shall have been obtained or received from the persons, authorities or
          bodies having jurisdiction in the circumstances;

     (f)  there shall not be in force any order or decree restraining or
          enjoining the consummation of the


<PAGE>   86



           transactions contemplated by this Agreement and the Arrangement;

     (g)  none of the consents, orders, regulations or approvals
          contemplated herein shall contain terms or conditions or require
          undertakings or security deemed unsatisfactory or unacceptable by any
          of the parties hereto;

     (h)  Royal Oak shall have acquired a 100% undivided interest in the
          Red Mountain property located in northwestern British Columbia; and

     (i) this Agreement shall not have been terminated under Article Six.

     The foregoing conditions are for the mutual benefit of the parties hereto
and may be waived, in whole or in part, by any of them at any time.  If any of
the said conditions precedent shall not be complied with or waived as aforesaid
on or before the date required for the performance thereof, any of the parties
hereto may, in addition to the other remedies it may have at law or in equity,
rescind and terminate this Agreement by written notice to the other parties.

     Section 5.02  Royal Oak Conditions:  The obligation of Royal Oak to
complete the transactions contemplated herein is subject to the fulfillment of
the following conditions on or before the Effective Date or such other time as
specified below:

     (a)  the representations and warranties made by each of the other
          parties hereto in this Agreement shall be true as of the Effective
          Date as if made on and as of such date and each of the other parties
          hereto shall have provided to Royal Oak certificates of two officers
          of such party certifying such accuracy on the Effective Date and
          Royal Oak shall have no knowledge to the contrary;

     (b)  on or before the Effective Date, each of the other parties
          hereto shall have furnished Royal Oak with:

           (i)  certified copies of the resolutions duly passed by
                the boards of directors of such party approving this Agreement
                and the completion of the transactions contemplated hereby,
                approving the Proxy

                                       17

                 Circular and directing the submission of the Arrangement (and,
                 in the case of El Condor and St. Philips, their continuance
                 under the OBCA) for approval at the applicable Meeting; and


<PAGE>   87





           (ii) certified copies of the resolutions duly passed at
                the applicable Meeting approving the Arrangement (and, in the
                case of El Condor and St. Philips, their continuance under the
                OBCA);

     (c)  each of the other parties hereto shall have provided Royal Oak
          with opinions of its counsel reasonably satisfactory to Royal Oak
          dated the Effective Date (or such other date as the parties hereto
          may agree) and addressed to Royal Oak and its counsel to the effect
          that:

           (i)  such party and, if applicable, each of its material
                Subsidiaries is duly incorporated and validly existing under
                the laws of the jurisdiction of its incorporation and has the
                corporate power and authority to own or lease its property and
                assets and to carry on any business now conducted by it and is
                duly qualified to carry on business in each jurisdiction in
                which the nature of its business or the property or assets
                owned or leased by it makes such qualification necessary;

           (ii) such party has full corporate power and authority
                to enter into this Agreement and to perform its obligations
                hereunder;

           (iii) all necessary proceedings, corporate, regulatory
                or otherwise, of such party have been taken to fully, validly
                and effectively authorize this Agreement and the transactions
                contemplated herein, including the Arrangement, the performance
                by such party of its obligations hereunder and the execution
                and delivery by such party of this Agreement and all documents
                delivered pursuant hereto;

           (iv) the execution and delivery by such party of this
                Agreement and all documents delivered pursuant hereto, the
                performance by such party of its obligations hereunder and
                thereunder and the consummation of the transactions
                contemplated herein and therein will not result in the breach
                of or violate any term or provision of the articles, by-laws or
                other governing documents of such party; and

           (v)  this Agreement has been duly executed and delivered
                by such party and this Agreement and all documents delivered
                pursuant to the terms hereof


<PAGE>   88



                  are valid and binding obligations of such party enforceable
                  against it in accordance with their respective terms, subject
                  to enforce-ability being limited by applicable bankruptcy,
                  insolvency, reorganization and other laws affecting
                  creditors' rights generally and the discretionary nature of
                  certain remedies (including specific performance and
                  injunctive relief) and subject to the effectiveness of
                  provisions providing rights of indemnity or exculpating a
                  party or persons from a liability or a duty otherwise owed
                  which may be limited by law.

           In giving such opinions, counsel to such party may rely, where
           appropriate, upon the opinions of local counsel provided that
           counsel to such party is of the opinion that the opinion of such
           local counsel is one upon which counsel to the other parties may
           properly rely, and, in respect of matters of fact, upon such
           certificates of senior officers of such party or any other
           appropriate persons;

     (d)  each of the other parties hereto shall have complied in all
          material respects with its covenants herein and shall have provided
          to Royal Oak certificates of two officers of such party certifying
          that such party has complied in all material respects with its
          respective covenants herein and Royal Oak shall have no knowledge to
          the contrary;

     (e)  before giving effect to the transactions contemplated by this
          Agreement, there shall have been no material adverse change,
          financial or otherwise, in the business, financial condition,
          operations, prospects, properties, assets or affairs, of any of the
          other parties hereto and its Subsidiaries on a consolidated basis or
          any occurrences or circumstances which have resulted or might
          reasonably be expected to result in a material adverse change thereto
          (other than changes attributable to general economic conditions,
          including changes in interest rates and fluctuations in the price of
          gold); and

     (f)  holders of not more than 5% of the issued and outstanding El
          Condor Common Shares, St. Philips Common Shares or Geddes Common
          Shares shall have exercised rights of dissent in respect of the
          matters to be dealt with at the Meetings and each of El Condor, St.
          Philips and Geddes shall have provided to Royal Oak a certificate
          signed by a senior officer as to the number of shareholders and the
          number of shares in respect of which such rights have been exercised.



                                       18


<PAGE>   89






     The foregoing conditions are for the benefit of Royal Oak and may be
waived, in whole or in part, by Royal Oak in writing at any time.  If any of
the said conditions precedent shall not be complied with or waived by Royal Oak
on or before the date required for their performance then Royal Oak may, in
addition to the other remedies it may have at law or in equity, rescind and
terminate this Agreement by written notice to the other parties hereto.

     Section 5.03  El Condor Conditions:  The obligation of El Condor to
complete the transactions contemplated herein is subject to the fulfillment of
the following conditions on or before the Effective Date or such other time as
specified below:

     (a)  the representations and warranties made by each of the other
          parties hereto in this Agreement shall be true as of the Effective
          Date as if made on and as of such date and each of the other parties
          hereto shall have provided to El Condor certificates of two officers
          of such party certifying such accuracy on the Effective Date and El
          Condor shall have no knowledge to the contrary;

     (b)  on or before the Effective Date, each of the other parties
          hereto shall have furnished El Condor with:

           (i)  certified copies of the resolutions duly passed by
                the boards of directors of such party approving this Agreement
                and the completion of the transactions contemplated hereby and,
                in the case of St. Philips and Geddes, approving the Proxy
                Circular and directing the submission of the Arrangement (and,
                in the case of St. Philips, its continuance under the OBCA) for
                approval at the applicable Meeting; and

           (ii) certified copies of the resolutions duly passed at
                the St. Philips and Geddes Meetings approving the Arrangement
                (and, in the case of St. Philips, its continuance under the
                OBCA);

     (c)  each of the other parties hereto shall have provided El Condor
          with opinions of its counsel reasonably satisfactory to El Condor
          dated the Effective Date (or such other date as the parties hereto
          may agree) and addressed to El Condor and its counsel to the effect
          that:

           (i)  such party and, if applicable, each of its material
                Subsidiaries is duly incorporated and validly existing under
                the laws of the jurisdiction of its incorporation and has the
                corporate power and authority to own or lease


<PAGE>   90



                its property and assets and to carry on any business now 
                conducted by it and is duly qualified to carry on business
                in each jurisdiction in which the nature of its business or
                the property or assets owned or leased by it makes such
                qualification necessary;

           (ii) such party has full corporate power and authority
                to enter into this Agreement and to perform its obligations
                hereunder;

           (iii) all necessary proceedings, corporate, regulatory
                or otherwise, of such party have been taken to fully, validly
                and effectively authorize this Agreement and the transactions
                contemplated herein, including the Arrangement, the performance
                by such party of its obligations hereunder and the execution
                and delivery by such party of this Agreement and all documents
                delivered pursuant hereto;

           (iv) the execution and delivery by such party of this
                Agreement and all documents delivered pursuant hereto, the
                performance by such party of its obligations hereunder and
                thereunder and the consummation of the transactions
                contem-plated herein and therein will not result in the breach
                of or violate any term or provision of the articles, by-laws or
                other governing documents of such party; and

           (v)  this Agreement has been duly executed and delivered
                by such party and this Agreement and all documents delivered
                pursuant to the terms hereof are valid and binding obligations
                of such party enforceable against it in accordance with their
                respective terms, subject to enforceability being limited by
                applicable bankruptcy, insolvency, reorganization and other
                laws affecting creditors' rights generally and the
                discretionary nature of certain remedies (including specific
                performance and injunctive relief) and subject to the
                effectiveness of provisions providing rights of indemnity or
                exculpating a party or persons from a liability or a duty
                otherwise owed which may be limited by law.

           In giving such opinions, counsel to such party may rely, where
           appropriate, upon the opinions of local counsel provided that
           counsel to such party is of the opinion that the opinion of such
           local counsel is one


                                       19


<PAGE>   91


          upon which counsel to the other parties may properly rely, and, in
          respect of matters of fact, upon such certificates of senior officers
          of such party or any other appropriate persons;

     (d)  each of the other parties hereto shall have complied in all
          material respects with its covenants herein and shall have provided
          to El Condor certificates of two officers of such party certifying
          that such party has complied in all material respects with its
          respective covenants herein and El Condor shall have no knowledge to
          the contrary; and

     (e)  before giving effect to the transactions contemplated by this
          Agreement, there shall have been no material adverse change,
          financial or otherwise, in the business, financial condition,
          operations, prospects, properties, assets or affairs, of any of the
          other parties hereto and its Subsidiaries on a consolidated basis or
          any occurrences or circumstances which have resulted or might
          reasonably be expected to result in a material adverse change thereto
          (other than changes attributable to general economic conditions,
          including changes in interest rates and fluctuations in the price of
          gold).

     Section 5.04  St. Philips Conditions:  The obligation of St. Philips to
complete the transactions contemplated herein is subject to the fulfilment of
the following conditions on or before the Effective Date or such other time as
specified below:

     (a)  the representations and warranties made by each of the other
          parties hereto in this Agreement shall be true as of the Effective
          Date as if made on and as of such date and each of the other parties
          hereto shall have provided to St. Philips certificates of two
          officers of such party certifying such accuracy on the Effective Date
          and St. Philips shall have no knowledge to the contrary;

     (b)  on or before the Effective Date, each of the other parties
          hereto shall have furnished St. Philips with:

          (i)   certified copies of the resolutions duly passed by
                the boards of directors of such party approving this Agreement
                and the completion of the transactions contemplated hereby and,
                in the case of El Condor and Geddes, approving the Proxy
                Circular and directing the submission of the Arrangement (and,
                in the case of El Condor, its continuance under the OBCA) for
                approval at the applicable Meeting; and


<PAGE>   92



          (ii)  certified copies of the resolutions duly passed at
                the El Condor and Geddes Meetings approving the Arrangement
                (and, in the case of El Condor, its continuance under the
                OBCA);

     (c)  each of the other parties hereto shall have provided St.
          Philips with opinions of its counsel reasonably satisfactory to St.
          Philips dated the Effective Date (or such other date as the parties
          hereto may agree) and addressed to St. Philips and its counsel to the
          effect that:

          (i)   such party and each of its material Subsidiaries is
                duly incorporated and validly existing under the laws of the
                jurisdiction of its incorporation and has the corporate power
                and authority to own or lease its property and assets and to
                carry on any business now conducted by it and is duly qualified
                to carry on business in each jurisdiction in which the nature
                of its business or the property or assets owned or leased by it
                makes such qualification necessary;

          (ii)  such party has full corporate power and authority
                to enter into this Agreement and to perform its obligations
                hereunder;

          (iii) all necessary proceedings, corporate, regulatory
                or otherwise, of such party have been taken to fully, validly
                and effectively authorize this Agreement and the transactions
                contemplated herein, including the Arrangement, the performance
                by such party of its obligations hereunder and the execution
                and delivery by such party of this Agreement and all documents
                delivered pursuant hereto;

          (iv)  the execution and delivery by such party of this
                Agreement and all documents delivered pursuant hereto, the
                performance by such party of its obligations hereunder and
                thereunder and the consummation of the transactions
                contemplated herein and therein will not result in the breach
                of or violate any term or provision of the articles, by-laws or
                other governing documents of such party; and

          (v)   this Agreement has been duly executed and delivered
                by such party and this Agreement and all documents delivered
                pursuant to the terms


<PAGE>   93



                    hereof are valid and binding obligations of such party

                                       20


<PAGE>   94




               enforceable against it in accordance with their respective terms,
               subject to enforceability, being limited by applicable
               bankruptcy, insolvency, reorganization and other laws affecting
               creditors' rights generally and the discretionary nature of
               certain remedies (including specific performance and injunctive
               relief) and subject to the effectiveness of provisions providing
               rights of indemnity or exculpating a party or persons from a
               liability or a duty otherwise owed which may be limited by law.

          In giving such opinions, counsel to such party may rely, where
          appropriate, upon the opinions of local counsel provided that counsel
          to such party is of the opinion that the opinion of such local counsel
          is one upon which counsel to the other parties may properly rely, and,
          in respect of matters of fact, upon such certificates of senior
          officers of such party or any other appropriate persons;

     (d)  each of the other parties hereto shall have complied in all
          material respects with its covenants herein and shall have provided
          to St. Philips certificates of two officers of such party certifying
          that such party has complied in all material respects with its
          respective covenants herein and St. Philips shall have no knowledge
          to the contrary; and

     (e)  before giving effect to the transactions contemplated by this
          Agreement, there shall have been no material adverse change,
          financial or otherwise, in the business, financial condition,
          operations, prospects, properties, assets or affairs, of any of the
          other parties hereto and its Subsidiaries on a consolidated basis or
          any occurrences or circumstances which have resulted or might
          reasonably be expected to result in a material adverse change thereto
          (other than changes attributable to general economic conditions,
          including changes in interest rates and fluctuations in the price of
          gold).

     Section 5.05  Geddes Conditions:  The obligation of Geddes to complete the
transactions contemplated herein is subject to the fulfilment of the following
conditions on or before the Effective Date or such other time as specified
below:

     (a)  the representations and warranties made by each of the other
          parties hereto in this Agreement shall be true as of the Effective
          Date as if made on and as of such date and each of the other parties
          hereto shall have provided to Geddes certificates of two officers of
          such party


<PAGE>   95



          certifying such accuracy on the Effective Date and Geddes shall have
          no knowledge to the contrary;

     (b)  on or before the Effective Date, each of the other parties
          hereto shall have furnished Geddes with:

           (i)  certified copies of the resolutions duly passed by
                the boards of directors of such party approving this Agreement
                and the completion of the transactions contemplated hereby and,
                in the case of El Condor and St. Philips, approving the Proxy
                Circular and directing the submission of the Arrangement and
                their continuance under the OBCA for approval at the applicable
                Meeting; and

           (ii) certified copies of the resolutions duly passed at
                the El Condor and St. Philips Meetings approving the
                Arrangement and the continuance of El Condor and St. Philips
                under the OBCA;

     (c)  each of the other parties hereto shall have provided Geddes
          with opinions of its counsel reasonably satisfactory to Geddes dated
          the Effective Date (or such other date as the parties hereto may
          agree) and addressed to Geddes and its counsel to the effect that:

          (i)   such party and, if applicable, each of its material
                Subsidiaries is duly incorporated and validly existing under
                the laws of the jurisdiction of its incorporation and has the
                corporate power and authority to own or lease its property and
                assets and to carry on any business now conducted by it and is
                duly qualified to carry on business in each jurisdiction in
                which the nature of its business or the property or assets
                owned or leased by it makes such qualification necessary;

          (ii)  such party has full corporate power and authority
                to enter into this Agreement and to perform its obligations
                hereunder;

          (iii) all necessary proceedings, corporate, regulatory
                or otherwise, of such party have been taken to fully, validly
                and effectively authorize this Agreement and the transactions
                contemplated herein, including the Arrangement, the performance
                by such party of its obligations hereunder and the execution
                and delivery by such party of this Agreement and all documents
                delivered pursuant hereto;





                                       21


<PAGE>   96


           (iv) the execution and delivery by such party of this Agreement and
                all documents delivered pursuant hereto, the performance by such
                party of its obligations hereunder and thereunder and the
                consummation of the transactions contemplated herein and therein
                will not result in the breach of or violate any term or
                provision of the articles, by-laws or other governing documents
                of such party; and

           (v)  this Agreement has been duly executed and delivered by such
                party and this Agreement and all documents delivered pursuant to
                the terms hereof are valid and binding obligations of such party
                enforceable against it in accordance with their respective
                terms, subject to enforceability being limited by applicable
                bankruptcy, insolvency, reorganization and other laws affecting
                creditors' rights generally and the discretionary nature of
                certain remedies (including specific performance and injunctive
                relief) and subject to the effectiveness of provisions providing
                rights of indemnity or exculpating a party or persons from a
                liability or a duty otherwise owed which may be limited by law.

           In giving such opinions, counsel to such party may rely, where
           appropriate, upon the opinions of local counsel provided that
           counsel to such party is of the opinion that the opinion of such
           local counsel is one upon which counsel to the other parties may
           properly rely, and, in respect of matters of fact, upon such
           certificates of senior officers of such party or any other
           appropriate persons;

     (d)  each of the other parties hereto shall have complied in all
          material respects with its covenants herein and shall have provided
          to Geddes certificates of two officers of such party certifying that
          such party has complied in all material respects with its respective
          covenants herein and Geddes shall have no knowledge to the contrary;
          and

     (e)  before giving effect to the transactions contemplated by this
          Agreement, there shall have been no material adverse change,
          financial or otherwise, in the business, financial condition,
          operations, prospects, properties, assets or affairs, of any of the
          other parties hereto and its Subsidiaries on a consolidated basis or
          any occurrences or circumstances which have resulted or might
          reasonably be expected to result in a material adverse change thereto
          (other than changes attributable


<PAGE>   97



           to general economic conditions, including changes in interest rates
           and fluctuations in the price of gold).

     Section 5.06  Merger of Conditions:  The conditions set out in sections
5.01, 5.02, 5.03, 5.04 and 5.05 shall be conclusively deemed to have been
satisfied, waived or released on the filing by El Condor, St. Philips and
Geddes of articles of arrangement under subsection 183(l) of the OBCA.


                                  ARTICLE SIX

                           AMENDMENT AND TERMINATION

     Section 6.01  Amendment:  This Agreement may, at any time and from time to
time before and after the holding of the Meetings, but not later than the
Effective Date, be amended by written agreement of the parties hereto without,
subject to applicable law, further notice to or authorization on the part of
the shareholders of the El Condor, St. Philips and Geddes.  Without limiting
the generality of the foregoing, any such amendment may:

     (a)  change the time for the performance of any of the obligations
          or acts of the parties hereto;

     (b)  waive any inaccuracies or modify any representation or warranty
          contained herein or in any document to be delivered pursuant hereto;
          or

     (c)  waive compliance with or modify any of the covenants contained
          herein or waive or modify the performance of any of the obligations
          of the parties hereto;

provided that no such amendment shall decrease the consideration to be received
by the shareholders of El Condor, St. Philips or Geddes in exchange for their
shares pursuant to the Arrangement without the approval of such shareholders in
the same manner as required for the approval of the Arrangement or in such
other manner as may be ordered by the Court.  This agreement including the Plan
of the Arrangement may be amended in accordance with the Final Order but if the
terms of the Final Order require any such amendment, the rights of the parties
hereto under Article Five and Section 6.02 shall remain unaffected.

                                       22


<PAGE>   98




     Section 6.02  Termination:  Notwithstanding any other rights contained
herein, any party to this Agreement may terminate this Agreement at any time
prior to the Effective Date, upon notice to the other parties but without
further notice to, or action on the part of, its shareholders:

     (a)  if, notwithstanding the best efforts of the parties hereto, the
          Interim Order has been refused or has been granted in form or
          substance not satisfactory to any party hereto, or has not been
          granted by September 6, 1995 or, if issued, has been set aside or
          modified in a manner unacceptable to any party on appeal or
          otherwise;

     (b)  if, notwithstanding the best efforts of El Condor and St.
          Philips, the shareholders of such corporations do not approve the
          continuance under the OBCA of such corporation;

     (c)  if, notwithstanding the best efforts of El Condor, St. Philips
          and Geddes, the shareholders of such corporations do not approve the
          Arrangement in accordance with the terms of the Interim Order;

     (d)  if, notwithstanding the best efforts of the parties hereto, the
          Final Order has not been granted in form and substance satisfactory
          to the parties on or before November 30, 1995; or

     (e)  if, notwithstanding the best efforts of the parties hereto, the
          Arrangement has not become effective on or before December 31, 1995.

     Section 6.03  Effect of Termination:  Upon the termination of this
Agreement pursuant to this Article Six, and except as otherwise specifically
provided herein, no party shall have any liability or further obligation to the
other parties hereunder provided that nothing herein shall in any way limit or
negate the liability of any party hereto to any other party or parties hereto
pursuant to any other agreement which pertains to or contemplates the
Arrangement.




                                 ARTICLE SEVEN

                                    GENERAL

     Section 7.01  Notices:  All notices which may or are required to be given
pursuant to any provision of this Agreement shall be given or made in writing
and shall be served personally or by telecopy, in each case addressed to:


<PAGE>   99





     (a)  in the case of Royal Oak:

          5501 Lakeview Drive
          Kirkland, Washington
          98033

          Telecopy number:  (206) 822-3552

     (b)  in the case of El Condor:

          Suite 1020
          800 West Pender Street
          Vancouver, British Columbia
          V6C 2V6

          Telecopy number: (604) 684-8092

     (c)  in the case of St. Philips:

          Suite 1995
          650 West Georgia Street
          Vancouver, British Columbia
          V6B 4N8

          Telecopy number:  (604) 682-0904


                                       23


<PAGE>   100




     (d)  in the case of Geddes:

          1st Floor
          West Pender Street
          Vancouver, British Columbia
          V6G 2S3

          Telecopy number:  (206) 822-3349

or such other address or telecopier number as the parties may, from time to
time, advise the other parties hereto by notice in writing.  The date of
receipt of any such notice shall be deemed to be the date of delivery thereof
or, in the case of notice sent by telecopy, the date of successful transmission
thereof (unless transmission is received after normal business hours, in which
case the date of receipt shall be deemed to be the next Business Day).

     Section 7.02  Assignment:  No party hereto may assign its rights or
obligations under this Agreement or the Arrangement without the prior written
consent of the other parties hereto.

     Section 7.03  Binding Effect:  This Agreement and the Arrangement shall be
binding upon and shall enure to the benefit of the parties hereto and their
respective successors and permitted assigns.

     Section 7.04  Waiver:  Any waiver or release of any of the provisions of
this Agreement, to be effective must be in writing and executed by the party
granting such waiver or release.  Waivers may only be granted upon compliance
with the terms governing amendments set forth in Section 6.01 hereof.

     Section 7.05  Governing Law:  This Agreement shall be governed by and be
construed in accordance with the laws of the Province of Ontario and the laws
of Canada applicable therein and shall be treated in all respects as an Ontario
contract.  Each party hereby attorns to the non-exclusive jurisdiction of the
Courts of the Province of Ontario.

     Section 7.06  Counterparts:  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

     Section 7.07  Entire Agreement:  This Agreement, together with the
agreements and other documents herein or therein referred to, constitutes the
entire agreement among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, among the parties hereto with respect to
the


<PAGE>   101



subject matter hereof save and except for greater certainty, the El Condor
Lock-Up Agreement and the St. Philips Lock-Up Agreement.

     Section 7.08  Expenses:  Subject to the El Condor Lock-Up Agreement and
the St. Philips Lock-Up Agreement, all expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, provided that Royal Oak agrees to indemnify and
save Geddes harmless of and from the fees and disbursements of its financial
and legal advisors from and including July 28, 1995 to and including August 16,
1995 to a maximum of $75,000 in the event the Arrangement is not completed on
or before August 14, 1996.

     The provisions of this Section 7.08 shall survive the termination of this
Agreement.

     Section 7.09  Time of Essence:  Time is of the essence of this Agreement.


                                       24


<PAGE>   102




     IN WITNESS WHEREOF the parties hereto have executed Agreement as of the
date hereinbefore written.



<TABLE>
<S>                                   <C>
        ROYAL OAK MINES INC.                 EL CONDOR RESOURCES LTD.
       /s/ Margaret K. Witte                /s/ Robert G. Hunter
   Per:  (Signed) MARGARET K. WITTE      Per: (Signed) ROBERT G. HUNTER
                      President               Chief Executive Officer

     /s/ William J.V. Sheridan   c/s    /s/ Ronald W. Thiessen  c/s
Per:  (Signed) WILLIAM J.V. SHERIDAN    Per:  (Signed) RONALD W. 
                                               THIESSEN
                     Secretary                   Director

        ST. PHILIPS RESOURCES INC.           GEDDES RESOURCES LIMITED
              /s/ Jim Heras                 /s/ Margaret K. Witte
     Per:  (Signed) JIM HERAS             Per: (Signed) MARGARET K. 
                    Director                            WITTE
                                                       Chairman

         /s/ Evangelos Catevatis  c/s      /s/ William J.V. Sheridan c/s
Per: (Signed) EVANGELOS CATEVATIS          Per: (Signed) WILLIAM
                                                J.V. SHERIDAN
                 Director                         Secretary
</TABLE>



                                       25


<PAGE>   103




                                   EXHIBIT 1

            To the Arrangement Agreement made as of August 29, 1995
             Among Royal Oak Mines Inc., El Condor Resources Ltd.,
                           St. Philips Resources Inc.
                          and Geddes Resources Limited
                     PLAN OF ARRANGEMENT UNDER SECTION 182
                   OF THE BUSINESS CORPORATIONS ACT (ONTARIO)

1.1 Definitions

     In this Plan, unless the context otherwise requires, defined terms shall
have the following meanings:

"Arrangement" means the arrangement contemplated by this Plan;

"Articles of Arrangement" means the articles of arrangement in respect of the
     Arrangement required by the OBCA to be sent to the Director by each of El
     Condor, St. Philips and Geddes after the Final Order is made;

"BCCA" means the British Columbia Company Act, R.S.B.C. 1979, c. 59, as
     amended;

"Business Day" means a day which is not a Saturday, Sunday or a statutory
     holiday in Canada;

"Court" means the Ontario Court of Justice (General Division);

"Depositary" means The R-M Trust Company, as the registrar and transfer agent
     of the Royal Oak Common Shares;

"Director" means the Director appointed pursuant to section 278 of the OBCA;

"Effective Date" means the date set forth in the certificates of arrangement
     issued by the Director to each of El Condor, St. Philips and Geddes under
     the OBCA giving effect to the Arrangement;

"El  Condor" means El Condor Resources Ltd., a corporation amalgamated under
     the BCCA;

"El  Condor Common Shares" means the common shares in the capital of El
     Condor, as the same are constituted on the date hereof;

"El  Condor Dissenting Shares" means all El Condor Common Shares which are
     deemed to have been cancelled on the Effective Date in accordance with the
     provisions of clause 5.1(a);


<PAGE>   104





"Final Order" means an order of the Court approving the Arrangement, as such
     order may be amended or modified by the highest court to which appeal may
     be applied for;

"Geddes" means Geddes Resources Limited, a corporation incorporated under the
     OBCA;

"Geddes Common Shares" means the common shares in the capital of Geddes as the
     same are constituted on the date hereof;

"Geddes Dissenting Shares" means the Geddes Common Shares which are deemed to
     have been cancelled on the Effective Date in accordance with the
     provisions of clause 5.1(a);

"Interim Order" means an order of the Court containing declarations and
     directions under the OBCA with respect to the Arrangement;

"Letter of Transmittal" shall have the meaning ascribed thereto in section 4.2
     hereof;

"OBCA" means the Business Corporations Act, R.S.O. 1990 c. B.16, as amended;

"Plan" means this plan, as amended or supplemented for time to time, and
     "hereby", "hereof", "hereunder", "herewith" and similar terms refer to
     this Plan and not to any particular provision of this Plan;

"Royal Oak" means Royal Oak Mines Inc., a corporation amalgamated under the
     OBCA;

"Royal Oak Common Shares" means the common shares in the capital of Royal Oak,
     as the same are constituted on the date hereof;

"St. Philips" means St. Philips Resources Inc., a corporation incorporated
     under the BCCA;


                                       26


<PAGE>   105



"St. Philips Common Shares" means the common shares in the capital of St.
     Philips, as the same are constituted on the date hereof;

"St. Philips Dissenting Shares" means all St. Philips Common Shares which are
     deemed to have been cancelled on the Effective Date in accordance with the
     provisions of clause 5.1(a);

"Shareholders" means the registered holders of El Condor Common Shares, St.
     Philips Common Shares and Geddes Common Shares as of the Effective Date;
     and

"Subsidiary" means a subsidiary as defined in the OBCA.

1.2 Interpretation Not Affected by Headings

     The division of this agreement into articles, sections, subsections and
paragraphs and the insertion of headings are for convenience of reference only
and shall not affect in any way the meaning or interpretation of this Plan.

1.3 Article References

     Unless the contrary intention appears, references in this Plan to an
article, section, subsection, paragraph, exhibit or schedule by number or
letter or both refer to the article, section, subsection, paragraph, exhibit or
schedule, respectively, bearing that designation in this Plan.

1.4 Number

     In this Plan, unless the contrary intention appears, words importing the
singular include the plural and vice versa, words importing gender shall
include all genders, and words importing persons shall include a natural
person, firm, trust, partnership, association, corporation, joint venture or
government (including any governmental board, agency or instrumentality
thereof).

1.5 Date for Any Action

     In the event that the date on which any action is required to be taken
hereunder is not a Business Day, such action shall be required to be taken on
the next succeeding day which is a Business Day.



<PAGE>   106




1.6 Currency

     Unless otherwise stated, all references in this Plan to sums of money are
expressed in lawful money of Canada.


                                   ARTICLE 2

                         PURPOSE AND EFFECT OF THE PLAN

2.1 The following is only intended to be a general statement of the purpose of
the Plan and is qualified in its entirety by the specific provisions of the
Plan.  The purpose of the Plan is to effect a reorganization and restructuring
of the share capital of each of El Condor, St. Philips and Geddes in a manner
that is equitable to the Shareholders, maintains the business and goodwill of
El Condor, St. Philips and Geddes as going concerns and results in El Condor,
St. Philips and Geddes becoming wholly-owned subsidiaries of Royal Oak.

2.2 The Plan shall be binding on all Shareholders, on El Condor, St. Philips
and Geddes and on Royal Oak upon the filing of the Articles of Arrangement with
the Director.

                                   ARTICLE 3

                                  ARRANGEMENT

3.1 On the Effective Date, each of the events set out below shall occur and be
deemed to occur without further act or formality:

     (a)  all issued and outstanding El Condor Common Shares (other than
          the El Condor Dissenting Shares and El Condor Common Shares
          beneficially owned by Royal Oak) shall be and be deemed to be
          transferred to Royal Oak (free of any claims) and the registered
          holders thereof shall be entitled to receive from Royal Oak in
          exchange for each such share:

           (i)  subject to section 4.7, 0.95 Royal Oak Common
                Shares (for 69.06% of each El Condor Common Share); and


                                       27


<PAGE>   107




     (ii) $2.00 in cash (for 30.94% of each El Condor Common Share);

     (b)  all issued and outstanding St. Philips Common Shares (other
          than the St. Philips Dissenting Shares and St. Philips Common Shares
          beneficially owned by Royal Oak) shall be and be deemed to be
          transferred to Royal Oak (free of any claims) and the registered
          holders thereof shall be entitled to receive from Royal Oak $3.40 in
          cash in exchange for each such share;

     (c)  all issued and outstanding Geddes Common Shares (other than the
          Geddes Dissenting Shares and Geddes Common Shares beneficially owned
          by Royal Oak) shall be and be deemed to be transferred to Royal Oak
          (free of any claims) and the registered holders thereof shall be
          entitled to receive from Royal Oak in exchange for each share,
          subject to section 4.7, 0.30 Royal Oak Common Shares;

     (d)  with respect to each El Condor Common Share, St. Philips Common
          Share and Geddes Common Share to which clause 3.1(a), 3.1(b) or
          3.1(c) applies:

           (i)  the registered holder thereof shall cease to be a
                holder of such share and such holder's name shall be removed
                from the applicable register of shares as of the Effective
                Date; and

           (ii) Royal Oak shall be and be deemed to be the
                transferee of such share (free of any claims) and shall be
                entered in the register of such shares as the holder thereof.

                                   ARTICLE 4

                     OUTSTANDING CERTIFICATES AND PAYMENTS

4.1 After the Effective Date and subject to Article 5, certificates formerly
representing El Condor Common Shares, St. Philips Common Shares and Geddes
Common Shares (other than El Condor Common Shares, St. Philips Common Shares
and Geddes Common Shares beneficially owned by Royal Oak) shall represent only
the right to receive the consideration therefor specified in section 3.1,
subject to compliance with the requirements set forth in this Article 4.

4.2 As soon as practicable after the Effective Date, Royal Oak shall forward or
cause to be forwarded to each Shareholder (other than Royal Oak and those
shareholders who have exercised their dissent rights), at the address of such
holder as it appears in the relevant share register a letter of transmittal
(the "Letter


<PAGE>   108



of Transmittal") containing, among other things, instructions for obtaining
delivery of Royal Oak Common Shares and/or cash pursuant to this Plan.  Subject
to section 4.6, such Shareholders shall be entitled to receive certificates
representing the Royal Oak Common Shares and/or cheques representing the cash
payment specified in section 3.1 upon delivering the certificate or
certificates formerly representing such holder's El Condor Common Shares, St.
Philips Common Shares or Geddes Common Shares, as the case may be, to the
Depositary or as the Depositary may otherwise direct in accordance with the
instructions contained in the Letter of Transmittal.  Such certificate or
certificates shall be accompanied by the Letter of Transmittal, duly completed,
and such other documents as the Depositary may reasonably require.

4.3 Subject to Article 5, the Depositary shall register the Royal Oak Common
Shares to which each Shareholder of El Condor or Geddes is entitled in the name
of such Shareholder or as otherwise instructed in the Letters of Transmittal,
and shall deliver such Royal Oak Common Shares as each such holder may direct
in such Letter of Transmittal, as soon as practicable after receipt by the
Depositary thereof.

4.4 Subject to Article 5, Royal Oak shall forward or cause to be forwarded to
each Shareholder of El Condor and St. Philips as soon as practicable after
receipt by the Depositary of such Shareholder's Letter of Transmittal, in
accordance with the instructions of such Shareholder therein, a cheque in
Canadian currency representing the cash payment required to be made to such
Shareholder pursuant to section 3.1.

4.5 After the Effective Date, and subject to Article 5, the Shareholders shall
not be entitled to any interest, dividend, premium or other payment on or with
respect to El Condor Common Shares, St. Philips Common Shares or Geddes Common
Shares other than the Royal Oak Common Shares and/or cash which they are
entitled to receive for such shares pursuant to section 3.1.

4.6 Any certificate formerly representing El Condor Common Shares, St. Philips
Common Shares or Geddes Common Shares that is not deposited with the Letters of
Transmittal and other required documents as provided in section 4.2 on or
before the sixth anniversary of the Effective Date shall cease to represent a
right or claim of any kind or nature against Royal Oak, El Condor, St. Philips
or Geddes and the right of the holder of such shares to


                                       28


<PAGE>   109



receive Royal Oak Common Shares and/or cash shall be deemed to be surrendered
to Royal Oak together with all dividends, distributions and any interest
thereon held for such holder.

4.7 No fractional Royal Oak Common Shares will be issued.  In the event that
the exchange ratios referred to herein would in any case otherwise result in a
Shareholder being entitled to a fractional Royal Oak Common Share, an
adjustment will be made to the next highest whole number of Royal Oak Common
Shares in the case of a fraction that is greater than or equal to one half, and
to the next lowest whole number of Royal Oak Common Shares in the case of
fractions less than one half, and a certificate for the resulting whole number
of Royal Oak Common Shares will be issued.

                                   ARTICLE 5

                           SHAREHOLDER DISSENT RIGHTS

5.1 Shareholders who have given a demand for payment which remains outstanding
on the Effective Date in accordance with the rights of dissent in respect of
the Plan granted by the Interim Order and who:

     (a)  are ultimately entitled to be paid for the El Condor Common
          Shares, St. Philips Common Shares or Geddes Common Shares in respect
          of which they dissent in accordance with the provisions of such
          Interim Order whether by order of a Court (as defined in the OBCA) or
          by acceptance of an offer made pursuant to such Interim Order, shall
          be deemed to have transferred such shares to El Condor, St. Philips
          or Geddes, as the case may be, for cancellation immediately after the
          Effective Date; or

     (b)  are ultimately not so entitled to be paid for the El Condor
          Common Shares, St. Philips Common Shares or Geddes Common Shares in
          respect of which they dissent for any reason, shall be or be
          reinstated as shareholders of El Condor, St. Philips or Geddes, as
          the case maybe, but for purposes of receipt of consideration shall be
          treated as if they had participated in this Plan on the same basis as
          a non-dissenting holder of shares and such holders shall accordingly
          be entitled to receive Royal Oak Common Shares and/or cash as such
          non-dissenting holders are entitled to receive on the basis
          determined in accordance with Section 3.1 and shall be deemed to have
          transferred such shares to Royal Oak.

In no case shall Royal Oak, El Condor, St. Philips or Geddes be entitled or
required to recognize Shareholders as shareholders of El Condor, St. Philips or
Geddes, as the case may be, after the Effective Date.


<PAGE>   110





                                   ARTICLE 6

                                   AMENDMENTS

6.1 Royal Oak, El Condor, St. Philips and Geddes may at any time and from time
to time before the Effective Date, vary, amend, modify or supplement this Plan
if the Court and each of Royal Oak, El Condor, St. Philips and Geddes determine
that such variation, amendment, modification or supplement would not be
prejudicial to the interests of Shareholders under this Plan.


                                       29



<PAGE>   111




                               AMENDING AGREEMENT

THIS AMENDING AGREEMENT is dated as of the 31st day of October, 1995.

BETWEEN:

           ROYAL OAK MINES INC., a corporation amalgamated pursuant to the
           provisions of the Business Corporation Act (Ontario)

     (hereinafter referred to as "Royal Oak")

                                                               OF THE FIRST PART

                                     -and-

           EL CONDOR RESOURCES LTD., a corporation continued
           pursuant to the provisions of the Business Corporations Act
           (Ontario)

     (hereinafter referred to as "El Condor")

                                                              OF THE SECOND PART

                                     -and-

     ST. PHILIPS RESOURCES INC., a corporation continued
     pursuant to the provisions of the Business Corporations Act (Ontario)

     (hereinafter referred to as "St. Philips")

                                                               OF THE THIRD PART

                                     -and-

     GEDDES RESOURCES LIMITED, a corporation incorporated
     pursuant to the provisions of the Business Corporations Act (Ontario)

     (hereinafter referred to as "Geddes")



                                                              OF THE FOURTH PART

     WHEREAS Royal Oak, El Condor, St. Philips and Geddes (collectively the
"Participating Companies") entered into an arrangement agreement (the
"Arrangement Agreement") dated as of the 29th day of August, 1995;



<PAGE>   112




                                      -2-

     AND WHEREAS the Final Order (as defined in the Arrangement Agreement) was
issued on October 24, 1995;

     AND WHEREAS the Participating Companies wish to extend the time permitted
under the Arrangement Agreement for the fulfilment of the conditions contained
therein to the completion of the transactions contemplated thereby:

     NOW THEREFORE, in consideration of the premises and the respective
covenants and agreements contained herein and in the Arrangement Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by each of the parties hereto, the parties hereto
hereby covenant and agree as follows:

1. Section 2.02 of the Arrangement Agreement is hereby amended by deleting the
phrase "more than ten Business Days after the date of the Final Order" after
the words "which shall not be" and substituting therefor "later than January
31, 1996".

2. Clause 6.02(e) of the Arrangement Agreement is hereby amended by deleting
"December 31, 1995" and substituting therefor "January 31, 1996".

3. In consideration for the foregoing amendments, Royal Oak covenants and
agrees with each of the other Participating Companies to complete as soon as
possible bulk sampling and bulk sample milling testing on the Kemess South
property owned by El Condor and St. Philips, to commence engineering on the
Kemess South property by January 31, 1996, to complete any and all reclamation
work, if necessary, as a result of the foregoing or any other work carried out
by Royal Oak on the Kemess South property, and to expend approximately $2.5
million in connection with the foregoing activities.  Royal Oak further agrees
that all such expenditures made by it are for Royal Oak's own account and will
not be subject to repayment by El Condor and St. Philips under any
circumstances whatsoever, including the failure to complete the transactions
contemplated by the Arrangement Agreement.

4. Royal Oak will conduct all work related to the Kemess South property prior
to the completion of the Arrangement (as defined in the Arrangement Agreement)
in a proper and workman-like manner and will indemnify El Condor and St.
Philips and their respective directors, officers, employees and agents from any
claims made against and liabilities incurred by any of such indemnified parties
(including any liens which are registered against the Kemess South property)
arising as a result of such work done by or for the account of Royal Oak.  In
the event the Arrangement is not completed, Royal Oak will deliver to
El Condor


<PAGE>   113



and St. Philips all reports or other documentation pertaining to such work.
The obligation of Royal Oak to indemnify hereunder shall survive any
termination of the Arrangement Agreement.

5. Royal Oak acknowledges and accepts that as a result of this Amending
Agreement, El Condor and/or St. Philips may be in a position where either or
both of such companies have limited or no cash or cash equivalents and Royal
Oak agrees to waive




<PAGE>   114




                                      -3-

compliance with any representation or condition in the Arrangement Agreement
that would otherwise be in default as a result of such financial situation.

6. Royal Oak agrees to reimburse the other Participating Companies for all
reasonable fees and disbursements of legal counsel incurred by them relating to
the entering into of this Amending Agreement or incurred by them after December
31, 1995 and until completion of the Arrangement or termination of the
Arrangement Agreement.  Legal fees and disbursements incurred after December
31, 1995 shall be subject to the prior approval of Royal Oak.

7. The parties acknowledge that the principal purpose of this Amending
Agreement is to extend the time provided under the Arrangement Agreement for
the completion of the Arrangement and that, except as specifically provided
herein, this Amending Agreement is not intended to and does not vary, alter,
withdraw or affect in any manner and is without prejudice to any rights or
obligations of the Participating Companies under the Arrangement Agreement.

8. This Amending Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

     IN WITNESS WHEREOF the parties hereto have executed this Amending
Agreement as of the date hereinbefore written.


<TABLE>
      <S>                              <C>                         
      ROYAL OAK MINES INC.             EL CONDOR RESOURCES LTD.

      Per:/s/ M.K. Witte               Per: /s/
      -----------------------------    -----------------------------
                                c/s                              c/s

      Per:/s/ Ross F. Burns            Per: /s/
      -----------------------------    -----------------------------

      ST. PHILIPS RESOURCES INC.       GEDDES RESOURCES LIMITED

      Per:/s/ E. Catevatis             Per: /s/ M.K. Witte
      -----------------------------    -----------------------------
                                c/s                              c/s

      Per:                             Per: /s/
      -----------------------------    -----------------------------

</TABLE>



<PAGE>   115



                                                        Court File No:
                                                        B254/95


                            ONTARIO COURT OF JUSTICE
                               (GENERAL DIVISION)

                                COMMERCIAL LIST



                THE HONORABLE        )    Tuesday, the 24th day
                MR. JUSTICE WINKLER  )    of October, 1995.



ON BEHALF OF:

                ROYAL OAK MINES INC., EL CONDOR RESOURCES LTD.,
            ST. PHILIPS RESOURCES INC. and GEDDES RESOURCES LIMITED

                                                                      Applicants

APPLICATION UNDER Section 182 of the Business Corporations Act, R.S.O. 1990, c.
B.16, as amended, in respect of a Plan of Arrangement involving Royal Oak Mines
Inc., El Condor Resources Ltd., St. Philips Resources Inc. and Geddes Resources
Limited.

                                    JUDGMENT

     THIS APPLICATION was heard this day in the presence of counsel for the
Applicants.

     ON READING THE NOTICE OF APPLICATION AND THE EVIDENCE FILED BY THE
APPLICANTS, and on hearing the submissions of counsel, and upon being advised
that if made this Judgement will form the basis for an exemption from the
registration and prospectus delivery requirements under the Securities Act of
1933, as amended, of the United States of America with respect to the common
shares which are to be issued by Royal Oak Mines Inc. pursuant to the plan of
arrangement,

     AND UPON this Court being of the opinion that the terms and conditions of
the arrangement are fair and reasonable and ought therefore to be approved,

1. THIS COURT ORDERS that the Arrangement (the "Arrangement") as set forth in
the Plan of Arrangement, a copy of which is annexed hereto, be and the same is
hereby approved.

                                               /s/
                                               -----------------------------
                                                         Registrar


<PAGE>   116




                                   EXHIBIT 1


            To the Arrangement Agreement made as of August 29, 1995

             Among Royal Oak Mines Inc., El Condor Resources Ltd.,

                           St. Philips Resources Inc.

