<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file No. 0-6202-2
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NORD RESOURCES CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 85-0212139
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(State or other jurisdiction (I.R.S Employer
of incorporation or organization) Identification No.)
8150 Washington Village Dr. Dayton, Ohio 45458
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (513) 433-6307
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Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock par
New York Stock Exchange
value $.01 per share
Securities registered pursuant to Section 12 (g) of the Act:
None
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates, based on the
closing price of $3.75 as of March 31, 1995, was $58,700,000.
The number of shares of Common Stock outstanding as of March 31, 1995 was
15,838,408.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Proxy Statement to be dated April 25, 1995 (Part III).
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Nord Resources Corporation ("Company") is a natural resource company
primarily engaged in the mining and processing of industrial minerals -- kaolin
and titanium dioxide (rutile and ilmenite). The Company owns an 80% interest in
the kaolin operation and a 50% interest in the titanium dioxide operation. The
Company's investments include 35% ownership of Nord Pacific Limited ("Pacific"),
a company engaged in the exploration of precious metal, base metal and strategic
mineral properties and in the production of copper.
In January 1995, the mining location of the titanium dioxide operation
("SRL") in Sierra Leone, West Africa was attacked by non-government forces. As
a result of concern for the safety of SRL's employees, the minesite was
evacuated. Mining operations are currently suspended as there continues to be
civil disturbances in Sierra Leone. It has been reported to the Company that
military activity between government and non-government forces has continued in
and around the SRL mining location since the initial attack. As a result, SRL
employees have not been able to assess any damage which likely has occurred to
mine assets. The Company and its 50% joint venture partner are continuing to
assess the future of the mining operation, including political, military and
security situations in Sierra Leone. Until security in Sierra Leone improves,
SRL will not be able to determine when it will be able to recommence operations
in Sierra Leone, or the extent of loss in the value of its property and
equipment due to damage, looting or general deterioration due to lack of
maintenance. In addition, until SRL is able to assess the status of the
production facilities, it cannot determine the costs it will incur to
reestablish operations, including the cost of replacing supplies, training its
work-force and recommissioning the facilities. The Company will assess the need
for an impairment reserve and the accrual of start-up cost when information
becomes available. If the civil disturbances in Sierra Leone do not cease or
the estimated costs of reestablishment of SRL's operations in Sierra Leone are
prohibitive, the Company may have to record an impairment reserve against a
significant portion or possibly all of its investment in SRL, which is carried
at $64.4 million (Company's cost plus undistributed earnings less certain
indebtedness with effective recourse to the Company) at December 31, 1994. The
Company carries certain levels of insurance against certain political risks, as
is further discussed under the heading "Political and Other Risks" of this Form
10-K.
In February 1994, Pacific completed a public offering in Australia and
raised $14.3 million through the sale of its common stock. In connection with
this transaction, the Company converted $2,900,000 of its outstanding advances
to Pacific to 3,488,721 common shares of Pacific. As a result of these
transactions, the Company's ownership in Pacific decreased from 47% at December
31, 1993 to 35% at the effective date of the Pacific offering. The Company's
ownership could be further diluted in the future as each
<PAGE>
shareholder who purchased a share in the above noted public offering also
received an option, exercisable through June 30, 1995, to purchase an additional
share of Pacific common stock at $.97 ($1.25 Australian) per share. The Company
did not receive any options in connection with the conversion of its advance to
Pacific.
During 1993, the Company sold a 20% interest in its kaolin operation and a
50% interest in its titanium dioxide operation. Proceeds from the sales were
used to repay indebtedness and for working capital. Also during 1993, the
Company disposed of its holdings in Nord Perlite Company. The financial
statements of the Company include the accounts of Nord Perlite Company as
discontinued operations.
Financial information with respect to each of the Company's industry
segments and foreign and domestic operations is presented in the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note T -- Industry Segments of "Notes to Financial Statements" of this
Form 10-K.
KAOLIN
GENERAL
The Company is engaged in the mining and processing of kaolin in
Jeffersonville, Ga., through Nord Kaolin Company ("NKC"). Since the acquisition
of the kaolin operation in January 1978, NKC has expanded and modernized the
production facilities to enhance the production capability for products that are
used as coating or filling pigments by the paper industry. NKC's annual
production capacity for these "conventional type" products has increased from
100,000 tons in 1978 to 310,000 tons currently. Through 1990, NKC's sales
consisted almost exclusively of these "conventional type" products which carry
relatively low per ton prices and profit margins. Even though profit margins
were low, because of efficiency in production methods and cost controls, NKC was
able to generate operating profits through 1988. Since 1988, NKC has
experienced operating losses because of an oversupply of these conventional
products and significant costs associated with the introduction of a new line of
structured pigment products (Norplex[REGISTERED TRADEMARK]).
During 1985, NKC embarked on a research program to evaluate new products
directed toward enhancing profit margins and strengthening its competitive
position in the market. The research efforts resulted in the development of
Norplex[REGISTERED TRADEMARK] products, which are high-bulking composite
pigments made from kaolin and other minerals. These composite pigments can be
custom designed to meet specific needs of the paper industry, such as increased
paper opacity and brightness, often at reduced cost. The ability to custom
design a pigment for a particular application or even for a particular customer
is unique. It is important because, for example, a filler pigment used in
newsprint is different than one used in copy paper or lightweight publication
grades. In another example, a coating pigment for packaging board is different
than that used for magazine paper. Each segment of the paper industry has its
own individual needs. Certain of these needs can be satisfied by supplying
high-bulking composite pigments such as Norplex[REGISTERED TRADEMARK].
Norplex[REGISTERED TRADEMARK] products are produced using an evolving technology
which can create products to meet
<PAGE>
specific customer requirements at various prices and profit margins for NKC.
In 1987, a decision was made to proceed with a capital expansion program to
enhance the cost effectiveness of the current plant facilities and to establish
new facilities for the production of Norplex[REGISTERED TRADEMARK]. A program
began in 1988 to expand production capacity and to enable NKC to produce
Norplex[REGISTERED TRADEMARK] and another kaolin based product (calcined clay --
Norcal[REGISTERED TRADEMARK]). In connection with the expansion, NKC expended
$23.8 million and entered into leasing arrangements for an additional $17.6
million of equipment.
Production of Norplex[REGISTERED TRADEMARK] commenced during the first
quarter of 1990 and was used primarily in customer trials. Sales of
Norplex[REGISTERED TRADEMARK] products occurred on a limited basis through 1992,
as the rigorous and lengthy evaluation by the paper industry and the severe
negative pressures on the economy due to the recession caused a delay in market
penetration of Norplex[REGISTERED TRADEMARK] products. Sales of
Norplex[REGISTERED TRADEMARK] products began increasing in 1993, with this trend
continuing into 1994. A number of paper companies are now purchasing
Norplex[REGISTERED TRADEMARK] products on a regular basis. In addition,
production trialing of various Norplex[REGISTERED TRADEMARK] products at a
number of potential customers locations indicates continued interest in market
acceptance of Norplex[REGISTERED TRADEMARK].
NKC has an ongoing program for development of new kaolin-based products for
the paper industry and potentially other industries. Recently developed
products being introduced include Norplex[REGISTERED TRADEMARK] products which
can be used as a primary opacifying pigment in alkaline paper filling. In
addition a kaolin-based product has been developed for use in the paper
recycling industry to remove certain impurities in recycled paper.
NKC's operations are subject to local and environmental regulations which
require among other things, reclamation of mined areas, purification of
production waste water and maintenance of dust emission control. The Company
believes that NKC's mining and production operations comply with applicable
local and environmental laws.
RESERVES
NKC owns and leases land with crude kaolin reserves and owns mineral rights
to additional reserves, all located within 35 miles of the Jeffersonville
facility. Estimated recoverable crude kaolin reserves as of December 31, 1994
are 31 million tons. Considering the mining and processing recovery rates
associated with current and future product mix, total reserves constitute over a
25 year supply of kaolin feedstock. Substantially all reserves held under
existing leases are anticipated to be mined prior to expiration of lease terms.
NKC continues to seek new reserves in the Jeffersonville area, although it faces
heavy competition for such reserves from other large kaolin producers. The
estimated recoverable reserves have been prepared by employees of NKC and have
not been independently verified since 1989. During 1994, NKC purchased almost
half of its crude ore requirements from one source. This enables NKC to
further extend its owned or leased reserves available for the production of
conventional type products. NKC anticipates that this source of crude ore will
continue to be available for purchase for at least the next 2-4 years.
<PAGE>
LICENSES AND TRADEMARKS
During 1990, NKC had Norplex[REGISTERED TRADEMARK] registered as a Federal
Trademark. This registration will expire 10 years from date of issuance. It
can be renewed after that period with the proper application. NKC had
Norcal[REGISTERED TRADEMARK] registered as a Federal Trademark in November 1993.
NKC has entered into a license agreement to produce and sell products
produced using the Norplex [REGISTERED TRADEMARK] technology. The license
extends through June 1998, with NKC having an option to extend the license for
two successive five year periods. The license allows NKC exclusive rights
through 1999, with a five year extension of exclusive rights available to NKC if
certain levels of Norplex[REGISTERED TRADEMARK] product revenues are attained.
The license agreement requires payment of an annual royalty of 1 1/2% on
Norplex[REGISTERED TRADEMARK] product revenues up to $60 million and 2% on any
Norplex[REGISTERED TRADEMARK] product revenues in excess of $60 million. NKC is
required to pay minimum monthly royalties of approximately $34,200, adjusted
annually by the change in the United States Bureau of Labor Statistics Consumer
Price Index. NKC may terminate the license agreement upon 30 days notice to the
licensor.
SALES AND COMPETITION
Substantially all of NKC's production of conventional kaolin,
Norcal[REGISTERED TRADEMARK] and Norplex[REGISTERED TRADEMARK] products are
sold to the paper manufacturing industry. To the best of NKC's knowledge, there
are no take or pay long-term contracts between a supplier of kaolin and a paper
manufacturer. However, there are signed letters of intent regarding annual
kaolin requirements. Sales are made in response to current orders at
competitive prices. This lack of long-term contracts subjects NKC to reduction
of orders based on general economic conditions. Any material reduction in
orders or the loss of a significant customer would have a material adverse
effect on the results of operations. Following is a summary of tons sold by NKC
(in 000's).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
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1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Conventional 180 161 209
Norcal[REGISTERED TRADEMARK] 19 18 13
Norplex[REGISTERED TRADEMARK] 29 22 12
--- --- ---
TOTAL 228 201 234
--- --- ---
--- --- ---
</TABLE>
<PAGE>
NKC's revenues in 1994 include sales to one customer in excess of 10% of
the Company's revenues. NKC has had a long-term relationship with this customer
and although there is no indication the current relationship is likely to
change, in the event the customer is lost or significantly reduces its orders,
such loss or significant reduction could have a material adverse effect upon the
financial condition and results of operations of the Company. During 1994, 96%
of sales were to domestic customers and 4% were for export, compared to 92%
domestic and 8% export in 1993 and 88% domestic and 12% export in 1992.
Kaolin frequently constitutes a significant percentage of the material in
paper used in magazines, annual reports, advertising brochures and similar
publications that employ glossy paper and yet represents only a modest
percentage of the cost of the paper. The Company is not aware of any commercial
substitute for kaolin in the coating applications of paper; however, because a
number of paper manufacturers have converted to the alkaline process, calcium
carbonate can be substituted for kaolin in certain filling applications. The
Company believes that the paper industry will continue to attempt to use kaolin
in the production of paper to a maximum extent practicable. However,
consumption of paper products in which kaolin is primarily used is sensitive to
general economic conditions and paper and kaolin production could decline in
periods of recession or economic difficulty.
NKC's competitors, all located in middle Georgia, have production capacity
for conventional type products several times that of NKC. The Company believes
that excess capacity of kaolin producers and conversion by paper manufacturers
to the alkaline process for production of certain grades of paper have had a
negative impact on NKC's conventional type product prices and sales volume in
the last five years.
The Company believes that NKC is presently the only company in its industry
which is producing Norplex[REGISTERED TRADEMARK] type products for sale to the
paper industry. Certain Norplex[REGISTERED TRADEMARK] products are marketed to
customers for use in coating and filling applications that require
high opacity pigments. While there are companies with greater market maturity
with products, such as titanium dioxide pigments, in direct competition with
these Norplex[REGISTERED TRADEMARK] products, the Company believes the
Norplex[REGISTERED TRADEMARK] products have performance and cost advantages that
will result in continued market penetration and sales to the paper industry.
EMPLOYEES
At December 31, 1994, NKC employed a total of 163 persons, including 61
salaried personnel and 102 hourly employees. The mining and manufacturing
employees are represented by the United Paperworkers International Union under a
contract which expires in November 1996. The Jeffersonville facility has not
been the subject of a strike or labor disturbance and NKC considers its labor
relations to be satisfactory.
<PAGE>
RUTILE
GENERAL
On November 17, 1993 the Company sold a 50% interest in its rutile
operations to Consolidated Rutile Limited, an Australian company. The data
contained in the following discussion relate to 100% of these rutile operations.
Sierra Rutile Limited ("SRL") is engaged in the mining and processing of
titanium dioxide minerals (rutile and ilmenite) in Sierra Leone, West Africa and
the marketing of these products. Both rutile and ilmenite are used in the
production of more highly concentrated titanium dioxide, which in turn is used
as a pigment in the manufacture of paint and many types of paper and plastic
products. Titanium dioxide is also used in the production of fiberglass,
enamels and coated fabrics. Rutile is used to a lesser extent in welding rod
electrode coatings and in the production of titanium metal.
SRL has leased from the government of Sierra Leone a total of 224 square
miles until the year 2009, when the lease is subject to a renewal option of
fifteen years on terms to be established at the time of renewal.
In January 1995, the mining location of the titanium dioxide operation
("SRL") in Sierra Leone, West Africa was attacked by non-government forces. As
a result of concern for the safety of SRL's employees, the minesite was
evacuated. Mining operations are currently suspended as there continues to be
civil disturbances in Sierra Leone. It has been reported to the Company that
military activity between government and non-government forces has continued in
and around the SRL mining location since the initial attack. As a result, SRL
employees have not been able to assess any damage which likely has occurred to
mine assets. The Company and its 50% joint venture partner are continuing to
assess the future of the mining operation, including political, military and
security situations in Sierra Leone. Until security in Sierra Leone improves,
SRL will not be able to determine when it will be able to recommence operations
in Sierra Leone, or the extent of loss in the value of its property and
equipment due to damage, looting or general deterioration due to lack of
maintenance. In addition, until SRL is able to assess the status of the
production facilities, it cannot determine the costs it will incur to
reestablish operations, including the cost of replacing supplies, training its
work-force and recommissioning the facilities. The Company will assess the need
for an impairment reserve and the accrual of start-up cost when information
becomes available. If the civil disturbances in Sierra Leone do not cease or
the estimated costs of reestablishment of SRL's operations in Sierra Leone are
prohibitive, the Company may have to record an impairment reserve against a
significant portion or possibly all of its investment in SRL, which is carried
at $64.4 million (Company's cost plus undistributed earnings less certain
indebtedness with effective recourse to the Company) at December 31, 1994. The
Company carries certain levels of insurance against certain political risks, as
is further discussed under the heading "Political and Other Risks" of this Form
10-K.
<PAGE>
PRODUCTION FACILITIES
SRL's production facilities presently include a bucket-ladder dredge
equipped with 68 buckets, each with a capacity of 28 cubic feet. The average
digging rate of the bucket-ladder dredge under good conditions is about 1,100
metric tonnes ("tonnes":2,204.6 pounds) per hour. Production from this dredge
in 1995 was projected to approximate 1994 levels of 140,000 tonnes. Beginning
in 1996, annual production levels were projected to decline to ranges near the
100,000 tonne level, due to change in ore grade. Additional production capacity
is available through use of a smaller, bucket-wheel dredge, with an annual
digging rate under good conditions of about 500 tonnes per hour. This dredge
did not operate in 1994 and is currently on stand-by. Annual production is
dependent on the ore grade and other recovery factors inherent in the deposits,
as well as down time for maintenance and equipment installation.
The concentrating of the crude ore, which has a titanium dioxide content of
between 1.5% and 2.0%, begins on the bucket-ladder dredge. The first stages of
processing consist of primary and secondary scrubbing and two stages of
screening. The bucket-wheel dredge pumps reclaimed ore to a supplemental wet
processing plant where primary and secondary scrubbing and two stage screening
are also carried out. The screened material, containing 2.7% to 3.0% titanium
dioxide, is then pumped to the floating wet plant where slimes are removed by
cyclones. The cyclone discharge, consisting of screened, deslimed sand
containing about 4% titanium dioxide is then pumped to the concentrating
section, consisting of banks of spiral separators. These increase the titanium
dioxide content of this wet semi-concentrate to about 50%, which is pumped to
shore for dewatering. From there it is transported by truck to the table plant
where shaking tables are used to concentrate the material to a grade of about
60% titanium dioxide. This material is then fed to the dry plant where,
following drying to less than 0.1% moisture, electrostatic and magnetic
separation complete the process, producing a final rutile product containing
about 96% titanium dioxide and an ilmenite by-product containing about 64%
titanium dioxide.
During 1993, SRL began a production expansion and facilities improvement
program, primarily the construction of a third dredge and a new power generating
facility. The dredge is expected to cost $30 million and was targeted for
commissioning during the fourth quarter of 1995 and was expected to be producing
at capacity by January 1996. The expected annual production capacity of the
dredge is over 100,000 tonnes of rutile to be mined from the Gangama ore body,
where it will initially begin production. However, due to the current
suspension of mining operations, a revised construction schedule for the dredge
cannot be determined. The new power generating facility, consisting of two 5
megawatt diesel generators which have been delivered to the minesite in Sierra
Leone, was initially expected to be on-line in mid-1995 at a cost of $19
million. The power generated by this facility is anticipated to be available to
the third dredge, as described above, and to supplement the existing power
generating equipment. The Company is not able to determine when this facility
will be operational due to the present suspension of mining operations.
<PAGE>
Other physical assets of SRL include support plant and equipment including
a power plant, workshops, tugs, barges, concentrate loading facilities,
administrative buildings and a "company town" of furnished homes for senior and
intermediate staff.
RESERVES
Based on drill hole testing and geological analysis carried out by SRL
personnel in 1993 and revised for amounts extracted in 1994, proven reserves
as of December 31, 1994 are 271,585,000 tonnes of ore, averaging 1.48%
recoverable rutile in the size ranges from which recovery is possible, which
computes to 4,006,000 tonnes of recoverable rutile. Actual recovery has
steadily improved and is now estimated at 80% of recoverable rutile, or about
3,200,000 tonnes. SRL's estimate of ore reserves as of December 31, 1991 were
reviewed and verified by independent consulting geologists in early 1993. The
data below are derived directly therefrom.
Reserves are located in five separate deposits. The five areas, the tonnes
of crude ore they contain, recoverable rutile grade and tonnes of recoverable
rutile at December 31, 1994 are as follows (tonnes in 000's):
<TABLE>
<CAPTION>
CRUDE RECOVERABLE RUTILE
ORE ------------------
DEPOSIT TONNES GRADE TONNES
- ------- ------ ----- ------
<S> <C> <C> <C>
LANTI NORTH 22,147 1.93% 428
LANTI SOUTH 55,644 1.74% 968
GBENI 33,381 1.61% 537
GANGAMA 22,011 1.75% 385
SEMBEHUN 138,402 1.22% 1,688
------- -----
271,585 1.48% 4,006
------- -----
------- -----
</TABLE>
The above amounts represent a decrease of 8,359,000 tonnes of crude ore
and 158,000 tonnes of recoverable rutile over December 31, 1993 figures, due
primarily to 1994 production. The average recoverable rutile grade decreased
from 1.49% in 1993 to 1.48% in 1994.
SRL remains of the view that additional exploration in the lease areas, or
in other nearby areas for which exploration concessions may be obtained and in
which there are indications of rutile mineralization, may identify additional
reserves. The reserves at Sembehun are located in the Northern portion of SRL's
mining concession, which is approximately 15 miles from the present plant
location and the other 4 deposits. The dredging operations in 1994 were
exclusively in the Lanti North deposit, which is adjacent to the Lanti South and
Gbeni deposits. The dredge presently under construction is expected to
initially operate in the Gangama deposit.
<PAGE>
SALES AND COMPETITION
Following is a summary of sales for SRL:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Tonnes Sold (in 000's):
Rutile 152 144 153
Ilmenite 53 65 63
Geographical Location of Customers
(% of Revenues):
Rutile:
U.S. 41% 57% 58%
Non-U.S. 59% 43% 42%
Ilmenite -- U.S. 100% 100% 100%
</TABLE>
The potential customers for SRL's products consist primarily of six major
companies, five of which were customers of SRL in 1994. All of SRL's major
customers in 1994 have been long time customers and all currently have long-term
supply agreements with SRL, which are periodically subject to renewal. During
1994, the Company's share of SRL's sales to two of these customers exceeded 10%
of the Company's revenues. SRL has been successful in negotiating sales
agreements which, had the mine been in sustained production during 1995, would
have resulted in the sale of its entire expected 1995 production, plus a portion
of its inventory available at December 31, 1994. The sales agreements generally
provide for a fixed rutile tonnage that each customer is expected to purchase.
Historically, each of the customers has purchased at least the minimum amounts
required in their respective sales agreements. Although there is no indication
that the current relationships with these customers is likely to change, in the
event a major customer is lost or significantly reduces its orders, such loss or
significant reduction could have a material adverse effect upon the financial
condition and results of operations of the Company.
As long as operations at the mine are suspended for reasons beyond the
control of SRL, it will not produce rutile for delivery to its customers. These
missed deliveries are generally subject to cancellation by SRL, or the customer,
for reasons of force majeure, without affecting future shipments.
<PAGE>
The two principal minerals mined by titanium raw material producers are
natural rutile (concentrated to 93% to 96% titanium dioxide) and ilmenite
(concentrated to between 40% and 70% titanium dioxide, with an accompanying high
iron content). SRL is one of the world's largest producers of natural rutile,
accounting for about 25% of the total. About 60% of the world's total is
produced by companies in Australia, some of whom have greater financial
resources than SRL, and about 15% is produced in South Africa. Minor production
comes from the United States, India and Sri Lanka and nominal amounts from other
sources.
The world's known reserves of natural rutile are not sufficient to supply
the world's raw material need for high titanium dioxide raw materials required
for pigment. As a result, processes have been developed to upgrade ilmenite to
provide high-content titanium dioxide substitutes known as "slag" and
"synthetic" rutile, containing 85% - 92% or more titanium dioxide. However,
since natural rutile remains a higher grade raw material source and contains
less waste, it continues to be the preferred feedstock for the production of
paint pigment. Any significant improvement in the economics of upgrading lower
grade titanium minerals to higher grade titanium products other than "slag" and
"synthetic rutile" could adversely affect SRL's competitive position.
Prior to suspension of operations SRL had undertaken a program to increase
annual production to about 190,000 tonnes of natural rutile concentrate, which
would represent about 30% of the world's annual production. SRL's ability to
meet such objectives is partially dependent upon world economic conditions and
the availability of financial resources. Economic conditions have allowed SRL
to obtain contracts for the sale of over 95% of its planned expanded production
through 1997. However, the timing and potentially the cost of the expansion may
be adversely affected by the suspension of mining operations. It is not
possible to predict at this time what the effect will be on the expansion.
EMPLOYEES
At December 31, 1994, SRL employed a total of 1,810 persons including 174
senior staff, 215 intermediate and junior staff, and 1,421 hourly rated
employees. All but 24 of SRL's employees are nationals of Sierra Leone. SRL is
one of that country's largest private employers. Subsequent to year end, as a
result of the suspension of mining operations in Sierra Leone, SRL terminated
all of its personnel except for a core staff of senior expatriates and senior
Sierra Leone nationals.
POLITICAL AND OTHER RISKS
Sierra Leone is an independent republic on the West African coast. A
former British colony, it is pro-western and retains ties to Great Britain
through its membership in the Commonwealth. The economy of Sierra Leone is
based largely on agriculture, fishing and the mining of rutile, bauxite, gold
and diamonds.
As has been previously discussed, Sierra Leone is presently in a general
state of
<PAGE>
civil unrest. Certain non-government factions have been involved in military
actions which have resulted in the suspension of operations at the SRL mine and
at a bauxite mine, located 10 miles from SRL's mine. SRL believes that at least
3 of its employees have been taken hostage by these forces. It has been
reported to SRL that numerous other expatriate and Sierra Leone nationals may
have also been taken hostage and that fighting between government and non-
government forces is continuing in many parts of Sierra Leone. Neither the
Company nor SRL is able to estimate when the political conditions in Sierra
Leone will stabilize to enable SRL to resume its mining operations.
Sierra Leone's former one-party government was overthrown in late May 1992,
in a nearly bloodless coup, by a group of young military officers, headed by
Captain Valentine Strasser who is now Head of State of Sierra Leone. The ruling
body is known as the National Provincial Ruling Council (the "NPRC"). The NPRC
has pledged to return the Government to civilian rule with elections after its
has ended disruption caused by dissidents along the border with Liberia and
restructured the Government. The NPRC is working closely with the International
Monetary Fund ("IMF") and currently has an IMF Structural Adjustment Program in
place, the objective of which is to help strengthen the economy. The present
Government is receiving considerable economic support from multi-lateral
international agencies including the World Bank, the European Economic Community
and the IMF.
Under the 1989 Agreement between SRL and the Government of Sierra Leone,
the Government has an option to purchase a 47% ownership interest in SRL on or
after January 1, 2000 at a purchase price of $57.4 million. Both shareholders
of SRL would sell equal interests in SRL if this purchase option is exercised.
Under the Agreement, SRL continues to maintain its currency outside of Sierra
Leone and will not be subject to withholding tax on any shareholder dividend
payments until the year 2000, after which the Government has the right to impose
a 10% withholding tax on dividends. The Agreement also defines the rate at
which income tax, royalty and mining lease payments are to be made by SRL. The
Agreement was reaffirmed by the NPRC by decree.
As Sierra Leone is a third-world country, the Company's investment in SRL
is subject, at any time, to the potentially volatile effects of political
instability and economic uncertainty often present in such countries, including
civil strife and expropriation, excessive taxation and other forms of government
interference. As a precaution to a change in political climate, the Company is
insured by Overseas Private Investment Corporation ("OPIC") (1) for loss of its
50% share of SRL's property due to political violence in an amount up to $15.7
million and, (2) expropriation of its Sierra Leone assets in an amount up to
$23.7 million. In addition to the OPIC coverage, the Company has coverage
through a private insurer for expropriation in an amount up to $8.4 million.
Both insurance coverages are renewable annually, contain certain limitations and
requirements and do not provide coverage for loss of revenues. The private
insurer elected to not renew its coverage when the policy expired on March 31,
1995. The Company has advised both of the above noted insurers that it may have
potential claims under the policies as a result of the present situation in
Sierra Leone. However, the Company is not presently able to predict the extent
or timing of claims which may be made under the above policies or the insurance
proceeds which may ultimately be realized by the Company.
<PAGE>
NON-SEGMENT BUSINESSES
The Company owns 35% of Nord Pacific Limited ("Pacific") (NASDAQ-NORPF), a
company involved in the exploration of precious metal, base metal and strategic
mineral properties. Pacific's currently producing operation consists of a 40%
interest in a copper mine located in Australia. The mine began production in
mid-1993 and projects that at its present production rate it can sustain
production from its present reserves through 1999. Pacific is engaged in a
program to explore for additional copper reserves in and around its present
mining operation, although no proven reserves have been identified to date. If
Pacific is successful in identifying additional reserves, the operating life of
the present mining operation could be extended. Pacific owns 40% of a nickel-
cobalt-chromium property and 100% of a gold prospect, both located in Papua New
Guinea. The nickel-cobalt-chromium project requires more stable prices and
additional test work and engineering before undertaking development, due to its
substantial capital costs and fairly lengthy engineering and construction
period. Pacific has agreed to reduce its interest to 40% in this property in
exchange for its venture partner funding 100% of the cost of further exploration
and initial development work. Pacific also has interests in other properties
which will require additional exploration to determine the existence of
commercial mineral deposits, primarily gold.
The Company has a 40% interest in a venture which owns an undeveloped
parcel of over 200 acres of real property located in Manatee County, Florida.
The venture intends to either sell this property or have it developed by others.
ITEM 2. PROPERTIES
Reference is made to Item 1 of this Form 10-K for information concerning
the nature and location of the properties of the Company and identification of
the major segments in which such properties are used. Management believes that
the Company's facilities are generally adequate for its operations and are
maintained in a good state of repair other than any as yet undetermined damage
which may have occurred to the equipment at SRL.
ITEM 3. LEGAL PROCEEDINGS
On January 31, 1990 the Company's wholly-owned subsidiary, Sierra Rutile
Limited ("SRL"), filed a Demand for Arbitration against Bomar Resources, Inc.
("Bomar"). The arbitration provision in the agreement between SRL and Bomar
required arbitration in New York City under the rules of the American
Arbitration Association. SRL demanded arbitration of various disputes arising
out of a written exclusive agency agreement dated November 15, 1983 and asserted
that Bomar failed to properly account for sales proceeds in connection with
rutile entrusted to it and committed fraudulent acts by which SRL was
<PAGE>
damaged in amounts believed to exceed $10,000,000. Bomar denied the allegations
contained in SRL's arbitration demand and asserted in written counterclaims that
SRL was obligated to it for (1) failing and refusing to pay commissions on
purchase orders executed before cancellation of the exclusive agency agreement
effective December 31, 1988, for delivery of rutile subsequent to such date (in
excess of $5,000,000), (2) commissions on purchase contracts executed in 1989
with respect to which Bomar allegedly provided assistance (no amount set forth),
and (3) interference with contracts of affreightment allegedly depriving Bomar
of certain profits which would have been made by way of payments from ocean
carriers had Bomar been able to transport SRL's rutile shipped in 1990 (in
excess of $1,000,000). In proceedings in the United States District Court for
the Southern District of New York captioned SIERRA RUTILE LIMITED v. BOMAR
RESOURCES, INC., 90 Civ. 835 (JFK), (the "SRL Proceeding"), Bomar disputed its
obligation to arbitrate matters relating to 1989 transactions and that objection
was overruled by the Court in an Opinion and Order dated February 21, 1990, in
which the District Judge compelled arbitration as to all disputes. On March 7,
1990, Bomar moved for reargument before the District Judge. On June 12, 1990,
its motion was denied and SRL's cross-motion for a hearing on its application
for a preliminary injunction was granted. On the motion for reargument, Bomar
advised that it was now known as Brinc, Ltd. and that its affiliated company,
Rivson International Inc. was now known as Bomar Resources, Inc. ("New Bomar").
Hearings in the arbitration were held in April and May 1991. On November
15, 1991, the arbitration panel rendered an award in favor of SRL and against
Bomar. The arbitration decision adjudged Bomar liable to SRL for breach of the
exclusive agency agreement and awarded damages in the determined amount of
approximately $3,700,000, and directed an accounting to SRL for various
transactions found to have been improper. The arbitration decision trebled the
entire award under the provisions of the Federal Racketeer Influenced and
Corruption Organizations Act (RICO). It also awarded SRL legal fees, expenses
and interest. All of Bomar's counterclaims for post termination sales
commissions, unjust enrichment and alleged interference by SRL with contracts of
affreightment were denied in all respects.
On April 2, 1992, the arbitration panel rendered a final arbitration award
in favor of SRL for an amount in excess of $50 million. SRL was awarded $13.8
million in connection with various transactions found by the arbitrators to have
been improper and fraudulent as to SRL. SRL was also awarded interest totaling
in excess of $4.5 million on all amounts. The award trebles damages under the
provisions of RICO. SRL was also awarded its counsel fees and costs. On August
20, 1992 the United States District Court for the Southern District of New York
confirmed the arbitration award in SRL's favor and on August 25, 1992 entered a
judgment in favor of SRL and against Bomar in an amount of $56.7 million.
On July 5, 1990, SRL instituted an action in the Supreme Court of the
State of New York, County of New York captioned SIERRA RUTILE LIMITED v. SIMON
Y. KATZ, ET AL. against Bomar's principals and a number of persons and entities
not bound to arbitrate under the terminated restated exclusive agency agreement
dated November 15, 1983 between SRL and Bomar and who are alleged to have
participated in, and benefited from, the acts of
<PAGE>
which SRL has complained. The SRL complaint transcended the arbitrable issues
and among other things, also sought damages against various corporate entities
on various legal theories including transferred liability and alter ego/piercing
the corporate veil, in addition to claims under the Racketeer Influence and
Corrupt Organization Act, 18 U.S.C. Para. 1961, ET SEQ. and the laws of the
State of New York ("SRL Lawsuit"). On July 25, 1990, certain defendants in the
SRL Lawsuit removed the action to the United States District Court for the
Southern District of New York where it has been assigned to the Honorable John
F. Kennan, 90 Civ. 4913 (JFK). On September 9, 1992, the District Court denied
motions to dismiss advanced by various defendants holding that SRL's claims had
been properly pleaded and that the Court had personal jurisdiction over all of
the defendants, including the London based Berisford International plc, the
Amsterdam based Eggerding & Co., and London residents Ephraim Margulies, Harold
Wiltshire and Patrice Klein.
On October 30, 1992, SRL entered into a settlement with several defendants
in the SRL Lawsuit, to wit, certain officers and directors of Bomar. The
settling defendants agreed to pay $2 million to SRL of which $1.5 million has
already been collected. They also agreed to cooperate in SRL's prosecution of
the SRL Lawsuit against the other defendants. Concurrently, Brinc Ltd.'s and
New Bomar's complaint in the "Bomar Lawsuit" was dismissed in its entirety with
prejudice. An application was filed by one of the defendants in the SRL Lawsuit
seeking to void or modify the terms of the above settlement and the Company
believes that the application is without any substance. During January and
April 1993, two other defendants settled with SRL by agreeing to make payments
to SRL in the aggregate of $2.65 million, of which $1.9 million has already been
collected.
In January 1993, SRL filed a second amended complaint bringing in
additional defendants, including a Liechtensteinian Anstalt known as Ferraris
Establishment, claiming fraudulent transfer in sums exceeding $15 million. In
September 1993, a settlement was reached with several defendants, including
Ferraris Establishment, for $3.2 million, which has been collected.
The Company has now reached settlements totaling approximately $7.85
million with all principal defendants in the above action except for the London
based Berisford International plc, various Berisford subdivisions and various
Berisford designees to Bomar's Board of Directors.
In June 1994, the Company was granted permission to assert additional
claims against Tradeco Holdings Limited and Bomar International Limited, Cayman
Island entities alleged by SRL to be controlled by Berisford International PLC,
on a guaranty and fraudulent conveyance claim. An answer denying SRL's
allegations was filed on behalf of those entities and on August 4, 1994, an
Amended Answer, including counterclaims against SRL, cross-claims and purported
third party claims against the Company and other defendants was filed. The
counterclaim and third party claims assert, among other things, that the acts
complained of by SRL and upon which its judgment in arbitration was predicated,
was not only known to SRL but also participated in by the Company and others and
constituted a fraud on Tradeco for which SRL and the Company have liability or
responsibility. The Company intends to vigorously oppose the counterclaims and
third
<PAGE>
party claims asserted against it, which it regards without merit. The Company
has been advised by its counsel that based on the facts known to it, Tradeco's
asserted claims both by counterclaim and/or by third party claims are without
merit and the Company has moved to dismiss the counterclaims and third party
claims and its motions are pending before the Court.
The amended class action entitled IN RE NORD RESOURCES CORPORATION,
SECURITIES LITIGATION, filed in the United States District Court for the
Southern District of Ohio (Dayton); (Civil Action No. C-3-90-391) against the
Company, Messrs. Edgar F. Cruft, Richard L. Steinberger, Terence H. Lang,
Leonard Lichter, Donald L. Roettele, Harrison Schmitt and Karl Frydryk, which is
discussed in detail in the Company's Form 10-K for the fiscal year ended
December 31, 1993, was settled by the Company paying $4,750,000, which was
comprised of $500,000 in cash and $4,250,000 in stock. In addition, the Company
paid costs of notice and administration of $76,000.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(A) The following table sets forth, for the calendar periods indicated,
the high and low closing sale price of the Company's Common Stock on
the New York Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
1994 1993
------------- -------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
FIRST QUARTER 7 5 6 5/8 5 5/8
SECOND QUARTER 5 3/4 4 1/2 6 3/8 4 1/8
THIRD QUARTER 6 7/8 4 1/2 5 3/8 4 1/4
FOURTH QUARTER 6 3/4 5 1/8 5 5/8 4 1/2
</TABLE>
(B) Approximate number of equity security holders at December 31, 1994:
NUMBER OF
TITLE OF CLASS HOLDERS OF RECORD
-------------- -----------------
Common Stock 1,800
(C) The Company has never paid cash dividends on its Common Stock and does
not expect to do so in the immediate future.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following summary of certain financial information relating to the
Company for the five years ended December 31, 1994 has been derived from the
financial statements of the Company. Such information should be read in
conjunction with the financial statements and the report of Deloitte & Touche
LLP, appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
SUMMARY OF OPERATIONS (In thousands except per share amounts)
- ---------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 71,831 $ 89,603 $101,175 $107,793 $ 99,928
Operating Costs and Expenses 77,447 89,866 100,288 107,919 91,255
Other Income (Expense):
Interest income 854 383 489 624 1,313
Interest expense (1,615) (6,287) (5,135) (4,026) (3,234)
Litigation recoveries 950 4,200 1,450
Shareholder litigation settlement (4,750)
Impairment of assets (3,074)
Gain on sale of 50% of
rutile segment 1,527
Equity in earnings (loss)
of affiliate 1,613 (1,299) (928) (769) (3,530)
Minority interest 1,321 1,166
Income tax (expense) benefit (14,645) 1,562 (3,945) (2,655) (758)
-------- -------- --------- --------- ---------
Earnings (loss) from
continuing operations (15,611) (8,362) (7,182) (6,962) 2,464
Earnings (loss) from
discontinued operations 106 (2,900) (6,584) (2,378)
-------- -------- --------- --------- ---------
Earnings (loss) before extraordinary
item and cumulative effect of
change in accounting principle (15,611) (8,256) (10,082) (13,546) 86
Extraordinary item -- loss on early
extinguishment of debt (826)
Cumulative effect of
change in accounting principle 23,480
---------- --------- --------- ---------- --------
Net earnings (loss) $ (15,611) $ (9,082) $ 13,398 $ (13,546) $ 86
---------- --------- --------- ---------- --------
---------- --------- --------- ---------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------
SUMMARY OF OPERATIONS
- ---------------------
(continued) 1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings (loss) per common
and common equivalent share:
Primary:
From continuing operations $(1.02) $(.55) $(.47) $(.46) $.16
From discontinued operations .01 (.19) (.44) (.15)
------- ------ ------ ------ -----
Earnings (loss) before
extraordinary item and
cumulative effect of change
in accounting principle (1.02) (.54) (.66) (.90) .01
Extraordinary item (.06)
Cumulative effect of
change in accounting
principle 1.55
------- ------ ------ ------ -----
Net earnings (loss) $(1.02) $( .60) $ .89 $(.90) $ .01
------- ------ ------ ------ -----
------- ------ ------ ------ -----
Fully diluted:
From continuing operations $(.31)
From discontinued operations (.16)
------
(Loss) before cumulative
effect of change in
accounting principle (.47)
Cumulative effect of change
in accounting principle 1.29
-----
Net earnings $ .82
-----
-----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
- ------------------
Working Capital
(Deficiency) (1) $ (6,455) $ 28,547 $ 19,521 $ 14,901 $ 9,540
Total Assets 146,115 162,758 226,307 212,890 208,596
Long-Term Debt (1) 4,701 19,738 70,652 65,976 51,330
Stockholders' Equity 97,534 108,809 115,197 102,012 114,943
OTHER DATA
- ----------
Cash from Operating Activities $ 9,540 $ 10,544 $ 12,520 $ 9,315 $ 20,654
Payments of Indebtedness 3,942 25,431 11,986 11,825 5,851
Capital Expenditures 17,307 10,820 7,728 13,023 33,185
Additional Indebtedness 5,650 5,000 21,606 23,544 20,441
<FN>
(1) At December 31, 1994, an additional $19.7 million of long-term debt has
been classified as a current liability because it is in default.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During the three year period ended December 31, 1994, the Company required
substantial funds for capital expenditures, debt payments and other long-term
asset additions totaling $36.4 million, $45.4 million and $7.4 million,
respectively. The Company's operating activities provided $32.6 million of cash
while additional debt totaling $32.3 million was incurred during the three year
period, primarily for capital expenditures and to pay other indebtedness. In
March 1993, Nord Kaolin Company ("NKC") sold a 20% minority interest to an
investor for $4.95 million in cash and received an additional $5.05 million of
raw materials from the investor. During November 1993, the Company sold a 50%
interest in its rutile operations to an Australian mining company and received
initial gross proceeds of $54.8 million, of which $20 million was used to retire
a convertible debenture. Of the remaining proceeds received, the Company used
$13.6 million to repay other indebtedness.
During 1994 and 1993, the Company converted $2.9 million and $2.5 million,
respectively, of its advances to Nord Pacific Limited ("Pacific") to shares of
Pacific's common stock. In 1994, the Company did not receive dividends on its
investment in Pacific.
The Company anticipates that its domestic (non-rutile) operations will use
cash in its operations during 1995. Operations at NKC are projected to improve
so that by the fourth quarter of 1995 NKC could generate cash to repay a portion
of the advances previously made by the Company. This improvement in cash flow
of the kaolin segment is expected to result from increasing levels of sales of
its Norplex[REGISTERED TRADEMARK] line of products, the amount and timing of
which cannot be projected with any certainty. To conserve cash, the Company
does not anticipate making significant expenditures related to domestic capital
programs unless warranted by improving product market conditions. Also, an
additional $2 million received from the settlement of the purchase price of the
1993 sale of 50% of the rutile operations and over $1 million expected to be
collected from defendants in a legal proceeding who have settled will supplement
the Company's cash position in 1995. Sufficient funds are expected to be
available for the Company to continue its existing operations throughout 1995 by
utilization of a portion of its cash balances at December 31, 1994. However, if
the Company is required to fund any activities at the rutile segment, as
discussed below, or if operations at the kaolin segment do not continue to
improve in 1995, the Company's cash reserves could be inadequate.
