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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 1O-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
Commission file number 0-14329
CANYON RESOURCES CORPORATION
(a Delaware corporation)
84-0800747
(I.R.S. Employer Identification No.)
14142 Denver West Parkway, Suite 250, Golden, Colorado 80401
Registrant's telephone number: (303) 278-8464
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
and Warrants to Purchase Common Stock
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
--- ---
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]
The aggregate market value of the 19,739,607 shares of the registrant's voting
stock held by non-affiliates on March 1, 1996 was approximately $64,548,515.
At March 1, 1996, there were 25,943,459 shares of the registrant's common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the 1995 Annual Meeting to be filed within 120 days after
the fiscal year end (Item 11 in Part III).
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CANYON RESOURCES CORPORATION
FORM 10-K
YEAR ENDED DECEMBER 31, 1995
TABLE OF CONTENTS
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ITEM
NUMBER PAGE
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PART I
1. Business 1
2. Properties 8
3. Legal Proceedings 27
4. Submission of Matters to a Vote of Security Holders 29
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters 30
6. Selected Financial Data 31
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 32
8. Financial Statements 40
9. Disagreements on Accounting and Financial Disclosure 63
PART III
10. Directors and Executive Officers of the Registrant 64
11. Executive Compensation 68
The information required by this item appears in the Company's
Proxy Statement for the 1996 Annual Meeting to be filed within
120 days after the end of the fiscal year and is incorporated
by reference in this Annual Report on Form 10-K.
12. Security Ownership of Certain Beneficial Owners and Management 68
13. Certain Relationships and Related Transactions 71
PART IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 72
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PART I
ITEM 1. BUSINESS
GENERAL
Canyon Resources Corporation, a Delaware corporation (the Company or
Canyon) is a Colorado-based company which was organized in 1979 to explore,
acquire, develop, and mine precious metal and other mineral properties. The
Company or Canyon is used herein to refer to all of the wholly-owned and
majority-owned subsidiaries of Canyon Resources Corporation. Since 1986 the
Company has been a reporting company and its securities have been traded on
NASDAQ.
The Company is involved in all phases of the mining business from early
stage exploration, exploration drilling, development drilling, feasibility
studies and permitting, through construction, operation and final closure of
mining projects.
The Company has gold and industrial mineral production operations in the
western United States. The Company conducts exploration activities in the search
for additional valuable mineral properties in the western United States, and in
a number of areas throughout Latin America and Africa. The Company's exploration
and development efforts emphasize precious metals (gold and silver) and
industrial minerals.
Once acquired, mineral properties are evaluated by means of geologic
mapping, rock sampling, and geochemical analyses. Properties having favorable
geologic conditions and anomalous geochemical results usually warrant further
exploration by the Company. In almost all cases, exploration or development
drilling is required to further test the mineral potential of a property.
Properties which have a demonstrated inventory of mineralized rock of a
potentially economic nature are further evaluated by conducting various studies
including calculation of tonnage and grade, metallurgical testing, development
of a mine plan, environmental baseline studies and economic feasibility studies.
If economics of a project are favorable, a plan of operations is developed and
submitted to the required governmental agencies for review. Depending on the
magnitude of the proposed project and its expected environmental impact, a
vigorous environmental review may be required prior to issuance of permits for
the construction of a mining operation.
The Company conducts a portion of its mineral exploration and development
through joint ventures with other companies. The Company has also independently
financed the acquisition of mineral properties and conducted exploration and
drilling programs and implemented mine development and production from mineral
properties in the western United States and exploration programs in Latin
America and Africa. (See "Item 2 - Properties").
The Company is continually evaluating its properties and other properties
which are available for acquisition, and will acquire, joint venture, market to
other companies, or abandon properties in the ordinary course of business
subsequent to the date hereof.
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OPERATIONS
During 1995, the Company continued production of gold and silver from its
Kendall Mine near Lewistown, Montana. The last new ore at Kendall was placed on
a leach pad in January, 1995. Continued leaching of all ore placed on leach pads
since inception occurred throughout 1995, with the production of 16,624 ounces
of gold and 7,429 ounces of silver during the year. Extensive reclamation
activities, such as recontouring the waste-rock piles and covering them with
topsoil and revegetating abandoned areas, occurred at Kendall during 1995. As of
January 1, 1996, an estimated 7,000 ounces of recoverable gold remained in the
two leach pads. (See "Item 2 - Properties - Production Properties - Kendall
Mining District"). In general at the Kendall Mine, gold production declines
during winter months as the colder temperatures reduce the rate of gold
dissolution by the leach solutions.
In 1995, the Company, through its wholly-owned subsidiary, CR Minerals
Corporation, expanded its diatomaceous earth production and marketing and sales
of diatomite products. Diatomaceous earth or diatomite is an industrial mineral
that has a wide variety of uses. Mining and processing of the diatomite occur in
western Nevada and marketing of the products is carried out in the United States
and abroad (See "Item 2 - Properties - Production Properties - Fernley Diatomite
Property").
During 1995, approximately 71% of the Company's revenue was derived from
the Kendall Mine production of gold and silver. In 1996, as production from the
Kendall Mine further declines and the Briggs Mine begins production, it is
anticipated that approximately 20% of revenues will be derived from the Kendall
Mine and approximately 56% from the Briggs Mine. In subsequent years, the Briggs
Mine will dominate production revenues until the McDonald project is placed into
production.
FINANCING
On March 26, 1996, the Company completed a private placement in the amount
of $12.1 million ($11.3 million net of expenses). The offering was completed at
a price of $3.00 per unit which included one share of common stock (4,034,333
total shares) and one-half warrant (2,017,167 total warrants). Each whole
warrant entitles the holder to purchase one share of common stock at an exercise
price equal to $3.75 per share. The warrants expire on March 25, 1999. The
Company intends to file a Registration Statement under the Securities and
Exchange Act of 1933 in respect of the common shares, the warrants, and the
common shares underlying the warrants and use its best efforts to cause such
Registration Statement to become effective as soon as practical. In the event
that the Registration Statement does not become effective on or before the 90th
day following the completion of the private placement, each purchaser of units
will be issued an additional 1/10 of one common share and 1/20 of one warrant
for each unit purchased. The Company's planned use of proceeds are for
exploring properties within and in proximity to the Briggs claim block,
continuing to fund its share of expenditures on the McDonald Project,
exploration work on select foreign properties, particularly in Brazil, and
for general corporate purposes. This financing is expected to adequately
capitalize the Company for the next two years consistent with its present
objectives.
On December 6, 1995, CR Briggs Corporation, a wholly owned subsidiary of
the Company secured a mine financing for development of the Briggs Mine in
Southern California. The financing was completed by Banque Paribas, Bayerische
Vereinsbank AG, and NM Rothschild & Sons Limited and consists of a $34 million
credit facility. This facility is composed of 3 tranches: tranche A is a $25
million gold loan, tranche B is a $5 million cash loan, and tranche C is a $4
million cost-overrun facility. Tranche A portion of the facility consisted of
borrowing 64,425 ounces of gold and immediately selling those ounces at the then
(December 21, 1995) current market price of $388.05 per ounce to raise $25
million. Interest is paid quarterly with a total rate of 2 1/8% plus the gold
lease rate which floats with
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the market and will adjust quarterly. The 3-month gold lease rate was 3.2% when
the loan was monetized and as of February 7, 1996, this rate had decreased to
1.5%. Tranche B portion of the facility consists of a cash loan which is in the
amount of $5 million. Interest is paid quarterly with a total rate of 4 1/8%
plus LIBOR which will adjust quarterly. The 3-month LIBOR rate was 5 3/4% when
the first draw-down was made and as of February 9, the rate had decreased to 5
3/16%. Draw-downs on Tranche C are only expected if the project experiences cost
overruns. The interest rate for Tranche C will be calculated in the same manner
as that of Tranche B. The loan facility will be paid back over a six-year period
from start of gold production. The gold loan agreement contains, among other
things, the following provisions:
1. Canyon Resources Corporation guarantees the gold loan obligations of
CR Briggs Corporation.
2. The loan facility is collateralized by a first mortgage lien on the
property, non-leased assets of CR Briggs Corporation and a pledge of
Canyon's stock in CR Briggs.
3. Mandatory prepayments of principal in reverse order of maturity, are
required out of 30% of excess cash flow, as defined in the loan
agreement.
4. Within 3 years of project completion an additional 70,000 recoverable
ounces of gold processable at the Briggs Mine processing facility must
be identified, or 100% of excess cash flow will then be used to prepay
principal.
5. Canyon Resources must maintain $2 million in an escrow account which
will be used in the event of project cost overruns before the $4
million Tranche C facility can be drawn. Any funds remaining from this
$2 million will be released back to the Company upon completion of
project construction.
6. A condition of the loan agreement is that certain gold hedging will be
undertaken to assure that a portion of the future gold production
costs are covered by such hedging. In December, 1995, a hedge program
was put in place which consisted of forward sales of 186,600 ounces
over the next three years with prices ranging from $395 to $424 per
ounce. In addition, 21,600 puts with a strike price of $380/oz. were
purchased by selling 10,800 calls with a strike price of $403/oz.
7. The loan agreement places limitations on additional indebtedness
during the term of the loan.
8. The Company is required to maintain a debt service reserve account
which is equal to 3 months of debt service requirement funded out of
project cash flow.
In addition to the gold loan facility described above, Caterpillar
Financial Services granted a $10 million facility for leasing mining and
electrical generation equipment for the Briggs Mine. The Company anticipates
using approximately $8.5 million of the facility. The equipment leases will have
a 5-year term.
On June 2, 1993, the Company sold $22.0 million of Subordinated Convertible
Debentures which are due June 1, 1998. Net proceeds to the Company from the sale
was $20.5 million. Interest is payable
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semi-annually on June 1 and December 1 at a rate of 6% per annum. Interest
payments in 1995 totalled $1,292,250. The debentures are convertible at the
option of the holder any time into common shares at the rate of $3.45 of
outstanding principal per share. During 1995, $725,000 of principal was
converted into 210,145 shares of common stock. After June 1, 1996, the Company,
at its option, may redeem the debentures by issuing common stock at the lower of
$3.45 per share or at a rate equal to 94% of the trading common stock price at
the time of redemption or by payment in cash at par.
On May 26, 1993, the Company secured a $4.0 million gold loan and $1.9
million Letter of Credit (Credit Facility) with N M Rothschild (Rothschild). The
Company defeased the Letter of Credit over the term of the Credit Facility by
depositing equivalent cash with a financial institution. The gold loan portion
was monetized at $374.50 per ounce (10,681 ounces) and was repaid by December
31, 1994 from gold production at the Kendall Mine in varying quarterly
installments beginning in the third quarter 1993. Additionally, as part of the
agreement, the Company issued to Rothschild a warrant to purchase 200,000 shares
of common stock at a price of $2.875 per share. One-half of the warrant was
exercised in 1993 resulting in proceeds to the Company of $287,500. A
replacement warrant was issued for the remaining 100,000 shares which is
currently outstanding and due to expire on April 12, 1996.
As part of equity financings in 1990 and 1992, the Company issued warrants
to purchase 3,943,632 shares of common stock, exercisable at $3.50 per share
until December 31, 1994. The Company extended the expiration date of these
warrants to April 12, 1996. No warrants have been exercised to date in
connection with these financings.
AVAILABILITY OF MINERAL DEPOSITS; COMPETITION AND MARKETS
The Company continually explores for and obtains additional mineral
properties in order to secure gold deposits for future development. Gold
mineralization is found in many countries and in many different geologic
environments, and in most cases is accompanied by the presence of silver
mineralization. Country politics and tax structure are important criteria, as
well as the geologic favorability, in the decision to invest in exploration in a
country. Since many companies are engaged in the exploration and development of
gold properties and often have substantially greater technical and financial
resources than the Company, the Company may be at a disadvantage with respect to
some of its competitors in the acquisition and development of suitable mining
prospects. Mineral properties in an early stage of exploration, or not currently
being explored, are often relatively inexpensive to acquire; and the Company
believes that the expertise of its staff and its ability to rapidly evaluate and
respond to opportunities allow it to compete effectively with many companies
having far greater financial resources. In recent years the political
environments in many countries of the world have become favorable to investment
in the mining industry. The Company believes that, in particular, many of such
countries in Latin America and Africa host favorable geologic conditions for the
occurrence of sizeable gold deposits. For these reasons, the Company has
expanded its exploration for gold, silver and other precious metals from the
Western United States to various countries in Latin America and Africa.
In general, larger and higher grade gold deposits can be produced at a
lower cost per ounce than smaller and lower grade deposits. Also deposits that
can be mined by open pit methods usually can be exploited more economically than
those which must be mined by underground methods. The Company believes that the
Briggs gold deposit and the McDonald gold deposit will have production costs
close to or below the world-wide average for gold mines. There are numerous
large gold mining operations throughout the world owned by other companies that
are able to produce gold for a lower cost than the
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Company. Demand for gold and other factors in the financial marketplace have
more of an impact on the gold price than does the production of larger, lower
cost producers. Therefore, the principal competitive factor for the Company is
in the acquisition of suitable mining prospects and not in the marketing of
gold.
Diatomite is a naturally occurring amorphous silica formed by the
silicification of the skeletal remains of single cell aquatic plants. The
Company's diatomite deposits are located in Nevada. Since these deposits are of
such a high quality and are of a sufficient quantity to supply enough material
to meet production and sales forecasts for several decades, the Company does not
actively explore for additional diatomite deposits at the present time. The
Company's diatomite deposits have a high natural brightness which makes them
suitable in many filler applications without calcination. Although there are
many diatomite deposits throughout the world, few of these have the natural
brightness to allow them to compete with the Company's products without
calcination. In addition to being an added expense, calcination of diatomite
greatly increases the crystalline silica content, which can create health
problems. (See "Item 2 - Properties - Production Properties - Fernley Diatomite
Property").
The marketing of all minerals is affected by numerous factors, many of
which are beyond the control of the Company. Such factors include the price of
the mineral in the marketplace, imports of minerals from other nations, demand
for minerals, the availability of adequate refining and milling facilities, and
the market price of competitive minerals used in the same industrial
applications. The market price of minerals is extremely volatile and beyond the
control of the Company. Gold prices are generally influenced by basic
supply/demand fundamentals. The market dynamics of supply/demand can be heavily
influenced by economic policy, i.e., central banks sales/purchases, political
unrest, conflicts between nations, and general perceptions about inflation.
Fluctuating metal prices may have a significant impact on the Company's results
of operations and operating cash flow. Furthermore, if the price of a mineral
should drop dramatically, the value of the Company's properties which are being
explored or developed for that mineral could also drop dramatically and the
Company might not be able to recover its investment in those properties. The
decision to put a mine into production, and the commitment of the funds
necessary for that purpose, must be made long before the first revenues from
production will be received. During the last five years, the average annual
market price of gold has fluctuated between $344 per ounce and $384 per ounce.
Price fluctuations between the time that such a decision is made and the
commencement of production can change completely the economics of the mine.
Although it is possible to protect against price fluctuations by hedging in
certain circumstances, the volatility of mineral prices represents a substantial
risk in the mining industry generally which no amount of planning or technical
expertise can eliminate. The Company's practice has generally been to sell its
minerals at spot prices, unless price hedging was required in connection with
securing loan facilities.
CUSTOMERS
During 1995, the Company sold its gold and silver production primarily to
one precious metal buyer. Given the nature of the commodities being sold and
because many other potential purchasers of gold and silver exist, it is not
believed that the loss of such buyer would adversely affect the Company. The
Company's diatomite products are sold to numerous customers and in several
markets, and the loss of any one customer would not materially affect the
Company's diatomite operations.
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ENVIRONMENTAL MATTERS
The exploration, development, and production programs conducted by the
Company in the United States are subject to local, state, and federal
regulations regarding environmental protection. Many of the Company's mining and
exploration activities are conducted on public lands. The U.S.D.A. Forest
Service extensively regulates mining operations conducted in National Forests.
Department of Interior regulations cover mining operations carried out on most
other public lands. All operations by the Company involving the exploration for
or the production of minerals are subject to existing laws and regulations
relating to exploration procedures, safety precautions, employee health and
safety, air quality standards, pollution of water sources, waste materials,
odor, noise, dust and other environmental protection requirements adopted by
federal, state, and local governmental authorities. The Company may be required
to prepare and present to such authorities data pertaining to the effect or
impact that any proposed exploration for or production of minerals may have upon
the environment. The requirements imposed by any such authorities may be costly,
time consuming, and may delay operations. Future legislation and regulations
designed to protect the environment, as well as future interpretations of
existing laws and regulations, may require substantial increases in equipment
and operating costs to the Company and delays, interruptions, or a termination
of operations. The Company cannot accurately predict or estimate the impact of
any such future laws or regulations, or future interpretations of existing laws
and regulations, on its operations.
The United States has an extensive framework of environmental legislation
that undergoes constant revision. The Company participates in the legislative
process through independent contact with legislators and through trade
organizations to assist legislative bodies in making informed decisions.
Historic mining activities have occurred on certain properties held by the
Company. In the event that such historic activities have resulted in releases or
threatened releases of hazardous substances to the environment, potential for
liability may exist under federal or state remediation statutes. The Company is
not aware of any pending claims under these statutes at this time, and cannot
predict whether any such claims will be asserted in the future.
The Company has spent approximately $1.5 million on reclamation at the
Kendall Mine through December 31, 1995, and expects to spend approximately $0.7
million during 1996 and a further $2.0 million beyond 1996 through mine closure.
At December 31, 1995, the Company has fully accrued for its remaining
anticipated reclamation expenditures. The Company currently maintains a $1.9
million bond with the Montana Department of Environmental Quality to ensure
appropriate reclamation.
As described in "Item 2 - Properties", the cost of acquiring environmental
permits at the Briggs property exceeded $4 million, and the Company has now
obtained all permits required for the construction of the Briggs Mine. Certain
legal proceedings described in "Item 2 - Properties" have been instituted to
challenge the issue of the Briggs Mine permits. The cost of acquiring permits
for the McDonald project could exceed $12.0 million ($3.3 million to the
Company). The Blackfoot River, which flows within a mile of the McDonald
project, has received extensive publicity in the environmental press. Compliance
with existing federal and state laws will insure that the McDonald project will
not cause undue harm to the river. The Company cannot accurately predict or
estimate the level of publicity or environmental activism that could arise
around the project, nor can it predict what effect, if any, such publicity or
activism will have on the ability to bring this project into operation.
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Environmental regulations add to the cost and time needed to bring new
mines on line and add to operating and closure costs for mines already in
operation. As the Company places more mines into production, the costs
associated with regulatory compliance can be expected to increase. Such costs
are a normal cost of doing business in the mining industry, and may require
significant capital expenditures in the future. Additional information and the
potential effects of environmental regulation on specific Company properties are
described in "Item 2-Properties."
To date, the Company has done very little work on its Latin American and
African properties which involved surface disturbance. A limited amount of
trenching and road building was conducted in the Dominican Republic, but has
been totally reclaimed. Although some of the countries in which the Company
works have not as yet developed environmental laws and regulations, it is the
Company's policy to adhere to North American standards in our foreign
operations. The Company cannot accurately predict or estimate the impact of any
future laws or regulations developed in foreign countries on our operations.
EMPLOYEES
As of March 1, 1996, the Company and its wholly-owned subsidiaries employed
114 persons, which number may adjust seasonally. None of the Company's employees
are covered by collective bargaining agreements.
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS & GOVERNMENT
CONTRACTS
Other than (i) interests in mining properties granted by governmental
authorities and private landowners; and (ii) the use of the tradename "DiaFil"
for the marketing of its diatomaceous earth products, the Company does not own
any material patents, trademarks, licenses, franchises or concessions.