                          and Geddes Resources Limited

                     PLAN OF ARRANGEMENT UNDER SECTION 182
                   OF THE BUSINESS CORPORATIONS ACT (ONTARIO)

1.1 Definitions

     In this Plan, unless the context otherwise requires, defined terms shall
have the following meanings:

"Arrangement" means the arrangement contemplated by this Plan;

"Articles of Arrangement" means the articles of arrangement in respect of the
     Arrangement required by the OBCA to be sent to the Director by each of El
     Condor, St. Philips and Geddes after the Final Order is made;

"BCCA" means the British Columbia Company Act, R.S.B.C. 1979, c. 59, as
     amended;

"Business Day" means a day which is not a Saturday, Sunday or a statutory
     holiday in Canada;

"Court" means the Ontario Court of Justice (General Division);

"Depositary" means The R-M Trust Company, as the registrar and transfer agent
     of the Royal Oak Common Shares;

"Director" means the Director appointed pursuant to Section 278 of the OBCA;

"Effective Date" means the date set forth in the certificates of arrangement
     issued by the Director to each of El Condor, St. Philips and Geddes under
     the OBCA giving effect to the Arrangement;

"El  Condor" means El Condor Resources Ltd., a corporation amalgamated under
     the BCCA;

"El  Condor Common Shares" means the common shares in the capital of El
     Condor, as the same are constituted on the date hereof;




<PAGE>   117



"El Condor Dissenting Shares" means all El Condor Common Shares which are
     deemed to have been cancelled on the Effective Date in accordance with the
     provisions of clause 5.1(a);

"Final Order" means an order of the Court approving the Arrangement, as such
     order may be amended or modified by the highest court to which appeal may
     be applied for;

"Geddes" means Geddes Resources Limited, a corporation incorporated under the
     OBCA;

"Geddes Common Shares" means the common shares in the capital of Geddes, as the
     same are constituted on the date hereof;

"Geddes Dissenting Shares" means the Geddes Common Shares which are deemed to
     have been cancelled on the Effective Date in accordance with the
     provisions of clause 5.1(a);

"Interim Order" means an order of the Court containing declarations and
     directions under the OBCA with respect to the Arrangement;

"Letter of Transmittal" shall have the meaning ascribed thereto in section 4.2
     hereof;

"OBCA" means the Business Corporations Act, R.S.O. 1990 c. B.16, as amended;

"Plan" means this plan, as amended or supplemented for time to time, and
     "hereby", "hereof", "hereunder", "herewith" and similar terms refer to
     this Plan and not to any particular provision of this Plan;

"Royal Oak" means Royal Oak Mines Inc., a corporation amalgamated under the
     OBCA;

"Royal Oak Common Shares" means the common shares in the capital of Royal Oak,
     as the same are constituted on the date hereof;

"St. Philips" means St. Philips Resources Inc., a corporation incorporated
     under the BCCA;


                                      A-26


<PAGE>   118



"St. Philips Common Shares" means the common shares in the
     capital of St. Philips, as the same are constituted on the date hereof;

"St. Philips Dissenting Shares" means all St. Philips Common Shares which are
     deemed to have been cancelled on the Effective Date in accordance with the
     provisions of clause 5.1(a);

"Shareholders" means the registered holders of El Condor Common Shares, St.
     Philips Common Shares and Geddes Common Shares as of the Effective Date;
     and

"Subsidiary" means a subsidiary as defined in the OBCA.

1.2 Interpretation Not Affected by Headings

     The division of this agreement into articles, sections, subsections and
paragraphs and the insertion of headings are for convenience of reference only
and shall not affect in any way the meaning or interpretation of this Plan.

1.3 Article References

     Unless the contrary intention appears, references in this Plan to an
article, section, subsection, paragraph, exhibit or schedule by number or
letter or both refer to the article, section, subsection, paragraph, exhibit or
schedule, respectively, bearing that designation in this Plan.

1.4 Number

     In this Plan, unless the contrary intention appears, words importing the
singular include the plural and vice versa, words importing gender shall
include all genders, and words importing persons shall include a natural
person, firm, trust, partnership, association, corporation, joint venture or
government (including any governmental board, agency or instrumentality
thereof).

1.5 Date for Any Action

     In the event that the date on which any action is required to be taken
hereunder is not a Business Day, such action shall be required to be taken on
the next succeeding day which is a Business Day.


<PAGE>   119




1.6 Currency

     Unless otherwise stated, all references in this Plan to sums of money are
expressed in lawful money of Canada.

                                   ARTICLE 2

                         PURPOSE AND EFFECT OF THE PLAN

2.1 The following is only intended to be a general statement of the purpose of
the Plan and is qualified in its entirety by the specific provisions of the
Plan.  The purpose of the Plan is to effect a reorganization and restructuring
of the share capital of each of El Condor, St. Philips and Geddes in a manner
that is equitable to the Shareholders, maintains the business and goodwill of
El Condor, St. Philips and Geddes as going concerns and results in El Condor,
St. Philips and Geddes becoming wholly-owned subsidiaries of Royal Oak.

2.2 The Plan shall be binding on all Shareholders, on El Condor, St. Philips
and Geddes and on Royal Oak upon the filing of the Articles of Arrangement with
the Director.

                                   ARTICLE 3

                                  ARRANGEMENT

3.1 On the Effective Date, each of the events set out below shall occur and be
deemed to occur without further act or formality:

     (a)  all issued and outstanding El Condor Common Shares (other than
          the El Condor Dissenting Shares and El Condor Common Shares
          beneficially owned by Royal Oak) shall be and be deemed to be
          transferred to Royal Oak (free of any claims) and the registered
          holders thereof shall be entitled to receive from Royal Oak in
          exchange for each such share:

           (i)  subject to section 4.7, 0.95 Royal Oak Common
                Shares (for 69.06% of each El Condor Common Share); and


                                      A-27


<PAGE>   120




     (ii) $2.00 in cash (for 30.94% of each El Condor Common Share);

     (b)  all issued and outstanding St. Philips Common Shares (other
          than the St. Philips Dissenting Shares and St. Philips Common Shares
          beneficially owned by Royal Oak) shall be and be deemed to be
          transferred to Royal Oak (free of any claims) and the registered
          holders thereof shall be entitled to receive from Royal Oak $3.40 in
          cash in exchange for each such share;

     (c)  all issued and outstanding Geddes Common Shares (other than the
          Geddes Dissenting Shares and Geddes Common Shares beneficially owned
          by Royal Oak) shall be and be deemed to be transferred to Royal Oak
          (free of any claims) and the registered holders thereof shall be
          entitled to receive from Royal Oak in exchange for each share,
          subject to section 4.7, 0.30 Royal Oak Common Shares;

     (d)  with respect to each El Condor Common Share, St. Philips Common
          Share and Geddes Common Share to which clause 3.1(a), 3.1(b) or
          3.1(c) applies:

           (i)  the registered holder thereof shall cease to be a
                holder of such share and such holder's name shall be removed
                from the applicable register of shares as of the Effective
                Date; and

           (ii) Royal Oak shall be and be deemed to be the
                transferee of such share (free of any claims) and shall be
                entered in the register of such shares as the holder thereof.

                                   ARTICLE 4

                     OUTSTANDING CERTIFICATES AND PAYMENTS

4.1 After the Effective Date and subject to Article 5, certificates formerly
representing El Condor Common Shares, St. Philips Common Shares and Geddes
Common Shares (other than El Condor Common Shares, St. Philips Common Shares
and Geddes Common Shares beneficially owned by Royal Oak) shall represent only
the right to receive the consideration therefor specified in section 3.1,
subject to compliance with the requirements set forth in this Article 4.

4.2 As soon as practicable after the Effective Date, Royal Oak shall forward or
cause to be forwarded to each Shareholder (other than Royal Oak and those
shareholders who have exercised their dissent rights), at the address of such
holder as it appears in the relevant share register a letter of transmittal
(the "Letter


<PAGE>   121



of Transmittal") containing, among other things, instructions for obtaining
delivery of Royal Oak Common Shares and/or cash pursuant to this Plan.  Subject
to section 4.6, such Shareholders shall be entitled to receive certificates
representing the Royal Oak Common Shares and/or cheques representing the cash
payment specified in section 3.1 upon delivering the certificate or
certificates formerly representing such holder's El Condor Common Shares, St.
Philips Common Shares or Geddes Common Shares, as the case may be, to the
Depositary or as the Depositary may otherwise direct in accordance with the
instructions contained in the Letter of Transmittal.  Such certificate or
certificates shall be accompanied by the Letter of Transmittal, duly completed,
and such other documents as the Depositary may reasonably require.

4.3 Subject to Article 5, the Depositary shall register the Royal Oak Common
Shares to which each Shareholder of El Condor or Geddes is entitled in the name
of such Shareholder or as otherwise instructed in the Letters of Transmittal,
and shall deliver such Royal Oak Common Shares as each such holder may direct
in such Letter of Transmittal, as soon as practicable after receipt by the
Depositary thereof.

4.4 Subject to Article 5, Royal Oak shall forward or cause to be forwarded to
each Shareholder of El Condor and St. Philips as soon as practicable after
receipt by the Depositary of such Shareholder's Letter of Transmittal, in
accordance with the instructions of such Shareholder therein, a cheque in
Canadian currency representing the cash payment required to be made to such
Shareholder pursuant to section 3.1.

4.5 After the Effective Date, and subject to Article 5, the Shareholders shall
not be entitled to any interest, dividend, premium or other payment on or with
respect to El Condor Common Shares, St. Philips Common Shares or Geddes Common
Shares other than the Royal Oak Common Shares and/or cash which they are
entitled to receive for such shares pursuant to section 3.1.

4.6 Any certificate formerly representing El Condor Common Shares, St. Philips
Common Shares or Geddes Common Shares that is not deposited with the Letters of
Transmittal and other required documents as provided in section 4.2 on or
before the sixth anniversary of the Effective Date shall cease to represent a
right or claim of any kind or nature against Royal Oak, El Condor, St. Philips
or Geddes and the right of the holder of such shares to

                                      A-28


<PAGE>   122



receive Royal Oak Common Shares and/or cash shall be deemed to be surrendered
to Royal Oak together with all dividends, distributions and any interest
thereon held for such holder.

4.7 No fractional Royal Oak Common Shares will be issued.  In the event that
the exchange ratios referred to herein would in any case otherwise result in a
Shareholder being entitled to a fractional Royal Oak Common Share, an
adjustment will be made to the next highest whole number of Royal Oak Common
Shares in the case of a fraction that is greater than or equal to one half, and
to the next lowest whole number of Royal Oak Common Shares in the case of
fractions less than one half, and a certificate for the resulting whole number
of Royal Oak Common Shares will be issued.

                                   ARTICLE 5

                           SHAREHOLDER DISSENT RIGHTS

5.1 Shareholders who have given a demand for payment which remains outstanding
on the Effective Date in accordance with the rights of dissent in respect of
the Plan granted by the Interim Order and who:

     (a)  are ultimately entitled to be paid for the El Condor Common
          Shares, St. Philips Common Shares or Geddes Common Shares in respect
          of which they dissent in accordance with the provisions of such
          Interim Order whether by order of a Court (as defined in the OBCA) or
          by acceptance of an offer made pursuant to such Interim Order, shall
          be deemed to have transferred such shares to El Condor, St. Philips
          or Geddes, as the case may be, for cancellation immediately after the
          Effective Date; or

     (b)  are ultimately not so entitled to be paid for the El Condor
          Common Shares, St. Philips Common Shares or Geddes Common Shares in
          respect of which they dissent for any reason, shall be or be
          reinstated as shareholders of El Condor, St. Philips or Geddes, as
          the case maybe, but for purposes of receipt of consideration shall be
          treated as if they had participated in this Plan on the same basis as
          a non-dissenting holder of shares and such holders shall accordingly
          be entitled to receive Royal Oak Common Shares and/or cash as such
          non-dissenting holders are entitled to receive on the basis
          determined in accordance with Section 3.1 and shall be deemed to have
          transferred such shares to Royal Oak.

In no case shall Royal Oak, El Condor, St. Philips or Geddes be entitled or
required to recognize Shareholders as shareholders of El Condor, St. Philips or
Geddes, as the case may be, after the Effective Date.


<PAGE>   123





                                   ARTICLE 6

                                   AMENDMENTS

6.1 Royal Oak, El Condor, St. Philips and Geddes may at any time and from time
to time before the Effective Date, vary, amend, modify or supplement this Plan
if the Court and each of Royal Oak, El Condor, St. Philips and Geddes determine
that such variation, amendment, modification or supplement would not be
prejudicial to the interests of Shareholders under this Plan.


                                      A-29



<PAGE>   124




     Ontario Corporation Number
     Numero de la compagnie
     en Ontario
     481860


                             ARTICLES OF AMENDMENT
                            STATUTS DE MODIFICATION





               1.   The present name of the     Denomination sociale
                    corporation is:             actuelle de la
                                                compagnie:


                    G E D D E S  R E S O U R C E S  L I M I T E D


               2.   The name of the corpora-    Nouvelle denomination
                    tion is changed to (if      sociale de la compagnie
                    applicable):                (s'il y a lieu):

                    K E M E S S  M I N E S  I N C.


               3.   Date of incorporation/      Date de la constitution ou de
                    amalgamation:               la fusion:

                                  3 JUNE 1981
               --------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)

               4.   The articles of the         Les statuts de la compagnie
                    corporation are amended     sont modifies de la facon
                    as follows:                 suivante:

               RESOLVED as a special resolution that the articles of the
               Corporation are hereby amended as follows:

               1.   to change the name of the Corporation to Kemess Mines Inc.


<PAGE>   125





     5.   The amendment has been duly authorized     La modification a ete
          as required by Sections 168 & 170          dument autorisee
          (as applicable) of the Business            conformement a l'article
          Corporations Act.                          168 et, s'il y a lieu, a 
                                                     l'article 170 de la Loi
                                                     sur les compagnies.

     6.   The resolution authorizing the             Les actionnaires ou les
          amendment was approved by the              administrateurs (le cas
          shareholders/directors (as                 echeant) de la compagnie  
          applicable) of the corporation on          ont approuve la
                                                     resolution autorisant la
                                                     modification  

                                12 January 1996
- -----------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)

These articles are signed in duplicate.              Les presents statuts sont
                                                     signes en double 
                                                     exemplaire.



                                          GEDDES RESOURCES LIMITED
                                -------------------------------------------
                                            (Name of Corporation)
                                   (Denomination sociale de la compagnie)



                                By/Par: /s/       SECRETARY
                                        ------------------------------------
                                        (Signature) (Description of Office)
                                        (Signature) (Fonction)     



<PAGE>   126

     Ontario Corporation Number
     Numero de la compagnie en Ontario
     481860

                             ARTICLES OF AMENDMENT
                            STATUTS DE MODIFICATION



               1.   The present name of the     Denomination sociale
                    corporation is:             actuelle de la
                                                compagnie:


                    G E D D E S  R E S O U R C E S  L I M I T E D


               2.   The name of the corpora-    Nouvelle denomination
                    tion is changed to (if      sociale de la compagnie
                    applicable):                (s'il y a lieu):


               3.   Date of incorporation/      Date de la constitution ou
                    amalgamation:               de la fusion:

                                  3 JUNE 1981
- ---------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)

               4.   The articles of the         Les statuts de la compagnie
                    corporation are amended     sont modifies de la facon
                    as follows:                 suivante:


                    "WHEREAS Geddes Resources Limited (the "Corporation") was
               incorporated under the laws of the Province of Ontario by
               Articles of Incorporation dated June 3, 1981;

                    AND WHEREAS the authorized capital of the Corporation is
               divided into 10,000,000 Class A Preferred Shares with a par
               value of $10 each and 10,000,000 Common Shares without par
               value;

                    NOW THEREFORE BE IT RESOLVED THAT:

               A. The Articles of Incorporation be amended by deleting all of
               item 7 setting forth the designations, preferences, rights,
               conditions, restrictions, limitations or prohibitions attaching
               to the Class A


<PAGE>   127



               Preferred Shares and substituting the following therefor:


<PAGE>   128



       5.    The amendment has been duly authorized    La modification a ete
             as required by Sections 168 & 170         dument autorisee
             (as applicable) of the Business           conformement a l'article
             Corporations Act.                         168 et, s'il y a lieu, a
                                                       l'article 170 de la Loi
                                                       sur les compagnies.

       6.    The resolution authorizing the            Les actionnaires ou les
             amendment was approved by the             administrateurs (le cas
             shareholders/directors (as                echeant) de la compagnie
             applicable) on the corporation on         ont approuve la
                                                       resolution autorisant la
                                                       modification  

                                12 JANUARY 1996
- --------------------------------------------------------------------------------
                               (Day, Month, Year)
                              (jour, mois, annee)

These articles are signed in duplicate.                Les presents status sont
                                                       signes en double
                                                       exemplaire.



                                                GEDDES RESOURCES LIMITED
                                        ----------------------------------------
                                                 (Name of Corporation)
                                         (Denomination sociale de la compagnie)



                                By/Par. /s/             SECRETARY
                                       ----------------------------------------
                                       (Signature) (Description of Office)
                                       (Signature) (Fonction)


<PAGE>   129




                                      -2-

     AND WHEREAS the Final Order (as defined in the Arrangement Agreement) was
issued on October 24, 1995;

     AND WHEREAS the Participating Companies wish to extend the time permitted
under the Arrangement Agreement for the fulfilment of the conditions contained
therein to the completion of the transactions contemplated thereby;

     NOW THEREFORE, in consideration of the premises and the respective
covenants and agreements contained herein and in the Arrangement Agreement, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by each of the parties hereto, the parties hereto
hereby covenant and agree as follows:

1. Section 2.02 of the Arrangement Agreement is hereby amended by deleting the
phrase "more than ten Business Days after the date of the Final Order" after
the words "which shall not be" and substituting therefor "later than January
31, 1996".

2. Clause 6.02(e) of the Arrangement Agreement is hereby amended by deleting
"December 31, 1995" and substituting therefor "January 31, 1996".

3. In consideration for the foregoing amendments, Royal Oak covenants and
agrees with each of the other Participating Companies to complete as soon as
possible bulk sampling and bulk sample milling testing on the Kemess South
property owned by El Condor and St. Philips, to commence engineering on the
Kemess South property by January 31, 1996, to complete any and all reclamation
work, if necessary, as a result of the foregoing or any other work carried out
by Royal Oak on the Kemess South property, and to expend approximately $2.5
million in connection with the foregoing activities.  Royal Oak further agrees
that all such expenditures made by it are for Royal Oak's own account and will
not be subject to repayment by El Condor and St. Philips under any
circumstances whatsoever, including the failure to complete the transactions
contemplated by the Arrangement Agreement.

4. Royal Oak will conduct all work related to the Kemess South property prior
to the completion of the Arrangement (as defined in the Arrangement Agreement)
in a proper and workmanlike manner and will indemnify El Condor and St. Philips
and their respective directors, officers, employees and agents from any claims
made against and liabilities incurred by any of such indemnified parties
(including any


<PAGE>   130



liens which are registered against the Kemess South property) arising as a
result of such work done by or for the account of Royal Oak.  In the event the
Arrangement is not completed, Royal Oak will deliver to El Condor and St.
Philips all reports or other documentation pertaining to such work.  The
obligation of Royal Oak to indemnify hereunder shall survive any termination of
the Arrangement Agreement.

5. Royal Oak acknowledges and accepts that as a result of this Amending
Agreement, El Condor and/or St. Philips may be in a position where either or
both of such companies have limited or no cash or cash equivalents and Royal
Oak agrees to waive

<PAGE>   131

                                      -3-

compliance with any representation or condition in the Arrangement Agreement
that would otherwise be in default as a result of such financial situation.

6. Royal Oak agrees to reimburse the other Participating Companies for all
reasonable fees and disbursements of legal counsel incurred by them relating to
the entering into of this Amending Agreement or incurred by them after December
31, 1995 and until completion of the Arrangement or termination of the
Arrangement Agreement.  Legal fees and disbursements incurred after December
31, 1995 shall be subject to the prior approval of Royal Oak.

7. The parties acknowledge that the principal purpose of this Amending
Agreement is to extend the time provided under the Arrangement Agreement for
the completion of the Arrangement and that, except as specifically provided
herein, this Amending Agreement is not intended to and does not vary, alter,
withdraw or affect in any manner and is without prejudice to any rights or
obligations of the Participating Companies under the Arrangement Agreement.

8. This Amending Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.

     IN WITNESS WHEREOF the parties hereto have executed this Amending
Agreement as of the date hereinbefore written.


<TABLE>
      <S>                         <C>  <C>                            <C>
      ROYAL OAK MINES INC.             EL CONDOR RESOURCES LTD.

      Per:/s/ M.K. Witte               Per: /s/
      --------------------------  ---  -----------------------------  ---
                                  c/s                                 c/s

      Per:/s/ Ross F. Burns            Per: /s/
      --------------------------  ---  -----------------------------  ---

      ST. PHILIPS RESOURCES INC.            GEDDES RESOURCES LIMITED

      Per:/s/                          Per: /s/ M.K. Witte
      --------------------------  ---  -----------------------------  ---
                                  c/s                                 c/s

      Per:                             Per: /s/
      --------------------------  ---  -----------------------------  ---
</TABLE>





<PAGE>   1

                                                                    EXHIBIT 3.4

                                   I N D E X

                             to By-Law Number 8 of

                            GEDDES RESOURCES LIMITED

<TABLE>
          <S>                                    <C>        <C>
          Interpretation                         Paragraph  Page
          -----------------------------------------------------------

              Definitions .....................  1.01 ....  1 .......
              Definitions .....................  1.02 ....  2 .......
              Definitions .....................  1.03 ....  2 .......

          Business of the Corporation
          -------------------------------------

              Registered Office ...............  2.01 ....  3 .......
              Corporate Seal ..................  2.02 ....  3 .......
              Financial Year ..................  2.03 ....  3 .......
              Execution of Instruments ........  2.04 ....  3 .......
              Banking Arrangements ............  2.05 ....  3 .......
              Voting Rights in Other Bodies
               Corporate ......................  2.06 ....  4 .......
              Withholding Information from
               Shareholders ...................  2.07 ....  4 .......


          Borrowing and Securities
          -------------------------------------

              Borrowing Power .................  3.01 ....  4 .......
              Delegation ......................  3.02 ....  5 .......

          Directors
          -------------------------------------

              Number of Directors and Quorum ..  4.01 ....  5 .......
              Qualification ...................  4.02 ....  5 .......
              Election and Term ...............  4.03 ....  6 .......
              Removal of Directors ............  4.04 ....  6 .......
              Vacation of Office ..............  4.05 ....  6 .......
              Vacancies .......................  4.06 ....  6 .......
              Action by the Board .............  4.07 ....  6 .......
              Canadian Majority ...............  4.08 ....  7 .......
              Meetings by Telephone ...........  4.09 ....  7 .......
              Place of Meetings ...............  4.10 ....  7 .......
              Calling of Meetings .............  4.11 ....  8 .......
              Notice of  Meeting ..............  4.12 ....  8 .......
              First Meeting of New Board ......  4.13 ....  8 .......
              Adjourned Meeting ...............  4.14 ....  8 .......
              Regular Meetings ................  4.15 ....  8 .......
              Chairman ........................  4.16 ....  9 .......
              Votes to Govern .................  4.17 ....  9 .......
              Conflict of Interest ............  4.18 ....  9 .......
              Remuneration and Expenses .......  4.19 ....  9 .......

          Committees
          -------------------------------------

              Committee of Directors ..........  5.01 ....  10
              Transaction of Business .........  5.02 ....  10
              Advisory Bodies .................  5.03 ....  10
              Procedure .......................  5.04 ....  10
              Audit Committee .................  5.05 ....  10
</TABLE>



<PAGE>   2

                                     - ii -


<TABLE>
         <S>                                            <C>        <C>
                                                        Paragraph  Page
                                                        ---------  ----

         Officers
         ---------------------------------------------

                Appointment ..........................  6.01 ....  10
                Chairman of the Board ................  6.02 ....  11
                Managing Director ....................  6.03 ....  11
                President ............................  6.04 ....  11
                Vice-President .......................  6.05 ....  12
                Secretary ............................  6.06 ....  12
                Treasurer ............................  6.07 ....  12
                Powers and Duties of Other
                 Officers ............................  6.08 ....  12
                Variation of Powers and Duties .......  6.09 ....  12
                Term of Office .......................  6.10 ....  12
                Terms of Employment and
                 Remuneration ........................  6.11 ....  13
                Conflict of Interest .................  6.12 ....  13
                Agents and Attorneys .................  6.13 ....  13
                Fidelity Bonds .......................  6.14 ....  13

         Protection of Directors, Officers and Others
         ---------------------------------------------

                Limitation of Liability ..............  7.01 ....  13
                Indemnity ............................  7.02 ....  14
                Insurance ............................  7.03 ....  14

         Shares
         ---------------------------------------------

                Allotment ............................  8.01 ....  15
                Commissions ..........................  8.02 ....  15
                Registration of Transfer .............  8.03 ....  15
                Transfer Agents and Registrars .......  8.04 ....  15
                Non-Recognition of Trusts ............  8.05 ....  16
                Share Certificates ...................  8.06 ....  16
                Replacement of Share
                 Certificates ........................  8.07 ....  16
                Joint Shareholders ...................  8.08 ....  17
                Deceased Shareholders ................  8.09 ....  17

         Dividends and Rights
         ---------------------------------------------

                Dividends ............................  9.01 ....  18
                Dividend Cheques .....................  9.02 ....  18
                Non-Receipt of Cheques ...............  9.03 ....  18
                Record Date for Dividends
                 and Rights ..........................  9.04 ....  18
                Unclaimed Dividends ..................  9.05 ....  19

         Meetings of Shareholders
         ---------------------------------------------
                Annual Meetings ......................  10.01 ...  19
                Special Meetings .....................  10.02 ...  19
                Place of Meetings ....................  10.03 ...  19
                Notice of Meetings ...................  10.04 ...  20
                List of Shareholders Entitled
                 to Notice ...........................  10.05 ...  20
                Record Date for Notice ...............  10.06 ...  21
                Meetings without Notice ..............  10.07 ...  21
                Chairman, Secretary and Scrutineers ..  10.08 ...  21
</TABLE>



<PAGE>   3



                                     - iii -


<TABLE>
         <S>                                          <C>       <C>
         Meetings of Shareholders (continued)         Paragraph Page
         -------------------------------------------  -----------------

              Persons Entitled to be Present .......  10.09 ..   22
              Quorum ...............................  10.10 ..   22
              Right to Vote ........................  10.11 ..   22
              Proxies ..............................  10.12 ..   23
              Time for Deposit of Proxies ..........  10.13 ..   23
              Joint Shareholders ...................  10.14 ..   24
              Votes to Govern ......................  10.15 ..   24
              Show of Hands ........................  10.16 ..   24
              Ballots ..............................  10.17 ..   24
              Adjournment ..........................  10.18 ..   25
              Resolution in Lieu of Meeting ........  10.19 ..   25
              Only One Shareholder .................  10.20 ..   25

         Divisions and Departments
         -------------------------------------------

              Creation and Consolidation of
                Divisions ..........................  11.01 ..   26
              Name of Division .....................  11.02 ..   26
              Officers of Divisions ................  11.03 ..   26
         Notices
         -------------------------------------------

              Method of Giving Notice ..............  12.01 ..   26
              Notice of Joint Shareholders .........  12.02 ..   27
              Computation of Time ..................  12.03 ..   27
              Undelivered Notices ..................  12.04 ..   27
              Ommissions and Errors ................  12.05 ..   27
              Persons Entitled by Death or
                Operation of Law ...................  12.06 ..   28
              Waiver of Notice .....................  12.07 ..   28

         Voting Rights in Other Corporations
         -------------------------------------------

              Voting Rights in Other Corporations ..  13.01 ..   28

         Repeal
         -------------------------------------------

              Repeal ...............................  14.01 ..   29

         Effective Date
         -------------------------------------------

              Effective Date .......................  15.01 ..   29
</TABLE>




<PAGE>   4




                                  BY-LAW NO. 1

                         A by-law relating generally to
                        the transaction of the business
                                 and affairs of

                            GEDDES RESOURCES LIMITED

     BE IT ENACTED as a by-law of the Corporation as follows:

                                  Section One

                                 INTERPRETATION

1.01 Definitions - In the by-laws of the Corporation, unless the context
otherwise requires:

        "Act" means the Business Corporations Act (S.O. 1982, c.4) and any
        statute that may be substituted therefor, as from time to time amended;

        "articles" means the articles on which is endorsed the certificate of
        incorporation dated June 3, 1981, of the Corporation as from time to
        time amended or restated;

        "board" means the board of directors of the Corporation;

        "by-laws" means this by-law and all other by-laws of the Corporation
        from time to time in force and effect;

        "Corporation" means the corporation incorporated under the Act by the
        said certificate endorsed on the articles and named

                            GEDDES RESOURCES LIMITED

        "meeting of shareholders" means any meeting of shareholders, whether
        annual or special;
        "non-business day" means Saturday, Sunday and any other day that is a
        holiday as defined in the Interpretation Act (Ontario);


<PAGE>   5

                                     - 2 -


        "offering corporation" means a corporation that is offering its
        securities to the public within the meaning of the Act and that is not
        the subject of an order of the Ontario Securities Commission deeming it
        to have ceased to be offering its securities to the public;

        "recorded address" means in the case of a shareholder his address as
        recorded in the securities register; and in the case of joint
        shareholders the address appearing in the securities register in
        respect of such joint holding or the first address so appearing if
        there are more than one; and in the case of a director, officer,
        auditor or member of a committee of the board, his latest address as
        recorded in the records of the Corporation;

        "signing officer" means, in relation to any instrument, any person
        authorized  to sign the same on behalf of the Corporation by section
        2.04 or by a resolution passed pursuant thereto;

        "special meeting of shareholders" means a special meeting of all
        shareholders entitled to vote at an annual meeting of shareholders and
        a meeting of any class or classes of shareholders entitled to vote on
        the question at issue.

1.02 Save as aforesaid, words and expressions defined in the Act have the same
meanings when used herein.

1.03 Words importing the singular number include the plural and vice versa;
words importing gender include the masculine, feminine and neuter genders; and
words importing persons include individuals, bodies corporate, partnerships,
trusts and unincorporated organizations.



<PAGE>   6

                                     - 3 -


                                  Section Two

                          BUSINESS OF THE CORPORATION

2.01 Registered Office - Until  changed in accordance with the Act, the
registered office of the Corporation shall be at the Municipality of
Metropolitan Toronto in the Province of Ontario and at such location therein as
the board may from time to time determine.

2.02 Corporate Seal - Until changed by the board, the corporate seal of the
Corporation, if any, shall be in the form impressed hereon.

2.03 Financial Year - Until changed by the board, the financial year of the
Corporation shall end on the 31st day of December in each year.

2.04 Execution of Instruments - Deeds, transfers, assignments, bills of sale,
contracts, obligations, certificates and other instruments may be signed on
behalf of the Corporation by any two directors or officers or any director
together with any officer.  In addition, the board may from time to time direct
the manner in which and the person or persons by whom any particular instrument
or class of instruments may or shall be signed.  Any signing officer may affix
the corporate seal to any instrument requiring the same.

2.05 Banking Arrangements - The banking business of the Corporation including,
without limitation, the borrowing of money and the giving of security therefor,
shall be transacted with such banks, trust companies or other bodies corporate
or organizations as may from time to time be designated by or under the
authority of the board.  Such banking business or any part thereof shall be
transacted under such agreements, instructions and delegations of powers as the
board may from time to time prescribe or authorize.



<PAGE>   7

                                     - 4 -


2.06 Voting Rights in Other Bodies Corporate - The signing officers of the
Corporation may execute and deliver proxies and arrange for the issuance of
voting certificates or other evidence of the right to exercise the voting
rights attaching to any securities held by the Corporation.  Such instruments,
certificates or other evidence shall be in favour of such person or persons as
may be determined by the officers executing such proxies or arranging for the
issuance of voting certificates or such other evidence of the right to exercise
such voting rights.  In addition, the board may from time to time direct the
manner in which and the person or persons by whom any particular voting rights
or class of voting rights may or shall be exercised.

2.07 Withholding Information from Shareholders - Subject to the provisions of
the Act, no shareholder shall be entitled to discovery of any information
respecting any details or conduct of the Corporation's business which, in the
reasonable opinion of the board, could be inexpedient in the interests of the
shareholders or the Corporation to communicate to the public.  The board may
from time to time determine whether and to what extent and at what time and
place and under what conditions or regulations the accounts, records and
documents of the Corporation or any of them shall be open to the inspection of
shareholders and no shareholder shall have any right to inspect any account,
record or document of the Corporation except as conferred by the Act or
authorized by the board.

                                 Section Three

                            BORROWING AND SECURITIES

3.01 Borrowing Power - Without limiting the borrowing powers of the Corporation
as set forth in the Act, the board may, without authorization of the
shareholders, from time to time:

     (a) borrow money upon the credit of the Corporation;

     (b) issue, reissue, sell or pledge debt obligations of the Corporation;



<PAGE>   8

                                     - 5 -


      (c) subject to the Act, give a guarantee on behalf of the Corporation to
          secure performance of an obligation of any person; and

      (d) mortgage, hypothecate, pledge or otherwise create a security interest
          in all or any  property of the Corporation, owned or subsequently
          acquired, to secure any obligation of the Corporation.

Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.

3.02 Delegation - The board may from time to time by resolution delegate to a
director, a committee of directors or an officer of the Corporation as may be
designated by the board all or any of the powers conferred on the board by
section 3.01 to such extent and in such manner as the board shall determine at
the time of each such delegation.

                                  Section Four

                                   DIRECTORS

4 .01 Number of Directors and Quorum - Until changed in accordance with the
Act, the board shall consist of not fewer than the minimum number and not more
than the maximum number of directors provided in the articles. Subject to the
Act and to section 4.08 hereof, the quorum for the transaction of business at
any meeting of the board shall consist of a majority of directors or such other
number of directors as the board may from time to time determine.

4.02 Qualification - No person shall be qualified for election as a director if
he is less than 18 years of age; if he is of unsound mind and has been so found
by a court in Canada or elsewhere; if he is not an individual; or if he has the
status of a bankrupt.  A director need not be a shareholder.  A majority of the
directors shall be resident Canadians but where the Corporation has only one or
two directors that director or one of the two directors, as the case may be,
shall be resident Canadians.  If the Corporation is an offering corporation at
least one-third of the directors shall not be officers or employees of the
Corporation or any of its affiliates.

4.03 Election and Term - Directors shall be elected yearly to hold office until
the next annual meeting of shareholders and until their successors are elected.
At each


<PAGE>   9

                                     - 6 -

annual meeting of shareholders, all the directors then in office shall retire
but, if qualified, shall be eligible for re-election.  The number of directors
to be elected at any such meeting shall be the number of directors as shall be
determined from time to time by special resolution or, if a special resolution
empowers the directors to determine the number, by resolution of directors.
The election shall be by resolution.

4.04 Removal of Directors - Subject to the provisions of the Act, the
shareholders may by ordinary resolution passed at a meeting of shareholders
remove any director or directors from office and the vacancy created by such
removal may be filled at the same meeting failing which it may be filled by a
quorum of directors.

4.05 Vacation of Office - A director ceases to hold office when he dies; or
subject to the Act, he resigns; he is removed from office by the shareholders;
or he ceases to be qualified for election as a director.  A resignation of a
director becomes effective at the time a written resignation is received by the
Corporation or at the time specified in the resignation, whichever is later.

4.06 Vacancies - Subject to the Act, a quorum of the board may fill a vacancy
in the board, except a vacancy resulting from an increase in the number or
maximum number of directors or from a failure to elect the number of directors
required to be elected at any meeting of shareholders.  In the absence of a
quorum of the board,  or if there has been a failure to elect the number of
directors required by the articles or by the Act, the board shall forthwith
call a special meeting of shareholders to fill the vacancy.  If the board fails
to call such meeting or if there are no directors then in office, any
shareholder may call the meeting.

4.07 Action by the Board - Subject to any unanimous shareholder agreement, the
board shall manage or supervise the management of the business and affairs of
the Corporation.  Subject to sections 4.08 and 4.09, the powers of the board
may be exercised by resolution passed at a meeting at which a quorum is


<PAGE>   10

                                     - 7 -

present or by resolution in writing signed by all the directors entitled to
vote on that resolution at a meeting of the board.  Where there is a vacancy in
the board, the remaining directors may exercise all the powers of the board so
long as a quorum remains in office.  A resolution in writing, signed by all the
directors entitled to vote on that resolution at a meeting of directors or a
committee of directors, is as valid as if it had been passed at a meeting of
directors or a committee of directors.

4.08 Canadian Majority - The board shall not transact business at a meeting
unless a majority of the directors present are resident Canadians, except where

        (a)  a resident Canadian director who is unable to be present
             approves in writing or by telephone or other communications
             facilities the business transacted at the meeting; and

        (b)  a majority of resident Canadian directors would have been
             present had that director been present at the meeting.

4.09 Meetings by Telephone - If all the directors present at or participating
in the meeting consent, a meeting of the board or of a committee of the board
may be held by means of such telephone, electronic or other communications
facilities as permit all persons participating in the meeting to communicate
with each other simultaneously and instantaneously, and a director
participating in such a meeting by such means is deemed for the purposes of the
Act to be present at the meeting.  Any such consent shall be effective whether
given before or after the meeting to which it relates and may be given with
respect to all meetings of the board and of committees of the board held while
a director holds office.

4.10 Place of Meetings - Meetings of the board may be held at any place within
or outside Ontario and it shall not be necessary that, in any financial year of
the Corporation, a majority of the meetings of the board be held at a place
within Canada.



<PAGE>   11

                                     - 8 -


4.11 Calling of Meetings - Meetings of the board shall be held from time to
time at such time and at such place as the chairman of the board, the managing
director, the president, or any director may determine.

4.12 Notice of Meeting - Notice of the time and place of each meeting of the
board shall be given in the manner provided in section 12.01 to each director
not less than 48 hours before the time of the meeting.  A notice of a meeting
of directors need not specify the purpose of or the business to be transacted
at the meeting except where the Act requires such purpose or business to be
specified.  A director may in any manner and at any time waive a notice of a
meeting of the board.  Attendance of a director at a meeting of directors is a
waiver of notice of the meeting except where a director attends a meeting for
the express purpose of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called.

4.13 First Meeting of New Board - Provided  a quorum of directors is present,
each newly elected board may without notice hold its first meeting immediately
following the meeting of shareholders at which such board is elected.

4.14 Adjourned Meeting - Notice of an adjourned meeting of the board is not
required to be given if the time and place of the adjourned meeting is
announced at the original meeting.

4.15 Regular Meetings - The board may appoint a day or days in any month or
months for regular meetings of the board at a place and hour to be named.  A
copy of any resolution of the board fixing the place and time of such regular
meetings shall be sent to each director forthwith after being passed, but no
other notice shall be required for any such regular meeting except where the
Act requires the purpose thereof or the business to be transacted thereat to be
specified.



<PAGE>   12

                                     - 9 -


4.16 Chairman - The chairman of any meeting of the board shall be the first
mentioned of such of the following officers as have been appointed and who is a
director and is present at the meeting:  chairman of the board, managing
director, president, or a vice-president who is a director.  If no such officer
is present, the directors present shall choose one of their number to be
chairman.

4.17 Votes to Govern - At all meetings of the board every question shall be
decided by a majority of the votes cast on the question.  In case of an
equality of votes the chairman of the meeting shall be entitled to a second or
casting vote.

4.18 Conflict of Interest - A director or officer who is a party to, or who is
a director or officer of or has a material interest in any person who is a
party to, a material contract or transaction or proposed material contract or
transaction with the Corporation shall disclose the nature and extent of his
interest at the time and in the manner provided by the Act.  Any such contract
or transaction or proposed contract or transaction shall be referred to the
board or the shareholders for approval even if such contract is one that in the
ordinary course of the Corporation's business would not require approval by the
board or the shareholders, and a director interested in a contract so referred
to the board shall not vote on any resolution to approve the same except as
provided by the Act.

4.19 Remuneration and Expenses - Subject to the articles or any unanimous
shareholder agreement, the directors shall be paid such remuneration for their
services as the board may from time to time determine.  The directors shall
also be entitled to be reimbursed for travelling and other expenses properly
incurred by them in attending meetings of the board or any committee thereof.
Nothing herein contained shall preclude any director from serving the
Corporation in any other capacity and receiving remuneration therefor.



<PAGE>   13

                                     - 10 -


                                  Section Five

                                   COMMITTEES

5.01 Committee of Directors - The board may appoint from its members one or
more committees of directors, however designated, and delegate to any such
committee any of the powers of the board except those which, under the Act, a
committee of directors has no authority to exercise.  A majority of the members
of any such committee shall be resident Canadians.

5.02 Transaction of Business - Subject to the provisions of section 4.09, the
powers of a committee of directors may be exercised by a meeting at which a
quorum of the committee is present or by resolution in writing signed by all
the members of such committee who would have been entitled to vote on that
resolution at a meeting of the committee.  Meetings of such committee may be
held at any place within or outside Ontario.

5.03 Advisory Bodies - The board may from time to time appoint such advisory
bodies as it may deem desirable.

5.04 Procedure - Unless otherwise determined by the board, each committee and
advisory body shall have the power to fix its quorum at not less than a
majority of its members, to elect its chairman and to regulate its procedure.

5.05 Audit Committee - If the Corporation is an offering corporation, the board
shall elect annually from among its number an audit committee to be composed of
not fewer than 3 directors of whom a majority shall not be officers or
employees of the Corporation or any of its affiliates.  The audit committee
shall have the powers and duties provided in the Act.

                                  Section Six

                                    OFFICERS

6.01 Appointment - Subject to the articles or any unanimous shareholder
agreement, the board may from time to time appoint a


<PAGE>   14

                                     - 11 -

president, one or more vice-presidents (to which title may be added words
indicating seniority or function), a secretary, a treasurer and such other
officers as the board may determine, including one or more assistants to any of
the officers so appointed.  The board may specify the duties of and, in
accordance with this by-law and subject to the provisions of the Act, delegate
to such officers powers to manage the business and affairs of the Corporation.
Subject to sections 6.02 and 6.03, an officer may but need not be a director
and one person may hold more than one office.

6.02 Chairman of the Board - The board may from time to time also appoint a
chairman of the board who shall be a director.  If appointed, the board may
assign to him any of the powers and duties that are by any provisions of this
by-law capable of being assigned to the managing director or to the president;
and he shall, subject to the provisions of the Act, have such other powers and
duties as the board may specify.  During the absence or disability of the
chairman of the board, his duties shall be performed and his powers exercised
by the managing director, if any, or by the president.

6.03 Managing Director - The board may from time to time appoint a managing
director who shall be a resident Canadian and a director.  If appointed, he
shall be the chief executive officer and, subject to the authority of the
board, shall have general supervision of the business and affairs of the
Corporation; and he shall, subject to the provisions of the Act, have such
other powers and duties as the board may specify.  During the absence or
disability of the president, or if no president has been appointed, the
managing director shall also have the powers and duties of that office.

6.04 President - The board may from time to time appoint a president.  If
appointed, the president shall be the chief operating officer if no managing
director has been appointed, and, subject to the authority of the board, shall
have general supervision of the business of the Corporation; and he shall have
such other powers and duties as the board may specify.  During the absence or
disability of the managing director, or if no managing director has been
appointed, the president shall also have the powers and duties of that office.



<PAGE>   15

                                     - 12 -


6.05 Vice-President - The board may from time to time appoint one or more
vice-presidents.  Any vice-president so appointed shall have such powers and
duties as the board or the chief executive officer may specify.

6.06 Secretary - The board may from time to time appoint a secretary.  If so
appointed, the secretary shall attend and be the secretary of all meetings of
the board, shareholders and committees of the board and shall enter or cause to
be entered in records kept for that purpose minutes of all proceedings thereat;
he shall give or cause to be given, as and when instructed, all notices to
shareholders, directors, officers, auditors and members of committees of the
board; he shall be the custodian of the stamp or mechanical device generally
used for affixing the corporate seal of the Corporation and of all books,
papers, records, documents and instruments belonging to the Corporation, except
when some other officer or agent has been appointed for that purpose; and he
shall have such other powers and duties as the board or the chief executive
officer may specify.

6.07 Treasurer - The board may from time to time appoint a treasurer.  If so
appointed, the treasurer shall keep proper accounting records in compliance
with the Act and shall be responsible for the deposit of money, the safekeeping
of securities and the disbursement of the funds of the Corporation; he shall
render to the board whenever required an account of all his transactions as
treasurer and of the financial position of the Corporation; and he shall have
such other powers and duties as the board or the chief executive officer may
specify.

6.08 Powers and Duties of Other Officers - The powers and duties of all other
officers shall be such as the terms of their engagement call for or as the
board or the chief executive officer may specify.  Any of the powers and duties
of an officer to whom an assistant has been appointed may be exercised and
performed by such assistant, unless the board or the chief executive officer
otherwise directs.

6.09 Variation of Powers and Duties - The board may from time to time and
subject to the provisions of the Act, vary, add to or limit the powers and
duties of any officer.

6.10 Term of Office - The board, in its discretion, may remove any officer of
the Corporation, without prejudice to such officer's rights under any
employment contract.  Otherwise each


<PAGE>   16

                                     - 13 -

officer appointed by the board shall hold office until his successor is
appointed, or until his earlier resignation or death.

6.11 Terms of Employment and Remuneration - The terms of employment and the
remuneration of officers appointed by the board shall be settled by it from
time to time.

6.12 Conflict of Interest - An officer shall disclose his interest in any
material contract or transaction or proposed material contract or transaction
with the Corporation in accordance with section 4.18.

6.13 Agents and Attorneys - The board shall have power from time to time to
appoint agents or attorneys for the Corporation in or outside Canada with such
powers of management or otherwise (including the power to sub-delegate) as may
be thought fit.

6.14 Fidelity Bonds - The board may require such officers, employees and agents
of the Corporation as the board deems advisable to furnish bonds for the
faithful discharge of their powers and duties, in such form and with such
surety as the board may from time to time determine.

                                 Section Seven

                  PROTECTION OF DIRECTORS, OFFICERS AND OTHERS

7.01 Limitation of Liability - Every director and officer of the Corporation in
exercising his powers and discharging his duties shall act honestly and in good
faith with a view to the best interests of the Corporation and exercise the
care, diligence and skill that a reasonably prudent person would exercise in
comparable circumstances.  Subject to the foregoing, no director or officer
shall be liable for the acts, receipts, neglect or default of any other
director or officer or employee, or for joining in any receipt or other act for
conformity, or for any loss, damage or expense happening to the Corporation
through the insufficiency or deficiency of title to any property acquired for
or on behalf of the Corporation, or for the insufficiency or deficiency of any
security in or upon which any of the moneys of the Corporation shall be
invested, or for any loss or damage arising from the bankruptcy, insolvency or
tortious acts of any person with whom any of the moneys, securities or effects
of the


<PAGE>   17

                                     - 14 -

Corporation shall be deposited, or for any loss occasioned by any error of
judgment or oversight on his part, or for any other loss, damage or misfortune
whatever which shall happen in the execution of the duties of his office or in
relation thereto, unless the same are occasioned by his own wilful neglect or
default; provided that nothing herein shall relieve any director or officer
from the duty to act in accordance with the Act and the regulations thereunder
or from liability for any breach thereof.

7.02 Indemnity - Subject to the limitations contained in the Act, the
Corporation shall indemnify a director or officer, a former director or
officer, or a person who acts or acted at the Corporation's request as a
director or officer of a body corporate of which the Corporation is or was a
shareholder or creditor (or a person who undertakes or has undertaken any
liability on behalf of the Corporation or any such body corporate) and his
heirs and legal representatives, against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a judgment, reasonably
incurred by him in respect of any civil, criminal or administrative action or
proceeding to which he is made a party by reason of being or having been a
director or officer of the Corporation or such body corporate, if

        (a)  he acted honestly and in good faith with a view to the
             best interests of the Corporation; and

        (b)  in the case of a criminal or administrative action or
             proceeding that is enforced by a monetary penalty, he had
             reasonable grounds for believing that his conduct was lawful.