Due to civil disturbances in Sierra Leone, operations of the Company's 50%
owned rutile segment were suspended in January 1995. The Company cannot
estimate when operations will recommence in Sierra Leone nor can it determine
the amount of funds which may ultimately be required by SRL to restart the
operations. SRL has instituted steps to minimize its cash requirements during
the suspension of its operations, including
<PAGE>
termination of substantially all of its work force and delaying vendor payments.
However, its available cash reserves are not expected to be adequate to satisfy
all of its current obligations and to sustain its remaining operations for an
extended period of time. In addition, SRL is not in compliance with certain
financial and operational covenants under its financing agreements at December
31, 1994. The lenders have agreed to forebear through May 15, 1995 from calling
a default and thereby accelerating payment of the outstanding indebtedness, to
enable SRL to assess the situation in Sierra Leone. If the default conditions
exist at May 15, 1995, the Company anticipates that SRL will request a continued
forbearance from the lenders and possibly changes in the timing of the repayment
of amounts due to the lenders. The Company cannot determine the willingness of
the lenders to grant any additional relief to SRL after May 15, 1995. At
December 31, 1994, the Company's share of SRL's debt outstanding is $23 million,
which is partially secured by $2.9 million required to be carried by SRL in a
restricted cash account.
Under the financing agreements, until SRL's capital expansion program
attains "project completion" the lenders can require the Company to provide 50%
of any funds which may be needed by SRL to fulfill its financial obligations,
including repayment of the above indebtedness. In addition, under the agreement
with the lenders, the Company is required to provide funds due from its 50%
joint venture partner if the partner does not provide its share of funds.
However, the partner has an agreement with the Company to provide its 50% share
of funds required by SRL. If the lenders request acceleration of repayment of
the indebtedness by SRL or SRL requires funds for vendor payments for its
remaining operations, the funds will more than likely have to be provided by the
Company and its partner. The Company may not have an adequate amount of funds
currently available to sustain SRL, including funds required to reestablish its
operations. As a result, it may need to seek funds through additional bank
financing or from other undetermined sources. One source of funds which may be
available to the Company is proceeds from foreign political risk insurance
policies. One policy provides up to $15.7 million of insurance to the Company
for loss of property due to political violence. However, the amount of
recoveries, if any, is not yet determinable and may not be sufficient to fund
all of the Company's portion of cash required by SRL. The Company is unable to
determine the amount of funds which could be required by SRL or if adequate
funds will be available from the above or other undetermined sources on
conditions acceptable to the Company.
Payments under lease agreements at NKC are guaranteed by the Company.
Under the terms of the guaranty, the Company is required to maintain minimum
levels of tangible net worth compared to total liabilities and of cash flow
relative to current maturities of long-term debt beginning March 31, 1995. If a
covenant violation occurs the Company has the right through September 11, 1995
to cure a default by securing a letter of credit, within 30 days of the event
of default, in the name of the lessors which, as of December 31, 1994, would be
in the amount of $21 million. The lease agreements also place restrictions on
the amount of cash which NKC may transfer to its owners and limitations on the
repayment of advances previously made by the Company to NKC. The Company's
ability to comply with the financial covenants will more than likely be
adversely impacted by the suspension
<PAGE>
of SRL's operations. Should the Company fail to comply with the covenants or
provide a letter of credit as noted above, the lessors would have certain rights
under the lease including the ability to require liquidating damages ($17
million at December 31, 1994) and could also elect to retain ownership of the
leased equipment. If a default occurs, the Company would initiate discussions
with the lessors to seek appropriate modifications of the lease terms. However,
the Company cannot determine the willingness of the lessors to agree to any
modifications, if necessary, on terms which would be acceptable to the Company.
The financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. If the political climate in Sierra Leone
continues to be disruptive to business operations, the cost to reestablish
operations is economically prohibitive or funding for repairs and start-up cost
is not available, the Company may not be able to recover its investment in SRL.
Because the lenders have not waived the SRL loan covenant violations beyond May
15, 1995, the amount due under the loan agreements ($23,234,000) has been
classified as a current liability. As a result, the Company has a working
capital deficiency at December 31, 1994. Also, NKC continues to operate at a
loss and to generate negative cash flows from operations. In addition, the
Company is required to comply with various financial covenants contained in
certain of its lease agreements at NKC. These factors raise substantial doubt
about the Company's ability to continue as a going concern for a reasonable
period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, to comply with the terms and covenants of its
financing agreements, to obtain additional financing or refinancing as may be
required and ultimately to attain successful operations. Management of the
Company and SRL are continuing their efforts to obtain control of the rutile
mining operation and to assure that sufficient funds are available by working
with current lenders, so that the Company can meet its obligations and sustain
its operations. Management of the Company believes that improved markets for
its kaolin products will result in increased sales levels and ultimately
operating profits. However, management cannot provide any assurance that these
events will occur.
The Company's principal financial requirements and anticipated sources and
uses of funds for 1995 on a segment basis are described below.
RUTILE (SRL)
Activity reported below includes 100% of the amounts recorded by SRL and
parenthetically the amount recorded in the Company's financial statements
(reflecting the sale of 50% of SRL in November 1993).
<PAGE>
Please refer to comments made in the above discussion regarding financing
at SRL relative to the current suspension of mining operations in Sierra Leone.
During the three year period ended December 31, 1994, SRL utilized $50.1
million ($33.4 million) of its operational cash flow for capital expenditures,
primarily for completion of the Lanti deposit development, enhancement and
expansion of production and recovery processes and purchase of earth moving
equipment, while $37.5 million ($31.9 million) was borrowed under the financing
agreements. During the three year period, SRL made debt principal payments of
$15.7 million ($11.9 million) and paid $15 million in dividends to the Company.
At December 31, 1994, SRL had outstanding debt totaling $46.4 million ($23.2
million), the long-term portion of which ($19.7 million) is classified as a
current liability due to the default of a covenant at December 31, 1994.
At December 31, 1994, SRL had $10.5 million available to borrow under
financing agreements with four international development banks to fund capital
expenditures. Due to the suspension of mining operations in Sierra Leone, SRL
is currently not able to borrow any funds under these agreements. In addition
to the financial covenants and cash escrow requirements previously noted, the
financing agreements contain restrictions on SRL's ability to declare dividends
and also place limitations on the amount of cash transfers from SRL to its
owners. Under the terms of the financing agreements, SRL is required to
complete a capital improvement program totaling $83.3 million by December 1996,
of which SRL expended $58 million through December 31, 1994. SRL is presently
unable to determine the extent to which this capital expansion program has been
affected by the situation in Sierra Leone, although it is likely that major
modifications will have to be made to the program once mining operations
recommence. Any such modifications would require approval of the current SRL
lenders and no assurance can be given that SRL would be successful if it sought
such modifications.
KAOLIN (NKC)
During the three year period ended December 31, 1994, NKC's capital
expenditures have been primarily for the acquisition of mineral properties and
recurring type items. During this period, NKC repaid $16.6 million of
indebtedness, primarily by borrowing funds from the Company. NKC does not
anticipate that it will expend significant amounts for capital additions during
1995. At December 31, 1994, NKC had outstanding debt totaling $5.2 million.
Based on current cash flow projections, NKC does not anticipate that it will be
able to make any distributions to its owners in 1995 but expects to reimburse
the Company for certain cash expenses paid by the Company on behalf of NKC.
<PAGE>
RESULTS OF OPERATIONS
The Company incurred a loss from continuing operations of $15.6 million in
1994 compared to a loss of $8.4 million in 1993. Operating results from the
kaolin and rutile segments are discussed individually below. Operating results
included $1.6 million as the Company's share of earnings from an affiliate
compared to a $1.3 million loss from the affiliate in 1993. In addition, the
final settlement of the Company's sale of 50% of its rutile segment resulted in
a $1.5 million gain in 1994. Interest expense decreased to $1.6 million in 1994
compared to $6.3 million in 1993 as the Company retired a substantial portion of
debt in November 1993 and capitalized $609,000 of interest in 1994. Included in
the 1993 loss was $4.75 million for the settlement of litigation against the
Company and certain of its officers and a $3.1 million provision for impairment.
The Company recognized $950,000 of other income in 1994 compared to $4.2 million
in 1993 in connection with settlements received from defendants of litigation
instituted by SRL. Selling, general and administrative expense in 1994 included
a $1 million payment to the government of Sierra Leone to resolve certain claims
made against SRL.
The Company incurred a loss from continuing operations of $8.4 million in
1993 compared to a loss of $7.2 million in 1992. Operating results of the
kaolin and rutile segments are discussed individually below. The New Jersey
zircon operation was terminated in early 1993 with no impact on operations,
while it incurred an operating loss of $1 million in 1992. Operations were
favorably impacted by recognition of $4.2 million of other revenue in 1993
compared to $1.45 million in 1992 in connection with settlements received from
defendants of litigation instituted by SRL. Selling, general and administrative
expenses increased by $832,000, primarily at the kaolin segment, as a result of
costs associated with the development and market introduction of the Company's
Norplex[REGISTERED TRADEMARK] products. Interest expense increased in 1993 as a
result of higher levels of borrowing during most of 1993 and a $382,000 decrease
in interest capitalized in 1993 compared to 1992. Included in the 1993 loss is
$4.75 million for the settlement of litigation against the Company and certain
of its officers and directors. Also, the Company recorded a provision for
impairment of $3.1 million in the fourth quarter of 1993 to reduce its
investment in a real estate joint venture and certain idle equipment to net
realizable value. Operating results in 1993 include an increase in the net loss
incurred from affiliates, while a minority owner was allocated $1.2 million of
the net loss from the kaolin operation in 1993. An income tax benefit of $1.6
million was recognized in 1993 compared to an income tax expense of $3.9 million
recorded in 1992, which is further discussed below.
Income tax expense is calculated in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (SFAS 109) which requires the Company to recognize the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. The Company's domestic income tax expense
<PAGE>
in 1993 includes the tax effect of certain differences between financial
statement amounts and amounts to be included in the Company's federal income tax
return. These differences consist of a tax deduction related to previously
granted stock options and awards and taxable income on the sale of a 20%
interest in Nord Kaolin Company, which is recorded as a component of additional
paid-in capital in 1993. Also included in 1993 domestic tax expense is a $1.0
million payment of Alternative Minimum Tax.
The Company's foreign income tax expense (benefit) consists primarily of
taxes related to earnings of SRL in Sierra Leone, where SRL's effective income
tax rate is 37.5%, with a minimum amount of income tax paid equal to 3.5% of
sales. The $23.5 million cumulative effect of the adoption of SFAS 109
recorded in 1992 is generated primarily by the differences between financial and
tax depreciation for the Sierra Leone tax jurisdiction. Sierra Leone's method
of depreciation is different from domestic tax law in that it allows SRL to
elect when to take a depreciation deduction and there is no time limitation as
to when any unused depreciation may be deducted. SRL enjoyed a tax holiday in
Sierra Leone through June 1987 and during that holiday, it was not required to
use any tax depreciation, creating a substantial difference between financial
statement and tax depreciation. In 1993, the Company determined that SRL would
not be required to utilize tax deductions of $18.8 million for prior periods,
for which the tax effect of over $7.1 million has been included as a reduction
of tax expense and an increase in the Company's deferred tax asset during the
fourth quarter of 1993. As a result of the suspension of mining operations at
SRL, the Company has determined that a valuation allowance is required for SRL's
deferred tax assets. Accordingly, the Company's tax provision for 1994 includes
a charge of $14.1 million for this valuation allowance.
The Company's operating results in the fourth quarter of 1994 include a
$1.5 million gain on sale of 50% of the rutile segment and income tax of $14.1
million related to recording the valuation allowance at the rutile segment.
During the fourth quarter of 1993, operating results include revisions of
estimates made during the year for certain costs and expenses at SRL, the effect
of which was to increase net earnings by $875,000 in the fourth quarter. In
addition, operating results in that quarter include $765,000 of selling, general
and administrative costs and $2.1 million of domestic income tax expense related
to the Company's sale of a 50% interest in SRL. Also the Company recorded a
provision for impairment totaling $3.1 million related to an investment in a
real estate joint venture and certain equipment and recorded a tax benefit of
$7.1 million at SRL due to an increase in allowable tax deduction carry forwards
from years prior to 1993. The impact of the above transactions was to increase
net earnings before extraordinary item by $2 million during the fourth quarter
of 1993.
Discussion of the changes in revenue, cost of sales and operating earnings
on a segment basis follows below.
<PAGE>
RUTILE (SRL)
As previously discussed, the mining operations of this segment were
suspended in January 1995 due to civil disturbances in Sierra Leone. The
Company cannot estimate when SRL may be able to recommence its mining operations
or what changes in the operations may occur due to this situation. In March,
SRL terminated all but a small core of its work force, with the remaining
employees available to perform various administrative tasks related to the
operations of this segment.
The amounts disclosed for SRL include 100% of SRL's operations through
November 17, 1993 and 50% from November 17, 1993 through December 31, 1994.
The Company's share of SRL revenues declined in 1994 compared to 1993 due
to the above noted 1993 change in ownership. For 100% of SRL's operations,
average sales prices declined by 5.6% while tonnes (2,204.6 lbs.) of rutile sold
increased by 6.1% in 1994 compared to 1993. Revenues in 1993 decreased compared
to 1992 revenues as, in addition to lower revenues recorded as a result of the
sale of 50% of SRL's operations in November 1993, average sales prices and
tonnes of rutile sold for 100% of SRL's operations declined by 9.2% and 6.1%,
respectively. Revenues in 1993 include $3.7 million of proceeds from the
partial settlement of legal proceedings brought by SRL against its former sales
agent and others. After November 17, 1993, the Company is responsible for all
costs of this litigation and receives any settlement proceeds. Included in 1992
revenues was $1.5 million from the legal proceedings noted above and $465,000 of
gain from disposal of equipment. Included in revenues are sales to individual
customers which exceeded 10% of the Company's revenues during 1994, 1993 and
1992, as disclosed in Note T -- Industry Segments to the Financial Statements.
Cost of sales as a percentage of sales was 78.7%, 75.1% and 77.5% in 1994,
1993 and 1992, respectively. Cost of sales as a percentage of sales increased
in 1994 compared to 1993 due primarily to the effect of lower average prices
received in 1994 and an increase in cost of maintenance. Despite the lower
average rutile prices received during 1993, the cost of sales percentage
decreased compared to 1992. This was due to lower cost of production as a
consequence of mining in higher grade ore, together with lower maintenance costs
and the curtailment of certain high-cost supplemental mining activities in late
1992, with the suspension of operations of a secondary dredge. Because of
improved mining conditions, the primary dredge was able to supply the required
amount of rutile production.
Operating earnings from this segment, before interest expense and income
taxes, were $3.8 million, $14.6 million and $14.1 million in 1994, 1993 and
1992, respectively. The Company's share of operating earnings from this segment
decreased in 1994 compared to 1993 due in part to the aforementioned 1993 change
in ownership. In comparing 100% of this segment's operation in 1994 to 1993,
lower operating earnings were realized due to higher cost of sales as noted
above. In addition, selling, general and administrative expense in 1994
includes a payment of $1 million to the government of Sierra Leone to resolve
certain claims made by the government against SRL for late payment of duties.
Operating earnings increased in 1993 compared to 1992, primarily due to lower
production costs and the larger settlement received in 1993 from the previously
noted litigation, which more than offset lower earnings due to fewer tonnes sold
and lower average selling prices. The Company's share of operating results of
SRL in 1993,
<PAGE>
exclusive of the litigation settlement, were generally comparable to those of
1992, after adjusting for the impact of the sale of 50% of SRL in November 1993.
KAOLIN (NKC)
Revenues increased by 28.7% in 1994 compared to 1993, as revenues in 1994
include $28.8 million from sales of the Company's Norplex[REGISTERED TRADEMARK]
and Norcal[REGISTERED TRADEMARK] products compared to $21.3 million in 1993. In
1994 the Company sold 33% more tons of Norplex[REGISTERED TRADEMARK] and 5% more
tons of Norcal[REGISTERED TRADEMARK] compared to 1993. Revenues for
Norplex[REGISTERED TRADEMARK] increased by 44% due to the increased tons sold
plus an increase of 8% in average selling prices. Norcal[REGISTERED TRADEMARK]
revenues increased by 10% as average prices increased by 5%. The Company's
conventional products revenue also increased by 15% due to a 12% increase in
tons sold and a 3% average increase in selling price. The increase in sales
volume and price in 1994 for all products enabled the Company to recover its
cost of sales. It is the Company's intention to continue to emphasize sales of
the Norplex[REGISTERED TRADEMARK] and Norcal[REGISTERED TRADEMARK] products.
Included in revenues are sales to one customer which exceeded 10% of the
Company's revenues during 1994 and 1993 as disclosed in Note T -- Industry
Segments to the Financial Statements. Revenues increased by 17.9% in 1993
compared to 1992, as revenues in 1993 include $21.3 million from sales of the
Company's Norplex[REGISTERED TRADEMARK] and Norcal[REGISTERED TRADEMARK]
products compared to $12.9 million in 1992. In 1993 the Company sold 81% more
tons of Norplex[REGISTERED TRADEMARK] and 47% more tons or Norcal[REGISTERED
TRADEMARK] compared to 1992. Revenues for Norplex[REGISTERED TRADEMARK]
increased by 77% although average selling prices decreased by 2% due to product
mix and a decline in sales prices. Norcal[REGISTERED TRADEMARK] revenues
increased by 37% as average prices also declined by 7%. The increase in sales
volume in 1993 of Norplex[REGISTERED TRADEMARK] and Norcal[REGISTERED TRADEMARK]
products enabled the Company to generate a gross profit for these new products.
A decline in sales volume of 23% and sales prices in 1993 averaging 2% less than
in 1992 resulted in a 25% decrease in sales revenue for the Company's
conventional products.
Cost of sales as a percentage of sales was 96.5%, 107.5% and 112.4% in
1994, 1993 and 1992, respectively. The decrease in the cost of sales percentage
in 1994 was due to the increased sales volume and price of all products and a
decrease in certain production costs. The increase in sales volume in 1993 of
Norcal[REGISTERED TRADEMARK] and Norplex[REGISTERED TRADEMARK] was sufficient to
improve the cost of sales percentage in 1993, although the Company experienced
declines in sales volume of conventional products.
NKC's operating loss was $4.7 million, $9.7 million and $9.4 million in
1994, 1993 and 1992, respectively. The decrease in operating loss in 1994
compared to 1993 resulted from the lower cost of sales and reductions in general
and administrative costs. A continued emphasis on new product development and
introduction contributed to the increased operating loss in 1993 compared to
1992.
NKC has incurred annual operating losses beginning in 1989 due primarily to
the costs associated with development and market introduction of its
Norplex[REGISTERED TRADEMARK] products and a longer than anticipated new product
introduction period. In addition, in the early 1990's lower demand and prices
for certain of its products as a result of the recession contributed to NKC's
operating losses. As a result of the above circumstances, NKC had not been
<PAGE>
able to generate sufficient sales volume at adequate prices to recover its fixed
and variable costs of production during this period. This situation has
improved during 1994 and the sales volume and prices of Norplex[REGISTERED
TRADEMARK] and Norcal[REGISTERED TRADEMARK] products have reached levels
sufficient to recover the fixed and variable production costs and to begin to
fund the selling, general and administrative costs of NKC. However, NKC
generated a net loss in 1994 and until the level of Norplex[REGISTERED
TRADEMARK] sales volume and prices improve, NKC expects to continue to
experience operating losses. The Company cannot precisely estimate when or if
adequate sales levels of Norplex[REGISTERED TRADEMARK] products will be achieved
or the level of operating losses which will be incurred during the future
periods. Based upon recent conversions of customers to the Norplex[REGISTERED
TRADEMARK] products and probable future testing and conversion at a number of
different customer locations, the Company believes the above noted improvement
in sales levels and operating results is likely to occur.
INFLATION
The Company has not been significantly affected by inflation in recent
years. Although the Company anticipates that it will not be significantly
affected by inflation during 1995, volatility in the cost of energy,
particularly petroleum, could have an impact on the Company's operations. The
Company is not expected to be affected by changes in interest rates as a
majority of its indebtedness is at fixed rates of interest.
ECONOMIC OUTLOOK
The Company's two operating segments (SRL and NKC) target their marketing
strategy toward the paint and paper industries. SRL's and NKC's operating
results are hinged very closely to the general economic conditions in the United
States and most of the western world.
Historically, demand for titanium based feedstocks, for the titanium
dioxide pigment industry (the market for Sierra Rutile Limited products) has
followed the major global business and economic cycles and generally have
followed or exceeded regional GDP in their growth and consumption rates. The
foundation for supply and demand and pricing for natural rutile is based to a
significant degree on the world wide consumption of the titanium dioxide
pigments. These pigments represent the largest single application for titanium
dioxide raw material feedstock, representing over 90% of world wide annual
consumption of Ti0(2) feedstock. The global Ti0(2) industry began recovering in
1994 after 3 years of declining prices caused by demand bottoming out in 1991
corresponding with the onset of unfortunately ill-timed implementation of new
pigment plant capacities. The Ti0(2) pigment industry and high Ti0(2)
feedstocks in 1994 did not experience any noticeable improvement in price,
however, 1995 appears to be a different story. The price for Ti0(2) pigments
and feedstocks have realized some price improvement in early 1995 and this is
expected to continue into 1996.
The rutile segment was poised to take advantage of the increased demand for
high level titanium feedstocks in 1995 and had implemented a program to increase
its overall production of Ti0(2) feedstocks from its current level of
approximately 150,000 tonnes annually to approximately 200,000 tonnes with a
scheduled start-up of this increased production capability in the fourth quarter
of 1995. Unfortunately during January 1995, the
<PAGE>
rutile operations in Sierra Leone, West Africa came under military attack from
alleged non-government forces and essentially were overrun by such forces. The
Company and its other 50% owner (Consolidated Rutile Limited) have suspended all
operations at the minesite. It is evident that resumption of mining operations
will not be possible until security improves.
The Company's financial results will be negatively impacted in 1995 by
continuance of the situation at its rutile operation in Sierra Leone, West
Africa. The Company's 50% owned rutile operation will be suspended until such
time as security in Sierra Leone improves. Until such time, SRL will not be
able to determine when it will be able to recommence operations in Sierra Leone.
Company management is unable to predict at this time when this event will occur.
The Company's other operating segment NKC, markets its products primarily
to the U.S. Paper Industry. Pulp, paper and paper board production in the U.S.
is forecast to grow faster than the overall economy in 1995. Although the
expansion of the U.S. economy is likely to be slower this year than in 1994
because of increasing interest rates, domestic demands for most grades of paper
will remain strong. At the same time, world wide demand for U.S. exports will
rise because of accelerating growth and increases in paper consumption in
Europe, Asia and Latin America. Paper industry analysts are predicting industry
production gains of 3 to 3 1/2% in 1995 compared to overall economic growth of
2.8% in the United States.
The recovery of the U.S. paper industry gained momentum all through 1994.
The turnaround was fast and much stronger than most analysts predicted. As a
result, much of the industry is now operating at nearly full capacity, and the
high level of demand for such products as chemical pulp, coated papers and kraft
liner board is straining capacity at most U.S. mills.
Again, NKC's Norplex[REGISTERED TRADEMARK] product line, whose primary
market is the U.S. paper industry, continued on a slower than expected pace in
1994, although tons of Norplex[REGISTERED TRADEMARK] products sold in 1994 were
30% greater than the 1993 levels. Due to the fact that 1995 overall demand for
paper products is forecasted to improve at a greater rate than the overall U.S.
economic growth rate, NKC is hopeful that some price increase will be realized
on its Norplex[REGISTERED TRADEMARK] and calcined products in 1995. It is
anticipated that operating losses at NKC will continue in 1995 but at a lesser
amount than experienced in 1994. As in 1994, it is also projected that the
volume of Norplex[REGISTERED TRADEMARK] products sold in 1995 will increase over
the 1994 volume.
NKC should continue to gain market share with its Norplex[REGISTERED
TRADEMARK] products and overall operating results from that segment should
improve over that achieved during 1993. As noted above, the markets that NKC
serves are affected directly by the overall economic growth world wide and in
particular in the U.S. NKC's results will directly relate to the strength of
those economies.
The Company also has a 35% ownership interest in Nord Pacific Limited.
Nord Pacific Limited is engaged in the production of copper and in the
exploration for gold, copper, nickel, cobalt and other minerals in Australia,
Papua new Guinea and North America including Mexico. Nord Pacific Limited's
only operation at this time is a copper mining and processing facility in
eastern Australia. The earnings of this operation are
<PAGE>
directly affected by world economic growth and the increase or decrease in
demand for copper. The above is qualified to the extent that Nord Pacific
Limited's copper hedging contracts guarantee a minimum price of $0.94 per pound
through June 30, 1995 and a minimum price of $1.17 per pound for the period July
through December 1995, with additional upside potential above $1.02 per pound
and $1.20 per pound, respectively. The price for copper rose steadily from the
end of 1993 and increased dramatically throughout 1994. At the end of 1994 it
stood at $1.34/lb. compared to a low of $.78 per lb. towards the end of 1993.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS: PAGE
----
Independent Auditors' Report 32
Consolidated Balance Sheets 34
Consolidated Statements of Operations 35
Consolidated Statements of Stockholders' Equity 36
Consolidated Statements of Cash Flows 37
Notes to Consolidated Financial Statements 38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Nord Resources Corporation
Dayton, Ohio
We have audited the accompanying consolidated balance sheets of Nord Resources
Corporation and subsidiaries ("Company") as of December 31, 1994 and 1993, and
the related statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express (or disclaim) an opinion on these statements based
on our audits. We did not audit the financial statements of Sierra Rutile
Limited (a 50% owned subsidiary) and related rutile segment entities (together
the "Rutile Segment") for the year ended December 31, 1994, the Company's
investment in which is accounted for by proportionate consolidation through
December 31, 1994 and on the cost basis as of December 31, 1994. Such
statements reflect assets and revenues constituting 47% and 42%, respectively,
of the related totals for that year in the accompanying 1994 consolidated
financial statements. The financial statements of the Rutile Segment, prepared
in accordance with accounting principles generally accepted in the United
Kingdom, were audited by other auditors whose report has been furnished to us,
and our report, insofar as it relates to the amounts included for the Rutile
Segment for the year ended December 31, 1994, is based solely on the report of
such auditors. The other auditors' report stated that they were unable to
express an opinion on the 1994 financial statements of the Rutile Segment since
they were unable to complete substantial auditing procedures and because of the
uncertain impact on the financial statement carrying amounts following civil
unrest near the mine facilities of the Rutile Segment.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about 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.
We believe that our audits provide a reasonable basis for our report.
<PAGE>
In our opinion, the consolidated financial statements as of December 31, 1993
and for each of the two years in the period then ended present fairly, in all
material respects, the financial position of Nord Resources Corporation and its
subsidiaries as of December 31, 1993, and the results of their operations and
their cash flows for each of the two years in the period then ended in
conformity with generally accepted accounting principles.
The accompanying 1994 financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes A and C to the
consolidated financial statements, operations of the Rutile Segment have been
suspended subsequent to December 31, 1994 because of civil war activities in the
area near the Rutile Segment's mine in Sierra Leone. Funds for repairs to mine
assets and restart costs may be required of the Company in 1995; the amount and
availability of such funds cannot be presently determined. Also as described in
Note A, the Company is not in compliance with provisions of various loan
agreements and, as a result of the classification of the related obligations as
current liabilities, the Company has negative working capital; and, the kaolin
segment continues to operate at a loss and to generate negative cash flows from
operations. In addition, as further described in Note M, the Company's ability
to comply with the financial covenants in several lease agreements will more
than likely be adversely impacted by the suspension of operations at the Rutile
Segment. These matters raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note A. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Because of the possible material effects of the uncertainties referred to in the
preceding paragraph, and the inability of the other auditors to express an
opinion on the financial statements of the Rutile Segment, we are unable to
express, and we do not express, an opinion on the Company's consolidated
financial statements for 1994.
As discussed in Note A to the consolidated financial statements, the Company
changed its method of accounting for its investment in the Rutile Segment to the
cost basis of accounting at December 31, 1994. As discussed in Note P to the
consolidated financial statements, the Company changed its method of accounting
for income taxes in 1992.
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 7, 1995
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1994 AND 1993
(In thousands except share and per share amounts)
<TABLE>
<CAPTION>
ASSETS (Notes A and G) 1994 1993
- ---------------------- ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,946 $ 20,555
Restricted cash -- SRL (Notes C and G) 2,934
Accounts receivable:
Trade (less allowance of $145 in 1994
and $75 in 1993) 6,897 7,096
Related parties 2,094 1,376
Other 1,302 2,346
----------- -----------
10,293 10,818
Inventories:
Finished and semi-finished 1,342 5,527
Supplies 1,736 2,354
----------- -----------
3,078 7,881
Prepaid expenses 1,985 1,822
Deferred tax asset (Note P) 2,105
----------- -----------
TOTAL CURRENT ASSETS 27,236 43,181
RESTRICTED CASH AND
INVESTMENTS (Note G) 2,797 5,380
DEFERRED TAX ASSET (Note P) 11,527
INVESTMENTS IN AND ADVANCES TO
AFFILIATES (Note D) 8,142 6,552
INVESTMENT IN RUTILE SEGMENT, at cost as
described in Note A 64,353
PROPERTY, PLANT AND EQUIPMENT, at cost
less accumulated depreciation and depletion
(Note E) 36,804 86,250
OTHER ASSETS (Note F) 6,783 9,868
----------- -----------
$ 146,115 $ 162,758
----------- -----------
----------- -----------
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY (Note A) 1994 1993
- ----------------------------- ----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 3,059 $ 4,478
Accounts payable -- related party 4,310 1,454
Accrued expenses 1,193 2,405
Accrued reclamation 717 762
Accrued taxes other than income 534 1,084
Obligations in default (Notes C and G) 23,234
Current maturities of long-term debt 644 4,451
----------- -----------
TOTAL CURRENT LIABILITIES 33,691 14,634
LONG-TERM DEBT (Note G) 4,701 19,738
IMPUTED INTEREST ON NON-INTEREST
BEARING DEBT (Note G) 2,653
LONG-TERM LIABILITIES:
Retirement and postretirement benefits
(Notes H and I) 5,225 5,109
Other 507 1,786
---------- ----------
5,732 6,895
COMMITMENTS AND CONTINGENT LIABILITIES
(Notes C, J, K, L, and M)
STOCKHOLDER LITIGATION SETTLEMENT (Note J) 4,250
MINORITY INTEREST (Note N) 4,457 5,779
STOCKHOLDERS' EQUITY (Notes G and O):
Common Stock, par value $.01 per share;
authorized, 25,000,000 shares, issued and
outstanding 15,838,408 -- 1994 and
15,139,974 -- 1993 158 151
Additional paid-in capital 58,137 53,856
Retained earnings, restricted (Note G) 39,092 54,703
Cumulative foreign currency translation
adjustment (Note D) 282 379
Minimum pension liability (Note H) (135) (280)
----------- -----------
97,534 108,809
----------- -----------
$ 146,115 $ 162,758
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Sales $ 71,494 $ 88,446 $ 100,069
Other revenues 337 1,157 1,106
---------- ---------- ----------
Total Revenues 71,831 89,603 101,175
OPERATING COSTS AND EXPENSES:
Cost of sales 63,762 77,310 88,564
Selling, general, and administrative expenses 13,685 12,556 11,724
---------- ---------- ----------
Total Operating Costs and Expenses 77,447 89,866 100,288
EARNINGS (LOSS) FROM OPERATIONS (5,616) (263) 887
OTHER INCOME (EXPENSE):
Interest income 854 383 489
Interest expense (1,615) (6,287) (5,135)
Litigation recoveries (Note J) 950 4,200 1,450
Stockholder litigation settlement (Note J) (4,750)
Provision for impairment of assets (Note D) (3,074)
Gain on sale of 50% of rutile segment (Note C) 1,527
Equity in net earnings (loss) of affiliate (Note D) 1,613 (1,299) (928)
Minority interest 1,321 1,166
---------- ---------- ----------
Total Other Income (Expense) 4,650 (9,661) (4,124)
---------- ---------- ----------
(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX
(EXPENSE) BENEFIT (966) (9,924) (3,237)
INCOME TAX (EXPENSE) BENEFIT (Note P) (14,645) 1,562 (3,945)
---------- ---------- ----------
(LOSS) FROM CONTINUING OPERATIONS (15,611) (8,362) (7,182)
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS (Note Q) 106 (2,900)
---------- ---------- ----------
(LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (15,611) (8,256) (10,082)
EXTRAORDINARY ITEM -- Loss on early extinguishment of debt (Note C) (826)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (Note P) 23,480
---------- ---------- ----------
NET EARNINGS (LOSS) $ (15,611) $ (9,082) $ 13,398
---------- ---------- ----------
---------- ---------- ----------
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE (Note B):
Primary:
From continuing operations $ (1.02) $ (.55) $ (.47)
From discontinued operations .01 (.19)
---------- ---------- ----------
(Loss) before extraordinary item and cumulative
effect of change in accounting principle (1.02) (.54) (.66)
Extraordinary item (.06)
Cumulative effect of change in accounting principle 1.55
---------- ---------- ----------
Net earnings (loss) $ (1.02) $ (.60) $ .89
---------- ---------- ----------
---------- ---------- ----------
Average shares 15,306 15,134 15,152
---------- ---------- ----------
---------- ---------- ----------
Fully diluted:
From continuing operations $ (.31)
From discontinued operations (.16)
----------
(Loss) before cumulative effect
of change in accounting principle (.47)
Cumulative effect of change in accounting principle 1.29
----------
Net earnings $ .82
----------
----------
Average shares 18,209
----------
----------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands except shares)
<TABLE>
<CAPTION>
Cumulative
Common Stock Foreign
Outstanding Additional Currency Minimum
------------------- Paid-in Retained Translation Pension
Shares Amount Capital Earnings Adjustment Liability
---------- ------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE -- December 31, 1991 15,120,026 $ 151 $ 51,001 $ 50,387 $ 473 $
Net earnings 13,398
Exercise of stock options 3,000 8
Issuance of common stock 5,448 29
Compensation related to
non-qualified options 67
Foreign currency translation
adjustment (317)
---------- ------- ---------- ---------- ----------- -----------
BALANCE -- December 31, 1992 15,128,474 151 51,105 63,785 156
Net (loss) (9,082)
Exercise of stock options 11,500 30
Compensation related to
non-qualified options 315
Net gain on issuance of stock
by subsidiary (Note N) 793
Tax benefit from common stock
transactions 1,613
Foreign currency translation
adjustment 223
Minimum pension liability (Note H) (280)
----------- ------- --------- ---------- ----------- -----------
BALANCE -- December 31, 1993 15,139,974 151 53,856 54,703 379 (280)
Net (loss) (15,611)
Exercise of stock options 8,275 38
Issuance of common stock (Note J) 690,159 7 4,243
Foreign currency translation
adjustment (97)
Minimum pension liability (Note H) 145
----------- ------- ---------- ---------- ----------- -----------
BALANCE -- December 31, 1994 15,838,408 $ 158 $ 58,137 $ 39,092 $ 282 $ (135)
----------- ------- ---------- ---------- ----------- -----------
----------- ------- ---------- ---------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (Note S):
Rutile $ 12,040 $ 17,069 $ 25,051
Domestic (2,500) (6,525) (12,531)
----------- ----------- -----------
Net cash provided by operating activities 9,540 10,544 12,520
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures:
Rutile (16,378) (10,214) (6,758)
Domestic (929) (606) (970)
Net proceeds from sale of minority interest--Domestic 4,950
Net cash proceeds from sale of 50% of SRL
(gross proceeds, $54.8 million)--Domestic 29,461
Additions to other assets:
Rutile (9) (305) (3,081)
Domestic (1,073) (1,515) (2,012)
Decrease (increase) in investments in and
advances to affiliates--Domestic (74) (1,750) 268
----------- ----------- -----------
Net cash provided by (used in) investing activities (18,463) 20,021 (12,553)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional indebtedness:
Rutile 5,650 5,000 21,220
Domestic 386
Short-term (repayments)--Rutile (4,050)
Payments of indebtedness:
Rutile (3,473) (2,796) (1,500)
Domestic (469) (22,635) (10,486)
Restricted cash and investments:
Rutile (158) (3,106)
Domestic (194) (2,304) (1,200)
Stock option activity--Domestic 37 31 37
----------- ----------- -----------
Net cash provided by (used in) financing activities 1,393 (25,810) 4,407
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,530) 4,755 4,374
CASH AND CASH EQUIVALENTS -- Beginning of year 20,555 15,800 11,426
CASH INCLUDED IN INVESTMENT IN RUTILE SEGMENT
AT DECEMBER 31, 1994 (4,079)
----------- ----------- -----------
----------- ----------- -----------
CASH AND CASH EQUIVALENTS -- End of Year $ 8,946 $ 20,555 $ 15,800
----------- ----------- -----------
----------- ----------- -----------
CASH PAID FOR:
Interest, net of capitalized amount of
$609 in 1994 and $382 in 1992 $ 2,119 $ 6,127 $ 5,141
----------- ----------- -----------
----------- ----------- -----------
Income taxes $ 865 $ 3,090 $ 2,450
----------- ----------- -----------
----------- ----------- -----------
NON-CASH TRANSACTIONS:
Conversion of advances to affiliate into common stock (Note D) $ 2,900 $ 2,500
----------- -----------
----------- -----------
Debenture retired in connection with sale of 50% of SRL (Note C) $ 20,000
-----------
-----------
Stock issued to settle long-term liability $ 4,250
-----------
-----------
Refinancing of IDR Bond (Note G) $ 1,900
-----------
-----------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
A. BASIS OF PRESENTATION
The Company is engaged in operating natural resource properties primarily for
production of kaolin and rutile (titanium dioxide). Kaolin produced by the
Company is sold primarily to the paper industry and rutile is sold primarily to
the paint pigment industry. The Company has a normal business cycle which occurs
over an extended period of time.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Nord Resources
Corporation, its majority-owned subsidiaries and its 50% interest in a rutile
mining operation ("SRL") (the "Company"). All significant intercompany
transactions and balances are eliminated.
SRL as used in these financial statements includes Sierra Rutile Holdings,
Sierra Rutile Limited (the mining operation) and other subsidiaries of the
Company and Sierra Rutile Holdings which are economically dependent on the
mining operation. See Note C for summarized financial information regarding
SRL.
Financial statement amounts relating to SRL represent the Company's
proportionate share in each of the assets, liabilities and operations of SRL,
which were 100% owned by the Company through November 17, 1993 and 50% owned
thereafter. As a result of the situation described below, the Company's 50%
investment in SRL is carried at the cost basis of accounting (which includes
original cost plus undistributed earnings through December 31, 1994 except for
certain SRL indebtedness with effective recourse to the Company and related
restricted cash) in the consolidated balance sheet at December 31, 1994.
Investments in 20% to 40%-owned affiliates and joint ventures and in affiliates
or joint ventures in which the Company's investment may temporarily be in excess
of 40% are carried using the equity method.
<PAGE>
INVESTMENT IN RUTILE SEGMENT
In January 1995, the Company's 50% owned rutile mining operation in Sierra
Leone, located in West Africa, came under armed attack from non-government
forces. As a result, SRL was forced to suspend mining operations and
subsequently terminated all nonessential personnel. SRL has received reports of
fighting between government and non-government forces at a number of locations
in Sierra Leone. There is considerable uncertainty surrounding the future of
the rutile mining operation, given the ongoing civil unrest and the uncertain
political environment in Sierra Leone.
Management of SRL intends to resume operations upon restoration of political
stability in Sierra Leone, but at the present time it is not possible to
estimate when this might be achieved or the extent of damage and deterioration
to SRL's facilities which might occur during the period of suspension of
operations. When SRL is able to recommence operations, it will likely incur
costs to reestablish and train a workforce, replenish supplies and restore and
recommission facilities. Until the current security situation improves and SRL
personnel can return to the minesite, it is not possible to estimate these costs
without knowledge of the condition of the facilities and equipment.
Prior to December 31, 1994, the Company proportionately consolidated its share
in each of the assets, liabilities and operations of SRL. As of December 31,
1994, the Company adopted the cost basis of accounting (which includes original
cost plus undistributed earnings through December 31, 1994) for its investment
in SRL, except for certain SRL indebtedness with effective recourse to the
Company which is reported as a separate liability and related restricted cash
(see Note C), because the Company no longer controlled SRL's operations
following the attack by non-government forces. The consolidated statements of
operations and cash flows include the Company's proportionate share of
operations of SRL through December 31, 1994. The Company intends to resume
proportional consolidation when it regains control of the mine.
FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. If the political climate in
Sierra Leone continues to be disruptive to business operations, the cost to
reestablish operations is economically prohibitive or funding for repairs and
start-up cost is not available, the Company may not be able to recover its
investment in SRL. In
<PAGE>
addition, the kaolin segment (Note T) continues to operate at a loss and to
generate negative cash flows from operations. Also the Company is required to
comply with various financial covenants contained in certain of its lease
agreements, as further described in Note M. As described in
Note G, the Company is not in compliance with several provisions of various loan
agreements and because the lender has not waived the violations beyond May 15,
1995, the amount due under these borrowings ($23,234,000) has been classified as
a current liability. As a result, the Company has a working capital deficiency
at December 31, 1994. These factors raise substantial doubt about the Company's
ability to continue as a going concern for a reasonable period of time.
The operations of the kaolin segment have incurred losses during the past
several years, primarily due to slower than anticipated market acceptance of a
new product line. For the year ended December 31, 1994, the operating loss at
the kaolin segment is lower than in prior years. Operating losses at this
segment will likely continue until such time as sufficient sales levels of the
new products are attained, the timing of which is not determinable by the
Company.
The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to generate sufficient cash flow to meet
its obligations on a timely basis, to comply with the terms and covenants of its
financing agreements, to obtain additional financing or refinancing as may be
required and ultimately to attain successful operations. Management of the
Company and SRL are continuing their efforts to obtain control of the rutile
mining operation and to assure that sufficient funds are available by working
with current lenders so that the Company can meet its obligations and sustain
its operations. Management of the Company believes that improved markets for
its kaolin products will result in increased sales levels and, ultimately,
operating profits. However, management cannot provide any assurance that these
events will occur.