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ITEM 2. PROPERTIES
PRODUCTION PROPERTIES
KENDALL MINING DISTRICT
General
The Kendall Mine near Lewistown, Montana, was developed as an operating
open-pit, heap-leach gold mine in September 1988 under the management of the
Kendall Venture, a joint venture between the Company and Addwest Gold, Inc.
(Addwest). On January 26, 1990, the Company acquired all of the issued and
outstanding common stock of Addwest and through its wholly-owned subsidiary, CR
Kendall Corporation, became the operator and sole owner of the operating
interest in the Kendall Mine.
Through 1995, the Kendall Mine operation leached gold and silver from
crushed ore on a year-round basis. Mining and crushing of all remaining ore was
completed in January 1995. Leaching of the remaining gold in the heap leach pads
will continue through 1996.
Operations
The Kendall Mining District is located approximately 20 miles north of
Lewistown, Montana, and is accessible by paved U.S. highway and graded dirt
roads. The property rights controlled by the Company include (i) approximately
253.61 acres in patented claims and fee land; (ii) mining leases on
approximately 1,932 acres in 71 patented mining claims and fee land. The
recovery facilities include a 1.6 million ton heap leach pad and a 9 million ton
heap leach pad of crushed ore which are still undergoing leaching; process ponds
for retention of barren and pregnant solutions, a 1,000 gpm carbon adsorption
plant, a complete assay laboratory, and facilities for production of gold-silver
dore bars.
Mining operations were terminated in January, 1995, with the exhaustion of
the known orebodies. In 1995, a total of 21,500 tons of ore containing 1,354
ounces of gold and 24,000 tons of waste were mined. The Kendall Mine produced
16,624 ounces of gold and 7,429 ounces of silver during 1995. As of January 1,
1996, approximately 7,000 ounces of recoverable gold remained in the two leach
pads. Cyanide-bearing solutions are applied to the crushed ore through a drip
irrigation system that, during the winter, is buried within the heap. In
general, gold production declines during the winter at the Kendall Mine, due to
the lower temperatures and resulting slower dissolution rate of gold.
It is anticipated that approximately 7,000 ounces of gold will be produced
in 1996. This lower production is due to cessation of new ore mining and
crushing in January 1995. Gold production is expected to cease in 1997.
From April 1988 through December 1993, a total of 1,090 drill holes
totalling 332,619 feet were drilled in the Kendall Mining District. No drilling
has been done since 1994. Drilling was conducted along a two mile long
mineralized zone and resulted in the discovery or delineation of six separate
deposits. All known targets warranting drilling have been tested and no further
exploration work is planned for the Kendall Mining District.
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During 1995, the Company's capital expenditures at Kendall were
approximately $0.17 million, primarily related to closure construction
activities.
Statistical production and financial data of the Kendall Mine for the
period from 1991 through 1995 are shown on the following table.
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KENDALL MINE OPERATIONS
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1995 1994 1993 1992 1991
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PRODUCTION
Tons Mined (waste and ore)(000) 45 7,570 6,183 7,117 3,928
Tons Ore Mined (000) 21 1,588 1,737 1,546 1,501
Gold Grade of Ore (oz/ton) 0.079 0.044 0.049 0.059 0.053
Actual Strip Ratio (tons waste/tons ore) 1.1:1 3.8:1 2.6:1 3.6:1 1.6:1
Gold Production (oz) 16,624 48,391 54,203 59,857 57,070
Silver Production (oz) 7,429 22,503 29,218 18,229 10,700
Recoverable Gold Inventory (oz) 7,000 20,608 13,344 14,420 20,371
(unleached gold in heap and ore stockpile)
FINANCIAL (NET TO CANYON)
Ounces of Gold Sold(1) 16,386 45,877 51,113 56,665 54,639
Average Gold Price Realized ($/oz) 386 374 353 376 385
Revenue From Mine Operations ($000) 6,331 17,154 18,027 21,288 21,019
Operating Cost/Ore Ton Mined ($)(2) --(3) 6.87 6.55 7.67 7.89
Operating Cost/Gold Ounce Sold ($)(2) 362 238 223 209 217
Operating Earnings ($000) 391(4) 6,240 6,650 9,432 9,173
Capital Expenditures ($000) 168 477 1,115 1,551 3,332
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(1) Gold production net to Canyon after payment in kind of 5% royalty.
(2) Includes royalty, severance taxes, overhead, and reclamation reserve.
(3) Not meaningful, as active mining of new ore ceased in January, 1995.
(4) Prior to provision for final site restoration of $1.1 million.
Environmental Regulation & Reclamation
The Kendall Mine operates under permits issued by the Montana Department of
Environmental Quality (DEQ), and other regulatory agencies. A life of mine
permit was granted by these agencies on November 1, 1989. The Company recently
completed a land exchange with the U.S. Bureau of Land Management (BLM). In the
exchange, the Company received about 150 acres of BLM land within the Kendall
Mine permit area in return for about 120 acres of patented mining claims outside
the permit area. Because of this exchange, the BLM no longer manages any land
within the permit area and no longer
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holds regulatory authority over the Kendall Mine. The Company has filed a final
closure plan with the DEQ. This plan provides for enhanced closure measures not
contemplated in the original permit. The DEQ approved the reclamation portion of
the closure plans, and is reviewing the water quality and monitoring plans.
The Kendall Mine uses internal and external technical experts to monitor
and insure environmental compliance. The Company believes the operation is
currently in material compliance with all environmental and safety regulations.
The Montana Department of Environmental Quality requires that the Company
maintain a $1,869,000 reclamation bond to ensure appropriate reclamation of the
Kendall Mine. Reclamation has been ongoing throughout the life of the operation.
Disturbed areas are contoured and topsoil is replaced and reseeded as soon as
possible. During 1995, approximately 11 disturbed acres were reclaimed, an
additional 16 acres were recontoured and prepared for reclamation, and no
additional acres were disturbed.
As of the end of January 1995, all identified mineable ore reserves have
been mined. Final reclamation will require recontouring of waste rock dumps,
roads and other areas and redistribution of topsoil and reseeding of some
disturbed areas. Reclamation of the heap will begin only when gold recovery by
continued leaching becomes no longer profitable. Rinsing of the spent ore may
require two or more years before final closure of the heap can begin. Bond
release on the property will only take place once the regulatory agencies are
satisfied that the mine has met all reclamation requirements. There is no
assurance of agency satisfaction with mine closure.
FERNLEY DIATOMITE PROPERTY
The industrial mineral activities of the Company are conducted through its
wholly-owned subsidiary, CR Minerals Corporation. The Company produces and
markets diatomite under the tradename of DiaFil and sells the product both by a
distributor network as well as directly to customers. Diatomite or diatomaceous
earth consists of siliceous skeletal remains of single cell aquatic plants. The
unique properties of diatomite allow it to be used in a wide variety of
applications. The main characteristics of diatomite that are important to its
use in industrial products are unique structure, large surface area, high
absorption of liquids, mild abrasive qualities, low bulk density, low thermal
conductivity, chemical inertness, high silica content, and low impurities.
Diatomite is used to manufacture a broad variety of industrial materials, such
as paints, plastics, asphalt coatings, insecticides, fertilizers, and polishes.
The Company has developed a wide range of diatomite products. These products are
differentiated based on particle size distribution, which yields different
physical properties.
CR Minerals has established a distributor network in the United States,
Canada, and throughout the world for assisting in the marketing of its
diatomite. These distributors sell into the nonagricultural markets - paint,
plastics, asphalt coatings, and other filler applications. Currently CR Minerals
sells directly to agricultural users and wholesalers. CR Minerals maintains its
administrative offices in Golden, Colorado. Sales orders are placed at this
office and transferred to the Fernley production site in Nevada after scheduling
the shipping date. Accounting, inventory control, transportation, and billing
are handled in Golden.
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CR Minerals conducts mining and hauling with its own equipment and staff.
The diatomaceous earth ore is mined from an open-pit and hauled by truck
approximately 15 miles to the diatomite plant in Fernley, Nevada. Initially the
diatomite is crushed to aggregate size, and then simultaneously milled and dried
in a high volume stream of hot air. The dried diatomite is collected in cyclones
for subsequent size classification by mechanical means or air classification.
The coarser and denser accessory minerals are removed, and the diatomite
particles can then be segregated by size fraction. Generally, the finer the size
fraction, the higher the value. The processing facility has a capacity of 40,000
tons per year of processed diatomite and can load finished product in bulk rail
cars, bulk bags, or standard 50 and 55 pound bags which can be shipped by rail,
truck, and as ocean cargo. The processing facility has been in operation since
the 1950's. Since acquisition in 1987, the Company has made capital improvements
including additional air classification equipment, storage bins, and bulk bag
loading facilities. Ample diatomite reserves exist for over 25 years production
at near capacity rates.
The plant produces a natural diatomite product that is composed mainly of
noncrystalline silica. DiaFil products typically contain less than 1%
crystalline silica. Competitive calcined diatomite products contain up to 65%
crystalline silica. Long-term exposure to crystalline silica is believed to
cause pneumoconiosis or fibrotic lung disease. Recent work by the International
Agency for Research on Cancer (IARC) of the World Health Organization has
highlighted the link between cancer and crystalline silica. The Company believes
that the low amount of crystalline silica in its DiaFil products is aiding in
its marketing activities.
The Company's diatomite operations are subject to local, state and federal
laws and regulations. These laws and regulations primarily apply to air quality
and plant emissions resulting from mining, crushing, drying, size
classification, and packaging operations. Pursuant to recently enacted Nevada
statutes, the Company has submitted mining reclamation plans for three diatomite
deposits. The Company currently mines diatomite from one of these deposits and a
prior operator mined from the other two deposits. All of the deposits have been
mined by previous operators under regulatory policies much different than those
in existence today. The Company anticipates, but cannot guarantee, that the
permits will be issued with full acknowledgement of the pre-law disturbance.
Regulatory agencies have not issued mining permits for any of the three
deposits, but have required the Company to post a reclamation assurance of
$24,785 in connection with one of the applications. The Company anticipates that
reclamation assurances will be required for the other applications at some time,
possibly an additional $60,000.
Mining is currently being conducted on private land owned by the Company.
Patent applications were filed in 1993 for claims that contain additional
diatomite deposits. Patents have not yet been issued. The land on which the
processing facility is located is leased from the Southern Pacific Railroad, but
the facilities are owned by the Company. This lease expires in September 2007
and requires monthly payments of $1,050.
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DEVELOPMENT PROPERTIES
BRIGGS PROJECT
General
The Briggs project, located on the west side of the Panamint Range, near
Death Valley, California was acquired by the Company in 1990. It is 16 miles
northeast of Trona and 35 miles northeast of Ridgecrest, in Inyo County,
California. Access from Trona is by 33 miles of paved and graded gravel roads.
The Company owns 100% of the Briggs project, subject to a 2% net smelter return
royalty and an additional 2% net smelter return royalty on all gold production
in excess of 400,000 ounces.
Briggs' holdings include 809 unpatented mining claims, 67 mill site claims
and 1 tunnel site claim that comprise an area of approximately 16,615 acres. The
passage of the Desert Protection Act in 1994 removed all of the Company's
holdings from Wilderness Study Areas. Most of Canyon's mining claims are now
located on land prescribed for multiple use management by the U.S. Bureau of
Land Management.
Financing
On December 6, 1995, CR Briggs, the Company's wholly owned subsidiary
closed a $34 million credit facility for the construction of the Briggs Mine.
See "Item 1 - Business" and "Item 8 - Notes to Financial Statements" for a
description of the transaction.
Exploration and Development
At the turn of the century numerous small gold mines and prospects were
active along the western slope of the Panamint Range, but all activity stopped
by World War II. Since the resurgence of gold exploration in the western United
States during the last 20 years, gold production in the Panamint Range resumed
intermittently on a small scale from two high-grade deposits. Moreover, in the
past several years, other companies have conducted drilling programs on mining
claims either within the perimeter of the Briggs claim block or on its
periphery.
Significant gold mineralization occurs within the Briggs claim block along
a six-mile long trend that includes the Briggs, Cecil R, Jackson, and Gold Tooth
prospects. In 1991, considerable drilling and exploration was conducted in each
of these areas. Since 1991, drilling has been conducted only on the Briggs
project. The Company plans to conduct further exploration, including drilling,
on several of these targets in 1996.
In 1992 and 1993, diamond drilling within the Briggs orebody obtained core
samples of gold ore for both metallurgical and crushing tests. Metallurgical
testing conducted to date indicates that if the ore is crushed to less than 1/4
inch, approximately 75-85% of the gold in the ore can be extracted by
conventional cyanide heap leaching methods.
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The Company completed a definitive Feasibility Study in February 1994.
Roberts & Schaefer Company of Salt Lake City, Utah was retained to conduct a
"Fatal Flaw Review" of all aspects of the Feasibility Study with the exception
of ore reserves; mine plan; mining capital and operating costs; land status;
permitting and environmental issues. Roberts & Schaefer Company also prepared
the Executive Summary for the Feasibility Study. Mine Reserves Associates, Inc.
of Wheat Ridge, Colorado, was retained to conduct the "Fatal Flaw Review" of the
ore reserves, mine plan, and mining capital and operating costs. Remy and
Thomas, Attorneys at Law, of Sacramento, California reviewed the environmental
and permitting aspects of the Feasibility Study. Chamberlin & Associates of
Littleton, Colorado provided an additional opinion on the gold recovery. The
"Fatal Flaw Reviews" concluded that the Briggs Gold Project is technically and
economically feasible.
Through the end of 1995, a total of 192,634 feet of drilling in 567 holes
has been completed at Briggs for exploration, condemnation, metallurgical, and
environmental purposes. The development drilling, on approximately 100 foot
centers, has defined 805,000 ounces of gold, contained within 32.2 million tons
of mineralized rock with an average grade of 0.025 ounce of gold per ton, using
a cutoff grade of 0.01 ounce of gold per ton.
The Feasibility Study, augmented by an economic update in August of 1995,
indicates that approximately 21.9 million tons of the Briggs deposit can be
mined economically at a $375 gold price. The 21.9 million tons of mineable ore
has an average grade of 0.030 ounce gold per ton, and contains 653,000 ounces of
gold with a strip ratio of 1.7:1 (waste tons to ore tons).
Patent application was made for the claims on the Briggs deposit during
1993, however no assurances can be made that patents will be issued.
With the completion of permitting and financing, construction of mine
facilities began on December 16, 1995. The initial construction period will last
approximately 7 months. Gold production will commence in the second half of
1996, after sufficient ore stacking and leaching to facilitate gold recovery has
occurred.
Environmental Regulation
In 1995 the U.S. Bureau of land Management (BLM) and Inyo County, as
co-lead agencies, completed a joint Environmental Impact Statement/Environmental
Impact Report (EIS/EIR) on the Briggs Project. Subsequently, those agencies, as
well as several other agencies, issued permits to the Briggs project. Excepting
permits issued by the air quality authority which require certain actions
following project construction, the permits issued to date are adequate for all
mine operations involving currently identified mineable reserves. A local
environmental group, allied with the Timbisha Shoshone Indian Tribe, have
initiated various actions in opposition to the Briggs permits. These actions are
more fully described under "Item 3 - Legal Proceedings". At present these legal
actions are having no effect on activities at the mine. No assurances can be
given regarding the outcome of these actions or the effects those outcomes might
have on the Company's ability to complete and operate the mine.
The BLM, Inyo County, the California Department of Conservation, and
the Lahontan Regional Water Quality Control Board (Lahontan) have jointly
required the Company to maintain a $3,030,000 reclamation bond to ensure
appropriate reclamation of the Briggs Mine. Additionally, Lahontan requires
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that the Company maintain a $1,010,000 bond to ensure adequate funds to mitigate
any "foreseeable release" of pollutants to state waters. These bonds are subject
to annual review and adjustment.
In 1994, the United States Congress passed the California Desert Protection
Act (CDPA), resolving surface management classifications for large portions of
BLM managed lands in the desert areas of California. The passage of the CDPA
released lands around the Briggs Project for multiple use management,
significantly reducing constraints on exploration and mine operations.
SEVEN-UP PETE JOINT VENTURE
General
Through its wholly-owned subsidiary, CR Montana Corporation, the Company
owns a 27.75% interest in the Seven-Up Pete Venture (SPV) which includes the
Seven-Up Pete gold deposit, the McDonald gold deposit, and the Keep Cool
exploration property. Phelps Dodge Mining Company is the operator of the SPV.
The Seven-Up Pete and McDonald properties are located six to eight miles
east of Lincoln and 45 miles northwest of Helena, in Lewis and Clark County,
Montana. Access to the properties is by dirt roads from a paved highway that
crosses the property. The SPV consists of approximately 35 square miles of
patented and unpatented mining claims and mineral leases of fee and state land,
in general subject to a 5% net smelter returns royalty. During 1994, the state
lease upon which substantially all of the currently identified McDonald orebody
is located was amended. The amendment extended the primary term for a period of
16 months beyond the time required for review and approval of permit
applications for development of the property, including the time required to
resolve any appeals of permit approvals. In addition, the lease may also be held
thereafter by the production of minerals in paying quantities or the payment of
a delay rental of $150,000 per month. The amendment also, along with similar
amendments to five other adjacent state leases, provides for cross-mining on all
six leases and the consolidation of the six leases under a single agreement.
The Company, during 1995, funded its 27.75% share of the operating budget
of the SPV. The Company will need to continue to contribute 27.75% of funds
required for venture expenditures onward in order to maintain its current
ownership interest in the venture.
Geology and Exploration
McDonald Property
During 1989 and 1990, exploration conducted on the McDonald property
included geophysical and geochemical surveys, preliminary metallurgical testing,
and drilling of 76 holes for a total of 41,331 feet. This early exploration
drilling discovered a gold deposit, estimated to contain at least 18 million
tons of mineralized rock of average grade of 0.03 ounce of gold per ton, and
also indicated the potential for a much larger deposit.
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In 1991, an aggressive exploration program was conducted and included
detailed geologic mapping, geophysical surveys, and a drill program of 196 holes
for a total of 176,216 feet. On November 18, 1991, the SPV announced the
discovery of a deposit containing 185 million tons of mineralized rock with an
average grade of 0.028 ounce of gold per ton. Preliminary metallurgical test
work indicated that the mineralized material is amenable to recovery of
approximately 75% of the contained gold in rock that is crushed and heap
leached.
In 1992, exploration drilling continued on the McDonald property and a Mine
Plan and Preliminary Feasibility Study were completed. A total of 232 holes with
172,790 feet of drilling was completed.
In 1993, exploration drilling continued and a definitive Feasibility Study
was completed. A total of 105 holes with 40,383 feet of drilling was completed,
bringing the total drilling footage for the McDonald property to 389,389 feet in
598 holes. Analysis of the drill data through the end of 1993 indicates that the
McDonald deposit contains 8.2 million ounces of gold within 414.4 million tons
of mineralized rock with an average grade of 0.020 ounce of gold per ton, using
a cutoff grade of 0.008 ounce of gold per ton.
The McDonald property is partially covered by a siliceous sinter deposited
by an ancient hot spring system. The sinter overlies shallow dipping volcanic
units which have been strongly fractured and mineralized. The gold
mineralization occurs primarily in a favorable rhyolitic volcanic unit.
The Feasibility Study, completed by Davy International, indicates that
205.1 million tons of the McDonald deposit, with an average grade of 0.025 ounce
of gold per ton and containing 5.2 million ounces of gold, can be mined
economically in an open-pit, heap-leaching operation. The study indicates that
mining and crushing of 121 million tons of ore above a 0.016 ounce of gold per
ton cutoff grade (with an average grade of 0.034 ounce of gold per ton) and
mining and direct loading onto the leach pad of an additional 84 million tons of
lower grade ore (averaging 0.012 ounce of gold per ton) could, with an expected
72% recovery of the contained gold, produce approximately 300,000 ounces of gold
per year over a 12-year mine life. The expected waste-to-ore ratio would be
2.1:1. Initial capital costs for the project, including pre-production
stripping, are expected to be approximately $188 million. Operating costs,
including royalty, severance and property taxes, and reclamation reserve, are
expected to be approximately $231 per ounce of gold produced.