The Corporation shall also indemnify such person in such other circumstances as
the Act permits or requires.

7.03 Insurance - Subject to the limitations contained in the Act, the
Corporation may purchase and maintain insurance for the benefit of any person
referred to in section 7.02 hereof.

                                 Section Eight

                                     SHARES

8.01 Allotment - Subject to the provisions of the Act, the articles and any
unanimous shareholder agreement, the board may from time to time grant options
to purchase or allot the whole or any part of the authorized and unissued
shares of the Corporation at


<PAGE>   18

                                     - 15 -

such times and to such persons and for such consideration as the board shall
determine, provided that no share shall be issued until it is fully paid as
prescribed by the Act.

8.02 Commissions - The board may from time to time authorize the Corporation to
pay a reasonable commission to any person in consideration of his purchasing or
agreeing to purchase shares of the Corporation from the Corporation or from any
other person, or procuring or agreeing to procure purchasers for any such
shares.

8.03 Registration of Transfer - Subject to the provisions of the Act, no
transfer of shares shall be registered in a securities register except upon
presentation of the certificate representing such shares with a transfer
endorsed thereon or delivered therewith duly executed by an appropriate person
as provided by the Act, together with such reasonable assurance that the
endorsement is genuine and effective as the board may from time to time
prescribe, upon payment of all applicable taxes and any fees prescribed by the
board, upon compliance with such restrictions on transfer as are authorized by
the articles and upon satisfaction of any lien referred to in the articles or
by-laws of the Corporation for a debt of the shareholder to the Corporation.

8.04 Transfer Agents and Registrars - The board may from time to time appoint a
registrar to maintain the securities register and a transfer agent to maintain
the register of transfers and may also appoint one or more branch registrars to
maintain branch securities registers and one or more branch transfer agents to
maintain branch registers of transfers, but one person may be appointed both
registrar and transfer agent.  The board may at any time terminate any such
appointment.



<PAGE>   19

                                     - 16 -


8.05 Non-Recognition of Trusts - Subject to the provisions of the Act, the
Corporation shall treat the registered holder of a security as the person
exclusively entitled to vote, to receive notices, to receive any interest,
dividend or other payments in respect of such security, and otherwise to
exercise all the rights and powers of an owner of such security.

8.06 Share Certificates - Every holder of one or more shares of the Corporation
shall be entitled, at his option, to a share certificate, or to a
non-transferable written acknowledgment of his right to obtain a share
certificate, stating the number and class or series of shares held by him as
shown on the securities register. Share certificates and acknowledgments of a
shareholder's right to a share certificate, respectively, shall be in such form
as the board shall from time to time approve. Any share certificate shall be
signed in accordance with section 2.04 and need not be under the corporate
seal; provided that, unless the board otherwise determines, certificates
representing shares in respect of which a transfer agent and/or registrar has
been appointed shall not be valid unless countersigned by or on behalf of such
transfer agent and/or registrar. The signature of one of the signing officers
or, in the case of share certificates which are not valid unless countersigned
by or on behalf of a transfer agent and/or registrar, the signatures of both
signing officers, may be printed or mechanically reproduced in facsimile upon
share certificates and every such facsimile signature shall for all purposes be
deemed to be the signature of the officer whose signature it reproduces and
shall be binding upon the Corporation.  A share certificate executed as
aforesaid shall be valid notwithstanding that one or both of the officers whose
facsimile signature appears thereon no longer holds office at the date of issue
of the certificate.

8.07 Replacement of Share Certificates - The board or any officer or agent
designated by the board may in its or his


<PAGE>   20

                                     - 17 -

discretion direct the issue of a new share certificate in lieu of and upon
cancellation of a share certificate that has been mutilated or in substitution
for a share certificate claimed to have been lost, destroyed or wrongfully
taken if the owner:

        (a)  so requests before the Corporation has notice that the
             security has been acquired by a bona fide purchaser;

        (b)  furnishes the Corporation with an indemnity bond sufficient, in the
             opinion of the board, to protect the Corporation and any transfer
             agent, registrar or other agent of the Corporation from any loss
             that the Corporation or any of them may suffer by complying with
             the request to issue the new share certificate; and

        (c)  satisfies any other reasonable requirements imposed by the
             Corporation from time to time, whether generally or in any
             particular case.

8.08 Joint Shareholders - If two or more persons are registered as joint
holders of any share, the Corporation shall not be bound to issue more than one
certificate or written acknowledgment referred to in section 8.06 in respect
thereof, and delivery of such certificate to one of such persons shall be
sufficient delivery to all of them. Any one of such persons may give effectual
receipts for the certificate issued in respect thereof or for any dividend,
bonus, return of capital or other money payable or warrant issuable in respect
of such share.

8.09 Deceased Shareholders - In the event of the death of a holder, or of one
of the joint holders, of any share, the Corporation shall not be required to
make any entry in the securities register in respect thereof or to make payment
of any dividends thereon except upon production of all such documents as may be
required by law and upon compliance with the reasonable requirements of the
Corporation and its transfer agents.



<PAGE>   21

                                     - 18 -


                                  Section Nine

                              DIVIDENDS AND RIGHTS

9.01 Dividends - The board may from time to time declare dividends payable to
the shareholders according to their respective rights and interests in the
Corporation.  Dividends may be paid by issuing fully paid shares of the
Corporation and, subject to the provisions of the Act, in money or property.

9.02 Dividend Cheques - A dividend payable in cash shall be paid by cheque
drawn on the Corporation's bankers or one of them to the order of each
registered holder of shares of the class or series in respect of which it has
been declared and mailed by prepaid ordinary mail to such registered holder at
his recorded address, unless such holder otherwise directs.  In the case of
joint holders the cheque shall, unless such joint holders otherwise direct, be
made payable to the order of all of such joint holders and mailed to them at
their recorded address.  The mailing of such cheque as aforesaid, unless the
same is not paid on due presentation, shall satisfy and discharge the liability
for the dividend to the extent of the sum represented thereby plus the amount
of any tax which the Corporation is required to and does withhold.

9.03 Non-Receipt of Cheques - In the event of non-receipt of any dividend
cheque by the person to whom it is sent as aforesaid, the Corporation shall
issue to such person a replacement cheque for a like amount on such terms as to
indemnity, reimbursement of expenses and evidence of non-receipt and of title
as the board may from time to time prescribe, whether generally or in any
particular case.

9.04 Record Date for Dividends and Rights - The board may fix in advance a
date, preceding by not more than 50 days the date for the payment of any
dividend or the date for the issue of any warrant or other evidence of right to
subscribe for securities of the Corporation, as a record date for the
determination of the persons entitled to receive payment of such dividend or to
exercise the right to subscribe for such securities, provided that, unless
notice of the record date is waived in writing by every holder of a share of
the class or series affected whose name is


<PAGE>   22

                                     - 19 -

set out in the securities register at the close of business on the day the
directors fix the record date, notice of any such record date shall be given
not less than 7 days before such record date, by newspaper advertisement in the
manner provided in the Act and by written notice to each stock exchange in
Canada on which the shares of the Corporation are listed for trading.  Where no
record date is fixed in advance as aforesaid, the record date for the
determination of the persons entitled to receive payment of any dividend or to
exercise the right to subscribe for securities of the Corporation shall be at
the close of business on the day on which the resolution relating to such
dividend or right to subscribe is passed by the board.

9.05 Unclaimed Dividends - Any dividend unclaimed after a period of 6 years
from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.


                                  Section Ten

                            MEETINGS OF SHAREHOLDERS

10.01 Annual Meetings - Subject to section 10.19, the board shall call an
annual meeting of shareholders not later than eighteen months after the
Corporation comes into existence and subsequently not later than fifteen months
after holding the last preceding annual meeting, for the purpose of considering
the financial statements and reports required by the Act to be placed before
the annual meeting, electing directors, appointing auditors and for the
transaction of such other business as may properly be brought before the
meeting.

10.02 Special Meetings - The board shall have power to call a special meeting
of shareholders at any time.

10.03 Place of Meetings - Meetings of shareholders shall be held at such place
in or outside Ontario as the board determines or, in the absence of such a
determination, at the place where the registered office of the Corporation is
located.



<PAGE>   23

                                     - 20 -


10.04 Notice of Meetings - Notice of the time and place of each meeting of
shareholders shall be given in the manner provided in section 12.01

     (a) if the Corporation is an offering corporation, not less than 21 days;
         and

     (b) if the Corporation is not an offering corporation, not less than 10
         days;

but, in either case, not more than 50 days before the date of the meeting, to
each director, to the auditor and to each shareholder who at the close of
business on the record date for notice is entered in the securities register as
the holder of one or more shares carrying the right to vote at the meeting.
Notice of a meeting of shareholders called for any purpose other than
consideration of the financial statements and auditor's report, election of
directors and reappointment of the incumbent auditor shall state or be
accompanied by a statement of the nature of such business in sufficient detail
to permit the shareholder to form a reasoned judgment thereon, and the text of
any special resolution or by-law to be submitted to the meeting.  A shareholder
and any other person entitled to attend a meeting of shareholders may in any
manner and at any time waive notice of or otherwise consent to a meeting of
shareholders.

10.05 List of Shareholders Entitled to Notice - For every meeting of
shareholders, the Corporation shall prepare a list of shareholders entitled to
receive notice of the meeting, arranged in alphabetical order and showing the
number of shares entitled to vote at the meeting held by each shareholder.  If
a record date for the meeting is fixed pursuant to section 10.06, the
shareholders listed shall be those registered at the close of business on such
record date.  If no record date is fixed, the shareholders listed shall be
those registered at the close of business on the day immediately preceding the
day on which notice of the meeting is given, or where no such notice is given,
on the day on which the meeting is held.  The list shall be available for
examination by any shareholder during usual business hours at the registered
office of the Corporation or at the place where the central securities register
is maintained and at the meeting for which the list was prepared.  Where a
separate list of


<PAGE>   24

                                     - 21 -

shareholders has not been prepared, the names of persons appearing in the
securities register at the requisite time as the holder of one or more shares
carrying the right to vote at such meeting shall be deemed to be a list of
shareholders.

10.06 Record Date for Notice - The board may fix in advance a date, preceding
the date of any meeting of shareholders by not more than 50 days and not less
than 21 days, as a record date for the determination of the shareholders
entitled to notice of the meeting.  If a record date is fixed, unless notice
thereof is waived in writing by every holder of a share of the class or series
affected whose name is set out in the share register at the close of business
on the day the directors fix the record date, notice thereof shall, not less
than seven days before the date so fixed, be given in the manner provided in
the Act.  If no record date is so fixed, the record date for the determination
of the shareholders entitled to receive notice of the meeting shall be the
close of business on the day immediately preceding the day on which the notice
is given or if no notice is given, the day on which the meeting is held.

10.07 Meetings without Notice - A meeting of shareholders may be held without
notice at any time and place permitted by the Act:

        (a)  if all the shareholders entitled to vote thereat are present in
             person or represented by proxy or if those not present or
             represented by proxy waive notice of or otherwise consent to such
             meeting being held; and

        (b)  if the auditors and the directors are present or waive notice of or
             otherwise consent to such meeting being held.

At such a meeting any business may be transacted which the Corporation at a
meeting of shareholders may transact.

10.08 Chairman, Secretary and Scrutineers - The president, or in his absence, a
vice-president who is a director shall preside as chairman at a meeting of
shareholders.  If there is no president or such a vice-president or if at a
meeting none of them is present within 15 minutes after the time appointed for
the


<PAGE>   25

                                     - 22 -

holding of the meeting, the shareholders present and entitled to vote shall
choose a person from their number to be the chairman.  If the secretary of the
Corporation is absent, the chairman shall appoint some person, who need not be
a shareholder, to act as secretary of the meeting.  If desired, one or more
scrutineers, who need not be shareholders, may be appointed by a resolution or
by the chairman with the consent of the meeting.

10.09 Persons Entitled to be Present - The only persons entitled to be present
at a meeting of shareholders shall be those entitled to vote thereat, the
directors and auditors of the Corporation and others who, although not entitled
to vote, are entitled or required under any provision of the Act or the
articles or by-laws to be present at the meeting.  Any other person may be
admitted only on the invitation of the chairman of the meeting or with the
consent of the meeting.

10.10 Quorum - Subject to the Act in respect of a sole shareholder, a quorum
for the transaction of business at any meeting of shareholders shall be two
persons present in person, each being a shareholder entitled to vote thereat or
a duly appointed proxyholder or representative for a shareholder so entitled.
If a quorum is present at the opening of any meeting of shareholders, the
shareholders present or represented may proceed with the business of the
meeting notwithstanding that a quorum is not present throughout the meeting.
If a quorum is not present at the time appointed for the meeting or within a
reasonable time thereafter as the shareholders may determine, the shareholders
present or represented may adjourn the meeting to a fixed time and place but
may not transact any other business.

10.11 Right to Vote - Subject to the provisions of the Act as to authorized
representatives of any other body corporate, at any meeting of shareholders in
respect of which the Corporation has prepared the list referred to in section
10.05, every person who is named in such list shall be entitled to vote the
shares shown thereon opposite his name, except:

        (a)  where the Corporation has fixed a record date in respect
             of such meeting pursuant to section 10.06, to the extent that any
             such person has transferred any of his shares after such record
             date and the transferee either pro-


<PAGE>   26

                                     - 23 -

             duces properly endorsed share certificates or otherwise establishes
             that he owns such shares and demands, not later than 10 days before
             the meeting, that his name be included in the list before the
             meeting; or

        (b)  where the Corporation has not fixed a record date in respect of
             such meeting pursuant to section 10.06, to the extent that any such
             person has transferred any of his shares after the date on which
             the list referred to in section 10.05 is prepared and the
             transferee, either produces properly endorsed share certificates or
             otherwise establishes that he owns such shares and demands, not
             later than 10 days before the meeting, that his name be included in
             the list before the meeting,

in either of which cases the transferee is entitled to vote his shares at the
meeting.

In the absence of a list prepared as aforesaid in respect of a meeting of
shareholders, every person shall be entitled to vote at the meeting whose name
appears in the securities register as the holder of one or more shares carrying
the right to vote at such meeting.

10.12 Proxies - Every shareholder entitled to vote at a meeting of shareholders
may by means of a proxy appoint a proxyholder, or one or more alternate
proxyholders, who need not be shareholders, as his nominees to attend and act
at the meeting in the manner, to the extent and with the authority conferred by
the proxy.  A proxy shall be executed by the shareholder or his attorney
authorized in writing or, if the shareholder is a body corporate, by an officer
or attorney thereof duly authorized.  Every form of proxy shall comply with the
regulations to the Act.

10.13 Time for Deposit of Proxies - The board may by resolution fix a time not
exceeding 48 hours, excluding Saturdays and holidays, preceding any meeting or
adjourned meeting of shareholders, before which time proxies to be used at that
meeting must be deposited with the Corporation or an agent thereof, and any
period of time so fixed shall be specified in the notice calling the meeting.
A proxy shall be acted upon only if, prior to the time so specified, it shall
have been deposited with the


<PAGE>   27

                                     - 24 -

Corporation or an agent thereof specified in such notice or, if no such time is
specified in such notice, unless it has been received by the secretary of the
Corporation or by the chairman of the meeting or any adjournment thereof prior
to the time of voting.

10.14 Joint Shareholders - If two or more persons hold shares jointly, any one
of the them present in person or represented by proxy at a meeting of
shareholders may, in the absence of the other or others, vote the shares; but
if two or more of those persons are present in person or represented by proxy
and vote, they shall vote as one on the shares jointly held by them.

10.15 Votes to Govern - At any meeting of shareholders every question shall,
unless otherwise required by the articles or by-laws or by law, be determined
by the majority of the votes cast on the question.  In case of an equality of
votes, the chairman presiding at the meeting shall be entitled to a second or
casting vote.

10.16 Show of Hands - Subject to the provisions of the Act, any question at a
meeting of shareholders shall be decided by a show of hands unless a ballot
thereon is required or demanded as hereinafter provided.  Upon a show of hands
every person who is present and entitled to vote shall have one vote.  Whenever
a vote by show of hands shall have been taken upon a question, unless a ballot
thereon is so required or demanded, a declaration by the chairman of the
meeting that the vote upon the question has been carried or carried by a
particular majority or not carried and an entry to that effect in the minutes
of the meeting shall be prima facie proof of the fact without proof of the
number or proportion of the votes recorded in favour of or against any
resolution or other proceeding in respect of the said question, and the result
of the vote so taken shall be the decision of the shareholders upon the said
question.

10.17 Ballots - On any question proposed for consideration at a meeting of
shareholders, and whether or not a show of hands has been taken thereon, any
shareholder or proxyholder entitled to vote at the meeting may require or
demand a ballot.  A ballot so required or demanded shall be taken in such
manner as the chairman shall direct.  A requirement or demand for a ballot may
be withdrawn at any time prior to the taking of the ballot.  If a


<PAGE>   28

                                     - 25 -

ballot is taken each person present shall be entitled, in respect of the shares
which he is entitled to vote at the meeting upon the question, to that number
of votes provided by the Act or the articles, and the result of the ballot so
taken shall be the decision of the shareholders upon the said question.

10.18 Adjournment - If a quorum is not present at the time appointed for a
meeting of shareholders or within such reasonable time thereafter as the
shareholders present may determine, the shareholders present may adjourn the
meeting to a fixed time and place but may not transact any other business.  If
a meeting of shareholders is adjourned for less than 30 days, it shall not be
necessary to give notice of the adjourned meeting, other than by announcement
at the earliest meeting that is adjourned.  If a meeting of shareholders is
adjourned by one or more adjournments for an aggregate of 30 days or more,
notice of the adjourned meeting shall be given as for an original meeting.

10.19 Resolution in Lieu of Meeting - Except where a written statement with
respect to the subject matter of the resolution is submitted by a director or
the auditors in accordance with the Act,

        (a)  a resolution in writing signed by all the shareholders
             entitled to vote on that resolution at a meeting of shareholders
             is as valid as if it had been passed at a meeting of the
             shareholders; and

        (b)  a resolution in writing dealing with any matter required
             by the Act to be dealt with at a meeting of shareholders, and
             signed by all the shareholders entitled to vote at that meeting,
             satisfies all the requirements of the Act relating to that meeting
             of shareholders.

10.20 Only One Shareholder - Where the Corporation has only one shareholder or
only one holder of any class or series of shares, the shareholder present in
person or by proxy constitutes a meeting.

                                 Section Eleven

                           DIVISIONS AND DEPARTMENTS

11.01 Creation and Consolidation of Divisions - The board may cause the
business and operations of the Corporation or any part thereof to be divided or
to be segregated into one or more divisions upon such basis, including without
limitation, character or


<PAGE>   29

                                     - 26 -

type of operation, geographical territory, product manufactured or service
rendered, as the board may consider appropriate in each case.  The board may
also cause the business and operations of any such division to be further
divided into sub-units and the business and operations of any such divisions or
sub-units to be consolidated upon such basis as the board may consider
appropriate in each case.

11.02 Name of Division - Any division or its sub-units may be designated by
such name as the board may from time to time determine and may transact
business under such name, provided that the Corporation shall set out its name
in legible characters in all contracts, invoices, negotiable instruments and
orders for goods or services issued or made by or on behalf of the Corporation.

11.03 Officers of Divisions - From time to time the board or, if authorized by
the board, the chief executive officer, may appoint one or more officers for
any division, prescribe their powers and duties and settle their terms of
employment and remuneration.  The board or, if authorized by the board, the
chief executive officer, may remove at its or his pleasure any officer so
appointed, without prejudice to such officer's rights under any employment
contract.  Officers of divisions or their sub-units shall not, as such, be
officers of the Corporation.

                                 Section Twelve

                                    NOTICES

12.01 Method of Giving Notice - Any notice (which term includes any
communication or document) to be given (which term includes sent, delivered or
served) pursuant to the Act, the regulations thereunder, the articles, the
by-laws or otherwise to a shareholder, director, officer, auditor or member of
a committee of the board shall be sufficiently given if delivered personally to
the person to whom it is to be given or if delivered to his recorded address or
if mailed to him at his recorded address by prepaid ordinary or air mail or if
sent to him at his recorded address by any means of prepaid transmitted or
recorded communication.  A notice so delivered shall be deemed to have been
given when it is delivered personally or to the recorded address as aforesaid;
a notice so mailed shall be deemed to have been received on the fifth day after
mailing; and a notice so sent by any means of transmitted or recorded
communication shall be deemed to have been given when dispatched or delivered
to the appropriate communication company or agency or its representative for
dispatch.  The secretary may change or cause to be changed the recorded address
of any shareholder, director, officer, auditor or member of


<PAGE>   30

                                     - 27 -

a committee of the board in accordance with any information believed by him to
be reliable.

12.02 Notice to Joint Shareholders - If two or more persons are registered as
joint holders of any share, any notice shall be addressed to all of such joint
holders but notice to one or such persons shall be sufficient notice to all of
them.

12.03 Computation of Time - In computing the date when notice must be given
under any provision requiring a specified number of days' notice of any meeting
or other event, "day" means a clear day and a period of days shall be deemed to
commence the day following the event that began the period and shall be deemed
to terminate at midnight of the last day of the period except that if the last
day of the period falls on a Sunday or holiday the period shall terminate at
midnight of the day next following that is not a Sunday or holiday.

12.04 Undelivered Notices - If any notice given to a shareholder pursuant to
section 12.01 is returned on three consecutive occasions because he cannot be
found, the Corporation shall not be required to give any further notices to
such shareholder until he informs the Corporation in writing of his new
address.

12.05 Omissions and Errors - The accidental omission to give any notice to any
shareholder, director, officer, auditor or member of a committee of the board
or the non-receipt of any notice by any such person or any error in any notice
not affecting the substance thereof shall not invalidate any action taken at
any meeting held pursuant to such notice or otherwise founded thereon.



<PAGE>   31

                                     - 28 -


12.06 Persons Entitled by Death or Operation of Law - Every person who, by
operation of law, transfer, death of a shareholder or any other means
whatsoever, shall become entitled to any share, shall be bound by every notice
in respect of such share which shall have been duly given to the shareholder
from whom he derives his title to such share prior to his name and address
being entered on the securities register (whether such notice was given before
or after the happening of the event upon which he became so entitled) and prior
to his furnishing to the Corporation the proof of authority or evidence of his
entitlement prescribed by the Act.

12.07 Waiver of Notice - Any shareholder (or his duly appointed proxyholder),
director, officer, auditor or member of a committee of the board may at any
time waive the sending of any notice, or waive or abridge the time for any
notice, required to be given to him under any provision of the Act, the
regulations thereunder, the articles, the by-laws or otherwise and such waiver
or abridgement shall cure any default in the giving or in the time of such
notice, as the case may be.  Any such waiver or abridgement shall be in writing
except a waiver of notice of a meeting of shareholders or of the board or a
committee of the board which may be given in any manner.


                                Section Thirteen

                                 VOTING RIGHTS

13.01 VOTING RIGHTS IN OTHER CORPORATIONS:  The proper signing officers of the
Corporation may execute and deliver instruments of proxy and arrange for the
issuance of voting certificates or other evidence of the right to exercise the
voting rights attaching to any securities held by the Corporation.  Such
instruments, certificates or other evidence shall be in favor of such person or
persons as may be determined by the officers signing them or arranging
therefor.  In addition, the board may from time to time direct the manner in
which or the person or persons by whom any particular voting rights or class of
voting rights may or shall be exercised.



<PAGE>   32

                                     - 29 -

                                Section Fourteen

                                     REPEAL

14.01 Repeal - By-law Number 1 of the Corporation is repealed as of the coming
into force of this by-law.  Such repeal shall not affect the previous operation
of any by-law so repealed or affect the validity of any act done or right,
privilege, obligation or liability acquired or incurred under, or the validity
of any contract or agreement made pursuant to, or the validity of any articles
(as defined in the Act) or predecessor character documents of the Corporation
obtained pursuant to, or the validity of any articles (as defined in the Act)
or predecessor character documents of the Corporation obtained pursuant to, any
such by-law prior to its repeal.  All officers and persons acting under any
by-law so repealed shall continue to act as if appointed under the provisions
of this by-law and all resolutions of the shareholders or the board or a
committee of the board with continuing effect passed under any repealed by-law
shall continue to be good and valid except to the extent inconsistent with this
by-law and until amended or repealed.


                                Section Fifteen

                                 EFFECTIVE DATE

15.01 Effective Date - This by-law shall come into force when enacted by the
directors, subject to the Act.
     ENACTED by the Board the 19th day of February, 1988.
     WITNESS the corporate seal of the Corporation.

_________________________________  ___________________________________
 President                         Secretary
                                                                   c/s


     CONFIRMED by the shareholders the 30th day of March, 1988.

                                  ___________________________________
                                   Secretary
                                                                   c/s


<PAGE>   1

                                                                     Exhibit 4.1




                             ROYAL OAK MINES INC.,

                                   as Issuer


                                      and


                               KEMESS MINES INC.,

                                  as Guarantor


                                      and


                              MELLON BANK, F.S.B.,

                                   as Trustee




                                   INDENTURE

                          Dated as of August 12, 1996





                                  $175,000,000

                     11% Senior Subordinated Notes due 2006

                                      and

                Series B 11% Senior Subordinated Notes due 2006




<PAGE>   2

                             CROSS-REFERENCE TABLE

<TABLE>
<CAPTION>
     TIA                                  Indenture
   Section                                 Section
   -------                                ---------
<S>                                       <C>
310  (a)(1) ............................  7.10
     (a)(2) ............................  7.10
     (a)(3) ............................  N.A.
     (a)(4) ............................  N.A.
     (a)(5) ............................  7.08; 7.10
     (b)    ............................  7.08; 7.10;
                                          13.02
     (c)    ............................  N.A.
311  (a)    ............................  7.11
     (b)    ............................  7.11
     (c)    ............................  N.A.
312  (a)    ............................  2.05
     (b)    ............................  13.03
     (c)    ............................  13.03
313  (a)    ............................  7.06
     (b)(1) ............................  N.A.
     (b)(2) ............................  7.06
     (c)    ............................  7.06; 13.02
     (d)    ............................  7.06
314  (a)    ............................  4.07; 4.08;
                                          13.02
     (b)    ............................  N.A.
     (c)(1) ............................  13.04
     (c)(2) ............................  13.04
     (c)(3) ............................  N.A.
     (d)    ............................  N.A.
     (e)    ............................  13.05
     (f)    ............................  N.A.
315  (a)    ............................  7.01(b)
     (b)    ............................  7.05; 13.02
     (c)    ............................  7.01(a)
     (d)    ............................  7.01(c)
     (e)    ............................  6.11
316  (a)(last sentence)  ...............  2.09
     (a)(1)(A)  ........................  6.05
     (a)(1)(B)  ........................  6.04
     (a)(2)     ........................  N.A.
     (b)    ............................  6.07
     (c)    ............................  9.05
317  (a)(1) ............................  6.08
     (a)(2) ............................  6.09
     (b)    ............................  2.04
318  (a)    ............................  13.01
     (c)    ............................  13.01
</TABLE>
______________________
N.A. means Not Applicable.

NOTE:     This Cross-Reference Table shall not, for any purpose, be deemed to be
          a part of the Indenture.


<PAGE>   3

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----
<S>                                                                <C>
                                  ARTICLE ONE

                   DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01   Definitions ......................................    1
Section 1.02   Incorporation by Reference of
                 TIA ............................................   27
Section 1.03   Rules of Construction ............................   27


                                  ARTICLE TWO

                                   THE NOTES

Section 2.01   Form and Dating ..................................   28
Section 2.02   Execution and Authentication; Aggregate
                 Principal Amount ...............................   29
Section 2.03   Registrar and Paying Agent .......................   30
Section 2.04   Paying Agent To Hold Assets in
                 Trust ..........................................   31
Section 2.05   Noteholder Lists .................................   31
Section 2.06   Transfer and Exchange ............................   32
Section 2.07   Replacement Notes ................................   33
Section 2.08   Outstanding Notes ................................   33
Section 2.09   Treasury Notes ...................................   34
Section 2.10   Temporary Notes ..................................   34
Section 2.11   Cancellation .....................................   34
Section 2.12   Defaulted Interest ...............................   35
Section 2.13   CUSIP Number .....................................   35
Section 2.14   Deposit of Moneys ................................   35
Section 2.15   Restrictive Legends ..............................   36
Section 2.16   Book-Entry Provisions for Global
                 Security .......................................   38
Section 2.17   Special Transfer Provisions ......................   39


                                 ARTICLE THREE

                                   REDEMPTION

Section 3.01   Notices to Trustee ...............................   42
Section 3.02   Selection of Notes To Be Redeemed ................   42
Section 3.03   Notice of Redemption .............................   43
Section 3.04   Effect of Notice of Redemption ...................   44
Section 3.05   Deposit of Redemption Price ......................   45
Section 3.06   Notes Redeemed in Part ...........................   45
</TABLE>

                                      -i-

<PAGE>   4

<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----
<S>                                                                <C>

                                  ARTICLE FOUR

                                   COVENANTS

Section 4.01   Payment of Notes .................................   45
Section 4.02   Maintenance of Office or Agency ..................   47
Section 4.03   Corporate Existence ..............................   47
Section 4.04   Payment of Taxes and Other Claims ................   47
Section 4.05   Maintenance of Properties and
                 Insurance ......................................   48
Section 4.06   Compliance Certificate; Notice of
                 Default ........................................   48
Section 4.07   Compliance with Laws .............................   49
Section 4.08   SEC Reports ......................................   50
Section 4.09   Waiver of Stay, Extension or Usury
                 Laws ...........................................   51
Section 4.10   Limitation on Restricted Payments ................   51
Section 4.11   Limitation on Transactions with
                 Affiliates .....................................   53
Section 4.12   Limitation on Indebtedness .......................   54
Section 4.13   Limitation on Dividend and Other
                 Payment Restrictions Affecting
                 Subsidiaries ...................................   56
Section 4.14   Prohibition on Incurrence of Senior
                 Subordinated Indebtedness ......................   57
Section 4.15   Change of Control ................................   57
Section 4.16   Limitation on Sale of Assets .....................   60
Section 4.17   Limitation on Preferred Stock of
                 Restricted Subsidiaries ........................   63
Section 4.18   Limitation on Liens ..............................   63
Section 4.19   Conduct of Business ..............................   64
Section 4.20   Additional Subsidiary Guarantees .................   64


                                  ARTICLE FIVE

                             SUCCESSOR CORPORATION

Section 5.01   Merger, Consolidation and Sale of
                 Assets .........................................   65
Section 5.02   Successor Corporation Substituted ................   67


                                  ARTICLE SIX

                              DEFAULT AND REMEDIES

Section 6.01   Events of Default ................................   68
Section 6.02   Acceleration .....................................   70
</TABLE>

                                      -ii-

<PAGE>   5

<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----
<S>                                                                <C>
Section 6.03   Other Remedies ...................................   71
Section 6.04   Waiver of Past Defaults ..........................   71
Section 6.05   Control by Majority ..............................   71
Section 6.06   Limitation on Suits ..............................   72
Section 6.07   Rights of Holders To Receive Payment .............   72
Section 6.08   Collection Suit by Trustee .......................   73
Section 6.09   Trustee May File Proofs of Claim .................   73
Section 6.10   Priorities .......................................   74
Section 6.11   Undertaking for Costs ............................   74


                                 ARTICLE SEVEN

                                    TRUSTEE

Section 7.01   Duties of Trustee ................................   75
Section 7.02   Rights of Trustee ................................   76
Section 7.03   Individual Rights of Trustee .....................   78
Section 7.04   Trustee's Disclaimer .............................   78
Section 7.05   Notice of Default ................................   78
Section 7.06   Reports by Trustee to Holders ....................   78
Section 7.07   Compensation and Indemnity .......................   79
Section 7.08   Replacement of Trustee ...........................   80
Section 7.09   Successor Trustee by Merger, Etc. ................   81
Section 7.10   Eligibility; Disqualification ....................   81
Section 7.11   Preferential Collection of Claims
                 Against Company ................................   82


                                 ARTICLE EIGHT

                       DISCHARGE OF INDENTURE; DEFEASANCE

Section 8.01   Termination of the
                 Company's Obligations ..........................   82
Section 8.02   Legal Defeasance and Covenant
                 Defeasance .....................................   84
Section 8.03   Conditions to Legal Defeasance or
                 Covenant Defeasance ............................   85
Section 8.04   Application of Trust Money .......................   87
Section 8.05   Repayment to the Company
                 or the Guarantors ..............................   88
Section 8.06   Reinstatement ....................................   89


                                  ARTICLE NINE

                      AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 9.01   Without Consent of Holders ......................    89

                                     -iii-

</TABLE>

<PAGE>   6

<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----
<S>                                                                <C>
Section 9.02   With Consent of Holders .........................    90
Section 9.03   Effect on Senior Indebtedness and
                 Guarantor Senior Indebtedness ..................   92
Section 9.04   Compliance with TIA ..............................   92
Section 9.05   Revocation and Effect of Consents ................   92
Section 9.06   Notation on or Exchange of Notes .................   93
Section 9.07   Trustee To Sign Amendments, Etc.  .................  94


                                  ARTICLE TEN

                                 SUBORDINATION

Section 10.01  Notes Subordinated to
                 Senior Indebtedness ............................   94
Section 10.02  No Payment on Notes in
                 Certain Circumstances ..........................   95
Section 10.03  Payment Over of Proceeds upon
                 Dissolution, Etc. ..............................   96
Section 10.04  Payments May Be Paid Prior to
                 Dissolution ....................................   98
Section 10.05  Subrogation ......................................   99
Section 10.06  Obligations of the Company
                 Unconditional ..................................   99
Section 10.07  Notice to Trustee ................................  100
Section 10.08  Reliance on Judicial Order or
                 Certificate of Liquidating Agent ...............  100
Section 10.09  Trustee's Relation to Senior
                 Indebtedness ...................................  101
Section 10.10  Subordination Rights Not Impaired by
                 Acts or Omissions of the Company
                 or Holders of Senior Indebtedness ..............  101
Section 10.11  Noteholders Authorize Trustee To
                 Effectuate Subordination of Notes ..............  102
Section 10.12  This Article Ten Not To Prevent
                 Events of Default ..............................  103
Section 10.13  Trustee's Compensation Not
                 Prejudiced .....................................  103


                                 ARTICLE ELEVEN

                                   GUARANTEE

Section 11.01  Unconditional Guarantee ..........................  103
Section 11.02  Subordination of
                 Guarantee ......................................  104
Section 11.03  Severability .....................................  104
Section 11.04  Release of a Guarantor ...........................  105
</TABLE>

                                      -iv-

<PAGE>   7

<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----
<S>                                                                <C>
Section 11.05  Limitation of Subsidiary Guarantor's
                 Liability ......................................  105
Section 11.06  Guarantors May Consolidate, Etc., on
                 Certain Terms ..................................  106
Section 11.07  Contribution .....................................  107
Section 11.08  Waiver of Subrogation ............................  107
Section 11.09  Execution of Guarantee ...........................  108
Section 11.10  Waiver of Stay, Extension or Usury
                 Laws ...........................................  109


                                 ARTICLE TWELVE

                     SUBORDINATION OF GUARANTEE OBLIGATIONS

Section 12.01  Guarantee Obligations
                 Subordinated to Guarantor Senior
                 Indebtedness ...................................  109
Section 12.02  No Payment on Notes in Certain
                 Circumstances ..................................  110
Section 12.03  Payment Over of Proceeds upon
                 Dissolution, Etc. ..............................  112
Section 12.04  Payments May Be Paid Prior to
                 Dissolution ....................................  113
Section 12.05  Subrogation ......................................  114
Section 12.06  Obligations of the Subsidiary
                 Guarantors Unconditional .......................  114
Section 12.07  Notice to Trustee ................................  115
Section 12.08  Reliance on Judicial Order or
                 Certificate of Liquidating Agent ...............  116
Section 12.09  Trustee's Relation to Guarantor
                 Senior Indebtedness ............................  116
Section 12.10  Subordination Rights Not Impaired by
                 Acts or Omissions of the Subsidiary
                 Guarantors or Holders of Guarantor
                 Senior Indebtedness ............................  117
Section 12.11  Noteholders Authorize Trustee To
                 Effectuate Subordination of
                 Guarantee Obligations ..........................  117
Section 12.12  This Article Twelve Not To Prevent
                 Events of Default ..............................  118
Section 12.13  Trustee's Compensation Not
                 Prejudiced .....................................  118
</TABLE>

                                      -v-

<PAGE>   8

<TABLE>
<CAPTION>
                                                                   Page
                                                                   ----
<S>                                                                <C>
                                ARTICLE THIRTEEN

                                 MISCELLANEOUS

Section 13.01  TIA Controls .....................................  118
Section 13.02  Notices ..........................................  119
Section 13.03  Communications by Holders with Other
                 Holders ........................................  120
Section 13.04  Certificate and Opinion as to
                 Conditions Precedent ...........................  120
Section 13.05  Statements Required in Certificate
                 or Opinion .....................................  121
Section 13.06  Rules by Trustee, Paying Agent,
                 Registrar ......................................  121
Section 13.07  Legal Holidays ...................................  121
Section 13.08  Governing Law ....................................  122
Section 13.09  No Adverse Interpretation of Other
                 Agreements .....................................  122
Section 13.10  No Recourse Against Others .......................  122
Section 13.11  Successors .......................................  122
Section 13.12  Duplicate Originals ..............................  122
Section 13.13  Severability .....................................  122

Signatures  .....................................................  124

Exhibit A - Form of Initial Note with Guarantee

Exhibit B - Form of Exchange Note with Guarantee

Exhibit C - Form of Certificate To Be Delivered in Connection
            with Transfers to Non-QIB Accredited Investors

Exhibit D - Form of Certificate To Be Delivered in Connection
            with Transfers Pursuant to Regulation S
</TABLE>


Note:  This Table of Contents shall not, for any purpose, be deemed to be part
       of the Indenture.



                                      -vi-

<PAGE>   9


     INDENTURE, dated as of August 12, 1996, by and among Royal Oak Mines Inc.,
an Ontario, Canada corporation (the "Company"), Kemess Mines Inc., an Ontario,
Canada corporation (the "Guarantor"), and Mellon Bank, F.S.B., a federal savings
bank with trust powers, as Trustee (the "Trustee").

     The Company has duly authorized the creation of an issue of 11% Senior
Subordinated Notes due 2006 (the "Initial Notes") and Series B 11% Senior
Subordinated Notes due 2006 (the "Exchange Notes," and together with the Initial
Notes, the "Notes") and, to provide therefor, the Company and the Guarantor have
duly authorized the execution and delivery of this Indenture. All things
necessary to make the Notes, when duly issued and executed by the Company, and
authenticated and delivered hereunder, the valid obligations of the Company and
the Guarantor, and to make this Indenture a valid and binding agreement of the
Company and the Guarantor, have been done.

     Each party hereto agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Notes.


                                  ARTICLE ONE

                   DEFINITIONS AND INCORPORATION BY REFERENCE


     SECTION 1.01   Definitions.

     "Acquired Indebtedness" of any Person means Indebtedness of another Person
and any of its Subsidiaries existing at the time such other Person becomes a
Restricted Subsidiary of such Person or at the time it merges or consolidates
with such Person or any of such Person's Restricted Subsidiaries or is assumed
by such Person or any Restricted Subsidiary of such Person in connection with
the acquisition of assets from such other Person and in each case not Incurred
by such Person or any Restricted Subsidiary of such Person or such other Person
in connection with, or in anticipation or contemplation of, such other Person
becoming a Restricted Subsidiary of such Person or such acquisition, merger or
consolidation, and which Indebtedness is without recourse to the Company or any
of its Restricted Subsidiaries or to any of their respective properties or
assets other than the Person or the assets to which such Indebtedness related
prior to the time such Person becomes a Restricted Subsidiary  of the Company or
the time of such acquisition, merger or consolidation.



<PAGE>   10

                                      -2-


     "Additional Amounts" has the meaning set forth in Section 6(c) of Exhibit A
hereto.  Whenever in this Indenture there is mentioned, in any context, (a) the
payment of principal (and premium, if any), (b) purchase prices in connection
with a repurchase of Notes, (c) interest, or (d) any other amount payable on or
with respect to any of the Notes, such mention shall be deemed to include
mention of the payment of Additional Amounts provided for in Section 4.01 to the
extent that, in such context, Additional Amounts are, were or would be payable
in respect thereof.

     "Adjusted Consolidated Net Tangible Assets" means the total amount of
consolidated assets of the Company and its Restricted Subsidiaries (net of
applicable depletion, depreciation, amortization and other valuation reserves),
except to the extent resulting from write-ups of capital assets (excluding
write-ups in connection with accounting for acquisitions in conformity with
GAAP), after deducting therefrom (i) all current liabilities of the Company and
its Restricted Subsidiaries (excluding intercompany items) and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all as set forth on the most recently
available quarterly or annual consolidated balance sheet of the Company and its
Restricted Subsidiaries, prepared in conformity with GAAP.

     "Affiliate" means, when used with reference to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person.  For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct or cause the direction of management or policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative of the foregoing.

     "Affiliate Transaction" has the meaning set forth in Section 4.11.

     "Agent" means any Registrar, Paying Agent, co-Registrar or Authenticating
Agent.

     "Agent Members" has the meaning provided in Section 2.16.

     "all or substantially all" shall have the meaning given such phrase in the
Revised Model Business Corporation Act of 1984, as amended.



<PAGE>   11

                                      -3-


     "Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
with or into the Company or any Restricted Subsidiary of the Company or (ii) the
acquisition by the Company or any Restricted Subsidiary of the Company of assets
of any Person comprising a division or line of business of such Person.

     "Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value by the Company or by any
of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than to the Company or to a direct or indirect wholly owned
Restricted Subsidiary of the Company of (i) any Capital Stock of any Restricted
Subsidiary of the Company or (ii) any other property or assets of the Company or
of any Restricted Subsidiary of the Company, other than with respect to this
clause (ii) any disposition of mineral products for value in the ordinary course
of business.

     "Asset Sale Offer" has the meaning set forth in Section 4.16.

     "Authenticating Agent" has the meaning provided in Section 2.02.

     "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or
foreign law for the relief of debtors.

     "Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.

     "Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the board of directors of such Person and to be in
full force  and effect on the date of such certification, and delivered to the
Trustee.

     "Business Day" means any day other than a Saturday, Sunday or any other day
on which banking institutions in the City of New York are required or authorized
by law or other governmental action to be closed.

     "Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of



<PAGE>   12

                                      -4-


corporate stock, including each class of Common Stock and Preferred Stock of
such Person and (ii) with respect to any Person that is not a corporation, any
and all partnership or other equity interests of such Person.

     "Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease that are required to be
classified and accounted for as capital lease obligations under GAAP and, for
purposes of this definition, the amount of such obligations at any date shall
be the capitalized amount of such obligations at such date, determined in
accordance with GAAP.  The stated maturity of such obligations shall be the
date of the last payment of rent or any other amount due under such lease prior
to the first date upon which such lease may be terminated by the lessee without
payment of a penalty.

     "Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or Canadian
Government or issued by any agency thereof and backed by the full faith and
credit of the United States or Canada, in each case maturing within one year
from the date of acquisition thereof; (ii) marketable direct obligations issued
by any state of the United States of America or any political subdivision of
any such state or any public instrumentality thereof or any province of Canada
or any political subdivision of any such province or any public instrumentality
thereof maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings obtainable from
either S&P or Moody's; (iii) commercial paper maturing no more than one year
from the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates
of deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof issued by any commercial bank organized  under the laws of
the United States of America or any state thereof or the District of Columbia
or Canada or any province thereof or any U.S. branch of a foreign bank having
at the date of acquisition thereof combined capital and surplus of not less
than US$250 million; and (v) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in clause
(iv) above.

     "Change of Control" means the occurrence of one or more of the following
events (whether or not approved by the board of directors of the Company):  (i)
the Company or any of its Restricted Subsidiaries, directly or indirectly,
sells, assigns, conveys, transfers, leases or otherwise disposes of, in one



<PAGE>   13

                                      -5-


transaction or a series of related transactions, all or substantially all of
the property or assets of the Company and its Restricted Subsidiaries
(determined on a consolidated basis) to any Person or group of related Persons
for purposes of Section 13(d) of the Exchange Act other than the Company or a
Person which is a Restricted Subsidiary (a "Group of Persons"); or (ii) the
adoption of any plan of liquidation or dissolution of the Company; or (iii) any
Person or Group of Persons is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or more of
the Voting Stock of the Company; or (iv) the first day on which a majority of
the members of the Board of Directors of the Company are not Continuing
Directors.

     "Change of Control Offer" has the meaning provided in Section 4.15.

     "Change of Control Payment Date" has the meaning provided in Section 4.15.

     "Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Event.

     "Commodity Agreement" of any Person means any option or futures contract
or similar agreement or arrangement.

     "Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.

     "Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.

     "Consolidated EBITDA" means, with respect to any Person, for any period,
the sum (without duplication) of (i) Consolidated Net Income plus (ii) to the
extent that any of the following shall have been taken into account in
determining Consolidated Net Income, (A) all income taxes of such Person and
its Restricted Subsidiaries paid or accrued in accordance with GAAP for such
period (other than income taxes attributable to extraordinary, unusual or
non-recurring gains or losses or taxes attributable to sales or dispositions of
assets outside the ordinary course of business), Consolidated Interest Expense,
amortization expense and depreciation expense, and (B) other non-cash items
(other than non-cash interest) reducing Consolidated Net Income, other than any



<PAGE>   14

                                      -6-


non-cash item which requires the accrual of or a reserve for cash charges for
any future period and other than any non-cash charge constituting an
extraordinary item of loss, less other non-cash items increasing Consolidated
Net Income, all as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in conformity with GAAP.

     "Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction or event giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed
Charges of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
Incurrence or repayment of any Indebtedness of such Person or any of its
Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any Incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than
the Incurrence or repayment of Indebtedness in the ordinary course of business
for working capital purposes pursuant to working capital facilities, at any
time subsequent to the first day of the Four Quarter Period and on or prior to
the Transaction Date, as if such Incurrence or repayment, as the case may be
(and the application of the proceeds thereof), occurred on the first day  of
the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need
to make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of any such Asset Acquisition) Incurring, assuming or otherwise being
liable for Acquired Indebtedness at any time subsequent to the first day of the
Four Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition (including the Incurrence, assumption or liability
for any such Indebtedness or Acquired Indebtedness) and also including any
Consolidated EBITDA associated with such Asset Acquisition) occurred on the
first day of the Four Quarter Period; provided that the Consolidated EBITDA of
any Person acquired shall be included only to the extent includable pursuant to
the definition of "Consolidated Net Income."  If such Person or any of its
Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the Incurrence of
such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of
such Person had directly Incurred or



<PAGE>   15

                                      -7-


otherwise assumed such guaranteed Indebtedness.  Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on Indebtedness determined on a fluctuating basis as of the
Transaction Date (including Indebtedness actually Incurred on the Transaction
Date) and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; and (2) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Swap
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.