<PAGE>
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
Management of the Company is responsible for the preparation, objectivity and
integrity of the consolidated financial statements, including the determination
of estimates and judgments used in the preparation of the consolidated financial
statements. These estimates include rates of return on investments and rates of
discounting and salary escalation used to evaluate retirement and postretirement
benefits. Estimates of mineral reserves are used as a basis for amortization of
certain of the Company's long-term assets.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are carried at the lower of cost (first-in, first-out method) or
market.
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment is depreciated using the straight-line method over the
estimated useful lives of the assets ranging from two to thirty years. Minerals
and mineral rights and dams and deposit development are depleted by the units-
of-production method over the estimated reserves.
MINE DEVELOPMENT COSTS
The Company defers costs directly attributable to the development of reserves.
Such costs are amortized by the units-of-production method over the estimated
reserves.
LONG-TERM ASSETS
A significant amount of the Company's assets are of a long-term nature. In the
preparation of its financial statements, the Company evaluates the carrying
amount of these assets through application of a number of techniques including
analysis of future cash flows, review of third party transactions with the
Company, obtaining third party valuations of assets and review of the underlying
operations of its affiliates. Any assets which may be deemed impaired are
written down to their estimated recoverable amount under a going concern
assumption.
<PAGE>
NET EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Primary earnings (loss) per common and common equivalent share are computed by
dividing net earnings (loss) by the weighted average number of common shares
outstanding during the year adjusted for the dilutive effect of common stock
equivalents when applicable. Fully diluted earnings per common and common
equivalent share assumes conversion of the 8% convertible debentures which were
retired in November 1993. For 1992, equivalent shares are increased by an
additional 3,027,092 shares, and net earnings is adjusted to eliminate interest
expense of $1,600,000. The effect of conversion of the 8% convertible
debentures into the Company's Common Stock was anti-dilutive in 1993.
RECLASSIFICATIONS
Certain reclassifications have been made in the 1993 and 1992 consolidated
financial statements to conform to the classifications used in 1994. These
reclassifications had no effect on results of operations or stockholders' equity
as previously reported.
C. RUTILE SEGMENT
The Company sold 50% of its equity interest in its rutile segment ("SRL") in
November 1993 for initial proceeds of $54,800,000 of which $20,000,000 was used
to retire its debenture. In connection with this sale in 1993, $13,600,000 of
debt was also repaid and $826,000 of debt issuance costs were written off as a
loss from early extinquishment of debt which is reported as an extraordinary
item. The Company recognized a gain of $1,527,000 in the fourth quarter of 1994
as a result of receiving an additional $2,000,000 as a final payment from this
sale.
As explained in Note A, as of December 31, 1994 the Company has adopted the cost
basis of accounting for its investment in SRL. The consolidated statements of
operations and cash flows includes the Company's proportionate share of
operations and cash flows of the accounts of the rutile segment through December
31, 1994.
The following summarized financial information of the Company's share of the
rutile segment has been prepared assuming the Company will continue as a going
concern. The Company will assess the need for an impairment reserve and the
accrual of start-up cost when information becomes available. If the civil
disturbances in Sierra Leone do not cease or the estimated costs of
reestablishment of SRL's operations in Sierra Leone are prohibitive, the Company
may have to record an impairment
<PAGE>
reserve against a portion or possibly all of its investment in SRL. Although
SRL will likely incur costs to restart the operations, the amount of impairment
and costs to restart the operations cannot be estimated currently.
<TABLE>
<CAPTION>
December 31
---------------------------
Balance Sheet Data -- SRL 1994 1993
- ------------------------- ------------ ------------
(In thousands)
<S> <C> <C>
Current assets $ 13,371 $ 15,733
Property, plant and
equipment 58,375 47,222
Long-term income
tax asset 11,527
Other assets 1,935 2,874
Restricted cash 2,934 2,776
------------ ------------
Total assets $ 76,615 $ 80,132
------------ ------------
------------ ------------
December 31
---------------------------
Balance Sheet Data -- SRL 1994 1993
- ------------------------- ------------ ------------
Obligations in default $ 23,234 $
Other current liabilities 6,896 5,743
Long-term debt 14,664
Imputed interest on
non-interest bearing note 2,653
Other liabilities 2,435 1,164
------------ ------------
Total liablities 32,565 24,224
Foreign currency
translation adjustment (3)
Company's share of equity 44,053 55,908
------------ ------------
Total liabilities and
stockholders' equity $ 76,615 $ 80,132
------------ ------------
------------ ------------
Company's share of equity $ 44,053
Debt with recourse to
the Company 23,234
Restricted cash (2,934)
------------
Company's investment in
rutile segment $ 64,353
------------
------------
</TABLE>
<PAGE>
The following is summarized operating data for the Company's share of operations
of the rutile segment. Amounts in 1994 represent 50% of the rutile segment.
Amounts in 1993 represent 100% of the rutile segment through November 17, 1993
(date of sale) and 50% from the date of sale to December 31, 1993. Amounts in
1992 represent 100% of the rutile segment.
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
Operating Data -- SRL 1994 1993 1992
- --------------------- --------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Sales $30,263 $56,146 $ 70,463
Other revenues 177 895 1,092
--------- --------- ---------
Total revenues 30,440 57,041 71,555
Cost of sales 23,828 42,127 54,632
Selling, general and
administrative 3,073 4,198 4,413
--------- --------- ---------
Total costs and expenses 26,901 46,325 59,045
--------- --------- ---------
Interest income 250 171 120
Litigation recoveries 3,700 1,450
Interest expense (952) (2,918) (975)
--------- --------- ---------
Total other income (expense) (702) 953 595
Earnings before income
tax (expense) benefit 2,837 11,669 13,105
Income tax (expense) benefit (14,692) 3,639 (4,053)
Cumulative effect of change
in accounting principle 23,480
--------- --------- ---------
Net earnings (loss) $(11,855) $ 15,308 $ 32,532
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
PROPERTY, PLANT AND EQUIPMENT -- SRL
<TABLE>
<CAPTION>
December 31
------------------------------
1994 1993
-------------- --------------
(In thousands)
<S> <C> <C>
Dams and deposit development $ 18,161 $ 17,914
Buildings 7,667 7,641
Mining, exploration and
milling equipment 50,966 49,932
Office equipment 1,155 1,048
Construction-in-process 17,152 1,750
-------------- --------------
95,101 78,285
Less accumulated depreciation
and depletion 36,726 31,063
-------------- --------------
$ 58,375 $ 47,222
-------------- --------------
-------------- --------------
</TABLE>
Mining equipment with a net carrying amount of $2,530,000 at December 31, 1994
is temporarily idle due to market conditions. In the opinion of SRL management,
there has been no impairment of value with respect to this idle equipment at
December 31, 1994.
OTHER ASSETS -- SRL
<TABLE>
<CAPTION>
December 31
-------------------------------
1994 1993
-------------- --------------
(In thousands)
<S> <C> <C>
Mine development costs $ 1,270 $ 1,162
Debt issuance costs (less accumulated
amortization of $202 in 1994
and $102 in 1993) 650 750
Other 15 962
-------------- --------------
$ 1,935 $ 2,874
-------------- --------------
-------------- --------------
</TABLE>
<PAGE>
INCOME TAXES -- SRL
The principal current and long-term deferred tax assets and (liabilities) are as
follows:
<TABLE>
<CAPTION>
December 31
------------------------------
1994 1993
-------------- --------------
(In thousands)
<S> <C> <C>
SRL current deferred tax asset:
Inventory $ 2,796 $ 2,200
Other (95)
-------------- --------------
2,796 2,105
Valuation allowance (2,796)
-------------- --------------
$ 0 $ 2,105
-------------- --------------
-------------- --------------
SRL long-term deferred tax asset:
Depreciation $ 11,203 $ 11,241
Other 478 668
-------------- --------------
11,681 11,909
Valuation allowance (11,681) (382)
-------------- --------------
$ 0 $ 11,527
-------------- --------------
-------------- --------------
</TABLE>
The SRL income tax asset is generated primarily by the differences between
financial and tax depreciation for the Sierra Leone tax jurisdiction. Sierra
Leone's method of depreciation is different from domestic tax law in that it
allows SRL to elect when to take a depreciation deduction and there is no time
limitation as to when the unused depreciation may be deducted. SRL enjoyed a
tax holiday in Sierra Leone through June 1987 and during that holiday, it was
not required to use any tax deduction for depreciation, creating a substantial
difference between financial statement and tax depreciation. As a result of the
suspension of mining operations as described in Note A, the Company has
determined that under the provisions of Statement of Financial Accounting
Standards No. 109, a valuation allowance is required for these deferred tax
assets. Accordingly, the income taxes of $14,645,000 in the Company's statement
of operations for the year ended December 31, 1994 includes a charge of
$14,095,000 to increase the valuation allowance pertaining to SRL deferred tax
assets.
<PAGE>
COMMITMENTS -- SRL
In connection with the settlement of certain claims asserted by the government
of Sierra Leone (government), SRL has agreed to commit $6 million for projects
for the benefit of Sierra Leone. The projects, to be mutually agreed upon by
the government and SRL, will be phased over a period not less than 3 years
beginning in 1996. The Company anticipates that the capital projects, once they
are determined, will benefit Sierra Leone and become an integral part of the
mining operations of SRL.
OPERATING LEASES -- SRL
A mining concession is leased by SRL for its rutile operation through 2009,
subject to renewal for an additional fifteen years. The Company's 50% share of
estimated annual lease payments is $138,000, based upon the area occupied by
SRL. In addition, a royalty is paid based on sales. For the years ended
December 31, 1994, 1993 and 1992, $1,161,000, $2,226,000, and $2,671,000,
respectively, was recorded by the Company as its share of mining lease and
royalty expense.
CONTINGENCIES -- SRL
The government of Sierra Leone has an option to acquire 47% of the shares of SRL
beginning January 2000 at a purchase price of $57,352,000. Each of the
shareholders of SRL would sell equal interests in SRL if this purchase option is
exercised.
The Company carries varying levels of insurance to cover risk of loss on its
investment in SRL due to political violence and expropriation of SRL's assets.
Under an insurance policy provided by an agency of the United States government,
political violence coverage is provided to cover the Company's share of damage
to property. Coverage by the same insurer is provided for loss due to
expropriation (any actions taken by a government which prevents the Company from
exercising rights or control over its investment). Collection under the above
policy is limited to $15.7 million for damages resulting from political
violence; however, policy limits are $23.7 million for losses which include
expropriation. Another political risk policy carried by the Company for up to
$8.4 million of coverage with a private insurer includes expropriation coverage
but specifically excludes losses resulting from political violence. This policy
expired on March 31, 1995 and the insurer has elected not to renew the coverage.
The Company has advised both insurers that it may have claims under these
political risk policies. However, the Company cannot estimate the extent of
claims which may be asserted under either of these policies or the timing or
amount of recoveries which may ultimately be available to the Company.
<PAGE>
D. INVESTMENTS IN AND ADVANCES TO AFFILIATES
<TABLE>
<CAPTION>
December 31
------------------------------------------
1994 1993
-------------------------- ------------
(In thousands)
Percent
Owned
--------
<S> <C> <C>
Nord Pacific Limited:
Investment, at cost 35.3% $ 10,726 $ 7,826
Foreign currency
translation adjustment 282 379
Equity in net earnings (loss) (4,205) (5,818)
--------- ---------
Total investment 6,803 2,387
Advances 19 2,845
--------- ---------
Total Nord Pacific Limited 6,822 5,232
Manatee Gateway:
Investment, at cost 40% 3,539 3,539
Less valuation allowance (2,219) (2,219)
--------- ---------
Total Manatee Gateway 1,320 1,320
--------- ---------
$ 8,142 $ 6,552
--------- ---------
--------- ---------
</TABLE>
NORD PACIFIC LIMITED ("Pacific")
In February 1994, Pacific declared a stock bonus of seven additional shares for
each share outstanding (in effect an 8 for 1 stock split) prior to completing a
public offering in Australia. In connection with the public offering, the
Company converted $2,900,000 of its advances to Pacific into 3,488,721 shares of
common stock of Pacific, at a price of $.83 per share. As a result of these
transactions the Company's ownership in Pacific decreased from 47% at December
31, 1993 to 35.3% currently. During 1993, the Company converted $2,500,000 of
its advances to Pacific into 2,962,960 shares of Pacific's common stock, at a
market price of $.84 per share, increasing its ownership from 42% to 47%. The
Company's share of equity in net assets in excess of its investment is being
amortized over ten years.
<PAGE>
The aggregate market value of the Company's investment in Pacific at December
31, 1994, based on the average of the bid and asked price of Pacific common
stock (NASDAQ bid and asked) at December 31, 1994 of $.84 per share, was
$14,112,000.
The following is summarized information from the audited financial statements of
Pacific. The independent auditors' report covering those consolidated financial
statements contains an explanatory paragraph indicating that the realization of
deferred exploration and development costs is dependent upon future events.
The deferred exploration, development and other costs appearing on the balance
sheet of Pacific relate primarily to three properties. The Company has obtained
financial analyses of each of these properties from Pacific and based on review
of the information supplied by Pacific and the position expressed by Pacific as
to the expected recovery of its investment in these key properties, the Company
believes that it will recover its investment in Pacific.
<TABLE>
<CAPTION>
December 31
----------------------------
Balance Sheet Data -- Pacific 1994 1993
- ----------------------------- ---------- ----------
(In thousands)
<S> <C> <C>
Current assets $ 9,957 $ 1,773
Restricted cash 1,024 1,005
Forward currency exchange contracts 849
Property, plant and equipment 5,612 5,882
Deferred exploration,
development and other costs 15,408 13,945
---------- ----------
Total assets 32,850 22,605
Current liabilities 5,940 4,895
Long-term debt:
Nord Resources Corporation 2,772
Affiliate 1,905
Other 3,949 9,490
Retirement benefits 148 102
---------- ----------
Shareholders' equity $ 22,813 $ 3,441
---------- ----------
---------- ----------
Company's share of equity
(35.3% at December 31, 1994
and 47% at December 31, 1993) $ 8,049 $ 1,617
---------- ----------
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------
Operating Data -- Pacific 1994 1993 1992
- ------------------------- ----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Sales $ 11,293 $ 4,674 $
Less costs and expenses (10,577) (6,787) (1,934)
Forward currency
transaction gain (loss) 1,033 (204)
Gain on foreign
currency contracts 2,535 14
Other (expenses) (295) (734) (287)
----------- ----------- -----------
Net earnings (loss) $ 3,989 $ (3,037) $ (2,221)
----------- ----------- -----------
----------- ----------- -----------
Charges from the Company
included in costs
and expenses $ 342 $ 551 $ 441
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The consolidated financial statements of Pacific include Pacific's 40%
proportionate interest in the assets, liabilities and costs and expenses of the
joint venture related to the copper property.
MANATEE GATEWAY
The Company, through its wholly-owned subsidiary, Nord Manatee Ltd., has an
interest in an inactive joint venture which holds approximately 200 acres of
undeveloped real property in Manatee County, Florida. Contributions to the
venture are required in the same ratios as the participants' interests. Based
on a 1993 review of the underlying real estate and potential uses, the Company
believed that its investment in Nord Manatee Ltd. was impaired. Accordingly,
the Company recorded a $2,219,000 provision for impairment during the fourth
quarter of 1993. The carrying amount recorded by the joint venture for the
undeveloped real property at December 31, 1994 is $8,110,000.
<PAGE>
E. PROPERTY, PLANT AND EQUIPMENT
Amounts relating to SRL are excluded from the amounts below at December 31, 1994
(see Note C).
<TABLE>
<CAPTION>
December 31
----------------------------
1994 1993
------------ ------------
(In thousands)
<S> <C> <C>
Land $ 583 $ 583
Minerals and mineral rights 5,076 5,076
Buildings 5,406 5,406
Mining, exploration and
milling equipment 52,285 52,038
Office equipment 670 736
Construction-in-process 532 247
------------ ------------
64,552 64,086
Less accumulated depreciation
and depletion 27,748 25,058
------------ ------------
36,804 39,028
Net book value of plant and
equipment of rutile segment (Note C) 47,222
------------ ------------
$ 36,804 $ 86,250
------------ ------------
------------ ------------
</TABLE>
Equipment with a net carrying amount of approximately $4,016,000 is temporarily
idle at December 31, 1994 due to market conditions. In the opinion of
management, there has been no impairment of value with respect to this
equipment.
Capital leases included in property and equipment
consist of:
<TABLE>
<CAPTION>
December 31
------------ ------------
1994 1993
------------ ------------
(In thousands)
<S> <C> <C>
Mining and milling equipment $ 5,101 $ 5,101
Less accumulated depreciation 2,239 1,861
------------ ------------
Capital leases -- net $ 2,862 $ 3,240
------------ ------------
------------ ------------
</TABLE>
<PAGE>
F. OTHER ASSETS
Amounts relating to SRL are excluded from the amounts below at December 31, 1994
(see Note C).
<TABLE>
<CAPTION>
December 31
----------------------------
1994 1993
------------ ------------
(In thousands)
<S> <C> <C>
Mine development costs $ 3,016 $ 3,067
Cash surrender value of life
insurance, net of policy loans
of $1,194 in 1994 and $995 in 1993 1,793 1,565
Advance royalties 1,040 842
Unamortized pension cost 78 658
Other 856 862
------------ ------------
6,783 6,994
Other assets of rutile segment (Note C) 2,874
------------ ------------
$ 6,783 $ 9,868
------------ ------------
------------ ------------
</TABLE>
G. INDEBTEDNESS
<TABLE>
<CAPTION>
December 31
----------------------------
1994 1993
------------ ------------
(In thousands)
<S> <C> <C>
Sierra Rutile Limited (Note A and C):
Financing lines of credit $ 16,497 $ 13,110
Non-interest bearing bank financing 6,737 4,865
Other 400
Nord Kaolin Company:
Industrial Revenue Bonds, due in
annual payments through 2004 1,900 1,900
Capital leases (Note M) 3,364 3,695
Parent -- Other 81 219
------------ ------------
28,579 24,189
Less: Current maturities 644 4,451
Obligations in default classified
as current -- SRL 23,234
------------ ------------
$ 4,701 $ 19,738
------------ ------------
------------ ------------
</TABLE>
<PAGE>
Maturities of long-term debt (in thousands) for the next five years are:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Company including
Parent $ 644 $ 608 $ 660 $ 719 $ 784
Parent only $ 81
</TABLE>
SRL (100%, WITH THE COMPANY'S SHARE NOTED PARENTHETICALLY)
SRL has financing lines of credit provided by four financial institutions,
primarily to fund capital expenditures. As of December 31, 1994, SRL had
$32,994,000 ($16,497,000) outstanding at rates ranging from 9% to 11% per annum
and $10,480,000 is available under these lines of credit. SRL has agreed to pay
commitment fees of up to 1% per annum on any unused amount of the lines. The
suspension of the rutile mining operation as described in Note A constitutes an
event of default under all of SRL's loan agreements. The lenders have agreed to
forebear from accelerating the maturities of the loans or enforcing their rights
against any collateral until May 15, 1995 to allow SRL time to determine the
damage to the mining operation, to assess the political situation in Sierra
Leone and to develop and present a plan for refinancing, rehabilitating and
reopening the mining operation. During this period of forebearance, the
financial institutions have exercised their right under the financing agreements
to suspend their disbursement obligation under the lines of credit and prohibit
any dividend payment or any other payments by SRL to the Company except for
reimbursement of operating or administrative expenses for the benefit of SRL.
If the present situation in Sierra Leone has not improved by May 15, 1995, the
Company anticipates that SRL will request a continued forebearance from the
lenders and a moratorium on repayment of amounts due to the lenders. The
Company cannot determine the willingness of the lenders to grant any additional
relief to SRL after May 15, 1995. If the lenders request acceleration of
payment of the indebtedness by SRL, funds for which will be provided by the
Company and its partner, the Company will likely be required to seek additional
funds from as yet undetermined sources. As of December 31, 1994, all debt in
default has been classified in the balance sheet as a current liability.
Under these financing arrangements, SRL has committed to complete an $83,300,000
capital expansion program of which $57,999,000 had been expended through
December 31, 1994. The financing agreements contain restrictive covenants
relating to SRL including minimum current and debt coverage ratios and a limit
on indebtedness compared to net worth. In addition, SRL is restricted as to the
amount of dividends it may declare in any one year to 90% of its cash balance as
of the prior year
<PAGE>
end, with a maximum annual dividend of $7,500,000 ($3,750,000) prior to "project
completion", as defined. SRL must also be in compliance with its financial
covenants in order to pay a dividend. Additional covenants under these
agreements include restrictions on change of control of SRL and limitations on
additional indebtedness at SRL. In addition to the previously noted default,
SRL was also in default of a debt coverage ratio under the financing
arrangements.
Amounts borrowed are payable in semi-annual installments over 6-8 year periods,
with early payments subject to prepayment penalties. During the term of the
indebtedness, SRL is required to maintain a balance in a cash escrow account
equal to the total amount of payments (including principal, interest and fees)
required to be made in the subsequent six months under these financing
arrangements and under the bank financing noted below. At December 31, 1994,
SRL escrowed $5,869,000 ($2,934,500) under this requirement.
SRL has $13,475,000 ($6,737,500) of non-interest bearing bank financing. This
loan is also in default similiar to the above noted loans and at December 31,
1994 has been classified in the balance sheet as a current liability. This bank
is also a party to the above mentioned forebearance agreement. Prior to
December 31, 1994, this debt was discounted at 11% and imputed interest on non-
interest bearing debt was recorded on the balance sheets, as there were no
fixed and determinable payment terms for this financing agreement at the time of
its acquisition.
Under the above loan agreements, prior to "project completion", the Company has
agreed to provide 50% of any funds which may be required by SRL to fulfill its
financial obligations, including payment of the above indebtedness. In
addition, the Company is required to provide the 50% share of funds which would
be due from its joint venture partner if the partner does not make such funds
available (including funds for payment of the indebtedness). If it is required
to provide the partner's funds, the Company would seek reimbursement from the
joint venture partner, as prescribed under an agreement with the joint venture
partner. The completion of certain events are required for SRL to attain
"project completion" including construction or procurement of certain capital
assets, attainment of certain production and sales levels, generation of minimum
amounts of net earnings and net worth and maintenance of certain financial
ratios.
<PAGE>
NORD KAOLIN COMPANY (NKC)
In June 1994, NKC refinanced $1.9 million in Industrial Development Bonds. The
new bonds contain a variable interest rate (5.70% at December 31, 1994) and are
payable in ten annual payments of $190,000 beginning July 1995. The Company has
secured payment of the bonds by obtaining a letter of credit in an amount equal
to 120% of the amount of the bonds outstanding plus six months interest. The
letter of credit is secured by funds invested by the Company which are
restricted as to withdrawal.
OTHER
The Company's share of net assets of SRL, which are restricted under debt
agreements as to transfer to the Company, is $41,632,000 at December 31, 1994.
The fair value and related carrying value of the above debt, excluding capital
leases, at December 31, 1994 and 1993 was $25,215,000 and $20,494,000,
respectively.
H. RETIREMENT BENEFITS
The Company has an unfunded non-contributory defined benefit plan for certain of
its executive officers and management personnel ("Management Plan"). The
Company also has a qualified non-contributory defined benefit plan covering its
domestic bargaining hourly employees ("Hourly Plan"). The Company's funding
policy has been to contribute an amount in excess of the minimum required by
Federal regulations.
The following sets forth the funded status and amounts recognized in the
Company's balance sheets at December 31:
<TABLE>
<CAPTION>
Hourly Plan Management Plan
------------------ ------------------
1994 1993 1994 1993
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Present value of accumulated
benefit obligation:
Estimated present value
of vested benefits $ 634 $ 711 $ 4,608 $ 4,783
Estimated present value
of non-vested benefits 18 20 27 58
-------- -------- -------- --------
Present value of accumulated
benefit obligation 652 731 4,635 4,841
<PAGE>
Estimated effect of salary
and benefit increases 25 28 1,017 1,223
-------- -------- -------- --------
Projected benefit obligation 677 759 5,652 6,064
Less plan assets at fair
market value 567 498
-------- -------- -------- --------
Excess of projected benefit
obligation over plan assets 110 261 5,652 6,064
Unrecognized transition
obligation (29) (34) (276) (418)
Unrecognized prior service cost (50) (55) (147) (151)
Unrecognized net loss
including effects of
changes in assumptions (159) (283) (152) (1,248)
Minimum pension liability 213 344 594
-------- -------- -------- --------
Accrued pension cost $ 85 $ 233 $5,077 $4,841
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
Statement of Financial Accounting Standard No. 87, "Employers' Accounting for
Pensions," requires recognition of a minimum pension liability. A corresponding
amount is recognized as either an asset or a reduction of equity. As of December
31, 1994, the Company recorded a minimum pension liability of $213,000, an asset
of $78,000 and an equity reduction of $135,000.
Net pension expense consists of the following components:
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------
1994 1993 1992
---------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Service costs -- benefits
earned during the period $ 87 $ 137 $ 75
Interest on projected
benefit obligation 476 469 383
Actual return on plan assets 8 (24) (22)
Net amortization and deferral 342 372 397
---------- ---------- ----------
Net pension expense $ 913 $ 954 $ 833
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
The discount rate, the estimated rate at which the Hourly Plan could settle its
liabilities, and the expected long-term rate of return on plan assets was 8% in
1994, 7% in 1993 and 9% in 1992. The assumed discount rate for the Management
Plan was 8% in 1994, 7% in 1993 and 8% in 1992. The assumed rate of future pay
increases was 5%.
I. POSTRETIREMENT BENEFITS
The Company provides certain supplementary medical insurance to bargaining
hourly employees upon retirement. These benefits are expensed during the years
an employee provides service.
The following table sets forth the supplemental medical insurance plan's funded
status (in thousands):
<TABLE>
<CAPTION>
December 31
----------------
1994 1993
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 9 $ 13
Disabled participants 13 21
Other active plan participants 124 155
------ ------
Accumulated postretirement benefit obligation 146 189
Unrecognized transition obligation 204 215
Unrecognized gain (121) (61)
------ ------
Accrued post retirement benefit $ 63 $ 35
------ ------
------ ------
</TABLE>
Net postretirement benefit expense consists of the following components (in
thousands):
<TABLE>
<CAPTION>
Year Ended
December 31
----------------
1994 1993
------ ------
<S> <C> <C>
Service cost $ 12 $ 12
Interest cost 13 13
Net amortization 9 9
------ ------
Net postretirement benefit expense $ 34 $ 34
------ ------
------ ------
</TABLE>
<PAGE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation at December 31, 1994 was 10% for 1995
decreasing linearly each successive year until it reaches 6.5% in 2005, after
which it remains constant. A one percentage point increase in the assumed
health care cost trend rate for each year would increase the accumulated
postretirement benefit obligation and net postretirement health care cost by
approximately 30% at December 31, 1994. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 8% in 1994 and
7% in 1993.
J. LITIGATION
STOCKHOLDER
During 1993, the plaintiffs and defendants agreed to the settlement of a class
action complaint, filed initially in 1990, against the Company and certain of
its officers and directors. The final settlement was approved by the United
States District Court in December 1994 and the case was dismissed. The Company
settled the litigation through issuance of 690,159 shares of its common stock at
a value of $4,250,000 and payment of $500,000 in cash, plus the payment of
notice and administration costs of $76,000. The amount of the settlement was
recorded in the financial statements at December 31, 1993. The number of shares
to be issued as part of the settlement was determined and included in shares
outstanding in the fourth quarter of 1994 and distribution of the shares
occurred in January 1995.
RECOVERIES
A final arbitration award was rendered in 1992 by an arbitration panel of the
American Arbitration Association in favor of the Company's then wholly-owned
subsidiary, Sierra Rutile Limited, ("SRL") for approximately $57,000,000 plus
interest against Bomar Resources Inc. (now known as Brinc Ltd.) ("Bomar"),
including trebled damages awarded under the provisions of the Federal Racketeer
Influenced and Corrupt Organizations Act (RICO). The award has been confirmed
by the United States District Court for the Southern District of New York. It
is believed that Bomar does not have sufficient assets to satisfy the award, as
Bomar has filed for bankruptcy under Chapter 11 of the United States Bankruptcy
Code. SRL initiated civil action in the United States District Court, against
those allegedly responsible for the acts and conduct complained of and is
presently proceeding against various defendants. The action seeks damages
against various individuals and corporate entities on various legal theories,
including transferee liability and alter ego/piercing the corporate veil. SRL
has reached settlement agreements for amounts in excess of $7,850,000 with all
principal defendants in the civil action, except for London based Beresford
International PLC, various Beresford subsidiaries, various Beresford designees
to Bomar's Board of Directors and entities allegedly controlled by Beresford
(all
<PAGE>
herein referred to as "Beresford"). The Company has asserted various claims
against Beresford and an answer denying SRL's allegations was filed by
Beresford. On August 4, 1994, an amended answer was filed by Beresford,
including counterclaims against SRL, cross-claims and purported third party
claims against the Company and other defendants. The counterclaim and third
party claims assert, among other things, that the acts complained of by SRL and
upon which its judgment in arbitration was predicated, was not only known to SRL
but also participated in by the Company and others and constituted a fraud on
Beresford for which SRL and the Company have liability or responsibility. The
Company intends to vigorously oppose the counterclaims and third party claims
asserted against it which it regards without merit. The Company has been
advised by its counsel that based on the facts known to it, Beresford's asserted
claims both by counterclaim and/or by third party claim are without merit and
the Company has moved to dismiss the counterclaims and the third party claims
and its motions are pending before the Court. Through December 31, 1994,
$6,600,000 of the settlements have been received, with remaining amounts due
through February 1996. The remainder of the settlements will be included in
earnings upon perfection of collateral or when collection is assured. Under an
agreement signed in conjunction with the sale of 50% of SRL, beginning November
18, 1993, the Company is responsible for all costs of this litigation and will
receive all settlement proceeds.
The Company is a party to other claims and lawsuits incidental to its business.
In the opinion of management, after consultation with legal counsel, the
ultimate outcome of such matters, in the aggregate, will not have a material
effect upon the Company's financial position or results of operations.
K. COMMITMENTS
The Company has agreements with certain employees of the Company or its
affiliates which contain change in control provisions which would entitle two
employees to receive three times their salary in the event of a change in
control of the Company (as defined) and three other employees to receive two
times their salary in the event of a change in control and a change in certain
conditions of their employment. The maximum contingent liability under these
agreements is approximately $2,800,000 at December 31, 1994. In addition, the
Company has an agreement with its salaried employees which would entitle a
covered employee to receive up to six months of salary in the event of a change
in their employment status resulting from a change in control of the Company or
its sale of a business unit.
<PAGE>
L. ROYALTY AGREEMENT
NKC has entered into a license agreement to produce and sell products using the
Norplex (R) technology. The license extends through June 1998, with NKC having
the option to extend the license for two successive five year periods. The
license allows NKC exclusive rights through 1999, with a five year extension of
exclusive rights available to NKC if certain levels of Norplex (R) product
revenues are attained. The license agreement requires payment of an annual
royalty of 1 1/2% on Norplex (R) product revenues up to $60 million and 2% on
Norplex (R) product revenues in excess of $60 million. NKC is required to pay
minimum monthly royalties of $34,200, adjusted annually by the change in the
United States Bureau of Labor Statistics Consumer Price Index. NKC may
terminate the license agreement upon 30 days notice to the licensor. To date
the Company has paid the minimum monthly royalty required by this agreement.
NKC has paid $403,000 through December 31, 1994, related to obtaining foreign
patents for the licensor and these payments are available to reduce future
payments in excess of the minimum required under the agreement.
M. LEASES
Amounts relating to SRL are excluded from the amounts below at December 31, 1994
(see Note C).
Rail cars used to transport the Company's products are leased for periods up to
ten years and generally contain renewal options. Lease payments are reduced by
credits earned for rail car usage on a mileage basis. The Company had no net
cost in 1994, 1993 and 1992, for these rail car leases, after reduction for
mileage usage credits.
NKC entered into a master lease agreement under which $21,725,000 of equipment
has been provided to NKC. Approximately $16,700,000 of equipment was provided
under operating leases which require payments over a 10-year period, with
payments in the initial five years at a lesser amount than in the final five
years. NKC has recognized the lease expense on a straight-line basis over the
term of the lease, with the resulting difference recorded as a long-term
liability of $493,000 at December 31, 1994. NKC has an option to purchase the
equipment at the end of the initial lease term at the greater of its fair value
or 20% of original cost. An additional $5,025,000 of equipment has been
provided under two capital leases which require payments over 7-1/2 and 10-year
periods with options to purchase the equipment at the greater of its fair value
or 20% of original cost and 17.5% of original cost, respectively, at the end of
the lease term. If the options to purchase are not exercised under the leases,
the lessors may elect to extend the leases for an additional eighteen months at
the existing lease rates.
<PAGE>
Payments under these lease agreements are guaranteed by the Company. The
guarantee contains certain restrictive covenants to be maintained by the Company
beginning March 31, 1995, requiring a minimum cash flow coverage to current
maturities of 1.5 to 1.0 and a liabilities to tangible net worth ratio not to
exceed 1.5 to 1.0. The Company's ability to comply with the financial covenants
will more than likely be adversely impacted by the suspension of SRL's
operations. Should the Company fail to comply with the covenants or provide a
letter of credit as noted below, the lessors would have certain rights including
the ability to recover liquidating damages under the lease ($17 million at
December 31, 1994) and could also elect to retain ownership of the leased
equipment. At such time the Company would initiate discussions with the lessors
to seek appropriate modifications of the terms. However, the Company cannot
determine the willingness of the lessors to agree to any modifications, if
necessary, on terms which would be acceptable to the Company. The Company,
however, has the right through September 11, 1995 to cure a covenant default by
securing a letter of credit, within thirty days following the notice of default,
in the name of the lessors which, as of December 31, 1994, would have to be in
the amount of $21 million. The lease agreements also place restrictions on the
amount of cash which NKC may transfer to its owners and limitations on the
repayment of advances previously made by the Company to NKC.
Minimum annual lease payments at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Operating Leases
-------------------
Year Ending Office & Capital
December 31 Railcars Equipment Leases
- ----------- -------- --------- --------
(In thousands)
<S> <C> <C> <C>
1995 $ 1,795 $ 3,424 $ 756
1996 1,422 2,762 756
1997 1,276 2,709 756
1998 1,197 2,681 756
1999 558 1,380 756
Future 437 1,094
-------- --------- --------
Total $ 6,685 $ 12,956 4,874
-------- ---------
-------- ---------
Less amount representing interest 1,510
--------
Capital lease commitments $ 3,364
--------
--------
</TABLE>
<PAGE>
Total rent expense for leases other than rail car leases during the years ended
December 31, 1994, 1993 and 1992 was $3,922,000, $4,159,000 and $4,101,000,
respectively.
The Company operates eleven kaolin open pit mines, of which eight are on leased
property, and controls or owns a number of other leasehold interests and
properties containing reserve deposits. The lease terms range from one to
twenty-six years and generally contain renewal options. The Company is
obligated to pay the lessors minimum royalties of $171,000 in 1995 whether the
properties are mined or not. A substantial portion of these leases containing
minimum royalty requirements may be canceled at the Company's option on thirty
days notice.
N. MINORITY INTEREST
In March 1993, the Company and a subsidiary entered into a Stock Purchase
Agreement ("Agreement") under which a 20% interest in Norplex, Inc. ("Norplex"),
which owns NKC, was sold to an investor. Under the terms of the agreement,
Norplex received $4,950,000 in cash at closing, with the remainder of the
investment made by the investor supplying Norplex with certain raw materials.
As a result of this sale of a minority interest in Norplex, the Company's equity
in net assets of Norplex increased by $3,056,000. The investor also received an
option to purchase an additional 31% interest in Norplex from the Company at a
price which increases from $27,000,000 during 1995 to $36,000,000 during 1997,
after which it expires if unexercised. Under this option, the price received by
the Company would be reduced by an amount, determined at exercise date, equal to
the cumulative amount of temporary tax differences of Norplex plus operating
losses used by the Company multiplied by Norplex's marginal tax rate and the
percentage of Norplex owned by the investor after exercise. This amount is
estimated to be $5,066,000 at December 31, 1994, if the investor had exercised
the 31% option at that date.
As a condition to this investment in Norplex, the license agreement between NKC
and the licensor of certain products produced and sold by NKC was also amended.
Under the amendment, NKC is no longer permitted to reduce future royalty
payments by previous minimum royalty payments. As a result, the Company's
equity in net assets of NKC was reduced by $1,512,000 of previously deferred
minimum royalty payments.
The gain of $3,056,000 from the sale of a minority interest and the reduction of
$1,512,000 of deferred royalty payments as a result of this sale along with
$216,000 of legal and organizational costs, net of income tax of $535,000, have
been included in 1993 as a net increase in additional paid-in capital of
$793,000.
<PAGE>
Related party transactions with the minority investor in Norplex include the
following (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31
---------------------
1994 1993
-------- --------
<S> <C> <C>
Sales $ 8,120 $ 9,155
Raw material purchases $ 12,097 $ 3,395
</TABLE>
O. STOCKHOLDERS' EQUITY
In connection with the settlement of the stockholder class action litigation
(see Note J), the Company issued 690,159 shares of its Common Stock in January
1995. Because the number of shares in this settlement was determined during the
fourth quarter of 1994, the shares have been considered to be outstanding at
December 31, 1994.
Under the Company's various stock option plans, options have been granted at
market price at date of grant (incentive stock options) and at less than market
price at date of grant (non-qualified stock options). Options are generally
exercisable beginning one year from date of grant and expire ten years from date
of grant.
A summary of the option transactions is as follows:
<TABLE>
<CAPTION>
Purchase Price
Shares Per Share
------------ ---------------
<S> <C> <C>
Outstanding at December 31, 1991 1,388,274 $2.67 - $10.50
Granted 117,850 5.50 - 6.50
Exercised (3,000) 2.67
Terminated (233,160) 5.50 - 8.25
------------
Outstanding at December 31, 1992 1,269,964 2.67 - 10.50
Granted 176,950 4.88 - 6.75
Exercised (11,500) 2.67
Terminated (20,525) 5.50 - 8.25
Canceled (33,750) 4.00
------------
Outstanding at December 31, 1993 1,381,139 2.67 - 10.50
Granted 149,000 5.13
Exercised (8,275) 2.67 - 5.50
Terminated (85,485) 4.83 - 8.25
------------
Outstanding at December 31, 1994 1,436,379 2.67 - 10.50
------------
------------
</TABLE>
<PAGE>
All outstanding options are exercisable at December 31, 1994 except 139,700
options at a purchase price of $5.13 per share. In addition, 361,059 shares are
available for future option grants.
The Company also has granted options to a consultant to purchase 150,000 shares
of common stock at a purchase price of $5.63 per share and 50,000 shares of
common stock at a purchase price of $7.00 per share, both of which expire on
July 1, 1997.
A total of 1,997,438 shares are reserved for exercise of the above described
stock options.
Retained earnings are not available for dividends since retained earnings of the
Company are comprised of the cumulative amount of undistributed earnings of
foreign subsidiaries, the distribution of which is limited under the terms of
the financing lines of credit.
P. INCOME TAX
Income tax expense (benefit) includes the following:
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
1994 1993 1992
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Domestic:
Current $ (47) $ 16,181 $
Reduction for use of net
operating loss carryforwards (14,103)
Deferred (credit) (110)
---------- ---------- ----------
Total domestic (47) 2,078 (110)
SRL:
Currently payable 1,060 1,979 2,475
Current deferred (691) 450
Long-term deferred (credit) 228 (5,391) 520
Change in valuation allowance 14,095 (228) 610
---------- ---------- ----------
Total SRL 14,692 (3,640) 4,055
---------- ---------- ----------
Income tax expense (benefit) $ 14,645 $ (1,562) $ 3,945
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
As a result of the suspension of mining operations as described in Note A, the
Company has determined that under the provisions of Statement of Financial
Accounting Standards No. 109, a valuation allowance is required for SRL's
deferred tax assets. Accordingly, the income tax expense of $14,645,000 in the
statement of operations for the year ended December 31, 1994 includes a charge
of $14,095,000 to increase the valuation allowance pertaining to SRL deferred
tax assets.
<PAGE>
The principal current and long-term deferred tax assets and (liabilities) are as
follows:
<TABLE>
<CAPTION>
December 31
--------------------
1994 1993
--------- ---------
<S> <C> <C>
Current domestic deferred tax assets
and (liability):
Accrued expenses $ 296 $
Gain on sale of 50% of SRL (680)
Net operating loss carryforwards 289
Other 95 283
Valuation allowance (283)
--------- ---------
Total domestic 0 0
Total SRL (Note C):
Deferred tax assets 2,796 2,105
Valuation allowance (2,796)
--------- ---------
$ 0 $ 2,105
--------- ---------
--------- ---------
<CAPTION>
December 31
--------------------
1994 1993
--------- ---------
(In thousands)
<S> <C> <C>
Long-term domestic deferred tax assets
and (liabilities):
Deferred tax assets:
Affiliate losses -- Nord Pacific $ 1,838 $ 2,387
Deferred compensation 1,693 1,411
Litigation settlement 1,615
Impairment of investments and assets 1,045 1,045
Net operating loss carryforwards 7,387 2,939
Tax credit carryforwards 3,528 3,283
Other 239 288
--------- ---------
15,730 12,968
Deferred tax (liabilities):
Mine development and exploration (804) (837)
Depreciation (6,800) (6,651)
Other (230) (142)
--------- ---------
(7,834) (7,630)
--------- ---------
Net domestic deferred tax asset 7,896 5,338
Valuation allowance (7,896) (5,338)
--------- ---------
Total domestic 0 0
<PAGE>
Total SRL (Note C):
Deferred tax assets 11,681 11,909
Valuation allowance (11,681) (382)
--------- ---------
$ 0 $ 11,527
--------- ---------
--------- ---------
</TABLE>
The domestic valuation allowance for deferred tax assets represents a 100%
valuation allowance. Based upon the earnings history of the Company's domestic
operations, it is more likely than not that the Company will be unable to
generate enough income to take advantage of the net operating loss carryforwards
and related tax credits.
Domestic income taxes have not been provided on undistributed earnings of SRL
aggregating $43,150,000 at December 31, 1994 which the Company intends to
reinvest in SRL. The unrecognized domestic deferred tax liability for the
temporary differences related to the Company's investment in SRL was $11,600,000
at December 31, 1994.