Since the Feasibility Study was completed, additional drilling,
engineering, and metallurgical work have been conducted which provide a basis
for in-progress modifications of the feasibility analysis. The additional data
indicates the potential for mining and economic recovery of more gold from the
McDonald deposit than indicated in the earlier Feasibility Study.
Environmental baseline studies have been conducted since 1989, providing
the necessary information to design and site facilities for the proposed
McDonald gold mine. Baseline studies include air quality, meteorology, surface
water, groundwater, wildlife, fisheries, aquatics, vegetation, soils,
recreation, transportation, visual resources, wetlands, cultural resources, and
socioeconomics.
In 1994 the SPV completed environmental baseline and engineering studies
that demonstrate that the proposed McDonald gold mine can be operated in an
environmentally sound manner. This information was used to prepare and file an
application for Plan of Operations with the Montana
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Department of State Lands (recently reorganized under the Department of
Environmental Quality (DEQ)) in November 1994. The DEQ is reviewing the
application and has initiated preparation of an Environmental Impact Statement
(EIS) with the Montana Department of Natural Resources and Conservation (DNRC)
and the US Army Corps of Engineers (COE) as co-lead agencies.
The agencies have selected Morrison-Maierle Environmental, an experienced
Montana firm, to act as a third party contractor in preparing the EIS. The
contractor will complete the EIS under supervision of the lead agencies with the
SPV bearing all costs through an arrangement with the lead agencies. Subsequent
to contractor selection, the lead agencies have completed "scoping" and the
contractor is actively preparing the EIS. Scoping included four public meetings
in communities around the project and acceptance of written comments from
interested parties. The SPV expects that permits for the project could be issued
as early as the third quarter of 1997.
Seven-Up Pete Property
Between 1989 and 1993, exploration, bulk sampling, development studies,
metallurgical testing, and environmental baseline studies were conducted on the
Seven-Up Pete property. By 1993, the total drilling on the property was 378
holes for 159,410 feet of drilling. A draft preliminary Feasibility Study was
completed in early January 1993, updating an earlier September 1991 study.
The January 1993 Preliminary Feasibility Study for the Seven-Up Pete
property considered the development of the Seven-Up Pete deposit as a satellite
to the McDonald deposit. In this study, a revised estimate of the Seven-Up Pete
deposit was calculated as a mineable reserve of 10.3 million tons at an average
grade of 0.058 ounce of gold per ton. The SPV has determined that no additional
work on the Seven-Up Pete property should be carried out at present and efforts
should concentrate on the McDonald property.
The Seven-Up Pete property is covered by middle Tertiary andesitic volcanic
rocks. The most important controls on mineralization at Seven-Up Pete are north
to northwest-trending faults that have localized quartz-pyrite-precious metal
mineralization. The structures generally dip to the west and can be up to 150
feet wide. Gold and silver occur in high grade quartz veins that are localized
near the margins of the shear zone, as well as in lower grade shattered zones
between the high grade veins. Gold mineralization occurs as free gold as well as
submicroscopic particles associated with pyrite.
Environmental Regulation
The Seven-Up Pete deposit occurs on patented mining claims within a U.S.
National Forest. The McDonald deposit occurs on private and state lands. As with
all mining projects, careful environmental study and permitting will be required
before a mine can be developed on either property. There are no assurances that
all needed permits will be issued nor that, in the event they are issued, such
issuance will be timely, nor that conditions contained in permits issued by the
agencies will not be so onerous as to preclude construction and operation of the
project.
Mining activity in the United States is subject to the granting of numerous
permits under applicable Federal and State statutes, including, but not limited
to, the National Environmental Policy Act, the Clean Water Act, the Clean Air
Act, and the Montana Environmental Policy Act. It is not legal
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to engage in mining activity without securing the permits required by these and
other statutes. Initiation of gold production at the McDonald project will thus
require the granting of numerous permits, some of which are discretionary.
Major permits include the Operating Permit from the Montana Department of
Environmental Quality (DEQ), the Operating Plan from the Montana Department of
Natural Resources and Conservation (DNRC), the Air Quality Permit (DEQ), the
Montana Pollutant Discharge Elimination System Permit (DEQ), a Non-Degradation
Authorization (DEQ), a Stormwater Discharge Permit (DEQ), a Water Rights Permit
(DNRC), a Section 404 Dredge and Fill Permit from the U.S. Army Corps of
Engineers (COE), and a Fiscal Impact Plan which must be approved by the Montana
Hard Rock Impact Board and numerous local government units.
An Environmental Impact Statement (EIS) is currently being prepared by
three co-lead agencies, DEQ, DNRC, and COE. This EIS will be used to support all
of the major permit decisions. Agency decisions on the permits are anticipated
to be forthcoming by the end of 1997. Certain environmental groups are in the
process of attempting to qualify an initiative petition related to water quality
regulation for placement on the ballot during the general election in Montana in
November of 1996. If placed on the ballot and if passed in the election in
November, such an initiative could have a materially adverse effect on the
permitting process at McDonald. No assurance can be given that such permits will
be issued, or if issued, in what time frame such issuance would occur.
PRINCIPAL EXPLORATION PROPERTIES
The status of exploration activities on the Company's major exploration
properties is described below. The properties described are believed to be the
most significant of the Company's current inventory. However, that inventory is
constantly changing and it is to be expected that some of the properties
discussed will eventually be joint-ventured, marketed or abandoned, and that
other properties owned or acquired by the Company will become the object of more
intensive exploration activities.
BRIGGS/PANAMINT PROPERTIES
Significant gold mineralization occurs within the Briggs claim block along
a six-mile long trend that includes the Briggs, Cecil R, Jackson, and Gold Tooth
prospects. In 1991, considerable drilling and exploration was conducted in each
of these areas. Drilling activity was severely hampered on the Cecil R, Jackson
and Gold Tooth areas by the presence of Wilderness Study Areas. Since 1991,
drilling has been conducted only on and immediately adjacent to the Briggs
project. The Company plans to conduct further exploration, including drilling,
on several of these targets in 1996 now that the Company's entire claim block
has been released from Wilderness Study Area designation.
MOUNTAIN VIEW PROPERTY
The Mountain View project is located in the Deep Hole Mining District,
approximately 15 miles northwest of Gerlach, in northwestern Nevada. In mid
1992, the Company entered into a joint venture with Independence Mining Company
and also acquired additional claims in the area consolidating a major
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land position. The Company conducted an aggressive integrated exploration
program, including geological, geochemical, geophysical, and drilling programs
to evaluate the gold potential near the old Mountain View Mine and elsewhere
across the property block. This program resulted in the discovery of a
significant new gold mineralization zone on the south end of the property in
late 1992.
During 1993 and 1994, the Company continued an aggressive exploration
program on the property, including drilling more than 75,000 feet in 117 reverse
circulation and combined reverse circulation/core drill holes. Of the total
drilling, 60,375 feet in 87 holes were concentrated in the discovery area on the
south end of the property. The discovery area drilling has resulted in the
identification and partial delineation of a deposit which contains an estimated
19.6 million tons of mineralized rock with an average grade of 0.027 ounce of
gold per ton. The mineralized rock occurs beneath 100 to 600 feet of pediment
gravel on the west side of the Granite Mountains range front fault.
At the beginning of 1994, the Company owned a 60% interest and Independence
Mining Company (IMC) owned a 40% interest in the Mountain View Joint Venture.
The joint venture partners funded $0.5 million of exploration expenditures in
early 1994, after which time IMC declined to contribute any additional funds.
The Company obtained and subsequently exercised an option to purchase IMC's
remaining interest in the joint venture in exchange for 61,539 shares of common
stock of the Company, thereby owning 100% interest in the Mountain View project,
effective January, 1995.
On July 17, 1995, the Company entered into an exploration agreement with
Homestake Mining Company (HMC). HMC can earn a 51% interest in the Mountain View
property by expenditures of $4 million prior to December 31, 1999 and completion
of a feasibility study. An additional 9% interest can be acquired by HMC by
funding all development costs through to production.
During 1995 HMC expended $738,412 on the property, primarily in the
drilling of 22 reverse circulation and 4 core holes. Additional work consisted
of geological mapping, sampling, petrography, age dating, geophysics and staking
130 new lode claims. Including the new claims, the Mountain View property
consists of approximately 8,600 acres of mineral rights in leased and located
unpatented lode claims, placer mining claims and 440 acres of leased fee land.
The leased properties have minor advance royalty payments and a maximum of 4%
net smelter return royalty.
HMC's work in 1995 confirmed the high-grade zone of the gold deposit
previously discovered by Canyon and located several other gold-mineralized areas
on the property. HMC has indicated that they intend to continue the exploration
program in 1996 with a planned budget of $1 million.
RATTLESNAKE PROPERTY
The Rattlesnake project is located in the Rattlesnake Hills, Natona County,
Wyoming, about 70 miles west of Casper. The property consists of 144 unpatented
lode mining claims (partly leased) and two state mineral leases, totalling
approximately 3,540 acres. The leased properties have modest annual advance
royalty payments and a maximum 4% net smelter return royalty.
The Company acquired the property in 1992 and conducted mapping and surface
rock sampling. This work, in conjunction with exploration conducted by American
Copper and Nickel Company from
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1983 to 1987 (9,825 feet of drilling in 32 reverse circulation holes),
identified several favorable drill targets. In 1993 the Company entered into a
joint venture agreement with Newmont Exploration Ltd.
From 1993 to 1995, Newmont conducted detailed evaluation of the property
consisting of surface sampling (rock, soil, stream sediment), ground geophysics
(magnetics, VLF-EM, radiometrics, IP), trenching and drilling. A total of 14
holes (2 core, 12 reverse circulation) and 10,705 feet were drilled in the North
Stock target area. The Antelope Basin and South Stock target areas, initially
scheduled for drill testing by Newmont, were not drilled prior to Newmont
dropping out of the joint venture in August, 1995.
Preliminary estimates indicated that Newmont drilling in the North Stock
area identified and partially delineated a mineralized zone from surface to a
depth of 900 feet. Drilling by ACNC in the Antelope Basin area indicates the
presence of mineralized rock in that area also. The South Stock area appears to
be the largest target on the property, but at present, remains untested by
drilling.
The Company is currently seeking a new joint venture partner to continue
the exploration of the Rattlesnake project.
MONTANA PROPERTIES
The Company owns approximately 900,000 acres of fee simple and fee mineral
rights in western Montana. The fee mineral rights underlie surface rights owned
by other parties. In March 1995 the Company entered into an Exploration
Agreement with Option to Acquire Title Agreement with BHP Minerals International
Exploration Inc. (BHP) to explore the Company's 900,000 acre holding in western
Montana. The Agreement allows BHP the option to acquire an undivided 50%
ownership in the property as to gold and an undivided 51% ownership for all
other minerals by expending at least $2.5 million on the property over a
six-year period and making payments of $25,000 per year to the Company. BHP also
has the option to acquire an additional 1% ownership in gold properties by
paying one million dollars to the Company.
During 1995, BHP Minerals expended $200,870 on surface exploration and
drilling on the Company's property. Eight drill holes totalling 2,960 feet were
drilled on one prospect in the Garnet Range, generally with negative results. A
large (1,200 square mile) stream sediment sampling program identified over 20
potential base and/or precious metal targets. Extensive follow-up surface work
and drilling are planned for 1996. BHP Minerals has a minimum expenditure
requirement obligation of $300,000 on the property for 1996.
In October, 1995 the Company entered into a Mining Venture Agreement with
Kennecott Exploration Company (Kennecott) to explore approximately 2,100 acres
in the Lincoln Valley, adjacent to the Seven-Up Pete Joint Venture. Kennecott
has the option to earn a 51% interest in and to the Company's holdings by
expending $2,000,000 over 5 years. Kennecott also has the option to increase its
interest by an additional 9% by funding a Feasibility Study for the Properties.
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During 1995, Kennecott conducted geologic mapping, rock and soil
geochemical sampling and geophysical surveys on the Lincoln Valley properties.
Several structural zones were identified along portions of which anomalous gold
and indicator minerals were identified. Kennecott plans continued exploration,
including drilling in 1996.
LATIN AMERICAN EXPLORATION
GENERAL
In 1995, the Company concentrated its exploration activities in Brazil,
Argentina, and Panama. Precious metal opportunities were also evaluated in
Bolivia and Ecuador. The Company terminated its option with Minera Cachabi Ltda.
on the Pampa Blanca property in Ecuador during 1995. The Company ceased
conducting work in Venezuela in mid-1995 and is in the process of disposing of
its Venezuelan subsidiary.
ARGENTINA
The Company, through wholly owned subsidiary, CR International Corporation
(CRIC), conducted early stage exploration work on most of the 18 properties held
at the start of 1995 in Chubut, La Rioja, Catamarca and Jujuy Provinces in
Argentina. In addition, in 1995, four properties in Santa Cruz Province were
acquired under an exploration contract from Empresa F.K. Minera S.A. and CRIC
filed cateos (mining claims) on 6 properties. On a number of the properties, the
exploration programs conducted indicated low potential for economic occurrences
of gold and as a result 10 of the properties were abandoned by the end of 1995.
The Company decided in 1995 that other areas in Latin America and Africa
offered better potential to quickly find and develop gold resources than
Argentina. The Company decided to market its Argentine properties to other
mining companies in joint ventures or options. CRIC closed its Argentina office
in October, 1995, and has maintained Argentinean activities through the use of
consultants since that time.
In February 1996, CRIC entered into an exploration agreement with Phelps
Dodge Exploration de Argentina, S.A. (PDA), a wholly owned subsidiary of Phelps
Dodge Corporation, on five CRIC properties. By funding $3.9 million in
exploration expenditures over a six-year period, PDA will earn a 50% interest in
the properties. PDA will be manager and has the optional right to increase its
ownership to 65% on any particular property by financing a feasibility study
suitable for submission for bank financing of that property.
The CRIC - PDA joint venture properties include 724 square kilometers in
the Arroyo Cascada property in Chubut Province and 120 square kilometers in four
properties in Santa Cruz Province. The Arroyo Cascada property contains strongly
anomalous gold values in rocks, soils, and stream-sediments within an altered
volcanic pile, suggestive of a buried porphyry system with potential for both
gold and copper. The Santa Cruz properties contain gold-bearing quartz veins and
stockworks in volcanic rocks, similar geologically to the nearby multi-million
ounce Cerro Vanguardia gold deposit.
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CRIC currently has 6 properties in La Rioja Province under an option to
Argentina Mineral Development Co. which expires May 31, 1996. CRIC is in
discussions regarding an option on its remaining seven properties. There is no
assurance that any agreement will be finalized.
BRAZIL
In 1995 the Company acquired approximately 60,000 hectares of mineral
rights in the Rio Maria area of Para State in Brazil. These mineral rights are
on areas for which mineral concessions have been applied. Although there can be
no assurance, the Company has conducted a due diligence of the status of these
applications and believes that the concessions will be formally granted in due
course. Gold has been produced by informal miners from alluvial and bedrock gold
deposits within and adjacent to the Company's properties. A primary target area
has been identified, comprising about 140 square kilometers within which most
streams contain anomalous gold in pan concentrates. These streams drain an area
of folded and sheared greenstones and sediments, presenting a geologic setting
similar to that of some multi-million-ounce gold deposits in the region.
Numerous workings of local gold miners and gold occurrences are located within
this target area.
In December 1995, Canyon's wholly owned subsidiary, Canyon Mineracao do
Brasil Ltda. acquired the concession applications from a Brazilian gold mining
company, Mineracao Vale das Andorinhas Ltda., after conducting property
evaluations on over 240,000 hectares of mineral rights during 1995. The Rio
Maria properties were selected as having exceptional potential to host one or
more significant gold deposits. Work during 1996 will consist of detailed
surface mapping and sampling with the expectation of delineating initial drill
targets before year's end.
DOMINICAN REPUBLIC
Effective April 13, 1995, an Option Agreement was signed with Eldorado
Corporation Ltd. (Eldorado) giving Eldorado the right to purchase all the issued
and outstanding shares of Minera Hispaniola, S.A. (MH). The Option Agreement
requires Eldorado to: (i) pay $50,000 upon signing; (ii) $3.0 million work
commitment over three years; (iii) pay $500,000 to exercise the option within 3
years; (iv) pay $500,000 upon commencement of commercial production; and (v) pay
various net smelter return royalty on production. MH is a company incorporated
in the Dominican Republic and owned 40% by Canyon Resources Corporation and 60%
by Battle Mountain (Dominican Republic) Inc. By a Consent Agreement dated June
8, 1995, Eldorado assigned all of its right, title and interest in the Option
Agreement to Energold Mining Ltd. (Energold).
Energold has, since acquiring the Option Agreement, been conducting
exploration activities on several of the MH exploration concessions and on other
areas in the Dominican Republic. Energold completed 3 core holes on the El Higo
Exploration Concession in 1995 and, through January 1996, had completed 5
additional core drill holes on the adjacent Los Pedregones Concession. Drilling
was halted at El Higo in September 1995 due to environmental concerns expressed
to the government Forestry Service by outside parties opposed to the project.
Energold, at the request of the government, has conducted an environmental
baseline assessment of the exploration work, which indicates that the
environment will not be endangered by the work program. Energold is uncertain
when permission to
21
<PAGE> 24
recommence the exploration program will be granted and has initiated further
drilling on the Los Pedregones Concession.
PANAMA
In August 1995, the Company, through its wholly owned subsidiary Canyon de
Panama, S.A., was formally granted the 10,594 hectare San Pedrito Concession,
applied for in 1994. The San Pedrito property covers the area between the Santa
Rosa open-pit, heap-leach gold mine (over one million ounces of gold) and a
smaller underground gold mine at Remance. Geologic mapping and geochemical
sampling by the Company on the property have identified gold-bearing alteration
zones in andesitic volcanic rocks. The geologic environment is similar to that
at Santa Rosa. Work during 1996 will consist of detailed geologic mapping and
geochemical sampling with the objective of delineating drill targets before the
end of the year. The Company is investigating the possibility of forming a joint
venture with another mining company to continue the work at San Pedrito.
AFRICA EXPLORATION
GENERAL
In February 1994, the Company entered into an agreement with Africa Mineral
Resource Specialists Inc. (AMRS), a Colorado corporation, whereby the Company
would finance the exploration and acquisition of precious metal properties in
Africa and the AMRS staff would conduct certain exploration/acquisition
activities under the direction of the Company. To conduct the business
activities in Africa, a subsidiary company, Canyon Resources Africa Ltd. (CRAL)
was formed - of which the Company owns 90% and AMRS owns 10%.
CRAL is concentrating exploration efforts in Ethiopia and Tanzania, while
also evaluating property specific opportunities elsewhere in Africa. CRAL has
acquired one property in Zimbabwe and has applied for a Prospecting License in
Burkina Faso.
ETHIOPIA
In August 1994, CRAL filed applications on two areas which had been
selected for competitive bid by the government of Ethiopia. CRAL also filed
applications for Exploration Licenses on two additional areas in Ethiopia which
were open to non-competitive applications. In January 1995, CRAL was notified by
the Ministry of Mines of Ethiopia that its bid had been selected for the
Megado-Serdo area of the Adola gold belt in southern Ethiopia. On September 6,
1995, CRAL and the Ministry of Mines signed a three-year Exploration License,
renewable for two additional one-year terms on the 60 square kilometer
Megado-Serdo area. The Megado Serdo Exploration License requires that CRAL spend
at least $500,000 and complete an approved work program during the first year.
CRAL has posted a $500,000 Performance Guarantee Bond with the Ethiopian
government to assure completion of the work.