     "Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(including amortization or write-off of deferred financing costs of such Person
and its consolidated Restricted Subsidiaries during such period and any premium
or penalty paid in connection with redeeming or retiring Indebtedness of such
Person and its consolidated Restricted Subsidiaries prior to the stated
maturity thereof pursuant to the agreements governing such Indebtedness) and
(ii) the product of (x) the amount of all dividend payments on  any series of
Preferred Stock of such Person (other than dividends paid in Common Stock)
paid, accrued or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated Federal, state and local tax rate
of such Person, expressed as a decimal.

     "Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense (without deduction of interest
income) of such Person and its Restricted Subsidiaries for such period, on a
consolidated basis, as determined in accordance with GAAP, and including (a)
all amortization of original issue discount; (b) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during such period; (c)
net cash costs under all Interest Swap Obligations (including amortization of
fees); (d) all capitalized interest; and (e) the interest portion of any
deferred payment obligations for such period.

     "Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a



<PAGE>   16

                                      -8-


consolidated basis, determined in accordance with GAAP; provided that there
shall be excluded therefrom (a) after-tax gains from Asset Sales or
abandonments or reserves relating thereto, (b) after-tax items classified as
extraordinary or non-recurring gains, (c) the net income of any Person acquired
in a "pooling of interests" transaction accrued prior to the date it becomes a
Restricted Subsidiary of the referent Person or is merged or consolidated with
the referent Person or any Restricted Subsidiary of the referent Person, (d)
the net income (but not loss) of any Restricted Subsidiary of the referent
Person to the extent that the declaration of dividends or similar distributions
by that Restricted Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income of any Person, other than a
Restricted Subsidiary of the referent Person, except to the extent of cash
dividends or distributions paid to the referent Person or to a wholly owned
Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period  whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets.

     "Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person and its consolidated Restricted
Subsidiaries, determined on a consolidated basis in accordance with GAAP, less
(without duplication) amounts attributable to Disqualified Capital Stock of
such Person.

     "Continuing Director" means, as of the date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of a majority of
the Continuing Directors who were members of such Board at the time of such
election or nomination; provided, however, that in the event of a business
combination involving the Company, by merger or consolidation or otherwise,
from the time of effectiveness of such business combination until the next
annual general meeting of the shareholders of the surviving entity, Continuing
Directors shall only be directors of the Company not elected in anticipation
of, or in connection with, any such transaction who are also directors of the
surviving entity.



<PAGE>   17

                                      -9-


     "Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.

     "Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.

     "Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.

     "Default Notice" has the meaning provided in Section 10.02.

     "Depositary" means The Depository Trust Company, its nominees and
successors.

     "Designated Senior Debt" means Indebtedness constituting Senior
Indebtedness which, at the time of designation, has an aggregate principal
amount of at least US$25 million and is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by the Company.

     "Disqualified Capital Stock" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the sole option of the holder thereof, in whole or in part, on or
prior to the final maturity date of the Notes.

     "Events of Default" has the meaning set forth in Section 6.01.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended or
any successor statute or statutes thereto.

     "Exchange Notes" has the meaning provided in the preamble to this
Indenture.

     "Exchange Offer" means the registration by the Company and the Guarantors
under the Securities Act pursuant to a registration statement of the offer by
the Company and the Guarantors to each Holder of the Initial Notes to exchange
all the Initial Notes held by such Holder for the Exchange Notes in an
aggregate principal amount equal to the aggregate principal amount



<PAGE>   18

                                      -10-


of the Initial Notes held by such Holder, all in accordance with the terms and
conditions of the Registration Rights Agreement.

     "fair market value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between an informed and willing seller and an informed
and willing and able buyer, neither of whom is under undue pressure or
compulsion to complete the transaction.  Fair market value shall be determined
by the board of directors of the Company acting reasonably and in good faith
and shall be evidenced by a Board Resolution delivered to the Trustee;
provided, however, that if the aggregate non-cash consideration to be received
by the Company or any of its Restricted Subsidiaries from any Asset Sale could
be reasonably likely to exceed US$15 million the fair market value shall be
determined by an Independent Financial Advisor.

     "Financial Advisor" means an accounting, appraisal or investment banking
firm of nationally recognized standing that is, in the reasonable and good
faith judgment of the board of directors of the Company, qualified to perform
the task for which such firm has been engaged.

     "Fiscal Year" has the meaning set forth in Section 4.06(a).

     "Foreign Exchange Obligations" means the obligations of any Person under
any foreign currency future, option, swap or cap or other foreign currency
hedge or arrangement.

     "Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."

     "Funding Guarantor" has the meaning provided in Section 11.07.

     "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.

     "Global Note" has the meaning provided in Section 2.01.



<PAGE>   19

                                      -11-


     "Gradation" means a gradation within a Rating Category, which shall be "+"
and "-", in the case of S&P's current Rating Categories (e.g., a decline from
BB+ to BB would constitute a decrease of one gradation); "1", "2" and "3", in
the case of Moody's current Rating Categories (e.g., a decline from B1 to B2
would constitute a decrease of one gradation); or the equivalent in respect of
successor Rating Categories of S&P or Moody's or Rating Categories used by
Rating Agencies other than S&P and Moody's.

     "Guarantee" means the guarantee of each Guarantor set forth in Article
Eleven and any additional guarantee of the Notes executed by any Subsidiary of
the Company.

     "Guarantor" or "Guarantors" means (i) Kemess Mines Inc. and (ii) each of
the Company's Subsidiaries that in the future executes a supplemental indenture
in which such Subsidiary agrees to be bound by the terms of this Indenture as a
Guarantor; provided that any Person constituting a Guarantor as described above
shall cease to constitute a Guarantor when its respective Guarantee is released
in accordance with the terms of this Indenture.

     "Guarantor Senior Indebtedness" means any Indebtedness of any Guarantor
(including any interest accruing subsequent to the filing of a petition in
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law), whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Guarantee of such Guarantor.  Notwithstanding the foregoing, Guarantor Senior
Indebtedness shall not include (i) any Indebtedness of such Guarantor to a
Subsidiary of such Guarantor or to a Subsidiary of the Company, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of such Guarantor or any Subsidiary of such Guarantor (including,
without limitation, amounts owed for compensation), (iii) Indebtedness and
other amounts incurred in connection with obtaining goods, materials or
services owing to trade creditors, (iv) Disqualified Capital Stock, (v) any
liability for federal, state, local or other taxes owed or owing by such
Guarantor, (vi) Indebtedness incurred in violation of the covenant described in
Section 4.12 and (vii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of such Guarantor.

     "Holder" or "Noteholder" means the Person in whose name a Note is
registered in the Registrar's books.


<PAGE>   20

                                      -12-


     "Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or  other
obligation or the initial recording, as required pursuant to GAAP or otherwise,
of any such Indebtedness or other obligation on the balance sheet of such
Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have
meanings correlative to the foregoing); provided, however, that (A) any
Indebtedness assumed in connection with an acquisition of assets and any
Indebtedness of a Person existing at the time such Person becomes a Restricted
Subsidiary (whether by merger, consolidation, acquisition or otherwise) of the
Company or at the time such Person is merged or consolidated with the Company
or any Restricted Subsidiary of the Company shall be deemed to be Incurred at
the time of the acquisition of such assets or by such Restricted Subsidiary at
the time it becomes, or is merged or consolidated with, a Restricted Subsidiary
of the Company or by the Company at the time of such merger or consolidation,
as the case may be, and (B) any amendment, modification or waiver of any
document pursuant to which Indebtedness was previously Incurred shall be deemed
to be an Incurrence of Indebtedness unless such amendment, modification or
waiver does not (i) increase the principal or premium thereof or interest rate
thereon (including by way of original issue discount) or (ii) change to an
earlier date the stated maturity thereof or the date of any scheduled or
required principal payment thereon or the time or circumstances under which
such Indebtedness shall be redeemed.

     "Indebtedness" means with respect to any Person, any liability of such
Person or such Person's Restricted Subsidiaries, without duplication, (i) for
borrowed money, (ii) evidenced by bonds, debentures, notes or other similar
instruments, (iii) for Capitalized Lease Obligations, (iv) issued or assumed as
the deferred purchase price of property, all conditional sale obligations and
under any title retention agreement (but excluding trade accounts payable and
accrued liabilities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction, (vi) for all Indebtedness of others (including all
dividends of other Persons for the payment of which is) guaranteed, directly or
indirectly, by such Person or its Restricted Subsidiaries or that is otherwise
its legal liability or which such Person or its Restricted Subsidiaries has
agreed to purchase or repurchase or in respect of which such Person or its
Restricted Subsidiaries has agreed contingently to supply or advance funds,
(vii) comprising net  liabilities under Interest



<PAGE>   21

                                      -13-


Swap Obligations and Commodity Agreements, (viii) for all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on any asset or
property (including, without limitation, leasehold interests and any other
tangible or intangible property) of such Person or its Restricted Subsidiaries,
whether or not such Indebtedness is assumed by such Person or its Restricted
Subsidiaries or is not otherwise such Person's or its Restricted Subsidiaries'
legal liability; provided that if the Obligations so secured have not been
assumed by such Person or its Restricted Subsidiaries or are otherwise not such
Person's or its Restricted Subsidiaries' legal liability, the amount of such
Indebtedness for the purposes of this definition shall be limited to the lesser
of the amount of such Indebtedness secured by such Lien or the fair market
value of the assets or property securing such Lien, and (ix) all Disqualified
Capital Stock issued by such Person with the amount of Indebtedness represented
by such Disqualified Capital Stock being equal to the greater of its voluntary
or involuntary liquidation preference and its maximum fixed repurchase price,
but excluding accrued dividends if any.  The amount of Indebtedness of any
Person or its Restricted Subsidiaries at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to
the obligation, of any contingent obligations at such date; provided that the
amount outstanding at any time of any Indebtedness issued with original issue
discount is the full amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP.

     "Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.

     "Independent," when used with respect to any specified Person, means such
a Person who (a) is in fact independent, (b) does not have any direct financial
interest or any material indirect financial interest in the Company or any of
its Subsidiaries, or in any Affiliate of the Company or any of its
Subsidiaries, and (c) is not an officer, employee, promoter, underwriter,
trustee, partner, director or person performing similar functions for the
Company or any of its Subsidiaries.  Whenever it is provided in this Indenture
that any Independent Person's opinion or certificate shall be  furnished to the
Trustee, such Person shall be appointed by the Company and approved by the
Trustee in the exercise of reasonable care, and such opinion or certificate
shall state that the signer has read this definition and that the signer is
Independent within the meaning thereof.



<PAGE>   22

                                      -14-


     "Initial Notes" has the meaning provided in the preamble to this
Indenture.

     "Initial Purchasers" means BT Securities Corporation and Scotia Capital
Markets

     "Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act.

     "Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.

     "Interest Swap Obligations" means the obligations of any Person under any
interest rate protection agreement, interest rate future, interest rate option,
interest rate swap, interest rate cap or other interest rate hedge or
arrangement.

     "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.

     "Investment" by any Person means any direct or indirect (i) loan, advance
or other extension of credit or capital contribution (by means of transfers of
cash or other property (valued at the fair market value thereof as of the date
of transfer) to others or payments for property or services for the account or
use of others, or otherwise); (ii) purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by any other Person; (iii) guarantee or assumption of any Indebtedness
or any other obligation of any other Person (except for an assumption of
Indebtedness for which the assuming Person receives consideration at the time
of such assumption in the form of property or assets with a fair market value
at least equal to the principal amount of the Indebtedness assumed); and (iv)
all other items that would be classified as investments (including, without
limitation, purchases of assets outside the ordinary course of business) on a
balance sheet of such Person prepared in accordance with  GAAP.  The amount of
any Investment shall not be adjusted for increases or decreases in value, or
write-ups, write-downs or write-offs with respect to such Investment.  If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Common Stock of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, the
Company no longer owns, directly or indirectly, greater than 50% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such



<PAGE>   23

                                      -15-


sale or disposition equal to the fair market value of the Common Stock of such
Subsidiary not sold or disposed of.

     "Issue Date" means the date of original issuance of the Notes.

     "Kemess South" means that portion of the Kemess gold-copper ore body
(located in British Columbia and the acquisition of which was completed by the
Company in January 1996) upon which construction of an open-pit mine and
processing facility began in July, 1996.

     "Legal Holiday" has the meaning provided in Section 13.07.

     "Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statute or statutes) of any jurisdiction other than to reflect
ownership by a third party of property leased to the referent Person or any of
its Subsidiaries under a lease that is not in the nature of a conditional sale
or title retention agreement).

     "Maturity Date" means August 15, 2006.

     "Mining Business" means (i) the acquisition, exploration, development,
operation and disposition of mineral interests, (ii) the gathering, marketing,
treating, processing, storage, selling and transporting of any production from
such  interests and (iii) ancillary activities that are directly related to,
and necessary in connection with, the activities described in clauses (i) and
(ii) above.

     "Mining Related Assets Investment" means any Investment or capital
expenditure (but not including additions to working capital or repayments of
any revolving credit or working capital borrowings) by the Company or any
Restricted Subsidiary of the Company which is related to the business of the
Company and its Restricted Subsidiaries as it is conducted on the date of the
Asset Sale giving rise to the Net Cash Proceeds to be reinvested.



<PAGE>   24

                                      -16-


     "Moody's" means Moody's Investors Service, Inc. and its successors.

     "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents (including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, brokerage, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid or payable ((1)
including, without limitation, income taxes reasonably estimated to be actually
payable as a result of any disposition of property within two years of the date
of disposition and (2) after taking into account any reduction in tax liability
due to available tax credits or deductions and any tax sharing arrangements)
and (c) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.

     "Net Equity Proceeds" means (a) in the case of any sale by the Company of
Qualified Capital Stock of the Company, the aggregate net cash proceeds
received by the Company, after payment of expenses, commissions and the like
(including, without limitation, brokerage, legal, accounting and investment
banking fees and commissions) incurred in connection therewith, and (b) in the
case of any exchange, exercise, conversion or  surrender of any outstanding
Indebtedness of the Company or any Restricted Subsidiary issued after the Issue
Date for or into shares of Qualified Capital Stock of the Company, the amount
of such Indebtedness (or, if such Indebtedness was issued at an amount less
than the stated principal amount thereof, the accrued amount thereof as
determined in accordance with GAAP) as reflected in the consolidated financial
statements of the Company prepared in accordance with GAAP as of the most
recent date next preceding the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder of such
Indebtedness to the Company or to any wholly owned Restricted Subsidiary of the
Company upon such exchange, exercise, conversion or surrender and less any and
all payments made to the holders of such Indebtedness, and all other expenses
incurred by the Company


<PAGE>   25

                                      -17-


in connection therewith), in each case (a) and (b) to the extent consummated
after the Issue Date.

     "Non-U.S. Person" means a person who is not a U.S. person, as defined in
Regulation S.

     "Notes" means the Initial Notes and the Exchange Notes treated as a single
class of securities, as amended or supplemented from time to time in accordance
with the terms hereof, that are issued pursuant to this Indenture.

     "Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.

     "Offering Memorandum" means the Offering Memorandum dated August 5, 1996,
pursuant to which the Initial Notes were offered, and any supplement thereto.

     "Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, the Controller, or the Secretary of such
Person, or any other officer designated by the Board of Directors serving in a
similar capacity.

     "Officers' Certificate" means a certificate signed by two Officers of the
Company.

     "Opinion of Counsel" means a written opinion from legal counsel which and
who are acceptable to the Trustee.

     "Paying Agent" shall initially be Mellon Securities Trust Co., a New York
chartered trust company, until a successor paying agent for the Notes is
selected in accordance with this Indenture.

     "Payment Blockage Period" has the meaning provided in Section 10.02.

     "payment default" has the meaning set forth in Section 6.01.

     "Permitted Indebtedness" has the meaning set forth in Section 4.12.

     "Permitted Investments" means (a) investments in  cash and Cash
Equivalents; (b) Investments by the Company or by any Restricted Subsidiary of
the Company in any Person (i) that is or



<PAGE>   26

                                      -18-


will become immediately after such Investment a direct or indirect Restricted
Subsidiary of the Company, or (ii) such that such Investment, when combined
with all other outstanding Investments of the Company permitted pursuant to
this clause (ii), would not exceed, in the aggregate, 5% of the Company's
Adjusted Consolidated Net Tangible Assets; (c) any Investments in the Company
by any Restricted Subsidiary of the Company; provided that any Indebtedness
evidencing such Investment is unsecured and subordinated, pursuant to a written
agreement, to the Company's obligations in respect of the Notes and this
Indenture; and (d) Investments made by the Company or by its Restricted
Subsidiaries as a result of an Asset Sale made in compliance with Section 4.16.

          "Permitted Liens" means:

          (i) Liens on assets or property of the Company that secure Senior
     Indebtedness of the Company and Liens on assets or property of a Restricted
     Subsidiary that secure Senior Indebtedness of such Restricted Subsidiary,
     in each case to the extent such Senior Indebtedness is permitted under
     paragraph (b) of the covenant described under Section 4.12 or clause (vi)
     of the definition of Permitted Indebtedness;

          (ii) Liens securing Indebtedness permitted under clause (iv) of the
     definition of Permitted Indebtedness;

          (iii) Liens securing Indebtedness of a Person existing at the time
     that such Person is merged into or consolidated with the Company or a
     Restricted Subsidiary, provided that such Liens were in existence prior to
     the contemplation of such merger or consolidation and do not extend to any
     assets other than those of such Person;

          (iv) Liens on property acquired by the Company or a Restricted
     Subsidiary, provided that such Liens were in existence prior to the
     contemplation of such acquisition and do not extend to any other property;

          (v) Liens relating to royalty payments to be made by the Company to
     the British Columbia provincial government in respect of copper extracted
     and processed from the Kemess South property;

          (vi) Liens in respect of Interest Swap Obligations, Commodity
     Agreements, Capitalized Lease Obligations or Purchase Money Obligations, in
     each case permitted under this Indenture;



<PAGE>   27

                                      -19-


          (vii) Liens in favor of the Company or any Restricted Wholly Owned
     Subsidiary;

          (viii) Liens incurred, or pledges and deposits in connection with,
     workers' compensation, unemployment insurance and other social security
     benefits, and leases, appeal bonds and other obligations of like nature
     incurred by the Company or any Restricted Subsidiary in the ordinary course
     of business;

          (ix) Liens imposed by law, including, without limitation, mechanics',
     carriers', warehousemen's, materialmen's, suppliers' and vendors' Liens,
     incurred by the Company or any Restricted Subsidiary in the ordinary course
     of business; and

          (x) Liens for ad valorem, income or property taxes or assessments and
     similar charges which either are not delinquent or are being contested in
     good faith by appropriate proceedings for which the Company has set aside
     on its books reserves to the extent required by GAAP.

     "Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.

     "Physical Notes" has the meaning provided in Section 2.01.

     "Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.

     "principal" of any Indebtedness (including the Notes) means the principal
amount of such Indebtedness plus the premium, if any, on such Indebtedness.

     "Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.15.

     "pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors of the Company in consultation with its independent public
accountants.



<PAGE>   28

                                      -20-


     "Public Equity Offering" means a public offering of Common Stock of the
Company resulting in net proceeds to the Company in excess of US$20 million.

     "Purchase Money Obligations" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in connection with the purchase of property or
assets of the business of the Company; provided that any Lien so created in
connection with such incurrence is limited solely to the property or assets so
purchased.

     "Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.

     "Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.

     "Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or
Moody's or both of them are not making publicly available ratings of the Notes,
a nationally recognized U.S.  rating agency or agencies, as the case may be,
selected by the Company, which will be substituted for S&P or Moody's or both,
as the case may be.

     "Rating Category" means (i) with respect to S&P, any of the following
categories:  AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor
categories); (ii) with respect to Moody's, any of the following categories:
Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories);
and (iii) the equivalent of any such categories of S&P or Moody's used by
another Rating Agency, if applicable.

     "Rating Event" means that at any time within 90 days (which period shall
be extended so long as the rating of the Notes is under publicly announced
consideration for possible downgrade or for review without indication of
direction by any Rating Agency) after the earlier of the date of public notice
of a Change of Control or of the intention of the Company or of any Person to
effect a Change of Control, the rating of the Notes is decreased by any Rating
Agency by one or more Gradations.

     "Record Date" means the Record Dates specified in the Notes, whether or
not a Legal Holiday.

     "Redemption Date," when used with respect to any Note to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Notes.



<PAGE>   29

                                      -21-


     "Redemption Price," when used with respect to any Note to be redeemed,
means the price fixed for such redemption pursuant to this Indenture and the
Notes.

     "Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part.  "Refinanced" and "Refinancing"
shall have correlative meanings.

     "Refinancing Indebtedness" means any Refinancing by the Company of
Indebtedness Incurred in accordance with Section 4.12 (other than pursuant to
clause (iv), (v), (vi), (vii) or (viii) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregate principal amount of Indebtedness of such Person as of the date of
such proposed Refinancing (plus the amount of any premium  required to be paid
under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that (x) if such
Indebtedness being Refinanced is Indebtedness of the Company, then such
Refinancing Indebtedness shall be Indebtedness solely of the Company, and (y)
if such Indebtedness being Refinanced is subordinate or junior to the Notes,
then such Refinancing Indebtedness shall be subordinate to the Notes at least
to the same extent and in the same manner as the Indebtedness being Refinanced.

     "Registrar" shall initially mean the Trustee, as the registration agent
for the Notes, until a successor registrar for the Notes is appointed in
accordance with Section 2.03.

     "Registration Rights Agreement" means the Registration Rights Agreement
dated as of August 12, 1996 among the Company, the Guarantors and the Initial
Purchasers for the benefit of themselves and the Holders, as the same may be
amended or modified from time to time in accordance with the terms thereof.

     "Regulation S" means Regulation S under the Securities Act.

     "Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Indebtedness; provided that
if, and for so long as, any


<PAGE>   30

                                      -22-


Designated Senior Indebtedness lacks such a representative, then the
Representative for such Designated Senior Indebtedness shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Indebtedness in respect of any Designated Senior
Indebtedness.

     "Restricted Payment" has the meaning provided in Section 4.10.

     "Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided that the Trustee shall be entitled
to request and conclusively rely on an Opinion of Counsel with respect to
whether any Note constitutes a Restricted Security.

     "Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.

     "Rule 144A" means Rule 144A under the Securities Act.

     "S&P" means Standard & Poor's Corporation and its successors.

     "SEC" means the Securities and Exchange Commission.

     "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.

     "Senior Indebtedness" means any Indebtedness of the Company (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law), whether outstanding on
the Issue Date or thereafter created, incurred or assumed, unless, in the case
of any particular Indebtedness, the instrument creating or evidencing the same
or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, Senior Indebtedness shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company, (ii) Indebtedness
to, or guaranteed on behalf of, any shareholder, director, officer or employee
of the Company or any Subsidiary (including, without limitation, amounts owed
for compensation), (iii) Indebtedness and other amounts incurred in connection
with obtaining goods, materials or services owing to trade creditors, (iv)
Disqualified Capital Stock, (v) any liability for federal, state, local or
other taxes owed or owing by the Company, (vi) Indebtedness incurred in


<PAGE>   31

                                      -23-


violation of the covenant described in Section 4.12 and (vii) any Indebtedness
which is, by its express terms, subordinated in right of payment to any other
Indebtedness of the Company.

     "Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.

     "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section Section
77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except
as otherwise provided in Section 9.04.

     "Trust Officer" means any officer of the Trustee assigned by the Trustee
to administer this Indenture, or in the case of a successor trustee, an officer
assigned to the department, division or group performing the corporation trust
work of such successor and assigned to administer this Indenture.

     "Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.

     "Unrestricted Subsidiary" means any Subsidiary of the Company designated
as an Unrestricted Subsidiary by the Board of Directors of the Company;
provided, however, that (i) the Subsidiary to be so designated (x)(I) has total
assets with a fair market value at the time of such designation of US$1,000 or
less or (II) is being so designated prior to the acquisition by the Company of
such Subsidiary by merger or consolidation with an Unrestricted Subsidiary, and
(y) does not own any Capital Stock of the Company or any Restricted Subsidiary,
(ii) if such Subsidiary is acquired by the Company, such Subsidiary is
designated as an Unrestricted Subsidiary prior to the consummation of such
acquisition, (iii) no Default or Event of Default shall have occurred and be
continuing, (iv) no portion of any Indebtedness or any other obligation
(contingent or otherwise) of such Subsidiary (a) is guaranteed by or is
otherwise the subject of credit support provided by the Company or any of its
Restricted Subsidiaries, (b) is recourse to or obligates the Company or any of
its Restricted Subsidiaries in any way, or (c) subjects any property or asset
of the Company or any of its Restricted Subsidiaries directly or indirectly,
contingently or otherwise, to the satisfaction of such Indebtedness or other
obligation, (v) neither the Company nor any of its


<PAGE>   32

                                      -24-


Restricted Subsidiaries has any contract, agreement, arrangement or
understanding with such Subsidiary other than on terms as favorable to the
Company or such Restricted Subsidiary as those that might be obtained at the
time from Persons that are not Affiliates of the Company, and (vi) neither the
Company nor any of its Restricted Subsidiaries has any obligations (a) to
subscribe for additional shares of Capital Stock of such Subsidiary, or (b) to
maintain or preserve such Subsidiary's  financial condition or to cause such
Subsidiary to achieve certain levels of operating results.  Any such
designation by the Company's Board of Directors shall be evidenced to the
Trustee by filing with the trustee a certified certificate stating that such
designation complies with the foregoing conditions.  The Company's Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation, no Default or Event of Default shall have occurred and be
continuing, including, without limitation, under Sections 4.12 and 4.18,
assuming the incurrence by the Company and its Restricted Subsidiaries at the
time of such designation of all existing Indebtedness and Liens of the
Unrestricted Subsidiary to be so designated as a Restricted Subsidiary.  In the
event of any Disposition involving the Company in which the Company is not the
Surviving Person, the Board of Directors of the Surviving Person may (x) prior
to such Disposition, designate any of its Subsidiaries, and any of the
Company's Subsidiaries being acquired pursuant to such Disposition that are not
Restricted Subsidiaries, as Unrestricted Subsidiaries, and (y) after such
Disposition, designate any of its direct or indirect Subsidiaries as an
Unrestricted Subsidiary under the same conditions and in the same manner as the
Company under the terms of this Indenture.

     "U.S. Government Obligations" means direct obligations of, and obligations
guaranteed by, the United States of America for the payment of which the full
faith and credit of the United States of America is pledged.

     "U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.

     "U.S. Physical Notes" has the meaning provided in Section 2.01.

     "Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any



<PAGE>   33

                                      -25-


contingency) to vote in the election of members of the Board of Directors of
such Person.

     "Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate  principal amount of such Indebtedness into (b) the total
of the product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.

     "wholly owned Subsidiary" of any Person means any Subsidiary of such
Person of which all the outstanding voting securities (other than directors'
qualifying shares or similar legally required de minimis holdings) which
normally have the right to vote in the election of directors are owned by such
Person or any wholly owned Subsidiary of such Person.

     "Working Capital Facility" means the existing working capital facility
provided to the Company pursuant to a credit agreement between The Bank of Nova
Scotia and the Company dated February 15, 1996, as the same may be amended from
time to time, and any agreement evidencing the refinancing, modification,
replacement, renewal, restatement, refunding, deferral, extension,
substitution, supplement, reissuance or resale thereof.

     SECTION 1.02   Incorporation by Reference of TIA.

     Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in, and made a part of, this Indenture.  The
following TIA terms used in this Indenture have the following meanings:

     "indenture securities" means the Notes.

     "indenture security holder" means a Holder or a Noteholder.

     "indenture to be qualified" means this Indenture.

     "indenture trustee" or "institutional trustee" means the Trustee.

     "obligor" on the indenture securities means the Company, the Guarantors or
any other obligor on the Notes or the Guarantees.



<PAGE>   34

                                      -26-


     All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute  or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.

     SECTION 1.03   Rules of Construction.

     Unless the context otherwise requires:

          (i) a term has the meaning assigned to it;

          (ii) an accounting term not otherwise defined has the meaning assigned
     to it in accordance with GAAP as in effect on the date hereof;

          (iii) "or" is not exclusive;

          (iv) words in the singular include the plural, and words in the plural
     include the singular;

          (v) "herein," "hereof" and other words of similar import refer to this
     Indenture as a whole and not to any particular Article, Section or other
     subdivision;

          (vi) all references to "$" and "US$" shall refer to the lawful
     currency of the United States of America; and

          (vii) all references to "Cdn.$" shall refer to the lawful currency of
     Canada.


                                  ARTICLE TWO

                                   THE NOTES

     SECTION 2.01   Form and Dating.

     The Initial Notes, the notation thereon relating to the Guarantees and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A hereto.  The Exchange Notes, the notation relating to the Guarantees
and the Trustee's certificate of authentication shall be substantially in the
form of Exhibit B hereto.  The Notes may have notations, legends or
endorsements required by law, stock exchange rule or depository rule or usage.
The Company, the Guarantors and the Trustee shall approve the form of the Notes
and any notation, legend or



<PAGE>   35

                                      -27-


endorsement on them.  Each Note shall be dated the  date of its issuance and
shall show the date of its authentication.

     The terms and provisions contained in the Notes and the Guarantees,
annexed hereto as Exhibits A and B, shall constitute, and are hereby expressly
made, a part of this Indenture and, to the extent applicable, the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.

     Notes offered and sold (i) to Qualified Institutional Buyers ("QIBs") in
reliance on Rule 144A or (ii) Institutional Accredited Investors (who are not
QIBs) shall be issued initially in the form of one or more permanent global
Notes in registered form, substantially in the form set forth in Exhibit A (the
"Global Note"), deposited with the Trustee, as custodian for the Depositary,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided.  The aggregate principal amount of the Global Note may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary, as hereinafter provided.

     Notes offered and sold in offshore transactions in reliance on Regulation
S shall be issued in the form of permanent certificated Notes in registered
form in substantially the form set forth in Exhibit A (the "Offshore Physical
Notes").  Notes offered and sold in reliance on any exemption from registration
under the Securities Act other than as described in the preceding paragraph
shall be issued, and Notes offered and sold in reliance on Rule 144A or to
Institutional Accredited Investors, as described in the preceding paragraph,
may be issued, in the form of permanent certificated Notes in registered form,
in substantially the form set forth in Exhibit A (the "U.S. Physical Notes").
The Offshore Physical Notes and the U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes."

     SECTION 2.02   Execution and Authentication;
                    Aggregate Principal Amount.

     One Officer shall sign, or one Officer and a Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature.   The Company's seal shall also be reproduced on the Notes.  Each
Guarantor shall execute the Guarantees in the manner set forth in Section
11.09.

     If an Officer or Secretary whose signature is on a Note was an Officer or
Secretary at the time of such execution but no



<PAGE>   36

                                      -28-


longer holds that office or position at the time the Trustee authenticates the
Note, the Note shall nevertheless be valid.

     A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note.  The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.

     The Trustee shall authenticate (i) Initial Notes for original issue in the
aggregate principal amount not to exceed $175,000,000, and (ii) Exchange Notes
from time to time for issue only in exchange for a like principal amount of
Initial Notes, in each case upon written orders of the Company in the form of
an Officers' Certificate.  The Officers' Certificate shall specify the amount
of Notes to be authenticated, the date on which the Notes are to be
authenticated and the aggregate principal amount of Notes outstanding on the
date of authentication, whether the Notes are to be Initial Notes or Exchange
Notes, and shall further specify the amount of such Notes to be issued as the
Global Note, Offshore Physical Notes or U.S. Physical Notes.  The aggregate
principal amount of Notes outstanding at any time may not exceed $175,000,000,
except as provided in Section 2.07.

     The Trustee may appoint an authenticating agent (the "Authenticating
Agent") reasonably acceptable to the Company to authenticate Notes.  Unless
otherwise provided in the appointment, an Authenticating Agent may authenticate
Notes whenever the Trustee may do so.  Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent.  An Authenticating Agent has the same rights as an Agent to deal with
the Company and Affiliates of the Company.

     The Notes shall be issuable in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples thereof.

     SECTION 2.03   Registrar and Paying Agent.

     The Company shall maintain an office or agency where Notes may be
presented or surrendered for registration of transfer or for exchange
("Registrar").  The Company shall also maintain an office or offices or agency
(which shall be located in the Borough of Manhattan in the City of New York,
State of New York) where Notes may be presented or surrendered for payment
("Paying Agent") and notices and demands to or upon the Company in respect of
the Notes and this Indenture may be served.  The Registrar shall keep a
register of the Notes and of their transfer and exchange.  The Company, upon
prior written notice to the Trustee, may appoint one



<PAGE>   37

                                      -29-


or more co-Registrars and one or more additional paying agents reasonably
acceptable to the Trustee.  The term "Paying Agent" includes any additional
Paying Agent.  Neither the Company nor any Affiliate of the Company may act as
Paying Agent.

     The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall incorporate the
provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent.  The Company shall notify the Trustee, in advance, of the
name and address of any such Agent.  If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such.

     The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed.  The
Paying Agent or Registrar may resign upon 30 days' notice to the Company.

     SECTION 2.04   Paying Agent To Hold Assets in Trust.

     The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, premium, if any, or interest on the Notes (whether such assets
have been distributed to it by the Company or any other obligor on the Notes),
and the Paying Agent shall notify the Trustee of any Default by the Company (or
any other obligor on the Notes) in making any such payment.  The Company at any
time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed  and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed.  Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent shall have no further liability for such assets.

     SECTION 2.05   Noteholder Lists.

     The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders and shall otherwise comply with TIA Section  312(a).  If the
Trustee is not the Registrar, the Company shall furnish or cause the Registrar
to furnish to the Trustee before each Record Date and at such other times as
the Trustee may


<PAGE>   38

                                      -30-


request in writing a list as of such date and in such form as the Trustee may
reasonably require of the names and addresses of the Holders and the Company
and the Guarantor shall otherwise comply with TIA Section  312(a).

     SECTION 2.06   Transfer and Exchange.

     Subject to the provisions of Sections 2.16 and 2.17, when Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer of such Notes or to exchange such Notes for an equal principal amount
of Notes of other authorized denominations, the Registrar or co-Registrar shall
register the transfer or make the exchange as requested if its requirements for
such transaction are met; provided, however, that the Notes presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar or co-Registrar, duly executed by the Holder thereof
or his attorney, duly authorized in writing.  To permit registrations of
transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's or co-Registrar's request.  No service
charge shall be made for any registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Section 2.10, 3.06, 4.15, 4.16 or 9.06); provided, that
in no event shall the Trustee, Registrar or co-Registrar be responsible for the
payment of any such taxes or governmental charges.

     The Company shall not be required to issue, and the Company and the
Registrar or co-Registrar shall not be required to register the transfer of or
exchange of any Note (i) during a period beginning at the opening of business
15 days before the mailing of a notice of redemption of Notes and ending at the
close of business on the day of such mailing and (ii) selected for redemption
in whole or in part pursuant to Article Three, except the unredeemed portion of
any Note being redeemed in part.

     Any Holder of the Global Note shall, by acceptance of such Global Note,
agree that transfers of beneficial interests in such Global Notes may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry.



<PAGE>   39

                                      -31-


     SECTION 2.07   Replacement Notes.

     If a mutilated Note is surrendered to the Trustee or the Company and the
Trustee receive evidence to their satisfaction that a Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Note if the conditions for replacement set forth
herein have been met.  If required by the Trustee or the Company, such Holder
must provide an affidavit of lost certificate and an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and the Trustee, to
protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Note is replaced.  The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Note, including reasonable
fees and expenses of counsel.  Every replacement Note shall constitute an
additional obligation of the Company.

     SECTION 2.08   Outstanding Notes.

     Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Note effected
by the Trustee in accordance with the provisions hereof and those described in
this Section as not outstanding.  Subject to the provisions of Section 2.09, a
Note does not cease to be outstanding because the Company, the Guarantors or
any of their respective Affiliates holds the Note.

     If a Note is replaced pursuant to Section 2.07 (other than a mutilated
Note surrendered for replacement), it ceases to be outstanding unless the
Trustee receives an Opinion of Counsel that the replaced Note is held by a bona
fide purchaser.  A mutilated Note ceases to be outstanding upon surrender of
such Note and replacement thereof pursuant to Section 2.07.

     If on a Redemption Date or the Maturity Date, the Paying Agent holds U.S.
Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.

     SECTION 2.09  Treasury Notes.

     In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver, consent or notice, Notes owned
by the Company, the Guarantors or


<PAGE>   40

                                      -32-

any of their respective Affiliates shall be considered as though they are not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so considered.

     SECTION 2.10   Temporary Notes.

     Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon receipt of a written order
of the Company in the form of an Officers' Certificate.  The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated.  Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Company considers appropriate for temporary Notes.  Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate upon receipt of a written order of the Company pursuant to Section
2.02 definitive Notes in exchange for temporary Notes.

     SECTION 2.11   Cancellation.

     The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for transfer, exchange or payment.  The Trustee, or at the
direction of the Trustee, the Registrar or the Paying Agent, and no one else,
shall cancel all Notes surrendered for transfer, exchange, payment, replacement
or cancellation and shall retain or destroy, in accordance with its normal
practice, cancelled Notes (subject to the record retention requirement of the
Exchange Act).  If such Notes are destroyed, certification of the destruction
of all cancelled Notes shall be delivered to the Company.  Subject to Section
2.07, the Company may not issue new Notes to replace Notes that it has paid or
that have been delivered to the Trustee for cancellation.  If the Company or
the Guarantors shall acquire any of the Notes, such acquisition shall not
operate as a redemption or satisfaction of the Indebtedness represented by such
Notes unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.

     SECTION 2.12   Defaulted Interest.

     If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest, plus (to the extent lawful) any interest payable on
the defaulted interest to the


<PAGE>   41

                                      -33-


Persons who are Holders on a subsequent special record date, which date shall
be the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest or the next succeeding Business Day if such date
is not a Business Day, in each case at the rate provided in Section 4.01
hereof.  At least 15 days before the subsequent special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or caused to be mailed to each
Holder, as of a recent date selected by the Company, with a copy to the
Trustee, a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.

     SECTION 2.13   CUSIP Number.

     The Company in issuing the Notes may use one or more "CUSIP" numbers, and
if so, the Trustee shall use the CUSIP numbers in notices of redemption or
exchange as a convenience  to Holders; provided that no representation is
hereby deemed to be made by the Trustee as to the correctness or accuracy of
the CUSIP numbers printed in the notice or on the Notes, and that reliance may
be placed only on the other identification numbers printed on the Notes.  The
Company shall promptly notify the Trustee of any change in the CUSIP numbers.

     SECTION 2.14   Deposit of Moneys.

     Prior to 11:00 a.m. New York City time on each Interest Payment Date and
Maturity Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be.

     SECTION 2.15   Restrictive Legends.

     Each Global Note and Physical Note that constitutes a Restricted Security
shall bear the following legend (the "Private Placement Legend") on the face
thereof until August 12, 1999, unless otherwise agreed by the Company and the
Holder thereof:

     THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
     1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
     WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.


<PAGE>   42

                                      -34-


     PERSONS EXCEPT AS SET FORTH BELOW.  BY ITS ACQUISITION HEREOF, THE HOLDER
     (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
     IN RULE 144A UNDER THE ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
     INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT) (AN
     "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
     SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN
     THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
     OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
     THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
     COMPLIANCE WITH RULE 144A UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN
     ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
     FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE OR TRANSFER
     AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
     RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF
     WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR TRANSFER AGENT FOR THIS
     SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
     COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE ACT, (E) PURSUANT TO THE
     EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT (IF
     AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
     ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY
     IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.  IN
     CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE
     ORIGINAL ISSUANCE OF THE SECURITY, IF THE PROPOSED TRANSFEREE IS AN
     ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO
     THE TRUSTEE OR TRANSFER AGENT AND THE ISSUER SUCH CERTIFICATIONS, LEGAL
     OPINIONS OR OTHER INFORMATION AS ANY OF THEM MAY REASONABLY REQUIRE TO
     CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
     IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT.
     AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
     PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT.

     Each Global Note shall also bear the following legend on the face thereof:

     UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
     DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
     THE DEPOSITORY TO A


<PAGE>   43

                                      -35-


     NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH NOMINEE OF THE DEPOSITORY, OR BY
     THE DEPOSITORY OR NOMINEE OF SUCH SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE
     TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS
     THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
     DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
     ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
     CERTIFICATE  ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
     NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
     PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
     REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
     OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
     INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
     HEREIN.

     TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
     BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
     SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
     SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
     FORTH IN SECTION 2.17 OF THE INDENTURE.

     SECTION 2.16   Book-Entry Provisions
                    for Global Security.

     (a) The Global Note initially shall (i) be registered in the name of the
Depositary or the nominee of such Depositary, (ii) be delivered to the Trustee
as custodian for such Depositary and (iii) bear legends as set forth in Section
2.15.

     Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global
Note for all purposes whatsoever.  Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or
the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.

     (b) Transfers of the Global Note shall be limited to transfers in whole,
but not in part, to the Depositary, its


<PAGE>   44

                                      -36-


successors or their respective nominees.  Interests of beneficial owners in the
Global Note may be transferred or  exchanged for Physical Notes in accordance
with the rules and procedures of the Depositary and the provisions of Section
2.17.  In addition, Physical Notes shall be transferred to all beneficial
owners in exchange for their beneficial interests in the Global Note if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the Global Note and a successor depositary is not appointed by
the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a written request
from the Depositary to issue Physical Notes.

     (c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver,
one or more Physical Notes of like tenor and amount.

     (d) In connection with the transfer of the entire Global Note to beneficial
owners pursuant to paragraph (b), the Global Note shall be deemed to be
surrendered to the Trustee for cancellation, and the Company shall execute, and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depositary in exchange for its beneficial interest in the Global Note, an
equal aggregate principal amount of Physical Notes of authorized denominations.

     (e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in the Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Section 2.15.

     (f) The Holder of the Global Note may grant proxies and otherwise authorize
any person, including Agent Members and persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Notes.



<PAGE>   45

                                      -37-


     SECTION 2.17   Special Transfer Provisions.

     (a) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S.
Persons.  The following provisions shall apply with respect to the registration
of any proposed transfer of a Note constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person:

          (i) the Registrar shall register the transfer of any Note constituting
     a Restricted Security, whether or not such Note bears the Private Placement
     Legend, if (x) the requested transfer is after August 12, 1999 or (y) (1)
     in the case of a transfer to an Institutional Accredited Investor which is
     not a QIB (excluding Non-U.S. Persons), the proposed transferee has
     delivered to the Registrar a certificate substantially in the form of
     Exhibit C hereto or (2) in the case of a transfer to a Non-U.S. Person, the
     proposed transferor has delivered to the Registrar a certificate
     substantially in the form of Exhibit D hereto; and

          (ii) if the proposed transferor is an Agent Member holding a
     beneficial interest in the Global Note, upon receipt by the Registrar of
     (x) the certificate, if any, required by paragraph (i) above and (y)
     instructions given in accordance with the Depositary's and the Registrar's
     procedures,

whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.

     (b) Transfers to QIBs.  The following provisions shall apply with respect
to the registration of any proposed transfer of a Note constituting a Restricted
Security to a QIB (excluding transfers to Non-U.S. Persons):

          (i) the Registrar shall register the transfer if such transfer is
     being made by a proposed transferor who has checked the box provided for on
     the form of Note stating, or has otherwise advised the Company and the
     Registrar in writing, that the sale has been made in compliance with the
     provisions of Rule 144A to a transferee who has signed the certification
     provided for on the form of Note stating, or has otherwise advised the
     Company and the Registrar in writing, that it is purchasing the Note for
     its own account or an


<PAGE>   46

                                      -38-


     account with respect to which it exercises sole investment discretion and
     that it and any such account is a QIB within the meaning of Rule 144A, and
     is aware that the sale to it is being made in reliance on Rule 144A and
     acknowledges that it has received such information regarding the Company as
     it has requested pursuant to Rule 144A or has determined not to request
     such information and that it is aware that the transferor is relying upon
     its foregoing representations in order to claim the exemption from
     registration provided by Rule 144A; and

          (ii) if the proposed transferee is an Agent Member, and the Notes to
     be transferred consist of Physical Notes which after transfer are to be
     evidenced by an interest in the Global Note, upon receipt by the Registrar
     of instructions given in accordance with the Depositary's and the
     Registrar's procedures, the Registrar shall reflect on its books and
     records the date and an increase in the principal amount of the Global Note
     in an amount equal to the principal amount of the Physical Notes to be
     transferred, and the Trustee shall cancel the Physical Notes so
     transferred.

     (c) Private Placement Legend.  Upon the transfer, exchange or replacement
of Notes not bearing the Private Placement Legend, the Registrar shall deliver
Notes that do not bear the Private Placement Legend.  Upon the transfer,
exchange or replacement of Notes bearing the Private Placement Legend, the
Registrar shall deliver only Notes that bear the Private Placement Legend unless
(i) the circumstance contemplated by paragraph (a)(i)(x) of this Section 2.17
exist or (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.

     (d) General.  By its acceptance of any Note bearing the Private Placement
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture.

     The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.16 or this Section 2.17.
The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon
the giving of reasonable written notice to the Registrar.



<PAGE>   47
                                      -39-

                                 ARTICLE THREE

                                   REDEMPTION

     SECTION 3.01    Notices to Trustee.

     If the Company elects to redeem Notes pursuant to Paragraph 6 of the 
Notes, it shall notify the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.

     The Company shall give each notice provided for in this Section 3.01 at
least 30 days before the Redemption Date (or at least 45 days if the Company
requests the Trustee to give notice to the Holders pursuant to Section 3.03 
hereof) (unless a shorter notice period shall be satisfactory to the Trustee, 
as evidenced in a writing signed on behalf of the Trustee), together with an
Officers' Certificate stating that such redemption shall comply with the
conditions contained herein and in the Notes.