Income taxes differ from the amount computed by applying the U.S. statutory
federal income tax rate as follows:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
1994 1993 1992
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Tax (benefit) at statutory rate $ (328) $ (3,374) $ (1,100)
Increase (decrease) in taxes
resulting from:
Additional foreign asset recognized (7,066)
Repatriation of foreign earnings 21,048 2,550
Change in valuation allowance 16,370 (9,715) 2,742
Rate difference related to
alternative minimum tax (2,825)
Equity in loss of foreign affiliate (549) 442 316
Rate difference on foreign earnings 85 342 381
Percentage depletion (272) (229) (298)
Non taxable foreign income (634)
Other (27) (185) (646)
--------- --------- ---------
Income tax expense (benefit) $ 14,645 $ (1,562) $ 3,945
--------- --------- ---------
--------- --------- ---------
</TABLE>
<PAGE>
FEDERAL
At December 31, 1994, the Company had a net operating loss carryforward for
domestic income tax purposes totaling $22,576,000 available to be carried
forward to future periods. This carryforward expires from 2006 to 2009. The
Company also had general business credit carryforwards of $578,000 which expire
from 1995 to 2009, and foreign tax credits of $1,910,000, which expire in 1997
and 1998, available to reduce the Company's future tax liability.
The Alternative Minimum Tax (AMT) requires a separate tax computation from
regular tax, based on a 20% rate. For AMT purposes, net operating loss
carryforwards are adjusted by certain tax preference items, including the
percentage depletion deduction previously taken by the Company. The Company has
paid $1,040,000 of AMT and such amount is available to be used as a credit in
future years to the extent that regular tax exceeds the AMT.
FOREIGN
The Company's principal foreign interest is a 50% subsidiary (SRL) which is
assessed income tax at a 37.5% rate with a minimum tax payment equal to 3.5% of
net sales. SRL has received notification from tax authorities in Sierra Leone
regarding their acceptance of income tax returns filed through 1988. As a
result, $18,842,000 of tax deductions for depreciation which had previously been
utilized became available and the Company increased its deferred tax asset by
$7,066,000 and recognized the corresponding income tax benefit in 1993.
ACCOUNTING CHANGE
Effective January 1, 1992, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting For Income Taxes." The statement requires that
income tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and
tax credit and loss carryforwards. The cumulative effect of this change in
accounting for income taxes of $23,480,000 ($1.55 per share) is determined as of
January 1, 1992, and is reported separately in the statement of operations for
the year ended December 31, 1992.
<PAGE>
Q. DISCONTINUED OPERATIONS
In August 1993 the Company disposed of the perlite operations for $1,270,000 in
cash, for a gain of $106,000. The loss from discontinued operations includes
the following amounts:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------
1993 1992
---------- ----------
(In thousands)
<S> <C> <C>
(Gain) loss on disposal,
including provision for
operating losses to disposal
date of $900 in 1992 $ (106) $ 2,900
---------- ----------
---------- ----------
</TABLE>
During 1993 and 1992, the Company charged $931,000 and $1,546,000, respectively,
for operating losses of the perlite operations to the provision for operating
losses.
Sales from the perlite operations of $2,424,000 and $3,710,000 for the years
ended December 31, 1993 and 1992, respectively, have been excluded from
continuing operations.
R. RESEARCH AND DEVELOPMENT
Research and development costs were $1,042,000 for 1994, $1,071,000 for 1993,
and $1,028,000 for 1992. These costs are primarily associated with new product
development at NKC.
<PAGE>
S. CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------
Increase (Decrease) in cash and cash equivalents 1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
RUTILE SEGMENT
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (11,855) $ 15,308 $ 32,532
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation, depletion and amortization 6,212 10,999 11,455
Deferred income taxes 13,632 (5,619) 1,580
Imputed interest expense 28 180 282
Cumulative effect of change in accounting principle (23,480)
Change in assets and liabilities:
Accounts receivable (2,088) 2,987 2,683
Inventories 1,142 (3,094) 5,188
Prepaid expenses (646) 611 (321)
Accounts payable 3,234 (4,272) (3,522)
Accrued expenses 1,110 970 (1,379)
Long-term liabilities 1,271 (1,001) 33
----------- ----------- -----------
Net cash provided by operating activities -- Rutile $ 12,040 $ 17,069 $ 25,051
----------- ----------- -----------
----------- ----------- -----------
DOMESTIC
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (3,756) $ (24,390) $ (19,134)
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating activities:
Equity in net (earnings) loss of affiliates (1,613) 1,299 928
Depreciation, depletion and amortization 3,822 4,275 4,456
Gain on sale of 50% of rutile segment (1,527)
Deferred income taxes 1,078 (110)
Extraordinary item -- loss on early extinguishment of debt 826
Compensation related to non-qualified options 315 67
Minority interest (1,321) (1,166)
Stockholder litigation settlement 4,250
Provision for impairment of assets 3,074
Raw material contributed by investor 5,050
(Earnings) loss from discontinued operations (106) 2,900
Change in assets and liabilities, excluding effects
of dispositions and discontinued operations:
Accounts receivable (1,322) (1,886) (372)
Inventories 573 (117) 1,116
Prepaid expenses (260) (6) (340)
Accounts payable 3,324 (597) 382
Accrued expenses (1,171) 1,046 (2,272)
Long-term liabilities 751 971 701
Net cash used in discontinued operations (441) (853)
----------- ----------- -----------
Net cash (used in) operating activities -- Domestic $ (2,500) $ (6,525) $ (12,531)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
T. INDUSTRY SEGMENTS
The Company's reportable industry segments are its domestic kaolin operation and
its Sierra Leone, Africa, rutile operation. Financial data by reportable
industry segment are as follows:
<TABLE>
<CAPTION>
Operating Depreciation Identi-
Earnings Depletion and Capital fiable
Sales(1) (Loss)(2) Amortization Expenditures Assets
---------- --------- ------------- ------------ ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994:
- -----------------------------
Industry segments:
Kaolin (domestic) $ 41,231 $ (4,693) $ 3,703 $ 929 $ 53,776
Rutile (foreign) 30,263 3,789 6,212 16,378 (5)
---------- --------- ------------- ----------- ----------
71,494 (904) 9,915 17,307 53,776
Corporate and other non-segment
items (2,996) (3) 119 0 92,339 (5)
---------- --------- ------------- ----------- ----------
Total $ 71,494 $ (3,900) (4) $ 10,034 $ 17,307 $ 146,115
---------- --------- ------------- ----------- ----------
---------- --------- ------------- ----------- ----------
Year Ended December 31, 1993:
- -----------------------------
Industry segments:
Kaolin (domestic) $ 32,037 $ (9,709) $ 3,815 $ 810 $ 54,804
Rutile (foreign) 56,146 14,587 10,999 10,364 80,132
---------- --------- -------------- ___________ __________
88,183 4,878 14,814 11,174 134,936
Corporate and other non-segment
items 263 (14,669) (3) 460 45 27,822
---------- --------- ------------- ----------- ----------
Total $ 88,446 $ (9,791) (4) $ 15,274 $ 11,219 $ 162,758
---------- --------- ------------- ----------- ----------
---------- --------- ------------- ----------- ----------
Year Ended December 31, 1992:
- -----------------------------
Industry segments:
Kaolin (domestic) $ 27,167 $ (9,378) $ 3,962 $ 966 $ 55,949
Rutile (foreign) 70,463 14,080 11,455 6,932 155,738
---------- --------- -------------- ----------- ----------
97,630 4,702 15,417 7,898 211,687
Corporate and other non-segment
items 2,439 (7,011) (3) 494 57 14,620
---------- --------- ------------- ----------- ----------
Total $ 100,069 $ (2,309) (4) $ 15,911 $ 7,955 $ 226,307
---------- --------- ------------- ----------- ----------
---------- --------- ------------- ----------- ----------
<FN>
(1) Sales in 1994 includes rutile sales to two customers of $9,920,000 and
$8,120,000 and kaolin sales to one customer of $11,400,000. Sales in 1993
include rutile and ilmenite sales to a customer of $24,177,000 and kaolin
sales to a customer of $9,422,000. Sales in 1992 include rutile and
ilmenite sales to two customers of $30,579,000 and $11,963,000.
(2) Operating earnings (loss) of the segments consists of total revenues less
cost of sales, distribution, marketing and service charges and
administrative expenses applicable to the individual segments.
(3) Includes interest expense related to the kaolin and rutile segments.
(4) Earnings from continuing operations before equity in net earnings (loss) of
affiliate, minority interest and income taxes.
(5) At December 31, 1994 the Company adopted the cost basis of accounting for
its investment in SRL (see Note A) and recorded $64,353,00 as its
investment in SRL which is included in Corporate and other non-segment
items.
</TABLE>
<PAGE>
U. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The quarterly results of operations are shown below:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Year Ended December 31, 1994:
- -----------------------------
Sales $ 17,316 $ 15,770 $ 15,971 $ 22,437
Gross profit 1,908 1,499 1,675 2,650
Net (loss) (683) (322) (1,152) (13,454) (1)
(Loss) per common and common
equivalent share (4) (0.05) (0.02) (0.08) (0.85)
Year Ended December 31, 1993:
- -----------------------------
Sales $ 21,001 $ 24,875 $ 18,524 $ 24,046
Gross profit 1,951 2,624 1,234 5,326 (2)
Earnings (loss) before extraordinary item (7,213) (2,929) 89 1,797
Net earnings (loss) (7,213) (2,929) 89 971 (3)
Earnings (loss) per common and common
equivalent share: (4)
Earnings (loss) before extraordinary item (0.48) (0.19) 0.01 0.12
Net earnings (loss) (0.48) (0.19) 0.01 0.06
<FN>
(1) Net loss in the fourth quarter include a $1,527,000 gain on sale of 50% of
the rutile segment, a $1,000,000 payment made to the government of Sierra
Leone to resolve certain claims and income tax expense of $14,095,000
related to recording a valuation allowance for a deferred tax asset at the
rutile segment.
(2) Gross profit in the fourth quarter of 1993 includes $1,400,000 related to
revisions of estimates made during the year for certain costs and
depreciation in the rutile segment. Since actual costs were lower than
estimated costs, the fourth quarter bore a lower than normal expense for
these items. The effect of these revisions was to increase net earnings by
$875,000 ($.06 per share) during the fourth quarter.
(3) In addition to the items in Note (2) above, net earnings in the fourth
quarter of 1993 include a charge of $3,074,000 for the impairment of an
investment and a writedown of the carrying amount of certain equipment, an
income tax benefit of $7,066,000 related to additional tax deductions at
SRL and, as a result of the sale of 50% of SRL, costs of $765,000, an
extraordinary loss of $826,000 related to the early extinquishment of debt
and a domestic income tax provision of $2,078,000. The effect of these
events was to increase net earnings by $1,198,000 ($.08 per share) during
the fourth quarter.
(4) The number of shares used in the calculation of per share data varies from
period to period since stock options and convertible debentures are
included in the calculations only for the periods in which they are
dilutive; therefore, the sum of the individual quarterly earnings per share
may not equal the annual computation.
</TABLE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by the above Items 10-13 is incorporated by
reference from the Company's Proxy Statement to be dated April 25,
1995.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements: The following financial statements of Nord
Resources Corporation are included in Part II, Item 8 of this
Form 10-K
PAGE
----
(a) 2. Financial Statement Schedules:
Independent Auditors' Report 74
Schedule I - Condensed financial information of
Registrant, Nord Resources Corporation 75
Schedule II - Valuation and qualifying accounts 78
Nord Pacific Limited:
Independent Auditors' Report 79
Consolidated Balance Sheets 80
Consolidated Statements of Operations 82
Consolidated Statements of Shareholders' Equity 83
Consolidated Statements of Cash Flows 84
Notes to Consolidated Financial Statements 85
(a) 3. Exhibits: See INDEX TO EXHIBITS
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1994.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Nord Resources Corporation
Dayton, Ohio
We have audited the consolidated financial statements of Nord Resources
Corporation and subsidiaries as of December 31, 1994 and 1993, and for each of
the three years in the period ended December 31, 1994; and have issued our
report thereon dated April 7, 1995, which report disclaims an opinion on the
consolidated financial statements as of December 31, 1994 and for the year then
ended because of uncertainties relating to the ability of the Company to
continue as a going concern and includes an explanatory paragraph as to the
Company changing its method of accounting for its investment in the Rutile
Segment to the cost basis at December 31, 1994; such report is included
elsewhere in this Form 10-K. Our audits also included the consolidated
financial statement schedules of Nord Resources Corporation and subsidiaries,
listed in Item 14. These consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
(or disclaim) an opinion based on our audits. In our opinion, the consolidated
financial statement schedules as of December 31, 1993 and 1992 and for each of
the two years in the period then ended December 31, 1993, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects, the information set forth therein. As
explained in the fifth paragraph of our report, we are unable to express, and we
do not express, an opinion on the Company's consolidated financial statements
for 1994. Accordingly, we are unable to express, and we do not express, an
opinion on the consolidated financial statement schedules as of December 31,
1994 and for the year then ended.
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 7, 1995
<PAGE>
NORD RESOURCES CORPORATION
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF
REGISTRANT, NORD RESOURCES CORPORATION
BALANCE SHEETS, DECEMBER 31, 1994 AND 1993
(In thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
- --------------- ---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,140 $ 13,400
Restricted cash -- SRL 2,934
Accounts receivable -- affiliates 2,189 646
Accounts receivable -- other 489
Prepaid expenses 438 182
---------- ----------
TOTAL CURRENT ASSETS 14,190 14,228
RESTRICTED CASH AND INVESTMENTS 2,797 2,604
INVESTMENTS IN AND ADVANCES TO
UNCONSOLIDATED AFFILIATE 8,142 6,552
INVESTMENTS IN AND ADVANCES TO
CONSOLIDATED SUBSIDIARIES 34,855 93,215
INVESTMENT IN RUTILE SEGMENT, at cost as
described in Note A 64,353
PROPERTY, PLANT AND EQUIPMENT, at cost
less accumulated depreciation 119 226
OTHER ASSETS 2,270 2,631
---------- ----------
$126,726 $119,456
---------- ----------
---------- ----------
LIABILITIES AND
STOCKHOLDERS' EQUITY 1994 1993
- -------------------- ---------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 61 $ 114
Accrued expenses 724 717
Stockholder litigation settlement 500
Obligations in default 23,234
Current maturities of long-term debt 82 137
---------- ----------
TOTAL CURRENT LIABILITIES 24,101 1,468
LONG-TERM DEBT 82
LONG-TERM LIABILITIES:
Retirement benefits 5,076 4,842
Other 15 5
---------- ----------
5,091 4,847
STOCKHOLDER LITIGATION SETTLEMENT 4,250
STOCKHOLDERS' EQUITY:
Common Stock 158 151
Additional paid-in capital 58,137 53,856
Retained earnings 39,092 54,703
Cumulative foreign currency translation
adjustment 282 379
Minimum pension liability (135) (280)
---------- ----------
97,534 108,809
---------- ----------
$126,726 $119,456
---------- ----------
---------- ----------
</TABLE>
<PAGE>
NORD RESOURCES CORPORATION
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF
REGISTRANT, NORD RESOURCES CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
COSTS AND EXPENSES:
Depreciation and amortization $ 119 $ 271 $ 438
Selling, general and administrative 4,351 1,076 958
Stockholder litigation settlement 4,750
-------- -------- --------
Total costs and expenses 4,470 6,097 1,396
OTHER INCOME (EXPENSE):
Interest income 580 367 362
Equity in net earnings (loss) of:
Consolidated subsidiaries (15,873) (9,812) (2,757)
Unconsolidated affiliates 1,613 (1,299) (928)
Litigation recoveries 950 500
Interest expense (92) (2,003) (2,573)
Gain on sale of 50% of SRL 1,527
Other 138 242
-------- -------- --------
Total other income (expense) (11,157) (12,005) (5,896)
(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX
(EXPENSE) BENEFIT (15,627) (18,102) (7,292)
INCOME TAX (EXPENSE) BENEFIT 16 9,740 110
-------- -------- --------
(LOSS) FROM CONTINUING OPERATIONS (15,611) (8,362) (7,182)
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS 106 (2,900)
-------- -------- --------
(LOSS) BEFORE EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (15,611) (8,256) (10,082)
EXTRAORDINARY ITEM -- Loss on early extinguishment of debt (826)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 23,480
-------- -------- --------
NET EARNINGS (LOSS) $(15,611) $ (9,082) $ 13,398
-------- -------- --------
-------- -------- --------
</TABLE>
<PAGE>
NORD RESOURCES CORPORATION
SCHEDULE I -- CONDENSED FINANCIAL
INFORMATION OF REGISTRANT, NORD RESOURCES CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands)
<TABLE>
<CAPTION>
Increase (Decrease) in cash and cash equivalents 1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) adjusted for non-cash
items except depreciation, depletion,
amortization and dividends received $ (4,783) $ (500) $ 386
Depreciation, depletion and amortization 119 271 438
Dividends received from consolidated
subsidiaries 7,500 7,500
--------- --------- ---------
Net cash provided by (used in) operating activities (4,664) 7,271 8,324
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (44) (35)
Additions to other assets (228) (209) (326)
(Increase) decrease in investments in and
advances to subsidiaries and affiliate (74) 17,178 (11,695)
--------- --------- ---------
Net cash provided by (used in) investing activities (302) 16,925 (12,056)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional indebtedness 219
Payments of indebtedness (137) (9,318) (5,567)
Restricted cash and investments (194) (2,304) (300)
Stock option activity 37 31 37
--------- --------- ---------
Net cash (used in) financing activities (294) (11,372) (5,830)
--------- --------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (5,260) 12,824 (9,562)
CASH AND CASH EQUIVALENTS -- Beginning of year 13,400 576 10,138
--------- --------- ---------
CASH AND CASH EQUIVALENTS -- End of Year $ 8,140 $ 13,400 $ 576
--------- --------- ---------
--------- --------- ---------
CASH PAID FOR:
Interest $ 12 $ 2,072 $ 2,558
--------- --------- ---------
--------- --------- ---------
Income taxes $ 1,100
---------
---------
NON-CASH TRANSACTIONS:
Conversion of advances to affiliate into
into common stock $ 2,900 $ 2,500
--------- ---------
--------- ---------
Debenture retired in connection with
the sale of 50% of SRL $ 20,000
---------
---------
Stock issued to settle long-term liability $ 4,250
---------
---------
</TABLE>
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------------------------- -------- -------- --------- --------
Balance at Additions
Beginning Charged to Balance
of Costs and at End
Description Period Expenses Deductions of Period
- -------------------------------------------------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts $ 75 $ 70 $ $ 145
-------- -------- ---------- --------
-------- -------- ---------- --------
Investment valuation allowance -- Manatee Gateway $ 2,219 $ $ $ 2,219
-------- -------- ---------- --------
-------- -------- ---------- --------
Provision for impairment -- Ilmenite equipment $ 855 $ $ $ 855
-------- -------- ---------- --------
-------- -------- ---------- --------
Income tax valuation allowance $ 6,003 $ 16,370 $ $ 22,373
-------- -------- ---------- --------
-------- -------- ---------- --------
YEAR ENDED DECEMBER 31, 1993
Estimated loss on disposal, including
provision for estimated operating losses
to disposal date. $ 5,839 $ $5,839 (1) $
-------- -------- ---------- --------
-------- -------- ---------- --------
Allowance for doubtful accounts $ $ 75 $ $ 75
-------- -------- ---------- --------
-------- -------- ---------- --------
Investment valuation allowance -- Manatee Gateway $ $ 2,219 $ $ 2,219
-------- -------- ---------- --------
-------- -------- ---------- --------
Provision for impairment -- Ilmenite equipment $ $ 855 $ $ 855
-------- -------- ---------- --------
-------- -------- ---------- --------
Income tax valuation allowance $ 15,718 $ $9,715 (2) $ 6,003
-------- -------- ---------- --------
-------- -------- ---------- --------
YEAR ENDED DECEMBER 31, 1992
Estimated loss on disposal, including
provision for estimated operating losses
to disposal date. $ 4,485 $ 2,900 $1,546 (3) $ 5,839
-------- -------- ---------- --------
-------- -------- ---------- --------
Income tax valuation allowance $ $ 15,718 $ $ 15,718
-------- -------- ---------- --------
-------- -------- ---------- --------
<FN>
(1) Loss on disposal and operating loss charged to reserve.
(2) Reversal of valuation allowance included as a component of income tax
expense.
(3) Operating loss charged to reserve.
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Nord Pacific Limited
Hamilton, Bermuda
We have audited the accompanying consolidated balance sheets of Nord Pacific
Limited and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1994 (all expressed in
U.S. dollars). These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Nord Pacific Limited and
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with accounting principles generally accepted in the
United States of America.
As discussed in Note D to the consolidated financial statements, the Company has
deferred exploration and development costs related to exploration prospects
aggregating $9,308,000 and $7,763,000 at December 31, 1994 and 1993,
respectively. Realization of these costs is dependent upon future events.
Deloitte & Touche
Chartered Accountants
Hamilton, Bermuda
March 9, 1995
<PAGE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
ASSETS (Notes E) 1994 1993
- -------------------------------- ------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $7,149 $ 304
Accounts receivable (no allowance for
doubtful accounts is considered necessary):
Trade 1,191 987
Affiliates 46 19
Other 50 32
------- -------
1,287 1,038
Inventories:
Copper 108 265
Supplies 116 125
------- -------
224 390
Forward currency exchange contracts (Note F) 1,264
Prepaid expenses 33 41
------- -------
TOTAL CURRENT ASSETS 9,957 1,773
RESTRICTED CASH (Note E) 1,024 1,005
FORWARD CURRENCY EXCHANGE CONTRACTS (NOTE F) 849
DEFERRED COSTS ASSOCIATED WITH
ORE UNDER LEACH, net of accumulated amortization
of $3,619 in 1994 and $1,172 in 1993 (Note B) 4,295 3,115
PROPERTY, PLANT, AND EQUIPMENT, at cost
less accumulated depreciation (Note C) 5,612 5,882
DEFERRED EXPLORATION AND DEVELOPMENT COSTS:
Girilambone, net of accumulated amortization
of $469 in 1994 and $159 in 1993 (Note B) 1,587 1,866
Exploration prospects (Note D) 9,308 7,763
DEBT ISSUANCE COSTS, net of accumulated amortization
of $271 in 1994 and $215 in 1993 218 504
DEFERRED PUBLIC OFFERING COSTS (Note I) 697
------- -------
$32,850 $22,605
------- -------
------- -------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1994 AND 1993
- -------------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS,
EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
- ---------------------------------------------------- ------- -------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable:
Trade $ 932 $ 1,227
Affiliates 47 3
------- -------
979 1,230
Accrued interest 247
Other accrued expenses 303 731
Obligation under purchase agreement (Note D) 698
Current maturities of long-term debt (Note E) 3,960 2,687
------- -------
TOTAL CURRENT LIABILITIES 5,940 4,895
LONG-TERM LIABILITIES:
Long-term debt (Note E):
Nord Resources Corporation 2,772
Affiliate 1,905
Other 3,173 8,200
------- -------
3,173 12,877
Obligation under purchase agreement (Note D) 776 1,290
Retirement benefits (Note L) 148 102
------- -------
TOTAL LONG-TERM LIABILITIES 4,097 14,269
CONTINGENT LIABILITY (Note M)
SHAREHOLDERS' EQUITY (Notes G and I):
Common Stock, par value $.01 per share,
authorized - 100,000,000 shares, issued
and outstanding: 1994 - 47,446,707 and
1993 - 27,925,376 474 279
Additional paid-in capital 31,325 16,137
Deficit (9,784) (13,773)
Foreign currency translation adjustment 798 798
------- -------
22,813 3,441
------- -------
$32,850 $22,605
------- -------
------- -------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
- ----------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
SALES (Notes F and J) $11,293 $4,674 $
COSTS AND EXPENSES:
Cost of sales (Note B) 7,807 3,861
Abandoned and impaired projects 35 298 3
General and administrative:
Nord Resources Corporation (Note G) 318 308 206
Other 2,417 2,320 1,725
------- ------- -------
Total general and administrative 2,735 2,628 1,931
------- ------- -------
Total costs and expenses 10,577 6,787 1,934
------- ------- -------
OPERATING EARNINGS (LOSS) 716 (2,113) (1,934)
OTHER INCOME (EXPENSE):
Interest and other income 697 235 64
Interest and debt issuance costs (992) (969) (351)
Forward currency exchange contracts
gain (Note F) 2,535 14
Foreign currency transaction gain
(loss) 1,033 (204)
------- ------- -------
TOTAL OTHER INCOME (EXPENSE) 3,273 (924) (287)
------- ------- -------
NET EARNINGS (LOSS) $ 3,989 $(3,037) $(2,221)
------- ------- -------
------- ------- -------
NET EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT SHARE $ 0.09 $(0.12) $(0.09)
------- ------- -------
------- ------- -------
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES (In thousands) (Note A) 54,002 25,764 24,280
------- ------- -------
------- ------- -------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
- ----------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARES)
<TABLE>
<CAPTION>
Common Stock Additional Currency
-------------------------- Paid-in Translation
Shares Amount Capital Deficit Adjustment
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE - December 31, 1991 23,979,216 $240 $13,251 ($8,515) $1,097
Net (loss) (2,221)
Unrealized translation (loss) (727)
Compensation relating to non-
qualified options 19
Common Stock issued relating
to stock bonus plan 128,000 1 32
Exercise of stock options 84,000 1 31
Issuance of restricted stock 176,000 2 50
---------- ---------- ---------- ---------- ----------
BALANCE - December 31, 1992 24,367,216 244 13,383 (10,736) 370
Net (loss) (3,037)
Unrealized translation gain 428
Compensation relating to
non-qualified options and
restricted shares 69
Common Stock issued relating
to stock bonus plan 155,200 1 21
Exercise of stock options 456,000 4 203
Forfeiture of restricted stock (16,000) (9)
Conversion of long-term debt
to common stock (Note G) 2,962,960 30 2,470
---------- ---------- ---------- ---------- ----------
BALANCE - December 31, 1993 27,925,376 279 16,137 (13,773) 798
Net earnings 3,989
Compensation relating to
restricted shares 16
Issuance of common stock 16,000,000 160 12,304
Stock option activity 32,610 3
Conversion of long-term debt
to common stock (Note G) 3,488,721 35 2,865
---------- ---------- ---------- ---------- ----------
BALANCE - December 31, 1994 47,446,707 $474 $31,325 ($9,784) $ 798
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
- ----------------------------------------------------
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 3,989 $ (3,037) $ (2,221)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used for) operating activities:
Depreciation 995 545 109
Amortization 3,043 1,548
Compensation relating to non-qualified options,
bonus shares and restricted stock 16 83 104
Unrealized gain on forward currency exchange contracts (2,017) (14)
Foreign currency transaction (gain) loss (1,033) 187
Abandoned and impaired projects 35 298 3
Change in assets and liabilities:
Accounts receivable (226) (804) (73)
Inventories 171 (406)
Prepaid expenses 11 (1) (41)
Accounts payable (378) (43) 1,023
Accrued expenses and other liabilities (613) 282 580
-------- -------- --------
Net cash provided by (used for) operating activities 3,993 (1,362) (516)
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred costs associated with ore under leach (3,627) (4,157)
Capital expenditures (727) (3,893) (2,029)
Deferred exploration costs (1,611) (1,236) 733
Recovery of deferred exploration costs 760
-------- -------- --------
Net cash (used for) investing activities (5,965) (9,286) (536)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 14,266
Costs associated with issuance of common stock (1,105) (697)
Payments of long-term debt (5,771)
Additions to long-term debt 140 10,817 755
Borrowings - Nord Resources Corporation 221 1,839 1,587
Payments - Nord Resources Corporation (166) (170) (1,950)
Stock option activity 3 207 32
Restricted cash 115 (1,026)
-------- -------- --------
Net cash provided by financing activities 7,703 10,970 424
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 1,114 (36) 1
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,845 286 (627)
CASH AND CASH EQUIVALENTS- beginning of year 304 18 645
-------- -------- --------
CASH AND CASH EQUIVALENTS - end of year $ 7,149 $ 304 $ 18
-------- -------- --------
-------- -------- --------
CASH PAID FOR INTEREST, net of capitalized interest of
$97 in 1993 $ 950 $ 481 $ 117
-------- -------- --------
-------- -------- --------
NON-CASH TRANSACTIONS:
Conversion of long-term debt due to Nord Resources
Corporation into common stock (Note G) $ 2,900 $ 2,500
-------- --------
-------- --------
Obligation incurred for purchase of interest in
exploration project (Note D) $ 1,289
--------
--------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN U.S. DOLLARS)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPANY DESCRIPTION
Nord Pacific Limited (the "Company") operates in a single industry segment which
includes the exploration for and development and production of precious and base
metals and strategic mineral properties primarily in Australia and Papua New
Guinea. Exploration activity is also carried on in North America, primarily for
gold.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, and its 40% interest in the Girilambone copper
property ("Girilambone") in Australia. Financial statement amounts relating to
Girilambone represent the Company's proportionate interest in the assets,
liabilities and operations of Girilambone. All significant intercompany
transactions are eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
DEFERRED COSTS ASSOCIATED WITH ORE UNDER LEACH
Costs at Girilambone incurred with respect to ore under leach are deferred and
amortized using the units of production method over the estimated reserves.
Copper is projected to be recovered during the next 4 1/2 year period, based on
the present proven reserves. The Company will continually evaluate and refine
estimates used to determine the amortization and carrying amount of deferred
costs associated with ore under leach based upon actual copper recoveries and
operating plans.
<PAGE>
PROPERTY, PLANT AND EQUIPMENT
Non-mining property, plant and equipment is depreciated using the straight-line
method over the estimated useful lives of the assets. Property, plant and
equipment related to Girilambone is depreciated by the units of production
method over the estimated reserves.
DEFERRED EXPLORATION AND DEVELOPMENT COSTS
All costs directly attributable to prospecting, exploration and development are
deferred. Costs related to producing properties are amortized by the units-of-
production method over the estimated reserves. Deferred costs are carried at
cost, not in excess of anticipated future recoverable value, and are expensed
when a project is no longer considered commercially viable.
DEBT ISSUANCE COSTS
Professional fees and expenses relating to the issuance of debt are capitalized
and amortized over the term of the related borrowings.
FOREIGN CURRENCY TRANSLATION
The functional currency for operations conducted in Australia was changed to the
U.S. dollar on April 1, 1993 due to changes in economic facts and circumstances
pertaining to the Company's Australian operations, including obtaining
additional U.S. dollar denominated indebtedness and entering into certain
forward currency exchange contracts. Adjustments to U.S. dollar balances as a
result of changes in the exchange rate between U.S. dollars and Australian
dollars are recognized currently in the statement of operations as foreign
currency transaction gains and losses.
For the period through March 31, 1993, the Australian dollar was the functional
currency for the Company's operations conducted in Australia. The assets and
liabilities of the Australian operations were translated into United States
dollars at current exchange rates. Revenue and expense accounts were translated
into United States dollars at the average exchange rate for the period. The
resulting translation adjustments were accumulated as a separate component of
shareholders' equity through March 31, 1993.
FINANCIAL INSTRUMENTS
Gains and losses related to qualifying hedges of anticipated copper sales are
deferred and recognized in the statement of operations at the settlement date.
<PAGE>
Realized and unrealized gains and losses on forward currency exchange contracts
that do not qualify as hedges are recognized currently in the statement of
operations. Net unrealized gains and losses are included as assets or
liabilities in the balance sheet. (See Note F)
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Net earnings per common and common equivalent share are computed on a modified
treasury stock method as options outstanding exceed 20% of the Company's shares
outstanding at December 31,1994. Under this method of computation, all options
outstanding are presumed exercised, and proceeds are deemed to be applied to
reduce borrowing with any excess proceeds applied to the purchase of U.S.
government securities. Net earnings and average common and common equivalent
shares are adjusted to include the effect of the above calculation in
determining the Company's net earnings per common and common equivalent share.
RECLASSIFICATIONS
Certain reclassifications have been made in the 1993 and 1992 consolidated
financial statements to conform to the classifications used in 1994. These
reclassifications had no effect on results of operations or shareholders' equity
as previously reported.
B. GIRILAMBONE
The Company is a 40% joint venturer in Girilambone which commenced production in
May 1993. All costs incurred during mine development have been capitalized and
are being amortized using the units of production method over the estimated
reserves. Following is summarized balance sheet information of Girilambone:
<PAGE>
<TABLE>
<CAPTION>
Amounts
Included in
Total Accompanying
Balance Sheet Data Girilambone Financial
(In thousands) Joint Venture Statements
- ------------------ ---------------------- ----------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Current assets $ 861 $ 1,395 $ 344 $ 558
Deferred costs
associated with
ore under leach 10,738 7,786 4,295 3,115
Property, plant and
equipment 13,638 14,677 5,455 5,870
Deferred exploration
and development costs 8,293 9,315 1,587 1,866
-------- -------- -------- --------
Total assets 33,530 33,173 11,681 11,409
Current liabilities 1,599 2,607 639 1,043
-------- -------- -------- --------
Partners' equity $ 31,931 $ 30,566 $ 11,042 $ 10,366
-------- -------- -------- --------
-------- -------- -------- --------
The Company's share of
equity (40%) $ 12,772 $ 12,226
Less: Eliminations (1,730) (1,860)
-------- --------
$ 11,042 $ 10,366
-------- --------
-------- --------
</TABLE>
Debt incurred for the development and construction of Girilambone is the
separate responsibility of each venturer and is not included in the joint
venture's financial statements. The Company has $7,133,000 of debt outstanding
at December 31, 1994, which was incurred to fund the construction and
development of Girilambone.
Copper production is distributed to each venturer based on its respective
ownership interest. Sale of copper is the responsibility of each venturer.
Cost and expense information related to the operation of the mine is as follows:
<TABLE>
<CAPTION>
Amounts
Included in
Total Accompanying
Cost and Expense Data Girilambone Financial
(In thousands) Joint Venture Statements
- ------------------ ---------------------- ----------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cost of copper sales $ 19,518 $ 9,653 $ 7,807 $ 3,861
General and administrative 235 502 94 201
</TABLE>
<PAGE>
C. PROPERTY, PLANT & EQUIPMENT
<TABLE>
<CAPTION>
December 31,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Land $ 186 $ 185
Plant, mining and milling equipment 6,783 6,155
Furniture and fixtures 700 610
-------- --------
7,669 6,950
Less accumulated depreciation 2,057 1,068
-------- --------
$ 5,612 $ 5,882
-------- --------
-------- --------
</TABLE>
D. DEFERRED EXPLORATION AND DEVELOPMENT COSTS
Exploration prospects include the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Ramu $ 1,507 $ 1,496
Tabar Islands 6,553 5,752
Girilambone Exploration Area 1,147 378
Other 101 137
-------- --------
$ 9,308 $ 7,763
-------- --------
-------- --------
</TABLE>
RAMU
In May 1992 the Company entered into an agreement with its Ramu joint venturer
to dilute its interest to 40%. In return, the joint venturer is required to
fund the next 5,000,000 Kina (Papua New Guinea currency) of expenditures on the
project. As of December 31, 1994, approximately 3,600,000 Kina has been expended
by the joint venturer toward the required expenditure, and the Company is
maintaining a 40% interest until the completion of the sole funding by the joint
venturer. Thereafter, the Company will be required to contribute its
proportionate share of exploration costs or will dilute its interest below 40%.
The Company currently does not have sufficient capital to fund its share of Ramu
development and construction costs, and would need to obtain additional funding
for such costs. The Kina has approximately equaled the U.S. dollar until its
devaluation in 1994. The exchange rate at December 31, 1994, was 1.00 Kina
equals U.S. $0.85.
<PAGE>
Another party, Eastern Pacific Mines, may elect within 180 days of receiving
details of any proposed commercial development of Ramu to participate in such
development up to 10%. The interest is to be acquired from the joint venturer
if the Company's interest is 51% or greater, and otherwise from the Company and
the joint venturer in proportion to their interests.
TABAR ISLANDS
On August 30, 1993, the Company entered into an agreement to increase its
interest in the Tabar Islands project from 29% to 100%. The remaining purchase
price of $1,474,000 (A$1,900,000) is payable in installments of $698,000
(A$900,000) in June 1995 and $776,000 (A$1,000,000) two years after the granting
of a mining lease by the government of Papua New Guinea.
The sellers have an option to reacquire 50% of the project if feasibility
studies indicate that the project could produce 150,000 ounces or more of gold
annually. Exercise of the option would require payment to the Company of 2 1/2
times its cumulative expenditures for mine development from July 1994 to the
date the option is exercised. Expenditures from July 1994, through December 31,
1994 totaled approximately $480,000.
GIRILAMBONE EXPLORATION AREA
The Company has a 50% interest in an exploration joint venture related to areas
adjacent to its Girilambone copper mine. Under the venture the Company is
required to fund its 50% share of exploration costs.
Additional efforts on each of the prospects in the adjacent area, including
further drilling and feasibility studies incorporating all relevant technical
and economic factors, will be required in order to determine the extent to which
resources will be commercially viable and whether the deferred exploration and
development costs ultimately will be realizable.
<PAGE>
E. INDEBTEDNESS
<TABLE>
<CAPTION>
December 31,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Girilambone financing agreement,
(payable $3,960 in 1995 and
$3,173 in 1996) $ 7,133 $ 10,000
Girilambone venturer 1,905
Working capital loan 814
Subordinated demand note -
Nord Resources Corporation 2,845
-------- --------
7,133 15,564
Less current maturities (3,960) (2,687)
-------- --------
$ 3,173 $ 12,877
-------- --------
-------- --------
</TABLE>
GIRILAMBONE FINANCING AGREEMENT
The Company borrowed $10,000,000, of which $7,133,000 was outstanding at
December 31, 1994, under a financing agreement to fund its share of the
development and construction costs of Girilambone. The lender holds a security
interest in the Company's 40% interest in Girilambone. The loan bears interest
at LIBOR plus 1.85% (8.35% at December 31, 1994). Minimum principal payments of
$3,960,000 are required under the financing agreement in 1995; however,
repayment amounts may be higher based on available cash flow of Girilambone.
Amounts not repaid in 1995 will be repaid in 1996. In August 1994, a principal
payment of $1,000,000 was made in accordance with the financing agreement using
funds previously held to cover cost overruns. Additional principal payments
during 1994 totaled $1,867,000.
During the period the loan is outstanding, the Company is required to maintain a
minimum $1,000,000 reserve account with the lender. All cash proceeds generated
from Girilambone operations are required to be deposited with the lender and
must be used to pay any project costs, bank fees, interest, principal, and
funding required in the reserve account before any cash is available to the
Company.
SUBORDINATED DEMAND NOTE - NORD RESOURCES CORP. ("RESOURCES")
The Company and Resources previously entered into an agreement under which
Resources had provided the Company advances of up to $3,000,000 which were
payable on demand. In February 1994, simultaneous with the closing of the
Australian Offering, Resources converted $2,900,000, the amount of the
subordinated demand note, into 3,488,721 shares of the common stock of the
Company at a price of approximately $.83 per share. There are currently no loan
agreements between the Company and Resources.
<PAGE>
F. FINANCIAL INSTRUMENTS
The Company utilizes certain financial instruments, primarily copper hedging
agreements and forward currency exchange contracts. These financial instruments
are utilized to reduce the risk associated with the volatility of commodity
prices and fluctuations in foreign currency exchange rates, particularly the
Australian dollar. The Company does not hold or issue financial instruments for
trading purposes.
COPPER HEDGING AGREEMENTS
To hedge the effect of price changes on substantially all of its expected copper
sales through December 31, 1995, the Company has entered into both swap and call
option agreements. The swap agreements lock in a fixed forward price as a
floor, with the purchase of call options above the floor permitting the Company
to benefit from an increase in copper price above the call price. The copper
hedging agreements qualify as hedges, and gains and losses under these
agreements are reflected as a component of sales when each contract settles.
Under one hedging arrangement, the Company entered into both swap and call
option agreements on a total of 5.6 million pounds of copper that generally
settle ratably each month through June 1995. Under this arrangement, at the
settlement date for each copper contract, the Company receives $.94 per pound
plus the excess of market price (as determined by the London Metals Exchange)
over $1.02 per pound. If market price is less than $1.02 per pound, the Company
receives $.94 per pound. Sales for the year ended December 31, 1994 and 1993
are net of $27,000 of losses and $616,000 gains, respectively, that were
paid/received in settlement of the copper hedging contracts.
The Company entered into a second copper hedging agreement in December 1994,
effective in July 1995, which contains both swap and call option agreements on a
total of 6.6 million pounds of copper that settle ratably each month from July
through December 1995. Under this arrangement, at the settlement date for each
copper contract, the Company will receive $1.17 per pound plus the excess of
market price (as determined by the London Metals Exchange) over $1.20 per pound.
If market price is less than $1.20 per pound, the Company will receive $1.17 per
pound. The cost to the Company for the hedge is $.06 per pound of copper which
is recognized as an adjustment to sales ratably over the life of the contracts.
<PAGE>
FORWARD CURRENCY EXCHANGE CONTRACTS
The Company has entered into forward exchange contracts, expiring at various
times through July 1996, to hedge against potential Australian currency
fluctuations related to payment of a portion of the expected operating costs of
Girilambone. Realized and unrealized gains and losses on these contracts are
included currently in the results of operations. For the year ended December
31, 1994 the Company recognized a gain of $2,535,000 compared to a gain of
$14,000 in 1993. At December 31, 1994, the unrealized gain totaled $2,113,000
on the outstanding contracts of $14,600,000 (A$21,900,000); at December 31, 1993
outstanding contracts totaled $19,500,000 (A$29,300,000).
The Company is exposed to copper price fluctuations and currency risks in the
event of nonperformance by the counterparties to the various agreements
described above but has no off balance sheet risk of accounting loss. The
Company anticipates, however, that the counterparties will be able to fully
satisfy their obligations under the agreements. The Company does not obtain
collateral or other security to support financial instruments subject to credit
risk.