22
<PAGE> 25
The Megado-Serdo area is within a greenstone belt of metamorphic rocks of
Proterozoic age. The property is located 10-15 kilometers southwest of the large
Lega Dembi gold mine owned and operated by the Ethiopian Government Mining
Corporation. Government workers have conducted considerable exploration work and
have identified several areas of gold mineralization associated with quartz
veins within favorable schist horizons on the Megado-Serdo property and have
conducted trenching and limited drilling. Most of the streams draining the
Megado-Serdo area have had considerable placer mining activity. CRAL commenced a
detailed review and compilation of prior government work at Megado Serdo in
September 1995 and conducted preliminary site studies in December 1995. The
field work program commenced in February 1996 and should be completed by August
1996. The work program will consist of surveying, line cutting, geochemical
sampling, geologic mapping, road building and trenching. Geophysical surveys are
also being considered.
In August 1994, CRAL also applied for an Exploration License on the 108
square kilometer Meleka-Abeba area located about 50 kilometers north of the Lega
Dembi mine in the northern end of the Adola Gold Belt. Stream sediment
geochemistry conducted by the government has identified numerous concentrations
of anomalous gold which have not been followed-up to date. Some artisanal placer
mining has recently been conducted within the application area. Negotiations
with the Ministry of Mines for an Exploration License on the Meleka-Abeba area
commenced in July 1995. On March 26, 1996 the Meleka-Abeba Exploration License
was issued.
CRAL has also applied for an Exploration License on the 1,700 square
kilometer Adi Dairo-Adi Hageray area located in Tigray Province of northern
Ethiopia just south of the border with Eritrea. The region is underlain by
Proterozoic greenstone rocks and has had recent artisanal mining of both placer
and lode gold occurrences. The CRAL application is in the review process and
there is no assurance that it will be granted.
On February 6, 1996 CRAL entered into a joint venture agreement with JCI
Limited, a large South African mining company, to finance gold exploration on
CRAL's Exploration Licenses and license applications in Ethiopia. By funding
$4.5 million in exploration expenditures on three licenses, JCI would earn a 51%
joint venture interest. JCI, with 100 years of African mining experience, is a
leading South African mining company which produces approximately 1.8 million
ounces of gold per year from a mineable reserve of over 80 million ounces.
CRAL will be the manager of the joint venture through the $4.5 million of
exploration financing and JCI earn-in of its 51% interest. Thereafter, JCI will
be the joint venture manager. JCI has the optional right to increase its
ownership to 65% of any particular license by financing the lesser of an
additional $4.5 million of expenditures or a bankable feasibility study on that
license.
TANZANIA
In November 1994, Canyon Resources Tanzania Limited (CRTL) was established
(90% owned by Canyon and 10% owned by AMRS), to conduct business and hold
mineral properties in Tanzania. CRTL has been actively evaluating property
submittals from several companies holding Mineral Licenses in Tanzania. AMRS, on
behalf of CRTL, filed several Mineral License applications in April 1994.
23
<PAGE> 26
In October 1995, the Tanzanian government granted AMRS Prospecting Licenses
for gold on three areas in the Lake Victoria Goldfields region totaling 264
square kilometers; two Reconnaissance Licenses for diamonds in southwestern
Tanzania near Lake Nyasa totaling 1,138 square kilometers; and one
Reconnaissance Licenses for platinum to the east of Lake Victoria totalling 243
square kilometers. In addition, in October 1995, CRTL entered into a joint
venture with Sampo Resources (T) Limited on a 150 square kilometer Prospecting
License for gold in the Musoma District (Lake Victoria region). CRTL can earn a
60% interest in the property by expenditure of $1 million over three years. CRTL
also has the option to increase interest to 85% by spending an additional $2
million.
The Lake Victoria Goldfields region has had historic gold production of
more than two million ounces through 1970. Gold mining has concentrated in areas
of Archean-aged greenstones and banded iron formations and associated alluvial
concentrations of placer gold. The Lake Nyasa area has recent artisanal placer
gold production and geologic mapping in the past has identified kimberlite
pipes. Ultramafic rock occurrences similar to those of the Bushveld complex of
South Africa and the Great Dyke of Zimbabwe have been mapped to the east of the
Lake Victoria Goldfields region. During 1996, CRTL plans to conduct geologic
mapping and geochemical sampling on each of the mineral licenses to determine if
they warrant a more detailed exploration program, including drilling. CRTL is
evaluating the possibility of forming joint ventures with one or more mining
companies to continue work on the Tanzanian properties.
ZIMBABWE
In September 1995, CRAL was granted Exclusive Prospecting Order (EPO) #1005
covering an area of approximately 234 square kilometers to the east of the town
of Chegutu in north-central Zimbabwe. There has been recorded gold production of
more than 200,000 ounces from numerous small mines and prospects within the EPO.
In addition, there has been considerable unrecorded production by artisanal
miners and ancient mining by indigenous peoples. Numerous small parcels within
the EPO are held by others which represent earlier filed claims, mainly in the
areas of past production.
The regional geology consists of low grade metamorphic mafic volcanic rocks
(greenstone) of Archean age which are intercalated with felsic volcanics and
banded iron formations. These rocks are cut by somewhat younger Archean
granites. Most of the prior gold production has been derived from either granite
or greenstone hosts adjacent to or on the granite-greenstone contact.
Mineralization is often related to major shear zones, parallel to, and within
the greenstone belt.
CRAL has completed a review of the known information on geology, land
ownership, past production and claimholders of record. In 1996, CRAL will
conduct orientation geochemical surveys to select the best techniques for
identifying favorable target areas and will investigate the possibility of
forming a joint venture to continue the exploration of EPO #1005.
24
<PAGE> 27
TITLE TO PROPERTY
U.S. MINERAL PROPERTIES
The Company's U.S. mineral properties consist of fee mineral rights, leases
covering state and private lands, leases of unpatented mining claims, and
unpatented mining claims located or otherwise acquired by the Company. Many of
the Company's mining properties which are in the United States are unpatented
mining claims to which the Company has only possessory title. Because title to
unpatented mining claims is subject to inherent uncertainties, it is difficult
to determine conclusively ownership of such claims. Since a substantial portion
of all mineral exploration, development and mining in the United States now
occurs on unpatented mining claims, this uncertainty is inherent in the mining
industry. In addition, in order to retain title to an unpatented mining claim, a
claim holder must have met annual assessment work requirements ($100 per claim)
through September 1, 1992 and must have complied with stringent state and
federal regulations pertaining to the filing of assessment work affidavits.
Moreover, after September 1, 1992, the right to locate or maintain a claim
generally is conditional upon payment to the United States of a rental fee of
$100 per claim per year for each assessment year instead of performing
assessment work. State law may, in some instances, still require performance of
assessment work.
The present status of the Company's properties as unpatented mining claims
located on public lands of the U.S. allows the claimant the exclusive right to
mine and remove valuable minerals, such as precious and base metals and
industrial minerals, found therein, and also to use the surface of the land
solely for purposes related to mining and processing the mineral-bearing ores.
However, legal ownership of the land remains with the U.S. Accordingly, with an
unpatented claim, the U.S. retains many of the incidents of ownership of land,
the U.S. regulates use of the surface, and the Company remains at risk that the
claims may be forfeited either to the U.S. or to rival private claimants due to
failure to comply with statutory requirements as to location and maintenance of
the claims. If there exists a valuable deposit of locatable minerals (which is
the requirement for the unpatented claim to be valid in the first place), and
provided certain levels of work and improvements have been performed on an
unpatented mining claim, the Mining Law of 1872 authorizes claimants to then
seek to purchase the full title to the claim, thereby causing the claim to
become the private property of the claimant. Such full ownership expands the
claimant's permissible uses of the property (to any use authorized for private
property) and eliminates the need to comply with maintenance and reporting
requirements necessary to protect rights in an unpatented claim.
Because the Company believes that it has established the existence of
valuable mineral deposits in certain of its properties, and has maintained and
improved the claims in the manner required by law, it has sought to enhance its
rights in those properties by seeking issuance of mineral patents. In July of
1992, the Company caused four applications for mineral patent for the 20 lode
mining claims comprising the then-known ore reserves at the Briggs property to
be filed with the Bureau of Land Management ("BLM"). However, due to
administrative backlogs in the California State Office of the BLM, processing of
those applications has not proceeded. On December 30, 1993, the Company caused
five applications for mineral patent for the 15 placer mining claims which
encompass known ore reserves on public lands for the diatomite operations
conducted by the Company's subsidiary, CR Minerals, to be filed with the Nevada
State Office of the BLM. Those applications have been processed to the point
where the purchase price for the claims has been accepted.
25
<PAGE> 28
On October 1, 1994, while the above patent applications were pending,
Congress imposed a moratorium on accepting and processing mineral patent
applications within the Department of the Interior. Under the terms of the
continuing statutory moratorium (as interpreted by the Secretary of the
Interior), and solely as a result of the actions or inactions of the respective
state offices prior to the time the moratorium became effective, the Secretary
considers the California applications not to be exempt from the moratorium, and
therefore will not allow them to be processed while the moratorium remains in
effect, but the Nevada applications are considered exempt and should be
adjudicated. The Company instituted litigation in the U.S. District Court for
the District of Nevada to attempt to force the Secretary to construe all of the
applications as exempt from the moratorium and to diligently process all of
them, either by granting patents or be contesting the claims. However, the Court
has declined to compel the Secretary to expedite processing of the applications.
The Court's decision does not determine the validity of the claims, nor does it
directly affect the Company's basic ability to conduct mining operations on the
claims.
The Company has no reason to believe that grounds exist for denial of any
of the patents when and if they are ultimately adjudicated. However, there can
be no assurance that such patents will be granted.
For the last several Congressional sessions, bills have been repeatedly
introduced in the U.S. Congress which would supplant or radically alter the
provisions of the Mining Law of 1872. As of December 31, 1995, no such bills
have passed, although a number of differing and sometimes conflicting bills are
now pending. If enacted, such legislation could substantially increase the cost
of holding unpatented mining claims and could impair the ability of companies to
develop mineral resources on unpatented mining claims. Under the terms of
certain proposed legislation, the ability of companies to obtain a patent on
unpatented mining claims would be nullified or substantially impaired. Moreover,
certain forms of such proposed legislation contain provisions for the payment of
royalties to the federal government in respect of production from unpatented
mining claims, which could adversely affect the potential for development of
such claims and the economics of operating existing mines on federal unpatented
mining claims. The Company's financial performance could therefore be affected
adversely by passage of such legislation. It is impossible to predict at this
point what any legislated royalties might be, but a potential three to four
percent gross royalty, assuming a gold price of $400 per ounce, would have an
approximated $12 to $16 per ounce impact on the Company's costs of production
from unpatented mining claims.
The Company supports reasonable, rational changes to the Mining Law of 1872
and is currently active in industry efforts to work with Congress to achieve
responsible changes to mining law. Although the exact nature or timing of any
mining law changes cannot be predicted, enactment of any federal mining law
changes would not affect the Company's Kendall, McDonald, or Seven-Up Pete
projects, or the CR Minerals property currently being mined, because these
projects are not on federal lands. The Fernley Diatomite project, Briggs
project, the Mountain View project, and certain other exploration properties,
however, do occur on federal mining claims and could be materially affected by
such legislation.
26
<PAGE> 29
FOREIGN MINERAL PROPERTIES
In the countries outside the United States where the Company is operating,
the rights to minerals are vested with the government. Mineral rights are
granted by the government through concessions, licenses or leases. Often, the
earliest stage work is conducted under Reconnaissance or Prospecting Permits
which have a duration of one to two years and cover large areas. Exploration
Licenses or Concessions often will involve a considerably smaller area and will
have a duration of one to three years, often with the right to extend for one or
two additional years with a reduction of the size of the area with each renewal.
Exploration Licenses usually contain the right to convert to a Mining License or
Concession provided the Licensee adheres to the terms of the Exploration License
and has defined an economic mineral deposit. Mining Licenses are generally for a
term of 10 to 20 years or longer or for the economic life of the deposit.
Usually the Licensee must considerably reduce the size of the area held when
converting from an Exploration License to a Mining License.
Mineral Licenses generally have a land rental charge which varies from a
few cents to several dollars per hectare per year and increases from Prospecting
to Exploration to Mining Licenses. Some countries have no royalty provisions on
production from Mining Licenses, whereas others will charge royalties varying
from 1-5% of the value of the minerals produced. Several countries require a
free carried interest in a mining operation at levels of 10-20% equity
participation, although most countries in which the Company is working do not. A
number of countries charge a tax of 10-20% on dividends which are remitted
outside the country. Income tax rates vary from 30-45% in the countries in which
the Company is working. In several countries the sole benefit, outside of land
rental, that the country derives from Mining Licenses is through collection of
income tax.
LEASED PROPERTY
The Company leases approximately 5,600 square feet of office space at 14142
Denver West Parkway, Suite 250, Golden, Colorado 80401, under a lease which
expires March 31, 1996. Rent is presently $5,406 per month. An additional 1,500
square feet of office space is leased at the same location for $1,761 per month.
The Company maintains storage and/or facilities in Golden, Colorado; and
Ridgecrest, California on a month-to-month basis. CR Minerals maintains storage
facilities in several states and leases land for its processing facilities in
Fernley, Nevada for $1,050 per month under a lease which expires September 2007.
ITEM 3. LEGAL PROCEEDINGS
Following the completion of the environmental review process for the
permitting of the Briggs Project, the United States Department of the Interior,
Bureau of Land Management (BLM) issued an approval of the Plan of Operations for
the project on July 10, 1995. That approval was appealed to the Interior Board
of Land Appeals within the Department of the Interior (IBLA) on August 10, 1995
by the Timbisha Shoshone Tribe of Death Valley, Madeline Esteves (a member of
the Tribe), and the Desert Citizens Against Pollution (DCAP). The appeal alleges
that BLM failed to adequately consult with the Tribe prior to taking its action
and also alleges various technical errors in the environmental review process
and requested a stay of the effectiveness of the approval pending resolution of
the appeal. On August 29, 1995 the IBLA issued a temporary stay of the
effectiveness of the Plan of Operations pending
27
<PAGE> 30
resolution of the request for stay included in the appeal. The Company has
vigorously opposed this appeal through the filing of responsive briefs with the
IBLA. In addition, the BLM has vigorously opposed the appeal through the filing
of its own brief. The IBLA denied the request for stay and removed the temporary
stay on October 23, 1995, stating that there was not a likelihood that the
appellants would prevail on the merits of the appeal, thus allowing the Company
to proceed with the development and operation of the project under the BLM Plan
of Operations. The same appellants filed a Petition for Expedited Secretary's
Review on November 14, 1995 with the office of the Secretary of the Interior
requesting that the Secretary take jurisdiction of the proceeding and overrule
the Interior Board of Land Appeals. On March 13, 1996, the Office of the
Solicitor of the Interior on behalf of the Secretary issued a decision refusing
to take jurisdiction with respect to the appeal. No final decision on the merits
of the appeal has yet been rendered by the Interior Board of Land Appeals. Once
the Interior Board of Land Appeals rules on the merits of the appeal, a further
appeal by any of the parties to the proceeding can be filed in Federal Court.
The Company believes that the appeal will be dismissed in the ordinary course of
the appeals process as being without substantial merit or basis in law or fact.
On July 12, 1995, the Inyo County Planning Commission approved the Mine
Reclamation Plan for the Briggs Project under applicable California law. This
approval was appealed on July 26, 1995 to the Inyo County Board of Supervisors
by the same appellants listed above in connection with the appeal to the IBLA.
The Inyo County Board of Supervisors unanimously rejected the appeal and issued
its decision on August 30, 1995. The appellants (hereafter "Tribe") appealed the
decision of the Inyo County Board of Supervisors to the Superior Court of
California in and for Inyo County on November 10, 1995 under a Petition for Writ
of Mandate and Complaint for Injunctive Relief ("Petition") filed November 13,
1995 as No. 21419. Both the Company and Inyo County have answered the complaint
and are vigorously defending the appeal.
The Petition alleged violations of the California Environmental Quality Act
(hereinafter, "CEQA") and the Surface Mining and Reclamation Act ("SMARA"). The
Tribe sought a Temporary Restraining Order from the Court on January 16, 1996.
However, on January 17, the Inyo County Superior Court denied that request and
set the matter for an Order to Show Cause regarding the issuance of a
Preliminary Injunction on February 5, 1996.
The matter was heard on February 5, and, on February 16, 1996, the Court
denied the Tribe's request for the issuance of a Preliminary Injunction. This
matter will now proceed with briefing for a hearing before the Court on June 13,
1996. The Company believes that the matter will be dismissed as being without
substantial merit or basis in law or fact.
On July 14, 1995, the Lahontan Regional Water Quality Control Board
("Lahontan") in California issued a Waste Discharge Order to the Company for the
Briggs Project. On October 2, 1995, the same appellants identified above filed a
petition with the California State Water Quality Control Board challenging
certain of the findings and certain aspects of the Waste Discharge Order. In
this petition, the appellants have not requested a stay and have not asked that
the Waste Discharge Order be withdrawn or rescinded. Instead, they have
petitioned to change various technical matters of the Waste Discharge Order and
to have the financial assurance bond be increased. The Company and Lahontan are
responding to this petition through the staff of the State Water Quality Control
Board. The Company believes that the petition will be dismissed administratively
through the staff consultation process without the necessity of a hearing before
the entire board.
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<PAGE> 31
The Company has vigorously defended its position in each of the proceedings
before the Interior Board of Land Appeals, the Inyo County Court and the Water
Board, and believes that all of the claims of the Timbisha Shoshone Tribe and
the local environmental group are without merit. No assurances can be given
regarding the outcome of these actions or the effects those outcomes might have
on the Company's ability to complete and operate the mine.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were brought to a vote of Security Holders in the last quarter
of 1995.
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<PAGE> 32
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market and is
quoted on the National Association of Securities Dealers Automated Quotation
System (NASDAQ), National Market, under the symbol CYNR. The Company's common
stock was first included on NASDAQ on February 9, 1986, following the completion
of the Company's initial public offering and on the NASDAQ National Market on
May 15, 1990. Canyon also has warrants that trade on the National Market under
the symbol CYNRW. The following table reflects the high and low bid prices for
the Company's common stock and warrants during the indicated periods:
<TABLE>
<CAPTION>
================================================================
COMMON STOCK WARRANTS
----------------------------------------------------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
1995
Fourth Quarter $2.56 $1.81 $0.25 $0.09
Third Quarter $2.75 $2.13 $0.28 $0.13
Second Quarter $2.44 $1.88 $0.38 $0.13
First Quarter $2.13 $1.50 $0.31 $0.16
1994
Fourth Quarter $2.56 $1.50 $0.63 $0.13
Third Quarter $2.88 $2.00 $0.63 $0.13
Second Quarter $3.63 $2.25 $1.06 $0.38
First Quarter $4.44 $3.38 $1.81 $0.91
================================================================
</TABLE>
On March 1, 1996 the high and low prices for the Company's common stock
were $3.38 and $3.25, respectively. The high and low prices for the Company's
warrants on March 1, 1996 were $0.28 and $0.25, respectively. These prices
represent prices between dealers, do not include retail markups, markdowns, or
commissions, and do not necessarily represent actual transactions. All price
quotations were provided by NASDAQ.
As of March 1, 1996, there were approximately 1,359 holders of record of
the Company's common stock. The number of shareholders of the Company who
beneficially own shares in nominee or "street" name or through similar
arrangements is estimated by the Company to be approximately 3,000. As of March
1, 1996, there were also 29 holders of record of trading warrants and 12 holders
of unregistered warrants to purchase common stock.
As of March 1, 1996, there were outstanding; a) 25,943,459 shares of common
stock; b) 4,118,632 warrants to purchase common stock; c) 2,128,500 employee and
non-qualified stock options to purchase common stock; and d) 6,137,681 shares of
common stock issuable upon conversion of debentures totalling $21.2 million.