     SECTION 3.02     Selection of Notes To Be Redeemed

     If fewer than all of the Notes are to be redeemed, the Trustee shall select
the Notes to be redeemed in compliance with the requirements of the principal
national securities exchange, if any, on which such Notes are listed or, if such
Notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or in such other fair and reasonable manner chosen at the
discretion of the Trustee; provided, however, that if a partial redemption is
made with the proceeds of a Public Equity Offering, selection of the Notes or
portion thereof for redemption shall be made by the Trustee only on a pro rata
basis, unless such method is otherwise prohibited.  Not less than 30 days nor
more than 60 days prior to the  Redemption Date, the Trustee shall make the
selection from the Notes outstanding and not previously called for redemption
and shall promptly notify the Company in writing of the Notes selected for
redemption and, in the case of any Note selected for partial redemption, the
principal amount thereof to be redeemed.  Notes in denominations of $1,000 or
less may be redeemed only in whole; except that if all of the Notes of the
Holder are to be redeemed, the entire outstanding amount of Notes held by such
Holder, even if not a multiple of $1,000 shall be redeemed.  Unless the Company
defaults in making the redemption payment, interest on Notes or portions thereof
called for redemption ceases to accrue on and after the Redemption Date, and the
only remaining right of the Holders of such Notes is to receive payment of the
Redemption Price plus accrued interest, if any, upon surrender to the Paying
Agent



<PAGE>   48

                                      -40-


of the Notes redeemed.  The Trustee may select for redemption portions (equal to
$1,000 or any integral multiple thereof) of the principal of Notes that have
denominations larger than $1,000.  Provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption.

     SECTION 3.03    Notice of Redemption.

     At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail or cause to be mailed a notice of redemption by first class
mail, postage prepaid, to each Holder whose Notes are to be redeemed to such
Holder's registered address, with a copy to the Trustee and any Paying Agent.
At the Company's written request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.

     Each notice for redemption shall identify the Notes to be redeemed and
shall state:

          (i) the Redemption Date;

          (ii) the Redemption Price and the amount of accrued interest, if any,
     to be paid;

          (iii) the name and address of the Paying Agent or the place or places
     where such Notes are to be surrendered for payment;

          (iv) the subparagraph of the Notes pursuant to which such redemption
     is being made;

          (v) that Notes called for redemption must be surrendered to the Paying
     Agent to collect the Redemption Price plus accrued interest, if any;

          (vi) that, unless the Company defaults in making the redemption
     payment, interest on Notes or portions thereof called for redemption ceases
     to accrue on and after the Redemption Date, and the only remaining right of
     the Holders of such Notes is to receive payment of the Redemption Price
     plus accrued interest, if any, upon surrender to the Paying Agent of the
     Notes redeemed;

          (vii) if any Note is being redeemed in part, the portion of the
     principal amount of such Note to be redeemed and that, after the Redemption
     Date, and upon surrender and cancellation of such Note, a new Note or Notes
     in the aggregate principal


<PAGE>   49

                                      -41-


     amount equal to the unredeemed portion thereof will be issued in the name
     of the Holder thereof; and

          (viii) if fewer than all the Notes are to be redeemed, the
     identification of the particular Notes (or portion thereof) to be redeemed,
     as well as the aggregate principal amount of Notes to be redeemed and the
     aggregate principal amount of Notes to be outstanding after such partial
     redemption; and

          (ix) the CUSIP number, if any, listed on such Note or printed on the
     Notes, provided, that such notice shall specify that no representation is
     made as to the correctness or accuracy of such CUSIP number.

     At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the Redemption
Date, an Officer's Certificate, requesting that the Trustee give such notice
and setting forth the information to be stated in such notice.

     SECTION 3.04   Effect of Notice of Redemption.

     Once notice of redemption is mailed in accordance with Section 3.03, Notes
called for redemption become due and payable on the Redemption Date and at the
Redemption Price plus accrued interest, if any.  Upon surrender to the Trustee
or Paying Agent, such Notes called for redemption shall be paid at  the
Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the
close of business on the relevant record dates referred to in the Notes.

     SECTION 3.05   Deposit of Redemption Price.

     On or before the Redemption Date, the Company shall deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus
accrued interest, if any, of all Notes to be redeemed on that date.  The Paying
Agent shall promptly return to the Company any U.S. Legal Tender so deposited
which is not required for that purpose.

     If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Notes to be redeemed will cease to accrue on and after
the applicable



<PAGE>   50

                                      -42-


Redemption Date, whether or not such Notes are presented for payment.

     SECTION 3.06  Notes Redeemed in Part.

     Upon surrender of a Note that is to be redeemed in part, the Trustee shall
authenticate for the Holder a new Note or Notes equal in principal amount to
the unredeemed portion of the Note surrendered.


                                  ARTICLE FOUR

                                   COVENANTS


     SECTION 4.01   Payment of Notes.

     The Company shall pay the principal of and interest on the Notes on the
dates and in the manner provided in the Notes and in this Indenture.  An
installment of principal of or interest on the Notes shall be considered paid
on the date it is due if the Trustee or Paying Agent (other than the Company or
an Affiliate of the Company) holds on that date U.S. Legal Tender designated
for and sufficient to pay the installment in full and is not prohibited from
paying such money to the Holders pursuant to the terms of this Indenture.

     The Company shall pay, to the extent such payments are lawful, interest on
overdue principal and on overdue installments of interest (without regard to
any applicable grace periods) from time to time on demand at the rate borne by
the Notes plus 2% per annum.  Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.

     Notwithstanding anything to the contrary contained in this Indenture, the
Company may, to the extent it is required to do so by law, deduct or withhold
income or other similar taxes imposed by the United States of America from
principal or interest payments hereunder.

     If the Company is required to make any withholding or deduction for or on
account of any Canadian taxes from any payment made under or with respect to the
Notes, the Company will pay such Additional Amounts as may be necessary so that
the net amount received by each Holder (including Additional Amounts) will not
be less than the amount the Holder would have received had such Canadian taxes
not been withheld or deducted; provided that no



<PAGE>   51

                                      -43-


Additional Amounts will be payable with respect to a payment made to a Holder
(an "Excluded Holder") (i) with which the Company does not deal at arm's length
(within the meaning of the Income Tax Act (Canada)) at the time of making such
payment, or (ii) which is subject to such Canadian taxes by reason of its being
connected with Canada otherwise than by the mere holding of the Notes or the
receipt of payments thereunder.

     The Company will also (i) make such withholding or deduction and (ii)
remit the full amount deducted or withheld to the relevant authority in
accordance with applicable law.  The Company will furnish, within 30 days after
the date the payment of any Canadian taxes is due pursuant to applicable law,
to the Holders of Notes that are outstanding on the date of the withholding or
deduction copies of tax receipts evidencing that such payment has been made by
the Company.  The Company will indemnify and hold harmless each Holder of Notes
that are outstanding on the date of the withholding or deduction (other than an
Excluded Holder) and upon written request reimburse each such Holder for the
amount of (i) any Canadian taxes so levied or imposed and paid by such Holder
as a result of payments made under or with respect to the Notes, (ii) any
liability (including penalties, interest and expense) arising therefrom or with
respect thereto, and (iii) any Canadian taxes imposed with respect to any
reimbursement under clause (i) or (ii) above.

     At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Company becomes obligated to
pay Additional Amounts with respect to such payment, the Company will deliver
to the Trustee an Officers' Certificate stating the fact that such Additional
Amounts will be payable, and the amounts so payable and will set forth such
other information as is necessary to enable the Trustee to pay such Additional
Amounts to the Holders on the payment date.

     SECTION 4.02   Maintenance of Office or Agency.

     The Company shall maintain the office or agency located in the Borough of
Manhattan, State of New York as required under Section 2.03.  The Company shall
give prior written notice to the Trustee of the location, and any change in the
location, of such office or agency.  If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 13.02.


<PAGE>   52

                                      -44-


     SECTION 4.03   Corporate Existence.

     Except as otherwise permitted by Article Five and Section 4.16, the Company
shall do or cause to be done, at its own cost and expense, all things necessary
to preserve and keep in full force and effect its corporate existence and the
corporate existence of each of its Restricted Subsidiaries in accordance with
the respective organizational documents of each such Restricted Subsidiary and
the material rights (charter and statutory) and franchises of the Company and
each such Restricted Subsidiary; provided, however, that the Company shall not
be required to preserve, with respect to itself, any material right or franchise
and, with respect to any of its Restricted Subsidiaries, any such existence,
material right or franchise, if the Board of Directors of the Company shall
determine in good faith that the preservation thereof is no longer desirable in
the conduct of the business of the Company and the Restricted Subsidiaries,
taken as a whole.

     SECTION 4.04   Payment of Taxes and Other Claims.

     The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, all material taxes, assessments and
governmental charges  (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
properties of it or any of its Subsidiaries; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings or where the failure to
effect such payment is not adverse in any material respect to the Holders of the
Notes.

     SECTION 4.05   Maintenance of Properties and Insurance.

     (a) The Company shall, and shall cause each of its Restricted Subsidiaries
to, maintain its material operating properties in appropriate condition (subject
to ordinary wear and tear and taking into account the historical and intended
use of any such properties) and make appropriate repairs, renewals and
replacements thereto, all as in the sole judgment of the Company and its
Management may be necessary so that business carried on in connection therewith
may be properly conducted at all times unless the failure to so maintain such
properties would not have a material adverse effect on the financial condition
of the Company and its Restricted Subsidiaries taken as a whole; provided,
however, that nothing in this Section 4.05 shall prevent the Company or any of
its Restricted Subsidiaries from discontinuing or


<PAGE>   53

                                      -45-


abandoning the operation and maintenance of any of such properties, if such
discontinuance or abandonment is, in the sole judgment of Management of the
Company or the Restricted Subsidiary, as the case may be, desirable in the
conduct of their respective businesses and does not materially affect the
ability of the Company to repay principal on the Securities.

     (b) The Company shall provide or cause to be provided, for itself and each
of its Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds that, in the good faith judgment of the
Board of Directors of the Company, are adequate and appropriate for the conduct
of the business of the Company and such Restricted Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary, in the good faith
judgment of the Board of Directors of the Company, for companies similarly
situated in the industry.

     SECTION 4.06   Compliance Certificate;
                    Notice of Default.

     (a) The Company shall deliver to the Trustee, within 90 days after the end
of the Company's fiscal year, an Officers' Certificate stating that a review of
its activities and the activities of its Subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers with a
view to determining whether each of the Company and its Subsidiaries has kept,
observed, performed and fulfilled its obligations under this Indenture and
further stating, as to each such Officer signing such certificate, that to the
best of such Officer's knowledge each of the Company and its Subsidiaries during
such preceding fiscal year has kept, observed, performed and fulfilled each and
every such covenant and no Default or Event of Default occurred during such year
and at the date of such certificate there is no Default or Event of Default that
has occurred and is continuing or, if such signers do know of such Default or
Event of Default, the certificate shall describe such Default or Event of
Default and its status.  The Officers' Certificate shall also notify the Trustee
should the Company elect to change the manner in which it fixes its fiscal year
end.

     (b) The annual financial statements delivered pursuant to Section 4.08
shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that


<PAGE>   54

                                      -46-


would lead them to believe that the Company has violated any provisions of
Article Four, Five or Six of this Indenture insofar as they relate to accounting
matters or, if any such violation has occurred, specifying the nature and period
of existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.

     (c) (i) If any Default or Event of Default has occurred and is continuing
or (ii) if any Holder seeks to exercise any remedy hereunder with respect to a
claimed Default under this Indenture or the Notes, the Company shall deliver to
the Trustee, at its address set forth in Section 13.02 hereof, by registered or
certified mail or by telegram, telex or facsimile transmission followed by hard
copy by registered or certified mail an Officers' Certificate specifying such
event,  notice or other action within five Business Days of its becoming aware
of such occurrence.

     SECTION 4.07   Compliance with Laws.

     The Company shall comply, and shall cause each of its Subsidiaries to
comply, with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America and Canada, all states, provinces
and municipalities thereof, and of any governmental department, commission,
board, regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective businesses and the
ownership of their respective properties, except for such noncompliances as are
not in the aggregate reasonably likely to have a material adverse effect on the
financial condition or results of operations of the Company and its Restricted
Subsidiaries, taken as a whole.

     SECTION 4.08   SEC Reports.

     (a) Upon consummation of the Exchange Offer and the issuance of the
Exchange Notes, the Company (at its own expense) shall file with the SEC when
due as required by the Exchange Act and shall file with the Trustee within 15
days after it files them with the SEC copies of the quarterly and annual reports
and of the information, documents, and other reports (or copies of such portions
of any of the foregoing as the SEC may by rules and regulations prescribe) to be
filed pursuant to Section 13 or 15(d) of the Exchange Act (without regard to
whether the Company is subject to the requirements of such Section 13 or 15(d)
of the Exchange Act); provided that prior to the consummation of the Exchange
Offer and the issuance of the Exchange Notes, the Company (at its own expense)
will mail to the Trustee and Holders in


<PAGE>   55

                                      -47-


accordance with paragraph (b) of this Section 4.08 substantially the same
information that would have been required by the foregoing documents within 15
days of when any such document would otherwise have been required to be filed
with the SEC. Upon qualification of this Indenture under the TIA, the Company
shall also comply with the provisions of TIA Section  314(a).

     (b) At the Company's expense, the Company shall cause an annual report if
furnished by it to stockholders generally and each quarterly or other financial
report if furnished by it to stockholders generally to be filed with the Trustee
and mailed to the Holders at their addresses appearing  in the register of Notes
maintained by the Registrar at the time of such mailing or furnishing to
stockholders.

     (c) The Company shall provide to any Holder any information reasonably
requested by such Holder concerning the Company and the Guarantors (including
financial statements) necessary in order to permit such Holder to sell or
transfer Notes in compliance with Rule 144A under the Securities Act.

     SECTION 4.09   Waiver of Stay, Extension
                    or Usury Laws.

     The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.

     SECTION 4.10   Limitation on Restricted Payments.

     Neither the Company nor any of its Restricted Subsidiaries shall, directly
or indirectly, (a) declare or pay any dividend or make any distribution (other
than dividends or distributions payable solely in Qualified Capital Stock of the
Company) on or in respect of shares of the Company's Capital Stock to holders of
such Capital Stock, (b) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company, or


<PAGE>   56

                                      -48-


any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock, other than through the exchange therefor solely of Qualified
Capital Stock of the Company or warrants, rights or options to acquire Qualified
Capital Stock of the Company, (c) make any principal payment on, purchase,
defease, redeem, prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or scheduled sinking
fund payment, any Indebtedness of the Company that is subordinate or junior in
right of payment to the Notes, or (d) make any  Investment (other than Permitted
Investments) in any Person (each of the foregoing prohibited actions set forth
in clauses (a), (b), (c) and (d) being referred to as a "Restricted Payment"),
if at the time of such proposed Restricted Payment or immediately after giving
effect thereto, (i) a Default or an Event of Default has occurred and is
continuing or would result therefrom, or (ii) the Company is not able to Incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12(b) (as if such Restricted Payment had been made as
of the last day of the Four Quarter Period), or (iii) the aggregate amount of
Restricted Payments (including such proposed Restricted Payment) made subsequent
to the Issue Date (the amount expended for such purposes, if other than in cash,
being the fair market value of such property as determined reasonably and in
good faith by the board of directors of the Company) exceeds or would exceed the
sum of:  (x) 50% of the cumulative Consolidated Net Income (or if cumulative
Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company
during the period (treating such period as a single accounting period)
subsequent to the Issue Date and prior to the date of the making of such
Restricted Payment; and (y) 100% of the aggregate Net Equity Proceeds received
by the Company from any Person (other than from a Subsidiary of the Company)
from the issuance and sale subsequent to the Issue Date of Qualified Capital
Stock of the Company (excluding (A) any Qualified Capital Stock of the Company
paid as a dividend on any Capital Stock of the Company and (B) any Qualified
Capital Stock of the Company with respect to which the purchase price thereof
has been financed directly or indirectly using funds (i) borrowed from the
Company or from any of its Subsidiaries, unless and until and to the extent such
borrowing is repaid, or (ii) contributed, extended, guaranteed or advanced by
the Company or by any of its Subsidiaries (including, without limitation, in
respect of any employee stock ownership or benefit plan)).

     Notwithstanding the foregoing, these provisions do not prohibit:  (1) the
payment of any dividend or making of any distribution within 60 days after the
date of its declaration if the dividend or distribution would have been
permitted on the date


<PAGE>   57

                                      -49-


of declaration; (2) the acquisition of Capital Stock of the Company or warrants,
rights or options to acquire Capital Stock of the Company either (i) solely in
exchange for shares of Qualified Capital Stock of the Company or warrants,
rights or options to acquire Qualified Capital Stock of the Company, or (ii)
through the application of net proceeds of a  substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of shares of Qualified Capital
Stock of the Company or warrants, rights or options to acquire Qualified Capital
Stock of the Company; and (3) the acquisition of any Indebtedness of the Company
that is subordinate or junior in right of payment to the Notes either (i) solely
in exchange for shares of Qualified Capital Stock of the Company, or (ii)
through the application of net proceeds of a substantially concurrent sale for
cash (other than to a Subsidiary of the Company) of (A) shares of Qualified
Capital Stock of the Company or warrants, rights or options to acquire Qualified
Capital Stock of the Company or (B) Refinancing Indebtedness; provided, however,
that in the case of clauses (2) and (3) of this paragraph, no Default or Event
of Default shall have occurred and be continuing at the time of such payment or
as a result thereof.  In determining the aggregate amount of Restricted Payments
made subsequent to the Issue Date, amounts expended pursuant to clauses (1) and
(2) shall, in each case, be included in such calculation.

     Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment complies with this Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which calculations may
be based upon the Company's latest available internal quarterly financial
statements.

     SECTION 4.11   Limitation on Transactions
                    with Affiliates.

     The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into any transaction or series of transactions
with or for the benefit of any of their Affiliates (each an "Affiliate
Transaction"), except in good faith and on terms that are no less favorable to
the Company or such Subsidiary, as the case may be, than those that could have
been obtained in a comparable transaction on an arm's-length basis from a Person
not an Affiliate of the Company or such Subsidiary.  All Affiliate Transactions
(and each series of related Affiliate Transactions which are similar or part of
a common plan) involving aggregate payments or other property with a fair market
value in excess of $5 million shall be approved by the board of directors of the
Company, such approval to be evidenced by a Board Resolution


<PAGE>   58

                                      -50-


stating that such board of directors has determined that such transaction
complies with the foregoing provisions.  If the Company or any  Subsidiary of
the Company enters into an Affiliate Transaction (or a series of related
Affiliate Transactions related to a common plan) that involves an aggregate fair
market value of more than $15 million, the Company or such Subsidiary shall,
prior to the consummation thereof, obtain a favorable opinion as to the fairness
of such transaction or series of related transactions to the Company or the
relevant Subsidiary, as the case may be, from a financial point of view, from an
Independent Financial Advisor and file the same with the Trustee.
Notwithstanding the foregoing, the restrictions set forth in this covenant shall
not apply to customary directors' fees, indemnification and similar
arrangements.

     SECTION 4.12   Limitation on Indebtedness.

     (a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness, including,
without limitation, any Acquired Indebtedness (other than Permitted
Indebtedness).

     (b) Notwithstanding the foregoing limitations, in addition to Permitted
Indebtedness, the Company may Incur Indebtedness (including, without limitation,
Acquired Indebtedness) and Restricted Subsidiaries of the Company may Incur
Acquired Indebtedness, in each case, if (i) no Default or Event of Default shall
have occurred and be continuing on the date of the proposed Incurrence thereof
or would result as a consequence of such proposed Incurrence and (ii)
immediately after giving effect to such proposed Incurrence, (x) the
Consolidated Fixed Charge Coverage Ratio of the Company is at least equal to 2.0
to 1.0 if such proposed Incurrence is on or prior to December 31, 1998 at least
equal to 2.5 to 1.0 if such proposed Incurrence is after December 31, 1998 and
on or prior to December 31, 1999, and at least equal to 2.75 to 1.0 if such
proposed Incurrence occurs after December 31, 1999 and (y) the Adjusted
Consolidated Net Tangible Assets of the Company are at least equal to 150% of
the aggregate consolidated Indebtedness of the Company.

     (c) The Company will not, directly or indirectly, in any event Incur any
Indebtedness which by its terms (or by the terms of any agreement governing such
Indebtedness) is subordinated to any other Indebtedness of the Company ranking
pari passu with the Notes unless such Indebtedness is also by its terms (or by
the terms of any agreement governing such Indebtedness) made expressly
subordinate to the Notes to the same extent and in the same manner as such
Indebtedness is subordinated to such pari passu 


<PAGE>   59

                                      -51-


Indebtedness pursuant to any subordination provisions that are most favorable to
the holders of any such pari passu Indebtedness of the Company.

     "Permitted Indebtedness" means, without duplication, each of the following:

          (i) Indebtedness under the Notes, this Indenture and the Guarantee;

          (ii) Commodity Agreements of the Company; provided, however, that such
     Commodity Agreements are entered into to reduce the exposure of the Company
     and its Restricted Subsidiaries to fluctuations in the prices of
     commodities, in each case consistent with past practice of the Company;

          (iii) Interest Swap Obligations and Foreign Exchange Obligations of
     the Company; provided, however, that such Interest Swap Obligations and
     Foreign Exchange Obligations are entered into to protect the Company and
     its Restricted Subsidiaries from fluctuations in interest or exchange rates
     on Indebtedness Incurred in accordance with this Indenture to the extent
     the notional principal amount of such Interest Swap Obligation or Foreign
     Exchange Obligation does not exceed the principal amount of the
     Indebtedness to which such Obligation relates; and provided, further, that
     the Company may enter into Foreign Exchange Obligations to protect the
     Company and its Restricted Subsidiaries from fluctuations in exchange rates
     related to the operating costs of the Company and its Restricted
     Subsidiaries, in each case consistent with past practice of the Company;

          (iv) Indebtedness under the Working Capital Facility not to exceed
     Cdn.$28 million, less any amounts repaid from Net Cash Proceeds pursuant to
     Section 4.16;

          (v) Capitalized Lease Obligations and Purchase Money Obligations of
     the Company or any Restricted Subsidiary not to exceed $20 million
     outstanding at any one time;

          (vi) additional Indebtedness Incurred by the Company not to exceed $25
     million outstanding at any time;

          (vii) Indebtedness of a direct or indirect Restricted Subsidiary of
     the Company to the Company or to a direct or indirect wholly owned
     Restricted Subsidiary of the Company  for so long as such Indebtedness is
     held by the Company or a direct or indirect wholly owned Restricted
     Subsidiary of the 


<PAGE>   60

                                      -52-


     Company in each case subject to no Lien held by a Person other than the
     Company or a direct or indirect wholly owned Restricted Subsidiary of the
     Company; provided that if as of any date any Person other than the Company
     or a direct or indirect wholly owned Restricted Subsidiary of the Company
     owns or holds any such Indebtedness or holds a Lien in respect of such
     Indebtedness, such date shall be deemed the Incurrence of Indebtedness not
     constituting Permitted Indebtedness by the issuer of such Indebtedness;

          (viii) Indebtedness of the Company to a direct or indirect wholly
     owned Restricted Subsidiary of the Company for so long as such Indebtedness
     is held by a direct or indirect wholly owned Restricted Subsidiary of the
     Company in each case subject to no Lien; provided that (a) any Indebtedness
     of the Company to any direct or indirect Restricted Subsidiary of the
     Company is unsecured and subordinated, pursuant to a written agreement, to
     the Company's obligations under this Indenture and the Notes, and (b) if as
     of any date any Person other than a direct or indirect wholly owned
     Restricted Subsidiary of the Company owns or holds any such Indebtedness or
     any Person holds a Lien in respect of such Indebtedness, such date shall be
     deemed the Incurrence of Indebtedness not constituting Permitted
     Indebtedness under this clause (viii) by the issuer of such Indebtedness;

          (ix) guarantees by Restricted Subsidiaries of the Company of
     Indebtedness of the Company (other than Permitted Indebtedness) Incurred on
     or after the Issue Date; provided that such Indebtedness was Incurred in
     compliance with this Section 4.12; and

          (x) Refinancing Indebtedness.

     SECTION 4.13   Limitation on Dividend and
                    Other Payment Restrictions
                    Affecting Subsidiaries.

     The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions  on
its Capital Stock; (b) make loans or advances or pay any Indebtedness or other
obligation owed to the Company or to any Restricted Subsidiary of the Company;
or (c) transfer any of its property or assets to the Company or to any
Restricted Subsidiary of the Company (each such encumbrance or restriction in
clause (a),


<PAGE>   61

                                      -53-


(b), or (c) a "Payment Restriction"), except for such encumbrances or
restrictions existing under or by reason of:  (1) applicable law; (2) this
Indenture; (3) customary non-assignment provisions of any lease governing a
leasehold interest of any Restricted Subsidiary of the Company; (4) any
instrument governing Acquired Indebtedness Incurred in accordance with paragraph
(b) of Section 4.12; provided that such encumbrance or restriction is not, and
will not be, applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or asset of the Person, becoming
a Restricted Subsidiary of the Company; (5) agreements existing on the Issue
Date to the extent and in the manner such agreements are in effect on the Issue
Date; (6) restrictions imposed by Liens granted pursuant to clauses (v) and
(vii)-(ix) of the definition of Permitted Liens solely to the extent such Liens
encumber the transfer or other disposition of the assets subject to such Liens;
(7) any restriction or encumbrance contained in contracts for the sale of assets
to be consummated in accordance with this Indenture solely in respect of the
assets to be sold pursuant to such contract; or (8) any encumbrance or
restriction contained in Refinancing Indebtedness Incurred to Refinance the
Indebtedness issued, assumed or Incurred pursuant to an agreement referred to in
clause (2), (4) or (5) above; provided that the provisions relating to such
encumbrance or restriction contained in any such Refinancing Indebtedness are no
less favorable to the Company or to the Holders in any material respect in the
reasonable and good faith judgment of the board of directors of the Company than
the provisions relating to such encumbrance or restriction contained in
agreements referred to in such clause (2), (4) or (5).

     SECTION 4.14   Prohibition on Incurrence of
                    Senior Subordinated Indebtedness.

     The Company shall not incur or suffer to exist Indebtedness that is senior
in right of payment to the Notes and subordinate in right of payment to any
other Indebtedness of the Company.

     SECTION 4.15   Change of Control.

     (a) Upon the occurrence of a Change of Control Triggering Event, the
Company will be required to offer to repurchase (the "Change of Control Offer")
all of the outstanding Notes pursuant to the offer described below, at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase.


<PAGE>   62

                                      -54-


     (b) Within 30 days following the date upon which the Change of Control
Triggering Event occurred, the Company must send, by first class mail, a notice
to each Holder, with a copy to the Trustee, which notice shall govern the terms
of the Change of Control Offer.  Such notice will state:

          (1) that the Change of Control Offer is being made pursuant to this
     Section 4.15 and that all Notes tendered and not withdrawn will be accepted
     for payment;

          (2) the purchase price (including the amount of accrued interest) and
     the purchase date (which shall be no earlier than 30 days nor later than 60
     days from the date such notice is mailed, other than as may be required by
     law) (the "Change of Control Payment Date"); provided that the Change of
     Control Payment Date for the Notes shall be a date subsequent to any
     payment dates for the purchase or other repayment of Senior Indebtedness
     having similar provisions;

          (3) that any Note not tendered will continue to accrue interest;

          (4) that, unless the Company defaults in making payment therefor, any
     Note accepted for payment pursuant to the Change of Control Offer shall
     cease to accrue interest after the Change of Control Payment Date;

          (5) that Holders electing to have a Note purchased pursuant to a
     Change of Control Offer will be required to surrender the Note, with the
     form entitled "Option of Holder to Elect Purchase" on the reverse of the
     Note completed, to the Paying Agent at the address specified in the notice
     prior to the close of business on the third Business Day prior to the
     Change of Control Payment Date;

          (6) that Holders will be entitled to withdraw their election if the
     Paying Agent receives, not later than five Business Days prior to the
     Change of Control Payment Date, a telegram, telex, facsimile transmission
     or letter setting forth the name of the Holder, the principal amount of the
     Notes the Holder delivered for purchase and a statement that such Holder is
     withdrawing his election to have such Notes purchased;

          (7) that Holders whose Notes are purchased only in part will be issued
     new Notes in a principal amount equal to the unpurchased portion of the
     Notes surrendered; provided that each Note purchased and each new Note
     issued shall be in an


<PAGE>   63

                                      -55-


     original principal amount of $1,000 or integral multiples thereof; and

          (8) the circumstances and relevant facts regarding such Change of
     Control.

     On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender in
immediately available funds sufficient to pay the purchase price plus accrued
interest, if any, of all Notes so tendered and (iii) deliver to the Trustee
Notes so accepted together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company.  The Paying Agent shall
promptly mail to the Holders of Notes so accepted payment in an amount equal to
the purchase price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered.  Any Notes not so accepted shall
be promptly mailed by the Company to the Holder thereof.  For purposes of this
Section 4.15, the Trustee shall act as the Paying Agent.

     Any amounts remaining after the purchase of Notes pursuant to a Change of
Control Offer shall be returned by the Trustee to the Company.

     The Change of Control Offer is required to remain open for at least 20
Business Days and until the close of business on the Change of Control Payment
Date.

     (c) A Change of Control Triggering Event requires both the occurrence of a
Change of Control and a Rating Event.   A Rating Event will occur if the rating
on the Notes is downgraded by one or more Gradations at any time within a
specified 90-day period (subject to extension under certain circumstances). See
"Change of Control," "Change of Control Triggering Event" and "Rating Event" of
Section 1.01.

     (d) If an offer is made to repurchase the Notes pursuant to a Change of
Control Offer, the Company will comply with all tender offer rules under state
and Federal Securities laws, including, but not limited to, Section 14(e) under
the Exchange Act and Rule 14e-1 thereunder, to the extent applicable to such
offer.


<PAGE>   64

                                      -56-


     SECTION 4.16   Limitation on Sale of Assets.

     The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate any Asset Sale unless (i) such Asset Sale is for at
least fair market value, (ii) at least 85% of the consideration therefrom
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents, and (iii) the Company or such Subsidiary shall apply the Net
Cash Proceeds of such Asset Sale within 180 days of receipt thereof as follows:

          (a) to repay any Indebtedness secured by the assets involved in such
     Asset Sale together with a concomitant permanent reduction in the amount of
     such Indebtedness (including a permanent reduction in committed amounts
     therefor in the case of any revolving credit facility so repaid); and

          (b) with respect to any Net Cash Proceeds remaining after application
     pursuant to the preceding paragraph (a) (the "Available Proceeds Amount"),
     the Company shall make an offer to purchase (the "Asset Sale Offer") from
     all Holders up to a maximum principal amount (expressed as an integral
     multiple of $1,000) of Notes equal to the Available Proceeds Amount at a
     purchase price equal to 100% of the principal amount thereof plus accrued
     and unpaid interest thereon, if any, to the date of purchase; provided,
     that the Company will not be required to apply pursuant to this paragraph
     (b) Net Cash Proceeds received from any Asset Sale if, and only to the
     extent that, such Net Cash Proceeds are (i) applied to or invested in
     Mining Related Assets, within 180 days of such Asset Sale or (ii) applied
     on or prior to the date of such Asset Sale, to the purchase, redemption,
     payment or other permanent  reduction of then outstanding Senior
     Indebtedness.  If at any time any non-cash consideration received by the
     Company or any Restricted Subsidiary of the Company, as the case may be, in
     connection with any Asset Sale is converted into or sold or otherwise
     disposed of for cash, then such conversion or disposition shall be deemed
     to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof
     shall be applied in accordance with this Section 4.16.  The Company may
     defer the Asset Sale Offer until there is an aggregate unutilized Available
     Proceeds Amount equal to or in excess of $10 million resulting from one or
     more Asset Sales (at which time, the entire unutilized Available Proceeds
     Amount, and not just the amount in excess of $10 million, shall be applied
     as required pursuant to this paragraph).



<PAGE>   65

                                      -57-


     In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the Company and its Restricted Subsidiaries not so transferred for purposes of
this Section 4.16, and shall comply with the provisions of this Section 4.16
with respect to such deemed sale as if it were an Asset Sale.  In addition, the
fair market value of such properties and assets of the Company or its Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this Section 4.16.

     Notwithstanding the foregoing, the Company shall not be obligated to
purchase Notes pursuant to an Asset Sale Offer on or prior to the fifth
anniversary of the Issue Date to the extent that such purchase would result in
the aggregate of the principal amount of Notes purchased pursuant thereto or
prior thereto being in excess of 25% of the principal amount of Notes originally
issued; provided, however, that to the extent that the Available Proceeds Amount
is not required to be applied to purchase Notes pursuant to an Asset Sale Offer,
the Company shall apply such proceeds to make an Asset Sale Offer immediately
after the fifth anniversary of the Issue Date.

     Notice of an Asset Sale Offer will be mailed to the Holders as shown on the
register of Holders not less than 30 days nor more than 60 days before the
payment date for the Asset Sale Offer, with a copy to the Trustee.  The notice
shall contain all instructions and materials necessary to enable such  Holders
to tender Notes pursuant to the Asset Sale Offer and shall state the following
terms:

          (1) that the Asset Sale Offer is being made pursuant to this Section
     4.16, that all Notes tendered will be accepted for payment and that Holders
     may elect to tender their Notes in whole or in part in integral multiples
     of $1,000 principal amount at maturity in exchange for cash; provided,
     however, that if the aggregate principal amount of Notes properly tendered
     in an Asset Sale Offer plus accrued interest at the expiration of such
     offer exceeds the Available Proceeds Amount, the Company shall select the
     Notes to be purchased on a pro rata basis (based on amounts tendered);

          (2) the purchase price (including the amount of accrued interest) and
     the purchase date (which shall be  20 Business Days from the date of
     mailing of notice of such Asset Sale Offer, or such longer period as
     required by law) (the


<PAGE>   66

                                      -58-


     "Proceeds Purchase Date"); provided that the Proceeds Purchase Date for the
     Notes shall be a date subsequent to any payment dates for the purchase or
     other repayment of Senior Indebtedness having similar provisions;

          (3) that any Note not tendered will continue to accrue interest;

          (4) that, unless the Company defaults in making payment therefor, any
     Note accepted for payment pursuant to the Asset Sale Offer shall cease to
     accrue interest after the Proceeds Purchase Date;

          (5) that Holders electing to have a Note purchased pursuant to an
     Asset Sale Offer will be required to surrender the Note, with the form
     entitled "Option of Holder to Elect Purchase" on the reverse of the Note
     completed, to the Paying Agent at the address specified in the notice prior
     to the close of business on the third Business Day prior to the Proceeds
     Purchase Date;

          (6) that Holders will be entitled to withdraw their election if the
     Paying Agent receives, not later than five Business Days prior to the
     Proceeds Purchase Date, a telegram, telex, facsimile transmission or letter
     setting forth the name of the Holder, the principal amount of the Notes the
     Holder delivered for purchase and a statement  that such Holder is
     withdrawing his election to have such Note purchased; and

          (7) that Holders whose Notes are purchased only in part will be issued
     new Notes in a principal amount equal to the unpurchased portion of the
     Notes surrendered; provided that each Note purchased and each new Note
     issued shall be in an original principal amount of $1,000 or integral
     multiples thereof;

     On or before the Proceeds Purchase Date, the Company shall (i) accept for
payment Notes or portions thereof tendered pursuant to the Asset Sale Offer
which are to be purchased in accordance with item (b) above, (ii) deposit with
the Paying Agent U.S. Legal Tender in immediately available funds sufficient to
pay the purchase price plus accrued interest, if any, of all Notes to be
purchased and (iii) deliver to the Trustee Notes so accepted together with an
Officers' Certificate stating the Notes or portions thereof being purchased by
the Company.  The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price plus accrued interest,
if


<PAGE>   67

                                      -59-


any.  For purposes of this Section 4.16, the Trustee shall act as the Paying
Agent.

     Any amounts remaining after the purchase of Notes pursuant to an Asset Sale
Offer shall be returned by the Trustee to the Company.

     If an Offer is made to repurchase the Notes pursuant to an Asset Sale
Offer, the Company will and will cause its Subsidiaries to comply with all
tender offer rules under state and Federal securities laws, including, but not
limited to, Section 14(e) under the Exchange Act and Rule 14e-1 thereunder, to
the extent applicable to such offer.

     SECTION 4.17   Limitation on Preferred Stock
                    of Restricted Subsidiaries.

     The Company shall not cause or permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a wholly owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a wholly owned Restricted Subsidiary of the Company) to own or hold
any Preferred Stock of any Restricted Subsidiary of the Company or any Lien or
security interest therein.

     SECTION 4.18   Limitation on Liens.

     The Company shall not, and shall not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist or remain in effect any Liens (other than Permitted Liens) upon
any properties or assets of the Company or of any of its Restricted Subsidiaries
whether owned on the Issue Date or acquired after the Issue Date, or on any
income or profits therefrom, or assign or otherwise convey any right to receive
income or profits thereon; provided that in addition to creating Permitted Liens
on its properties or assets, (i) the Company may create any Lien upon any of its
properties or assets (including, but not limited to, any Capital Stock of its
Subsidiaries) if the Notes are equally and ratably secured thereby, and (ii) a
Subsidiary Guarantor may create any Lien upon any of its properties or assets
(including, but not limited to, any Capital Stock of its Subsidiaries) if its
Subsidiary Guarantee is equally and ratably secured thereby; and provided,
further, that if (a) the Company creates any Lien on its assets to secure any
Indebtedness of the Company subordinated to the Notes, the Lien securing such
Indebtedness shall be subordinated and junior to the Lien securing the Notes
with the same or lesser priorities as the subordinated Indebtedness shall have
with respect to the Notes, and (b) a


<PAGE>   68

                                      -60-


Guarantor creates any Lien on its assets to secure any Indebtedness of such
Guarantor subordinated to the Notes, the Lien securing such subordinated
Indebtedness shall be subordinated and junior to the Lien securing the Guarantee
of such Guarantor with the same or lesser priorities as the subordinated
Indebtedness shall have with respect to the Guarantee.

     SECTION 4.19   Conduct of Business.

     The Company and its Restricted Subsidiaries shall not engage in the conduct
of any business other than the Mining Business on a basis congruent with the
conduct of such business as it is conducted on the Issue Date.

     SECTION 4.20   Additional Subsidiary Guarantees.

     In the event that any Subsidiary, directly or indirectly, guarantees any
Indebtedness of the Company other than the Notes (the "Other Indebtedness"), the
Company shall cause such Subsidiary (an "Additional Guarantor") to concurrently
guarantee (an "Additional Guarantee") the  Company's Obligations under this
Indenture and the Notes to the same extent that such Subsidiary guaranteed the
Company's Obligations under the Other Indebtedness (including waiver of
subrogation, if any); provided that if such Other Indebtedness is (i) Senior
Indebtedness, the Additional Guarantee shall be subordinated in right of payment
to the guarantee of such Other Indebtedness on the same basis that the Notes are
subordinated to such Other Indebtedness, (ii) pari passu Indebtedness, the
Additional Guarantee shall be pari passu in right of payment to the guarantee of
such Other Indebtedness, or (iii) subordinated Indebtedness, the Additional
Guarantee shall be senior in right of payment with respect to the guarantee of
the Other Indebtedness; provided, however, that each Additional Guarantor will
be automatically and unconditionally released and discharged from its
obligations under such Additional Guarantee upon the release or discharge of the
guarantee of the Other Indebtedness that resulted in the creation of such
Additional Guarantee, except (i) a discharge or release by, or as a result of,
any payment under the guarantee of such Other Indebtedness by such Additional
Guarantor or (ii) a discharge or release of an initial Guarantee.



<PAGE>   69


                                      -61-


                                  ARTICLE FIVE

                             SUCCESSOR CORPORATION


     SECTION 5.01   Mergers, Consolidation
                     and Sale of Assets.

     The Company shall not, in a single transaction or a series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Company's Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless; (i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which acquires
by sale, assignment, transfer, lease, conveyance or other disposition the
properties and assets of the Company and of the Company's Restricted
Subsidiaries substantially as an entirety (the "Surviving  Entity") (x) shall be
a corporation organized and validly existing under the laws of the United States
or any State thereof or the District of Columbia or Canada or any province
thereof and (y) shall expressly assume, by supplemental indenture (in form and
substance satisfactory to the Trustee), executed and delivered to the Trustee,
the due and punctual payment of the principal of, and  premium, if any, and
interest on all of the Notes and the performance of every covenant of the Notes,
this Indenture and the Registration Rights Agreement on the part of the Company
to be performed or observed; (ii) immediately after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above (including
giving effect to any Indebtedness and Acquired Indebtedness Incurred or
anticipated to be Incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be, (1)
shall have a Consolidated Net Worth equal to or greater than the Consolidated
Net Worth of the Company immediately prior to such transaction and (2) shall be
able to Incur at least $1.00 of additional Indebtedness pursuant to Section
4.12(b); provided that in determining the Consolidated Fixed Charge Coverage
Ratio of the resulting, transferee or surviving Person, such ratio shall be
calculated as if the transaction (including the Incurrence of Any Indebtedness
or Acquired Indebtedness) took place on the first day of the Four Quarter
Period; (iii) immediately before and immediately after giving effect to such
transaction and the 


<PAGE>   70

                                      -62-


assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness Incurred
or anticipated to be Incurred and any Lien granted in connection with or in
respect of the transaction), no Default and no Event of Default shall have
occurred or be continuing; and (iv) the Company or the Surviving Entity shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of this Indenture and that all
conditions precedent in this Indenture relating to such transaction have been
satisfied, which Opinion of Counsel may rely, as to factual matters, upon an
Officers' Certificate.

     For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of  the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.

     Upon any such consolidation, merger, conveyance, lease or transfer in
accordance with the foregoing, the successor Person formed by such consolidation
or into which the Company is merged or to which such conveyance, lease or
transfer is made will succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same effect as if
such successor had been named as the Company therein, and thereafter (except in
the case of a sale, assignment, transfer, lease, conveyance or other
disposition) the predecessor corporation will be relieved of all further
obligations and covenants under this Indenture and the Notes.

     Each Guarantor (other than any Guarantor whose Guarantee is to be released
in accordance with the terms of the Guarantee and this Indenture in connection
with any transaction complying with the provisions of Section 4.16) will not,
and the Company will not cause or permit any Guarantor to, consolidate with or
merge with or into any Person other than the Company or any other Guarantors
unless: (i) the entity formed by or surviving any such consolidation or merger
(if other than the Guarantor), or to which sale, lease, conveyance or other
disposition shall have been made, is a corporation organized and existing under
the laws of the United States, any state thereof or the District of Columbia,
or


<PAGE>   71

                                      -63-


under the laws of Canada or any provinces thereof; (ii) such entity assumes
by supplemental indenture all of the obligations of the Guarantor on the
Guarantee; (iii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; and (iv) immediately
after giving effect to such transaction and the use of any net proceeds
therefrom on a pro forma basis, the Company could satisfy the provisions of
clause (ii) of the first paragraph of this covenant.  Any merger or
consolidation of a Guarantor with and into the Company (with the Company being
the surviving entity) or another Guarantor that is a wholly owned Restricted
Subsidiary of the Company need only comply with clause (iv) of the first
paragraph of this covenant.

     SECTION 5.02   Successor Corporation Substituted.

     Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing,
the surviving entity shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture and the Notes with
the same effect as if such surviving entity had been named as such; provided
that solely for purposes of computing amounts described in clause (iii) of the
first paragraph of Section 4.10, any such surviving entity to the Company shall
only be deemed to have succeeded to and be substituted for the Company with
respect to periods subsequent to the effective time of such merger,
consolidation, combination or transfer of assets.


                                  ARTICLE SIX

                              DEFAULT AND REMEDIES
 

     SECTION 6.01   Events of Default.

     An "Event of Default" occurs if:

          (1) the Company fails to pay interest on any Note for a period of 30
     days or more after such interest becomes due and payable; or

          (2) the Company fails to pay the principal on any Note, when such
     principal becomes due and payable, at maturity, upon redemption, pursuant
     to an Asset Sale Offer or a Change of Control Offer or otherwise; or


<PAGE>   72

                                      -64-


          (3) (x) the failure of the Company or any Guarantor to comply with any
     of the terms or provisions of Section 5.01 or (y) a default in the
     observance or performance of any other covenant or agreement contained in
     this Indenture which default continues for a period of 30 days after the
     Company receives written notice specifying the default from the Trustee or
     from Holders of at least 25% in principal amount of outstanding Notes; or

          (4) default under any mortgage, indenture or instrument under which
     there may be issued or by which there may be secured or evidenced any
     Indebtedness of the Company or of any Restricted Subsidiary of the Company
     (or  the payment of which is guaranteed by the Company or any Restricted
     Subsidiary of the Company) which default (a) is caused by a failure to pay
     principal of or premium, if any, or interest on such Indebtedness after any
     applicable grace period provided in such Indebtedness on the date of such
     default (a "payment default") or (b) results in the acceleration of such
     Indebtedness prior to its express maturity and, in each case, the principal
     amount of any such Indebtedness, together with the principal amount of any
     other such Indebtedness under which there has been a payment default or the
     maturity of which has been so accelerated, aggregates $10 million; or

          (5) one or more judgments in an aggregate amount in excess of $10
     million (which are not covered by third-party insurance as to which a
     financially sound insurer has not disclaimed coverage) being rendered
     against the Company or any of its Subsidiaries and such judgments remain
     undischarged, or unstayed or unsatisfied for a period of 60 days after such
     judgment or judgments become final and non-appealable; or

          (6) the Company or any of its Restricted Subsidiaries pursuant to or
     within the meaning of any Bankruptcy Law:  (a) commences a voluntary case,
     (b) consents to the entry of an order for relief against it in an
     involuntary case, (c) consents to the appointment of a Custodian of it or
     for all or substantially all of its property, (d) makes a general
     assignment for the benefit of its creditors, or (e) admits in writing its
     inability to pay its debts as they become due;

          (7) a court of competent jurisdiction enters an order or decree under
     any Bankruptcy Law that:

               (a) is for relief against the Company or any Restricted
          Subsidiary in an involuntary case,



<PAGE>   73

                                      -65-


               (b) appoints a Custodian of the Company or any Restricted
          Subsidiary or for all or substantially all of the property of the
          Company or any Restricted Subsidiary, or

               (c) orders the liquidation of the Company or any Restricted
          Subsidiary.

          and the order or decree remains unstayed and in effect for 60
          consecutive days;

          (8) any of the Guarantees cease to be in full force and effect or any
     of the Guarantees are declared to be null and void and unenforceable or any
     of the Guarantees are found to be invalid or any of the Guarantors denies
     its liability under its Guarantee (other than by reason of release of a
     Guarantor in accordance with the terms of this Indenture).

Any Event of Default shall not be deemed to have occurred under clause (4) or
(5) until the Trustee shall have received written notice from the Company or any
of the Holders or unless a Trust Officer shall have actual knowledge of such
Event of Default.

     SECTION 6.02   Acceleration.

     (a) If an Event of Default (other than an Event of Default specified in
Sections 6.01(6) or 6.01(7) above with respect to the Company) occurs and is
continuing, then and in every such case the Trustee or the Holders of not less
than 25% in aggregate principal amount of the then outstanding Notes may declare
the unpaid principal of, premium, if any, and accrued and unpaid interest on,
all the Notes then outstanding to be due and payable, by a notice in writing to
the Company (and to the Trustee, if given by Holders) and upon such declaration
such principal amount, premium, if any, and accrued and unpaid interest will
become immediately due and payable.