G. NORD RESOURCES CORPORATION ("RESOURCES")
In February 1994, simultaneous with the closing of the Australian Offering,
Resources converted $2,900,000 owed to it by the Company into 3,488,721 shares
of common stock of the Company at $.83 per share. In September 1993, Resources
exchanged $2,500,000 of amounts owed to it by the Company for 2,962,960 shares
of the Company's common stock at $.84 per share, the closing bid price on NASDAQ
on the date of the exchange. Interest expense under previous loans from
Resources was $24,000, $243,000, and $235,000 for the years ended December 31,
1994, 1993, and 1992, respectively. Resources provides certain services to the
Company under a management agreement. Resources is reimbursed for all direct
expenses and a portion of its overhead associated with the operations of the
Company. At December 31, 1994, Resources owned approximately 35% of the
outstanding common stock of the Company.
H. OPERATING LEASES
The Company leases its office space and certain equipment under operating leases
with terms ranging from one to five years. Certain of the leases contain
renewal options and escalation clauses. Minimum annual lease payments under
non-cancelable lease obligations for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1995 $ 242,000
1996 113,000
1997 42,000
1998 21,000
</TABLE>
<PAGE>
Rent expense for operating leases was $239,000, $284,000, $278,000 for the years
ended December 31, 1994, 1993 and 1992, respectively.
I. SHAREHOLDERS' EQUITY
STOCK OPTION PLANS AND OTHER OPTION GRANTS
Under the Company's two stock option plans, options have been granted at market
price at date of grant (incentive stock options) and at or less than fair market
value at date of grant (non-qualified options). In addition, during 1994 and
1993, non-plan options totaling 1,320,000 and 1,040,000 shares, respectively,
have also been granted to officers and directors of the Company at or in excess
of fair market value at date of grant. Options are generally exercisable
beginning one to three years from date of grant and expire over a five to ten
year period from date of grant. During 1994, a non-plan option for 120,000
shares which expires three years from date of grant was issued to a consultant
to the Company.
A summary of the option transactions is as follows:
<TABLE>
<CAPTION>
Exercise Price
Shares Per Share
---------- --------------
<S> <C> <C>
Outstanding at December 31, 1991 1,692,000 $.38 - .51
Granted 460,000 .78
Exercised (84,000) .38 - .51
----------
Outstanding at December 31, 1992 2,068,000 .38 - .78
Granted 1,624,000 .85
Exercised (456,000) .38 - .78
Terminated (220,000) .78
----------
Outstanding at December 31, 1993 3,016,000 .38 - .85
Granted 2,094,000 .88 - .96
Granted with Australian offering 16,000,000 .97
Exercised (64,610) .51 - .85
Terminated (335,390) .78 - .88
----------
Outstanding at December 31, 1994 20,710,000 $.38 - .97
----------
----------
</TABLE>
At December 31, 1994, 19,472,000 options were exercisable at prices ranging from
$.38 to $.97 per share and 365,390 shares are available for future grant under
the Stock Option Plans.
<PAGE>
STOCK BONUS PLAN
The 1990 Stock Bonus Plan provides for the issuance of up to 400,000 shares of
common stock as incentive bonuses. At December 31, 1994, 366,400 shares have
been awarded and 33,600 shares are available for future award under this plan.
PUBLIC OFFERING
On February 15, 1994, the Company completed an offering of its
common stock in Australia. The offering consisted of 16,000,000 shares of the
Company's common stock at $.89 per share (A$1.25 converted at the February 15,
1994, exchange rate) together with 16,000,000 detachable options, expiring June
30, 1995, to purchase additional shares of the Company's common stock at $.97
per share (A$1.25 converted at the December 31, 1994, exchange rate).
Concurrent with the completion of the offering, the Board of Directors declared
a stock bonus to existing shareholders of seven shares for every existing share.
The stock bonus and an increase in the authorized shares to 100,000,000 were
approved by the Company's shareholders on January 7, 1994. All share and per
share data presented in the accompanying consolidated financial statements have
been restated retroactively to reflect the stock bonus.
A total of 21,108,990 shares have been reserved for exercise of stock options,
including the 16,000,000 options issued under the Australian offering, and for
award under the Stock Bonus Plan.
OTHER
In April 1992, the Company issued 80,000 shares of restricted stock to each of
the Chairman and President of the Company.
1995 STOCK OPTION PLAN
In January 1995, the Company's Board of Directors approved the adoption of the
1995 Stock Option Plan subject to approval by shareholders, which sets aside
3,000,000 options of which 1,440,000 are to be reserved for directors.
J. SIGNIFICANT CUSTOMERS
Sales in 1994 include copper sales to two customers of $9,622,000 and
$1,543,000. Sales in 1993 include copper sales to one customer of $3,873,000.
<PAGE>
K. INCOME TAXES
Under Bermuda law, the Company is not required to pay any taxes in Bermuda on
either income or capital gains. The Company has received an undertaking from
the Minister of Finance in Bermuda that in the event any such taxes are imposed,
the Company will be exempted from taxation until the year 2016. Although the
Company is not subject to income taxes, it has subsidiaries which are subject to
income taxes in their respective foreign countries.
Net operating loss carryforwards of $3,300,000 which expire from 2005 through
2008 are available in the United States. These carryforwards are available only
to reduce the separate taxable income of the Company's United States subsidiary.
Exploration cost carryforwards of $4,200,000 and development cost carryforwards
of $5,500,000 are available in Australia. Trading loss carryforwards of
$600,000 are also available in Australia. These carryforwards, subject to
certain restrictions, are available indefinitely only to reduce the separate
taxable income of the Company's Australian operations.
Exploration cost carryforwards of $6,300,000 which expire from 1995 through 2004
are available in Papua New Guinea, provided sufficient projects are developed in
that country. These carryforwards, which expire $300,000 in 1995, $546,000 in
1996, $692,000 in 1997, and the remainder, thereafter, are available only to
reduce the separate taxable income of the Company's Papua New Guinean
operations.
<PAGE>
The principal deferred tax assets and (liabilities) for the United States,
Australia and Papua New Guinea are as follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Long-term deferred tax assets
and (liabilities):
United States:
Deferred tax assets:
Deferred compensation $ 79 $ 53
Basis difference of intangible assets 1 2
Net operating loss carryforwards 1,137 1,066
-------- --------
1,217 1,121
Deferred tax (liabilities) -
Depreciation (16) (16)
-------- --------
Net deferred tax assets 1,201 1,105
Valuation allowance (1,201) (1,105)
-------- --------
Total United States $ 0 $ 0
-------- --------
-------- --------
Australia:
Deferred tax assets:
Trading loss carryforwards $ 211 1,197
Exploration cost carryforwards 1,398 971
Development cost carryforwards 1,804 347
Amortization of deferred costs 159 93
Depreciation 266 181
Royalty expense 80
-------- --------
3,918 2,789
Deferred tax (liabilities):
Unrealized currency gains (1,302)
Exploration costs (934) (150)
Unamortized legal expense (71)
Other (7) (13)
-------- --------
Net deferred tax assets 1,604 2,626
Valuation allowance (1,604) (2,626)
-------- --------
Total Australia $ 0 $ 0
-------- --------
-------- --------
Papua New Guinea:
Exploration cost carryforwards $ 2,193 2,298
Exploration costs (1,961) (2,143)
-------- --------
232 155
Valuation allowance (232) (155)
-------- --------
Total Papua New Guinea $ 0 $ 0
-------- --------
-------- --------
</TABLE>
<PAGE>
A valuation allowance has been provided for 100% of the Company's net deferred
tax assets based on the history of operating losses for the Company and
limitations on use of the above carryforwards.
The Company had taxable income during 1994 from its operations in Australia,
which utilized a portion of its trading loss carryforwards, as follows:
<TABLE>
<CAPTION>
<S> <C>
Taxes currently payable $ 1,150
Reduction for use of trading
loss carryforwards (1,150)
-------
Provision for income taxes $ 0
-------
-------
</TABLE>
L. PENSION PLANS
The Company has a defined contribution pension plan covering certain employees
of its Australian operations. Under the terms of the plan, the Company
contributes an amount equal to 10% of the employees wages. Pension costs were
$59,000, $83,000, and $98,000 for the years ended December 31, 1994, 1993 and
1992, respectively.
The Company is obligated to pay a lump sum benefit that matches the difference,
if any, between the present value of an executive's retirement benefit under a
previous plan and the cash value of an insurance policy at retirement. At
December 31, 1994 and 1993, the cash surrender value of $135,400 and $105,400,
respectively, has been offset against the accrued retirement benefits liability.
Pension expense for the years ended December 31, 1994, 1993 and 1992 was
$76,000, $50,000, and $49,000, respectively. Pension expense for 1994, 1993 and
1992 included $62,000, $38,000, and $40,000, respectively, of service cost and
$14,000, $12,000, and $9,000, respectively, of interest on the accrued benefit
obligation. The projected benefit obligation at December 31, 1994 and 1993 was
$320,000 and $289,000, respectively. The assumed discount rate, the estimated
rate at which the plan could settle its liabilities, was 8% in 1994 and 7% in
1993. The assumed rate of future pay increase was 5%.
M. EMPLOYMENT AGREEMENTS
The Company has agreements with two of its officers which contain change in
control provisions which would entitle one officer to receive 50% of his salary
and the other officer to receive 200% of his salary in the event of a change in
control of the Company and a change in certain conditions of their employment.
The maximum contingent liability under these agreements is approximately
$445,000 at December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NORD RESOURCES CORPORATION
BY:/s/EDGAR F. CRUFT
------------------------------
EDGAR F. CRUFT
CHAIRMAN OF THE BOARD (CHIEF EXECUTIVE
OFFICER), PRESIDENT AND DIRECTOR
APRIL 7, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
APRIL 7, 1995
/s/TERENCE H. LANG
- --------------------------------- /s/LEONARD LICHTER
TERENCE H. LANG -------------------------------
SENIOR VICE PRESIDENT -- FINANCE LEONARD LICHTER
(CHIEF FINANCIAL OFFICER), DIRECTOR
TREASURER AND DIRECTOR
APRIL 7, 1995
APRIL 7, 1995
/s/W. PIERCE CARSON
-------------------------------
W. PIERCE CARSON
/s/DONALD L. ROETTELE DIRECTOR
- --------------------------------
DONALD L. ROETTELE
DIRECTOR APRIL 7, 1995
APRIL 7, 1995
/s/KARL A. FRYDRYK
- --------------------------------
KARL A. FRYDRYK
SECRETARY AND VICE PRESIDENT--
CONTROLLER (CHIEF
ACCOUNTING OFFICER)
APRIL 7, 1995
/s/WALTER T. BELOUS
- --------------------------------
WALTER T. BELOUS
DIRECTOR
<PAGE>
INDEX TO EXHIBITS
PAGE
NUMBER
------
2. PLAN OF ACQUISITION, REORGANIZATION,
ARRANGEMENT, LIQUIDATION OR SUCCESSION
2.1 Stock Purchase Agreement dated March 11,
1993 by and among Nord Kaolin Corporation
("NK Corp"), Nord Resources Corporation
("NRC"), Norplex, Inc. ("Norplex") and Kemira
Holdings, Inc. ("Kemira"). Reference is made
to Exhibit 2.1 of Registrant's Current Report on
Form 8-K dated March 11, 1993, which exhibit is
incorporated herein by reference. **
2.2 Stock Purchase Agreement dated June 28, 1993
by and between Nord Resources Corporation and
Consolidated Rutile Limited. Reference is made
to Exhibit 2.2 of Registrant's Report on Form 8-K
dated June 28, 1993, which exhibit is incorporated
herein by reference. **
3. ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Certificate of Incorporation (as amended) of Regis-
trant. Reference is made to Exhibit 3.1 of Regis-
trant's Report on Form 10-K for the year ended
December 31,1987, which exhibit is incorporated
herein by reference. **
3.2 Amended and Restated By-Laws of Registrant. E-1
10. MATERIAL CONTRACTS
10.1 Loan Agreement between Development Authority
of the City of Jeffersonville and of Twiggs County
and Nord Kaolin Company, dated as of June 1, 1994. E-25
10.2 Shareholders Agreement dated March 11, 1993
by and among Norplex, Kemira, NK Corp. and NRC.
Reference is made to Exhibit 10.1 of Registrant's
Report on Form 8-K dated March 11, 1993, which
exhibit is incorporated herein by reference. **
<PAGE>
PAGE
NUMBER
------
10.3 Agreement By and Between Nord Kaolin Company
and United Paperworkers International Union, AFL-CIO
(effective November 16, 1993 to November 15, 1996).
Reference is made to Exhibit 10.7 of Registrant's Report
on Form 10-K for the year ended December 31, 1993,
which exhibit is incorporated herein by reference. **
10.4 Lease Agreement dated May 15, 1988 between
ATEL Financial Corporation and Nord Kaolin Company.
Reference is made to Exhibit 10.31 of Registrant's
Report on Form 10-K for the year ended December 31,
1988, which exhibit is incorporated herein by reference. **
10.5 Guaranty of Lease dated May 15, 1988 given by Regis-
trant to ATEL Financial Corporation. Reference is made to
Exhibit 10.32 of Registrant's Report on Form 10-K for the
year ended December 31, 1988, which exhibit is
incorporated herein by reference. **
10.6 Amendment and Waivers dated August, 1991 of Guaranty
of Lease dated May 15, 1988 given by Registrant to ATEL
Financial Corporation. Reference is made to Exhibit 19.6
of Registrant's Report on form 10-Q for the period ended
September 30, 1991, which exhibit is incorporated herein
by reference. **
10.7 Amendments and Waivers dated November, 1991
of Guaranty of Lease dated May 15, 1988 given by
Registrant to ATEL Financial Corporation. Reference
is made to Exhibit 10.75 of Registrant's Report on
Form 10-K for the year ended December 31, 1991,
which exhibit is incorporated herein by reference. **
10.8 Waiver, Consent and Agreement made March
11,1993 by and between Nord Kaolin Company
and entities under ATEL Financial Corporation
Lease Agreement. Reference is made to Exhibit
10.12 of Registrant's Report on Form 10-K for the
year ended December 31, 1993, which exhibit is
incorporated herein by reference **
<PAGE>
PAGE
NUMBER
------
10.9 License for Proprietary Pigment Technologies
dated September 1, 1986 between Nord Kaolin
Company and Industrial Progress, Inc. Reference
is made to Exhibit 10.33 of Registrant's Report on
Form 10-K for the year ended December 31, 1988,
which exhibit is incorporated herein by reference. **
10.10 Addendum to License for Proprietary Pigment
Technologies dated December, 1987. Reference
is made to Exhibit 10.34 of Registrant's Report on
Form 10-K for the year ended December 31, 1988,
which exhibit is incorporated herein by reference. **
10.11 Stock Option Agreement and Second Addendum to
License for Proprietary Pigment Technologies between
Nord Kaolin Company and Industrial Progress, Inc., dated
February 1, 1990. Reference is made to Exhibit 10.53
of Registrant's Report on Form 10-K for the year ended
December 31, 1990, which exhibit is incorporated
herein by reference. **
10.12 Second Stock Option Agreement and Third Addendum
to License for Proprietary Pigment Technology dated as of
July 9, 1992 by and between Nord Kaolin Company and
Industrial Progress, Inc. Reference is made to Exhibit 10.94
of Registrant's Report on Form 10-K for the year ended
December 31, 1992, which exhibit is incorporated herein
by reference. **
10.13 Joint Venture Agreement between Nord Southern
Dolomite Company and Istria, N. V. forming Manatee
Gateway No. I. Reference is made to Exhibit (10)(d)
(i) of Registrant's Registration Statement on Form S-2
(No. 33-00961), which exhibit is incorporated herein
by reference. **
<PAGE>
PAGE
NUMBER
------
10.14 Nord Resources Corporation Non-Qualified Stock Option
Plan. Reference is made to Exhibit 10.16 to Registrant's
Registration Statement on Forms S-3/S-8 (No. 2-92415),
which exhibit is incorporated herein by reference. **
10.15 Nord Resources Corporation 1982 Nord Incentive Stock
Option Plan. Reference is made to Exhibit 10.17 to
Registrant's Registration Statement on Forms S-3/S-8
(No. 2-92415), which exhibit is incorporated herein by
reference. **
10.16 Amendment No. 1 to Nord Resources Corporation 1982
Nord Incentive Stock Option Plan. Reference is made to
Exhibit 10.32 of Registrant's Report on Form 10-K for the
year ended December 31, 1987, which exhibit is incor-
porated herein by reference. **
10.17 Amendment No. 2 to Nord Resources Corporation 1982
Nord Incentive Stock Option Plan. E-68
10.18 Amendment No. 3 to Nord Resources Corporation 1982
Nord Incentive Stock Option Plan. E-69
10.19 Nord Resources Corporation 1987 Nord Incentive Stock
Option Plan. Reference is made to Exhibit 10.33 of
Registrant's Report on Form 10-K for the year ended
December 31, 1987, which exhibit is incorporated herein
by reference. **
10.20 Amendment No. 1 to Nord Resources Corporation
1987 Nord Incentive Stock Option Plan. E-70
10.21 Nord Resources Corporation 1989 Stock Option
Plan. Reference is made to Exhibit 10.33 of Regis-
trant's Report on Form 10-K for the year ended
December 31, 1989, which exhibit is incorporated
herein by reference. **
10.22 Amendment No. 1 to Nord Resources Corporation
1989 Stock Option Plan. Reference is made to
Exhibit 10.55 of Registrant's Report on Form 10-K
<PAGE>
PAGE
NUMBER
------
for the year ended December 31, 1990, which exhibit
is incorporated herein by reference. **
10.23 Amendment No. 2 to Nord Resources Corporation
1989 Stock Option Plan. E-71
10.24 Nord Resources Corporation 1991 Stock Option Plan.
Reference is made to Exhibit 10.24 of Registrant's Report
on Form 10-K for the year ended December 31, 1993,
which exhibit is incorporated herein by reference. **
10.25 Amendment No. 1 to Nord Resources Corporation
1991 Stock Option Plan. E-72
10.26 Restated Deferred Compensation Agreement dated
May 10, 1989 between Registrant and Terence H. Lang.
Reference is made to Exhibit 10.9 of Registrant's Report
on Form 10-K for the year ended December 31, 1989,
which exhibit is incorporated by reference. **
10.27 Restated Deferred Compensation Agreement dated
May 10, 1989 between Registrant and Richard L.
Steinberger. Reference is made to Exhibit 10.10
of Registrant's Report on Form 10-K for the year
ended December 31, 1989, which exhibit is incor-
porated herein by reference. **
10.28 Restated Deferred Compensation Agreement
dated May 10, 1989 between Registrant and
Edgar F. Cruft. Reference is made to Exhibit
10.11 of Registrant's Report on Form 10-K for
the year ended December 31, 1989, which exhibit
is incorporated herein by reference. **
10.29 Nord Resources Corporation Trust Agreement for
Key Executives, dated May 10, 1989. Reference is
made to Exhibit 10.12 of Registrant's Report on Form
10-K for the year ended December 31, 1989, which
exhibit is incorporated herein by reference. **
<PAGE>
PAGE
NUMBER
------
10.30 Split-Dollar Life Insurance and Supplemental Com-
pensation agreement between Karl A. Frydryk and
Registrant dated July 22, 1988. Reference is made
to Exhibit 10.29 of Registrant's Report on Form 10-K
for the year ended December 31, 1988, which exhibit
is incorporated herein by reference. **
10.31 Nord Resources Corporation Split-Dollar Life Insurance
and Supplemental Compensation Plan Trust Agreement,
December 5, 1988. Reference is made to Exhibit 10.35
of Registrant's Report on Form 10-K for the year ended
December 31, 1988, which exhibit is incorporated herein
by reference. **
10.32 Executive Severance Agreement between Registrant and
Edgar F. Cruft, dated May 10, 1989. Reference is made to
Exhibit 10.27 of Registrant's Report on Form 10-K for the
year ended December 31, 1989, which exhibit is incorporated
herein by reference. **
10.33 Executive Severance Agreement between Registrant and
Terence H. Lang, dated May 10, 1989. Reference is made
to Exhibit 10.29 of Registrant's Report on Form 10-K for the
year ended December 31, 1989, which exhibit is incorporated
herein by reference. **
10.34 Nord Resources Corporation Trust Agreement for
Executive Severance Agreements, dated May 10,
1989. Reference is made to Exhibit 10.30 of
Registrant's Report on Form 10-K for the year ended
December 31, 1989, which exhibit is incorporated
herein by reference. **
10.35 Executive Severance Agreement between Registrant
and J. Peter Davies, dated December 13, 1989. Ref-
erence is made to Exhibit 10.31 of Registrant's Report
on Form 10-K for the year ended December 31, 1989,
which exhibit is incorporated herein by reference. **
10.36 Executive Severance Agreement between Registrant
and Karl A. Frydryk, dated May 10, 1989. Reference
<PAGE>
PAGE
NUMBER
------
is made to Exhibit 10.32 of Registrant's Report on Form
10-K for the year ended December 31, 1989, which exhibit
is incorporated herein by reference. **
10.37 Executive Severance Agreement between Registrant and
William W. Wilcox, dated March 9, 1990. Reference is made
to Exhibit 10.57 of Registrant's Report on Form 10-K for the
year ended December 31, 1990, which exhibit is incorporated
herein by reference. **
10.38 Executive Severance Agreement between Registrant and
James T. Booth, dated June 8, 1994. E-73
10.39 Executive Loan Agreement dated September 10, 1987
between Terence H. Lang and Registrant. Reference is
made to Exhibit 10.40 of Registrant's Report on Form 10-K
for the year ended December 31, 1987, which exhibit is
incorporated herein by reference. **
10.40 Executive Loan Agreement dated August 8, 1988 between
Edgar F. Cruft and Registrant. Reference is made to
Exhibit 10.26 of Registrant's Report on Form 10-K for the
year ended December 31, 1988, which exhibit is incorporated
herein by reference. **
10.41 Executive Loan Agreement dated December 31,
1988 between Terence H. Lang and Registrant.
Reference is made to Exhibit 10.27 of Registrant's
Report on Form 10-K for the year ended December
31, 1988, which exhibit is incorporated herein by
reference. **
10.42 Executive Loan Agreement dated September 19, 1989
between Edgar F. Cruft and Registrant. Reference is
made to Exhibit 10.17 of Registrant's Report on Form
10-K for the year ended December 31, 1989, which
exhibit is incorporated herein by reference. **
10.43 Indemnification Agreement dated June 15,1990,
between Registrant and Edgar F. Cruft, Terence
H. Lang, Leonard Lichter, William W. Wilcox, Spitzer
& Feldman P.C. and Ronald Offenkrantz. Reference
<PAGE>
PAGE
NUMBER
------
is made to Exhibit 10.56 of Registrant's Report on Form
10-K for the year ended December 31, 1990, which
exhibit is incorporated herein by reference. **
10.44 Agreement between The Government of the Republic
of Sierra Leone and Sierra Rutile Limited ("SRL"), dated
November 3, 1989. Reference is made to Exhibit 10.4 of
Registrant's Report on Form 10-K for the year ended
December 31, 1989, which exhibit is incorporated herein by
reference. **
10.45 Agreement dated November 17, 1992 amending Fifth Amend-
ment to and Restatement of the Financing Agreement and
Second Amendment and Restatement of Credit between SRL
and Export-Import Bank of the United States ("Eximbank").
Reference is made to Exhibit 10.5 of Registrant's Report on
Form 10-K for the year ended December 31, 1992, which
exhibit is incorporated herein by reference. **
10.46 Fifth Amendment to and Restatement of the Financing Agree-
ment dated as of November 24, 1986 between SRL and Eximbank.
Reference is made to Exhibit 4.14 of Registrant's Report on
Form 10-K for the year ended December 31, 1988, which exhibit
is incorporated herein by reference. **
10.47 Second Amendment and Restatement of Credit
Agreement dated as of December 1, 1982 between
SRL and Eximbank. Reference is made to Exhibit
10(e)B(v) of Registrant's Registration Statement on
Form S-2 (33-00961), which exhibit is incorporated
herein by reference. **
10.48 Letter Agreement dated October 12, 1993 between
SRL and Eximbank. Reference is made to Exhibit
10.10 of Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is incorporated
herein by reference. **
10.49 Letter Agreement dated November 17, 1993 between
SRL and Eximbank. Reference is made to Exhibit
10.11 of Registrant's Report on Form 8-K dated Nov-
<PAGE>
PAGE
NUMBER
------
ember 17, 1993, which exhibit is incorporated herein
by reference. **
10.50 Loan Agreement dated August 6, 1992 between DEG
- Deutsche Investitions - Und Entwicklungsgesell Schaft
MBH ("DEG") and SRL. Reference is made to Exhibit
10.73 of Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is incorporated
herein by reference. **
10.51 First Amendment dated November 20, 1992 to the Loan
Agreement between DEG and SRL. Reference in made to
Exhibit 10.74 of Registrant's Report on Form 10-K for the
year ended December 31, 1992, which exhibit is incorporated
herein by reference. **
10.52 Amendatory Agreement dated November 17, 1993 between
SRL and DEG. Reference is made to Exhibit 10.12 of
Registrant's Report on Form 8-K dated November 17, 1993,
which exhibit is incorporated herein by reference. **
10.53 Investment Agreement dated June 30, 1992 between
SRL and International Finance Corporation ("IFC").
Reference is made to Exhibit 10.75 of Registrant's
Report on Form 10-K for the year ended December 31,
1992, which exhibit is incorporated herein by reference. **
10.54 Amendment No. 1 dated November 18, 1992 to Invest-
ment Agreement between SRL and IFC. Reference is
made to Exhibit 10.76 of Registrant's Report on Form 10-K
for the year ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.55 Amendatory Agreement dated November 17, 1993 bet-
ween SRL and IFC. Reference is made to Exhibit 10.9
of Registrant's Report on Form 8-K dated November 17,
1993, which exhibit is incorporated herein by reference. **
10.56 Loan Agreement dated January 24, 1992 between SRL
and Commonwealth Development Corporation ("CDC").
<PAGE>
PAGE
NUMBER
------
Reference is made to Exhibit 10.77 of Registrant's Report
on Form 10-K for the year ended December 31, 1992,
which exhibit is incorporated herein by reference. **
10.57 Amendment dated November 17, 1992 of the Loan Agree-
ment between SRL and CDC. Reference is made to Exhibit
10.78 of Registrant's Report on Form 10-K for the year ended
December 31, 1992, which exhibit is incorporated herein by
reference. **
10.58 Amendatory Agreement dated November 5, 1993 between
SRL and CDC. Reference is made to Exhibit 10.13 of Reg-
istrant's Report on Form 8-K dated November 17, 1993,
which exhibit is incorporated herein by reference. **
10.59 Waiver Letter dated October 22, 1993 from CDC to SRL.
Reference is made to Exhibit 10.14 of Registrant's Report
on Form 8-K dated November 17, 1993, which exhibit is
incorporated herein by reference. **
10.60 Finance Agreement dated August 11, 1992 between SRL
and Overseas Private Investment Corporation ("OPIC").
Reference is made to Exhibit 10.79 of Registrant's Report
on Form 10-K for the year ended December 31, 1992, which
exhibit is incorporated herein by reference. **
10.61 First Amendment dated November 24, 1992 to Finance
Agreement between SRL and OPIC. Reference is made to
Exhibit 10.80 of Registrant's Report on Form 10-K for the
year ended December 31, 1992, which exhibit is incorporated
herein by reference. **
10.62 Agreement of Wavier and Second Amendment to Finance
Agreement dated as of September 21, 1993 between SRL
and OPIC. Reference is made to Exhibit 10.6 of Registrant's
Report on Form 8-K dated November 17, 1993, which exhibit is
incorporated herein by reference. **
10.63 Third Amendment to Finance Agreement dated as of November
17, 1993 between SRL and OPIC. Reference is made to Exhibit
<PAGE>
PAGE
NUMBER
------
10.7 of Registrant's Report on Form 8-K dated November 17, 1993,
which exhibit is incorporated herein by reference. **
10.64 Funding Agreement dated February 16, 1993 among SRL,
OPIC and PNC Bank, National Association ("PNC"). Ref-
erence is made to Exhibit 10.70 of Registrant's Report on Form
10-K for the year ended December 31, 1993, which exhibit is
incorporated herein by reference. **
10.65 First Amendment to Funding Agreement dated November 12,
1993 among SRL, OPIC and PNC. Reference is made to
Exhibit 10.8 of Registrant's Report on Form 8-K dated November
17, 1993, which exhibit is incorporated herein by reference. **
10.66 Debenture dated November 17, 1992 made by SRL in favor
of CDC, DEG, Eximbank, IFC and OPIC. Reference is made
to Exhibit 10.81 of Registrant's Report on Form 10-K for the
year ended December 31, 1992, which exhibit is incorporated
herein by reference. **
10.67 Debenture dated November 17, 1992 made by SRL
in favor of DEG, Eximbank, IFC, OPIC and CDC.
Reference is made to Exhibit 10.85 of Registrant's
Report on Form 10-K for the year ended December
31, 1992, which exhibit is incorporated herein by reference. **
10.68 First Amendment and Restatement of Project Funds
Agreement dated as of November 17, 1993 among
Registrant, CRL, Holdings, SRL, CDC, DEG, Eximbank,
IFC and OPIC. Reference is made to Exhibit 10.17
of Registrant's Report on Form 8-K dated November
17, 1993, which exhibit is incorporated herein by reference. **
10.69 Share Retention Agreement dated November 17, 1992
among CDC, DEG, Eximbank, IFC and OPIC and Registrant,
Nord Rutile Company and SRL. Reference is made to Exhibit
10.83 of Registrant's Report on Form 10-K for the year ended
December 31, 1992, which exhibit is incorporated herein by
reference. **
<PAGE>
PAGE
NUMBER
------
10.70 First Amendment to Share Retention Agreement dated as of
November 17, 1993 among Registrant, NR Company, CRL,
Holdings, CDC, DEG, IFC, OPIC and Eximbank. Reference
is made to Exhibit 10.18 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit is incorporated herein
by reference. **
10.71 Pledge Agreement dated November 17, 1992 between SRL
and DEG, Eximbank, IFC, OPIC and CDC. Reference is made
to Exhibit 10.84 of Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is incorporated herein
by reference. **
10.72 Cash Collateral Charge dated November 17, 1992 made by SRL
in favor of DEG, Eximbank, IFC, OPIC and CDC. Reference is
made to Exhibit 10.86 of Registrant's Report on Form 10-K for
the year ended December 31, 1992, which exhibit is incorporated
herein by reference. **
10.73 Trust Deed between Standard Chartered Bank Sierra Leone
Limited, Financing Institutions and SRL. Reference is
made to Exhibit 10.87 of Registrant's Report on Form 10-K
for the year ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.74 Security Sharing and Intercreditor Agreement dated November
17, 1992 among DEG, Eximbank, IFC, OPIC and CDC.
Reference is made to Exhibit 10.88 of Registrant's Report on
Form 10-K for the year ended December 31, 1992, which
exhibit is incorporated herein by reference. **
10.75 Security Agreement dated November 17, 1992 among SRL
and DEG, Eximbank, IFC, OPIC and CDC. Reference is
made to Exhibit 10.90 of Registrant's Report on Form 10-K
for the year ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.76 Subordination Agreement dated November 17, 1992 among
DEG, Eximbank, IFC, OPIC and CDC and Registrant, Nord
Rutile Corporation, Nord Rutile Company and SRL. Reference
<PAGE>
PAGE
NUMBER
------
is made to Exhibit 10.89 of Registrant's Report on Form 10-K
for the year ended December 31, 1992, which exhibit is incor-
porated herein by reference. **
10.77 First Amendment to Subordination Agreement dated as of
November 17, 1993 among Registrant, NR Company, CRL,
Holdings, CDC, DEG, IFC, OPIC and Eximbank. Reference
is made to Exhibit 10.19 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit is incorporated
herein by reference. **
10.78 Arm's Length Agreement dated as of November 17, 1993
between CRL and SRL. Reference is made to Exhibit 10.15
of Registrant's Report on Form 8-K dated November 17,
1993, which exhibit is incorporated herein by reference. **
10.79 First Amendment to Arm's Length Agreement dated as of
November 17, 1993 between Registrant and SRL. Reference
is made to Exhibit 10.16 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit is incorporated herein
by reference. **
10.80 Joint Venture Agreement dated as of November 17,
1993 among CRL, Registrant, NR Company and
Holdings. Reference is made to Exhibit 10.1 of
Registrant's Report on Form 8-K dated November 17,
1993, which exhibit is incorporated herein by reference. **
10.81 Marketing Agreement dated as of November 17,
1993 among CRL, Registrant, NR Company, SRL,
Holdings and TMMI. Reference is made to Exhibit
10.2 of Registrant's Report on Form 8-K dated November
17, 1993, which exhibit is incorporated herein by
reference. **
10.82 U.S. Marketing Agreement dated as of November 17,
1993 among CRL, Registrant, NR Company, SRL,
Holdings and U.S. Partnership. Reference is made to
Exhibit 10.3 of Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is incorporated herein
<PAGE>
PAGE
NUMBER
------
by reference. **
10.83 General Partnership Agreement dated as of November 17,
1993 among CRL, CRL Delaware and Registrant. Reference
is made to Exhibit 10.4 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit is incorporated herein
by reference. **
10.84 Employment Agreement dated as of November 17, 1993
between U.S. Partnership and Richard L. Steinberger.
Reference is made to Exhibit 10.5 of Registrant's Report on
Form 8-K dated November 17, 1993, which exhibit is incor-
porated herein by reference. **
10.85 Amendment to Mining Lease dated September 17, 1991 from
the Ministry of Mines of the Government of Sierra Leone.
Reference is made to Exhibit 10.12 of Amendment No. 2 to
Registrant's Report on Form S-3 dated July 20, 1993, which
exhibit is incorporated herein by reference. **
10.86 Agreement between Sierra Rutile Limited and the
Government of Sierra Leone dated 3 January, 1995. E-86
10.87 Pledge Agreement dated February 4, 1993 among
Registrant, Haythe & Curley and Rothschild Australia
Limited. Reference is made to Exhibit 10.1 of Amend-
ment No. 2 to Registrant's Report on Form S-3 dated
July 20, 1993, which exhibit is incorporated herein by
reference. **
10.88 Girilambone Facility Agreement among Nord Pacific
Limited, Nord Gold Company Limited, Nord Resources
(Pacific) Pty Ltd., Nord Australex Nominees Pty Ltd.
and R & I Bank of Western Australia Ltd. dated January 12,
1993. Reference is made to Exhibit 10.41 of Nord Pacific
Limited's Form 10-K for the year ended December 31, 1992,
which exhibit is incorporated herein by reference. **
10.89 Girilambone US$ Advance and Letter of Credit Facility
Agreement among Nord Pacific Limited, Nord Resources
<PAGE>
PAGE
NUMBER
------
(Pacific) Pty Ltd., Nord Gold Company Limited, Nord
Australex Nominees Pty Ltd. and Rothschild Australia
Limited dated February 5, 1993. Reference is made to
Exhibit 10.42 of Nord Pacific Limited's Form 10-K for the
year ended December 31, 1992, which exhibit is incorporated
herein by reference. **
10.90 Commodity Swap Agreement between Nord Australex
Nominees Pty Ltd. and R & I Bank of Western Australia
Limited dated February 5, 1993. Reference is made to
Exhibit 10.43 of Nord Pacific Limited's Form 10-K for the
year ended December 31, 1992, which exhibit is incorporated
herein by reference. **
10.91 Commodity Options Agreement between Nord Australex
Nominees Pty Ltd. and R & I Bank of Western Australia
Ltd. dated February 5, 1993. Reference is made to Exhibit
10.44 of Nord Pacific Limited's Form 10-K for the year
ended December 31, 1992, which exhibit is incorporated herein
by reference. **
10.92 Letter dated February 22, 1995 regarding Sierra Rutile Limited
Development Bank Financing. E-88
10.93 Agreement and Fourth Amending Agreement dated March
24, 1995 between Consolidated Rutile Limited and
Registrant E-94
21. SUBSIDIARIES OF REGISTRANT
Jurisdiction in
Name of Subsidiary Which Incorporated
------------------ ------------------
Sierra Rutile Limited Sierra Leone,
West Africa
Nord Kaolin Company Georgia
<PAGE>
PAGE
NUMBER
------
23. CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Deloitte & Touche LLP E-97
23.2 Consent of KPMG E-98
27. FINANCIAL DATA SCHEDULE E-99
99. ADDITIONAL EXHIBITS
99.1 Independent Auditors' Report to the Board of
Directors and Shareholders, Sierra Rutile Limited,
April 3, 1995 E-100
99.2 Independent Auditors' Report to the Board of
Directors and Shareholders, Sierra Rutile America
Inc., April 3, 1995 E-101
99.3 Independent Auditors' Report to the Board of
Directors and Shareholders, Plainfield (Jersey) Limited,
April 3, 1995 E-102
99.4 Independent Auditors' Report to the Board of
Directors and Shareholders, Sierra Rutile Services
Limited, April 3, 1995 E-103
99.5 Independent Auditors' Report to the Board of
Directors and Shareholders, Sierra Rutile Holdings
Limited (BVI), April 3, 1995 E-104
99.6 Independent Auditors' Report to the Board of
Directors and Shareholders, TMMI Limited (BVI),
April 3, 1995 E-105
99.7 Independent Auditors' Report to the Board of
Directors and Shareholders, TMMI USA Marketing
Partnership, April 3, 1995 E-106
** Indicates that the exhibit is incorporated by reference
in this Annual Report on Form 10-K from a previous
filing with the Commission.
<PAGE>
AMENDED AND RESTATED
BYLAWS OF
NORD RESOURCES CORPORATION
ARTICLE I
OFFICES
Section 1.01. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
Section 1.02. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. All meetings of the stockholders for the election of
directors or for any other purpose shall be held at such place within or without
the State of Delaware as shall be designated from tine to time by the board of
directors and stated in the notice of the meeting.
Section 2.02. Annual meetings of stockholders, commencing with the
year 1972, shall be held on the first day of May if not a legal holiday, and if
a legal holiday, then on the next secular day following, at 11:00 A.M., or at
such other date and time as shall be designated from time to time by the board
of directors and
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stated in the notice of the meeting, at which they shall elect by a majority
vote a board of directors, and transact any other proper business as may
properly be brought before the meeting.
Section 2.03. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten nor more than sixty days before the date of
the meeting.
Section 2.04. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning at least
forty-five (45%) percent of the entire capital stock of the corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 2.05. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten nor more than fifty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
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Section 2.06. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice, unless all
stockholders owning capital stock of the corporation issued and outstanding and
entitled to vote otherwise agree.
Section 2.07. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (l0) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
Such list shall be open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote in person or by proxy at any
meeting of the stockholders.
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Section 2.08. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 2.09. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision
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of such question.
Section 2.10. Each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period.
Section 2.11. Whenever the vote of the stockholders at a meeting
thereof is required or permitted by law to be taken for or in connection with
any corporate action, the meeting and vote of the stockholders may be dispensed
with on the written consent of stockholders having not less than a majority of
the issued and outstanding voting stock, provided, that in no case, shall the
written consent be by stockholders holding in the aggregate less than the
minimum percentage of the issued and outstanding stock required by law to vote
in favor of the corporate action and provided that prompt notice must be given
to all stockholders of the taking corporate action without a meeting and without
unanimous written consent.
ARTICLE III
DIRECTORS
Section 3.01. The business of the corporation shall be managed by
its board of directors which may exercise all such powers of the corporation and
do all such lawful acts and things as
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are not by statute or by the certificate of incorporation or by these by-laws
directed or required to be exercised or done by the stockholders.
Section 3.02. The number of directors which shall constitute the
whole board shall be not less than six nor more than eleven. The directors
shall be elected at the annual meeting of the stockholders and each director
elected shall hold office until his successor is elected and qualified unless he
resigns, dies or is removed prior thereto. Any director may be removed at any
time, with or without cause, by the affirmative vote of the holders of a
majority of the stock of the corporation issued and outstanding and entitled to
vote. Directors need not be stockholders.
Section 3.03. Newly created directorships resulting from any
increase in the authorized number of directors and vacancies, however created,
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify, unless sooner displaced. If there are no directors
in office, then an election of directors may be held in the manner provided by
statute.
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<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
Section 3.04. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 3.05. The first meeting of each newly elected board of directors
shall be held immediately following the annual meeting of stockholders and no
notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, provided a quorum shall be present. In
the event of the failure of the stockholders to fix the time or place of such
first meeting of the newly elected board of directors, or in the event such
meeting is not held at the time and place so fixed by the stockholders, the
meeting may be held at such time and place as shall be specified in a notice
given as hereinafter provided for special meetings of the board of directors, or
as shall be specified in a written waiver signed by all of the directors.
Section 3.06. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 3.07. The board of directors may elect a chairman who shall
preside at meetings of the board and who shall have such other powers and
perform such other duties as may be prescribed from time to time by the board.
The chairman shall hold office
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<PAGE>
until his successor is elected and qualified unless he resigns, dies or is
removed prior thereto.
Section 3.08. Special meetings of the board may be called by the
president, or the chairman of the executive committee if an executive committee
is established, on five days' notice to each director, either personally or by
mail or telegram; special meetings shall be called by the president or secretary
in like manner and on like notice on the written request of two directors.
Section 3.09. At all meetings of the board a majority of the
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
COMMITTEES OF DIRECTORS
Section 3.10. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more
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<PAGE>
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have power or authority
in reference to amending the certificate of incorporation, adopting an agreement
of merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the Bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
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<PAGE>
Section 3.11. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
Section 3.12. Unless otherwise restricted by the certificate of
incorporation, any action required or permitted to be taken at any meeting of
the board of directors, or any committee thereof, including alteration,
amendment or repeal of these by-laws or adoption of new by-laws, may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
COMPENSATION OF DIRECTORS
Section 3.13. Unless otherwise restricted by the certificate of
incorporation, the board of directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
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<PAGE>
ARTICLE IV
NOTICES
Section 4.01. Whenever, under the provisions of the statutes or of
the certificate of incorporation or any of these by-laws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed given
at the time when the same shall be deposited in the United States mail. Notice
to the directors may also be given by facsimile or telegram.
Section 4.02. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated herein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 5.01. The officers of the corporation shall be elected by
the board of directors and shall be a chairman, a president, a secretary and a
treasurer. The board of directors may also elect one or more vice-chairmen,
vice-presidents, and one or
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more assistant secretaries and assistant treasurers. Any number of offices may
be held by the same person unless the certificate of incorporation or these
by-laws otherwise provide.