For the foreseeable future, it is anticipated that the Company will use any
earnings to finance its growth and that dividends will not be paid to
shareholders. Further, pursuant to an agreement executed by the Company in favor
of its wholly owned subsidiary, CR Briggs Corporation, in connection with a loan
for the Briggs Project, the Company has agreed to maintain certain levels of
working capital,
30
<PAGE> 33
tangible net worth, and leverage ratios which could restrict the payment of
dividends where such payment would result in a failure to maintain such levels.
Similarly, CR Briggs Corporation is prohibited from repaying the Company for
advances or from paying dividends to the Company from the Briggs Project cash
flow unless certain conditions relating to the financial performance of the
Briggs Project are met.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected information regarding the
Company's financial condition and results of operations over the past five
years.
<TABLE>
<CAPTION>
=========================================================================================================================
DECEMBER 31,
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUMMARY OF CONSOLIDATED
BALANCE SHEETS
Working Capital (Deficit) $25,787,400 $14,953,000 $19,301,600 $ 1,846,700 ($ 957,400)
Current Assets 28,654,800 18,318,100 24,264,500 6,615,800 5,926,300
Total Assets 72,424,200 52,187,600 53,235,700 29,143,500 43,747,400
Current Liabilities 2,867,400 3,365,100 4,962,900 4,769,100 6,883,700
Long-term Obligations 49,486,300 23,468,900 22,846,300 2,550,400 5,194,600
Total Liabilities 52,353,700 26,834,000 27,809,200 7,319,500 12,078,300
Common Stockholders' Equity 20,070,500 25,353,600 25,426,500 21,824,000 31,669,100
=========================================================================================================================
SUMMARY OF CONSOLIDATED
STATEMENTS OF OPERATIONS
Sales $ 9,006,600 $19,580,200 $19,879,600 $ 22,506,400 $21,690,800
Income (Loss) Before
Extraordinary Items (6,143,200) (337,700) 920,700 (14,277,000)(1) 297,700
Extraordinary Items -- -- -- -- 1,818,300(2)
Net Income (Loss) (6,143,200) (337,700) 920,700 (14,277,000) 2,116,000
Income (Loss) Per Share
Before Extraordinary Items (0.24) (0.01) 0.04 (0.61) 0.01
Net Income (Loss) Per Share (0.24) (0.01) 0.04 (0.61) 0.10
=========================================================================================================================
</TABLE>
(1) Includes asset writedowns of $14,075,400 for 1) Kendall Mine -
$8,000,000; 2) Exploration Properties - $4,042,100; 3) Non-Compete
Agreement - $2,033,300.
(2) Gain on extinguishment of debt, net of taxes ($1,098,900) and credit
equivalent to tax benefit from utilization of net operating loss
carryforwards ($719,400).
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<PAGE> 34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
The Company recorded a net loss of $6.1 million, or $0.24 per share, on
revenues of $9.0 million in 1995, compared to a net loss of $0.3 million, or
$0.01 per share, on revenues of $19.6 million in 1994. The 1995 results were
principally impacted by lower gold production, a provision for final site
restoration costs, and the writedown of remaining carrying values at the Kendall
Mine.
Active mining of new ore at Kendall ceased in January, 1995, with
production of 16,624 ounces realized from continued leaching of all previously
mined ore. As a result, substantially lower revenues of $9.0 million were
realized during 1995, a 54% decrease from the $19.6 million in revenues during
1994. The Company sold 16,386 ounces of gold and 8,694 ounces of silver in 1995
at an average realized price of $386 per equivalent gold ounce. Comparable
amounts in 1994 were 45,877 ounces of gold and 21,126 ounces of silver at an
average price of $374 per equivalent gold ounce. The New York Commodity Exchange
(COMEX) gold prices averaged $385 per ounce in 1995 and $384 per ounce in 1994.
All ounces sold in 1995 were at spot prices, in contrast to sales in 1994 which
included 18,300 ounces settled with spot deferred contracts averaging $351 per
ounce and 6,393 ounces delivered against a gold loan monetized at $374.50 per
ounce. As a result of the hedging program and gold deliveries in 1994, the
Company recognized lower revenues of $755,900 relative to spot prices in effect
on the settlement dates.
Cost of sales was $7.4 million in 1995 as compared to $12.3 million in
1994. Cost of sales per ounce at Kendall in 1995 increased to $362 as compared
to $238 in 1994 due to the lower production levels associated with cessation of
mining of new ore. Included in cost of sales for 1995 and 1994 are all direct
and indirect costs of mining, crushing, processing and general and
administrative expenses of the mine, including normal provisions for reclamation
of $0.8 million for each year. In addition, the Company recorded a fourth
quarter 1995 charge for remaining final site restoration at Kendall of $1.1
million as a consequence of reviewing and updating its anticipated scope of work
to achieve mine closure.
Depreciation, depletion, and amortization was lower during 1995 due
principally to lower ounces sold from the Kendall Mine. Effective October 1,
1995, the Company adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. SFAS 121 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that their carrying amount may not be recoverable. Concurrent with adoption, the
Company has determined that its carrying value for property and equipment at the
Kendall Mine is not recoverable, due principally to the maturing life of the
mine (remaining economic life of one year) and the level of site restoration
costs anticipated during the next two to three years to achieve mine closure. As
estimated cash outflows exceed estimated cash inflows, the Company has reduced
the carrying value to zero and recorded a fourth quarter 1995 impairment of
$296,000.
Selling, general and administrative expenses were $3.4 million in 1995 as
compared to $3.0 million in 1994. The increase was due primarily to increased
corporate activity for business development and to increased diatomite sales and
corresponding support levels.
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<PAGE> 35
Exploration costs expensed, almost entirely foreign related, decreased by
$0.2 million to $1.0 million in 1995. During the current year, the Company
closed its Mendoza, Argentina office and focused principally on opportunities in
Brazil and Africa.
Abandonments of $0.3 million in 1995 were in the ordinary course of
business, and related principally to properties in Latin America.
Interest income was marginally lower in 1995, as higher yields partially
offset the effects of lower investible balances. Interest expense was lower in
the current period as a gold loan was not outstanding for the full year. In
addition, interest expense associated with the Company's debentures declined due
to voluntary conversions of $725,000 principal during the year.
There was no current or deferred provision for income taxes during 1995 or
1994. The Company computes deferred taxes according to the provisions of
Statement of Financial Accounting Standards No. 109 (SFAS 109). SFAS 109
requires deferred income taxes to be computed under the asset and liability
method and to be adjusted to and maintained thereafter at statutory rates in
effect when the taxes are expected to be paid. SFAS 109 also requires that a
valuation allowance be provided if it is more likely than not that some portion
or all of a deferred tax asset will not be realized. Although the Company
maintains significant net deferred tax assets, principally in the form of
operating loss carry-forwards, the Company did not record a deferred tax credit
in either 1995 or 1994 due to an assessment of the "more likely than not"
realization criteria required by SFAS 109.
Inflation did not have a material impact on operations in 1995 or 1994.
Management of the Company does not anticipate that inflation will have a
significant impact on continuing operations.
1994 COMPARED TO 1993
The Company recorded a net loss of $0.3 million, or $0.01 per share, on
revenues of $19.6 million in 1994, compared to net income of $0.9 million, or
$0.04 per share, on revenues of $19.9 million in 1993. The 1994 results were
adversely affected by higher interest expense and exploration costs, as compared
to 1993.
Revenues of $19.6 million were realized from the sale of gold, silver, and
diatomite products during 1994, representing a 2% decrease from the $19.9
million in revenues during 1993. The Company sold 45,877 ounces of gold and
21,126 ounces of silver in 1994 at an average realized price of $374 per
equivalent gold ounce. The New York Commodity Exchange (COMEX) gold price
averaged $384 per ounce in 1994. Comparable amounts in 1993 were 51,113 ounces
of gold and 29,633 ounces of silver at an average realized price of $353 per
equivalent gold ounce and a COMEX average of $360 per ounce. As a condition of a
gold loan secured in May 1993, the Company was required to hedge a portion of
the Kendall Mine's future production to ensure adequate cash flow for repayment
of the obligation. Accordingly, the Company entered into spot deferred contracts
totalling 42,000 ounces of gold at prices ranging from $339 per ounce to $357
per ounce. During 1994, 18,300 ounces were settled at an average price of $351
per ounce. In addition, 6,393 ounces were delivered against the gold loan at a
monetized price of $374.50 per ounce. During 1993, the Company settled 23,700
ounces at an average price of $343 per ounce and delivered 4,288 ounces against
the gold loan. As a result of the hedging programs and gold loan deliveries, the
Company recognized lower revenues of $755,900 and $580,600 in 1994 and 1993,
respectively, relative to spot prices in effect on the settlement dates.
33
<PAGE> 36
Cost of sales was $12.3 million in 1994 as compared to $12.5 million in
1993. Cost of sales per ounce at Kendall in 1994 was $238 as compared to $223 in
1993, representing a 7% increase. The higher unit costs were due principally to
lower ore tons and ounces mined, and therefore lower production levels (-11%),
and higher strip ratios of the ores mined. Included in cost of sales for 1994
and 1993 are all direct and indirect costs of mining, crushing, processing, and
general and administrative expenses of the mine, including provisions for
reclamation of $0.8 million and $0.4 million, respectively. The higher
reclamation accrual in 1994 was due to a fourth quarter revision to the
anticipated cost of final site restoration. Although higher metal prices were
realized, lower production levels resulted in a decline of Kendall's operating
earnings (defined as sales less cost of sales) to $6.2 million as compared to
$6.7 million in the prior period.
Depreciation, depletion and amortization was higher during 1994 than 1993
due principally to an increase in the capital base at Kendall and the resulting
DD&A rate to $41 per ounce in 1994 from $35 per ounce in 1993. Other Company
DD&A charges increased marginally in 1994 as well, due to current year capital
additions.
Selling, general and administrative expenses were $3.0 million in 1994 as
compared to $2.1 million in 1993. The increase was due to: a) higher corporate
costs of $0.4 million; b) increased diatomite sales and corresponding support
levels ($0.2 million); and c) cost of establishing and maintaining an office in
Mendoza, Argentina to support exploration activities ($0.3 million).
Exploration costs expensed in 1994 were $1.2 million as compared to $0.3
million in 1993 and reflect the commencement of a worldwide exploration effort.
Foreign activity in 1994 totalled $1.1 million with a focus on exploration
opportunities in Central and South America, Africa and the Pacific Rim. U.S.
spending was a nominal $0.1 million in 1994.
Abandonments in 1994 resulted in a nominal charge of $0.1 million as
compared to $1.3 million in 1993. The prior year amount related principally to
properties in the Moccasin and Judith Mountains in Montana.
Interest income was higher in 1994 due to higher average cash balances.
Interest expense was higher in the current period due to a full year of interest
expense on the Company's $22.0 million, 6% interest, subordinated convertible
debentures which were sold in June 1993. During 1994, $0.1 million of principal
was converted to 29,900 shares of common stock.
There was no current provision for income taxes in 1994. The prior period
amount was a credit of $35,800, reflecting an adjustment to the Company's 1992
estimate of its alternative minimum tax liability.
Inflation did not have a material impact on operations in 1994 or 1993.
LIQUIDITY & CAPITAL RESOURCES
SUMMARY:
The Company's cash and cash equivalents decreased $11.4 million during 1995
to $1.9 million at year end. The decrease was a result of cash outflows from
operations of $2.4 million, $7.6 million of cash spent on investing activities,
and $1.4 million of cash used in financing activities.
34
<PAGE> 37
OPERATING ACTIVITIES:
Operations used $2.4 million of cash in 1995 in contrast to providing cash
of $2.4 million and $5.2 million in 1994 and 1993, respectively. The decreasing
trend is principally a result of declining production and sales of gold from the
Kendall Mine, now in its final year (1996) of economic life.
INVESTING ACTIVITIES:
Capital expenditures in 1995 totaled $8.1 million. Major components
included $5.5 million at Briggs, of which $1.6 million were financed by drawings
under a loan facility; approximately $1.2 million for the Company's share of
costs on the McDonald project, relating principally to permitting; $0.3 million
at the Company's diatomite operations; $0.8 million on foreign exploration
properties, with the remaining amount spent on miscellaneous projects.
Capital expenditures in 1994 totalled $6.7 million. Major components
included $3.4 million at the Briggs property, principally related to
environmental, metallurgical and engineering work; $1.0 million for the
Company's share of costs on the McDonald project which principally related to
engineering and environmental analyses to support the Plan of Operations and
commencement of the permitting process; $0.5 million at the Kendall Mine,
principally to construct a carbon adsorption plant to process lower grade
solutions expected with the cessation of new ore mining; $0.3 million at the
Company's diatomite operations; with the remaining amount associated with
miscellaneous exploration projects and corporate activities.
Capital expenditures in 1993 totalled $7.6 million. Major components
included $3.1 million at the Briggs property, principally related to
environmental, metallurgical and engineering work; $2.0 million for the
Company's share of costs on the McDonald project which principally related to
hydrological, metallurgical and engineering work and to additional purchases of
property within the area of interest; $1.1 million at the Kendall Mine,
principally for final leach pad expansion; with the remaining amount associated
with the Company's diatomite operations and miscellaneous exploration projects.
FINANCING ACTIVITIES:
On December 6, 1995, the Company's wholly owned subsidiary, CR Briggs
Corporation, secured a $34.0 million loan facility to finance the capital
requirements of mine construction and working capital for its Briggs Mine in
California. Costs of approximately $1.2 million incurred in connection with
obtaining the facility will also be financed. The Company is guaranteeing the
loan obligations of CR Briggs Corporation, and the loan facility is
collateralized by a first mortgage lien on the property, non-leased assets of CR
Briggs Corporation, and a pledge of the Company's stock in CR Briggs
Corporation. The facility was provided by a syndication of three banks; Banque
Paribas, Bayerische Vereinsbank AG, and NM Rothschild & Sons Ltd. and includes
three tranches; a $25 million gold loan; a $5 million cash loan; and a $4
million cost overrun facility. The cost overrun facility is available only in
the event of spending in excess of $30 million and an additional $2 million
contribution by the Company. The Company has escrowed $2.0 million in connection
with this requirement. The amount is included in other long-term assets on the
Balance Sheet at December 31, 1995, as it is not contemplated to be available to
the Company until 1997. On December 27, 1995 drawing commenced on the facility
and $25.0 million principal in the form of a gold loan and $1.0 million
principal as a dollar loan were drawn. At December 31, 1995, unspent proceeds of
$23.3 million are included as restricted cash on the Company's balance sheet.
The gold loan portion was monetized at $388.05 per ounce, or 64,425 ounces and
carries an initial interest rate for 90 days of 5.32%. The dollar loan's initial
interest rate for 90 days is 9.87%. Varying interest rate periods can be
selected under the terms of the facility. Repayment terms
35
<PAGE> 38
require quarterly installments over six years, commencing in 1997 which include
scheduled principal reductions and a varying cash sweep amount equal to 30% of
free cash flow after primary debt service. Within three years of project
completion (approximately 4 months beyond construction completion and start-up)
an additional 70,000 ounces of recoverable reserves must be identified or 100%
of excess cash flow after scheduled repayments will be applied as additional
prepayments against the loan amounts. As a condition of the loan, a portion of
the Briggs Mine's future production was hedged to ensure adequate cash flow for
repayment of the obligation. Accordingly, fixed forward contracts totalling
186,600 ounces were entered into at prices ranging from $395 per ounce to $424
per ounce. In addition, put options on 21,600 ounces at a strike price of $380
per ounce were purchased. The put options were financed by the sale of call
options on 10,800 ounces at a strike price of $403 per ounce. Approximately 41%
of the Briggs Mine production from current reserves was hedged through forwards
and put options as of December 31, 1995.
In connection with the issue of certain surety bonds in 1995 for the
performance of reclamation obligations at the Kendall and Briggs Mines, a bank
Letter of Credit has been provided in favor of the Surety as partial collateral
for such bond obligations. The Letter of Credit, in the amount of $1,953,000,
will expire no earlier than December 31, 1996, and at the bank's option, may be
renewed for successive one-year periods. The Company has fully collateralized
the Letter of Credit by depositing cash in the amount of $1,953,000 with the
bank. The amount is included as restricted cash on the Company's balance sheet
at December 31, 1995. Of the amount on deposit, $84,000 was funded in 1995 and
$1,869,000 was funded in prior years in connection with a separate
collateralized letter of credit for only the Kendall Mine.
During 1995, in connection with a first year work commitment on an
exploration property in Ethiopia, a bank Letter of Credit has been provided in
favor of the Ministry of Mines and Energy, Federal Democratic Republic of
Ethiopia. The Letter of Credit, in the amount of $500,000, will expire on
January 6, 1997. The Company has fully collateralized the Letter of Credit by
depositing cash in the amount of $500,000 with the bank. The amount is included
in other non-current assets in the Company's balance sheet at December 31, 1995.
During 1994, the Company fully repaid a previous gold loan by delivering
6,393 ounces to the lender. The initial loan amount of $4.0 million, secured in
1993, was monetized at $374.50 per ounce (10,681 ounces). The Company repaid
4,288 ounces on the loan during 1993. Because the gold price at the repayment
dates was higher than the original monetized price in 1994, the Company
recognized lower revenues and cash flow of $103,000 than it would have received
if all gold were sold at spot market prices. During 1993, the gold price was
lower than the original monetized price at the repayment dates and the Company
recognized higher revenues and cash flow of $28,500 than it would have received
if all gold were sold at spot market prices.
In August 1994, the Company exercised purchase options on its leased mining
equipment at the Kendall Mine for $0.9 million and financed the purchase price
over a three year period. Most of the equipment was transferred to the Briggs
Mine in late 1995 to be utilized during the mine development phase, some
equipment was disposed of during 1995, and some equipment will remain at Kendall
during the final year of production and reclamation activity.
On June 2, 1993 the Company raised a total of $22.0 million ($20.5 million
after financing costs) through the sale of subordinated debentures which are due
June 1, 1998. Interest is payable semi-annually on December 1 and June 1 at the
rate of 6% per annum. The debentures are convertible at the option of the holder
any time prior to maturity into common stock at the rate of $3.45 per share.
During 1995, $725,000 of principal was converted into 210,100 common shares of
the Company. The Company,
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<PAGE> 39
after June 1, 1996, may redeem the debentures by issuing common stock at a rate
of 94% of the then trading price of its common stock or by payment in cash at
par. During 1995, the Company made interest payments of $1.3 million. On-going
annual debt service costs will be comparable until any future conversions or
redemptions.
The expiration date on the Company's 3,943,600 trading warrants and a
private warrant to purchase 100,000 shares to purchase common stock (all at an
exercise price of $3.50 per share) were extended at various times during 1995
and are currently scheduled to expire on April 12, 1996.
At December 31, 1995, the Company's debt consisted of the following: 1)
$26.0 million Briggs loan; 2) $21.2 million convertible debentures; and 3) $0.4
million on a mining equipment loan.
OUTLOOK:
Operations
Mine development and construction of facilities at Briggs is expected to
take approximately seven months. Financed expenditures for the period will total
approximately $26 million. Gold production will commence in the second half of
1996, after sufficient ore stacking and leaching to facilitate gold recovery has
occurred with production of approximately 19,000 ounces anticipated. Direct cash
operating costs, after achieving design capacity, are expected in the range of
$215-$225 per ounce during the fourth quarter of 1996 and approximately
$230-$240 per ounce over the mine life.
The Company anticipates gold production from residual leaching at Kendall
in 1996 of approximately 7,000 ounces at direct cash operating costs of
approximately $330-340 per ounce. The Company expects to spend approximately
$0.7 million on reclamation during 1996, and a further $2.0 million beyond 1996
through mine closure. The Company has fully accrued the expected reclamation
costs as of December 31, 1995.