     (b) If an Event of Default with respect to the Company specified in
Sections 6.01(6) or 6.01(7) above occurs, all unpaid principal of, and premium,
if any, and accrued and unpaid interest on, the Notes then outstanding will ipso
facto become due and payable without any declaration or other act on the part of
the Trustee or any Holder.

     (c) The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and premium,


<PAGE>   74

                                      -66-


if any, and interest on the Notes which has become due solely by virtue of such
acceleration) have been cured or waived and if the rescission would not conflict
with any judgment or decree.  No such rescission shall affect any subsequent
Default or impair any right consequent thereto.

     The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under this Indenture, and its consequences,
except a Default in the payment of the principal of or interest on any Notes or
a Default in respect of any term or provision of the Notes or this Indenture
that cannot be modified or amended without the consent of all Holders.

     Holders of the Notes may not enforce this Indenture or the Notes except as
provided in this Indenture and under the TIA.  Subject to the provisions of this
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under this Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity against any and all expense and
liability to which the Trustee, in its discretion, may be exposed.  Subject to
all provisions of this Indenture and applicable law, the Holders of a majority
in aggregate principal amount of the then outstanding Notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee.

     SECTION 6.03   Other Remedies.

     If an Event of Default occurs and is continuing, and subject to the
Trustee's right to indemnification, the Trustee may pursue any available remedy
by proceeding at law or in equity to collect the payment of principal of or
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.

     The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding.  A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default.  No remedy is
exclusive of any other remedy.  All available remedies are cumulative to the
extent permitted by law.


<PAGE>   75

                                      -67-


     SECTION 6.04   Waiver of Past Defaults.

     Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority in
principal amount of the outstanding Notes by written notice to the Trustee may
on behalf of all Holders  waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Note as specified in clauses (1) and (2) of Section 6.01.  When a Default or
Event of Default is waived, it is cured and ceases to exist.

     SECTION 6.05   Control by Majority.

     Subject to Section 2.09, the Holders of a majority in principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any remedies provided for
in Section 6.03.  Subject to Section 7.01, however, the Trustee may refuse to
follow any direction that the Trustee reasonably believes conflicts with any law
or this Indenture, that the Trustee determines may be unduly prejudicial to the
rights of another Noteholder, or that may involve the Trustee in personal
liability; provided that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.

     SECTION 6.06   Limitation on Suits.

     A Noteholder may not pursue any remedy with respect to this Indenture or
the Notes unless:

          (1) the Holder gives to the Trustee written notice of a continuing
     Event of Default;

          (2) Holders of at least 25% in principal amount of the outstanding
     Notes make a written request to the Trustee to pursue the remedy;

          (3) such Holders offer to the Trustee indemnity reasonably
     satisfactory to the Trustee against any loss, liability or expense to be
     incurred in compliance with such request;

          (4) the Trustee does not comply with the request within 60 days after
     receipt of the request and the offer of satisfactory indemnity; and

          (5) during such 60-day period the Holders of a majority in principal
     amount of the outstanding Notes do not give the


<PAGE>   76

                                      -68-


     Trustee a direction which, in the opinion of the Trustee, is inconsistent
     with the request.

     A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over such other Noteholder.

     SECTION 6.07   Rights of Holders To Receive Payment.

     Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on a Note, on or after
the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.

     SECTION 6.08   Collection Suit by Trustee.

     If an Event of Default in payment of principal or interest specified in
clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Notes for the whole amount of principal and
accrued interest remaining unpaid, together with interest on overdue principal
and, to the extent that payment of such interest is lawful, interest on overdue
installments of interest at the rate set forth in Section 4.01 and such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.

     SECTION 6.09   Trustee May File Proofs of Claim.

     The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relating to the Company or any
other obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Noteholder to make such payments to the Trustee and,
in the event that the Trustee shall consent to the making of such payments
directly to the Noteholders, to pay to the Trustee any  amount due to it for the
reasonable


<PAGE>   77

                                      -69-


compensation, expenses, taxes, disbursements and advances of the Trustee, its
agent and counsel, and any other amounts due the Trustee under Section 7.07. The
Company's payment obligations under this Section 6.09 shall be secured in
accordance with the provisions of Section 7.07 hereunder.  Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Noteholder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Noteholder in any such proceeding.

     SECTION 6.10   Priorities.

     If the Trustee collects any money or property pursuant to this Article Six,
it shall pay out the money in the following order:

          First:  to the Trustee for amounts due under Section 7.07;

          Second:  if the Holders are forced to proceed against the Company
     directly without the Trustee, to Holders for their collection costs;

          Third:  to Holders for amounts due and unpaid on the Notes for
     principal and interest, ratably, without preference or priority of any
     kind, according to the amounts due and payable on the Notes for principal
     and interest, respectively; and

          Fourth:  to the Company, the Guarantors or any other obligor on the
     Notes, as their interests may appear, or as a court of competent
     jurisdiction may direct.

     The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Noteholders pursuant to this Section 6.10.

     SECTION 6.11   Undertaking for Costs.

     In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and  the court in
its discretion may assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in the suit, having due


<PAGE>   78

                                      -70-


regard to the merits and good faith of the claims or defenses made by the party
litigant.  This Section 6.11 does not apply to a suit by the Trustee, a suit by
a Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in principal amount of the outstanding Notes.


                                 ARTICLE SEVEN

                                    TRUSTEE


     SECTION 7.01   Duties of Trustee.

     (a) If a Default or an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.

     (b) Except during the continuance of a Default or an Event of Default:

          (1) The Trustee need perform only those duties as are specifically set
     forth in this Indenture and no covenants or obligations shall be implied in
     this Indenture against the Trustee.

          (2) In the absence of bad faith on its part, the Trustee may
     conclusively rely, as to the truth of the statements and the correctness of
     the opinions expressed therein, upon certificates or opinions furnished to
     the Trustee and conforming to the requirements of this Indenture.  However,
     the Trustee shall examine the certificates and opinions to determine
     whether or not they conform to the requirements of this Indenture.

     (c) Notwithstanding anything to the contrary herein contained, the Trustee
may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:

          (1) This paragraph does not limit the effect of paragraph (b) of this
     Section 7.01.

          (2) The Trustee shall not be liable for any error of judgment made in
     good faith by a Trust Officer, unless it is 
<PAGE>   79

                                      -71-


     proved that the Trustee was negligent in ascertaining the pertinent facts.

          (3) The Trustee shall not be liable with respect to any action it
     takes or omits to take in good faith in accordance with a direction
     received by it pursuant to Section 6.02, 6.04 or 6.05.

     (d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or powers
if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
to it.

     (e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.

     (f) The Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.

     SECTION 7.02   Rights of Trustee.

     Subject to Section 7.01:

          (a) The Trustee may rely and shall be fully protected in acting or
     refraining from acting upon any document believed by it to be genuine and
     to have been signed or presented by the proper Person.  The Trustee need
     not investigate any fact or matter stated in the document.

          (b) Before the Trustee acts or refrains from acting, it may consult
     with counsel and may require an Officers' Certificate and/or an Opinion of
     Counsel, which shall conform to Sections 13.04 and 13.05.  The Trustee
     shall not be liable for any action it takes or omits to take in  good faith
     in reliance on such Officers' Certificate or Opinion of Counsel.

          (c) The Trustee may act through its attorneys and agents and shall not
     be responsible for the misconduct or negligence of any agent appointed with
     due care.

               
<PAGE>   80

                                      -72-


          (d) The Trustee shall not be liable for any action that it takes or
     omits to take in good faith which it reasonably believes to be authorized
     or within its rights or powers.

          (e) The Trustee shall not be bound to make any investigation into the
     facts or matters stated in any resolution, certificate, statement,
     instrument, opinion, notice, request, direction, consent, order, bond,
     debenture, or other paper or document, but the Trustee, in its discretion,
     may make such further inquiry or investigation into such facts or matters
     as it may see fit, and, if the Trustee shall determine to make such further
     inquiry or investigation, it shall be entitled, upon reasonable notice to
     the Company, to examine the books, records, and premises of the Company,
     personally or by agent or attorney and to consult with the officers and
     representatives of the Company, including the Company's accountants and
     attorneys.

          (f) The Trustee shall be under no obligation to exercise any of the
     rights or powers vested in it by this Indenture at the request, order or
     direction of any of the Holders pursuant to the provisions of this
     Indenture, unless such Holders shall have offered to the Trustee security
     or indemnity reasonably satisfactory to the Trustee against the costs,
     expenses and liabilities which may be incurred by it in compliance with
     such request, order or direction.

          (g) The Trustee shall not be required to give any bond or surety in
     respect of the performance of its powers and duties hereunder.

          (h) The Trustee may exercise any powers hereunder and perform any
     duties of it through attorneys (which may but shall not be required to be
     employees of the Trustee), accountants, receivers, or other agents employed
     by the Trustee, and shall be entitled to pay the reasonable compensation
     and expenses of such attorneys, accountants,  receivers and agents.  Before
     being required to take any action, the Trustee may require an Opinion of
     Counsel reasonably acceptable to it, which Opinion shall be made available
     to the other parties hereto upon request, or a verified certificate of any
     party hereto, or both, concerning the proposed action.  If it does so in
     good faith, the Trustee shall be absolutely protected in relying thereon.



<PAGE>   81

                                      -73-


     SECTION 7.03   Individual Rights of Trustee.

     The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company, any Subsidiary of the
Company, or their respective Affiliates with the same rights it would have if it
were not Trustee.  Any Agent may do the same with like rights.  However, the
Trustee must comply with Sections 7.10 and 7.11.

     SECTION 7.04   Trustee's Disclaimer.

     The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Notes, and it shall not be accountable for the Company's use of
the proceeds from the Notes, and it shall not be responsible for any statement
of the Company in this Indenture or the Notes other than the Trustee's
certificate of authentication on the Notes.

     SECTION 7.05   Notice of Default.

     If a Default or an Event of Default occurs and is continuing of which the
Trustee has actual knowledge, the Trustee shall mail to each Noteholder notice
of the uncured Default or Event of Default within 90 days after such Default or
Event of Default occurs.  Except in the case of a Default or an Event of Default
in payment of principal of, or interest on, any Note, including an accelerated
payment and the failure to make payment on the Change of Control Payment Date
pursuant to a Change of Control Offer or on the Proceeds Purchase Date pursuant
to a Net Proceeds Offer and, except in the case of a failure to comply with
Article V hereof, the Trustee may withhold the notice if and so long as its
Board of Directors, the executive committee of its Board of Directors or a
committee of its directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Noteholders.

     SECTION 7.06   Reports by Trustee to Holders.

     Within 60 days after each May 15, the Trustee shall, to the extent that any
of the events described in TIA Section  313(a) occurred within the previous
twelve months, but not otherwise, mail to each Noteholder a brief report dated
as of such date that complies with TIA Section  313(a).  The Trustee also shall
comply with TIA Section Section  313(b), (c) and (d).

     A copy of each report at the time of its mailing to Noteholders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Notes are listed.


<PAGE>   82

                                      -74-


     The Company shall promptly notify the Trustee if the Notes become listed on
any stock exchange and the Trustee shall comply with TIA Section  313(d).

     SECTION 7.07   Compensation and Indemnity.

     The Company shall pay to the Trustee from time to time reasonable
compensation for its services.  The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust.  The Company shall
reimburse the Trustee promptly upon request for all advances and reasonable
out-of-pocket expenses incurred or made by it in connection with the performance
of its duties under this Indenture.  Such expenses shall include but not be
limited to the reasonable fees and expenses of the Trustee's agents and counsel
(including either in-house counsel or outside counsel).

     The Company shall indemnify the Trustee and its agents and employees,
stockholders, directors and officers for, and hold them harmless against, any
loss, liability or expense incurred by them except for such actions to the
extent caused by any negligence, bad faith or willful misconduct on their part,
arising out of or in connection with the administration of the Trustee's duties
under this Indenture including but not limited to the reasonable costs and
expenses (including without limitation reasonable attorneys' fees and expenses)
of defending themselves against any claim or liability in connection with the
exercise or performance of any of their rights, powers or duties hereunder. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity.  At the Trustee's sole discretion, the
Company shall defend the claim and the Trustee shall cooperate and may
participate in the defense; provided  that any settlement of a claim shall be
consented to in writing by the Trustee which consent shall not unreasonably be
withheld.  Alternatively, the Trustee may at its option have separate counsel of
its own choosing and the Company shall pay the reasonable fees and expenses of
such counsel; provided that the Company will not be required to pay such fees
and expenses if it assumes the Trustee's defense and there is no conflict of
interest between the Company and the Trustee in connection with such defense as
reasonably determined by the Trustee.  The Company need not pay for any
settlement made without its written consent, which consent shall not
unreasonably be withheld.  The Company need not reimburse any expense or
indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct.


<PAGE>   83

                                      -75-


     To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.  The
Trustee's right to receive payment of any amounts due under this Section 7.07
shall not be subordinate to any other liability or indebtedness of the Company
(even though the Notes may be subordinate to such other liability or
indebtedness).

     When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.

     SECTION 7.08   Replacement of Trustee.

     The Trustee may resign by so notifying the Company.  The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Company and the Trustee and may appoint a successor Trustee.
The Company may remove the Trustee if:

          (1) the Trustee fails to comply with Section 7.10;

          (2) the Trustee is adjudged bankrupt or insolvent;

          (3) a receiver or other public officer takes charge of the Trustee or
     its property; or

          (4) the Trustee becomes incapable of acting.

     If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee.  Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.

     A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company.  Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee


<PAGE>   84

                                      -76-


under this Indenture.  A successor Trustee shall mail notice of its succession
to each Noteholder.

     If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.

     If the Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.

     Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.

     SECTION 7.09   Successor Trustee by Merger, Etc.

     If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the resulting, surviving or transferee corporation without any further act
shall, if such resulting, surviving or transferee corporation is otherwise
eligible hereunder, be the successor Trustee; provided that such corporation
shall be otherwise qualified and eligible under this Article Seven.

     SECTION 7.10   Eligibility; Disqualification.

     This Indenture shall always have a Trustee who satisfies the requirement of
TIA Section Section  310(a)(1), (2) and (5).  The Trustee (or, in the case of a
corporation included in a bank holding company system, the related bank holding
company) shall have a combined capital and surplus of at least $50 million as
set forth in its most recent published annual report of condition. In addition,
if the Trustee is a corporation included in a bank holding company system, the
Trustee, independently of such bank holding company, shall meet the capital
requirements of TIA Section 310(a)(2).  The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding, if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met.  The provisions of TIA Section 310 shall apply to
the Company, as obligor of the Notes.



<PAGE>   85

                                      -77-



     SECTION 7.11   Preferential Collection of
                    Claims Against Company.

     The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b).  A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
The provisions of TIA Section 311 shall apply to the Company, as obligor on the
Notes.


                                 ARTICLE EIGHT

                       DISCHARGE OF INDENTURE; DEFEASANCE



     SECTION 8.01   Termination of the
                    Company's Obligations.

     The Company may terminate the Guarantors' and its obligations under the
Notes and this Indenture, except those obligations referred to in the
penultimate paragraph of this Section 8.01, if all Notes previously
authenticated and delivered (other than destroyed, lost or stolen Notes which
have been replaced or paid or Notes for whose payment U.S. Legal Tender has
theretofore been deposited with the Trustee or the Paying Agent in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company, as provided in Section 8.05) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder, or if:

          (a) either (i) pursuant to Article Three, the Company shall have given
     notice to the Trustee and mailed a notice of redemption to each Holder of
     the redemption of all of the Notes under arrangements satisfactory to the
     Trustee for the giving of such notice or (ii) all Notes have otherwise
     become due and payable hereunder;

          (b) the Company shall have irrevocably deposited or caused to be
     deposited with the Trustee or a trustee satisfactory to the Trustee, under
     the terms of an irrevocable trust agreement in form and substance
     satisfactory to the Trustee, as trust funds in trust solely for the benefit
     of the Holders for that purpose, U.S. Legal Tender in such amount as is
     sufficient without consideration of reinvestment of such interest, to pay
     principal of, premium, if any, and interest on the outstanding Notes to
     maturity or redemption; provided that the Trustee shall have been
     irrevocably instructed to apply such U.S. Legal Tender to the payment of
     said principal, 


<PAGE>   86

                                      -78-


     premium, if any, and interest with respect to the Notes and, provided,
     further, that from and after the time of deposit, the money deposited shall
     not be subject to the rights of holders of Senior Indebtedness pursuant to
     the provisions of Article Ten;

          (c) no Default or Event of Default with respect to this Indenture or
     the Notes shall have occurred and be continuing on the date of such deposit
     or shall occur as a result of such deposit and such deposit will not result
     in a breach or violation of, or constitute a default under, any other
     instrument to which the Company is a party or by which it is bound;

          (d) the Company shall have paid all other sums payable by it
     hereunder; and

          (e) the Company shall have delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that all conditions
     precedent providing for the termination of the Company's obligations under
     the Notes and this Indenture have been complied with.  Such Opinion of
     Counsel shall also state that such satisfaction and discharge does not
     result in a default under the Working  Capital Facility (if then in effect)
     or any other agreement or instrument then known to such counsel that binds
     or affects the Company.

     Notwithstanding the foregoing paragraph, the Company's obligations in
Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive
until the Notes are no longer outstanding pursuant to the last paragraph of
Section 2.08.  After the Notes are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.

     After such delivery or irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's and the Guarantors'
obligations under the Notes, the Guarantees and this Indenture except for those
surviving obligations specified above.


     SECTION 8.02   Legal Defeasance and
                    Covenant Defeasance.

     (a) The Company may, at its option by Board Resolution of the Board of
Directors of the Company, at any time, elect to have either paragraph (b) or (c)
below be applied to all outstanding Notes (determined in accordance with Section
2.08) upon compliance with the conditions set forth in Section 8.03.



<PAGE>   87

                                      -79-


     (b) Upon the Company's exercise under paragraph (a) hereof of the option
applicable to this paragraph (b), the Company and the Guarantors shall, subject
to the satisfaction of the conditions set forth in Section 8.03, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance").  For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.04 hereof and the other Sections of this Indenture
referred to in (i) and (ii) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), and Holders of the Notes and any amounts deposited
under Section 8.03 hereof shall cease to be subject to any obligations to, or
the rights of, any holder of Senior Indebtedness under Article Ten or otherwise,
except for the following provisions, which shall  survive until otherwise
terminated or discharged hereunder:  (i) the rights of Holders of outstanding
Notes to receive solely from the trust fund described in Section 8.04 hereof,
and as more fully set forth in such Section, payments in respect of the
principal of and interest on such Notes when such payments are due, (ii) the
Company's obligations with respect to such Notes under Article Two and Section
4.02 hereof, (iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's obligations in connection therewith and (iv)
this Article Eight.  Subject to compliance with this Article Eight, the Company
may exercise its option under this paragraph (b) notwithstanding the prior
exercise of its option under paragraph (c) hereof.

     (c) Upon the Company's exercise under paragraph (a) hereof of the option
applicable to this paragraph (c), the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.03 hereof, be released from its
obligations under the covenants contained in Sections 4.10 through 4.20 and
Article Five hereof with respect to the outstanding Notes on and after the date
the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes) and Holders of the Notes and any amounts deposited under Section 8.03
hereof shall cease to be subject to 


<PAGE>   88

                                      -80-


any obligations to, or the rights of, any holder of Senior Indebtedness or
Guarantor Senior Indebtedness under Article Ten or Article Twelve or otherwise.
For this purpose, such Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event or Default under Section
6.01(3) hereof, but, except as specified above, the remainder of this Indenture
and such Notes shall be unaffected thereby.  In addition, upon the Company's
exercise under paragraph (a) hereof of the option applicable to this paragraph
(c), subject to the satisfaction of the conditions set forth in Section 8.03
hereof, Sections 6.01(3), 6.01(4) and 6.01(5) shall not constitute Events of
Default.


     SECTION 8.03   Conditions to Legal Defeasance
                    or Covenant Defeasance.

     The following shall be the conditions to the application of either Section
8.02(b) or 8.02(c) hereof to the outstanding Notes:

     In order to exercise either Legal Defeasance or Covenant Defeasance:

          (a) the Company must irrevocably deposit with the Trustee, in trust,
     for the benefit of the Holders, U.S. Legal Tender or U.S. Government
     Obligations, or a combination thereof, in such amounts as will be
     sufficient, in the opinion of a nationally recognized firm of independent
     public accountants, to pay the principal of and interest on the Notes on
     the stated date for payment thereof or on the applicable redemption date,
     as the case may be, of such principal or installment of principal of or
     interest on the Notes; provided that the Trustee shall have received an
     irrevocable written order from the Company instructing the Trustee to apply
     such U.S. Legal Tender or the proceeds of such U.S. Government Obligations
     to said payments with respect to the Notes;

          (b) in the case of an election under Section 8.02(b) hereof, the
     Company shall have delivered to the Trustee an Opinion of Counsel in the
     United States reasonably acceptable to the Trustee confirming that (A) the
     Company has received from, or there has been published by, the Internal
     Revenue Service a ruling or (B) since the date of this Indenture, 


<PAGE>   89

                                      -81-


     there has been a change in the applicable federal income tax law, in either
     case to the effect that, and based thereon such Opinion of Counsel shall
     confirm that, the Holders of the Notes will not recognize income, gain or
     loss for federal income tax purposes as a result of such Legal Defeasance
     and will be subject to federal income tax on the same amounts, in the same
     manner and at the same times as would have been the case if such Legal
     Defeasance had not occurred;

          (c) in the case of an election under Section 8.02(c) hereof, the
     Company shall have delivered to the Trustee an Opinion of Counsel in the
     United States reasonably  acceptable to the Trustee confirming that the
     Holders of the Notes will not recognize income, gain or loss for federal
     income tax purposes as a result of such Covenant Defeasance and will be
     subject to federal income tax on the same amounts, in the same manner and
     at the same times as would have been the case if such Covenant Defeasance
     had not occurred;

          (d) no Default or Event of Default or event which with notice or lapse
     of time or both would become a Default or an Event of Default with respect
     to the Notes shall have occurred and be continuing on the date of such
     deposit (other than a Default or Event of Default resulting from the
     incurrence of Indebtedness all or a portion of the proceeds of which will
     be used to defease the Notes pursuant to this Article Eight concurrently
     with such incurrence) or insofar as Sections 6.01(6) and 6.01(7) hereof are
     concerned, at any time in the period ending on the 91st day after the date
     of such deposit;

          (e) such Legal Defeasance or Covenant Defeasance shall not result in a
     breach or violation of or constitute a default under this Indenture or any
     other material agreement or instrument to which the Company or any of its
     Subsidiaries is a party or by which the Company or any of its Subsidiaries
     is bound;

          (f) the Company shall have delivered to the Trustee an Officers'
     Certificate stating that the deposit was not made by the Company with the
     intent of preferring the Holders over any other creditors of the Company or
     with the intent of defeating, hindering, delaying or defrauding any other
     creditors of the Company;

          (g) the Company shall have delivered to the Trustee an Officers'
     Certificate and an Opinion of Counsel, each stating that all conditions
     precedent provided for or relating to the 
<PAGE>   90

                                      -82-


     Legal Defeasance or the Covenant Defeasance have been complied with; and

          (h) the Company shall have delivered to the Trustee an Opinion of
     Counsel to the effect that (i) the trust funds will not be subject to any
     rights of any holders of Indebtedness of the Company other than the Notes,
     and (ii) assuming no intervening bankruptcy or insolvency of the Company
     between the date of deposit and the 91st day following the deposit and that
     no Holder is an insider of  the Company, after the 91st day following the
     deposit, the trust funds will not be subject to the effect of any
     applicable Bankruptcy Law.

     SECTION 8.04   Application of Trust Money.

     The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S.
Government Obligations deposited with it pursuant to Article Eight, and shall
apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of and
interest on the Notes.  The Trustee shall be under no obligation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree with the
Company.

     The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Legal Tender or U.S.
Government Obligations deposited pursuant to Section 8.03 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.

     Anything in this Article Eight to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the Company's request
any U.S. Legal Tender or U. S. Government Obligations held by it as provided in
Section 8.03 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
     
     SECTION 8.05   Repayment to the Company or the
                    Guarantors.

     Subject to Article Eight, the Trustee and the Paying Agent shall promptly
pay to the Company, or if deposited with the Trustee by any Guarantor, to such
Guarantor, upon request any 

<PAGE>   91

                                      -83-


excess U.S. Legal Tender or U.S. Government Obligations held by them at any time
and thereupon shall be relieved from all liability with respect to such money.
The Trustee and the Paying Agent shall pay to the Company, or if deposited with
the Trustee by any Guarantor, to such Guarantor, upon request any money held by
them for the payment of principal or interest that remains unclaimed for two
years; provided that the Trustee  or such Paying Agent, before being required to
make any payment, may at the expense of the Company cause to be published once
in a newspaper of general circulation in the City of New York notice that such
money remains unclaimed and that after a date specified therein which shall be
at least 30 days from the date of such publication or mailing any unclaimed
balance of such money then remaining will be repaid to the Company or a
Guarantor.  After payment to the Company or a Guarantor, as the case may be,
Noteholders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person.

     SECTION 8.06   Reinstatement.

     If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or
U.S. Government Obligations in accordance with Article Eight by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and each Guarantor's obligations under this Indenture
and the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Article Eight until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with Article Eight; provided that if the Company or any Guarantor, as
the case may be, has made any payment of interest on or principal of any Notes
because of the reinstatement of its obligations, the Company or any Guarantor,
as the case may be, shall be subrogated to the rights of the Holders of such
Notes to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.


<PAGE>   92

                                      -84-


                                  ARTICLE NINE

                      AMENDMENTS, SUPPLEMENTS AND WAIVERS


     SECTION 9.01   Without Consent of Holders.

     The Company and the Guarantors, when authorized by a Board Resolution, and
the Trustee, together, may amend or supplement this Indenture or the Notes or
Guarantees without notice to or consent of any Noteholder:

          (1) to cure any ambiguity, defect or inconsistency; provided that such
     amendment or supplement does not, in the opinion of the Trustee, adversely
     affect the rights of any Holder in any material respect;

          (2) to comply with Article Five;

          (3) to provide for uncertificated Notes in addition to or in place of
     certificated Notes;

          (4) to comply with any requirements of the SEC in order to effect or
     maintain the qualification of this Indenture under the TIA;

          (5) to make any change that would provide any additional benefit or
     rights to the Noteholders or that does not adversely affect the rights of
     any Noteholder;

          (6) to provide for issuance of the Exchange Notes, which will have
     terms substantially identical in all material respects to the Initial Notes
     (except that the transfer restrictions contained in the Initial Notes will
     be modified or eliminated, as appropriate), and which will be treated
     together with any outstanding Initial Notes, as a single issue of
     securities; or

          (7) to make any other change that does not, in the opinion of the
     Trustee, adversely affect in any material respect the rights of any
     Noteholders hereunder;

provided that the Company has delivered to the Trustee an Opinion of Counsel
stating that such amendment or supplement complies with the provisions of this
Section 9.01.

     Upon the request of the Company accompanied by a resolution of the Board of
Directors of the Company and each of the 

<PAGE>   93

                                      -85-


Guarantors, as the case may be, authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.

     SECTION 9.02   With Consent of Holders.

     Subject to Section 6.07 and Section 9.07, the Company and the Guarantors,
when authorized by a Board Resolution, and the Trustee, together, with the
written consent of the Holder or Holders of at least a majority in aggregate
principal amount of the outstanding Notes, may amend or supplement this
Indenture, the Notes or the Guarantees, without notice to any other Noteholders.
Subject to Section 6.07, the Holder or Holders of a majority in aggregate
principal amount of the outstanding Notes may waive compliance by the Company
with any provision of this Indenture or the Notes without notice to any other
Noteholder.  No amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, shall, without the consent of each Holder of each Note affected
thereby:

          (1) reduce the amount of Notes whose Holders must consent to an
     amendment;

          (2) reduce the rate of or change or have the effect of changing the
     time for payment of interest, including defaulted interest, on any Notes;

          (3) reduce the principal of or change or have the effect of changing
     the fixed maturity of any Notes, or change the date on which any Notes may
     be subject to redemption or repurchase, or reduce the redemption or
     repurchase price therefor;

          (4) make any Notes payable in money other than that stated in the
     Notes;

          (5) make any change in provisions of this Indenture protecting the
     right of each Holder to receive payment of principal of and interest on
     such Note on or after the due date thereof or to bring suit to enforce such
     payment, permitting holders of a majority in principal amount of Notes 


<PAGE>   94

                                      -86-


     to waive Defaults or Events of Default, other than ones with respect to the
     payment of principal of or interest on the Notes, or relating to certain
     amendments of this Indenture;

          (6) amend, modify or change in any material respect the obligation of
     the Company to make or consummate a Change of Control Offer in the event of
     a Change of Control or make and consummate a Net Proceeds Offer in respect
     of any Asset Sale that has been consummated or  modify any of the
     provisions or definitions with respect thereto;

          (7) modify Article Ten or Article Twelve or the definitions used in
     Article Ten or Article Twelve to adversely affect the Holders of the Notes
     in any material respect; or

          (8) release any Guarantor that is a Significant Subsidiary of the
     Company from any of its obligations under its Guarantee or this Indenture
     otherwise than in accordance with the terms of this Indenture.

     It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment, supplement or waiver,
but it shall be sufficient if such consent approves the substance thereof.

     After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver.  Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.

     Upon the request of the Company accompanied by a resolution of the Board of
Directors of the Company and each of the Guarantors, as the case may be,
authorizing the execution of any such amended or supplemental Indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of
the documents described in Section 7.02 hereof, the Trustee shall join with the
Company and the Guarantors in the execution of such amended or supplemental
Indenture unless such amended or supplemental Indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental Indenture.


<PAGE>   95

                                      -87-


     SECTION 9.03    Effect on Senior Indebtedness and
                     Guarantor Senior Indebtedness.

     No amendment of this Indenture shall adversely affect the rights of any
holder of Senior Indebtedness or Guarantor  Senior Indebtedness under Article
Ten or Article Twelve of this Indenture, without the consent of such holder.

     SECTION 9.04    Compliance with TIA.

     Every amendment, waiver or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.

     SECTION 9.05    Revocation and Effect of Consents.

     Until an amendment, waiver or supplement becomes effective, a consent to it
by a Holder is a continuing consent by the Holder and every subsequent Holder of
a Note or portion of a Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note.  Subject
to the following paragraph, any such Holder or subsequent Holder may revoke the
consent as to such Holder's Note or portion of such Note by notice to the
Trustee or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Notes have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.

     The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent.  If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date.  No such consent shall be valid or effective for more than 90 days after
such record date.

     After an amendment, supplement or waiver becomes effective, it shall bind
every Noteholder, unless it makes a change described in any of clauses (1)
through (7) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note; provided that any such waiver shall not impair or
affect the right of any Holder to receive


<PAGE>   96

                                      -88-


payment of principal of and  interest on a Note, on or after the respective due
dates expressed in such Note, or to bring suit for the enforcement of any such
payment on or after such respective dates without the consent of such Holder.

     SECTION 9.06   Notation on or Exchange of Notes.

     If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of the Note to deliver it to the Trustee.  The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder.  Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms.  Any such
notation or exchange shall be made at the sole cost and expense of the Company.
Failure to make the appropriate notation or issue a new Note shall not affect
the validity and effect of such amendment, supplement or waiver.

     SECTION 9.07   Trustee To Sign Amendments, Etc.

     The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects the
Trustee's own rights, duties or immunities under this Indenture.  The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel and an Officers' Certificate each stating that the execution
of any amendment, supplement or waiver authorized pursuant to this Article Nine
is authorized or permitted by this Indenture.  Such Opinion of Counsel shall not
be an expense of the Trustee.


                                  ARTICLE TEN

                                 SUBORDINATION


     SECTION 10.01   Notes Subordinated to
                     Senior Indebtedness.

     The Company covenants and agrees, and the Trustee and each Holder of the
Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes
shall be issued subject to the provisions of this Article Ten; and the Trustee
and each  Person holding any Note, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that the payment


<PAGE>   97

                                      -89-


of all Obligations on the Notes by the Company shall, to the extent and in the
manner herein set forth, be subordinated and junior in right of payment to the
prior payment in full in cash or Cash Equivalents of all Obligations on the
Senior Indebtedness, and that the subordination is for the benefit of, and shall
be enforceable directly by, the holders of Senior Indebtedness, and that each
holder of Senior Indebtedness whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Senior
Indebtedness in reliance upon the covenants and provisions contained in this
Indenture and the Notes.


     SECTION 10.02   No Payment on Notes in
                     Certain Circumstances.

     (a) No direct or indirect payment by or on behalf of the Company of
principal of, premium, if any, or interest on, the Notes whether pursuant to the
terms of the Notes or upon acceleration or otherwise shall be made if, at the
time of such payment, there exists a default in the payment of all or any
portion of principal of, premium, if any, or interest on, any Senior
Indebtedness with a principal amount in excess of $5.0 million (and the Trustee
has received written notice thereof), and such default shall not have been cured
or waived or the benefits of this sentence waived by or on behalf of the holders
of Senior Indebtedness.  In addition, during the continuance of any other event
of default with respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may be accelerated, upon the occurrence of (x) receipt by
the Trustee of written notice from the holders of a majority of the outstanding
principal amount of the Designated Senior Indebtedness or their Representatives,
or (y) if such event of default results from the acceleration of the Notes, no
such payment may be made by the Company upon or in respect of the Notes for a
period ("Payment Blockage Period") commencing on the earlier of the date of
receipt of such notice or the date of such acceleration and ending 179 days
thereafter (unless such Payment Blockage Period shall be terminated by written
notice to the Trustee from the holders of a majority of the outstanding
principal amount of such Designated Senior Indebtedness or their Representatives
who delivered such notice).  Notwithstanding anything herein to the contrary, in
no event will a Payment Blockage Period extend beyond 179 days from the date on
which such Payment Blockage Period was commenced.  Not more than one Payment
Blockage Period may be  commenced with respect to the Notes during any period of
360 consecutive days.  For all purposes of this paragraph, no event of default
which existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis for the


<PAGE>   98

                                      -90-


commencement of a second Payment Blockage Period by the holders of such
Designated Senior Indebtedness or their Representatives whether or not within a
period of 360 consecutive days unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such Payment
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed or
was continuing shall constitute a new event of default for this purpose).

     (b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or the
Holders or any Paying Agent (or, if the Company is acting as its own Paying
Agent, money for any such payment or distribution shall be segregated or held in
trust) on account of principal of, premium, if any, or interest on, the Notes
before all Senior Indebtedness is paid in full, such payment or distribution
shall be received and held in trust by the Trustee or such Holder or Paying
Agent for the benefit of the holders of the Senior Indebtedness, or their
respective Representatives, ratably according to the respective amounts of
Senior Indebtedness held or represented by each, and shall be paid over or
delivered to the holders of the Senior Indebtedness remaining unpaid to the
extent necessary to make payment in full of all Senior Indebtedness remaining
unpaid after giving effect to all concurrent payments and distributions to or
for the holders of such Senior Indebtedness.  The Trustee shall be entitled to
rely on information regarding amounts then due and owing on the Senior
Indebtedness, if any, received from the holders of Senior Indebtedness (or their
Representatives) or, if such information is not received from such holders or
their Representatives, from the Company and only amounts included in the
information provided to the Trustee shall be paid to the holders of Senior
Indebtedness.

     Nothing contained in this Article Ten shall limit the right of the Trustee
or the Holders of Notes to take any action to accelerate the maturity of the
Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder;
provided that all Senior Indebtedness thereafter due or declared to be due shall
first be paid in full in cash or Cash Equivalents before the Holders are
entitled to receive any payment of any kind or character with respect to
Obligations on the Notes.



<PAGE>   99

                                      -91-


     SECTION 10.03   Payment Over of Proceeds
                     upon Dissolution, Etc.

     (a) Upon any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, to creditors upon any
total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Indebtedness
shall first be paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Senior Indebtedness, before
any payment or distribution of any kind or character is made on account of any
Obligations on the Notes, or for the acquisition of any of the Notes for cash or
property or otherwise.  Upon any such dissolution, winding-up, liquidation,
reorganization, receivership or similar proceeding, any payment or distribution
of assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders of the Notes or the Trustee under this
Indenture would be entitled, except for the provisions hereof, shall be paid by
the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by the Holders or
by the Trustee under this Indenture if received by them, directly to the holders
of Senior Indebtedness (pro rata to such holders on the basis of the respective
amounts of Senior Indebtedness held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full in
cash or Cash Equivalents after giving effect to any  concurrent payment,
distribution or provision therefor to or for the holders of Senior Indebtedness.

     (b) To the extent any payment of Senior Indebtedness (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Indebtedness or part thereof originally
intended to be


<PAGE>   100

                                      -92-


satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.

     (c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by Section 10.03(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Indebtedness (pro rata to such holders on the basis of
the respective amount of Senior Indebtedness held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of Senior
Indebtedness remaining unpaid until all such Senior Indebtedness has been paid
in full in cash or Cash Equivalents, after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.

     (d) The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of all or substantially all of its
assets, to another corporation upon the terms and conditions provided in Article
Five hereof and as long as permitted under the terms of the Senior Indebtedness
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer,  assume the Company's obligations
hereunder in accordance with Article Five hereof.


     SECTION 10.04   Payments May Be Paid Prior
                     to Dissolution.

     Nothing contained in this Article Ten or elsewhere in this Indenture shall
prevent (i) the Company, except under the conditions described in Sections 10.02
and 10.03, from making payments at any time for the purpose of making payments
of principal of and interest on the Notes, or from depositing with the Trustee
any moneys for such payments, or (ii) in the absence of actual knowledge by the
Trustee that a given payment would be prohibited by Section 10.02 or 10.03, the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments of principal of, and interest on, the Notes to the Holders
entitled thereto unless at least two Business Days prior to the date upon which
such payment would otherwise become due and


<PAGE>   101

                                      -93-


payable a Trust Officer shall have actually received the written notice provided
for in the second sentence of Section 10.02(a) or in Section 10.07 (provided
that, notwithstanding the foregoing, such application shall otherwise be subject
to the provisions of the first sentence of Section 10.02(a) and Section 10.03).
The Company shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of the Company.

     SECTION 10.05   Subrogation.

     Subject to the payment in full in cash or Cash Equivalents of all Senior
Indebtedness, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Indebtedness
until the Notes shall be paid in full; and, for the purposes of such
subrogation, no such payments or distributions to the holders of the Senior
Indebtedness by or on behalf of the Company or by or on behalf of the Holders by
virtue of this Article Ten which otherwise would have been made to the Holders
shall, as between the Company and the Holders of the Notes, be deemed to be a
payment by the Company to or on account of the Senior Indebtedness, it being
understood that the provisions of this Article Ten are and are intended solely
for the purpose of defining the relative rights of the Holders of the Notes, on
the one hand, and the holders of the Senior Indebtedness, on the other hand.


     SECTION 10.06   Obligations of the Company
                     Unconditional.

     Nothing contained in this Article Ten or elsewhere in this Indenture or in
the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay to the Holders the
principal of and any interest on the Notes as and when the same shall become due
and payable in accordance with their terms, or is intended to or shall affect
the relative rights of the Holders and creditors of the Company other than the
holders of the Senior Indebtedness, nor shall anything herein or therein prevent
the Holder of any Note or the Trustee on its behalf from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, in respect of cash, property or securities of the Company
received upon the exercise of any such remedy.


<PAGE>   102

                                      -94-


     SECTION 10.07   Notice to Trustee.

     The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Notes pursuant to the provisions of this Article Ten.
Regardless of anything to the contrary contained in this Article Ten or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge of
the existence of any default or event of default with respect to any Senior
Indebtedness or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Indebtedness or a
Representative therefor, and, prior to the receipt of any such written notice,
the Trustee shall be entitled to assume (in the absence of actual knowledge to
the contrary) that no such facts exist.

     In the event that the Trustee determines in good faith that any evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Ten, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article Ten, and if such evidence is not  furnished the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such person to receive such payment.


     SECTION 10.08   Reliance on Judicial Order or
                     Certificate of Liquidating Agent.

     Upon any payment or distribution of assets of the Company referred to in
this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Notes shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, delivered to
the Trustee or the Holders of the Notes, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article Ten.


<PAGE>   103

                                      -95-


     SECTION 10.09   Trustee's Relation to
                     Senior Indebtedness.

     The Trustee and any agent of the Company or the Trustee shall be entitled
to all the rights set forth in this Article Ten with respect to any Senior
Indebtedness which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Indebtedness and
nothing in this Indenture shall deprive the Trustee or any such agent of any of
its rights as such holder.

     With respect to the holders of Senior Indebtedness, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee.  The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness.

     Whenever a distribution is to be made or a notice given to holders or
owners of Senior Indebtedness, the  distribution may be made and the notice may
be given to their Representative, if any.


     SECTION 10.10   Subordination Rights Not Impaired
                     by Acts or Omissions of the Company
                     or Holders of Senior Indebtedness.

     No right of any present or future holders of any Senior Indebtedness to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.

     Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee, without incurring responsibility to the
Trustee or the Holders of the Notes and without impairing or releasing the
subordination provided in this Article Ten or the obligations hereunder of the
Holders of the Notes to the holders of the Senior Indebtedness, do any one or
more of the following:  (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Senior Indebtedness, or
otherwise amend or supplement in any manner Senior Indebtedness, or any
instrument


<PAGE>   104

                                      -96-


evidencing the same or any agreement under which Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any
Person liable in any manner for the payment or collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Company and any other Person.


     SECTION 10.11   Noteholders Authorize Trustee To
                     Effectuate Subordination of Notes.

     Each Holder of Notes, by its acceptance of them, authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Senior Indebtedness and the
Holders of Notes, the subordination provided in this Article Ten, and appoints
the Trustee its attorney-in-fact for such purposes, including, in the event of
any dissolution, winding-up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency, receivership, reorganization or similar
proceedings or upon an assignment for the benefit of creditors or otherwise)
tending towards liquidation of the business and assets of the Company, the
filing of a claim for the unpaid balance of its Notes and accrued interest in
the form required in those proceedings.

     If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Senior Indebtedness or
their Representative are or is hereby authorized to have the right to file and
are or is hereby authorized to file an appropriate claim for and on behalf of
the Holders of said Notes.  Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Senior Indebtedness or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Senior Indebtedness or their Representative to vote in
respect of the claim of any Holder in any such proceeding.


     SECTION 10.12   This Article Ten Not To
                     Prevent Events of Default.

     The failure to make a payment on account of principal of or interest on the
Notes by reason of any provision of this Article Ten will not be construed as
preventing the occurrence of an Event of Default.


<PAGE>   105

                                      -97-

     SECTION 10.13   Trustee's Compensation
                     Not Prejudiced.

     Nothing in this Article Ten will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.


                                 ARTICLE ELEVEN

                                   GUARANTEE


     SECTION 11.01   Unconditional Guarantee.

     Each Guarantor hereby unconditionally, jointly and severally, guarantees,
subject to Article Twelve, to each  Holder of a Note authenticated and delivered
by the Trustee and to the Trustee and its successors and assigns, that:  (i) the
principal of and interest on the Notes will be promptly paid in full when due,
subject to any applicable grace period, whether at maturity, by acceleration or
otherwise and interest on the overdue principal, if any, and interest on any
interest, to the extent lawful, of the Notes and all other obligations of the
Company to the Holders or the Trustee hereunder or thereunder will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (ii) in case of any extension of time of payment or renewal of any Notes or
of any such other obligations, the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, subject
to any applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in Section 11.05. Each Guarantor hereby agrees that its
obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
Guarantor.  Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Guarantee
will not be discharged except by complete performance of the obligations
contained in the Notes, this Indenture and in this Guarantee.  If any Holder or
the Trustee is required by any court or otherwise to return to the Company, any
Guarantor, or any


<PAGE>   106

                                      -98-


custodian, trustee, liquidator or other similar official acting in
relation to the Company or any Guarantor, any amount paid by the Company or any
Guarantor to the Trustee or such Holder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect.  Each
Guarantor further agrees that, as between each Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for
the purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in  Article Six, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of
this Guarantee.

     SECTION 11.02   Subordination of Guarantee.

     The obligations of each Guarantor to the Holders of Notes and to the
Trustee pursuant to the Guarantee and this Indenture are expressly subordinate
and subject in right of payment to the prior payment in full of all Guarantor
Senior Indebtedness of such Guarantor, to the extent and in the manner provided
in Article Twelve.

     SECTION 11.03   Severability.

     In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

     SECTION 11.04   Release of a Guarantor.

     Upon (i) the release by the lenders under the Working Capital Facility,
related documents and future refinancings thereof of all guarantees of a
Guarantor and all Liens on the property or assets of said Guarantor relating to
such Indebtedness or (ii) the sale or disposition (whether by merger, stock
purchase, asset sale or otherwise) of a Guarantor (or all or substantially all
its assets) to an entity which is not a Subsidiary of the Company and which sale
or disposition is otherwise in compliance with the terms of this Indenture, such
Guarantor shall be deemed released from all obligations under this Article
Eleven without any further action required on the part of the Trustee or any
Holder; provided, however, that any such termination shall occur only to the
extent that all obligations of such Guarantor under the Working Capital Facility
and all of its guarantees of, and under all of its pledges


<PAGE>   107

                                      -99-


of assets or other security interests which secure, such Indebtedness of the
Company or the Guarantor shall also terminate upon such release, sale or
transfer.

     The Trustee shall execute an appropriate instrument delivered by the
Company evidencing such release upon receipt of a request by the Company
accompanied by an Officers' Certificate and Opinion of Counsel certifying as to
the compliance with this Section 11.04.  Any Guarantor not so  released remains
liable for the full amount of principal of and interest on the Notes as provided
in this Article Eleven.


     SECTION 11.05   Limitation of Subsidiary
                     Guarantor's Liability.

     Each Guarantor and, by its acceptance hereof, each Holder hereby confirms
that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law.
To effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor (including, but not limited
to, the Guarantor Senior Indebtedness of such Guarantor) and after giving effect
to any collections from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.07, result in the obligations of such Guarantor under the
Guarantee not constituting such fraudulent transfer or conveyance.


     SECTION 11.06   Guarantors May Consolidate,
                     Etc., on Certain Terms.

     (a) Nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor that is a Wholly Owned Restricted Subsidiary of the Company or
shall prevent any sale of assets or conveyance of the property of a Guarantor as
an entirety or substantially as an entirety, to the Company or another Guarantor
that is a Wholly Owned Restricted Subsidiary of the Company.  Upon any such
consolidation, merger, sale or conveyance, the Guarantee given by such Guarantor
shall no longer have any force or effect.