Section 5.02. The board of directors at its first meeting after
each annual meeting of stockholders shall elect a chairman, a president, a
secretary and a treasurer.
Section 5.03. The board of directors may elect or appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the board.
Section 5.04. The salaries of all officers and agents of the
corporation elected or appointed by the board of directors, shall be fixed by
the board of directors.
Section 5.05. Unless he resigns, dies or is removed prior thereto
each officer of the corporation shall hold office until his successor is elected
or appointed and qualifies. Any officer elected or appointed by the board of
directors may be removed at any time by the affirmative vote of a majority or
the board of directors with or without cause. Any vacancy occurring in any
office of the corporation held by a person chosen by the board of directors
shall be filled by the board.
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<PAGE>
THE CHAIRMAN AND THE PRESIDENT
Section 5.06. The chairman and/or president, as appointed by the
board of directors, shall be the chief executive officer of the corporation,
shall preside at all meetings of the stockholders, shall have general and active
management of the business of the corporation and shall see that all orders and
resolutions of the board of directors are carried into effect. The chief
executive officer shall have all the general powers and duties usually vested in
the chief executive officer of a corporation and, in addition shall have such
other powers and perform such other duties as may be prescribed from time to
time by the board of directors. If the chairman is the chief executive officer,
the president, if an individual other than the chairman, shall perform such
duties and have such powers as may be prescribed from time to time by the board
of directors.
Section 5.07. In the absence of the chairman and/or the president
or in the event of his or their inability or refusal to act, the vice-president,
if one has been elected (or in the event there be more than one vice-president,
the vice-presidents in the order designated by the board of directors, or in the
absence of any designation, then in the order of their election), or if no
vice-president has been chosen, the treasurer, shall perform the duties of the
chairman and/or president, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the chairman and/or president. The vice
presidents shall perform
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such other duties and have such other powers as the board of directors or the
president may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 5.08. The secretary shall attend all meetings of the board
of directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required by the board of directors. He shall give or cause to be given,
notice of all meetings of the stockholders and special meetings of the board of
directors, and shall have such other powers and perform such other duties as may
be prescribed from time to time by the board of directors, the chairman, or the
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 5.09. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the
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secretary or in the event of his inability or refusal to act, perform the duties
and exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors or the president may from time
to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 5.10. The treasurer shall be the principal
financial and accounting officer of the corporation and shall have custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 5.11. He shall disburse the funds of the corporation as may
be ordered by the board of directors or by the president acting under the
supervision of the board of directors, taking proper vouchers for such
disbursements, and shall render to the board of directors, at its regular
meetings, and whenever the board of directors so requires, and to the president
whenever he so requires, an account of all his transactions as treasurer and of
the financial condition of the corporation.
Section 5.12. He shall have such other powers and
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perform such other duties as may be prescribed from time to time
by the board of directors or, the president.
Section 5.13. If required by the board of directors, he shall give
the corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board for the faithful performance of the duties of his
office and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the corporation.
Section 5.14. The assistant treasurer, or if there shall be more
than one, the assistant treasurers in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election) shall in the absence of the treasurer or in the event of his inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the president may from time to time prescribe.
ARTICLE VI
INDEMNIFICATION
Section 6.01. Without limiting any power or right of the
corporation to provide indemnification in such additional
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circumstances as the corporation may from time to time deem appropriate, the
corporation shall indemnify every person, his heirs, executors and
administrators, who was or is a party or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with such action, suit or proceeding and against
fines, judgments and reasonable settlement amounts to the full extent permitted
by, and subject to the determinations and otherwise in accordance with the
procedures (including, without limitation, procedures for the advancement of
expenses) specified in, the General corporation Law of the State of Delaware.
ARTICLE VII
CERTIFICATES OF STOCK
Section 7.01. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by,
the president or a vice-president and the treasurer or an assistant treasurer,
or the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation. If any stock certificate
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is counter-signed by either a transfer agent (other than the corporation or its
employee) or a registrar (other than the corporation or its employee) the
signatures of the officers of the corporation may be facsimiles. If any officer
who has signed or whose facsimile signature has been placed upon a stock
certificate shall cease to be such officer before such certificate is issued, it
may be issued by the corporation with the same effect as if he were such officer
at the date of issue. The certificates of stock of the corporation shall be
numbered and shall be entered in the books of the corporation as they are
issued.
If the corporation shall be authorized to issue more than one class
of stock or more than one series of any class, the designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each
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class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
TRANSFERS OF STOCK
Section 7.02. Shares of capital stock shall be transferable on the
books of the corporation only by the holder of record thereof in person, or by
duly authorized attorney, upon surrender and cancellation of certificates for a
like number of shares.
FIXING RECORD DATE
Section 7.03. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
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Section 7.04. If no record date is fixed, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
date on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. The record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the board of directors adopts the resolution
relating thereto.
(a) Notwithstanding the provisions of Section 7.03 and 7.04 above,
upon the declaration of any dividends, the stock transfer books of the
corporation will not be closed, and a record date will be set by the board of
directors of the corporation upon which date the transfer agent for the
corporation will take a record of all stockholders entitled to receive the
dividend without actually closing the transfer books.
REGISTERED STOCKHOLDERS
Section 7.05. The corporation shall be entitled to recognize and
treat the person registered on its books as the owner of any share or shares of
stock as the owner in fact of shares to receive dividends and to vote as such
owner, and to be responsible and liable for calls and assessments; the
corporation shall not be bound to recognize any equitable or other claim to
interest in such share or shares on the part of any other person, whether or not
it
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shall have express or other notice thereof, except as otherwise provided by the
laws of Delaware.
LOST CERTIFICATES
Section 7.06. Any person claiming a certificate of stock to be
lost, stolen or destroyed shall furnish proof of that fact satisfactory to two
officers of the corporation, one of whom shall be the secretary or an assistant
secretary and the other of whom shall be the treasurer or an assistant
treasurer, and shall give the corporation a bond of indemnity in form and amount
and with one or more sureties satisfactory to such officers, whereupon a new
certificate may be issued of the same tenor and for the same number of shares as
the one alleged to be lost, stolen or destroyed upon such other lawful terms and
conditions as the board of directors shall prescribe.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 8.01. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
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Section 8.02. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 8.03. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
POWERS OF EXECUTION
Section 8.04. All checks or demands for money and notes and other
instruments for the payment of money of the corporation shall be signed by such
officer or officers or such other person or persons as the board of directors
may from time to time designate.
Section 8.05. All contracts, deeds and other instruments, whether
or not the seal of the corporation is affixed thereto shall be signed on behalf
of the corporation by the president, any vice-president or by such other person
or persons as
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the board of directors may from time to time designate.
Section 8.06. All shares of stock owned by the corporation in other
corporations shall be voted on behalf of the corporation by such persons and in
such manner as shall be prescribed by the board of directors.
FISCAL YEAR
Section 8.07. The fiscal year of the corporation shall be
established by a resolution of the board of directors approved before the end of
the first calendar year of the corporation's existence.
SEAL
Section 8.08. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
Section 9.01. These Bylaws may be altered, amended or repealed or
new Bylaws may be adopted (i) at any regular or special meeting of the
stockholders by the affirmative vote of the holders of a majority of the stock
issued and outstanding and entitled to
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vote thereat, or (ii) by a majority of the members of the board of directors
then in office at any regular meeting, or at any special meeting if notice of
the substance of such alteration, amendment, repeal or adoption of new Bylaws be
contained in the notice of such special meeting.
December 19, 1991
(Amended Section 2.03 April 2, 1992)
(Amended June 8, 1994 to remove
CRL provisions)
8467.2
8467.2
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<PAGE>
LOAN AGREEMENT
between
DEVELOPMENT AUTHORITY OF THE CITY OF JEFFERSONVILLE
AND OF TWIGGS COUNTY
and
NORD KAOLIN COMPANY
$1,900,000 Development Authority of the City of
Jeffersonville and of Twiggs County
Variable Rate Demand Pollution Control
Revenue Refunding Bonds, Series 1994
(Nord Kaolin Company Project)
Dated
as of
June 1, 1994
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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<PAGE>
INDEX
(This Index is not a part of the Agreement
but rather is for convenience of reference only.)
PAGE
ARTICLE I
DEFINITIONS
Section 1.1. USE OF DEFINED TERMS.............................. 1
Section 1.2. DEFINITIONS....................................... 1
Section 1.3. INTERPRETATION.................................... 5
Section 1.4. CAPTIONS AND HEADINGS............................. 6
ARTICLE II
REPRESENTATIONS
Section 2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE ISSUER........................................ 7
Section 2.2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE COMPANY....................................... 9
ARTICLE III
ISSUANCE OF THE SERIES 1994 BONDS
Section 3.1. ISSUANCE OF THE SERIES 1994 BONDS: APPLICATION
PROCEEDS.......................................... 10
Section 3.2. DISBURSEMENTS FROM THE PROJECT FUND............... 10
Section 3.3. INVESTMENT OF FUND MONEYS......................... 10
Section 3.4. REBATE FUND....................................... 11
ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
Section 4.1. LOAN PAYMENTS; DELIVERY OF NOTES AND LETTER
OF CREDIT..................................... 12
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<PAGE>
Section 4.2. ADDITIONAL PAYMENTS........................... 14
Section 4.3. PLACE OF PAYMENTS............................. 14
section 4.4. OBLIGATIONS UNCONDITIONAL...................... 14
Section 4.5. ASSIGNMENT OF AGREEMENT AND REVENUES........... 15
Section 4.6. LETTER OF CREDIT............................... 15
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1. RIGHT OF INSPECTION............................. 16
Section 5.2. INDEMNIFICATION................................. 16
Section 5.3. COMPANY NOT TO ADVERSELY AFFECT EXCLUSION FROM
GROSS INCOME OF INTEREST ON SERIES 1994 BONDS... 17
Section 5.4. LEASE, SALE OR GRANT OF USE BY COMPANY.......... 17
ARTICLE VI
OPTIONS IN FAVOR OF THE COMPANY;
REDEMPTION OF SERIES 1994 BONDS
Section 6.1. OPTIONAL REDEMPTION.............................. 19
Section 6.2. EXTRAORDINARY OPTIONAL REDEMPTION................. 19
Section 6.3. MANDATORY SINKING FUND REDEMPTION................. 21
Section 6.4. MANDATORY REDEMPTION.............................. 22
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. EVENTS OF DEFAULT.................................. 23
Section 7.2. REMEDIES ON DEFAULT................................ 24
Section 7.3. NO REMEDY EXCLUSIVE............................... 25
Section 7.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES..... 25
Section 7.5. NO WAIVER......................................... 25
Section 7.6. NOTICE OF DEFAULT................................. 26
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1. TERM OF AGREEMENT................................ 27
Section 8.2. AMOUNTS REMAINING IN FUNDS....................... 27
Section 8.3. NOTICES.......................................... 27
Section 8.4. EXTENT OF COVENANTS OF THE ISSUER; NO PERSONAL
LIABILITY...................................... 28
Section 8.5. BINDING EFFECT................................... 28
Section 8.6. AMENDMENTS AND SUPPLEMENTS....................... 28
Section 8.7. EXECUTION COUNTERPARTS........................... 28
Section 8.8. SEVERABILITY..................................... 28
Section 8.9. GOVERNING LAW.................................... 29
Exhibit A - PROMISSORY NOTE
Exhibit B - PROJECT FACILITIES
Exhibit C - PROJECT SITE
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<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT made and entered into as of June 1, 1994 between the
Development Authority of the City of Jeffersonville and of Twiggs County (the
"Issuer"), and Nord Kaolin Company, a Georgia limited partnership (the
"Company") under the circumstances summarized in the following recitals (the
capitalized terms not defined in the recitals being used therein as defined in
or pursuant to Article I hereof):
A. Pursuant to the provisions of the laws of the State, including the
Act, the Issuer has heretofore issued the Prior Bonds to provide financing for
costs of the Project, and to reduce the financing costs of the Project the
Issuer has now determined to issue sell and deliver its Series 1994 Bonds and
to loan the proceeds thereof to the Company to be applied to the refunding of
the Prior Bonds.
B. The Company and the Issuer have full right and lawful authority to
enter into this Agreement and to perform and observe the provisions hereof on
their respective parts to be performed and observed.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto covenant, agree and bind themselves as
follows (provided that any obligation of the Issuer created by or arising out of
this Agreement but shall be payable solely out of the Revenues):
ARTICLE I
DEFINITIONS
Section 1.1. USE OF DEFINED TERMS. Words and terms defined in the
Indenture shall have the same meanings when used herein, unless the context or
use clearly indicates another meaning or intent. In addition, the words and
terms set forth in Section 1.2 hereof shall have the meanings set forth therein
unless the context or use clearly indicates another meaning or intent.
Section 1.2. DEFINITIONS. As used herein:
"Act" means the Development Authorities Law of the State of Georgia
(O.C.G.A. Section 36-62-1, ET. SEQ.), as amended.
"Bonds" means the Series 1994 Bonds and any Additional Bonds.
"Company" means Nord Kaolin Company, a Georgia limited partnership, and its
successors and assigns.
"Engineer" means an individual or firm selected by the Company, and
acceptable to the Trustee and, while the Letter of Credit is in effect, the
Letter of Credit Bank, which is qualified
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<PAGE>
to practice the profession of engineering or architecture under the laws of the
State.
"Event of Default" means any of the events described as an Event of Default
in Section 7.1 hereof.
"Force Majeure" means any of the causes, circumstances or events described
as constituting Force Majeure in Section 7.1. hereof.
"Indenture" means the Trust Indenture, dated as of even date herewith,
between the Issuer and the Trustee, as amended or supplemented from time to
time.
"Issuer" means the Development Authority of the City of Jeffersonville and
of Twiggs County, a public body corporate and politic duly organized and validly
existing under the laws of the State.
"Loan" means the loan by the Issuer to the Company of the proceeds received
from the sale of the Series 1994 Bonds.
"Loan Payment Date" means the third Business Day prior to the first
Business Day of each January, April, July and October, commencing the third
Business Day prior to the first Business Day of October, 1994, or any date at
least three Business Days (or longer if required by the Indenture) prior to any
other date on which any principal of or interest or any premium on the Bonds
shall be due and payable, whether at maturity, upon acceleration, call for
redemption or otherwise.
"Loan Payments" means amounts, payable on each Loan Payment Date,
sufficient to pay the principal of, premium, if any, and interest on the Bonds
next due and payable, whether on an Interest Payment Date, redemption date,
maturity date or upon acceleration.
"Notes" means the Project Note and any Additional Note.
"Notice Address" means:
(a) As to the Issuer: Development Authority of the City of
Jeffersonville and of Twiggs County
c/o Rabun Faulk, Esq.
P.O. Box 369
Jeffersonville, Georgia 31044
FAX: (912) 945-3240
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<PAGE>
(b) As to the Company: Nord Kaolin Company
c/o Nord Resources Corporation
8150 Washington Village Drive
Dayton, Ohio 45458
Attn: Mr. Terence Lang, Senior
Vice President-Finance
with a copy to:
Kenneth Gleidman, Esq.
Spitzer & Feldman, P.C.
405 Park Avenue
New York, New York 10022-4405
(c) As to the Trustee: PNC Bank, Ohio, National Association
201 East Fifth Street
Cincinnati, Ohio 45202
Attention: Corporate Trust
Department
FAX: (513) 651-7901
(d) As to the Letter
of Credit Bank: National City Bank
National City Center
1900 East 9th Street
Cleveland, Ohio 44114
Attention: Metro/Ohio Division
FAX: (216) 575-9396
with a copy to:
National City Bank, Dayton
6 North Main Street
Dayton, Ohio 45412
Attention: Neal R. Ratliff
FAX: (513) 226-2058
(e) As to the
Remarketing Agent: National City Bank
1900 East Ninth Street
Cleveland, Ohio 44114
Attention: Bank Investment
Division
FAX: (216) 575-2313
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<PAGE>
(f) As to the
Tender Agent: PNC Bank, Ohio, National Association
201 East Fifth Street
Cincinnati, Ohio 45202
Attention: Corporate Trust
Department
FAX: (513) 651-7901
or such additional or different address, notice of which is given under Section
8.3 hereof.
"Original Purchaser" means, as to the Series 1994 Bonds, the Person or
Persons identified as the purchaser or purchasers in the Purchase Agreement and,
as to Additional Bonds, the Person or Persons identified as the purchaser or
purchasers in the applicable Purchase Agreement.
"Prior Bonds" means the Development Authority of the City of Jeffersonville
and of Twiggs County Pollution Control Revenue Bonds, Series 1981 (Nord Kaolin
Company Project), issued by the Issuer on January 20, 1981 in the principal
amount of $2,715,000 and presently outstanding in the principal amount of
$1,900,500.
"Prior Bonds Lease" means the Lease dated as of January 1, 1981 between the
Issuer and the Company relating to the Prior Bonds and recorded on January 21,
1981 in Book PP, Folio 645-708, in the office of the Clerk of the Superior
Court, Twiggs County, Georgia.
"Prior Bonds Indenture" means the Trust Indenture dated as of January 1,
1981 between the Issuer and the Prior Bonds Trustee, pursuant to which the Prior
Bonds were issued and recorded on January 21, 1981 in Book PP, Folio 709-797, in
the office of the Clerk of the Superior Court, Twiggs County, Georgia.
"Prior Bonds Trustee" means Bank One, Dayton, NA (formerly known as Winters
National Bank and Trust Co.), as trustee for the Prior Bonds.
"Project" means, collectively, the Project Site and the Project Facilities,
together constituting a "project" as defined in the Act.
"Project Facilities" means the Company's facilities described in Exhibit B
hereto, together with any additions, modifications and substitutions to those
facilities.
"Project Note" means the Promissory Note of the Company, dated as of the
date of delivery of the Series 1994 Bonds, in the form attached to this
Agreement as Exhibit A and in the principal amount of $1,900,000, evidencing the
obligation of the Company to make Loan Payments.
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<PAGE>
"Project Site" means the real estate described in Exhibit C hereto, and
any additions thereto, less any removals therefrom.
"Series 1994 Bonds" means the Variable Rate Demand Pollution Control
Revenue Refunding Bonds, Series 1994 (Nord Kaolin Company Project), issued by
the Issuer pursuant to the Indenture, in the original principal amount
$1,900,000 and dated the date of their initial delivery to the Original
Purchaser.
"State" means the State of Georgia.
"Tax Certificate" means the Certificate of Tax Covenants and
Representations of the Company delivered in connection with the initial issuance
of the Series 1994 Bonds.
"Unassigned Issuer's Rights" means all of the rights of the Issuer to
receive Additional Payments under Section 4.2 hereof, to be held harmless and
indemnified under Section 5.2 hereof, to be reimbursed for attorney's fees and
expenses under Section 7.4 hereof, and to give or withhold consent to
amendments, changes, modifications, alterations and termination of this
Agreement under Section 8.6 hereof.
Section 1.3. INTERPRETATION. Any reference herein to the Issuer, to
the Legislative Authority or to any member or officer of either includes
entities or officials succeeding to their respective functions, duties or
responsibilities pursuant to or by operation of law or lawfully performing their
functions.
Any reference to a section or provision of the Constitution of the State or
the Act, or to a section, provision or chapter of the Code of Georgia Annotated
or to any statute of the United States of America, includes that section,
provision or chapter or statute as amended, modified, revised, supplemented or
superseded from time to time; provided, that no amendment, modification,
revision, supplement or superseding section, provision or chapter or statute
shall be applicable solely by reason of this provision, if it constitutes in
any way an impairment of the rights or obligations of the Issuer, the Holders,
the Trustee, the Letter of Credit Bank or the Company under this Agreement.
Unless the context indicates otherwise, words importing the singular number
include the plural number, and vice versa; the terms "hereof", "hereby",
"herein", "hereto", "hereunder" and similar terms refer to this Agreement; and
the term "hereafter" means after, and the term "heretofore" means before, the
date of delivery of the Series 1994 Bonds. Words of any gender include the
correlative words of the other genders, unless the sense indicates otherwise.
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<PAGE>
Section 1.4. CAPTIONS AND HEADINGS. The captions and headings in
this Agreement are solely for convenience of reference and in no way define,
limit or describe the scope or intent of any Articles, Sections, subsections,
paragraphs, subparagraphs or clauses hereof.
(End of Article I)
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<PAGE>
ARTICLE II
REPRESENTATIONS
Section 2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER. The
Issuer represents, warrants and covenants that:
(a) It is a validly existing public body corporate and
politic, duly created under the Act.
(b) It has full legal right, power and authority pursuant
to the Act to finance the Project through the issuance of the Prior Bonds and to
refinance the Project through the issuance of the Series 1994 Bonds; has made
the necessary findings of public purpose, has given any necessary notices and
has taken all procedures required by the Constitution and laws of the State
(including the Act) in connection therewith; and has full legal right, power and
authority to (i) enter into this Agreement and the Indenture, (ii) issue, sell
and deliver the Series 1994 Bonds and (iii) carry out and consummate all other
transactions contemplated by this Agreement and the Indenture.
(c) It has complied with all provisions of applicable law, including
the Act, and all material matters relating to the transactions contemplated by
this Agreement and the Indenture.
(d) It has duly authorized (i) the execution, delivery of and the
performance of its obligations under this Agreement, the Series 1994 Bonds and
the Indenture, and (ii) the taking of any and all such actions as may be
required on the part of the Issuer to carry out, give effect to and consummate
the transactions contemplated by such instruments.
(e) This Agreement, the Series 1994 Bonds and the Indenture
constitute legal, valid and binding obligations of the Issuer in accordance with
their respective terms; this Agreement, the Series 1994 Bonds and the Indenture
have been duly authorized and executed by the Issuer; and, when authenticated by
the Trustee in accordance with the provisions of the Indenture, the Series 1994
Bonds will have been duly authorized, executed, issued and delivered and will
constitute legal, valid and binding limited obligations of the Issuer in
conformity with the provisions of the Act and the Constitution of the State.
(f) There is no action, suit, proceeding, inquiry, or investigation
at law or in equity or before or by any court, public board or body, pending or,
to the best of the knowledge of the Issuer, threatened, nor to the best of the
knowledge of the Issuer is there any basis therefor, which in any manner
questions the validity of the Act, the powers of the Issuer referred to in
paragraph (b) above or the validity of any proceedings taken by the
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<PAGE>
Issuer in connection with the issuance of the Prior Bonds or the Series 1994
Bonds or wherein any unfavorable decision, ruling or finding could materially
adversely affect the transactions contemplated by this Agreement or which, in
any way, would adversely affect the validity or enforceability of the Series
1994 Bonds, the Indenture or this Agreement (or of any other instrument required
or contemplated for use in consummating the transactions contemplated thereby
and hereby).
(g) The execution and delivery of this Agreement, the Series 1994
Bonds and the Indenture in compliance with the provisions of each of such
instruments will not conflict with or constitute a breach of, or default under,
any material commitment, agreement or other instrument to which the Issuer is a
party or by which it is bound, or under any provision of the Act, the
Constitution of the State or any existing law, rule, regulation, ordinance,
judgment, order or decree to which the Issuer is subject.
(h) The Issuer will do or cause to be done all things necessary, so
far as lawful, to preserve and keep in full force and effect its existence.
(i) The Project is located wholly within the boundaries of Twiggs
County, Georgia.
(j) The issuance of the Series 1994 Bonds and the execution of this
Agreement and the Indenture have been approved by the Legislative Authority of
the Issuer in accordance with the Act. The Series 1994 Bonds were validated and
confirmed by judgment of the Superior Court of Twiggs County, Georgia, rendered
on June 13, 1994.
(k) The Issuer hereby finds and determines that the revenues and
receipts to be received by it hereunder will be sufficient to pay promptly when
due the interest on and the principal of all Bonds issued under the Indenture.
(1) The Issuer hereby finds and determines that the issuance of
the Series 1994 Bonds will further the purposes and policies of the Act, to wit:
to develop and promote for the public good and general welfare trade, commerce,
industry and employment opportunities and to promote the general welfare of the
State within the territorial area of the Issuer.
(m) Each of the representations and warranties of the Issuer in the
Prior Bonds Lease and the Prior Bonds Indenture was true and correct when made
and is true and correct as of the date hereof, and each of the covenants and
agreements of the Issuer in the Prior Bonds Lease and the Prior Bonds Indenture
has been duly performed and complied with by it.
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<PAGE>
Section 2.2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company represents, warrants and covenants that:
(a) The Company is a limited partnership duly organized and existing
in good standing under the laws of the State.
(b) The Company has full power and authority to execute, deliver and
perform this Agreement, the Purchase Agreement, the Reimbursement Agreement and
the Project Note and to enter into and carry out the transactions contemplated
by those documents. That execution, delivery and performance do not, and will
not, violate any provision of law applicable to the Company and do not, and
will not, conflict with or result in a default under the Company's limited
partnership agreement or any agreement or instrument to which the Company is a
party or by which it is bound. This Agreement, the Purchase Agreement, the
Reimbursement Agreement and the Project Note have, by proper action, been duly
executed and delivered by the Company and all steps necessary have been taken to
constitute this Agreement, the Purchase Agreement, the Reimbursement Agreement
and the Project Note legal, valid and binding obligations of the Company.
(c) The Project furthers the purposes and policies of the Act, and
the Project is and will be operated and maintained in such manner as to conform
in all material respects with all applicable zoning, planning, building,
environmental and other applicable governmental rules and regulations and as to
be consistent with the Act.
(d) The representations contained in the Tax Certificate (which is
incorporated herein by this reference thereto) are true and correct and the
Company will observe the covenants contained therein as fully as if set forth
herein.
(e) Each of the representations and warranties of the Company in the
Prior Bonds Lease was true and correct when made and is true and correct as of
the date hereof, and each of the covenants and agreements of the Company in the
Prior Bonds Lease has been duly performed and complied with by it.
(End of Article II)
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<PAGE>
ARTICLE III
ISSUANCE OF THE SERIES 1994 BONDS
Section 3.1 ISSUANCE OF THE SERIES 1994 BONDS; APPLICATION OF PROCEEDS.
To provide funds to make the Loan for purposes of refunding the Prior Bonds and
thereby refinancing costs of the Project, the Issuer will issue, sell and
deliver the Series 1994 Bonds pursuant to the provisions of the Purchase
Agreement. The Series 1994 Bonds will be issued pursuant to the Indenture in the
aggregate principal amount, will bear interest, will mature and will be subject
to redemption as set forth therein. The Company hereby approves the terms and
conditions of the Indenture and the Series 1994 Bonds, and the terms and
conditions under which the Series 1994 Bonds will be issued, sold and delivered.
The proceeds from the sale of the Series 1994 Bonds shall be loaned to the
Company by depositing such proceeds with the Trustee which shall deposit them in
the Project Fund as provided in the Indenture.
At the request of the Company, and for the purposes and upon fulfillment of
the conditions specified in the Indenture, the Issuer may provide for the
issuance,, sale and delivery of Additional Bonds and loan the proceeds from the
sale thereof to the Company.
Section 3.2 DISBURSEMENTS FROM THE PROJECT FUND. The Trustee is hereby
instructed to disburse the entire balance in the Project Fund, by wire transfer
on the date of the initial delivery of the Series 1994 Bonds, to the Prior Bonds
Trustee. The Issuer and the Company shall provide notice to the Prior Bonds
Trustee of such disbursement. Such notice shall direct the Prior Bonds Trustee
to utilize such disbursement, together with other moneys held or to be held by
the Prior Bonds Trustee and available for the purpose, to pay and redeem the
Prior Bonds in whole on July 1, 1994. Such notice to the Prior Bonds Trustee
shall also direct the Prior Bonds Trustee to release and pay to the Company or
at its direction any balance of funds held by the Prior Bonds Trustee and
pledged to secure payment of the Prior Bonds (after deducting the final fees
and expenses of.the Prior Bonds Trustee).
Section 3.3 INVESTMENT OF FUND MONEYS. At the oral (promptly confirmed in
writing) or written request of the Authorized Company Representative, any moneys
held as part of the Bond Fund (except moneys in the Letter of Credit Account,
Defeasance Account or Redemption Premium Account created under Section 5.03 of
the Indenture), the Project Fund or the Rebate Fund shall be invested or
reinvested by the Trustee in Eligible Investments. The Issuer and the Company
each hereby covenants that it will restrict that
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<PAGE>
investment and reinvestment and the use of the proceeds of the Series 1994 Bonds
in such manner and to such extent, if any, as may be necessary, after taking
into account reasonable expectations at the time of delivery of and payment for
the Series 1994 Bonds, so that the Series 1994 Bonds will not constitute
arbitrage bonds under Section 148 of the Code.
Any officer of the Issuer having responsibility for issuing the Series 1994
Bonds is authorized and directed, in conjunction with any of the foregoing or
with any other officer, employee or agent of or consultant to the Issuer, or
with the Company or any employee or agent of or consultant to the Company, to
give an appropriate certificate of the Issuer pursuant to said Section 148, for
inclusion in the transcript of proceedings for the Series 1994 Bonds, setting
forth the reasonable expectations of the Issuer regarding the amount and use of
the proceeds of the Series 1994 Bonds and the facts, estimates and circumstances
an which those expectations are based, that certificate to be premised on the
reasonable expectations and the facts, estimates and circumstances on which
those expectations are based, as provided by the Company, all as of the date of
delivery of and payment for the Series 1994 Bonds. The Company shall provide the
Issuer with, and the Issuer's certificate may be based on, a certificate of the
Company setting forth the reasonable expectations of the Company on the date of
delivery of and payment for the Series 1994 Bonds regarding the amount and use
of the proceeds of the Series 1994 Bonds and the facts, estimates and
circumstances on which they are based.
Section 3.4. REBATE FUND. The Company agrees to make such payments to the
Trustee as are required of it under Section 5.08 of the Indenture. The
obligation of the Company to make such payments shall remain in effect and be
binding upon the Company notwithstanding the release and discharge of the
Indenture.
(End of Article III)
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<PAGE>
ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
Section 4.1. LOAN PAYMENTS; DELIVERY OF NOTES AND LETTER OF CREDIT. Upon
the terms and conditions of this Agreement, the Issuer will make the Loan to the
Company. In consideration of and in repayment of the Loan, the Company shall
make, as Loan Payments, payments which correspond, as to amount, to the Bond
Service Charges payable on each series of Bonds. Such Loan Payments shall be
made by the Company without regard to whether the Trustee makes draws on the
Letter of Credit to pay Bond Service Charges and such Loan Payments shall be
applied as set forth below. All such Loan Payments shall be paid to the Trustee
in accordance with the terms of the Project Note for the account of the Issuer
on the Loan Payment Dates and shall be held and disbursed in accordance with the
provisions of the Indenture and this Agreement for application to the payment of
Bond Service Charges. To the extent that the Trustee makes a draw under the
Letter of Credit for the payment of Bond Service Charges on the Series 1994
Bonds, the amount paid by the Letter of Credit Bank under the Letter of Credit
shall be credited against the Loan Payments otherwise payable by the Company
which correspond to the amount of Bond Service Charges on such Series 1994 Bonds
and the excess of any Loan Payment made by the Company held by the Trustee
subsequent to such draw on the Letter of Credit shall be applied by the Trustee,
on behalf of the Company, to reimbursement of the Letter of Credit Bank for such
draws on the Letter of Credit.
The Company shall be entitled to a credit against the Loan Payments next
required to be made to the extent that the balance of the Bond Fund is then in
excess of amounts required (a) for payment of Bonds theretofore matured or
theretofore called for redemption, (b) for payment of interest for which checks
or drafts have been drawn and mailed by the Trustee, or which has otherwise been
paid by the Trustee, and (c) for deposit in the Bond Fund for use other than
for the payment of Bond Service charges on the Interest Payment Date next
following the applicable Loan Payment Date. In any event, however, if on any
Interest Payment Date, the balance in the Bond Fund is insufficient to make
required payments of Bond Service Charges, the Company forthwith will pay to the
Trustee, for the account of the Issuer and for deposit into the Bond Fund, any
deficiency.
Except for such interest of the Company as may hereafter arise pursuant to
Section 8.2 hereof or Section 5.07 of the Indenture, the Company and the Issuer
each acknowledge that neither the Company nor the Issuer has any interest in the
Bond Fund and any moneys deposited therein shall be in the custody of and held
by the Trustee in trust for the benefit of the Holders and, to the
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<PAGE>
extent of draws under the Letter of Credit, the Letter of Credit Bank.
In connection with the issuance of any Additional Bonds, the Company shall
execute and deliver to the Trustee one or more Additional Notes in a form
substantially similar to the form of the Project Note. All such Additional Notes
shall:
(a) provide for payments of interest equal to the payments of
interest on the corresponding Additional Bonds;
(b) require payments of principal and redemption payments and any
premium equal to the payments of principal prepayments and sinking fund payments
and any premium on the corresponding Additional Bonds;
(c) require all payments on any such Additional Notes to be made no
later than the due dates for the corresponding payments to be made on the
corresponding Additional Bonds; and
(d) contain by reference or otherwise optional and mandatory
redemption provisions and provisions in respect of the optional and mandatory
acceleration of prepayment of principal and any premium corresponding with the
redemption and acceleration provisions of the corresponding Additional Bonds.
All Notes shall secure equally and ratably all outstanding Bonds, except
that, so long as no Event of Default has occurred and is subsisting hereunder,
payments by the Company on any of the Notes shall be used by the Trustee to make
a like payment of Bond Service Charges on the corresponding Bonds in connection
with which those Notes were delivered and shall constitute Loan Payments made in
respect of the related Bonds.
Upon payment in full, in accordance with the Indenture, of the Bond Service
Charges on any or all Bonds, whether at maturity or by redemption or otherwise,
or upon provision for the payment thereof having been made in accordance with
the provisions of the Indenture, (i) the Notes issued concurrently with those
corresponding Bonds, of the same maturity, bearing the same interest rate and in
an amount equal to the aggregate principal amount of the Bonds so surrendered
and canceled or for the payment of which provision has been made, shall be
deemed fully paid, the obligations of the Company thereunder shall be
terminated, and any of those Notes shall be surrendered by the Trustee to the
Company, and shall be canceled by the Company, or (ii) in the event there is
only one of those Notes, an appropriate notation shall be endorsed thereon
evidencing the date and amount of the principal payment or prepayment equal to
the Bonds so paid, or with respect to which provision for payment has been made,
and that Note shall be surrendered by the Trustee to the Company for
cancellation if all Bonds shall have been paid (or provision made therefor) and
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<PAGE>
canceled as aforesaid. Unless the Company is entitled to a credit under express
terms of this Agreement or the Notes, all payments on each of the Notes shall be
in the full amount required thereunder.
Section 4.2. ADDITIONAL PAYMENTS. The Company shall pay to the Issuer, as
Additional Payments hereunder, any and all costs and expenses incurred or to be
paid by the Issuer in connection with the issuance and delivery of the Series
1994 Bonds and Additional Bonds or otherwise related to actions taken by the
Issuer under this Agreement or the Indenture.
The Company shall pay to the Trustee, the Registrar and any Paying Agent or
Authenticating Agent, their reasonable fees, charges and expenses for acting as
such under the Indenture.
The Company shall pay the Remarketing Agent and Tender Agent, as Additional
Payments hereunder, the fees and expenses of the Remarketing Agent and Tender
Agent under the Indenture for services rendered in connection with the Bonds.
The Company shall pay to the Tender Agent in federal or other immediately
available funds not later than 3:00 p.m., Cincinnati, Ohio time, an amount equal
to the amount the Tender Agent requires in order to purchase on behalf of the
Company Series 1994 Bonds or Beneficial Ownership Interests pursuant to Section
4.07 or 4.09 of the Indenture on the date payment is to be made; provided,
however, that the amount required to be paid under this paragraph shall be
reduced by an amount equal to the sum of the amounts made available to the
Tender Agent for such purpose from the proceeds of the remarketing of such
Series 1994 Bonds or Beneficial Ownership Interests by the Remarketing Agent or
proceeds of a draw under the Letter of Credit. The Company hereby authorizes
the Trustee to draw such moneys under the Letter of Credit, as are necessary for
the purchase of Series 1994 Bonds or Beneficial Ownership Interests pursuant to
said Section 4.07 or 4.09.
Section 4.3. PLACE OF PAYMENTS. The Company shall make all Loan Payments
directly to the Trustee at its corporate trust office. Additional Payments shall
be made directly to the person or entity to whom or to which they are due.
Section 4.4. OBLIGATIONS UNCONDITIONAL. The obligations of the Company to
make Loan Payments, Additional Payments and any payments required of the Company
under Section 5.08 of the Indenture shall be absolute and unconditional, and
the Company shall make such payments without abatement, diminution or deduction
regardless of any cause or circumstances whatsoever including, without
limitation, any defense, set-off, recoupment or counterclaim which the Company
may have or assert against the Issuer, the Trustee, the Remarketing Agent, the
Tender Agent, the Letter of Credit Bank or any other Person.
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Section 4.5. ASSIGNMENT OF AGREEMENT AND REVENUES. To secure the payment
of Bond Service Charges, the Issuer shall assign to the Trustee, by the
Indenture, all of its rights, title and interest in this Agreement (except for
the Unassigned Issuer's Rights) and the Note, and the other Revenues. The
Company hereby agrees and consents to that assignment.
Section 4.6. LETTER OF CREDIT. Prior to the initial delivery of the Series
1994 Bonds pursuant to Section 2.03 of the Indenture, the Company shall obtain
and deliver, to the Trustee, the Letter of Credit. The Letter of Credit shall be
issued by the Letter of Credit Bank pursuant to the Reimbursement Agreement;
shall be dated the date of delivery of the Series 1994 Bonds; shall obligate the
Letter of Credit Bank to pay amounts equal to (a) the principal amount of the
Series 1994 Bonds (i) to enable the Trustee to pay the principal amount of the
Series 1994 Bonds when due at maturity, upon redemption or acceleration and (ii)
to enable the Tender Agent to pay the portion of the purchase price of Series
1994 Bonds or Beneficial Ownership Interests tendered to it and not remarketed
equal to the principal amount of such Series 1994 Bonds or Beneficial Ownership
Interests, plus (b) an amount equal to the interest to accrue at the Maximum
Interest Rate on the Series 1994 Bonds for 110 days (i) to enable the Trustee
to pay interest on the Series 1994 Bonds when due and (ii) to enable the Tender
Agent to pay the portion of the purchase price of Series 1994 Bonds or
Beneficial Ownership Interests tendered to it and not remarketed equal to the
accrued interest on such Series 1994 Bonds or Beneficial Ownership Interests;
and shall be in substantially the same form as the exhibit attached to the
Reimbursement Agreement and made a part thereof.
The Company shall take whatever action may be necessary to maintain the
Letter of Credit in full force and effect during the period required by the
Indenture, including the payment of any transfer fees required by the Letter of
Credit Bank upon any transfer of the Letter of Credit to any successor Trustee
pursuant to Section 6.09 of the Indenture.
(End of Article IV)
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<PAGE>
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1. RIGHT OF INSPECTION. Subject to reasonable security and
safety regulations and upon reasonable notice, the Issuer and the Trustee, and
their respective agents, shall have the right during normal business hours to
inspect the Project.
Section 5.2. INDEMNIFICATION. The Company releases the Issuer from,
agrees that the Issuer shall not be liable for, and indemnifies the Issuer
against, all liabilities, claims, costs and expenses imposed upon, incurred or
asserted against the Issuer on account of: (a) any loss or damage to property
or injury to or death of or loss by any person that may be occasioned by any
cause whatsoever pertaining to the construction, maintenance, operation and use
of the Project; (b) any breach or default on the part of the Company in the
performance of any covenant or agreement of the Company under this Agreement,
the Reimbursement Agreement or any related document, or arising from any act or
failure to act by the Company, or any of its agents, contractors, servants,
employees or licensees; (c) the authorization, issuance, sale, trading,
redemption or servicing of the Series 1994 Bonds, and the provision of any
information or certification furnished in connection therewith concerning, the
Series 1994 Bonds, the Project or the Company including, without limitation, any
information furnished by the Company for, and included in, or used as a basis
for preparation of, any certifications, information statements or reports
furnished by the Issuer, and any other information or certification obtained
from the Company to assure the exclusion of the interest on the Series 1994
Bonds from gross income for federal income tax purposes; (d) the Company's
failure to comply with any requirement of this Agreement, the Tax Certificate,
or the Code pertaining to such exclusion of that interest including the
covenants in Section 5.3 hereof; and (e) any claim, action or proceeding brought
with respect to the matters set forth in (a), (b), (c) and (d).
The Company agrees to indemnify the Trustee and the Tender Agent for, and
to hold them harmless against, all liabilities, claims, costs and expenses
incurred without negligence or bad faith on the part of the Trustee and the
Tender Agent on account of any action taken or omitted to be taken by the
Trustee and the Tender Agent in accordance with the terms of this Agreement, the
Bonds, the Reimbursement Agreement, the Letter of Credit, or the Indenture or
any action taken at the request of or with the consent of the Company, including
the costs and expenses of the Trustee and the Tender Agent in defending
themselves against any such claim, action or proceeding brought in connection
with the exercise or performance of any of their powers or duties under this
Agreement, the Bonds, the Indenture, the Reimbursement Agreement, or the Letter
of Credit.
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In case any action or proceeding is brought against the Issuer, the Tender
Agent or the Trustee in respect of which indemnity may be sought hereunder, the
party seeking indemnity promptly shall give notice of that action or proceeding
to the Company, and the Company upon receipt of that notice shall have the
obligation and the right to assume the defense of the action or proceeding;
provided, that failure of a party to give that notice shall not relieve the
Company from any of its obligations under this Section unless that failure
prejudices the defense of the action or proceeding by the Company. At its own
expense, an indemnified party may employ separate counsel and participate in the
defense. The Company shall not be liable for any settlement made without its
consent.
The indemnification set forth above is intended to and shall include the
indemnification of all affected officials, directors, officers and employees of
the Issuer, the Tender Agent and the Trustee, respectively. That indemnification
is intended to and shall be enforceable by the Issuer, the Tender Agent and the
Trustee, respectively, to the full extent permitted by law.
Section 5.3. COMPANY NOT TO ADVERSELY AFFECT EXCLUSION FROM GROSS INCOME OF
INTEREST ON SERIES 1994 BONDS. The Company hereby represents that it has taken
and caused to be taken, and covenants that it will take and cause to be taken,
all actions that may be required of it, alone or in conjunction with the Issuer,
for the interest on the Series 1994 Bonds to be and remain excluded from gross
income for federal income tax purposes, and represents that it has not taken or
permitted to be taken on its behalf, and covenants that it will not take or
permit to be taken on its behalf, any actions that would adversely affect such
exclusion under the provisions of the Code.