During 1996, the Company expects to contribute approximately $1.8 million
to fund its share of expenditures for the McDonald Project, principally relating
to ongoing permitting and support activities. The permitting process will be
rigorous and is expected to take a minimum of 30-36 months from the initial
filing of the Plan of Operations in November 1994. The Company's overall
exploration objectives in 1996 will be to seek quality joint venture partners
for several of its foreign properties and focus internally on exploring and
drilling within and adjacent to the Briggs claim block and select foreign
properties, particularly in Brazil. These expenditures are expected to total
$3.0 million.
Financing
On March 26, 1996, the Company completed a private placement in the amount
of $12.1 million ($11.3 million net of expenses). The offering was completed at
a price of $3.00 per unit which included one share of common stock (4,034,300
total shares) and one-half warrant (2,017,200 total warrants). Each whole
warrant entitles the holder to purchase one share of common stock at an exercise
price equal to $3.75 per share. The warrants expire on March 25, 1999. The
Company intends to file a Registration Statement under the Securities and
Exchange Act of 1933 in respect of the common shares, the warrants, and the
common shares underlying the warrants and use its best efforts to cause such
Registration Statement to become effective as soon as practical. In the event
that the Registration Statement does not become effective on or before the 90th
day following the completion of the private placement, each purchaser of units
will be issued an additional 1/10 of one common share and 1/20 of one warrant
for each unit purchased. The Company's planned use of proceeds are for
exploring properties within and in proximity to the Briggs claim block,
continuing to fund its share of
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<PAGE> 40
expenditures on the McDonald Project, exploration work on select foreign
properties, particularly in Brazil, and for general corporate purposes. This
financing is expected to adequately capitalize the Company for the next two
years consistent with its present objectives.
The Company engages in an ongoing evaluation of opportunities in the mining
business which may require other uses or additions of capital which cannot be
predicted at this time. In addition, the Company, upon successful completion of
the permitting process at the McDonald Project, will be required to fund its
share of construction costs in order to maintain its present ownership level.
The Company's share of these costs may exceed $50 million, which will require
additional financing from external sources.
Gold Prices and Hedging
The Company's revenues, earnings and cash flow are strongly influenced by
world gold prices, which fluctuate widely and over which the Company has no
control. The Company's strategy is to provide an acceptable floor price for a
portion of its production in order to meet minimum coverage ratios as required
by loan facilities while providing participation in potentially higher prices.
Production not subject to loan covenants has historically been sold at spot
prices. The Company's hedging program for 1996 consists of forwards and put
options with approximately 52% of estimated total production hedged at an
average price of $394 per ounce. The risks of hedging include opportunity risk
by limiting unilateral participation in upward prices; production risk
associated with delivering physical ounces against a forward commitment; and
credit risk associated with counterparties to the hedged transaction. The
Company believes its production risk is minimal, and furthermore has the
flexibility to selectively extend maturity dates, thereby postponing delivery
against forward commitments. With regard to credit risk, the Company uses only
creditworthy counterparties and does not anticipate non-performance by such
counterparties.
Environmental Regulation
In 1995, the Montana State Legislature passed legislation which streamlined
the permitting process of new industrial projects by reorganizing the several
state agencies that had jurisdiction over environmental permitting into one
central agency, the new Department of Environmental Quality (DEQ). This agency
will be responsible for acting on an application for a Hard Rock Mining
Operating Permit in connection with a Plan of Operations filed by the Seven-Up
Pete Joint Venture for the McDonald gold project. This permit, as well as
several other local, state and federal permits, including a joint state and
federal Environmental Impact Statement (EIS), will be required before permits
can be issued. There are no assurances that all permits will be issued nor that,
in the event they are issued, such issuances will be timely, nor that conditions
contained in the permits will not be so onerous as to preclude construction and
operation of the project.
The Kendall Mine in Montana operates under permits granted by the DEQ. The
DEQ requires the Company to maintain a $1,869,000 Reclamation Bond to ensure
appropriate reclamation. The Company has filed a final closure plan which
provides for enhanced measures not contemplated in the original permit. The
reclamation portion of the closure plan has been approved, however, the water
quality and monitoring plans are still being reviewed. Release of bonding will
only take place once the regulatory agencies are satisfied that all reclamation
requirements have been met.
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The U.S. Bureau of Land Management (BLM), Inyo County, the California
Department of Conservation, and the Lahontan Regional Water Quality Control
Board (Lahontan) have jointly required the Company to post a reclamation bond in
the amount of $3,030,000 to ensure appropriate reclamation of the Briggs Mine.
Additionally, the Company will be required by Lahontan to post a $1,010,000 bond
to ensure adequate funds to mitigate any "foreseeable release" of pollutants to
state waters at least 90 days prior to initiation of cyanide on the heap leach
pads. Both bonds are subject to annual review and adjustment.
Based upon current knowledge, the Company believes that it is in material
compliance with all applicable environmental laws and regulations as currently
promulgated. However, the exact nature of environmental control problems, if
any, which the Company may encounter in the future cannot be predicted,
primarily because of the increasing number, complexity and changing character of
environmental requirements that may be enacted or of the standards being
promulgated by federal and state authorities.
Federal Legislation
In 1994, the United States Congress passed the California Desert Protection
Act (CDPA), resolving surface management classifications for large portions of
BLM managed lands in the desert areas of California. The passing of the CDPA
released lands around the Briggs Mine for multiple use management, significantly
reducing constraints on exploration and mine operations.
No congressional legislation was enacted in 1995 to modify the requirements
applicable to mining claims on federal lands under the Mining Law of 1812. The
timing and exact nature of any mining law changes cannot presently be predicted,
however, the Company will continue its active role in industry efforts to work
with Congress to achieve responsible changes to mining law. The Company is also
continuing its present efforts to patent the Briggs and diatomite claims into
private ownership in accordance with the provisions of currently applicable law.
Legal Actions
Certain actions are pending with respect to permits issued for the Briggs
Mine in California. A local environmental group and the Timbisha Shoshone Tribe
have; 1) appealed the Bureau of Land Management's decision to approve the Final
Environmental Impact Statement and Plan of Operations; 2) petitioned the
Superior Court of Inyo County alleging violations of the California
Environmental Quality Act and the Surface Mining and Reclamation Act; and 3)
filed a challenge to the issuance of Waste Discharge requirements by the
Lahontan Regional Water Quality Board. The Company has vigorously defended its
position in each of the proceedings and believes that all claims are without
merit, however, there are no assurances regarding the outcome of these actions
or the effects those outcomes might have on the Company's ability to complete
and operate the mine.
Other
In October, 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting For
Stock-Based Compensation. SFAS 123 defines a "fair value" based method of
accounting for employee options or similar equity instrument. SFAS 123
encourages, but does not require the method of accounting prescribed by the
Statement, and
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<PAGE> 42
does allow for an entity to continue to measure compensation cost as prescribed
by APB Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees.
Entities electing to remain with APB 25 must make proforma disclosures of net
income and earnings per share as if the fair value based method had been
applied, effective for fiscal years beginning after December 15, 1995. The
Company expects to continue to measure compensation cost under APB 25, subject
to the proforma disclosure requirements of SFAS 123.
For the foreseeable future, it is anticipated that the Company will use any
earnings to finance its growth and that dividends will not be paid to
shareholders. Further, pursuant to an agreement executed by the Company in favor
of its wholly owned subsidiary, CR Briggs Corporation, in connection with a loan
for the Briggs Project, the Company has agreed to maintain certain levels of
working capital, tangible net worth, and leverage ratios which could restrict
the payment of dividends where such payment would result in a failure to
maintain such levels. Similarly, CR Briggs Corporation is prohibited from
repaying the Company for advances or from paying dividends to the Company from
the Briggs Project cash flow unless certain conditions relating to the financial
performance of the Briggs Project are met.
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants ........................................ 41
Consolidated Balance Sheets............................................... 42
Consolidated Statements of Operations .................................... 43
Consolidated Statement of Changes in Stockholders' Equity................. 44
Consolidated Statements of Cash Flows..................................... 47
Notes to Consolidated Financial Statements................................ 47-62
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
of Canyon Resources Corporation:
We have audited the consolidated financial statements of Canyon Resources
Corporation and Subsidiaries listed in Item 14(a) of this Form 10-K. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform 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 opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Canyon Resources Corporation and Subsidiaries as of December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Note 9 to the consolidated financial statements, the
Company changed its method of accounting for impairment of long-lived assets, as
required by Statement of Financial Accounting Standards No. 121, in 1995.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
Denver, Colorado
March 27, 1996
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CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1995 1994
----------------- ----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $1,893,800 $13,280,100
Restricted cash 25,212,600 1,869,000
Accounts receivable 586,300 520,100
Inventories 664,200 2,430,400
Prepaid and other assets 297,900 218,500
----------------- ----------------
Total current assets 28,654,800 18,318,100
----------------- ----------------
Property and equipment, at cost
Mining claims and leases 34,321,800 28,624,200
Producing properties 2,869,100 29,988,500
Other 2,692,600 566,800
----------------- ----------------
39,883,500 59,179,500
Accumulated depreciation and depletion (1,359,100) (27,162,000)
----------------- ----------------
Net property and equipment 38,524,400 32,017,500
----------------- ----------------
Debt issuance costs, net of amortization of $741,100 for 1995, and $414,200 for 1994 1,981,800 1,079,600
Other assets 3,263,200 772,400
----------------- ----------------
Total Assets $72,424,200 $52,187,600
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $806,900 $847,300
Notes payable - current 216,600 276,400
Accrued taxes, other than payroll and income 413,200 757,700
Accrued reclamation costs 686,000 731,700
Deferred income taxes 267,900 245,600
Other accrued liabilities 476,800 506,400
----------------- ----------------
Total current liabilities 2,867,400 3,365,100
Notes payable - long term 47,371,800 22,479,900
Accrued reclamation costs 2,026,000 867,200
Other noncurrent liabilities 88,500 121,800
----------------- ----------------
Total Liabilities 52,353,700 26,834,000
----------------- ----------------
Commitments and contingencies (Notes 10 and 11)
Common stock ($.01 par value) 100,000,000 shares authorized; issued and out-
standing: 25,793,300 at December 31, 1995 and 25,497,100 at December 31, 1994 257,900 255,000
Capital in excess of par value 46,072,500 45,215,300
Deficit (26,259,900) (20,116,700)
----------------- ----------------
Total Stockholders' Equity 20,070,500 25,353,600
----------------- ----------------
Total Liabilities and Stockholders' Equity $72,424,200 $52,187,600
================= ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
42
<PAGE> 45
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
---------------- ---------------- ----------------
<S> <C> <C> <C>
REVENUE
Sales $9,006,600 $19,580,200 $19,879,600
---------------- ---------------- ----------------
EXPENSES
Cost of sales 7,393,600 12,307,300 12,534,100
Depreciation, depletion, and amortization 723,100 2,118,000 1,956,700
Selling, general and administrative 3,377,600 3,020,600 2,058,200
Exploration costs 991,700 1,158,700 303,800
Abandoned mineral properties 302,300 101,400 1,316,400
Provision for final site restoration 1,087,300 - -
Impairment of assets 296,000 - -
---------------- ---------------- ----------------
14,171,600 18,706,000 18,169,200
---------------- ---------------- ----------------
OTHER INCOME (EXPENSE)
Interest income 570,000 652,200 420,000
Interest expense (1,679,300) (1,861,000) (1,217,400)
Other 131,100 (3,400) (28,100)
---------------- ---------------- ----------------
(978,200) (1,212,200) (825,500)
---------------- ---------------- ----------------
Income (loss) before income tax expense
and minority interest in consolidated subsidiaries (6,143,200) (338,000) 884,900
Minority interest in net (loss) of consolidated
subsidiaries - 300 -
Provision for (benefit of) income taxes - - (35,800)
---------------- ---------------- ----------------
Net income (loss) ($6,143,200) ($337,700) $920,700
================ ================ ================
Net income (loss) per share ($0.24) ($0.01) $0.04
================ ================ ================
Weighted average shares outstanding 25,696,800 25,470,400 24,636,100
================ ================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<PAGE> 46
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
For the years ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Capital Retained
Common Stock in excess Earnings
Shares Amount of par value (Deficit)
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Balances, December 31, 1992 24,019,100 $240,200 $42,283,500 ($20,699,700)
-------------- --------------- --------------- ----------------
Issuance of stock and warrants 250,000 2,500 846,900 -
Exercise of stock options 259,500 2,600 329,800 -
Conversion of debenture 789,500 7,900 1,492,100
Net income - - - 920,700
-------------- --------------- --------------- ----------------
Balances, December 31, 1993 25,318,100 253,200 44,952,300 (19,779,000)
Exercise of stock options 150,000 1,500 163,300 -
Conversion of debenture 29,000 300 99,700 -
Net (loss) - - - (337,700)
-------------- --------------- --------------- ----------------
Balances, December 31, 1994 25,497,100 255,000 45,215,300 (20,116,700)
-------------- --------------- --------------- ----------------
Issuance of stock 61,600 600 99,400
Exercise of stock options 24,400 200 34,900 -
Conversion of debentures 210,200 2,100 722,900 -
Net (loss) - - - (6,143,200)
-------------- -------------- --------------- ----------------
Balances, December 31, 1995 25,793,300 $257,900 $46,072,500 ($26,259,900)
============== =============== =============== ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
44
<PAGE> 47
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
------------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($6,143,200) ($337,700) $920,700
Adjustments to reconcile net income (loss) to net cash:
Depreciation, depletion, and amortization 723,100 2,118,000 1,956,700
Amortization of financing costs 326,900 411,800 251,200
Abandoned mineral properties 302,300 101,400 1,316,400
Impairment of assets 296,000 - -
Equity in loss of Minera Hispaniola 7,100 22,400 29,000
Loss (gain) on disposal of equipment (161,000) (10,500) 1,800
Other 74,200 4,900 -
Changes in assets and liabilities,
(Increase) in receivables (70,100) (120,800) (157,200)
Decrease (increase) in inventories 1,766,200 (781,400) 846,500
Decrease (increase) in prepaid and other assets (97,000) 264,300 (229,600)
Increase (decrease) in accounts payable and accrued liabilities (604,500) 575,100 435,500
Increase (decrease) in other liabilities 1,223,900 154,100 (220,300)
------------------- ----------------- -----------------
Total adjustments 3,787,100 2,739,300 4,230,000
------------------- ----------------- -----------------
Net cash provided by (used in) operating activities (2,356,100) 2,401,600 5,150,700
------------------- ----------------- -----------------
Cash flows from investing activities:
Purchases of property and equipment (8,082,900) (6,667,400) (7,578,400)
Proceeds on asset dispositions 430,800 200,000 6,000
Increase (decrease) in accounts payable and accrued liabilities 2,100 (143,100) 410,500
Other 20,000 (72,500) (186,900)
------------------- ----------------- -----------------
Net cash used in investing activities (7,630,000) (6,683,000) (7,348,800)
------------------- ----------------- -----------------
Cash flows from financing activities:
Issuance of stock 35,100 174,200 619,900
Debenture conversion cost (43,500) (9,500) -
Payments on debt (386,400) (2,447,100) (4,606,000)
Payments on capital lease obligations (35,000) (35,700) (55,100)
Proceeds from gold loans and debentures 2,740,400 - 26,000,000
Payments for debt issuance costs (1,126,500) - (1,563,400)
Payments to escrow account (2,000,300) - -
Payments to collateralize letters of credit (584,000) (286,800) (1,582,200)
------------------- ----------------- -----------------
Net cash provided by (used in) financing activities (1,400,200) (2,604,900) 18,813,200
------------------- ----------------- -----------------
Net increase (decrease) in cash and cash equivalents (11,386,300) (6,886,300) 16,615,100
Cash and cash equivalents, beginning of year 13,280,100 20,166,400 3,551,300
------------------- ----------------- -----------------
Cash and cash equivalents, end of year $1,893,800 $13,280,100 $20,166,400
=================== ================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
45
<PAGE> 48
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
Supplemental disclosures of cash flow information:
1. The Company paid $1,369,100, $1,453,500, and $891,400 of interest during
1995, 1994, and 1993, respectively.
2. The Company paid no income taxes during 1995 and 1994, and $78,200 of income
taxes during 1993.
Supplemental schedule of noncash investing and financing activities:
1. Capital lease obligations of $48,600, $55,600, and $62,100 were incurred for
equipment in 1995, 1994, and 1993, resepectively.
2. Debentures in the principal amount of $725,000 were converted into 210,100
shares of common stock during 1995 and $100,000 in principal were converted
into 29,000 shares of common stock during 1994.
3. The Company issued 61,500 shares of common stock which was valued at
$100,000 in exchange for a joint venture interest during 1995 and issued
150,000 shares of common stock and warrants to purchase an additional 75,000
shares of common stock which was valued at $394,500 in exchange for a joint
venture interest during 1993.
4. During 1995, the Company transferred title to previously financed equipment
back to the creditor for consideration equal to the unpaid balance of
$56,500.
5. Certain stock options were exercised and paid for by tendering shares
otherwise issuable in lieu of cash payment. Fair market value of the shares
tendered was $9,500, $254,600, and $265,100 during 1995, 1994, and 1993,
respectively.
6. The Company financed $899,900 of equipment purchases during 1994.
7. The Company issued a warrant to purchase 200,000 shares of common stock
which was valued at $167,400 during 1993.
8. A note payable in the amount of $1,500,000 was converted into 789,500 shares
of common stock during 1993.
The accompanying notes are an integral part of these consolidated financial
statements.
46
<PAGE> 49
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS:
Canyon Resources Corporation ("the Company") is a United States based
corporation involved in all phases of the mining business from exploration,
permitting, developing, operating and final closure of mining projects. The
Company has gold and industrial mineral production operations in the western
United States and conducts exploration activities in search of additional
mineral properties (emphasizing precious metals and industrial minerals) in the
western United States and throughout Latin America and Africa. The principal
market for the Company's precious metals products are European-based bullion
trading concerns. The Company's industrial minerals products (diatomite) are
differentiated based on particle size distribution and sold through a
distributor network in the United States, Canada and internationally to the
paint, plastics, asphalt coatings, and filler markets. Direct sales of diatomite
are also made to agricultural markets as an insecticide.
2. USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION: The consolidated financial statements of the Company include the
accounts of Canyon and its wholly-owned subsidiaries: CR Kendall Corporation; CR
Minerals Corporation; CR Briggs Corporation; CR Montana Corporation; CR
International Corporation; Canyon Resources (Chile) S.A.; Canyon de Panama,
S.A.; CR Brazil Corporation; and its 90% owned subsidiaries: Canyon Resources
Venezuela, C.A.; Canyon Resources Africa Ltd.; and Canyon Resources Tanzania
Limited. The Company applies equity accounting principles for its 40% ownership
in Minera Hispaniola, S.A., a foreign corporation, and proportionately
consolidates its interests in undivided interest joint ventures. All
intercompany balances and transactions have been eliminated.
Certain prior period items have been reclassified in the consolidated financial
statements to conform with the current year presentation.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include amounts which are
readily convertible into cash and which are not subject to significant risk from
changes in interest rates. The Company maintained at December 31, 1995 and 1994,
a significant portion of its cash in two financial institutions.
RESTRICTED CASH: Cash held as collateral for letters of credit or in escrow for
contingencies is classified based on the expected expiration of such facilities.
Cash restricted to specific uses is classified based on the expected timing of
such disbursements. See Note 7.
INVENTORIES: Processed ores and metal-in-process are stated at the lower of
average cost or market. Materials and supplies are stated at cost.
47
<PAGE> 50
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
DEFERRED MINING COSTS: The Company, in order to more closely match expenses and
revenues, capitalizes costs of overburden removal that are in excess of the
estimated average pit strip ratio over the pit life. When the actual strip ratio
becomes less than the estimated average pit strip ratio, these costs are
expensed.