<PAGE>   108

                                     -100-


     (b) Except as set forth in Article Four and Article Five hereof, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into a corporation or
corporations other than the Company or another Guarantor (whether or not
affiliated with the Guarantor) or shall prevent any sale of assets or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety,
to a corporation or corporations  other than the Company or another Guarantor
(whether or not affiliated with the Guarantor); provided, however, that, subject
to Sections 11.04 and 11.06(a), (i) immediately after such transaction and
giving effect thereto, such transaction does not (a) violate any covenants set
forth herein or (b) result in a Default or Event of Default under this Indenture
that is continuing, (ii) upon any such consolidation, merger, sale or
conveyance, the Guarantee of such Guarantor set forth in this Article Eleven,
and the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by such Guarantor, shall be
expressly assumed (in the event that the Guarantor is not the surviving
corporation in the merger), by supplemental indenture satisfactory in form to
the Trustee and in compliance with Section 9.07, executed and delivered to the
Trustee, by the corporation formed by such consolidation, or into which the
Guarantor shall have merged, or by the corporation that shall have acquired such
property, and (iii) in the event that such Guarantor is not the surviving
corporation in the merger, such surviving corporation shall be a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia.  In the case of any such consolidation, merger,
sale or conveyance and upon the assumption by the successor corporation, by
supplemental indenture executed and delivered to the Trustee and satisfactory in
form to the Trustee of the due and punctual performance of all of the covenants
and conditions of this Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor.

     SECTION 11.07   Contribution.

     In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Notes or any other


<PAGE>   109

                                     -101-


Guarantor's obligations with respect to the Guarantee.  "Adjusted Net Assets" of
such Guarantor at any date shall mean the lesser of the amount by which (x) the
fair value of the property of such Guarantor exceeds the total  amount of
liabilities, including, without limitation, contingent liabilities (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date), but excluding liabilities under the Guarantee, of such Guarantor at such
date and (y) the present fair saleable value of the assets of such Guarantor at
such date exceeds the amount that will be required to pay the probable liability
of such Guarantor on its debts including, without limitation, Guarantor Senior
Indebtedness (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date and after giving effect to any collection from
any Subsidiary of such Guarantor in respect of the obligations of such
Subsidiary under the Guarantee), excluding debt in respect of the Guarantee of
such Guarantor, as they become absolute and matured.

     SECTION 11.08   Waiver of Subrogation.

     Until all Obligations are paid in full each Guarantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
the Company that arise from the existence, payment, performance or enforcement
of such Guarantor's obligations under the Guarantees and this Indenture,
including, without limitation, any right of subrogation, reimbursement,
exoneration, indemnification, and any right to participate in any claim or
remedy of any Holder of Notes against the Company, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from the Company,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other rights.  If any
amount shall be paid to any Guarantor in violation of the preceding sentence and
the Notes shall not have been paid in full, such amount shall have been deemed
to have been paid to such Guarantor for the benefit of, and held in trust for
the benefit of, the Holders of the Notes, and shall, subject to the provisions
of Section 11.02, Article Ten and Article Twelve, forthwith be paid to the
Trustee for the benefit of such Holders to be credited and applied upon the
Notes, whether matured or unmatured, in accordance with the terms of this
Indenture.  Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and that
the waiver set forth in this Section 11.08 is knowingly made in contemplation of
such benefits.


<PAGE>   110

                                     -102-


     SECTION 11.09   Execution of Guarantee.

     To evidence their guarantee to the Holders set forth in this Article
Eleven, the Guarantors hereby agree to execute the Guarantees in substantially
the form included in Exhibit A and Exhibit B, which shall be endorsed on each
Note ordered to be authenticated and delivered by the Trustee.  Each Guarantor
hereby agrees that its Guarantee set forth in this Article Eleven shall remain
in full force and effect notwithstanding any failure to endorse on each Note a
notation of such Guarantee.  Each such Guarantee shall be signed on behalf of
each Guarantor by two Officers, or an Officer and an Assistant Secretary or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to such Guarantee prior to the authentication of the Note
on which it is endorsed, and the delivery of such Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of such
Guarantee on behalf of such Guarantor.  Such signatures upon the Guarantees may
be by manual or facsimile signature of such officers and may be imprinted or
otherwise reproduced on the Guarantees, and in case any such officer who shall
have signed the Guarantees shall cease to be such officer before the Note on
which such Guarantee is endorsed shall have been authenticated and delivered by
the Trustee or disposed of by the Company, such Note nevertheless may be
authenticated and delivered or disposed of as though the person who signed the
Guarantees had not ceased to be such officer of the Guarantor.


     SECTION 11.10   Waiver of Stay, Extension
                     or Usury Laws.

     Each Guarantor covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive each such Guarantor from performing its
Guarantee as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) each such Guarantor
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.



<PAGE>   111

                                     -103-



                                 ARTICLE TWELVE

                     SUBORDINATION OF GUARANTEE OBLIGATIONS



     SECTION 12.01   Guarantee Obligations Subordinated
                     to Guarantor Senior Indebtedness.

     Each Guarantor covenants and agrees, and the Trustee and each Holder of the
Notes, by its acceptance thereof, likewise covenants and agrees, that all
Guarantees shall be issued subject to the provisions of this Article Twelve; and
the Trustee and each Person holding any Note, whether upon original issue or
upon transfer, assignment or exchange thereof, accepts and agrees that the
payment of all Obligations on the Notes pursuant to the Guarantees by any
Guarantor shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in cash
or Cash Equivalents of all Obligations on the Guarantor Senior Indebtedness of
such Guarantor; that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Guarantor Senior Indebtedness, and that
each holder of Guarantor Senior Indebtedness whether now outstanding or
hereafter created, incurred, assumed or guaranteed shall be deemed to have
acquired Guarantor Senior Indebtedness in reliance upon the covenants and
provisions contained in this Indenture, the Notes and the Guarantees.


     SECTION 12.02   No Payment on Notes in
                     Certain Circumstances.

     (a) No direct or indirect payment by or on behalf of any Guarantor with
respect to any obligations on the Guarantee whether pursuant to the terms of the
Guarantee or upon acceleration or otherwise shall be made if, at the time of
such payment, there exists a default in the payment of all or any portion of
principal of, premium, if any, or interest on, any Guarantor Senior Indebtedness
with a principal amount in excess of $5.0 million (and the Trustee has received
written notice thereof), and such default shall not have been cured or waived or
the benefits of this sentence waived by or on behalf of the holders of such
Guarantor Senior Indebtedness.  In addition, during the continuance of any other
event of default with respect to any Designated Senior Indebtedness (which
Designated Senior Indebtedness is also Guarantor Senior Indebtedness of such
Guarantor) pursuant to which the maturity thereof may be accelerated, upon the
occurrence of (x) receipt by the Trustee of written notice from the holders of a
majority of the outstanding principal amount of the Designated Senior
Indebtedness or their Representatives, or (y) if such event 


<PAGE>   112

                                     -104-


of default results from the acceleration of the Notes, no such payment may be
made by the Guarantor upon or in respect of the Guarantee of such Guarantor for
a period ("Payment Blockage Period") commencing on the earlier of the date of
receipt of such notice or the date of such acceleration and ending 179 days
thereafter (unless such Payment Blockage Period shall be terminated by written
notice to the Trustee from the holders of a majority of the outstanding
principal amount of such Designated Senior Indebtedness or their Representatives
who delivered such notice).  Notwithstanding anything herein to the contrary, in
no event will a Payment Blockage Period extend beyond 179 days from the date on
which such Payment Blockage Period was commenced.  Not more than one Payment
Blockage Period may be commenced with respect to the Notes during any period of
360 consecutive days.  For all purposes of this paragraph, no event of default
which existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis for the
commencement of a second Payment Blockage Period by the holders of such
Designated Senior Indebtedness or their Representatives whether or not within a
period of 360 consecutive days unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such Payment
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed or
was continuing shall constitute a new event of default for this purpose).

     (b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets or securities of the Guarantor of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or the
Holders or any Paying Agent (or, if the Company is acting as its own Paying
Agent, money for any such payment or distribution shall be segregated or held in
trust) on account of principal of, premium, if any, or interest on, the
Guarantee of such Guarantor before all Guarantor Senior Indebtedness is paid in
full, such payment or distribution shall be received and held in trust by the
Trustee or such Holder or Paying Agent for the benefit of the holders of the
Senior Indebtedness, or their respective  Representatives, ratably according to
the respective amounts of Guarantor Senior Indebtedness held or represented by
each, and shall be paid over or delivered to the holders of the Guarantor Senior
Indebtedness remaining unpaid to the extent necessary to make payment in full of
all Guarantor Senior Indebtedness remaining unpaid after giving 

<PAGE>   113

                                     -105-


effect to all concurrent payments and distributions to or for the holders of
such Guarantor Senior Indebtedness.  The Trustee shall be entitled to rely on
information regarding amounts then due and owing on the Guarantor Senior
Indebtedness, if any, received from the holders of Guarantor Senior Indebtedness
(or their Representatives) or, if such information is not received from such
holders or their Representatives, from the Guarantors and only amounts included
in the information provided to the Trustee shall be paid to the holders of
Guarantor Senior Indebtedness.

     Nothing contained in this Article Twelve shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Guarantor Senior Indebtedness thereafter due or
declared to be due shall first be paid in full in cash or Cash Equivalents
before the Holders are entitled to receive any payment of any kind or character
with respect to Obligations on the Guarantees.


     SECTION 12.03   Payment Over of Proceeds
                     upon Dissolution, Etc.

     (a) Upon any payment or distribution of assets of any Guarantor of any kind
or character, whether in cash, property or securities, to creditors upon any
total or partial liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of such
Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other
similar proceeding relating to such Guarantor or its property, whether voluntary
or involuntary, all Obligations due or to become due upon all Guarantor Senior
Indebtedness of such Guarantor shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of such Guarantor Senior Indebtedness, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Guarantee of such Guarantor.  Upon any such dissolution, winding-up,
liquidation, reorganization, receivership or similar proceeding, any payment or
distribution of assets of any Guarantor of any kind or character, whether in
cash, property or securities, to  which the Holders of the Notes or the Trustee
under this Indenture would be entitled, except for the provisions hereof, shall
be paid by such Guarantor or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other Person making such payment or distribution, or by the
Holders or by the Trustee under this Indenture if received by them, directly to
the holders of Guarantor Senior Indebtedness of such Guarantor (pro rata to such
holders on the basis of the respective amounts of such Guarantor Senior
Indebtedness held by such holders) or their respective 


<PAGE>   114

                                     -106-


Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Guarantor Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of such
Guarantor Senior Indebtedness remaining unpaid until all such Guarantor Senior
Indebtedness has been paid in full in cash or Cash Equivalents after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Guarantor Senior Indebtedness.

     (b) To the extent any payment of such Guarantor Senior Indebtedness
(whether by or on behalf of such Guarantor, as proceeds of security or
enforcement of any right of setoff or otherwise) is declared to be fraudulent or
preferential, set aside or required to be paid to any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar Person, such
Guarantor Senior Indebtedness or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.

     (c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of such Guarantor of any kind or character, whether in
cash, property or securities, shall be received by any Holder when such payment
or distribution is prohibited by Section 12.03(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of such Guarantor Senior Indebtedness (pro rata to such holders
on the basis of the respective amount of such Guarantor Senior Indebtedness held
by such holders) or their respective Representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Guarantor Senior
Indebtedness may have been issued, as their respective interests may appear, for
application to the payment of such Guarantor Senior Indebtedness remaining
unpaid until all  such Guarantor Senior Indebtedness has been paid in full in
cash or Cash Equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Guarantor
Senior Indebtedness.

     (d) The consolidation of any Guarantor with, or the merger of any Guarantor
with or into, another corporation or the liquidation or dissolution of any
Guarantor following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Section 11.06 hereof and as long as permitted under the terms of 

<PAGE>   115

                                     -107-


the Guarantor Senior Indebtedness of such Guarantor shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, assume such Guarantor's obligations hereunder in
accordance with Section 11.06 hereof.


     SECTION 12.04   Payments May Be Paid Prior
                     to Dissolution.

     Nothing contained in this Article Twelve or elsewhere in this Indenture
shall prevent (i) a Guarantor, except under the conditions described in Sections
12.02 and 12.03, from making payments at any time for the purpose of making
payments in respect of its Guarantee, or from depositing with the Trustee any
moneys for such payments, or (ii) in the absence of actual knowledge by the
Trustee that a given payment would be prohibited by Section 12.02 or 12.03, the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments in respect of the Notes to the Holders entitled thereto
unless at least two Business Days prior to the date upon which such payment
would otherwise become due and payable a Trust Officer shall have actually
received the written notice provided for in the second sentence of Section
12.02(a) or in Section 12.07 (provided that, notwithstanding the foregoing, such
application shall otherwise be subject to the provisions of the first sentence
of Section 12.02(a) and Section 12.03).  A Guarantor shall give prompt written
notice to the Trustee of any dissolution, winding-up, liquidation or
reorganization of such Guarantor.

     SECTION 12.05   Subrogation.

     Subject to the payment in full in cash or Cash Equivalents of all Guarantor
Senior Indebtedness of a Guarantor, the Holders of the Guarantee of such
Guarantor shall be subrogated to the rights of the holders of Guarantor Senior
Indebtedness of such Guarantor to receive payments or distributions of cash,
property or securities of such Guarantor applicable to such Guarantor Senior
Indebtedness until the Notes shall be paid in full; and, for the purposes of
such subrogation, no such payments or distributions to the holders of such
Guarantor Senior Indebtedness by or on behalf of such Guarantor or by or on
behalf of the Holders by virtue of this Article Twelve which otherwise would
have been made to the Holders shall, as between such Guarantor and the Holders
of the Notes, be deemed to be a payment by such Guarantor to or on account of
such Guarantor Senior Indebtedness, it being understood that the provisions of
this Article Twelve are and are intended solely for the purpose of 


<PAGE>   116

                                     -108-


defining the relative rights of the Holders of the Notes, on the one hand, and
the holders of the Guarantor Senior Indebtedness, on the other hand.


     SECTION 12.06   Obligations of the Subsidiary
                     Guarantors Unconditional.

     Nothing contained in this Article Twelve or elsewhere in this Indenture or
in the Notes or the Guarantees is intended to or shall impair, as among the
Guarantors, its creditors other than the holders of Guarantor Senior
Indebtedness, and the Holders, the obligation of the Guarantors, which is
absolute and unconditional, to pay to the Holders all amounts due and payable
under the Guarantees as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Guarantors other than the holders of
the Guarantor Senior Indebtedness, nor shall anything herein or therein prevent
the Holder of any Note or the Trustee on its behalf from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, in respect of cash, property or securities of the
Guarantors received upon the exercise of any such remedy.


     SECTION 12.07   Notice to Trustee.

     The Guarantors shall give prompt written notice to the Trustee of any fact
known to the Guarantors which would prohibit the making of any payment to or by
the Trustee in respect of the Notes and the Guarantees pursuant to the
provisions of this Article Twelve.  Regardless of anything to the contrary
contained in this Article Twelve or elsewhere in this Indenture, the Trustee
shall not be charged with knowledge of the existence of any default or event of
default with respect to any Guarantor Senior Indebtedness or of any other facts
which would prohibit  the making of any payment to or by the Trustee unless and
until the Trustee shall have received notice in writing from the Guarantors, or
from a holder of Guarantor Senior Indebtedness or a Representative therefor,
and, prior to the receipt of any such written notice, the Trustee shall be
entitled to assume (in the absence of actual knowledge to the contrary) that no
such facts exist.

     In the event that the Trustee determines in good faith that any evidence is
required with respect to the right of any Person as a holder of Guarantor Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article Twelve, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of 

<PAGE>   117

                                     -109-


Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Twelve, and if
such evidence is not furnished the Trustee may defer any payment to such Person
pending judicial determination as to the right of such person to receive such
payment.


     SECTION 12.08   Reliance on Judicial Order or
                     Certificate of Liquidating Agent.

     Upon any payment or distribution of assets of the Guarantors referred to in
this Article Twelve, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Notes shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, delivered to
the Trustee or the Holders of the Notes, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the
Guarantor Senior Indebtedness and other Indebtedness of the Guarantors, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Twelve.


     SECTION 12.09   Trustee's Relation to Guarantor
                     Senior Indebtedness.

     The Trustee and any agent of the Guarantors or the Trustee shall be
entitled to all the rights set forth in this  Article Twelve with respect to any
Guarantor Senior Indebtedness which may at any time be held by it in its
individual or any other capacity to the same extent as any other holder of
Guarantor Senior Indebtedness and nothing in this Indenture shall deprive the
Trustee or any such agent of any of its rights as such holder.

     With respect to the holders of Guarantor Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Twelve, and no implied covenants
or obligations with respect to the holders of Guarantor Senior Indebtedness
shall be read into this Indenture against the Trustee.  The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Guarantor Senior
Indebtedness.


<PAGE>   118

                                     -110-


     Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Indebtedness, the distribution may be made and the
notice may be given to their Representative, if any.


     SECTION 12.10   Subordination Rights Not Impaired by
                     Acts or Omissions of the Subsidiary
                     Guarantors or Holders of Guarantor
                     Senior Indebtedness.

     No right of any present or future holders of any Guarantor Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Guarantors or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Guarantors with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with.

     Without in any way limiting the generality of the foregoing paragraph, the
holders of Guarantor Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Twelve or the
obligations hereunder of the Holders of the Notes to the holders of the
Guarantor Senior Indebtedness, do any one or more of the following:  (i) change
the manner, place or terms of payment or extend the time of payment of, or renew
or alter, Guarantor Senior Indebtedness, or otherwise amend or supplement in any
manner Guarantor Senior Indebtedness, or any instrument  evidencing the same or
any agreement under which Guarantor Senior Indebtedness is outstanding; (ii)
sell, exchange, release or otherwise deal with any property pledged, mortgaged
or otherwise securing Guarantor Senior Indebtedness; (iii) release any Person
liable in any manner for the payment or collection of Guarantor Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Guarantors and any other Person.


     SECTION 12.11   Noteholders Authorize Trustee To
                     Effectuate Subordination of Guarantee
                     Obligations.

     Each Holder of the Notes and the Guarantees by its acceptance of them
authorizes and expressly directs the Trustee on its behalf to take such action
as may be necessary or appropriate to effectuate, as between the holders of
Guarantor Senior Indebtedness and the Holders, the subordination provided in
this


<PAGE>   119

                                     -111-


Article Twelve, and appoints the Trustee its attorney-in-fact for such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of any Guarantor (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of any Guarantor, the filing of a claim for the unpaid
balance of its Notes and accrued interest in the form required in those
proceedings.

     If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Guarantor Senior
Indebtedness or their Representative are or is hereby authorized to have the
right to file and are or is hereby authorized to file an appropriate claim for
and on behalf of the Holders of said Notes.  Nothing herein contained shall be
deemed to authorize the Trustee or the holders of Guarantor Senior Indebtedness
or their Representative to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Guarantor Senior Indebtedness or their Representative
to vote in respect of the claim of any Holder in any such proceeding.


     SECTION 12.12   This Article Twelve Not To
                     Prevent Events of Default.

     The failure to make a payment in respect of the Guarantees by reason of any
provision of this Article Twelve will not be construed as preventing the
occurrence of an Event of Default.


     SECTION 12.13   Trustee's Compensation
                     Not Prejudiced.

     Nothing in this Article Twelve will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.


<PAGE>   120

                                     -112-



                                ARTICLE THIRTEEN

                                 MISCELLANEOUS


     SECTION 13.01   TIA Controls.

     If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision  shall control.

     SECTION 13.02   Notices.

     Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:

     IF TO THE COMPANY OR THE GUARANTORS:

     Royal Oak Mines Inc.
     5501 Lakeview Drive
     Kirkland, WA  98033
     Attn:  Chief Financial Officer

     WITH COPIES TO:

     Lang Michener
     B.C.E. Place, P.O. Box 747,
     Suite 2500
     181 Bay Street
     Toronto, Ontario, Canada  M5J 2T7
     Attn:  David A. Knight, Esq.

     IF TO THE TRUSTEE:

     Mellon Bank, F.S.B.
     1111 Third Avenue, Suite 2230
     Seattle, WA  98101
     Attention:  Corporate Trust Department

     IF TO THE PAYING AGENT (WITH A COPY TO THE TRUSTEE)

     Mellon Securities Trust Company
     120 Broadway, 13th Floor
     New York, NY  10271



<PAGE>   121

                                     -113-


     Each of the Company, the Guarantors and the Trustee by written notice to
each other such Person may designate additional or different addresses for
notices to such Person.  Any notice or communication to the Company, the
Guarantors or the Trustee shall be deemed to have been given or made as of the
date so delivered if personally delivered; when answered back, if telexed; when
receipt is acknowledged, if faxed; and five (5) calendar days after mailing if
sent by registered or certified mail, postage prepaid (except that a notice of
change of address shall not be deemed to have been given until actually received
by the addressee).  Failure to deliver "copies" as noted above shall not affect
the sufficiency of a notice to the Company, Trustee or Paying Agent.

     Any notice or communication mailed to a Noteholder shall be mailed to him
by first class mail or other equivalent means at his address as it appears on
the registration books of the Registrar and shall be sufficiently given to him
if so mailed within the time prescribed.

     Failure to mail a notice or communication to a Noteholder or any defect in
it shall not affect its sufficiency with respect to other Noteholders.  If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.


     SECTION 13.03   Communications by Holders
                     with Other Holders.

     Noteholders may communicate pursuant to TIA Section  312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, the Trustee, the Registrar and any other Person shall
have the protection of TIA Section  312(c).


     SECTION 13.04   Certificate and Opinion as
                     to Conditions Precedent.

     Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:

          (1) an Officers' Certificate, in form and substance satisfactory to
     the Trustee, stating that, in the opinion of the signers, all conditions
     precedent to be performed by the Company, if any, provided for in this
     Indenture relating to the proposed action have been complied with; and


<PAGE>   122

                                     -114-


          (2) an Opinion of Counsel stating that, in the opinion of such
     counsel, all such conditions precedent to be performed by the Company, if
     any, provided for in this Indenture relating to the proposed action have
     been complied with.


     SECTION 13.05   Statements Required in
                     Certificate or Opinion.

     Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture, other than the Officers' Certificate
required by Section 4.06, shall include:

          (1) a statement that the Person making such certificate or opinion has
     read such covenant or condition;

          (2) a brief statement as to the nature and scope of the examination or
     investigation upon which the statements or opinions contained in such
     certificate or opinion are based;

          (3) a statement that, in the opinion of such Person, he has made such
     examination or investigation as is reasonably necessary to enable him to
     express an informed opinion as to whether or not such covenant or condition
     has been complied with; and

          (4) a statement as to whether or not, in the opinion of each such
     Person, such condition or covenant has been complied with.


     SECTION 13.06   Rules by Trustee, Paying
                     Agent, Registrar.

     The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Noteholders.  The Paying
Agent or Registrar may make reasonable rules for its functions.

     SECTION 13.07   Legal Holidays.

     A "Legal Holiday" used with respect to a particular place of payment is a
Saturday, a Sunday or a day on which banking institutions in New York, New York
or at such place of payment are not required to be open.  If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
<PAGE>   123

                                     -115-

     SECTION 13.08   GOVERNING LAW.

     THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.  EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE.


     SECTION 13.09   No Adverse Interpretation
                     of Other Agreements.

     This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any of its Subsidiaries.  Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.

     SECTION 13.10   No Recourse Against Others.

     A director, officer, employee, stockholder or incorporator, as such, of the
Company, the Guarantors or of the Trustee shall not have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creations.
Each Noteholder by accepting a Note waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Notes.

     SECTION 13.11   Successors.

     All agreements of the Company and the Guarantors in this Indenture, the
Notes and the Guarantees shall bind its successors.  All agreements of the
Trustee in this Indenture shall bind its successors.

     SECTION 13.12   Duplicate Originals.

     All parties may sign any number of copies of this Indenture.  Each signed
copy shall be an original, but all of them together shall represent the same
agreement.

     SECTION 13.13   Severability.

     In case any one or more of the provisions in this Indenture or in the Notes
shall be held invalid, illegal or unenforceable, in any respect for any reason,
the validity, legality and enforceability of any such provision in every other


<PAGE>   124

                                     -116-

respect and of the remaining provisions shall not in any way be affected or
impaired thereby, it being intended that all of the provisions hereof shall be
enforceable to the full extent permitted by law.


<PAGE>   125

                                     -117-



                                   SIGNATURES

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.

                                       Issuer:

                                       ROYAL OAK MINES INC.


                                       By: /s/ M. K. Witte
                                          ------------------------------
                                          Name:  M. K. Witte
                                          Title: Chairman and CEO

                                       Guarantor:

                                       KEMESS MINES INC.


                                       By: /s/ M. K. Witte
                                          ------------------------------
                                          Name:  M. K. Witte
                                          Title: Chairman and CEO


                                       Trustee:

                                       MELLON BANK, F.S.B.,
                                         as Trustee


                                       By: /s/ Robert R. Meyers
                                          ------------------------------
                                          Name:  
                                          Title: 



<PAGE>   126


                                                                       EXHIBIT A

                                                          CUSIP No.:  [        ]


                              ROYAL OAK MINES INC.

                     11% SENIOR SUBORDINATED NOTE DUE 2006

No.                                                                     $

     ROYAL OAK MINES INC., an ontario, Canada corporation (the "Company," which
term includes any successor entity), for value received promises to pay to   
             or registered assigns, the principal sum of         Dollars, 
on August 15, 2006.

     Interest Payment Dates:  February 15 and August 15.

     Record Dates:  February 1 and August 1.

     Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.

     IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers and a facsimile of its corporate
seal to be affixed hereto or imprinted hereon.

                                       ROYAL OAK MINES INC.

                                       By:
                                          ------------------------------
                                          Name:
                                          Title:


Dated:

Certificate of Authentication

     This is one of the 11% Senior Subordinated Notes due 2006 referred to in
the within-mentioned Indenture.

                                       MELLON BANK, F.S.B.,
                                         as Trustee


Dated:                                 By:
                                          ------------------------------
                                               Authorized Signatory





                                      A-1

<PAGE>   127


                             (REVERSE OF SECURITY)


                     11% SENIOR SUBORDINATED NOTE DUE 2006

     1. Interest.  ROYAL OAK MINES INC., an Ontario, Canada corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above.  Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from August 12, 1996.  The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing February 15, 1997.  Interest will be
computed on the basis of a 360-day year of twelve 30-day months.

     The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.

     2. Method of Payment.  The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Notes are cancelled on registration of transfer or registration of
exchange after such Record Date.  Holders must surrender Notes to a Paying Agent
to collect principal payments.  The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender").  However, the Company
may pay principal and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.

     3. Paying Agent and Registrar.  Initially, Mellon Bank, F.S.B. (the
"Trustee") will act as Registrar and Mellon Securities Trust Co., a New York
chartered trust company, will act as Paying Agent.  The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders.

     4. Indenture and Guarantees.  The Company issued the Notes under an
Indenture, dated as of August 12, 1996 (the "Indenture"), among the Company, the
Guarantor (as defined in the Indenture) and the Trustee.  This Note is one of a
duly authorized issue of Initial Notes of the Company designated as its 11%
Senior Subordinated Notes due 2006 (the "Initial Notes").  The Notes are limited
in aggregate principal amount to $175,000,000.  Payment on each Note is
guaranteed on a  senior subordinated basis by the Guarantors pursuant to Article
Eleven of the Indenture.  The Notes include the Initial Notes and the Exchange
Notes, as defined below, issued in exchange for the Initial Notes pursuant to
the Indenture.


                                      A-2

<PAGE>   128


The Initial Notes and the Exchange Notes are treated as a single class of
securities under the Indenture.  Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein.  The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code Section Section 77aaa-77bbbb)
(the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything
to the contrary herein, the Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and said Act for a statement of them.  The
Notes are general unsecured obligations of the Company.

     5. Subordination.  The Notes are subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter incurred.  The
Guarantee in respect of the Notes is subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Guarantor Senior Indebtedness of the
Guarantor, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed.  Each Holder by his acceptance hereof
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee his attorney-in-fact for such purposes.

     6. Redemption.

     (a) Optional Redemption.  The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after August
15, 2001, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on August 15 of the year set
forth below, plus, in each case, accrued and unpaid interest thereon, if any, to
the date of redemption:


                                      A-3

<PAGE>   129


<TABLE>
<CAPTION>
Year                                    Percentage
- ----                                    ----------
<S>                                     <C>
2001 ................................   105.500%
2002 ................................   103.667
2003 ................................   101.833
2004 and thereafter .................   100.000%
</TABLE>


     (b) Optional Redemption upon Public Equity Offerings.  At any time, or from
time to time, prior to August 15, 1999, the Company may, at its option, use the
net proceeds of one or more Public Equity Offerings of the Company to redeem up
to 35% of the aggregate principal amount of Notes at the following redemption
prices (expressed as percentages of the principal amount) if redeemed during the
twelve-month period commencing on August 15 of the year set forth below, plus,
in each case, accrued interest thereon to the date of redemption:


<TABLE>
<CAPTION>
Year                                    Percentage
- ----                                    ----------
<S>                                     <C>
1996 ................................   111.000%
1997 ................................   109.778%
1998 ................................   108.556%
</TABLE>


     In order to effect the foregoing redemption with the net proceeds of any
Public Equity Offering, the Company shall make such redemption on or prior to
120 days after the receipt of such net proceeds.

     (c) Optional Redemption upon Changes to Certain Canadian Laws.  The Notes
are redeemable, as a whole but not in part, at the option of the Company at any
time upon not less than 30 nor more than 60 days notice at a redemption price
equal to 100% of the aggregate principal amount so redeemed, plus accrued and
unpaid interest thereon to the date of redemption, if the Company has become or
would become obligated to pay, on the next date on which any amount would be
payable under or with respect to the Notes, any additional amounts ("Additional
Amounts") as a result of any change in, or amendment to, the laws (or any
regulations promulgated thereunder including changes to withholding tax laws) of
Canada (or any political subdivision or taxing authority thereof or therein), or
any change in, or amendment to, any official position regarding the application
or interpretation of such laws or regulations, which change or amendment is
announced or becomes effective on or after August 5, 1996.

     7. Notice of Redemption.  Notice of redemption will be mailed at least 30
days but not more than 60 days before the  Redemption Date to each Holder of
Notes to be redeemed at such Holder's registered address.  Notes in
denominations larger than $1,000 may be redeemed in part.



                                      A-4
<PAGE>   130


     Except as set forth in the Indenture, if monies for the redemption of the
Notes called for redemption shall have been deposited with the Paying Agent for
redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.

     8. Offers to Purchase.  Sections 4.15 and 4.16 of the Indenture provide
that, after certain Asset Sales (as defined in the Indenture) and upon the
occurrence of a Change of Control (as defined in the Indenture), and subject to
further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.

     9. Registration Rights.  Pursuant to the Registration Rights Agreement
among the Company, the Guarantor and the Holders of the Initial Notes, the
Company will be obligated to consummate an exchange offer pursuant to which the
Holder of this Note shall have the right to exchange this Note for the Company's
Series B 11% Senior Subordinated Notes due 2006 (the "Exchange Notes"), which
have been registered under the Securities Act, in like principal amount and
having terms identical in all material respects to the Initial Notes.  The
Holders of the Initial Notes shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.

     10. Denominations; Transfer; Exchange.  The Notes are in registered form,
without coupons, in denominations of $1,000 and integral multiples of $1,000. A
Holder shall register the transfer of or exchange of Notes in accordance with
the Indenture.  The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture.  The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.

     11. Persons Deemed Owners.  The registered Holder of a Note shall be
treated as the owner of it for all purposes.

     12. Unclaimed Money.  If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company.  After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.



                                      A-5

<PAGE>   131

     13. Discharge Prior to Redemption or Maturity.  If the Company at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).

     14. Amendment; Supplement; Waiver.  Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the written consent
of the Holders of at least a majority in aggregate principal amount of the Notes
then outstanding, and any existing Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding.  Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect in any material respect the rights
of any Holder of a Note.

     15. Restrictive Covenants.  The Indenture imposes certain covenants that
limit the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, pay dividends or make certain other
restricted payments, consummate certain asset sales, enter into certain
transactions with Affiliates, incur Indebtedness that is subordinated in right
of payment to any Senior Indebtedness and senior in right of payment to the
Notes, incur liens, impose restrictions on the ability of a subsidiary to pay
dividends or make certain payments to the Company and its Restricted
Subsidiaries, merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
assets of the Company or its Restricted Subsidiaries.  Such limitations are
subject to a number of important qualifications and exceptions.   The Company
must annually report to the Trustee on compliance with such limitations.

     16. Successors.  When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.

     17. Defaults and Remedies.  If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided



                                      A-6
<PAGE>   132

in the Indenture.  The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it.  The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power.  The Trustee may withhold
from Holders of Notes notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of such Holders.

     18. Trustee Dealings with Company.  The Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.

     19. No Recourse Against Others.  No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability.  The waiver and release are part of the consideration for the
issuance of the Notes.

     20. Authentication.  This Note shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on this
Note.

     21. Governing Law.  The Laws of the State of New York shall govern this
Note and the Indenture, without regard to principles of conflict of laws.

     22. Abbreviations and Defined Terms.  Customary abbreviations may be used
in the name of a Holder of a Note or an assignee, such as:  TEN COM (= tenants
in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).

     23. CUSIP Numbers.  Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes.  No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.

     24. Indenture.  Each Holder, by accepting a Note, agrees to be bound by all
of the terms and provisions of the Indenture, as the same may be amended from
time to time.


                                      A-7

<PAGE>   133


     The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture, which has the text of this Note in
larger type.  Requests may be made to:  Royal Oak Mines Inc., 5501 Lakeview
Drive, Kirkland, WA 98033, Attn:  Chief Financial Officer.




                                      A-8

<PAGE>   134


                [FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]

                                SENIOR GUARANTEE


     KEMESS MINES INC. (the "Guarantor"), has unconditionally guaranteed on a
senior subordinated basis (such guarantee by the Guarantor being referred to
herein as the "Guarantee") (i) the due and punctual payment of the principal of
and interest on the Notes, whether at maturity, by acceleration or otherwise,
the due and punctual payment of interest on the overdue principal and interest,
if any, on the Notes, to the extent lawful, and the due and punctual performance
of all other obligations of the Company to the Holders or the Trustee all in
accordance with the terms set forth in Article Eleven and Article Twelve of the
Indenture and (ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.

     The obligations of the Guarantor to the Holders and to the Trustee pursuant
to the Guarantee and the Indenture are expressly set forth and are expressly
subordinated and subject in right of payment to the prior payment in full of all
Guarantor Senior Indebtedness of such Guarantor, to the extent and in the manner
provided, in Article Eleven and Article Twelve of the Indenture, and reference
is hereby made to such Indenture for the precise terms of the Guarantees therein
made.

     No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Guarantors shall have any liability under
the Guarantee of such Guarantor by reason of such person's status as
stockholder, officer, director, employee or incorporator.  Each Holder of a Note
by accepting a Note waives and releases all such liability.  The waiver and
release are part of the consideration for the issuance of the Guarantee.


                                      A-9

<PAGE>   135


     The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.

                                       KEMESS MINES INC.

                                       
                                       By:
                                          ------------------------------
                                           Name:
                                           Title:





                                      A-10

<PAGE>   136


                                ASSIGNMENT FORM


     If you the Holder want to assign this Note, fill in the form below and have
your signature guaranteed:


I or we assign and transfer this Note to:

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
                 (Print or type name, address and zip code and
                 social security or tax ID number of assignee)

and irrevocably appoint ______________________________________ , agent to
transfer this Note on the books of the Company.  The agent may substitute
another to act for him.


Date:                                   Signed:
     -------------------------                 ------------------------------
                                               (Sign exactly as your name
                                               appears on the other side of
                                               this Note)


Signature Guarantee:
                    ----------------------------------------


     In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) December 1, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:



                                      A-11

<PAGE>   137


                                  [Check One]

(1)  ___  to the Company or a subsidiary thereof; or

(2)  ___  pursuant to and in compliance with Rule 144A under the Securities 
          Act; or

(3)  ___  to an institutional "accredited investor" (as defined in Rule
          501(a)(1), (2), (3) or (7) under the Securities Act) that has
          furnished to the Trustee a signed letter containing certain
          representations and agreements (the form of which letter can be
          obtained from the Trustee); or

(4)  ___  outside the United states to a "foreign person" in compliance with
          Rule 904 of Regulation S under the Securities Act; or

(5)  ___  pursuant to the exemption from registration provided by Rule 144 under
          the Securities Act; or

(6)  ___  pursuant to an effective registration statement under the Securities
          Act; or

(7)  ___  pursuant to another available exemption from the registration
          requirements of the Securities Act.


Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.



                                      A-12

<PAGE>   138


If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.17 of the Indenture shall have been satisfied.



Date:                                   Signed:
     -------------------------                 ------------------------------
                                               (Sign exactly as your name
                                               appears on the other side of
                                               this Note)


Signature Guarantee:
                    ----------------------------------------


              TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED

     The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.



Date:                                   Signed:
     -------------------------                 ------------------------------
                                               NOTICE:  To be executed by an
                                                        executive officer



                                      A-13

<PAGE>   139


                      [OPTION OF HOLDER TO ELECT PURCHASE]


     If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:

          Section 4.15 [     ]

          Section 4.16 [     ]

     If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:


$
 --------------------


Dated: 
      --------------------      ------------------------------------
                                NOTICE: The signature on this
                                assignment must correspond with
                                the name as it appears upon the
                                face of the within Note in
                                every particular without alteration
                                or enlargement or any change
                                whatsoever and be guaranteed by the
                                endorser's bank or broker.



Signature Guarantee: 
                     ------------------------------------------------



                                      A-14

<PAGE>   140


                                                                       EXHIBIT B

                                                             CUSIP No.:


                              ROYAL OAK MINES INC.
                                        
                 SERIES B 11% SENIOR SUBORDINATED NOTE DUE 2006


No.                                                                   $

     ROYAL OAK MINES INC., an Ontario, Canada corporation (the "Company," which
term includes any successor entity), for value received promises to pay to 
                                    or registered assigns, the principal sum 
of           Dollars, on August 15, 2006.

     Interest Payment Dates:  February 15 and August 15.

     Record Dates:  February 1 and August 1.

     Reference is made to the further provisions of this Note contained herein,
which will for all purposes have the same effect as if set forth at this place.

     IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers and a facsimile of its corporate
seal to be affixed hereto or imprinted hereon.

                                       ROYAL OAK MINES INC.


                                       By:
                                          ------------------------------
                                          Name:
                                          Title:

Dated:

Certificate of Authentication

     This is one of the Series B 11% Senior Subordinated Notes due 2006
referred to in the within-mentioned Indenture.

                                       MELLON BANK, F.S.B.,
                                         as Trustee



Dated:                                 By:
                                          ------------------------------
                                                Authorized Signatory




                                      B-1

<PAGE>   141


                             (REVERSE OF SECURITY)



                 SERIES B 11% SENIOR SUBORDINATED NOTE DUE 2006

     1.  Interest.  ROYAL OAK MINES INC., an Ontario, Canada corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above.  Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from August 12, 1996.  The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing February 15, 1997.  Interest will be
computed on the basis of a 360-day year of twelve 30-day months.

     The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes plus 2% per annum and on overdue installments of interest (without regard
to any applicable grace periods) to the extent lawful.

     2.  Method of Payment.  The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Notes are cancelled on registration of transfer or registration of
exchange after such Record Date.  Holders must surrender Notes to a Paying Agent
to collect principal payments.  The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender").  However, the Company
may pay principal and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.

     3.  Paying Agent and Registrar.  Initially, Mellon Bank, F.S.B. (the
"Trustee") will act as Paying Agent and Mellon Securities Trust Co., a New York
chartered trust company, will act as Paying Agent.  The Company may change any
Paying Agent, Registrar or co-Registrar without notice to the Holders.

     4.  Indenture and Guarantees.  The Company issued the Notes under an
Indenture, dated as of August 12, 1996 (the "Indenture"), among the Company, the
Guarantors (as defined in the Indenture) and the Trustee.  This Note is one of a
duly authorized issue of Exchange Notes of the Company designated as its Series
B 11% Senior Subordinated Notes due 2006 (the "Exchange Notes").  The Notes are
limited in aggregate  principal amount to $175,000,000.  Payment on each Note is
guaranteed on a senior subordinated basis by the Guarantors pursuant to Article
Eleven of the Indenture.  The Notes include the Initial Notes (the 11% Senior
Subordinated Notes due 2006) and the Exchange Notes, issued in exchange for the 


                                      B-2

<PAGE>   142


Initial Notes pursuant to the Indenture.  The Initial Notes and the Exchange
Notes are treated as a single class of securities under the Indenture.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S. Code Section Section  77aaa-77bbbb) (the "TIA"), as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and said Act for a statement of them.  The Notes are general unsecured
obligations of the Company.

     5.  Subordination.  The Notes are subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter incurred.  The
Guarantee in respect of the Notes is subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Guarantor Senior Indebtedness of the
Guarantor, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed.  Each Holder by his acceptance hereof
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee his attorney-in-fact for such purposes.

     6.  Redemption.

     (a) Optional Redemption.  The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after August
15, 2001, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on August 15 of the year set
forth below, plus, in each case, accrued and unpaid interest thereon, if any, to
the date of redemption:

<TABLE>
<CAPTION>
Year                                  Percentage
- ----                                  ----------
<S>                                   <C>
2001 ..............................   105.500%
2002 ..............................   103.667
2003 ..............................   101.833
2004 and thereafter ...............   100.000%
</TABLE>


     (b) Optional Redemption upon Public Equity Offerings.  At any time, or from
time to time, prior to August 15, 1999, the Company may, at its option, use the
net proceeds of one or more Public Equity Offerings of the Company to redeem up
to 35% of the aggregate principal amount of Notes at the following redemption 


                                      B-3

<PAGE>   143


prices (expressed as percentages of the principal amount) if redeemed during the
twelve-month period commencing on August 15 of the year set forth below, plus,
in each case, accrued interest thereon to the date of redemption:


<TABLE>
<CAPTION>
Year                                  Percentage
- ----                                  ----------
<S>                                   <C>
1996 ...............................  111.000%
1997 ...............................  109.778%
1998 ...............................  108.556%
</TABLE>


     In order to effect the foregoing redemption with the net proceeds of any
Public Equity Offering, the Company shall make such redemption on or prior to
120 days after the receipt of such net proceeds.

     (c) Optional Redemption upon Changes to Certain Canadian Laws.  The Notes
are redeemable, as a whole but not in part, at the option of the Company at any
time upon not less than 30 nor more than 60 days notice at a redemption price
equal to 100% of the aggregate principal amount so redeemed, plus accrued and
unpaid interest thereon to the date of redemption, if the Company has become or
would become obligated to pay, on the next date on which any amount would be
payable under or with respect to the Notes, any additional amounts ("Additional
Amounts") as a result of any change in, or amendment to, the laws (or any
regulations promulgated thereunder including changes to withholding tax laws) of
Canada (or any political subdivision or taxing authority thereof or therein), or
any change in, or amendment to, any official position regarding the application
or interpretation of such laws or regulations, which change or amendment is
announced or becomes effective on or after August 5, 1996.

     7.  Notice of Redemption.  Notice of redemption will be mailed at least 30
days but not more than 60 days before the  Redemption Date to each Holder of
Notes to be redeemed at such Holder's registered address.  Notes in
denominations larger than $1,000 may be redeemed in part.

     Except as set forth in the Indenture, if monies for the redemption of the
Notes called for redemption shall have been deposited with the Paying Agent for
redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.

     8.  Offers to Purchase.  Sections 4.15 and 4.16 of the Indenture provide
that, after certain Asset Sales (as defined in 

                                      B-4

<PAGE>   144


the Indenture) and upon the occurrence of a Change of Control (as defined in the
Indenture), and subject to further limitations contained therein, the Company
will make an offer to purchase certain amounts of the Notes in accordance with
the procedures set forth in the Indenture.

     9.  Denominations; Transfer; Exchange.  The Notes are in registered form,
without coupons, in denominations of $1,000 and integral multiples of $1,000. A
Holder shall register the transfer of or exchange Notes in accordance with the
Indenture.  The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture.  The Registrar need not register the transfer of or
exchange of any Notes or portions thereof selected for redemption.

     10.  Persons Deemed Owners.  The registered Holder of a Note shall be
treated as the owner of it for all purposes.

     11.  Unclaimed Money.  If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company.  After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.

     12.  Discharge Prior to Redemption or Maturity.  If the Company at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including  certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).

     13.  Amendment; Supplement; Waiver.  Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the written consent
of the Holders of at least a majority in aggregate principal amount of the Notes
then outstanding, and any existing Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding.  Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect in any material respect the rights
of any Holder of a Note.

     14.  Restrictive Covenants.  The Indenture imposes certain covenants that
limit the ability of the Company and its 

                                      B-5

<PAGE>   145


Restricted Subsidiaries to, among other things, incur additional Indebtedness,
pay dividends or make certain other restricted payments, consummate certain
asset sales, enter into certain transactions with Affiliates, incur Indebtedness
that is subordinated in right of payment to any Senior Indebtedness and senior
in right of payment to the Notes, incur liens, impose restrictions on the
ability of a subsidiary to pay dividends or make certain payments to the Company
and its Restricted Subsidiaries, merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company or its Restricted Subsidiaries.
Such limitations are subject to a number of important qualifications and
exceptions.  The Company must annually report to the Trustee on compliance with
such limitations.

     15.  Successors.  When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.

     16.  Defaults and Remedies.  If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture.  The Trustee is not obligated to enforce the Indenture or the
Notes unless it  has received indemnity reasonably satisfactory to it.  The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power.  The Trustee may withhold
from Holders of Notes notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.

     17.  Trustee Dealings with Company.  The Trustee under the Indenture, in
its individual or any other capacity, may become the owner or pledgee of Notes
and may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.

     18.  No Recourse Against Others.  No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability.  The waiver and release are part of the consideration for the
issuance of the Notes.


                                      B-6

<PAGE>   146


     19.  Authentication.  This Note shall not be valid until the Trustee or
Authenticating Agent manually signs the certificate of authentication on this
Note.

     20.  Governing Law.  The Laws of the State of New York shall govern this
Note and the Indenture, without regard to principles of conflict of laws.

     21.  Abbreviations and Defined Terms.  Customary abbreviations may be used
in the name of a Holder of a Note or an assignee, such as:  TEN COM (= tenants
in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).

     22.  CUSIP Numbers.  Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes as a convenience to the Holders of the
Notes.  No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.

     23.  Indenture.  Each Holder, by accepting a Note, agrees to be bound by
all of the terms and provisions of the Indenture, as the same may be amended
from time to time.