Section 5.4. LEASE, SALE OR GRANT OF USE BY COMPANY. Subject to the
provisions of the Reimbursement Agreement or any other agreement to which the
Company is a party or by which it is bound, the Company may lease, sell or grant
the right to occupy and use the Project in whole or in part to others, provided
that:
(a) No such grant, sale or lease shall relieve the Company from its
obligations under this Agreement, the Reimbursement Agreement or the Project
Note;
(b) In connection with any such grant, sale or lease the Company
shall retain such rights and interests as will permit it to comply with its
obligations under this Agreement, the Reimbursement Agreement and the Project
Note; and
(c) No such grant, sale or lease shall impair materially the purposes
of the Act to be accomplished by operation of the Project Facilities as herein
provided or adversely affect the
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<PAGE>
exclusion from gross income for Federal income tax purposes of the interest on
the Bonds.
(End of Article V)
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<PAGE>
ARTICLE VI
OPTIONS IN FAVOR OF THE Company;
REDEMPTION OF SERIES 1994 BONDS
Section 6.1. OPTIONAL REDEMPTION. At any time and from time to time, the
Company may deliver moneys to the Trustee in addition to Loan Payments or
Additional Payments required to be made and direct the Trustee to use the moneys
so delivered for the purpose of purchasing series 1994 Bonds or Beneficial
Ownership Interests or of calling Series 1994 Bonds for optional redemption in
accordance with the applicable provisions of the Bond Legislation and Indenture
providing for optional redemption at the redemption price stated in the
Indenture; provided, however, that if less than all of the Series 1994 Bonds or
Beneficial Ownership Interests are to be purchased or redeemed with such moneys,
no Event of Default shall have occurred and be subsisting; and provided further
that any moneys so used for optional redemption shall be from the same sources
and used in the same priority as provided in Section 5.03 of the Indenture for
the payment of Bond Service Charges. Pending application for those purposes, any
moneys so delivered shall be held by the Trustee in a special account in the
Bond Fund.
Delivery of those moneys shall not operate to abate or postpone Loan
Payments or Additional Payments otherwise becoming due or to alter or suspend
any other obligations of the Company under this Agreement.
Section 6.2. EXTRAORDINARY OPTIONAL REDEMPTION. The Company shall have,
subject to the conditions hereinafter imposed, and with the written notice to
the Letter of Credit Bank while a Letter of Credit is in effect, the option to
direct the redemption of the entire unpaid principal balance of the Series 1994
Bonds in accordance with the applicable provisions of the Indenture, upon the
occurrence of any of the following events:
(a) The Project shall have been damaged or destroyed to such an
extent that (1) it cannot reasonably be expected to be restored, within a period
of six consecutive months, to the condition thereof immediately preceding such
damage or destruction or (2) its normal use and operation is reasonably expected
to be prevented for a period of six consecutive months.
(b) Title to, or the temporary use of, all or a significant part of
the Project shall have been taken under the exercise of the power of eminent
domain (1) to such extent that the Project cannot reasonably be expected to be
restored within a period of six months to a condition of usefulness comparable
to that existing prior to the taking or (2) as a result of the taking,
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<PAGE>
normal use and operation of the Project is reasonably expected to be prevented
for a period of six consecutive months.
(c) As a result of any changes in the Constitution of the State, the
Constitution of the United States of America, or state or federal laws or as a
result of legislative or administrative action (whether state or federal) or by
final decree, judgment or order of any court or administrative body (whether
state or federal) entered after the contest thereof by the Issuer or the Company
in good faith, this Agreement shall have become void or unenforceable or
impossible of performance in accordance with the intent and purpose of the
parties as expressed in this Agreement, or if unreasonable burdens or excessive
liabilities shall have been imposed with respect to the Project or the operation
thereof, including, without limitation, federal, state or other ad valorem,
property, income or other taxes not being imposed on the date of this Agreement
other than ad valorem taxes presently levied upon privately owned property used
for the same general purpose as the Project.
(d) Changes in the economic availability of raw materials, operating
supplies, energy sources or supplies, or facilities (including, but not limited
to, facilities in connection with the disposal of industrial or medical wastes)
necessary for the operation of the Project for the Project Purposes shall have
occurred or technological or other changes shall have occurred which the Company
cannot reasonably overcome or control and which in the Company's reasonable
judgment render the Project uneconomic.
To exercise that option, the Company shall, within ninety days following
the event authorizing the exercise of that option, or at any time during the
continuation of the condition referred to in clause (d) above, give notice to
the Issuer and to the Trustee specifying the date on which the Company will
deliver the funds required for that redemption, which date shall be not more
than ninety days from the date that notice is mailed and shall make arrangements
satisfactory to the Trustee for the giving of the required notice of redemption.
The amount payable by the Company in the event of its exercise of the
option granted in this Section shall be the sum of the following:
(i) An amount of money which, when added to the moneys and
investments held to the credit of the Bond Fund, will be
sufficient pursuant to the provisions of the Indenture to pay, at
par, and discharge all then outstanding Series 1994 Bonds on the
earliest applicable redemption date, that amount to be paid to
the Trustee, plus
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<PAGE>
(ii) An amount of money equal to the Additional Payments relating
to the Series 1994 Bonds accrued and to accrue until actual final
payment and redemption of the Series 1994 Bonds, that amount or
applicable portions thereof to be paid to the Trustee or to the
Persons to whom those Additional Payments are or will be due.
The requirement of (ii) above with respect to Additional Payments to accrue may
be met if provisions satisfactory to the Trustee and the Issuer are made for
paying those amounts as they accrue.
The Company also shall have the option, in the event that title to or the
temporary use of a portion of the Project shall be taken under the exercise of
the power of eminent domain, even if the taking is not of such nature as to
permit the exercise of the redemption option upon an event specified in (b)
above, to direct the redemption, at a redemption price of 100% of the principal
amount thereof prepaid, plus accrued interest to the redemption date, of that
part of the outstanding principal balance of the series 1994 Bonds as may be
payable from the proceeds received by the Company (after the payment of costs
and expenses incurred in the collection thereof) received in the eminent domain
proceeding, provided, that, the Company shall furnish to the Issuer and the
Trustee a certificate of an Engineer stating that (1) the property comprising
the part of the Project taken is not essential to continued operations of the
Project in the manner existing prior to that taking, (2) the Project has been
restored to a condition substantially equivalent to that existing prior to the
taking, or (3) other improvements have been acquired or made which are suitable
for the continued operation of the Project.
The rights and options granted to the Company in this Section may be
exercised whether or not the Company is in default hereunder; provided, that
such default will not relieve the Company from performing those actions which
are necessary to exercise any such right or option granted hereunder.
Section 6.3. MANDATORY SINKING FUND REDEMPTION. The series 1994 Bonds are
subject to mandatory redemption pursuant to mandatory sinking fund requirements,
at a redemption price of 100 percent of the principal amount redeemed plus
interest accrued to the redemption date, on July 1 in the years and in the
principal amounts as follows:
(Remainder of Page Intentionally Left Blank]
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<PAGE>
<TABLE>
<CAPTION>
Year Principal Amount
---- ----------------
<S> <C>
1995 $190,000
1996 $190,000
1997 $190,000
1998 $190,000
1999 $190,000
2000 $190,000
2001 $190,000
2002 $190,000
2003 $190,000
2004 (maturity) $190,000
</TABLE>
Section 6.4 MANDATORY REDEMPTION. The Company shall deliver to the
Trustee the moneys needed to redeem the Series 1994 Bonds in accordance with any
mandatory redemption provisions relating thereto as may be set forth in Section
4.01 of the Indenture.
(End of Article VI)
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. EVENTS OF DEFAULT. Each of the following shall be an Event
of Default:
(a) The Company shall fail to pay or have paid on its behalf any
Loan Payment on or prior to the date on which that Loan Payment is due and
payable;
(b) The Company shall fail to deliver to the Trustee, or cause to be
delivered on its behalf, the moneys needed (i) to redeem any outstanding Series
1994 Bonds as provided in Article VI of this Agreement or (ii) to purchase any
Series 1994 Bonds or Beneficial Ownership Interests in the manner and upon the
date as provided in Section 4.2 of this Agreement;
(c) The Company shall fail to observe and perform any other
agreement, term or condition contained in this Agreement (other than with
respect to Section 5.3 hereof) and the continuation of such failure for a period
of thirty days after notice thereof shall have been given to the Company by the
Issuer or the Trustee;
(d) The Company shall: (i) admit in writing its inability to pay its
debts generally as they become due; (ii) have an order for relief entered in any
case commenced by or against it under the federal bankruptcy laws, as now or
hereafter in effect; (iii) commence a proceeding under any other federal or
state bankruptcy, insolvency, reorganization or similar law, or have such a
proceeding commenced against it and either have an order of insolvency or
reorganization entered against it or have the proceeding remain undismissed and
unstayed for ninety days; (iv) make an assignment for the benefit of creditors;
or (v) have a receiver or trustee appointed for it or for the whole or any
substantial part of its property;
(e) There shall occur an "Event of Default" as defined in Section
7.01 of the Indenture.
Notwithstanding the foregoing, if, by reason of Force Majeure, the Company
is unable to perform or observe any agreement, term or condition hereof which
would give rise to an Event of Default under subsection (c) hereof, the Company
shall not be deemed in default during the continuance of such inability.
However, the Company shall promptly give notice to the Trustee and the Issuer of
the existence of an event of Force Majeure and shall use its best efforts to
remove the effects thereof; provided that the settlement of strikes or other
industrial disturbances shall be entirely within its discretion.
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<PAGE>
The term Force Majeure shall mean, without limitation, the following:
(i) acts of God; strikes, lockouts or other industrial
disturbances; acts of public enemies; orders or restraints of any
kind of the government of the United States of America or of the
State or any of their departments, agencies, political
subdivisions or officials, or any civil or military authority;
insurrections; civil disturbances; riots; epidemics; landslides;
lightning; earthquakes; fires; hurricanes; tornados; storms;
droughts; floods; arrests; restraint of government and people;
explosions; breakage, malfunction or accident to facilities,
machinery, transmission pipes or canals; partial or entire
failure of utilities; shortages of labor, materials, supplies or
transportation; or
(ii) any cause, circumstance or event not reasonably within the
control of the Company.
The declaration of an Event of Default under subsection (d) above, and
the exercise of remedies upon any such declaration, shall be subject to any
applicable limitations of federal bankruptcy law affecting or precluding that
declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.
Section 7.2. REMEDIES ON DEFAULT. Whenever an Event of Default
shall have happened and be subsisting, any one or more of the following remedial
steps may be taken:
(a) If and only if acceleration of the principal amount of the Bonds
has been declared pursuant to Section 7.03 of the Indenture, the Trustee shall
declare all Loan Payments to be immediately due and payable, whereupon the same
shall become immediately due and payable;
(b) The Issuer, the Letter of Credit Bank or the Trustee may have
access to, inspect, examine and make copies of the books, records, accounts and
financial data of the Company pertaining to the Project; or
(c) The Issuer or the Trustee may pursue all remedies now or
hereafter existing at law or in equity to collect all amounts then due and
thereafter to become due under this Agreement or the Letter of Credit or to
enforce the performance and observance of any other obligation or agreement of
the Company under those instruments.
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<PAGE>
Notwithstanding the foregoing, the Issuer shall not be obligated to take any
step which in its opinion will or might cause it to expend time or money or
otherwise incur liability unless and until a satisfactory indemnity bond has
been furnished to the Issuer at no cost or expense to the Issuer. Any amounts
collected as Loan Payments or applicable to Loan Payments and any other amounts
which would be applicable to payment of Bond Service Charges collected pursuant
to action taken under this Section shall be paid into the Bond Fund and applied
in accordance with the provisions of the Indenture or, if the outstanding Bonds
have been paid and discharged in accordance with the provisions of the
Indenture, shall be paid as provided in section 5.07 of the Indenture for
transfers of remaining amounts in the Bond Fund.
The provisions of this Section are subject to the further limitation that
the rescission by the Trustee of its declaration that all of the Bonds are
immediately due and payable also shall constitute an annulment of any
corresponding declaration made pursuant to paragraph (a) of this Section and a
waiver and rescission of the consequences of that declaration and of the Event
of Default with respect to which that declaration has been made, provided that
no such waiver or rescission shall extend to or affect any subsequent or other
default or impair any right consequent thereon.
Section 7.3. NO REMEDY EXCLUSIVE. No remedy conferred upon or reserved
to the Issuer or the Trustee by this Agreement is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or the Letter of Credit, or now or hereafter existing at law, in
equity or by statute. No delay or omission to exercise any right or power
accruing upon any default shall impair that right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle the Issuer
or the Trustee to exercise any remedy reserved to it in this Article, it shall
not be necessary to give any notice, other than any notice required by law or
for which express provision is made herein.
Section 7.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. If an Event
of Default should occur and the Issuer or the Trustee should incur expenses,
including attorneys' fees, in connection with the enforcement of this Agreement
or the Letter of Credit or the collection of sums due thereunder, the Company
shall reimburse the Issuer and the Trustee, as applicable, for the reasonable
expenses so incurred upon demand.
Section 7.5. NO WAIVER. No failure by the Issuer or the Trustee to
insist upon the strict performance by the Company of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any
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<PAGE>
other existing or subsequent right to remedy the failure by the Company to
observe or comply with any provision hereof.
The Issuer and the Trustee may waive any Event of Default hereunder only
with the prior written consent of the Letter of Credit Bank.
Section 7.6. NOTICE OF DEFAULT. The Company or the Issuer shall notify the
Trustee and the Letter of Credit Bank immediately if it becomes aware of the
occurrence of any Event of Default hereunder or of any fact, condition or event
which, with the giving of notice or passage of time or both, would become an
Event of Default.
(End of Article VII)
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. TERM OF AGREEMENT. This Agreement shall be and remain in
full force and effect from the date of delivery of the Series 1994 Bonds to the
Original Purchaser until such time as all of the Bonds shall have been fully
paid (or provision made for such payment) pursuant to the Indenture and all
other sums payable by the Company under this Agreement and the Project Note
shall have been paid, except for obligations of the Company under Sections 4.2
and 5.2 hereof, which shall survive any termination of this Agreement.
Section 8.2. AMOUNTS REMAINING IN FUNDS. Any amounts in the Bond Fund
remaining unclaimed by the Holders of Bonds for four years after the due date
thereof (whether at stated maturity, by redemption or pursuant to any mandatory
sinking fund requirements or otherwise), shall be paid to the Company; provided
that if the Trustee shall have drawn on the Letter of Credit, and the Letter of
Credit Bank has not been reimbursed by the Company pursuant to the Reimbursement
Agreement, such amounts remaining in the Bond Fund shall belong and be paid
first to the Letter of Credit Bank to the extent it has not been so reimbursed.
With respect to that principal of and any premium and interest on the Bonds to
be paid from moneys paid to the Company or the Letter of Credit Bank pursuant to
the preceding sentence, the Holders of the Bonds entitled to those moneys shall
look solely to the Company for the payment of those moneys.
Further, any other amounts remaining in the Bond Fund (other than in the
Letter of Credit Account, Redemption Premium Account and Defeasance Account) and
any amounts remaining in any other special funds or accounts (other than the
Project Fund and the Rebate Fund) created under this Agreement or the Indenture
after all of the outstanding Bonds shall be deemed to have been paid and
discharged under the provisions of the Indenture and all other amounts required
to be paid under this Agreement and the Indenture have been paid, shall be paid
to the Company to the extent that those moneys are in excess of the amounts
necessary to effect the payment and discharge of the outstanding Bonds; provided
that if the Trustee shall have drawn on the Letter of Credit, and the Letter of
Credit Bank has not been reimbursed by the Company pursuant to the Reimbursement
Agreement, such amounts shall belong and be paid first to the Letter of Credit
Bank to the extent it has not been so reimbursed.
Section B-3. NOTICES. All notices, certificates, requests or other
communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by registered or certified mail, postage prepaid,
and addressed to the appropriate
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<PAGE>
Notice Address. A duplicate copy of each notice, certificate, request or other
communication given hereunder to the Issuer, the Company, the Letter of Credit
Bank, the Remarketing Agent, the Tender Agent or the Trustee shall also be given
to the others. The Company, the Issuer, the Letter of Credit Bank, the
Remarketing Agent, the Tender Agent and the Trustee, by notice given hereunder,
may designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.
Section 8.4. EXTENT OF COVENANTS OF THE ISSUER; NO PERSONAL LIABILITY.
All covenants, obligations and agreements of the Issuer contained in this
Agreement or the Indenture shall be effective to the extent authorized and
permitted by applicable law. No such covenant, obligation or agreement shall be
deemed to be a covenant, obligation or agreement of any present or future
official, member, officer, agent or employee of the Issuer or the Legislative
Authority in other than his official capacity, and neither the members of the
Legislative Authority nor any official executing the Bonds shall be liable
personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof or by reason of the covenants,
obligations or agreements of the Issuer contained in this Agreement or in the
Indenture.
Section 8.5. BINDING EFFECT. This Agreement shall inure to the benefit
of and shall be binding in accordance with its terms upon the Issuer, the
Company and their respective permitted successors and assigns, provided that
this Agreement may not be assigned by the Company (except in connection with a
lease, sale or grant of use pursuant to Section 5.4 hereof) and may not be
assigned by the Issuer except to the Trustee pursuant to the Indenture or as
otherwise may be necessary to enforce or secure payment of Bond Service Charges.
This Agreement may be enforced only by the parties, their assignees and others
who may, by law, stand in their respective places.
Section 8.6. AMENDMENTS AND SUPPLEMENTS. Except as otherwise expressly
provided in this Agreement or the Indenture, subsequent to the issuance of the
Series 1994 Bonds and prior to all conditions provided for in the Indenture for
release of the Indenture having been met, this Agreement may not be effectively
amended, changed, modified, altered or terminated except in accordance with the
provisions of Article XI of the Indenture, as applicable.
Section 8.7. EXECUTION COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.
Section 8.8. SEVERABILITY. If any provision of this Agreement, or any
covenant, obligation or agreement contained
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<PAGE>
herein is determined by a court to be invalid or unenforceable, that
determination shall not affect any other provision, covenant, obligation or
agreement, each of which shall be construed and enforced as if the invalid or
unenforceable portion were not contained herein. That invalidity or
unenforceability shall not affect any valid and enforceable application
thereof, and each such provision, covenant, obligation or agreement shall be
deemed to be effective, operative, made, entered into or taken in the manner
and to the full extent permitted by law.
Section 8.9. GOVERNING LAW. This Agreement shall deemed to be contract
made under the laws of the State and for purposes shall be governed by and
construed in accordance with laws of the State.
(End of Article VIII)
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<PAGE>
IN WITNESS WHEREOF, the Issuer and the Company have caused this Agreement
to be duly executed in their respective names, all as of the date hereinbefore
written.
NORD KAOLIN COMPANY, BY NORPLEX, INC., ITS
GENERAL PARTNER
By: /s/
----------------------------------------
Title: Chief Financial Officer
-------------------------------------
DEVELOPMENT AUTHORITY OF THE CITY OF
JEFFERSONVILLE AND OF TWIGGS COUNTY
By: /s/
----------------------------------------
Chairman
By: /s/
----------------------------------------
(SEAL) Secretary
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EXHIBIT A
PROMISSORY NOTE
$1,900,000 June __, 1994
Nord Kaolin Company, a Georgia limited partnership (the "Company"), for
value received, promises to pay to PNC Bank, Ohio, National Association,
Cincinnati, Ohio, as trustee (the "Trustee") under the Indenture hereinafter
referred to, the principal sum of
ONE MILLION NINE HUNDRED THOUSAND DOLLARS ($1,900,000)
and to pay interest on the unpaid balance of such principal sum from and after
the date hereof at the Applicable Rate until the payment of such principal sum
has been made or provided for. As used herein, "Applicable Rate" means the
interest rate borne by the Series 1994 Bonds (as hereafter defined) from time to
time in accordance with the Indenture (as hereafter defined).
This Note has been executed and delivered by the Company to the Trustee
pursuant to a certain Loan Agreement (the "Agreement"), dated as of June 1,
1994, between the Development Authority of the City of Jeffersonville and of
Twiggs County (the "Issuer") and the Company. Under the Agreement, the Issuer
has loaned the Company the principal proceeds received from the sale of the
Issuer's $1,900,000 aggregate principal amount of Variable Rate Demand Pollution
Control Revenue Refunding Bonds, Series 1994 (Nord Kaolin Company Project) dated
as of the date hereof (the "Series 1994 Bonds"), to assist the Company in the
refinancing of the Project (as defined in the Agreement), and the Company has
agreed to repay such loan by making payments (the "Loan Payments") at the times
and in the amounts set forth in this Note for application to the payment of the
principal of and redemption premium, if any, and interest on the Series 1994
Bonds (the "Bond Service Charges") as and when due. The Series 1994 Bonds have
been issued, concurrently with the execution and delivery of this Note, pursuant
to, and are secured by, the Trust Indenture (the "Indenture") dated as of June
1, 1994, between the Issuer and the Trustee. The Series 1994 Bonds also bear
interest from the date hereof at initially a floating rate of interest and are
subject to mandatory sinking fund redemption or mature on July 1 in the years
and in the amounts set forth below:
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<TABLE>
<CAPTION>
Year Principal Amount
---- ----------------
<S> <C>
1995 $190,000
1996 $190,000
1997 $190,000
1998 $190,000
1999 $190,000
2000 $190,000
2001 $190,000
2002 $190,000
2003 $190,000
2004 (maturity) $190,000
</TABLE>
To provide funds to pay the Bond Service Charges as and when due, the
Company hereby agrees to and shall make Loan Payments as follows: on the third
Business Day prior to the first Business Day of each January, April, July and
October, commencing the third Business Day prior to the first Business Day of
October, 1994, and on the third Business Day prior to any other date on which
Bond Service Charges shall be due and payable, whether at maturity, upon
acceleration, call for redemption or otherwise, an amount equal to the Bond
Service Charges next due and payable.
If payment or provision for payment in accordance with the Indenture is
made in respect of Bond Service Charges from moneys other than Loan Payments,
this Note shall be deemed paid to the extent such payments or provision for
payment of Bond Service Charges has been made. The Company shall receive a
credit against its obligation to make Loan Payments hereunder to the extent that
there are amounts already on deposit in the Bond Fund created by the Indenture,
and available to pay Bond Service Charges pursuant to the Indenture. Subject to
the foregoing, all Loan Payments shall be in the full amount required hereunder.
All Loan Payments shall be payable in lawful money of the United States of
America and shall be made to PNC Bank, Ohio, National Association at its
corporate trust office in Cincinnati, Ohio for the account of the Issuer and
deposited in the Bond Fund created by the Indenture. Except as otherwise
provided in the Indenture, such Loan Payments shall be used by the Trustee to
pay the Bond Service Charges as and when due.
The obligation of the Company to make the payments required hereunder shall
be absolute and unconditional and the Company shall make such payments without
abatement, diminution or deduction regardless of any cause or circumstances
whatsoever including, without limitation, any defense, set-off, recoupment or
counterclaim which the Company may have or assert against the Issuer, the
Trustee and the Letter of Credit Bank (as defined in the Indenture) or any other
person.
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This Note is subject to optional, extraordinary optional and mandatory
prepayment in whole or in part, at the prepayment price, in the amounts and upon
the conditions that the Series 1994 Bonds are subject to, respectively,
optional, extraordinary optional and mandatory redemption. The Company will
deliver or cause to be delivered to the Trustee, for the account of the Issuer,
such moneys as are required to effect such prepayment under the applicable terms
of the Series 1994 Bonds.
Whenever an event of default under Section 7.01 of the Indenture shall have
occurred and, as a result thereof, the principal of and any premium on all
series 1994 Bonds then outstanding, and interest accrued thereon, shall have
been declared to be immediately due and payable pursuant to Section 7.03 of the
Indenture, the unpaid principal amount of and any premium and accrued interest
on this Note shall also be due and payable on the date on which the principal of
and premium and interest on the Series 1994 Bonds shall have been declared due
and payable; provided that the annulment of a declaration of acceleration with
respect to the Series 1994 Bonds shall also constitute an annulment of any
corresponding declaration with respect to this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed as of
the date first set forth above.
NORD KAOLIN COMPANY, BY NORPLEX,
INC., ITS GENERAL PARTNER
By:
-------------------------------
Title
-------------------------------
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EXHIBIT B
PROJECT FACILITIES
Sediment basin and related water pollution control facilities and dust
collectors for the control of air pollution, all as more particularly described
and provided for in the Prior Bonds Lease.
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EXHIBIT C
PROJECT SITE
------------
Attached to Lease between Development Authority of the City of
Jeffersonville and of Twiggs County and Nord Kaolin Company, dated as of January
1, 1981.
I.
All that tract or parcel of land lying and being in Twiggs County and
described as follows:
Those two certain tracts of land, containing, in the aggregate, 37.1
acres which are more particularly described as follows:
TRACT A. All that tract or parcel of land lying, being and situate in
Land Lot 24 of the 26th Land District of Twiggs County, Georgia, containing 15.9
acres and designated "Tract A,, on a plat thereof prepared for Nord Kaolin
Company by Bryon L. Farmer, GRLS No. 1679, on July 11, 1980, a copy of which is
of record in Plat Book 6, folio 91, in the office of the Clerk of Twiggs
Superior Court and, by reference, incorporated herein and made a part hereof
for the purpose of a more particular description.
Both tracts A and B are a portion of the real property registered by
W. V. Watson in the Twiggs Superior Court in Registered Title No. 35, Title
Certificate No. 1, page 100, Title Register of Twiggs County, Georgia.
Together with that certain tract of land more particularly described
as follows:
All that tract or parcel of land containing 411.64 acres, more or
less, in Land Lots 2, 25 and 28 of the 26th Land District of Twiggs County,
Georgia, more particularly described on plat prepared by D. L. Jefferson dated
July 17, 1975, and recorded in Plat Book 6, Page 7, Deed Records, Twiggs
County, Georgia, as follows: Begin at the northeasterly right of way line of a
dirt road known as the old Macon-Jeffersonville Road where said right of way
line intersects the northwest line of Land Lot 2 of said District and go thence
along the northwest line of Land Lot 2, Land Lot 25 and Land Lot 28 north 45
degrees east 6735.03 feet to an iron pipe located at the common corner of Land
Lots 27, 28, 51 and 52 of said District; thence go south 43 degrees 59 minutes
48 seconds east along the northeast line of Land Lot 28 2123.16 feet to a pipe;
thence continuing along said Land Lot line south 46 degrees 22 minutes 34
seconds east 901.76 feet to a pipe at the common corner of Land Lots 28, 29, 50
and 51 of said district; thence along the southeast line of Land Lot
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28 south 44 degrees 40 minutes 43 seconds west 1823 feet to an iron pipe; thence
continuing along said Land Lot line and along the southwest line of Land Lot 25
south 45 degrees 20 minutes 49 seconds west 1440.59 feet to a pipe; thence
continuing along the southwest line of Land Lot 25 south 45 degrees 07 minutes
33 seconds west along a wire fence 1756.5 feet to a pipe; thence north 52
degrees 52 minutes 26 seconds west 1437.5 feet, more or less, to a pipe at the
north corner of property now or formerly of D.Y. Califf; thence along said
property line south 45 degrees 07 minutes 34 seconds west 1386 feet to a pipe on
the northeast right of way line of the Old Macon-Jeffersonville Road; thence
along said right of way north 44 degrees 49 minutes 51 seconds west 1589.75 feet
to the pipe and the point of beginning.
Said tract of land is bounded now or formerly as follows: Northeast
Georgia Kaolin Company; southeast - Georgia Kaolin Company, Cyprus Industrial
Minerals Co. and W.V. Watson; south -D.Y. Califf; southwest - Old Macon-
Jeffersonville Road; northwest - Roy Jones, Mrs. S.S. Jones and Mrs. Rosa
Thompson.
This is the same property described in deeds dated June 13, 1979, and
recorded in Deed Book KK at Pages 140 and 142 of the Deed Records of Twiggs
County, Georgia.
II.
An irrevocable easement for the purpose of ingress and egress on, over
and across the following described tract of land and into the following
described plant facility:
Parcel No. 1.
All that tract or parcel of land situate, lying and being in Twiggs
County, Georgia, and being the land described in Certificate of Title No. 2 of
Registered Title Number 35, which is of record in Title Register Docket Nq. 1,
page 101, in the Clerk's Office of the Superior Court of said County, and being
all that tract or parcel of land lying, being and situate in the 326th Georgia
Militia District and the 26th Land District of Twiggs County, Georgia,
containing 90.08 acres as more particularly described by reference to a plat
thereof prepared by Charles E. Yaun, Georgia RLS No. 1292, on September 24,
1966, which plat is incorporated into and made a part hereof, as follows:
BEGINNING at an iron pipe situated along the northwestern right of way
line of Old Durham Mill Road at the point where the said right of way line is
intersected by the line dividing said described property from lands now or
formerly owned by Georgia Kaolin Company and which point of beginning is
marked point A on said plat, and from said beginning point running thence north
44 degrees 28 minutes 09 seconds west along the fence line dividing said
properties for a distance of 1865.Ol feet to an iron pipe found on said dividing
line marked point B
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on said plat; thence dividing fence line for a distance of 1146.61 feet to an
iron pipe found at point C on said plat; thence south 46 degrees 13 minutes 14
seconds west along the fence line dividing said property from lands now or
formerly owned by Ira King and Hubert Martin for a distance of 1381.60 feet to
an iron pipe placed as indicated at point D on said Plat; thence south 47
degrees 59 minutes 37 seconds east for a distance of 2650.48 feet to an iron
pipe placed as indicated as point E on said plat; thence continuing south 47
degrees 59 minutes 37 seconds east for a distance of 400 feet to an iron pipe
set at point F on said plat; thence north 57 degrees 18 minutes 45 seconds east
for a distance of 247.77 feet to an iron pipe situated as indicated as point G
on said plat; thence north 39 degrees 35 minutes 58 seconds east for a distance
of 473.31 feet to an iron pipe set as indicated as point H on said plat; thence
north 43 degrees 17 minutes 39 seconds east for a distance of 481.02 feet to the
point of beginning.
Said plat referred to above has been recorded in Plat Book 2, folio
321, in the office of the Clerk of Twiggs Superior Court and it is specifically
covenanted and agreed between the parties to this instrument that the 10.04
acres labeled 10.04 Acres (Option)" on said plat is excluded from the
operation of this instrument.
Parcel No. 2.
All that tract or parcel of land lying and being in the 326th
District, G.M.D., and the 26th Land District of Twiggs County, Georgia,
containing twelve (12) acres, and more particularly described as Tract "B" of
the Georgia Coating Clay Company Property, according to a plat thereof prepared
by Charles E. Yaun, Georgia RLS N. 1292 on the 24th day of March, 1967, which
plat is of record in Plat Book 2, folio 355, in the office of the Clerk of
Twiggs Superior Court, and by reference incorporated into and made a part hereof
for the purpose of a more particular description. Said property is further
described as follows:
BEGINNING at an iron axle situated at a point 850 feet north 69
degrees 52 minutes 29 seconds west plus 275.57 feet north 45 degrees 46 minutes
31 seconds east plus 422.53 feet north 47 degrees 30 minutes 11 seconds east
plus 682.84 feet north 47 degrees 59 minutes 37 seconds west from Mile Post 19
of the Seaboard Coastline Main Line Tract, which point of beginning is labeled
point "E" on said plat, and from said beginning point running thence north 47
degrees 59 minutes 37 seconds west along the line of Georgia Coating Clay
Company Property, Tract "A" as shown on said plat for a distance of 2367.64
feet to an iron pin situated at Point I'D" on said plat; thence south 47 degrees
17 minutes 47 seconds west for a distance of 56.35 feet to an iron pin set at
Point "M" on said plat; thence south 39 degrees 38 minutes 45 seconds east for
a distance of 909.36 feet to an iron pin set at point "IN" on said plat; thence
south 39 degrees 36
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minutes 48 seconds east for a distance of 1011.41 feet to an iron axle set at
Point "0" on said plat; thence south 39 degrees 37 minutes 03 seconds east for a
distance of 406.51 feet to an iron pin set at Point "P" on said plat, thence
north 41 degrees 48 minutes 00 seconds east for a distance of 286.27 feet to an
iron pin set at point "Q" on said plat; thence north 57 degrees 59 minutes 12
seconds east for a distance of 115.82 feet to the point of beginning.
Parcel No. 3.
Six acre parcel of land lying in the 26th Land District of Twiggs
County, Georgia, as more fully described in that certain Warranty Deed dated
August 11, 1970, between W. V. Watson and Cyprus Mines Corporation, recorded in
the office of the Clerk of the Superior Court of Twiggs County, Georgia, on
August 12, 1970, in Book V, Folio 67-8.
SUBJECT AND SUBORDINATE, however, in all respects to the following:
1. Deed Reservation contained in that certain Warranty Deed dated August
11, 1970, between W. V. Watson and Cyprus Mines Corporation and
recorded in the office of the Clerk of Superior Court of Twiggs
County, Georgia on August 12, 1970, in Book V, Folio 67-8.
2. Deed Reservation contained in that certain Deed dated January 16,
1980, between Jewett W. Tucker, Jr., and Arthur J. Goolsby, Jr., and
Nord Kaolin Company (the "Company"), and recorded in the office of the
Clerk of Superior Court of Twiggs County, Georgia, on January 18,'
1980, in Book MM, Folio 316-317.
3. Deed to Secure Debt, Security Agreement and Assignment, dated
December 15, 1977, from the Company to Continental Illinois National
Bank and Trust Company of Chicago (the "Bank"), recorded in the
records of the Clerk's Office, Superior Court, Twiggs County,
Georgia, in Book 92, Folio 285-341.
4. First Supplemental Deed to Secure Debt, Security Agreement and
Assignment, dated April 1, 1978, from the Company to the Bank,
recorded in the records of the Clerk's Office, Superior Court, Twiggs
County, Georgia, in Book 92, Folio 688-690.
5. Second Supplemental Deed to Secure Debt, Security Agreement and
Assignment, dated October 6, 1978, from the Company to the Bank,
recorded in the records of the Clerk's Office, Superior Court, Twiggs
County, Georgia, in Book 93, Folio 662-679.
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6. Third Supplemental Deed to Secure Debt, Security Agreement and
Assignment, dated May 2, 1979, from the Company to the Bank, recorded
in the records of the Clerk's Office, Superior Court, Twiggs County,
Georgia, in Book JJ, Folio 424-432.
7. Fourth Supplemental Deed to Secure Debt, Security Agreement and
Assignment, dated September 6, 1979, from the Company to the
Bank, recorded in the records of the Clerk's Office, Superior
Court, Twiggs County, Georgia, in Book LL, Folio 150-161.
8. Fifth Supplemental Deed to Secure Debt, Security Agreement and
Assignment, dated May 7, 1980, from the Company to the Bank, recorded
in the records of the Clerk's Office, Superior Court, Twiggs County,
Georgia, in Book NN, Folio 588-603.
9. Sixth Supplemental Deed to Secure Debt, Security Agreement and
Assignment, dated September 9, 1980, from the Company to the Bank,
recorded in the records of the Clerk's Office, Superior Court, Twiggs
County, Georgia, in Book 00, Folio 668-686.
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NORD RESOURCES CORPORATION
1982 NORD INCENTIVE STOCK OPTION PLAN
AMENDMENT NO. 2
MAY 15, 1984
The 1982 Nord Incentive Stock Option Plan is amended pursuant to Article VI
thereof to add Section 6.6(e) as follows:
(e) That the Corporation be and it hereby is authorized in its sole
discretion to permit employees of the Corporation exercising options
granted to them under the 1982 Nord Incentive Stock Option Plan to
exercise such options by tendering for exchange other shares of the
Corporation's Common Stock in payment of the option exercise price,
such shares to be valued based on the market price on the date of
exercise, namely, the average of the closing bid and asked price on
the date of exercise.
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NORD RESOURCES CORPORATION
1982 NORD INCENTIVE STOCK OPTION PLAN
AMENDMENT NO. 3
NOVEMBER 30, 1994
The 1982 Nord Incentive Stock Option Plan is amended pursuant to Article VI
thereof to add Section 6.6(f) as follows:
(f) Only mature shares (those being owned for more than 6 months if
obtained through the previous exercise of stock options granted by the
Corporation) be accepted as payment of the exercise price of stock
options granted under this Plan.
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NORD RESOURCES CORPORATION
1987 NORD INCENTIVE STOCK OPTION PLAN
AMENDMENT NO. 1
NOVEMBER 30, 1994
The 1987 Nord Incentive Stock Option Plan is amended pursuant to Article VI
thereof to add Section 6.6(d) and (e) as follows:
(d) Holders of options under the Plan shall be permitted to exercise such
options by tendering for exchange other shares of the Corporation's
Stock in payment of the option price, such shares to be valued based
on the market price thereof on the date of exercise, namely the
closing per share market value of the Corporation's Stock on the New
York Stock Exchange on the date of exercise.
(e) Only mature shares (those being owned for more than 6 months if
obtained through the previous exercise of stock options granted by the
Corporation) be accepted as payment of the exercise price of stock
options granted under this Plan.
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NORD RESOURCES CORPORATION
1989 STOCK OPTION PLAN
AMENDMENT NO. 2
NOVEMBER 30, 1994
The 1989 Stock Option Plan is amended to add the following sentence at the
end of Section 6(c):
Only mature shares (those being owned for more than 6 months if
obtained through the previous exercise of stock options granted by the
Corporation) be accepted as payment of the exercise price of stock
options granted under this Plan.
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NORD RESOURCES CORPORATION
1991 STOCK OPTION PLAN
AMENDMENT NO. 1
NOVEMBER 30, 1994
The 1991 Stock Option Plan is amended to add the following sentence at the
end of Section 7(b):
Only mature shares (those being owned for more than 6 months if
obtained through the previous exercise of stock options granted by the
Corporation) be accepted as payment of the exercise price of stock
options granted under this Plan.
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NORD KAOLIN COMPANY
8150 WASHINGTON VILLAGE DRIVE, DAYTON, OHIO 45458
June 8, 1994
513-433-6307
TELEX 288-345
James T. Booth
176 Jackson Road
Lake Sinclair
Milledgeville, Georgia 31061
Dear Mr. Booth:
Nord Resources Corporation, a Delaware corporation ("Nord"), considers
the establishment and maintenance of a sound and vital management to be
essential to protecting and enhancing the best interests of Nord and its
stockholders. In this connection, Nord recognizes that, as is the case with
many publicly-held corporations, the mere possibility of a change in control can
raise distracting and disrupting uncertainties and questions among management
personnel, can interfere with their whole-hearted attention and devotion to the
performance of their duties, and can even lead to their departure, all to the
detriment of the best interests of Nord and its stockholders. Accordingly, the
Board of Directors of Nord (the "Board") has determined that the best interests
of Nord and its stockholders would be served by assuring to certain executives
of Nord and its Affiliates, including yourself, the protection provided by an
agreement which defines the respective rights and obligations of the Company and
the executive in the event of termination of employment subsequent to a change
in control.
In order to induce you to remain in the employ of Nord or an Affiliate
of Nord, this letter agreement sets forth the severance benefits which Nord
agrees will be provided to you in the event your employment with Nord or an
Affiliate of Nord is terminated subsequent to a "change in control" under the
circumstances described below.
Except where the context otherwise indicates, (i) the term "Nord"
hereinafter includes Nord and any Successor to Nord and (ii) the term "Affiliate
of Nord" when used herein with reference to your employment means any of Nord,
Nord Kaolin Company, a Georgia partnership, or any entity in which Nord has,
directly or indirectly, a 20% or more equity interest.
1. OPERATION AND TERM OF AGREEMENT. This agreement, although
effective immediately, shall not become operative unless and until there has
been a Change in Control (as defined at Paragraph 2). None of the provisions of
this agreement shall be applicable to any termination of your employment,
however occurring, which is effective prior to a Change in Control. This
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James T. Booth
June 8, 1994
Page 2
agreement shall continue until the later of December 31, 1995 or two years after
the occurrence of a Change in Control, provided such Change in Control occurs on
or before December 31, 1995, subject to extension beyond that date by mutual
consent. Nord will review this agreement with you between January 1, 1995 and
July 31, 1995, for the purpose of determining whether or not an extension beyond
December 31, 1995 is mutually agreeable and, if so, on what basis and for how
long.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a Change in Control, as set forth below, and your
employment with Nord or an Affiliate of Nord shall thereafter have been
terminated in accordance with paragraph 3 below. For purposes of this
agreement, a "Change in Control" shall mean and be deemed to have occurred if
(i) any "person," as such term is defined in Section 13(d) of the Securities
Exchange Act of 1934 (the "Act"), other than Nord or an entity then controlled
by Nord is or becomes the beneficial owner, directly or indirectly, of
securities of Nord representing 20% or more of the combined voting power of
Nord's then outstanding securities except, however, in determining whether the
20% threshold has been attained by a particular person, any voting securities of
Nord which such person acquires directly from Nord (other than pursuant to a
stock dividend or split) shall not be taken into consideration in calculating
such person's percentage of ownership of the voting power of Nord; (ii) any
"person" (as such term is defined at Section 13(d) of the Act) other than Nord
or an entity then controlled by Nord is or becomes the beneficial owner,
directly or indirectly, of securities of Nord representing 35% or more of the
combined voting power of Nord's then outstanding securities, including
securities such person may have acquired directly from Nord; (iii) during any
period of two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of Nord (the "Board") cease for any reason to
constitute at least a majority thereof unless the election, or the nomination
for the election by Nord's stockholders, of each new Director was approved by a
vote of at least two-thirds of the Directors then still in office who were
Directors at the beginning of the period; (iv) Nord merges or consolidates with
another corporation and an entity controlled by Nord immediately prior to the
merger or consolidation is not the surviving entity or if Nord is the surviving
entity, holders of 80% or more of the voting power of Nord immediately prior to
the merger or consolidation do not own, immediately after the merger or
consolidation, 65% or more of the voting power of the surviving entity; (v) a
sale, lease, exchange, or other disposition of all or substantially all of the
assets of Nord takes place; or (vi) Nord ceases to own directly
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James T. Booth
June 8, 1994
Page 3
or indirectly a 50% or more equity interest in Nord Kaolin Company.