MINING CLAIMS AND LEASES: The Company's policy is to expense exploration costs
incurred prior to identification of specific land areas of interest and to defer
all costs directly associated with acquisition, exploration and development of
specific properties until the land area of interest to which they relate is put
into operation, sold or abandoned. Gains or losses resulting from the sale or
abandonment of mining properties are included in operations. Proceeds from sales
of properties and earn-in arrangements in which the Company has retained an
economic interest are credited against property costs and no gain is recognized
until all costs have been fully recovered.
Costs associated with producing properties are charged to operations using the
units-of-production method based on estimated recoverable reserves.
PROPERTY AND EQUIPMENT: Gold production facilities and equipment are stated at
cost and are depleted over the estimated production base of the related
property. Diatomite production facilities and equipment are stated at cost and
are depreciated using the straight-line method over estimated useful lives of
three to forty years. Vehicles and office equipment are stated at cost and are
depreciated using the straight-line method over estimated useful lives of three
to five years. Maintenance and repairs are charged to expense as incurred. Gains
or losses on dispositions are included in operations.
The Company has elected early adoption of Statement of Financial Accounting
Standards No. 121 (SFAS 121), Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of. SFAS 121 requires that an
impairment loss be recognized when the estimated future cash flows (undiscounted
and without interest) expected to result from the use of an asset are less than
the carrying amount of the asset. Measurement of an impairment loss is based on
fair value of the asset if the asset is expected to be held and used.
RECLAMATION: Costs are estimated based primarily upon environmental and
regulatory requirements and are accrued and charged to expense over the expected
economic life of the operation using the units of production method. The accrual
for reclamation is classified based on the timing of expected expenditures.
GOLD HEDGING: Gains or losses related to changes in values of hedging
instruments are included in revenues when the related inventories are sold. The
resulting cash flow is included in net cash provided by operating activities on
the statements of cash flows.
GOLD LOANS: Gold loans are monetized at the original proceeds amount and are
recognized into revenue at the time of physical delivery of the metal. At any
time that it is not probable that the timing and amount of production will be
sufficient to repay the gold loan, or the cost of the production exceeds the
market price of the gold, the gold loan is recorded at the higher of the
original proceeds or the market value.
48
<PAGE> 51
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
DEFERRED FINANCING COSTS: Costs incurred to obtain debt financing are
capitalized and amortized over the life of the debt facilities using the
effective interest method.
INTEREST CAPITALIZATION: Interest costs are capitalized as part of the
historical cost of facilities and equipment, if material. Interest is not
capitalized on properties in the exploration stage until a decision is made to
develop the property and construct facilities, and all necessary permits and
financing (if necessary) are in place.
EARNINGS PER SHARE: Earnings per share are based on the weighted average number
of common shares outstanding during 1995, 1994, and 1993. Common share
equivalents were not included in 1995 and 1994 because their effect would be
antidilutive. During 1993, common share equivalents were not included because
they did not reduce per share amounts by more than 3%. Fully diluted earnings
per share are reported if the calculation results in per share dilution greater
than 3%.
4. INVENTORIES:
Inventories consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Gold-in-process (a) $389,200 $2,177,300
Diatomite (a) 120,000 90,000
Materials and supplies 155,000 163,100
-------- ----------
$664,200 $2,430,400
======== ==========
</TABLE>
(a) Includes all direct and indirect costs of mining, crushing, processing
and general and administrative expenses of the operation.
5. INCOME TAXES:
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109). SFAS 109 requires deferred income taxes
to be computed under the asset and liability method and to be adjusted to and
maintained thereafter at statutory rates in effect when the taxes are expected
to be paid. SFAS 109 also requires that a valuation allowance be provided if it
is more likely than not that some portion or all of a deferred tax asset will
not be realized. Although the Company has significant deferred tax assets,
principally in the form of operating loss carryforwards, its ability to generate
future taxable income to realize the benefit of these assets will depend
primarily on bringing new mines into production. The market, capital, and
environmental uncertainties associated with that growth requirement are
considerable, resulting in the Company's conclusion that a full valuation
allowance be provided, except to the extent that the benefit of operating loss
carryforwards can be used to offset future reversals of existing deferred tax
liabilities. As a result, adoption had no net cumulative effect on the results
of operations. No changes occurred during 1995, 1994 and 1993 in the conclusions
regarding the need for the valuation allowance. During 1995, 1994 and 1993, the
change in the valuation allowance was $2,190,200, $1,474,300, and $52,100,
respectively.
49
<PAGE> 52
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. INCOME TAXES, CONTINUED:
Deferred tax assets and liabilities were comprised of the following at
December 31, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
DEFERRED TAX ASSETS
Reserve for mine reclamation $ 1,084,800 $ 639,600
Inventories 759,500 1,191,200
Net Operating Loss Carryforwards 14,580,800 10,252,400
Other 333,600 317,900
------------ ------------
Total Gross Deferred Tax Assets 16,758,700 12,401,100
Valuation Allowances (12,560,600) (10,393,200)
------------ ------------
Net Deferred Tax Assets $ 4,198,100 $ 2,007,900
------------ ------------
DEFERRED TAX LIABILITIES
Net PP&E (writedowns, depreciation/depletion and
exploration/development expenditures) $ (4,198,100) $ (2,007,900)
------------ ------------
NET DEFERRED INCOME TAX ASSET (LIABILITY) $ - $ -
============= ============
</TABLE>
The provision for income taxes for the years ended December 31, 1995, 1994,
and 1993 consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Federal:
Current $ -- $ -- $(35,800)
Deferred -- -- --
-------- -------- --------
$ -- $ -- $(35,800)
======== ======== ========
</TABLE>
The provision for income taxes differs from the amounts computed by
applying the U.S. federal statutory rate as follows: 1995 1994 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Tax at Statutory Rate of 34% $(2,063,200) $ (114,800) $ 300,900
Net Operating Loss (With) Without Tax Benefit 2,063,200 114,800 (300,900)
Alternative Minimum Tax -- -- (35,800)
----------- ---------- -----------
$ -- $ -- $ (35,800)
=========== ========== ===========
</TABLE>
At December 31, 1995, the Company had net operating loss carryforwards for
regular tax purposes of approximately $37,186,200 and approximately $17,800,400
of net loss carryforwards available for the alternative minimum tax. The net
loss carryforwards will expire from 1999 through 2009.
50
<PAGE> 53
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. INCOME TAXES, CONTINUED:
As a result of a merger in 1987, net operating loss carryforwards are
limited by Section 382 of the Internal Revenue Tax Code to approximately
$112,800 annually. As of December 31, 1995, the amount of remaining net
operating loss carryforwards limited by Section 382 is $1,251,500.
6. NOTES PAYABLE:
Notes payable consisted of the following at:
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
----------- ------------
<S> <C> <C>
Briggs Loan (a) $26,000,000 $ --
6% Debentures (b) 21,175,000 21,900,000
Caterpillar Finance Note (c) 413,400 856,300
----------- -----------
47,588,400 22,756,300
Current portion 216,600 276,400
----------- -----------
Notes Payable - Long Term $47,371,800 $22,479,900
=========== ===========
</TABLE>
(a) On December 6, 1995, the Company's wholly owned subsidiary, CR Briggs
Corporation, secured a $34.0 million loan facility to finance the capital
requirements of mine construction and working capital for its Briggs Mine in
California. The Company is guaranteeing the loan obligations of CR Briggs
Corporation, and the loan facility is collateralized by a first mortgage lien on
the property, non-leased assets of CR Briggs Corporation, and a pledge of the
Company's stock in CR Briggs Corporation. The facility was provided by a
syndication of three banks; Banque Paribas, Bayerische Vereinsbank AG, and NM
Rothschild & Sons Ltd. and includes three tranches; a $25 million gold loan; a
$5 million cash loan; and a $4 million cost overrun facility. The cost overrun
facility is available only in the event of spending in excess of $30 million and
an additional $2 million contribution by the Company. (See Note 7(d)). On
December 27, 1995 drawing commenced on the facility and $25.0 million principal
in the form of a gold loan and $1.0 million principal as a dollar loan were
drawn. The gold loan portion was monetized at $388.05 per ounce, or 64,425
ounces and carries an initial interest rate for 90 days of 5.32%. The dollar
loan's initial interest rate for 90 days is 9.87%. Varying interest rate periods
can be selected under the terms of the facility. Repayment terms require
quarterly installments over six years, commencing in 1997 which include
scheduled principal reductions and a varying cash sweep amount equal to 30% of
free cash flow (as defined) after primary debt service. After funding certain
reserve accounts, if necessary, remaining cash flow is available to the Company,
subject to further restrictive conditions. These restrictions include assertions
of no potential or actual defaults at the time of transfer and to the frequency
of such transfers. Within three years of project completion (approximately 4
months beyond construction completion and start-up) an additional 70,000 ounces
of recoverable reserves must be identified or 100% of excess cash flow after
scheduled repayments will be applied as additional prepayments against the loan
amounts. As a condition of the loan, a portion of the Briggs Mine's future
production was hedged to ensure adequate cash flow for repayment of the
obligation. Accordingly, fixed forward contracts totalling 186,600 ounces were
entered into at prices ranging from $395 per ounce to
51
<PAGE> 54
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
6. NOTES PAYABLE, CONTINUED:
$424 per ounce. In addition, put options on 21,600 ounces at a strike price of
$380 per ounce were purchased. The put options were financed by the sale of call
options on 10,800 ounces at a strike price of $403 per ounce. Approximately 41%
of the Briggs Mine estimated production from current reserves was hedged through
forwards and put options as of December 31, 1995. Upon the occurrence and during
a default (as defined) the lenders may, by notice to CR Briggs Corporation,
terminate the commitment and declare all amounts immediately due and payable.
The Company (through project completion) and CR Briggs Corporation are also
subject to cross-default provisions without the giving of notice in respect of
other indebtedness and agreements which would cause such indebtedness to become
due prior to its maturity.
(b) On June 2, 1993, the Company sold $22.0 million of Subordinated Convertible
Debentures which are due June 1, 1998. Expenses associated with the financing
totalled $1.5 million. Interest is payable semi-annually on June 1 and December
1 at a rate of 6% per annum. Interest payments in 1995, 1994 and 1993 totalled
$1,289,300, $1,317,000 and $656,300, respectively. The debentures are
convertible at the option of the holder any time into common shares at the rate
of $3.45 per share. During 1995, $725,000 of principal was converted into
210,100 shares of common stock. During 1994, $100,000 of principal was converted
into 29,000 shares of common stock. After three years, the Company may redeem
the debentures by issuing common stock at a rate equal to 94% of the then
trading common stock price or by payment in cash at par. Upon the occurrence of
certain events, principally relating to changes in control of the Company, each
note holder has the right, at the holder's option, to require the Company to
repurchase the notes for cash at par plus accrued interest to the repurchase
date.
(c) In August 1994, the Company exercised purchase options on its leased mining
equipment at the Kendall Mine for $899,900. Caterpillar Financial Services
subsequently agreed to finance the purchase price over a three year period at a
fixed interest rate of 9.5%. During 1995, the Company paid $59,700 of interest
and reduced the principal balance by $442,900, including a prepayment of
$210,500 related to equipment which was sold because it was no longer needed.
During 1994, the Company paid $14,100 of interest and reduced the principal
balance by $57,600 in connection with the financing terms.
Maturities of notes payable, excluding additional payments under the gold loan
as more fully described in (a) above, are as follows for the next five years:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 216,600
1997 2,884,300
1998 24,612,500
1999 3,562,500
2000 3,187,500
Thereafter 13,125,000
-----------
Total $47,588,400
===========
</TABLE>
52
<PAGE> 55
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. RESTRICTED CASH:
Restricted cash consisted of the following at December 31:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Collateral for Letter of Credit (a) $ 1,953,000 $1,869,000
Collateral for Letter of Credit (b) 500,000 --
Unexpended proceeds from loan drawing (c) 23,259,600 --
Contingency account (d) 2,000,300 --
----------- ----------
Current portion (a and c) $27,712,900 $1,869,000
Noncurrent portion (b and d) 25,212,600 1,869,000
---------- ----------
$ 2,500,300 $ --
=========== ==========
</TABLE>
(a) In connection with the issue of certain bonds in 1995 for the performance of
reclamation obligations at the Kendall and Briggs Mines, a bank Letter of Credit
has been provided in favor of the Surety as partial collateral for such bond
obligations. The Letter of Credit, in the amount of $1,953,000, will expire no
earlier than December 31, 1996, and at the bank's option, may be renewed for
successive one-year periods. The Company has fully collateralized the Letter of
Credit by depositing cash in the amount of $1,953,000 with the bank. At December
31, 1994, cash held as collateral for a Letter of Credit related only to
reclamation bonding requirements at the Kendall Mine.
(b) In connection with a first year work commitment on an exploration property
in Ethiopia, a bank Letter of Credit has been provided in favor of the Ministry
of Mines and Energy, Federal Democratic Republic of Ethiopia. The Letter of
Credit, in the amount of $500,000, will expire on January 6, 1997. The Company
has fully collateralized the Letter of Credit by depositing cash in the amount
of $500,000 with the bank.
(c) As described in Note 6(a), the loan proceeds are restricted solely for the
development of the Briggs Mine.
(d) As a condition precedent to securing a loan facility (See Note 6(a)), the
Company transferred $2.0 million to an escrow account to be held in reserve
against construction cost overruns at the Briggs Mine. These funds, net of any
cost overruns, will be returned to the Company upon final completion of an
expansion phase of development, currently scheduled in 1997.
53
<PAGE> 56
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. MINING CLAIMS AND LEASES:
The carrying value of the Company's mining claims and leases consists of
the following components at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
December 31,
1995 1994
----------- -----------
<S> <C> <C>
Mining Property:
Briggs $17,973,200 $14,346,500
McDonald 7,216,900 6,038,100
Exploration Properties 9,131,700 8,239,600
----------- -----------
$34,321,800 $28,624,200
=========== ===========
</TABLE>
Feasibility studies on the Briggs and McDonald properties indicate sufficient
mineable reserves that, with subsequent development, would allow the Company to
ultimately recover its carrying value at December 31, 1995. The results of
exploration activities on the Company's exploration properties to date have not
resulted in conclusions that the carrying value of these properties will or will
not be recoverable by charges against income from future mining operations or
sale of properties. The Company cannot presently determine the ultimate
realizability of the carrying values of the exploration properties ($9,131,700
and $8,239,600 at December 31, 1995 and 1994, respectively) since the
realization is dependent upon the discovery of reserves in commercial quantities
and the subsequent development or sale of those reserves.
9. ASSET IMPAIRMENT:
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121 (SFAS 121), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. SFAS 121 requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable.
Concurrent with adoption, the Company has determined that its carrying value for
property and equipment at the Kendall Mine is not recoverable, due principally
to the maturing life of the mine (remaining economic life of one year) and the
level of site restoration costs anticipated during the next two to three years
to achieve mine closure. As estimated cash outflows exceed estimated cash
inflows, the Company has reduced the carrying value to zero, recorded a fourth
quarter 1995 impairment of $296,000, and removed gross property and equipment
costs and accumulated depreciation and depletion amounts from the Balance Sheet
of $26,763,900 and $26,467,900, respectively, as of the adoption date.
10. LEASE COMMITMENTS:
The Company has entered into various operating leases for office space and
equipment, including a mining fleet at the Briggs Mine, and vehicles used in its
operations. At December 31, 1995, future minimum lease payments extending beyond
one year under noncancellable leases were as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 Thereafter Total
---------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
$1,558,200 $1,557,900 $1,551,700 $1,511,200 $1,511,200 $ 84,000 $7,774,200
</TABLE>
54
<PAGE> 57
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. LEASE COMMITMENTS, CONTINUED:
The Company has also entered into various mining lease arrangements for
purposes of exploring, and if warranted, developing and producing minerals from
the underlying leasehold interests. The lease arrangements typically require
advance royalty payments during the pre-production phase and a production
royalty upon commencement of production, with previously advanced payments
credited against the production royalties otherwise payable. Advance royalty
commitments will vary each year as the Company adds or deletes properties.
Currently, minimum advance royalty payments total approximately $152,300
annually.
The Company is also required to pay an annual rental fee to the federal
government for any unpatented mining claims, mill or tunnel site claim on
federally owned lands at the rate of $100 per mining claim. The Company's
present inventory of claims would require approximately $134,100 in annual
rental fees, however, this amount will vary as claims are added or dropped. The
Company has submitted patent applications for its Briggs and diatomite claims,
however, no assurances can be made that patents will be issued. The Company is
also subject to rental fees to various other owners or lessors of mining claims.
Currently, rental payments to these parties total approximately $124,000
annually.
Lease costs included in cost of goods sold for the years ended December 31,
1995, 1994 and 1993 were $85,600; $1,013,000 and $1,419,500, respectively. Rent
expense included in selling, general and administrative expense of the Company
for the years ended December 31, 1995, 1994 and 1993, was $121,200; $107,900;
and $72,800, respectively.
Property and equipment includes equipment with a cost and accumulated
amortization of $143,500 and $46,200, respectively, at December 31, 1995 and
$330,600 and $234,300, respectively, at December 31, 1994 for leases that have
been capitalized. Future minimum lease obligations under capital leases are as
follows:
<TABLE>
<S> <C>
1996 $ 61,900
1997 45,900
1998 16,300
-----------
Total $ 124,100
Less amounts representing interest 15,500
-----------
Present value of minimum lease payments 108,600
Less current obligations 51,800
-----------
Long-term obligations under capital lease $ 56,800
===========
</TABLE>
11. COMMITMENTS AND CONTINGENCIES:
Certain actions are pending with respect to permits issued for the Briggs
Mine in California. A local environmental group and the Timbisha Shoshone Tribe
have; 1) appealed the Bureau of Land Management's decision to approve the Final
Environmental Impact Statement and Plan of Operations; 2) petitioned the
Superior Court of Inyo County alleging violations of the California
Environmental Quality Act and the Surface Mining and Reclamation Act; and 3)
filed a challenge to the issuance of Waste Discharge requirements by the
Lahontan Regional Water Quality Board. The Company has vigorously defended its
position in each of the proceedings and believes that all claims are without
merit.
55
<PAGE> 58
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. COMMITMENTS AND CONTINGENCIES, CONTINUED:
Based upon current knowledge, the Company believes that it is in material
compliance with environmental laws and regulations as currently promulgated.
However, the exact nature of environmental control problems, if any, which the
Company may encounter in the future cannot be predicted, primarily because of
the increasing number, complexity and changing character of environmental
requirements that may be enacted or of the standards being promulgated by
federal, state, or foreign authorities.
12. CERTAIN CONCENTRATIONS AND CONCENTRATIONS OF CREDIT RISK:
The Company sold its gold and silver production predominately to one
customer during 1995, 1994 and 1993. Given the nature of the commodities being
sold and because many other potential purchasers of gold and silver exist, it is
not believed that loss of such customer would adversely affect the Company.
Sales of diatomite were made to a diverse base of customers during 1995, 1994,
and 1993.
The Company is subject to credit risk in connection with its price
protection arrangements as outlined in Note 6(a) in the event of non-performance
by its counterparties. The Company uses only highly-rated creditworthy
counterparties, however, and does not anticipate non-performance.