     The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture, which has the text of this Note in
larger type.  Requests may be made to:  Royal Oak Mines Inc., 5501 Lakeview
Drive, Kirkland, WA 98033, Attn:  Chief Financial Officer.


                                      B-7

<PAGE>   147


                [FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]

                                SENIOR GUARANTEE


     KEMESS MINES INC. (the "Guarantor") has unconditionally guaranteed on a
senior subordinated basis (such guarantee by each Guarantor being referred to
herein as the "Guarantee") (i) the due and punctual payment of the principal of
and interest on the Notes, whether at maturity, by acceleration or otherwise,
the due and punctual payment of interest on the overdue principal and interest,
if any, on the Notes, to the extent lawful, and the due and punctual performance
of all other obligations of the Company to the Holders or the Trustee all in
accordance with the terms set forth in Article Eleven and Article Twelve of the
Indenture and (ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, that the same will be promptly paid in
full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.

     The obligations of the Guarantor to the Holders and to the Trustee pursuant
to the Guarantee and the Indenture are expressly set forth and are expressly
subordinated and subject in right of payment to the prior payment in full of all
Guarantor Senior Indebtedness of such Guarantor, to the extent and in the manner
provided, in Article Eleven and Article Twelve of the Indenture, and reference
is hereby made to such Indenture for the precise terms of the Guarantee therein
made.

     No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Guarantors shall have any liability under
the Guarantee of such Guarantor by reason of such person's status as
stockholder, officer, director, employee or incorporator.  Each Holder of a Note
by accepting a Note waives and releases all such liability.  The waiver and
release are part of the consideration for the issuance of the Guarantee.



                                      B-8

<PAGE>   148


     The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.

                                       KEMESS MINES INC.


                                       By:
                                          ------------------------------
                                          Name:
                                          Title:



                                      B-9

<PAGE>   149


                                ASSIGNMENT FORM


     If you the Holder want to assign this Note, fill in the form below and have
your signature guaranteed:


I or we assign and transfer this Note to:

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
                 (Print or type name, address and zip code and
                 social security or tax ID number of assignee)


and irrevocably appoint _________________________________ , agent to transfer
this Note on the books of the Company.  The agent may substitute another to act
for him.



Date:                                   Signed:
     -------------------------                 ------------------------------
                                               (Sign exactly as your name
                                               appears on the other side of
                                               this Note)


Signature Guarantee:
                     ----------------------------------------





                                      B-10

<PAGE>   150



                      [OPTION OF HOLDER TO ELECT PURCHASE]


     If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:

          Section 4.15 [     ]

          Section 4.16 [     ]

     If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:


$___________________


Dated: 
      -------------------------      ------------------------------------
                                     NOTICE:  The signature on this
                                     assignment must correspond with
                                     the name as it appears upon the
                                     face of the within Note in
                                     every particular without alteration
                                     or enlargement or any change
                                     whatsoever and be guaranteed by the
                                     endorser's bank or broker.


Signature Guarantee:
                     -------------------------------------



                                      B-11

<PAGE>   151


                                                                       Exhibit C

                           Form of Certificate To Be
                          Delivered in Connection with
                   Transfers to Non-QIB Accredited Investors


                                                               ___________, ____


Mellon Bank, F.S.B.
1111 Third Avenue, Suite 2230
Seattle, WA  98101
Attention: Corporate Trust Department


         Re:  Royal Oak Mines Inc.
              11% Senior Subordinated Notes due 2006
              --------------------------------------


Ladies and Gentlemen:

     In connection with our proposed purchase of 11% Senior Subordinated Notes
due 2006 (the "Notes") of Royal Oak Mines Inc. (the "Company"), we confirm that:

          1.  We have received a copy of the Offering Memorandum (the "Offering
     Memorandum"), dated August 5, 1996 relating to the Notes and such other
     information as we deem necessary in order to make our investment decision.
     We acknowledge that we have read and agreed to the matters stated on pages
     (i)-(iv) of the Offering Memorandum and in the section entitled "Transfer
     Restrictions" of the Offering Memorandum, including the restrictions on
     duplication and circulation of the Offering Memorandum.

          2.  We understand that any subsequent transfer of the Notes is
     subject to certain restrictions and conditions set forth in the Indenture
     relating to the Notes (as described in the Offering Memorandum) and the
     undersigned agrees to be bound by, and not to resell, pledge or otherwise
     transfer the Notes except in compliance with, such restrictions and
     conditions and the Securities Act of 1933, as amended (the "Securities
     Act").

          3.  We understand that the offer and sale of the Notes have not been
     registered under the Securities Act, and that the Notes may not be offered
     or sold except as permitted in the following sentence.  We agree, on our
     own behalf and on behalf of any accounts for which we are acting as
     hereinafter stated, that if we should sell or otherwise transfer any Notes
     prior to the date which is three years after the original issuance of the 
     Notes, we will do so 




                                      C-1

<PAGE>   152


     only (i) to the Company or any of its subsidiaries, (ii) inside the United
     States in accordance with Rule 144A under the Securities Act to a
     "qualified institutional buyer" (as defined in Rule 144A under the
     Securities Act), (iii) inside the United States to an institutional
     "accredited investor" (as defined below) that, prior to such transfer,
     furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the
     Trustee (as defined in the Indenture relating to the Notes), a signed
     letter containing certain representations and agreements relating to the
     restrictions on transfer of the Notes, (iv) outside the United States in
     accordance with Rule 904 of Regulation S under the Securities Act, (v)
     pursuant to the exemption from registration provided by Rule 144 under the
     Securities Act (if available), or (vi) pursuant to an effective
     registration statement under the Securities Act, and we further agree to
     provide to any person purchasing any of the Notes from us a notice advising
     such purchaser that resales of the Notes are restricted as stated herein.

          4.  We are not acquiring the Notes for or on behalf of, and will not
     transfer the Notes to, any pension or welfare plan (as defined in Section 3
     of the Employee Retirement Income Security Act of 1974), except as
     permitted in the section entitled "Transfer Restrictions" of the Offering
     Memorandum.

          5.  We understand that, on any proposed resale of any Notes, we will
     be required to furnish to the Trustee and the Company such certification,
     legal opinions and other information as the Trustee and the Company may
     reasonably require to confirm that the proposed sale complies with the
     foregoing restrictions.  We further understand that the Notes purchased by
     us will bear a legend to the foregoing effect.

          6.  We are an institutional "accredited investor" (as defined in Rule
     501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
     have such knowledge and experience in financial and business matters as to
     be capable of evaluating the merits and risks of our investment in the
     Notes, and we and any accounts for which we are acting are each able to
     bear the economic risk of our or their investment, as the case may be.

          7.  We are acquiring the Notes purchased by us for our account or for
     one or more accounts (each of which is an institutional "accredited
     investor") as to each of which we exercise sole investment discretion.

     You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a 



                                      C-2

<PAGE>   153


copy hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.

                                       Very truly yours,


                                       By:
                                          ------------------------------
                                          Name:
                                          Title:




                                      C-3

<PAGE>   154

                                                                       Exhibit D

                      Form of Certificate To Be Delivered
                          in Connection with Transfers
                            Pursuant to Regulation S


                                                            ______________, ____



Mellon Bank, F.S.B.
1111 Third Avenue, Suite 2230
Seattle, WA  98101
Attention:  Corporate Trust Department


     Re:  Royal Oak Mines Inc. (the "Company")
     11% Senior Subordinated
     Notes due 2006 (the "Notes")


Ladies and Gentlemen:

     In connection with our proposed sale of $___________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:

          (1)  the offer of the Notes was not made to a person in the United
     States;

          (2)  either (a) at the time the buy offer was originated, the
     transferee was outside the United States or we and any person acting on our
     behalf reasonably believed that the transferee was outside the United
     States, or (b) the transaction was executed in, on or through the
     facilities of a designated off-shore securities market and neither we nor
     any person acting on our behalf knows that the transaction has been
     pre-arranged with a buyer in the United States;

          (3)  no directed selling efforts have been made in the United States
     in contravention of the requirements of Rule 903(b) or Rule 904(b) of
     Regulation S, as applicable;

          (4)  the transaction is not part of a plan or scheme to evade the
     registration requirements of the Securities Act; and



                                      D-1

<PAGE>   155


          (5)  we have advised the transferee of the transfer restrictions
     applicable to the Notes.

     You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.  Terms used in this certificate have the
meanings set forth in Regulation S.

                                       Very truly yours,

                                       [Name of Transferor]


                                       By:
                                          ------------------------------
                                               Authorized Signature




                                      D-2


<PAGE>   1


                 [Letterhead of Wachtell, Lipton, Rosen & Katz]



                                                        Exhibit 5.1


                                October 7, 1996



Royal Oak Mines Inc.
5501 Lakeview Drive
Kirkland, Washington  98033


Ladies and Gentlemen:

   
     We have acted as special United States counsel for Royal Oak Mines Inc., an
Ontario, Canada corporation (the "Company"), in connection with the preparation
of the Company's Registration Statement on Form S-4, registration number
333-11117, as amended, (the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"), filed with the Securities and
Exchange Commission on August 30, 1996, relating to an offer to exchange (the
"Exchange Offer") the Series B 11% Senior Subordinated Notes Due 2006 of the
Company (the "Exchange Notes") for an equal principal amount of the Company's
outstanding 11% Senior Subordinated Notes due 2006 (the "Notes").  The Exchange
Notes will be guaranteed on a senior subordinated basis (the "Guarantee") by
Kemess Mines Inc. (the "Guarantor"), an Ontario, Canada corporation that is a
wholly owned subsidiary of the Company.
    

     The Notes were issued, and the Exchange Notes will be issued, under an
Indenture dated as of August 12, 1996 (the "Indenture"), among the Company, the
Guarantor and Mellon Bank, F.S.B., as Trustee (the "Trustee").

     As special United States counsel, we have examined the Registration
Statement, the Indenture (included as Exhibit 4.1 to the Registration
Statement), the form of the Exchange Notes (set forth as Exhibit B to the
Indenture) and such other


<PAGE>   2






Royal Oak Mines Inc.
October 7, 1996
Page 2





documents, records and other matters as we have deemed necessary or appropriate
in order to give the opinions set forth herein.

     We have, with your approval, assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of documents
submitted to us as certified, facsimile, conformed, electronic or photostatic
copies and the authenticity of the originals of such copies.  As to all
questions of fact material to this opinion that have not been independently
established, we have relied upon certificates or comparable documents, and oral
and written statements and representations, of officers and representatives of
the Company and the Guarantor.  We have not independently verified such
information and assumptions.

     We have further, with your approval, assumed (without any independent
investigation or verification of any kind) and have relied upon the opinion of
Lang Michener, Canadian counsel for the Company, delivered to you today, as to
(among other matters set forth therein): the due incorporation, valid existence
and good standing of each of the Company and the Guarantor in its respective
jurisdiction of incorporation; the possession by each of the Company and the
Guarantor of the requisite corporate power and authority to execute, deliver
and perform its respective obligations under the Exchange Notes, the Guarantee,
and the Indenture; the due and valid authorization, due execution and delivery
of the Indenture by each of the Company and the Guarantor; and the due and
valid authorization of the Exchange Notes and the Guarantee by the Company and
the Guarantor, respectively.

     Based upon and subject to the foregoing, assuming that the Indenture has
been duly authorized, executed and delivered by, and represents the valid and
binding obligation of, the Trustee, and when the Registration Statement,
including any amendment thereto, shall have become effective under the
Securities Act and the Indenture shall have been duly qualified under the Trust
Indenture Act of 1939, as amended, it is our opinion that:

      A. the Indenture constitutes the legal, valid and binding obligation of
         each of the Company and the Guarantor, enforceable against each of the
         Company and the Guarantor in accordance with its terms;


<PAGE>   3
Royal Oak Mines Inc.
October 7, 1996
Page 3


     B. the Exchange Notes, when duly executed and delivered by or on behalf of
        the Company in the form contemplated by the Indenture upon the terms set
        forth in the Exchange Offer and authenticated by the Trustee or the
        Authenticating Agent (as defined in the Indenture) in accordance with
        the terms of the Indenture, will constitute the legal, valid and binding
        obligations of the Company, enforceable against the Company in
        accordance with their terms; and

     C. the Guarantee, when duly executed and delivered by or on behalf of the
        Guarantor upon the terms set forth in the Exchange Offer, will
        constitute the legal, valid and binding obligation of the Guarantor,
        enforceable against the Guarantor in accordance with its terms;

subject, in each case, to (a) bankruptcy, insolvency, moratorium, reorganization
and other laws of general applicability relating to or affecting creditors'
rights from time to time in effect; (b) application of general principles of
equity (regardless of whether considered in proceedings in equity or at law) and
the discretion of the court before which any proceeding therefor may be brought;
(c) standards of commercial reasonableness and the implied covenant of good
faith; and (d) public policy.

     In addition, the opinions expressed herein are subject to the following
assumptions, exceptions, limitations, qualifications and comments:

      1.   We express no opinion as to whether a federal or state court
           outside New York would give effect to the choice of New York law
           provided for in the Indenture.

      2.   We express no opinion as to the effect of the laws of any
           jurisdiction (other than federal laws of the United States and the
           laws of the State of New York) wherein any holder of the Exchange
           Notes may be located which limit rates of interest that may be
           charged or collected by such holder.

      3.   We express no opinion with respect to the lawfulness or
           enforceability of:

           (i) provisions relating to delay or omission of enforcement of rights
               or remedies, waivers of defenses, or waivers of benefits of any
               usury, appraisement, valuation, stay, extension, moratorium,
               redemption, statutes of limitation or other non-waivable benefits
               bestowed by operation of law;


<PAGE>   4






Royal Oak Mines Inc.
October 7, 1996
Page 4





     (ii) exculpation provisions, provisions relating to releases of unmatured
          claims, provisions purporting to waive immaterial rights, severability
          provisions and provisions similar in substance and nature to those
          described in the foregoing clause (i) and this clause (ii), insofar as
          any of the foregoing are contained in the Indenture; and 

    
    (iii) indemnification or contribution provisions to the extent they purport
          to relate to liabilities from or based upon negligence or any
          violation of, or relate to rights of contribution or indemnification
          that are violative of, any law, rule or regulation or the public
          policy underlying any law, rule or regulation (including any federal,
          state or foreign securities law, rule or regulation).

     4. Certain of the remedial provisions and waivers with respect to the
        Guarantee contained in the Indenture may be unenforceable in whole or in
        part, but the inclusion of such provisions does not affect the validity
        of the Guarantee, taken as a whole, and the Guarantee, taken as a whole,
        together with the laws of the State of New York, contains adequate
        provision for the practical realization of the benefits of the guarantee
        created thereby.

     5. Notwithstanding anything to the contrary in this opinion, we express no
        opinion as to the enforceability against the Company or the Guarantor of
        the Indenture, the Exchange Notes or the Guarantee to the extent the
        foregoing may fail to be enforceable due to the fact that the Company
        and the Guarantor are not organized under the laws of the United States
        or of any State thereof, although as of the date of this opinion we are
        not aware of any limitation on enforceability arising from such fact.

     6. We express no opinion as to the effect on the Indenture, the Exchange
        Notes or the Guarantee, or on the opinions expressed herein, of any
        fraudulent conveyance laws.

     We are not members of the Bar of any jurisdiction other than the State of
New York.  The opinions herein are limited to the laws of the State of New York
and the federal laws of the United States, and we express no opinion as to the
effect on the matters covered by this opinion of the laws of any other
jurisdiction.  In addition, we express no opinion as to

<PAGE>   5

Royal Oak Mines Inc.
October 7, 1996
Page 5


any laws, statutes, regulations or other requirements relating to mining or the
transfer of mineral rights under the laws of any jurisdiction.

     This opinion is rendered solely for your benefit in connection with the
Exchange Offer.  This opinion may not be used or relied upon by any other
person and may not be disclosed, quoted, filed with a government agency or
otherwise referred to without our prior written consent, except that we hereby
consent (i) to the use of this opinion as an Exhibit to the Registration
Statement and to the reference to our firm under the caption "Validity of
Exchange Notes" in the Prospectus that is a part of the Registration Statement
and (ii) to your filing copies of this opinion as an Exhibit to the
Registration Statement with agencies of such states as you deem necessary in
the course of complying with the laws of such states regarding the Exchange
Offer.  In giving any such consent, we do not hereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act.

                                     Very truly yours,


                                     /s/ Wachtell, Lipton, Rosen & Katz





<PAGE>   1
                         [Letterhead of Lang Michener]



                                                                    Exhibit 5.2



October 7, 1996


Royal Oak Mines Inc.
5501 Lakeview Drive
Kirkland, Washington   98033

Dear Sirs:

RE:   ROYAL OAK MINES INC.


We have acted as Canadian counsel to Royal Oak Mines Inc. (the "Company") and
Kemess Mines Inc. (the "Guarantor") in connection with the preparation of the
Company's Registration Statement on Form S-4, registration number 333-11117 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), filed with the Securities and Exchange Commission on August
30, 1996, as amended, relating to an offer to exchange (the "Exchange Offer")
the Series B 11% Senior Subordinated Notes Due 2006 of the Company (the
"Exchange Notes") for an equal principal amount of the Company's outstanding 11%
Senior Subordinated Notes due 2006 (the "Notes"). The Exchange Notes will be
guaranteed on a senior subordinated basis (the "Guarantee") by the Guarantor.

The Notes were issued, and the Exchange Notes will be issued, under an Indenture
dated as of August 12, 1996 (the "Indenture"), among the Company, the Guarantor
and Mellon Bank, F.S.B., as Trustee (the "Trustee").

As such counsel, we have examined the Registration Statement, the Indenture
(included as Exhibit 4.1 to the Registration Statement), the form of the
Exchange Notes (set forth as Exhibit B to the Indenture) and such other
documents, records and other matters as we have deemed necessary or appropriate
in order to give the opinions set forth herein. In all of our examinations, we
have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as originals and the conformity to authentic original
documents of all documents submitted to us as certified or photostatic or
similarly reproduced copies.

We are solicitors qualified to practice law in the Province of Ontario and we
express no opinion as to any laws, or any matters governed by any laws, other
than the laws of the Province of Ontario and the federal laws of Canada
applicable therein.

For the purposes of the opinion expressed in paragraph 1, we have relied
exclusively upon certificates of status issued by the Ministry of Consumer and
Commercial Relations (Ontario), each dated October 4, 1996, with respect to the
Company and the Guarantor.

 
<PAGE>   2

Wherever an opinion herein is qualified by the phrase "to the best of our
knowledge" with respect to the existence or absence of facts, it is intended to
indicate that during the course of our representation of the Company and the
Guarantor, no information has come to our attention which would give us actual
knowledge of the existence or absence of facts which would render the opinion so
qualified inaccurate. Except to the extent expressly set forth herein, we have
not undertaken any independent investigation to determine the existence or
absence of such facts and any limited enquiry undertaken by us during the
preparation of this opinion letter should not be regarded as such investigation.
No inference as to our having constructive knowledge of the existence or absence
of such facts should be drawn merely from the fact of our representation of the
Company and the Guarantor as legal counsel.

Based and relying on and subject to the foregoing, we are of the
opinion that:

1. Each of the Company and the Guarantor is a corporation validly
existing under the laws of the Province of Ontario and has full
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Registration Statement.

2. All of the outstanding shares of capital stock of the Guarantor
have been duly authorized and validly issued, are fully paid and
non-assessable and were not issued in violation of any preemptive or
similar rights. All of the outstanding shares of capital stock of the
Guarantor are owned by the Company, free and clear of all perfected
security interests and, to the best of our knowledge, free and clear
of all other liens, encumbrances, equities and claims or
restrictions on transferability or voting except as provided under
applicable securities laws.

3. Each of the Company and the Guarantor has all requisite corporate
power and authority to execute, deliver and perform its respective
obligations under the Indenture, the Notes and the Exchange Notes.

4. The Indenture has been duly and validly authorized, executed and
delivered by the Company and the Guarantor.

5. The Notes are in the form contemplated by the Indenture. The Notes
have each been duly and validly authorized, executed and delivered by
the Company and the Guarantor.

6. The Exchange Notes have been duly and validly authorized by the
Company and the Guarantor.

7. The Exchange Offer and the consummation of the transactions
contemplated thereby will not conflict with or constitute or result
in a breach or a default under (or an event which with notice or
passage of time or both would constitute a default under) or
violation of the certificate of incorporation or bylaws of the
Company or the Guarantor.

This opinion is rendered solely for your benefit in connection with
the Exchange Offer. This opinion may not be used or relied upon by
any other person and may not be disclosed, quoted, filed with a
government agency or otherwise referred to without our prior written
consent, except that we hereby consent (i) to the use of
<PAGE>   3

this opinion as an Exhibit to the Registration Statement and to the reference to
our firm under the caption "Validity of Exchange Notes" in the Prospectus that
is a part of the Registration Statement; (ii) to your filing copies of this
opinion as an Exhibit to the Registration Statement with agencies of such states
as you deem necessary in the course of complying with the laws of such states
regarding the Exchange Offer; and (iii) to reliance by Wachtell, Lipton,
Rosen & Katz, Special United States Counsel to the Company, in connection with
their opinion to be issued in connection with the Registration Statement. In
giving any such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act.

                              Yours truly,




   
                              /s/ Lang Michener
    


<PAGE>   1


<PAGE>   1
                                                                EXHIBIT 99.1

                              LETTER OF TRANSMITTAL

                              ROYAL OAK MINES INC.

                               OFFER TO EXCHANGE
                Series B 11% Senior Subordinated Notes Due 2006
                       for any and all of the outstanding
                     11% Senior Subordinated Notes Due 2006

             THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
            5:00 P.M., NEW YORK CITY TIME, ON NOVEMBER 7, 1996
                          UNLESS THE OFFER IS EXTENDED


                               Mellon Bank, F.S.B
                             (the "Exchange Agent")

                      BY MAIL, HAND OR OVERNIGHT COURIER:

                               Mellon Bank, F.S.B.
                              c/o Mellon Bank, N.A.
                           Corporate Trust Operations
                         2 Mellon Bank Center, Room 325
                            Pittsburgh, PA 15259-0001
                     Attention: Elaine Renn, Vice President

                            BY FACSIMILE TRANSMISSION
                        (FOR ELIGIBLE INSTITUTIONS ONLY):

                                 (412) 234-9196

                              CONFIRM BY TELEPHONE:

                                 (412) 234-4694

     Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the ones listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.

     The undersigned hereby acknowledges receipt of the Prospectus dated
October 9, 1996 (the "Prospectus") of Royal Oak Mines Inc. (the "Company")
and this Letter of Transmittal, which together constitute the Company's offer
(the "Exchange Offer") to exchange $1,000 principal amount of its Series B 11%
Senior Subordinated Notes due 2006 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for each
$1,000 principal amount of its outstanding 11% Senior Subordinated Notes due
2006 (the "Notes"), respectively. The term "Expiration Date" shall mean 5:00
p.m., New York City time, on November 7, 1996, unless the Company, in its
reasonable judgment, extends the Exchange Offer, in which case the term shall
mean the latest date and time to which the Exchange Offer is extended.
Capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.

     YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.

     List on the next page the Notes to which this Letter of Transmittal
relates. If the space indicated is inadequate, the Certificate or Registration
Numbers and Principal Amounts should be listed on a separately signed schedule
affixed hereto.
<PAGE>   2
- --------------------------------------------------------------------------------
           DESCRIPTION OF SENIOR SUBORDINATED NOTES TENDERED HEREBY
- --------------------------------------------------------------------------------
                                                   AGGREGATE
                                   CERTIFICATE     PRINCIPAL
   NAME(S) AND ADDRESS(ES) OF          OR           AMOUNT         PRINCIPAL
       REGISTERED OWNER(S)        REGISTRATION    REPRESENTED       AMOUNT
        (PLEASE FILL IN)            NUMBERS*       BY NOTES       TENDERED**
- --------------------------------------------------------------------------------

                                  ----------------------------------------------

                                  ----------------------------------------------

                                  ----------------------------------------------

                                  ----------------------------------------------

                                  ----------------------------------------------
                                  TOTAL
- --------------------------------------------------------------------------------
*  NEED NOT BE COMPLETED BY BOOK-ENTRY HOLDERS.
** UNLESS OTHERWISE INDICATED, THE HOLDER WILL BE DEEMED TO HAVE TENDERED THE
   FULL AGGREGATE PRINCIPAL AMOUNT REPRESENTED BY SUCH NOTES.  ALL TENDERS MUST
   BE IN INTEGRAL MULTIPLES OF $1,000.
- --------------------------------------------------------------------------------

   This Letter of Transmittal is to be used (i) if certificates of Notes are to
be forwarded herewith, (ii) if delivery of Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company (the "Depository"), pursuant to the procedures set forth in "The
Exchange Offer -- Procedures for Tendering Notes" in the Prospectus or (iii)
tender of the Notes is to be made according to the guaranteed delivery
procedures described in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures." See Instruction 2. Delivery of documents to a
book-entry transfer facility does not constitute delivery to the Exchange Agent.

   The term "Holder" with respect to the Exchange Offer means any person in
whose name Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer. Holders who wish to tender their Notes must complete this letter in its
entirety.

    [ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY
        TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
        DEPOSITORY AND COMPLETE THE FOLLOWING:

        Name of Tendering Institution___________________________________________

        [ ]      The Depository Trust Company

        Account Number__________________________________________________________

        Transaction Code Number_________________________________________________

   Holders whose Notes are not immediately available or who cannot deliver their
Notes and all other documents required hereby to the Exchange Agent on or prior
to the Expiration Date must tender their Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 2.

      [ ]   CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A
            NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:

            Name of Registered Holder(s)________________________________________

            Name of Eligible Institution that Guaranteed Delivery_______________
            ____________________________________________________________________

            If delivery by book-entry transfer:
                  Account Number________________________________________________
                  Transaction Code Number_______________________________________

      [ ]   CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
            ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
            OR SUPPLEMENTS THERETO.

            Name________________________________________________________________

            Address_____________________________________________________________

<PAGE>   3
               PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

   Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such Notes tendered hereby, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest in
and to such Notes as are being tendered hereby, including all rights to accrued
and unpaid interest thereon as of the Expiration Date. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company in connection with the Exchange
Offer) to cause the Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim.

   The undersigned represents to the Company that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, and (ii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. If the undersigned or the person
receiving the Exchange Notes covered hereby is a broker-dealer that is receiving
the Exchange Notes for its own account in exchange for Notes that were acquired
as a result of market-making activities or other trading activities, the
undersigned acknowledges that it or such other person will deliver a prospectus
in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned and any such other person acknowledge that, if they are
participating in the Exchange Offer for the purpose of distributing the Exchange
Notes, (i) they cannot rely on the position of the staff of the Securities and
Exchange Commission enunciated in Exxon Capital Holdings Corporation (available
April 13, 1989), Morgan Stanley & Co., Inc. (available June 5, 1991) or similar
no-action letters and, in the absence of an exemption therefrom, must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with the resale transaction and (ii) failure to comply with such
requirements in such instance could result in the undersigned or any such other
person incurring liability under the Securities Act for which such persons are
not indemnified by the Company. If the undersigned or the person receiving the
Exchange Notes covered by this letter is an affiliate (as defined under Rule 405
of the Securities Act) of the Company, the undersigned represents to the Company
that the undersigned understands and acknowledges that such Exchange Notes may
not be offered for resale, resold or otherwise transferred by the undersigned or
such other person without registration under the Securities Act or an exemption
therefrom.

   The undersigned also warrants that it will, upon request, execute and deliver
any additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a book-entry transfer facility. The undersigned further agrees
that acceptance of any tendered Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement and that the
Company shall have no further obligations or liabilities thereunder for the
registration of the Notes or the Exchange Notes.

   The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived, in whole
or in part, by the Company), as more particularly set forth in the Prospectus,
the Company may not be required to exchange any of the Notes tendered hereby
and, in such event, the Notes not exchanged will be returned to the undersigned
at the address shown below the signature of the undersigned.

   All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Notes may be withdrawn at any time
prior to the Expiration Date.
<PAGE>   4
   Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Notes, and any Notes delivered herewith but not exchanged, will be
registered in the name of the undersigned and shall be delivered to the
undersigned at the address shown below the signature of the undersigned. If an
Exchange Note is to be issued to a person other than the person(s) signing this
Letter of Transmittal, or if the Exchange Note is to be mailed to someone other
than the person(s) signing this Letter of Transmittal or to the person(s)
signing this Letter of Transmittal at an address different than the address
shown on this Letter of Transmittal, the appropriate boxes of this Letter of
Transmittal should be completed. If Notes are surrendered by Holder(s) that have
completed either the box entitled "Special Registration Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (defined in Instruction 4).
<PAGE>   5
  SPECIAL REGISTRATION INSTRUCTIONS           SPECIAL DELIVERY INSTRUCTIONS

    To be completed ONLY if the              To be completed ONLY if the
Exchange Notes are to be issued in        Exchange Notes are to be sent to
the name of someone other than the        someone other than the undersigned,
undersigned.                              or to the undersigned at an address
                                          other than that shown under
Name:_______________________________      "Description of Notes Tendered
                                          Hereby."
Address:____________________________
                                          Name:_________________________________
Book-Entry Transfer Facility Account:
                                          Address:______________________________
____________________________________
                                          ______________________________________
Employee  Identification or Social
Security Number:                          

____________________________________      
       (Please print or type)                    (Please print or type)

                    REGISTERED HOLDER(S) OF NOTES SIGN HERE
               (In addition, complete Substitute Form W-9 Below)

X_______________________________________________________________________________

X_______________________________________________________________________________
                     (Signature(s) of Registered Holder(s))

      Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Notes or on a security position listing as the owner of the Notes or by
person(s) authorized to become registered holder(s) by properly completed bond
powers transmitted herewith. If signature is by attorney-in-fact, trustee,
executor, administrator, guardian, officer of a corporation or other person
acting in a fiduciary capacity, please provide the following information.
(Please print or type):

Name and Capacity (full title):_________________________________________________

Address (including zip code):___________________________________________________

________________________________________________________________________________

________________________________________________________________________________

Area Code and Telephone Number:_________________________________________________

Taxpayer Identification or Social Security No.:_________________________________

Dated:_______________________________

                               SIGNATURE GUARANTEE
                       (If Required -- See Instruction 4)

Authorized Signature:___________________________________________________________
                         (Signature of Representative of Signature Guarantor)

Name and Title:_________________________________________________________________

Name of Plan:___________________________________________________________________

Area Code and Telephone Number:_________________________________________________
                                             (Please print or type)

Dated:_______________________________
<PAGE>   6


                       PAYOR'S NAME: ROYAL OAK MINES INC.

              THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
        PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER
IDENTIFICATION NUMBER ON THE FOLLOWING SUBSTITUTE FORM W-9 AND CERTIFY THEREIN
THAT YOU ARE SUBJECT TO BACKUP WITHHOLDING.

                          PART 1 -- PLEASE PROVIDE YOUR TIN
                          IN THE BOX AT RIGHT AND CERTIFY
                          BY SIGNING AND DATING BELOW.       __________________
SUBSTITUTE                                                    SOCIAL SECURITY
FORM  W-9                 PART 2 -- CHECK THE BOX IF YOU     NUMBER OR EMPLOYEE
                          ARE NOT SUBJECT TO BACKUP            IDENTIFICATION
DEPARTMENT OF THE         WITHHOLDING UNDER THE PROVISIONS         NUMBER
TREASURY INTERNAL         OF SECTION 3406(A)(1)(C) OF THE
REVENUE SERVICE           INTERNAL REVENUE CODE BECAUSE (1)
                          YOU ARE EXEMPT FROM BACKUP
                          WITHHOLDING, (2) YOU HAVE NOT BEEN
                          NOTIFIED THAT YOU ARE SUBJECT TO
                          BACKUP WITHHOLDING AS A RESULT OF
                          FAILURE TO REPORT ALL INTEREST OR
                          DIVIDENDS OR (3) THE INTERNAL
                          REVENUE SERVICE HAS NOTIFIED YOU
                          THAT YOU ARE NO LONGER SUBJECT TO
                          BACKUP WITHHOLDING. [ ]

PAYOR'S REQUEST FOR       CERTIFICATION:  UNDER PENALTIES         PART 3 -
TAXPAYER IDENTIFICATION   OF PERJURY, I CERTIFY THAT THE       AWAITING TIN [ ]
NUMBER ("TIN")            INFORMATION PROVIDED ON THIS FORM          
                          IS TRUE, CORRECT, AND COMPLETE.

                          SIGNATURE:____________________
                          DATE:__________

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
      WITHHOLDING OF 31% OF ANY CASH PAYMENTS IN EXCESS OF $10.00 MADE TO YOU.
      YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
      PART 3 OF SUBSTITUTE FORM W-9.

                CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER

   I CERTIFY UNDER PENALTIES OF PERJURY THAT A TAXPAYER IDENTIFICATION NUMBER
HAS NOT BEEN ISSUED TO ME, AND EITHER (A) I HAVE MAILED OR DELIVERED AN
APPLICATION TO RECEIVE A TAXPAYER IDENTIFICATION NUMBER TO THE APPROPRIATE
INTERNAL REVENUE SERVICE CENTER OR SOCIAL SECURITY ADMINISTRATION OFFICE, OR (B)
I INTEND TO MAIL OR DELIVER AN APPLICATION IN THE NEAR FUTURE. I UNDERSTAND THAT
IF I DO NOT PROVIDE A TAXPAYER IDENTIFICATION NUMBER WITHIN 60 DAYS, 31% OF ALL
REPORTABLE PAYMENTS MADE TO ME THEREAFTER WILL BE WITHHELD, UNTIL I PROVIDE A
NUMBER.
     _____________________________           _____________________________
             SIGNATURE                                    DATE
<PAGE>   7
                                  INSTRUCTIONS

                          FORMING PART OF THE TERMS AND
                        CONDITIONS OF THE EXCHANGE OFFER

1.  DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.

   All physically delivered Notes or confirmations of any book-entry transfer to
the Exchange Agent's account at a book-entry transfer facility of Notes tendered
by book-entry transfer, as well as a properly completed and duly executed copy
of this Letter of Transmittal or facsimile thereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at any of its addresses set forth herein on or prior to the Expiration Date (as
defined in the Prospectus). The method of delivery of this Letter of
Transmittal, the Notes and any other required documents is at the election and
risk of the Holder, and except as otherwise provided below, the delivery will be
deemed made only when actually received by the Exchange Agent. If such delivery
is by mail, it is suggested that registered mail with return receipt requested,
properly insured, be used.

   No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.

   Delivery to an address other than as set forth herein, or instructions via a
facsimile number other than the ones set forth herein, will not constitute a
valid delivery.

2.  GUARANTEED DELIVERY PROCEDURES.

   Holders who wish to tender their Notes, but whose Notes are not immediately
available and thus cannot deliver their Notes, the Letter of Transmittal or any
other required documents to the Exchange Agent (or comply with the procedures
for book-entry transfer) prior to the Expiration Date, may effect a tender if:

    (a)  the tender is made through a member firm of a registered national
         securities exchange or of the National Association of Securities
         Dealers, Inc., a commercial bank or trust company having an office or
         correspondent in the United States or an "eligible guarantor
         institution" within the meaning of Rule 17Ad-15 under the Exchange Act
         (an "Eligible Institution");

    (b)  prior to the Expiration Date, the Exchange Agent receives from such
         Eligible Institution a properly completed and duly executed Notice of
         Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
         setting forth the name and address of the Holder, the registration
         number(s) of such Notes and the principal amount of Notes tendered,
         stating that the tender is being made thereby and guaranteeing that,
         within three New York Stock Exchange trading days after the Expiration
         Date, the Letter of Transmittal (or facsimile thereof), together with
         the Notes (or a confirmation of book-entry transfer of such Notes into
         the Exchange Agent's account at the Depository) and any other documents
         required by the Letter of Transmittal, will be deposited by the
         Eligible Institution with the Exchange Agent; and

    (c)  such properly completed and executed Letter of Transmittal (or
         facsimile thereof), as well as all tendered Notes in proper form for
         transfer (or a confirmation of book-entry transfer of such Notes into
         the Exchange Agent's account at the Depository) and all other documents
         required by the Letter of Transmittal, are received by the Exchange
         Agent within three New York Stock Exchange trading days after the
         Expiration Date.

   Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Notes according to the guaranteed
delivery procedures set forth above. Any Holder who wishes to tender Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery relating to such
Notes prior to the Expiration Date. Failure to complete the guaranteed delivery
procedures outlined above will not, of itself, affect the validity or effect a
revocation of any Letter of Transmittal form properly completed and executed by
a Holder who attempted to use the guaranteed delivery procedures.
<PAGE>   8
3.  PARTIAL TENDERS; WITHDRAWALS.

   If less than the entire principal amount of Notes evidenced by a submitted
certificate is tendered, the tendering Holder should fill in the principal
amount tendered in the column entitled "Principal Amount Tendered" of the box
entitled "Description of Notes Tendered Hereby." A newly issued Note for the
principal amount of Notes submitted but not tendered will be sent to such Holder
as soon as practicable after the Expiration Date. All Notes delivered to the
Exchange Agent will be deemed to have been tendered in full unless otherwise
indicated.

   Notes tendered pursuant to the Exchange Offer may be withdrawn at any time
prior to the Expiration Date, after which tenders of Notes are irrevocable. To
be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Exchange Agent. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Notes to
be withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn
(including the registration number(s) and principal amount of such Notes, or, in
the case of Notes transferred by book-entry transfer, the name and number of the
account at the Depository to be credited), (iii) be signed by the Holder in the
same manner as the original signature on this Letter of Transmittal (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Notes register the transfer
of such Notes into the name of the person withdrawing the tender and (iv)
specify the name in which any such Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Notes so withdrawn are validly retendered. Any Notes which have been
tendered but which are not accepted for exchange, will be returned to the Holder
thereof without cost to such Holder as soon as practicable after withdrawal,
rejection of tender or termination of Exchange Offer.

4.  SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
    ENDORSEMENTS; GUARANTEE OF SIGNATURES.

   If this Letter of Transmittal is signed by the registered Holder(s) of the
Notes tendered hereby, the signature must correspond with the name(s) as written
on the face of the certificates without alteration or enlargement or any change
whatsoever. If this Letter of Transmittal is signed by a participant in the
Depository, the signature must correspond with the name as it appears on the
security position listing as the owner of the Notes.

   If any of the Notes tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.

   If a number of Notes registered in different names is tendered, it will be
necessary to complete, sign and submit as many separate copies of this Letter of
Transmittal as there are different registrations of Notes.

   Signatures on this Letter of Transmittal or on a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution unless the Notes
tendered hereby are tendered (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.

   If this Letter of Transmittal is signed by the registered Holder or Holders
of Notes (which term, for the purposes described herein, shall include a
participant in the Depository whose name appears on a security listing as the
owner of the Notes) listed and tendered hereby, no endorsements of the tendered
Notes or separate written instruments of transfer or exchange are required. In
any other case, the registered Holder (or acting Holder) must either properly
endorse the Notes or transmit properly completed bond powers with this Letter of
Transmittal (in either case, executed exactly as the name(s) of the registered
Holder(s) appear(s) on the Notes, and, with respect to a participant in the
Depository whose name appears on a security position listing as the owner of
Notes, exactly as the name of the participant appears on such security position
listing), with the signature on the Notes or bond power guaranteed by an
Eligible Institution (except where the Notes are tendered for the account of an
Eligible Institution).
<PAGE>   9
   If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.

5.  SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.

   Tendering Holders should indicate, in the applicable box, the name and
address (or account at the Depository) in which the Exchange Notes or substitute
Notes for principal amounts not tendered or not accepted for exchange are to be
issued (or deposited), if different from the names and addresses or accounts of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the employer identification number or social security number of
the person named must also be indicated and the tendering Holder should complete
the applicable box.

   If no instructions are given, the Exchange Notes (and any Notes not tendered
or not accepted) will be issued in the name of and sent to the acting Holder of
the Notes or deposited at such Holder's account at the Depository.

6.  TRANSFER TAXES.

   The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Notes to it or its order pursuant to the Exchange Offer. If a
transfer tax is imposed for any other reason other than the transfer and
exchange of Notes to the Company or its order pursuant to the Exchange Offer,
the amount of any such transfer taxes (whether imposed on the registered Holder
or any other person) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exception therefrom is not submitted
herewith, the amount of such transfer taxes will be collected from the tendering
Holder by the Exchange Agent.

   Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Notes listed in this Letter of Transmittal.

7.  WAIVER OF CONDITIONS.

   The Company reserves the right, in its reasonable judgment, to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.

8.  MUTILATED, LOST, STOLEN OR DESTROYED NOTES.

   Any Holder whose Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.

9.  REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.

   Questions relating to the procedure for tendering as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Royal Oak Mines Inc., 5501 Lakeview Drive,
Kirkland, Washington, 98033, telephone (206) 822-8992.

10.  VALIDITY AND FORM.

   All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right, in its reasonable judgment, to waive any defects,
irregularities or conditions of tender as to particular Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in this Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Notes must be cured within such time as the Company shall
<PAGE>   10
determine. Although the Company intends to notify Holders of defects or
irregularities with respect to tenders of Notes, neither the Company, the
Exchange Agent nor any other person shall incur any liability for failure to
give such notification. Tenders of Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned by
the Exchange Agent to the tendering Holder as soon as practicable following the
Expiration Date.

                            IMPORTANT TAX INFORMATION

   Under federal income tax law, a Holder tendering Notes is required to provide
the Exchange Agent with such Holder's correct TIN on Substitute Form W-9 above.
If such Holder is an individual, the TIN is the Holder's social security number.
The Certificate of Awaiting Taxpayer Identification Number should be completed
if the tendering Holder has not been issued a TIN and has applied for a number
or intends to apply for a number in the near future. If the Exchange Agent is
not provided with the correct TIN, the Holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such Holder with respect to tendered Notes may be subject to backup withholding.

   Certain Holders (including, among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a Holder who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9 should
execute the certification following such Part 2. In order for a foreign Holder
to qualify as an exempt recipient, that Holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-9, signed under penalties
of perjury, attesting to that Holder's exempt status. Such forms can be obtained
from the Exchange Agent.

   If backup withholding applies, the Exchange Agent is required to withhold 31%
of any amounts otherwise payable to the Holder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.

PURPOSE OF SUBSTITUTE FORM W-9

   To prevent backup withholding on payments that are made to a Holder with
respect to Notes tendered for exchange, the Holder is required to notify the
Exchange Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
Holder is awaiting a TIN) and that (i) each Holder is exempt, (ii) such Holder
has not been notified by the Internal Revenue Service that he or she is subject
to backup withholding as a result of failure to report all interest or dividends
or (iii) the Internal Revenue Service has notified such Holder that he or she is
no longer subject to backup withholding.

WHAT NUMBER TO GIVE THE EXCHANGE AGENT

   Each Holder is required to give the Exchange Agent the social security number
or employer identification number of the record Holder(s) of the Notes. If Notes
are in more than one name or are not in the name of the actual Holder, consult
the instructions on Internal Revenue Service Form W-9, which may be obtained
from the Exchange Agent, for additional guidance on which number to report.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

   If the tendering Holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN or Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.

   IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS)
OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR
PRIOR TO THE EXPIRATION DATE.

<PAGE>   1

                                                                   Exhibit 99.3

                         NOTICE OF GUARANTEED DELIVERY
                                 FOR TENDER OF
                     11% SENIOR SUBORDINATED NOTES DUE 2006
                      (INCLUDING THOSE IN BOOK-ENTRY FORM)
                                       OF
                              ROYAL OAK MINES INC.

     This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Royal Oak Mines Inc. (the "Company") made pursuant to the
Prospectus, dated October 9, 1996 (the "Prospectus"), if certificates for
the outstanding 11% Senior Subordinated Notes Due 2006 of the Company (the "Old
Notes") are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Exchange Agent prior to 5:00 p.m., New York
time, on the Expiration Date of the Exchange Offer. Such form may be delivered
or transmitted by telegram, telex, facsimile transmission, mail or hand delivery
to Mellon Bank, F.S.B. (the "Exchange Agent") as set forth below. In addition,
in order to utilize the guaranteed delivery procedure to tender Old Notes
pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal (or facsimile thereof) must also be received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized
terms not defined herein are defined in the Prospectus.

                      MELLON BANK, F.S.B., EXCHANGE AGENT

                      BY MAIL, HAND OR OVERNIGHT COURIER:

                              Mellon Bank, F.S.B.
                             c/o Mellon Bank, N.A.
                         2 Mellon Bank Center, Room 325
                           Pittsburgh, PA 15259-0001
                     Attention: Elaine Renn, Vice President

                                 BY FACSIMILE:

                                 (412) 234-9196

                             CONFIRM BY TELEPHONE:

                                 (412) 234-4694

     DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.

Ladies and Gentlemen:

     Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed
Delivery Procedures" section of the Prospectus.

Principal Amount of Old Notes Tendered:*

$___________________________________________________________

Certificate Nos. (if available):

____________________________________________________________

Total Principal Amount Represented by Certificate(s):

$___________________________________________________________

*Must be in denominations of principal amount of $1,000 and
any integral multiple thereof.

____________________________________________________________
<PAGE>   2

     All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.

_______________________________________________________________________________

                                PLEASE SIGN HERE

X_____________________________________    _____________________________________


X_____________________________________    _____________________________________
      Signature(s) of Owner(s)                             Date
      or Authorized Signatory

Area Code and Telephone Number:_________________________

     Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below. If Old Notes will be delivered by book-entry
transfer to The Depository Trust Company, provide account number.

                      PLEASE PRINT NAME(S) AND ADDRESS(ES)

Name(s):        _______________________________________________________________

                _______________________________________________________________

                _______________________________________________________________

                _______________________________________________________________

Capacity:       _______________________________________________________________

                _______________________________________________________________

Address(es):    _______________________________________________________________

                _______________________________________________________________

Account Number: _______________________________________________________________

<PAGE>   3


                                   GUARANTEE
                    (NOT TO BE USED FOR SIGNATURE GUARANTEE)

     The undersigned, a financial institution (including most banks, savings and
loan associations and brokerage houses) that is a participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program or the Stock Exchanges Medallion Program, hereby guarantees
that the undersigned will deliver to the Exchange Agent the certificates
representing the Old Notes being tendered hereby or confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at The Depository
Trust Company, in proper form for transfer, together with any other documents
required by the Letter of Transmittal within three New York Stock Exchange
trading days after the Expiration Date.

Name of Firm ___________________________________________________________________

Address ________________________________________________________________________

________________________________________________________________________________

Area Code & Telephone No. ______________________________________________________

Authorized signature ___________________________________________________________

Name ___________________________________________________________________________
     (Please Type or Print)

Title __________________________________________________________________________

Date ___________________________________________________________________________

NOTE:  DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF OLD
       NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER
       OF TRANSMITTAL.


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