3. TERMINATION FOLLOWING CHANGE IN CONTROL.
(A) If any of the events described in paragraph 2 constituting a
Change in Control shall have occurred, then upon any subsequent termination of
your employment with Nord or an Affiliate of Nord at any time within two years
following the occurrence of such event, you shall be entitled to the benefits
provided by this agreement, as set forth in paragraph 5, unless such termination
is (i) directed by Nord for Cause or because of your Disability, or (ii) because
of your Retirement, or (iii) by you other than for Good Reason, or (iv) because
of your death.
(B) As used in this agreement, the terms "Cause," "Retirement,"
"Good Reason," and "Disability" shall have the meanings set forth below:
(i) CAUSE. "Cause" shall mean (a) the willful and continued
failure by you to substantially perform your duties with Nord or an
Affiliate of Nord (other than any such failure resulting from your physical
or mental illness or other physical or mental incapacity), after a demand
for substantial performance is delivered to you by the Board which
specifically identifies the manner in which the Board believes that you
have not substantially performed your duties, or (b) the willful engaging
by you in gross misconduct which is materially and demonstrably injurious
to Nord or an Affiliate of Nord resulting or intended to result, directly
or indirectly, in substantial personal gain or substantial personal
enrichment at the expense of Nord or an Affiliate of Nord. For purposes of
this subparagraph, no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission was
in the best interests of Nord. Notwithstanding the foregoing, Cause shall
not be deemed to exist unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less
than three-fourths of the number of Directors then in office at a meeting
of the Board called and held for that purpose (after reasonable notice to
you and an opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the Board you
were guilty of conduct set forth above in clauses (a) or (b) of the first
sentence of this subparagraph and specifying the particulars thereof in
detail.
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<PAGE>
James T. Booth
June 8, 1994
Page 4
(ii) RETIREMENT. "Retirement" shall mean cessation of your
employment in accordance with Nord's or an Affiliate of Nord's retirement
policy (including early retirement) generally applicable to salaried
employees, or in accordance with any retirement arrangement with respect to
you established with your consent.
(iii) GOOD REASON. "Good Reason" shall mean:
(a) The assignment to you of any duties inconsistent with
your position, duties, responsibilities and status with Nord or an
Affiliate of Nord immediately prior to a Change in Control or a change
in your responsibilities, as in effect immediately prior to a Change
in Control, which materially diminishes your responsibilities with
Nord or an Affiliate of Nord when considered as a whole, or any
removal of you from or any failure to re-elect you to any of such
positions or offices; provided, however, that the foregoing shall not
constitute Good Reason if done in connection with termination of your
employment by Nord or an Affiliate of Nord for Cause or because of
your Disability, or by you other than for Good Reason.
(b) A reduction by Nord or an Affiliate of Nord of your
then current annual base salary or, if higher, your annual base salary
as in effect at the time of the Change in Control.
(c) Failure by Nord or an Affiliate of Nord to continue in
effect any benefit, incentive compensation, pension, employee stock
ownership, stock option, life insurance, medical, health and accident,
or disability plan in which you are participating at the time of a
Change in Control or plans providing you with substantially similar
benefits, or the taking of any action by Nord or an Affiliate of Nord
which would adversely affect your participation in or materially
reduce your benefits under any of such plans or deprive you of any
material fringe benefit enjoyed by you at the time of the Change in
Control, or the failure by Nord or an Affiliate of Nord to provide you
with the number of paid vacation days to which you would then be
entitled in accordance with Nord's or an Affiliate of Nord's vacation
policy in effect at the time of the Change in Control.
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James T. Booth
June 8, 1994
Page 5
(d) The relocation of Nord's principal executive offices to
a location outside Montgomery County, Ohio, if at the time of a Change
in Control you are based at Nord's principal executive offices.
(e) Nord's or an Affiliate of Nord's requiring you to be
based anywhere other than the location where you are based at the time
of a Change in Control, if the same requires you to relocate your
principal residence; or, in the event you consent to being based
anywhere other than such location, the failure by Nord or an Affiliate
of Nord to pay (or reimburse you for) all reasonable moving expenses
incurred by you relating to a change of your principal residence in
connection with such relocation and to indemnify you against any loss
[defined as the difference between the higher of (1) your aggregate
investment in such residence or (2) the fair market value of such
residence, as determined by a real estate appraiser designated by you
and reasonably satisfactory to Nord, and the actual sale price of such
residence after the deduction of all real estate brokerage charges and
related selling expenses] realized upon the sale of such residence in
connection with any such change of residence.
(f) Nord's or an Affiliate of Nord's requiring you to
perform duties or services which necessitate absence overnight from
your place of residence, because of travel involving the business or
affairs of Nord or an Affiliate of Nord, to a degree not substantially
consistent with the extent of such absence necessitated by such travel
during the period of twelve months immediately preceding a Change in
Control.
(g) The failure of Nord to obtain the assumption of this
agreement by any Successor as provided in paragraph 7 hereof.
(h) Nord's or an Affiliate of Nord's termination of your
employment without satisfying any applicable requirements of paragraph
4 and subparagraph B(i) above.
(iv) DISABILITY. "Disability" shall mean your inability to
perform the duties required of you on a full-time basis for a period of six
consecutive months because of
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James T. Booth
June 8, 1994
Page 6
physical or mental illness or other physical or mental disability or
incapacity, followed by Nord giving you thirty days' written notice of its
intention to terminate your employment by reason thereof, and your failure
because of physical or mental illness or other physical or mental
disability or incapacity to resume the full-time performance of your duties
within such period of thirty days and thereafter perform the same for a
period of two consecutive months.
(C) During any period of time subsequent to a Change in Control, if
you fail to perform your duties as a result of physical or mental illness or
other physical or mental disability or incapacity, you shall continue to receive
your full salary at your annual base salary rate then in effect, together with
all incentive compensation until you return to work or your employment with Nord
or an Affiliate of Nord is terminated; provided, however, that any amount
otherwise payable for any period of time pursuant to this subparagraph (C) shall
be reduced by any payment or payments you receive for such period of time under
any employee salary continuation plan or employee disability insurance plan
maintained by Nord or an Affiliate of Nord no part of the cost of which was paid
or is payable by you.
(D) If subsequent to a Change in Control, your employment is
terminated by Nord or an Affiliate of Nord for Cause, Nord shall pay you your
full salary through the Date of Termination at your annual base salary rate in
effect at the time Notice of Termination is given, and you shall also receive
all accrued or vested benefits of any kind to which you are, or would otherwise
have been, entitled through the Date of Termination (as defined in paragraph 4),
and Nord or an Affiliate of Nord shall thereupon have no further obligation to
you under this agreement.
4. NOTICE AND DATE OF TERMINATION.
(A) Any termination of your employment subsequent to a Change in
Control shall be consummated by written Notice of Termination given to the other
party. For purposes of this agreement, "Notice of Termination" shall mean a
notice which indicates the specific termination provision or provisions in this
agreement relied upon, if any, and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment.
(B) "Date of Termination" shall mean (i) if your employment is
terminated by Nord or an Affiliate of Nord for Cause, the date specified in the
Notice of Termination or the
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James T. Booth
June 8, 1994
Page 7
date on which the meeting of the Board referred to in subparagraph 3(B)(i) is
concluded, whichever date is the later; or (ii) if your employment is terminated
for any other reason, the date on which Notice of Termination is given or the
effective date specified in the Notice, whichever is later. For purposes of
this agreement, termination of your employment shall be deemed to have occurred
within two years following the occurrence of a Change in Control if the Date of
Termination is within such two year period.
5. COMPENSATION UPON TERMINATION.
(A) The compensation and benefits to be provided to you pursuant to
paragraph 3 of this agreement upon termination of your employment with Nord
or an Affiliate of Nord under specified circumstances within two years following
a Change in Control include the following:
(i) Subject to the provisions of paragraph 8 hereof, Nord shall
pay to you as severance pay in a lump sum in cash on the fifteenth day
following the Date of Termination, the following amounts:
(a) Your full salary through the Date of Termination at
your annual base salary rate in effect at the time Notice of
Termination is given; and also the amount of the award or awards, if
any, with respect to any completed period or periods which has been
earned by or awarded to you pursuant to any incentive compensation
plan or arrangement of Nord or an Affiliate of Nord but which has not
yet been paid to you.
(b) In lieu of any further salary payments to you for
periods subsequent to the Date of Termination, an amount (the
"Additional Compensation Payment") equal to two hundred percent (200%)
of the greater of (i) the sum of your annual base salary at the rate
in effect as of the Date of Termination (or, if higher, at the rate in
effect at the time of the Change in Control) plus an amount equal to
the average annual amount awarded to you under any incentive
compensation plan or arrangement for the two years immediately
preceding the year during which the Date of Termination occurs
(whether or not fully paid) or (ii) your average annual compensation
for the five calendar years preceding the calendar year in which the
Change in Control occurred (it being understood that for purposes of
this clause
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James T. Booth
June 8, 1994
Page 8
(b)(ii), "compensation" means your actual salary plus any amount
awarded to you under any incentive compensation plan or arrangement).
(C) An amount in cash equal to the aggregate spread between
the exercise prices of all options granted to you under Nord's
existing stock option plans or any stock option plan adopted by Nord
subsequent to the date hereof ("Options") which are then outstanding,
whether or not then fully exercisable, and the higher of (a) the Fair
Market Value of share of Common Stock of Nord ("Nord Shares") on the
Date of Termination or (b) the average price per Nord Share actually
paid by the acquiring party in connection with any Change in Control.
As used in this subparagraph, "Fair Market Value" shall mean (1) in
the event Nord Shares are listed on any exchange or in the NASD
National Market System, the last sale price on such exchange or
System on the Date of Termination (or last trading date prior thereto)
or, if there are no sales on such date, the mean between the
representative bid and asked prices for Nord Shares on such exchange
or System at the close of business on such date or (2) in the event
that there is then no public market for Nord Shares or that trading
in Nord Shares is sporadic and the mean between any bid and asked
prices is not representative of fair market value, the fair market
value of Nord Shares determined in accordance with Section 2031-2(f)
of the Treasury Regulations or any successor provision thereto. Any
option for which payment is made as prescribed in this subparagraph
(c) shall be cancelled effective upon the making of such payment.
In lieu of having your Options cancelled and being paid the "spread"
on such cancelled Options in cash as set forth in this subparagraph
5(A)(i)(c), you may elect to continue to hold any part, or all, of
the Options and exercise such Options, if you so choose, in
accordance with their terms. Any such election to continue to hold
Options shall be made by giving written notice of this election to
Nord within 10 days of your Date of Termination, which notice shall
specify the date of grant, number of Shares subject to the options and
option exercise price of the options you elect to continue to hold.
(d) All legal fees and expenses reasonably incurred by you
in good faith as a result of such termination (including all such fees
and expenses, if
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James T. Booth
June 8, 1994
Page 9
any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this
agreement).
(ii) Nord shall, at its expense, maintain in full force and
effect for your continued benefit all life insurance, medical, health and
accident plans, programs and arrangements in which you were entitled to
participate at the time of the Change in Control, provided that your
continued participation is possible under the terms of such plans, programs
and arrangements. In the event that the terms of any such plan, program or
arrangement do not permit your continued participation or that any such
plan, program or arrangement has been or is discontinued or the benefits
thereunder have been or are materially reduced, Nord shall arrange to
provide, at its expense, benefits to you which are substantially similar to
those which you were entitled to receive under such plan, program or
arrangement at the time of the Change in Control. Nord's obligation under
this subparagraph (ii) shall terminate on the earliest of the following
dates: (a) the month in which you become age 65, (b) the date an
essentially equivalent and no less favorable benefit is made available to
you at no cost by a subsequent employer, or (c) the date which is 24 months
after the Date of Termination.
(iii) In the event that because of their relationship to you,
members of your family or other individuals are covered by any plan,
program, or arrangement described in subparagraph (ii) above immediately
prior to the Date of Termination, the provisions set forth in subparagraph
(ii) shall apply equally to require the continued coverage of such persons;
provided, however, that if under the terms of any such plan, program or
arrangement, any such person would have ceased to be eligible for coverage
during the period in which Nord is obligated to continue coverage for you,
nothing set forth herein shall obligate Nord to continue to provide
coverage for such person beyond the date such coverage would have ceased
even if you had remained an employee of Nord or an Affiliate of Nord.
(iv) Nord shall enable you to purchase the automobile, if any,
which Nord or an Affiliate of Nord was providing for your use at the time
Notice of Termination was given at the wholesale value of such automobile
at such time or if the automobile was leased, then at any buy-out price
provided for in the lease.
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James T. Booth
June 8, 1994
Page 10
(B) If an event constituting Good Reason shall occur, you shall be
entitled to the compensation and benefits described in (A) above only if you
give a Notice of Termination with respect thereto within 120 days after the
occurrence of such event, regardless of whether there has been an intervening
termination of your employment by Nord or an Affiliate of Nord or otherwise.
(C) You shall not be required to mitigate the amount of any payment
provided for in this paragraph 5 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this paragraph 5 be reduced by
any compensation earned by you after the Date of Termination as the result of
employment by another employer or otherwise, except, however, the amount of
payments provided for in paragraph 5 shall be reduced by the amount of any
severance benefits which you are entitled to receive under any other agreement
with, or plan of, Nord or an Affiliate of Nord.
6. RIGHTS AS FORMER EMPLOYEE. Nothing contained in this agreement
shall be construed as preventing you, and shall not prevent you, following any
termination of your employment whether pursuant to this agreement or otherwise,
from thereafter participating in any benefit or insurance plans, programs or
arrangements (including without limitation, any retirement plans or programs) in
the same manner and to the same extent that you would have been entitled to
participate as a former employee of Nord or an Affiliate of Nord had this
agreement not have been executed, except, however, you shall not be entitled to
any severance payments under any severance pay programs of Nord or an Affiliate
of Nord (other than this agreement) if you are paid the benefits provided for
under this agreement.
7. SUCCESSORS. Nord shall require any Successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of Nord, by agreement in form
and substance satisfactory to you, to expressly assume and agree to perform this
agreement in the same manner and to the same extent that Nord would be required
to perform it if no such succession had taken place. Failure of Nord to obtain
such agreement prior to the effectiveness of such succession shall be a breach
of this agreement and shall entitle you to compensation from Nord in the same
amount and on the same terms as you would be entitled hereunder if you
terminated your employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
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James T. Booth
June 8, 1994
Page 11
This agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amounts
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid to such beneficiary or
beneficiaries as you shall have designated by written notice delivered to Nord
prior to your death or, failing such written notice, to your estate.
8. SAVINGS CLAUSE. (A) The Deficit Reduction Act of 1984 added
Section 28OG to the Internal Revenue Code of 1954, as amended (the "Code").
Section 28OG imposes a 20% excise tax on excessive compensation received by, and
denies a deduction to the corporation for the amount of excess compensation paid
to, employees who are officers, shareholders, or highly compensated individuals
as a result of a change in the ownership or effective control of the corporation
or in the ownership of a substantial portion of the assets of the corporation.
In general, payments to an individual that are contingent on a Change in Control
will not be treated as excessive if such payments do not exceed three times the
average annual compensation received by such individual over the five years
preceding the Change in Control. The provisions in subparagraph (B) of this
paragraph 8 are designed to maximize the amounts payable to you pursuant to this
agreement or otherwise which are contingent upon a change of control.
(B) In the event that it is determined that any payment by Nord to or
for your benefit (whether paid or payable pursuant to the terms of this
agreement or otherwise) would be subject to the 20% tax pursuant to Section 4999
of the Code, then the aggregate present value of amounts payable to or for your
benefit pursuant to this agreement (such payments pursuant to this agreement are
hereinafter referred to as "Agreement Payments") shall be reduced to the Reduced
Amount. For purposes of this subparagraph, the "Reduced Amount" shall be
defined as an amount expressed in present value which maximizes the aggregate
present value of Agreement Payments without causing any payments to be subject
to the 20% tax pursuant to Section 4999 of the Code.
9. NOTICES. All notices required or permitted to be given under
this agreement shall be in writing and shall be
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James T. Booth
June 8, 1994
Page 12
mailed (postage prepaid by either registered or certified mail) or delivered, if
to Nord, addressed to
Nord Resources Corporation
8150 Washington Village Drive
Dayton, Ohio 45458
Attention: President
and if to you, addressed to
James T. Booth
176 Jackson Road
Lake Sinclair
Milledgeville, Georgia 31061
Either party may change the address to which notices to such party are to be
directed by giving written notice of such change to the other party in the
manner specified in this paragraph. All notices, including without limitation,
any Notice of Termination, shall be deemed to have been given upon the date of
actual receipt by the recipient party.
10. ARBITRATION. Any dispute or controversy arising out of or
relating to this agreement shall be settled by arbitration in Dayton, Ohio, in
accordance with the rules then obtaining of the American Arbitration
Association, and judgment may be entered on the arbitrator's award in any court
having jurisdiction.
11. MISCELLANEOUS. No provision of this agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing, signed by you and such officer of Nord as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of compliance by such other party with,
any condition or provision of this agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
agreement.
12. GOVERNING LAW. The validity, interpretation, construction and
performance of this agreement shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof.
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James T. Booth
June 8, 1994
Page 13
13. VALIDITY. The invalidity or unenforceability of any provision of
this agreement shall not affect the validity or enforceability of any other
provision, which shall remain in full force and effect.
If this letter correctly sets forth our agreement on the subject
matter hereof, please so confirm by signing and returning the enclosed copy.
Very truly yours,
NORD RESOURCES CORPORATION
By /s/
______________________________________
Title Chairman/President
___________________________________
Confirmed and agreed to:
James T. Booth
__________________________
James T. Booth
Dated: 11/8/94
____________________
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Principal Liaison Officer and
Secretary of State
Department of Marine Resources
9th Floor, Youyi Building
Brookfields
Freetown
3rd January, 1995
-------------------
Mr. Brian Calver
Managing Director
and Chief Executive
Sierra Rutile Limited
Guma Building
Lamina Sankoh Street
Freetown
Dear Mr. Calver:
The Government of Sierra Leone is pleased to have amicably settled with Sierra
Rutile Limited ("SR") all issues relating to the delay by SRL in the payment of
customs duties of $1,142,968.53 U.S. for certain machinery, equipment and other
items imported during the period from April 1990 to September 1991.
In the interest of continuing good relationships, the Government agrees to
accept the following payments to the Government:
(i) $2,000,000 immediately, and
(ii) $6,000,000 to be expended for Government projects as agreed between
the parties commencing in Calendar Year 1996 to be phased over a
period not less than 3 (three) years and/or as will be spelt out in
the ensuing negotiations, in the form of an infrastructure development
royalty related to the company's turnover.
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These payments are in full settlement of all claims, whether civil or criminal,
against SRL, its officers, directors, employees, affiliates and representatives
relating to such Customs Duties including without limitations, any claim for
penalties under Section 183 of Cap. - 271 of the Laws of Sierra Leone and
supersedes the letters received by SRL from the Comptroller of Customs and
Excise and from the Office of the Principal Liaison Officer and SRL's prior
settlement proposals to the Government with respect to this matter.
Yours truly,
s/ K. S. Mondeh
Captain K. S. Mondeh
PLO (I) & SOS - Marine Resources
- --------------------------------
CC: Ambassador Arthur Lewis
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February 22, 1995
Mr. Ralph Gilchrist
Commonwealth Development Corporation
One Bessborough Gardens
London, SW1 2JQ
UNITED KINGDOM
Ms. Hildegard Kraus
DEG - Deutsche Investitions und
Entwicklungsgwesellschaft mbH
Belvederstrasse 40
D-50933 Koln 41 (Mungersdorf)
FEDERAL REPUBLIC OF GERMANY
Mr. George J. Donegan
Export-Import Bank of the United States
811 Vermont Avenue, N.W.
Washington, D.C. 20571
Mr. Mutumwa Mawere
International Finance Corporation
1801 K Street, N.W.
Washington, D.C. 20433
Mr. Christopher B. Cowan
Overseas Private Investment Corporation
1100 New York Avenue, N.W.
Washington, D.C. 20527
Re: Sierra Rutile Limited
Development Bank Financing
--------------------------
Ladies and Gentlemen:
We refer to the various loan agreements and related documents executed
among Sierra Rutile Limited ("SRL"),
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Consolidated Rutile Limited and Nord Resources Corporation (together, the
"Sponsors") and each of the above institutions (together, the "Banks") with
respect to SRL's mining operations in Sierra Leone (the "Project"). All such
loan agreements and related documents, including all funding, security and
project agreements shall be referred together as the "Financing Documents."
On behalf of SRL and the Sponsors, we very much appreciate your support in
coordinating the meeting held on Monday, February 6th at IFC's offices to review
the status of the Project following the rebel incursion and occupation of the
SRL minesite and the subsequent discontinuance of operations there (the
"Occupation Events"). SRL acknowledges that the Occupation Events are Events
of Default as defined under the Financing Documents, but has asked each of the
Banks for time to undertake the following measures (the "Remedial Measures"):
(i) determine damage to the Project,
(ii) assess the political and military situation in Sierra Leone,
(iii) develop financial models for the reopening of the mine, and
(iv) present to the Banks, for discussion, plans for the financing,
rehabilitation and reopening of the Project.
SRL and each Sponsor proposes that, from the date hereof until May 15, 1995
only (the "Forbearance Period"), each of the above Banks agrees to forbear from
accelerating their loans or seeking to enforce their rights against the
collateral under the Financing Documents due to breaches of the financial
covenants and financial reporting requirements and other defaults arising from
the Occupation Events, subject to the following conditions:
1. During the Forbearance Period, SRL will provide to the Banks at least
every two weeks detailed status reports on the Occupation Events and
the Remedial Measures, and such other information as the Banks may
reasonably request.
2. For the duration of the Forbearance Period, the Events of Default
arising from the Occupation Events will be treated as potential or
actionable Events of Default under the Financing Documents with all
the associated results and restrictions thereunder, including, without
limitation, (i) a suspension of the Banks' disbursement obligations,
and (ii) a complete restriction on any
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dividends or other payments from SRL to the Sponsors or their
affiliates, other than reimbursement of expenses incurred for payroll,
operating and administrative purposes for the benefit of SRL.
3. The Escrow Agent (as defined in the Escrow Agreement, dated as of
February 16, 1993), and The Bank of Bermuda Limited, pursuant to the
Cash Collateral Charge (dated as of November 17, 1992) shall be
prohibited from making any withdrawals from the Escrow Account and
Cash Collateral Account, respectively, except for payments to the
Banks in accordance with such agreements.
Except for the forbearance granted hereunder, no waiver of any default
under any of the Financing Documents has been granted by any of the Banks, nor
shall anything contained in this letter constitute or be construed as a waiver
of any existing or future default or a modification or limitation of any
existing rights or remedies available to the Banks against SRL or the Sponsors.
The execution of this letter shall not preclude any of the Banks from refusing
to enter into any further forbearances with respect to the Project. Nothing
herein shall be construed as requiring the Banks to extend the term of the
Forbearance Period. Subject to the forbearance granted hereunder, each of the
Banks specifically reserves the right to insist on strict compliance with the
terms of the Financing Documents (including, without limitation, the First
Amendment and Restatement of Project Funds Agreement, dated as of November 17,
1993) and SRL and the Sponsors each expressly acknowledges such reservation of
rights.
The Company and the Sponsors each hereby reaffirms its obligations under
the Financing Documents with each of the undersigned and confirms that such
obligations remain in full force and effect.
Notwithstanding anything to the contrary in this letter, and in addition to
any other remedies otherwise available to the Banks arising under the Financing
Documents, at law or in equity, the Forbearance Period shall terminate (i) if
any of the information, data, representations, warranties, exhibits or other
material submitted to the Banks by or on behalf of SRL shall prove to contain
any material inaccuracy or misrepresentation known to SRL at the time of its
submission, (ii) upon the filing by SRL or any of the Sponsors of any type of
proceeding seeking bankruptcy, receivership or similar relief or upon the entry
of a bankruptcy, winding up, liquidation or similar type of order against SRL or
any Sponsor, (iii) if any event (other than the
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Occupation Events) shall have occurred which, in the reasonable judgment of any
of the Banks, is likely to affect materially and adversely the ability of any
party to observe or perform any of its respective material obligations or
undertakings under any of the Financing Documents, the effect of which would be
to materially adversely affect SRL's or any of the Sponsor's financial condition
or their ability to carry on their respective operations, or (iv) any of the
Financing Documents ceases to be in full force and effect or is declared to be
void or is at any time contested by SRL or the Sponsors, or, in the case of any
security document, ceases to give or provide the respective liens, security
interests, rights, titles, remedies, powers or privileges intended to be created
thereby. Upon the termination of the Forbearance Period, regardless of any
Remedial Measures, the Banks may pursue all available rights and remedies
pursuant to the Financing Documents, at law or in equity.
No person or creditor of SRL other than the undersigned may rely on this
letter.
The letter may not be modified in any manner, except by written agreement
signed by all parties hereto. This letter may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and of the parties hereto may execute this letter by signing any such
counterpart.
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Please sign and return a copy of this letter confirming your
acknowledgment and agreement with the terms hereof.
SIERRA RUTILE LIMITED
By: s/Benny L. Bray
--------------------------------
Benny L. Bray
Assistant Secretary
ACKNOWLEDGED AND AGREED:
COMMONWEALTH DEVELOPMENT CORPORATION
s/Ralph Gilchrist
- -------------------------------------
By:
Name: Ralph Gilchrist
Title: Portfolio Manager
DEUSTCHE INVESTITIONS UND
ENTWICKLUNGSGESELLSCHAFT MBH
s/Hildegard Kraus
- -------------------------------------
By:
Name: Hildegard Kraus
Title: Head of Department
EXPORT-IMPORT BANK OF THE UNITED STATES
s/Bernard A. Lubran
- -------------------------------------
By:
Name: Bernard A. Lubran
Title: Deputy Vice President
INTERNATIONAL FINANCE CORPORATION
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s/M.A.K. Alizai
- -------------------------------------
By:
Name: M.A.K. Alizai
Title: Director
Oil, Gas and Mining Department
OVERSEAS PRIVATE INVESTMENT CORPORATION
s/Robert O. Draggon
- -------------------------------------
By:
Name: Robert O. Draggon
Title: Vice President For Finance
NORD RESOURCES CORPORATION
s/Terence H. Lang
- -------------------------------------
By:
Name: Terence H. Lange
Title: Sr. V.P. Finance
CONSOLIDATED RUTILE LIMITED
s/John Scott
- -------------------------------------
By:
Name: John Scott
Title: C.E.O.
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AGREEMENT AND FOURTH AMENDING AGREEMENT
AGREEMENT AND FOURTH AMENDING AGREEMENT ("Agreement") dated as of
March 24, 1995 between CONSOLIDATED RUTILE LIMITED, a corporation organized
under the laws of the State of Queensland, Commonwealth of Australia ("CRL"),
and NORD RESOURCES CORPORATION, a Delaware corporation ("NORD").
W I T N E S S E T H :
WHEREAS, CRL and NORD entered into a Stock Purchase Agreement, dated
as of June 28, 1993, as amended by an Extension Agreement, dated November 5,
1993, and as further amended by the Amending Agreement, dated as of November 17,
1993, a Second Amending Agreement, dated as of December 12, 1994, and a Third
Amending Agreement, dated as of February 16, 1995 (as so amended, the "Stock
Purchase Agreement"), which sets out the terms and conditions for the purchase
by CRL from NORD of a 50% interest in Sierra Rutile Limited ("SIERRA") and the
concurrent transfer by CRL and NORD of their respective interests in SIERRA to
SIERRA RUTILE HOLDINGS LIMITED ("HOLDINGS") in exchange for shares in HOLDINGS;
and
WHEREAS, NORD and CRL wish to memorialize their agreement concerning
the Adjustment Amount and to make certain amendments to the Stock Purchase
Agreement on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements contained herein and in the Stock Purchase Agreement, the parties
hereto agree as follows:
1. All capitalized terms used but not defined herein shall have the
meanings assigned to them in the Stock Purchase Agreement.
2. NORD and CRL have resolved all of CRL's objections to the Audited
Closing Financial Statements and all disputes relating thereto have been
settled. NORD and CRL hereby agree that the Adjustment Amount (as provided for
in Section 2(c)(v) of the Stock Purchase Agreement) shall be US$2,000,000 to be
paid to NORD and CRL covenants and agrees that it shall, within two (2) days
after the date of this Agreement, wire transfer the Adjustment Amount to a bank
account designated by NORD.
3. In connection with the resolution of all disputes relating to the
Audited Closing Financial Statements, NORD and CRL hereby covenant and agree
that, notwithstanding anything to the contrary contained in the Stock Purchase
Agreement, neither party shall have or be entitled to assert any claim, right or
Loss against the other party relating to, arising out of or in connection with
any covenant, representation or warranty made by the other party under the Stock
Purchase Agreement, including,
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without limitation, any such claim for Losses under Section 11 of the Stock
Purchase Agreement. Notwithstanding the foregoing, nothing in this Agreement
shall in any way limit or otherwise affect the rights of either party to assert
any right, claim or Loss against the other party under, or to enforce any
covenant, representation, warranty or indemnity made by the other party in,
Sections 7(e), 7(l), 7(p), 13 or 16 of the Stock Purchase Agreement.
4. In furtherance and not limitation of Section 3 of this Agreement,
CRL and NORD covenant and agree that the representations and warranties set
forth in Sections 5 and 6 of the Stock Purchase Agreement are hereby
extinguished and terminated effective the date hereof.
5. This Agreement will be governed by, and construed and interpreted
in accordance with the laws of the State of New York applicable to agreements
executed in and performed entirely within such State and without reference to
any conflict of law principles thereof.
6. This Agreement and any amendments hereto may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument. This Agreement
shall become effective only when one or more counterparts shall have been signed
by each party and delivered to the other party.
7. If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, that provision will be enforced to the maximum extent
permissible so as to effect the intent of the parties, and the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. If necessary to effect the intent of the parties,
the parties will negotiate in good faith to amend this Agreement to replace the
unenforceable language with enforceable language which as closely as possible
reflects such intent.
8. Each party hereto shall pay, without right of reimbursement from
the other party, all the costs incurred by it incident to the preparation,
execution and delivery of, and performance of its obligations under this
Agreement.
9. This Agreement may be amended, or any performance, term or
condition waived in full or part, only by a writing signed by a person
authorized to so bind each party (in the case of an amendment) or the waiving
party (in the case of a waiver). No failure by any party to take any action
with respect to a breach by the other party of this Agreement or a default by
the other party hereunder shall constitute a waiver of the former party's right
to enforce any provision of this Agreement or to take action with respect to
such breach or default or any subsequent breach or
E-95
<PAGE>
default. A waiver by any party or any breach or failure to comply with any
provision of this Agreement by the other party shall not be construed as, or
constitute, a continuing waiver of such provision, or a waiver of any other
breach of or failure to comply with any other provisions of this Agreement.
10. No party shall assign this Agreement or any of its rights,
benefits, obligations or remedies hereunder or any of its other interests herein
without the prior written consent of the other party hereto. This Agreement
shall be binding upon, and inure to the benefit of and be enforceable by and
against the parties hereto and their respective successors and permitted
assigns.
11. This Agreement constitutes the entire and only agreement between
the parties with respect to the subject of the matter hereof, and any and all
prior arrangements, representations, promises, understandings and conditions in
connection with the matters covered by this Agreement and any representations,
promises or conditions not expressly incorporated herein or expressly made a
part hereof shall not be binding upon any party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the date first above written.
CONSOLIDATED RUTILE LIMITED NORD RESOURCES CORPORATION
By: /s/ J. Scott By: /s/ Terence H. Lang
---------------------------- ---------------------------------------
Name: J. Scott Name: Terence H. Lang
Title: Chief Executive Officer Title: Sr. Vice President-
Finance
E-96
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation be reference in (i) Registration Statement No.
33-34196 of Nord Resources Corporation on Form S-8, (ii) Post-Effective
Amendment No. 1 to Registration Statement No. 33-25569 of Nord Resources
Corporation on Form S-8/S-3, and (iii) Registration Statement No. 33-54600 of
Nord Resources Corporation on Form S-8 of our report on the consolidated
financial statements of Nord Resources Corporation and Subsidiaries dated April
7, 1995 (which disclaims an opinion because of an uncertainty relating to the
ability of the Company to continue as a going concern and includes an
explanatory paragraph as to the Company changing its method of accounting for
its investment in the Rutile Segment to the cost basis of accounting at December
31, 1994) appearing in the Annual Report on Form 10-K of Nord Resources
Corporation for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 7, 1995
E-97
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in (i) Registration Statement No.
33-34196 of Nord Resources Corporation on Form S-8, (ii) Post-Effective
Amendment No. 1 to Registration Statement No. 33-25569 of Nord Resources
Corporation on Form S-8/S-3, and (iii) Registration Statement No. 33-54600 of
Nord Resources Corporation on Form S-8 of our reports on the financial
statements of Sierra Rutile Limited and Sierra Rutile Holdings Limited (BVI)
(each of which disclaims an opinion because of a scope limitation and
uncertainties relating to the ability of the Company to continue as a going
concern), and Sierra Rutile America Inc., Plainfield (Jersey) Limited, TMMI USA,
and TMMI Limited (BVI) (each of which contains a qualified opinion because of
uncertainties relating to the recoverability of amounts due from certain
affiliates), and Sierra Rutile Services Limited each dated April 3, 1995
appearing in the Annual Report on Form 10-K of Nord Resources Corporation for
the year ended December 31, 1994.
KPMG April 10, 1995
CHARTERED ACCOUNTANTS Reading, UK
REGISTERED AUDITORS
E-98
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 8946
<SECURITIES> 0
<RECEIVABLES> 10438
<ALLOWANCES> 145
<INVENTORY> 3078
<CURRENT-ASSETS> 27236
<PP&E> 64552
<DEPRECIATION> 27748
<TOTAL-ASSETS> 146115
<CURRENT-LIABILITIES> 33691
<BONDS> 4701
<COMMON> 158
0
0
<OTHER-SE> 146957
<TOTAL-LIABILITY-AND-EQUITY> 146115
<SALES> 71494
<TOTAL-REVENUES> 71831
<CGS> 63762
<TOTAL-COSTS> 77447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 70
<INTEREST-EXPENSE> 1615
<INCOME-PRETAX> (966)
<INCOME-TAX> 14645
<INCOME-CONTINUING> (15611)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15611)
<EPS-PRIMARY> (1.02)
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Sierra Rutile Limited:
We were engaged to audit the balance sheet of Sierra Rutile Limited as of
December 31, 1994, and the related profit and loss account and cash flow
statement for the year ended. These financial statements are the responsibility
of the Company's management.
As described in note 1 to the financial statements, production at the Company's
mine was suspended following militant attacks on the mine and Company personnel
and, due to subsequent occupation of the facilities by rebel forces, it became
necessary to evacuate all employees. These circumstances adversely affected the
conduct of our planned audit procedures since they depended on continued access
to and examination of various on-site properties and conditions. Further, the
circumstances create substantial doubt about the recoverability of asset
carrying amounts, including prepaid royalties and deferred tax assets as to
which additional evidential matter was being sought before interruption of our
audit; the adequacy of recorded liabilities, including accrued reclamation costs
as to which additional evidential matter was being sought before interruption of
our audit; and the availability of funding to continue as a going concern even
if access to the mine is regained.
Since we were unable to complete substantial auditing procedures and because of
the uncertain impact on financial statement carrying amounts of the current
circumstances, we are unable to express, and we do not express, an opinion on
these financial statements.
KPMG April 3, 1995
CHARTERED ACCOUNTANTS Reading, UK
REGISTERED AUDITORS
E-100
<PAGE>
Exhibit 99.2
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Sierra Rutile America Inc.:
We have audited the accompanying balance sheet of Sierra Rutile America Inc. as
of December 31, 1994, and the related profit and loss account for the year then
ended. 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 audit.
Except as discussed in the following paragraph, we conducted our audit in
accordance with generally accepted auditing standards in the United Kingdom,
which are substantially equivalent to those in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.
Financial statements for two affiliated entities are accompanied by disclaimers
of audit opinions related to suspension of mining operations of Sierra Rutile
Limited and the occupation of the facilities by rebel forces. These
circumstances in turn create the possibility that amounts due from certain
affiliates in the accounts of the Company may not be fully recoverable and we
are unable to satisfy ourselves as to that matter.
In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to examine evidence of
recoverability of amounts due from certain affiliates, the financial statements
referred to in the first paragraph above present fairly, in all material
respects, the financial position of Sierra Rutile America Inc. as of December
31, 1994, and the results of its operations for the year then ended in
conformity with generally accepted accounting principles in the United Kingdom.
KPMG April 3, 1995
CHARTERED ACCOUNTANTS Reading, UK
REGISTERED AUDITORS
E-101
<PAGE>
Exhibit 99.3
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Plainfield (Jersey) Limited:
We have audited the accompanying balance sheet of Plainfield (Jersey) Limited as
of December 31, 1994, and the related profit and loss account for the year then
ended. 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 audit.
Except as discussed in the following paragraph, we conducted our audit in
accordance with generally accepted auditing standards in the United Kingdom,
which are substantially equivalent to those in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.
Financial statements for two affiliated entities are accompanied by disclaimers
of audit opinions related to suspension of mining operations of Sierra Rutile
Limited and the occupation of the facilities by rebel forces. These
circumstances in turn create the possibility that amounts due from certain
affiliates in the accounts of the Company may not be fully recoverable and we
are unable to satisfy ourselves as to that matter.
In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to examine evidence of
recoverability of amounts due from certain affiliates, the financial statements
referred to in the first paragraph above present fairly, in all material
respects, the financial position of Plainfield (Jersey) Limited as of December
31, 1994, and the results of its operations for the year then ended in
conformity with generally accepted accounting principles in the United Kingdom.
KPMG April 3, 1995
CHARTERED ACCOUNTANTS Reading, UK
REGISTERED AUDITORS
E-102
<PAGE>
Exhibit 99.4
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Sierra Rutile Services Limited:
We have audited the accompanying balance sheet of Sierra Rutile Services Limited
as of December 31, 1994, and the related profit and loss account for the year
then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United Kingdom, which are substantially equivalent to those in the United
States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sierra Rutile Services Limited
as of December 31, 1994, and the results of its operations for the year then
ended in conformity with generally accepted accounting principles in the United
Kingdom.
KPMG April 3, 1995
CHARTERED ACCOUNTANTS Reading, UK
REGISTERED AUDITORS
E-103
<PAGE>
Exhibit 99.5
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Sierra Rutile Holdings Limited (BVI):
We were engaged to audit the balance sheet of Sierra Rutile Holdings Limited
(BVI) as of December 31, 1994, and the related profit and loss account for the
year then ended. These financial statements are the responsibility of the
Company's management.
As described in note 1 to the financial statements of Sierra Rutile Limited, the
principal wholly-owned subsidiary of the Company, production at the subsidiary's
mine was suspended following militant attacks on the mine and subsidiary
personnel and, due to subsequent occupation of the facilities by rebel forces,
it became necessary to evacuate all employees. These circumstances adversely
affected the conduct of our planned audit procedures at the subsidiary since
they depended on continued access to and examination of various on-site
properties and conditions. Further, the circumstances create substantial doubt
about the recover-ability of asset carrying amounts, including prepaid royalties
and deferred tax assets as to which additional evidential matter was being
sought before interruption of our audit; the adequacy of recorded liabilities,
including accrued reclamation costs as to which additional evidential matter was
being sought before interruption of our audit; and the availability of funding
for the subsidiary to continue as a going concern even if access to the mine is
regained.
Since we were unable to complete substantial auditing procedures at the
subsidiary and because of the uncertain impact on financial statement carrying
amounts of both the subsidiary and the Company of the current circumstances, we
are unable to express, and we do not express, an opinion on these financial
statements.
KPMG April 3, 1995
CHARTERED ACCOUNTANTS Reading, UK
REGISTERED AUDITORS
E-104
<PAGE>
Exhibit 99.6
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
TMMI Limited (BVI):
We have audited the accompanying balance sheet of TMMI Limited (BVI) as of
December 31, 1994, and the related profit and loss account for the year then
ended. 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 audit.
Except as discussed in the following paragraph, we conducted our audit in
accordance with generally accepted auditing standards in the United Kingdom,
which are substantially equivalent to those in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.
Financial statements for two affiliated entities are accompanied by disclaimers
of audit opinions related to suspension of mining operations of Sierra Rutile
Limited and the occupation of the facilities by rebel forces. These
circumstances in turn create the possibility that amounts due from certain
affiliates in the accounts of the Company may not be fully recoverable and we
are unable to satisfy ourselves as to that matter.
In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to examine evidence of
recoverability of amounts due from certain affiliates, the financial statements
referred to in the first paragraph above present fairly, in all material
respects, the financial position of TMMI Limited (BVI) as of December 31, 1994,
and the results of its operations for the year then ended in conformity with
generally accepted accounting principles in the United Kingdom.
KPMG April 3, 1995
CHARTERED ACCOUNTANTS Reading, UK
REGISTERED AUDITORS
E-105
<PAGE>
Exhibit 99.7
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
TMMI USA Marketing Partnership:
We have audited the accompanying balance sheet of TMMI USA Marketing Partnership
as of December 31, 1994, and the related profit and loss account for the year
then ended. 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 audit.
Except as discussed in the following paragraph, we conducted our audit in
accordance with generally accepted auditing standards in the United Kingdom,
which are substantially equivalent to those in the United States. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.
Financial statements for two affiliated entities are accompanied by disclaimers
of audit opinions related to suspension of mining operations of Sierra Rutile
Limited and the occupation of the facilities by rebel forces. These
circumstances in turn create the possibility that amounts due from certain
affiliates in the accounts of the Company may not be fully recoverable and we
are unable to satisfy ourselves as to that matter.
In our opinion, except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to examine evidence of
recoverability of amounts due from certain affiliates, the financial statements
referred to in the first paragraph above present fairly, in all material
respects, the financial position of TMMI USA Marketing Partnership as of
December 31, 1994, and the results of its operations for the year then ended in
conformity with generally accepted accounting principles in the United Kingdom.
KPMG April 3, 1995
CHARTERED ACCOUNTANTS Reading, UK
REGISTERED AUDITORS
E-106