The Company is subject to concentrations of credit risk in connection with
maintaining its cash primarily in two financial institutions. The Company
considers the institutions to be financially strong and does not consider the
underlying risk to be significant. To date, these concentrations of credit risk
have not had a significant effect on the Company's financial position or results
of operations.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company does not acquire, hold or issue financial instruments for
trading purposes. The estimated fair values of the Company's financial
instruments at December 31, 1995 and December 31, 1994, are as follows:
<TABLE>
<CAPTION>
=============================================================================================================
AT DECEMBER 31 1995 1994
------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents $ 1,893,800 $ 1,893,800 $13,280,100 $13,280,100
Restricted Cash $27,712,900 $27,712,900 $ 1,869,000 $ 1,869,000
Long-term Investments:
Practicable to Estimate $ 353,700 $ 432,600 $ 50,000 $ 68,700
Not Practicable to Estimate -- -- $ 360,800 --(1)
Long-term Debt (2) $21,588,400 $18,200,400 $22,756,300 $15,310,300
=============================================================================================================
</TABLE>
56
<PAGE> 59
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED:
(1) At December 31, 1994, it was not practicable for the Company to
estimate fair value for its 40% ownership in an untraded foreign company
carried at historic cost, the principal assets of which were exploration
properties. During 1995, the shareholders of the foreign subsidiary entered
into an option to purchase shares agreement with a third party, allowing
the third party to acquire 100% ownership (subject to the shareholders
retaining certain royalty rights) after certain work commitments and
purchase obligations were fulfilled. At December 31, 1995, fair value was
estimated based on the Company's share of expected discounted cash flows
resulting from such agreement.
(2) Long-term debt excludes the carrying and fair value amounts for the
Company's gold loan (see Note 6(a)) because the commodity based loan does
not meet the criteria established for inclusion as a financial instrument.
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
CASH AND CASH EQUIVALENTS: Carrying amounts approximate fair value based on the
short-term maturity of those instruments.
RESTRICTED CASH: Carrying amounts approximate fair value based on the short term
maturity of those instruments.
LONG-TERM INVESTMENTS: Fair value estimate based on expected discounted cash
flows at a discount rate commensurate with the risk and contingent nature of
future payments.
LONG-TERM DEBT: Fair value estimate for convertible debentures based on quoted
market prices. Fair value estimate for other long-term debt based on discounted
cash flows using the Company's current rate of borrowing for a similar
liability.
14. STOCK OPTIONS:
The Company adopted an Incentive Stock Option Plan on April 12, 1982, as
amended (the "Plan"), whereby options to purchase shares of the Company's common
stock may be granted to employees of the Company, including those who are also
directors of the Company, or subsidiary corporations in which the Company owns
greater than a 50% interest. Exercise price for the options is at least equal to
100% of the market price of the Company's common stock at the date of grant for
employees who own 10% or less of the total voting stock of the Company; and 110%
of the market price of the Company's common stock at the date of grant for
employees who own more than 10% of the Company's voting stock. Options become
exercisable after the second anniversary of the date of the grant and can expire
up to 10 years from the date of the grant.
57
<PAGE> 60
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
14. STOCK OPTIONS, CONTINUED:
Information on incentive stock option activity follows:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------------------------------------------------
Price Range Amount Price Range Amount Price Range Amount
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year $1.00 - $3.69 1,689,000 $1.00 - $3.69 1,455,000 $0.97 - $3.50 1,498,500
Granted $2.00 - $2.31 540,500 $1.63 - $3.56 422,000 $2.72 - $3.69 422,500
Exercised $1.00 - $1.63 (23,500) $1.00 - $3.50 (141,500) $0.97 - $3.50 (321,500)
Cancelled $1.63 - $3.69 (240,500) $1.63 - $3.69 (46,500) $1.00 - $3.50 (144,500)
Outstanding,
end of year $1.00 - $3.69 1,965,500 $1.00 - $3.69 1,689,000 $1.00 - $3.69 1,455,000
========= ========= =========
</TABLE>
At December 31, 1995, the 1,965,500 shares under option are exercisable from
January 1, 1996 through December 6, 2000 and 911,386 shares remain reserved for
future issuance under the Plan.
On March 20, 1989, the Company's Board of Directors approved the adoption
of a Non-Qualified Stock Option Plan (the "Non-Qualified Plan"). Under the
Non-Qualified Plan, the Board of Directors may award stock options to
consultants, directors and key employees of the Company, and its subsidiaries
and affiliates, who are responsible for the Company's growth and profitability.
The Non-Qualified Plan does not provide criteria for determining the number of
options an individual shall be awarded, or the term of such options, but confers
broad discretion on the Board of Directors to make these decisions. Total
options granted under the Non-Qualified Plan may not have a term longer than 10
years or an exercise price less than 50 percent of the fair market value of the
Company's common stock at the time the option is granted.
By vote of the Company's shareholders at the May 17, 1995 Annual
Shareholders Meeting, the Company adopted a motion to award each non-employee
Director options to purchase 10,000 shares of common stock each year during
their tenure on the Board of Directors. Such stock option awards from the
Non-Qualified Plan are made at an exercise price equal to the closing price of
the Company's common stock one day prior to the Annual Shareholders Meeting. The
non-employee Director grants are exercisable at any time between one and five
years from the date of grant.
58
<PAGE> 61
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
14. STOCK OPTIONS, CONTINUED:
Information on non-qualified stock option activity follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Price Range Amount Price Range Amount Price Range Amount
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of year $1.44 - $3.69 305,000 $1.44 - $3.69 360,000 $1.44 - $2.50 310,000
Granted $2.06 60,000 $2.19 20,000 $3.19 - $3.69 75,000
Exercised $1.88 (5,000) $1.75 - $2.00 (75,000) $1.75 - $1.88 (25,000)
Cancelled $2.50 (25,000) -- -- -- --
------- ------- -------
Outstanding,
end of year $1.44 - $3.69 335,000 $1.44 - $3.69 305,000 $1.44 - $3.69 360,000
======= ======= =======
</TABLE>
At December 31, 1995, the 335,000 shares under option (all issued at 100% of
fair market value) are exercisable from January 1, 1996 through May 16, 2000 and
273,357 shares remain reserved for future issuance under the Non-Qualified Plan.
The Company has not recognized any compensation expense in connection with
option grants under the Non-Qualified Plan as all grants were issued at fair
market value.
In conjunction with the initial public offering of the Company's common
stock, the Company issued options to purchase 55,000 shares of the Company's
common stock at $2.00 per share to two members of the Company's Board of
Directors. The options were exercised in 1994.
In October, 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting For
Stock-Based Compensation. SFAS 123 defines a "fair value" based method of
accounting for employee options or similar equity instrument. SFAS 123
encourages, but does not require the method of accounting prescribed by the
Statement, and does allow for an entity to continue to measure compensation cost
as prescribed by APB Opinion No. 25 (APB 25), Accounting for Stock Issued to
Employees. Entities electing to remain with APB 25 must make proforma
disclosures of net income and earnings per share as if the fair value based
method had been applied, effective for fiscal years beginning after December 15,
1995. The Company expects to continue to measure compensation cost under APB 25,
subject to the proforma disclosure requirements of SFAS 123.
59
<PAGE> 62
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
15. WARRANTS:
As a result of a private placement during January 1990, warrants to
purchase 2,923,700 shares of $.01 par value common stock were sold. For each
four shares of the Company's common stock purchased in the private placement,
the purchaser received one warrant to purchase one share of the Company's common
stock, at an exercise price of $3.50 per share. The warrants were initially
scheduled to expire on December 31, 1994, however, the Company has extended the
expiration date to April 12, 1996. No warrants have been exercised to date.
As a result of a private placement during March 1992, warrants to purchase
1,019,900 shares of $.01 par value common stock were sold. For each two shares
of the Company's common stock purchased in the private placement, the purchaser
received one warrant to purchase one share of the Company's common stock, at an
exercise price of $3.50 per share. The warrants were initially scheduled to
expire on December 31, 1994, however, the Company has extended the expiration
date to April 12, 1996. No warrants have been exercised to date.
A warrant to purchase 200,000 shares of common stock at an exercise price
of $2.875 per share, exercisable until December 31, 1994, was issued in
connection with a gold loan secured by the Company in May 1993. One-half of the
warrant was subsequently exercised in October 1993. A replacement warrant was
issued for the remaining 100,000 shares and, the Company has extended the
scheduled expiration date to April 12, 1996.
In connection with the purchase of the Minex II parties' interests in May
1993 (see Note 17), warrants to purchase 75,000 shares of the Company's common
stock were issued at an exercise price of $3.00 per share, exercisable until May
11, 1996. No warrants have been exercised to date.
16. SITE RESTORATION COSTS:
Reclamation at the Kendall Mine is ongoing throughout the life of the
operation. Approximately $1.5 million has been spent to date reclaiming
disturbed areas by contouring, replacing topsoil and reseeding. As of the end of
January 1995, all identifiable mineable ore reserves have been mined. Final
reclamation will require recontouring of waste rock dumps, roads and other
areas, and rinsing of the spent ore in the heaps. In the fourth quarter of 1995,
the Company revised its anticipated scope of work for final reclamation and
estimates total costs of approximately $4.2 million. As of December 1, 1995, the
Company had accrued approximately $3.1 million of the total anticipated cost
and, as a result of the revised estimate, recorded a charge of $1.1 million in
the fourth quarter of 1995 to fully provide for remaining restoration costs as
currently contemplated.
The Kendall Mine operates under permits granted by the Montana Department
of Environmental Quality (DEQ). The DEQ requires the Company to maintain a
$1,869,000 Reclamation Bond to ensure appropriate reclamation. The Company has
filed a final closure plan which provides for enhanced measures not contemplated
in the original permit. The reclamation portion of the closure plan has been
approved, however, the water quality and monitoring plans are still being
reviewed. If these plans are not approved as submitted, the current estimate of
remaining closure costs could be impacted. Release of bonding will only take
place once the regulatory agencies are satisfied that all reclamation
requirements have been met.
60
<PAGE> 63
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
16. SITE RESTORATION COSTS, CONTINUED:
The U.S. Bureau of Land Management (BLM), Inyo County, the California
Department of Conservation, and the Lahontan Regional Water Quality Control
Board (Lahontan) have jointly required the Company to post a reclamation bond in
the amount of $3,030,000 to ensure appropriate reclamation of the Briggs Mine.
Additionally, the Company will be required by Lahontan to post a $1,010,000 bond
to ensure adequate funds to mitigate any "foreseeable release" of pollutants to
state waters at least 90 days prior to initiation of cyanide on the heap leach
pads. Both bonds are subject to annual review and adjustment.
17. RELATED PARTY TRANSACTIONS:
Keene Valley Minerals, a limited partnership, was a participant in the
Canyon-Minex II Joint Venture. One of the Company's Directors is the sole
general partner of a partnership which was a partner in Keene Valley Minerals.
The participation of his partnership in this joint venture was on the same terms
and conditions as were available to unaffiliated participants. Effective May 12,
1993, the Company acquired the Minex II parties' 38.25% interest in the venture
by issuing 150,000 shares of common stock and warrants to purchase 75,000 shares
of common stock at an exercise price of $3.00 per share, exercisable until May
11, 1996. The fair market value of the Company's common stock on the acquisition
date was $2.38 per share. The principal assets acquired were the Mountain View,
Rattlesnake and Judith Mountain properties. Keene Valley Minerals owned 22.5% of
the Canyon-Minex II Joint Venture and had invested $750,000 in the venture as of
May 12, 1993.
In January 1989, VenturesTrident II, L.P., one of the Company's major
shareholders, loaned the Company $2,000,000 as part of a Stock Purchase and Loan
Agreement. The Company paid $500,000 of the Debenture in early 1993. The
remaining principal amount of $1.5 million was repaid on July 20, 1993 by the
issuance of 789,473 fully paid and non-assessable common shares of the Company
based upon a conversion rate of $1.90 per share. For the year ended December 31,
1993, interest expense on the Debenture was $77,700.
61
<PAGE> 64
18. UNAUDITED QUARTERLY FINANCIAL DATA:
Quarterly financial information for the years ended December 31, 1995 and
1994 is summarized as follows:
<TABLE>
<CAPTION>
1995
==================================================================
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $ 3,689,900 $ 2,158,100 $ 1,978,800 $ 1,179,800
Gross profit $ 1,035,400 $ 348,200 $ 214,100 $ 15,300
Net (loss) $ (647,900) $(1,351,100) $(1,250,500) $(2,893,700)
Net (loss) per share $ (0.03) $ (0.05) $ (0.05) $ (0.11)
</TABLE>
<TABLE>
<CAPTION>
1994
==================================================================
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $3,917,000 $4,101,800 $6,703,700 $4,857,700
Gross profit $1,377,100 $1,280,400 $2,920,300 $1,695,100
Net income (loss) $ (237,200) $ (683,800) $ 632,200 $ (48,900)
Net income (loss) per share $ (0.01) $ (0.03) $ 0.02 $ (0.01)
</TABLE>
Climate conditions at the Kendall Mine in Montana curtail gold production
during the winter months.
19. SUBSEQUENT EVENT:
On March 26, 1996, the Company completed a private placement in the amount
of $12.1 million ($11.3 million net of expenses). The offering was completed at
a price of $3.00 per unit which included one share of common stock (4,034,300
total shares) and one-half warrant (2,017,200 total warrants). Each whole
warrant entitles the holder to purchase one share of common stock at an exercise
price equal to $3.75 per share. The warrants expire on March 25, 1999. The
Company intends to file a Registration Statement under the Securities and
Exchange Act of 1933 in respect of the common shares, the warrants, and the
common shares underlying the warrants and use its best efforts to cause such
Registration Statement to become effective as soon as practical. In the event
that the Registration Statement does not become effective on or before the 90th
day following the completion of the private placement, each purchaser of units
will be issued an additional 1/10 of one common share and 1/20 of one warrant
for each unit purchased.
62
<PAGE> 65
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no change in the Company's certified public accountants
during the past two years. There has been no report on Form 8-K of a
disagreement between the Company and its accountants on any matter of accounting
principles or practices or financial statement disclosure.
63
<PAGE> 66
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
OFFICERS AND DIRECTORS
The following table lists the names, ages, and positions of the executive
officers and directors of the Company as of March 1, 1996. Directors are divided
into classes, each of which is elected to serve for three years, with one class
being elected each year. All officers have been appointed to serve until their
successors are elected and qualified. Additional information regarding the
business experience, length of time served in each capacity, and other matters
relevant to each individual is set forth below the table.
<TABLE>
<CAPTION>
DIRECTORS' TERMS
NAME AGE POSITION EXPIRE
- ----------------------------------------- --------- ----------------------------------- ----------------
<S> <C> <C> <C>
Richard H. De Voto 61 President, Director and Chairman 1998
of the Board
Gary C. Huber 44 Vice President-Finance 1997
and Director
William W. Walker 56 Vice President-Exploration and 1996
Director
John R. Danio 45 Vice President-Operations
George S. Young 44 Vice President-Law and
Corporate Secretary
Richard T. Phillips 41 Treasurer
Paul A. Bailly 69 Director 1998
Leland O. Erdahl 67 Director 1997
George W. Holbrook, Jr. 64 Director 1998
Frank M. Monninger 71 Director 1997
William C. Parks 54 Director 1996
Christopher M.T. Thompson 48 Director 1996
</TABLE>
64
<PAGE> 67
DR. RICHARD H. DE VOTO was a founder of the Company and has been a Director
of the Company since its formation in 1979. Dr. De Voto served as President of
the Company from September 1979 to April 1985, and became President again in
April 1987. He is President of CR Montana Corporation, CR Briggs Corporation,
and CR International Corporation, each wholly owned subsidiaries of the Company.
Dr. De Voto is Professor Emeritus of Geology at the Colorado School of Mines,
where he taught from 1966 to 1987. Dr. De Voto was a founder of the private
Australian mining firm, Canyon Resources Proprietary Ltd., which later became
Delta Gold N.L., a publicly listed company of which he was a Director from 1983
to 1989. From 1966 to 1979, he was a Vice President of Earth Sciences, Inc., a
mineral exploration company, where he was involved in property acquisition and
exploration and development ventures. Dr. De Voto also has worked in the
petroleum business with Shell Oil and Mobil Oil. After graduating from Dartmouth
College in 1956 with an A.B. Degree in Engineering Sciences, he received an
M.Sc. Degree in Civil Engineering from Dartmouth in 1957 and a Doctor of Science
Degree in Geology from the Colorado School of Mines in 1961. Dr. De Voto is a
registered Professional Engineer in the State of Colorado.
GARY C. HUBER was a founder of the Company and served as Secretary of the
Company from inception through June 1986, as Treasurer from 1980 through
December 1991, as Vice President from April 1985 to April 1987, and as Vice
President-Finance since April 1987. He was elected as a Director of the Company
in June 1985 and serves as President of CR Minerals Corporation, a wholly owned
subsidiary of the Company. He was employed by Energy Reserves Group, Inc., an
energy fuels company, as District Geologist from 1975 to 1977, where his
responsibilities included exploration and development of several
uranium/vanadium mines in western Colorado. He graduated in 1973 from Fort Lewis
College with a B.Sc. Degree in Geology and received a Ph.D in Geology with a
minor in Mineral Economics from the Colorado School of Mines in 1979. Dr. Huber
has been responsible for the financial operations of the Company since its
inception and currently manages the Company's industrial minerals program.
WILLIAM W. WALKER was a founder of the Company and served as its Vice
President from 1979 to April 1985, and its President from April 1985 to April
1987. In April 1987, Mr. Walker became the Company's Vice President-Exploration.
He was elected as a Director of the Company in June 1985 and serves as President
of Canyon Resources Africa Ltd., the Company's African exploration subsidiary.
Mr. Walker directs the Company's exploration programs and is responsible for
joint venture activities and property farmouts. He has served as Division
Geologist for Central and Southwest Fuels, Inc., a uranium and coal exploration
company; as Vice President of Earth Sciences, Inc., a mineral exploration
company; and as geologist for Climax Molybdenum Company (AMAX). Mr. Walker
received a Professional Engineering Degree in Geological Engineering from the
Colorado School of Mines in 1961.
JOHN R. DANIO was appointed Vice President-Operations of the Company in
September 1987, and has overall responsibility for the Company's mine
development and production operations. Prior to joining the Company, he operated
several open-pit gold mines and heap-leaching operations as Project Engineer and
Mine Manager. Mr. Danio received a B.Sc. Degree in Mining Engineering from the
Colorado School of Mines in 1973. He is a registered professional engineer in
the States of Colorado and Nevada.
65
<PAGE> 68
GEORGE S. YOUNG was appointed Vice President - Law and Corporate Secretary
of the Company in November, 1993. Mr. Young was most recently employed as
President and Director of the Uruguayan and Argentinean affiliated companies of
American Resource Corporation, Inc. during 1992 and 1993 and as Vice President
and General Counsel of Alta Gold Co. from 1990-92. Mr. Young previously held
various positions in the mining and resources industries including General
Counsel of Bond International Gold, Inc. (1988-90), General Counsel and Acting
General Manager of Intermountain Power Agency (1984-88), Legal Supervisor for
the U.S. Minerals and Coal Division of Getty Oil Company (1981-84), and as a
Metallurgical Engineer for Kennecott Copper Corporation (1975-76). Mr. Young has
a B.S. degree in Metallurgical Engineering (1975) and a Law Degree (1979) from
the University of Utah, and served as a law clerk to Judge Aldon J. Anderson in
Utah Federal District Court (1979-80).
RICHARD T. PHILLIPS was appointed Treasurer of the Company in December
1991. Initially joining the Company as Controller in July 1991, he is
responsible for the Company's cash management, risk management, and financial
reporting functions. From 1988 to 1991, Mr. Phillips served as Controller for
Western Gold Exploration and Mining Company, a gold mining partnership between
Minorco and Inspiration Resources Corporation. From 1975 to 1987, he was
employed by subsidiaries of Inspiration Resources Corporation, a natural
resources company, in various financial capacities including Director of
Corporate Accounting. Mr. Phillips received a B.S. Degree in Business
Administration from the University of Phoenix in 1984 and is a Certified
Management Accountant.
PAUL A. BAILLY has been a Director of the Company since February 1989.
Pursuant to the provisions of a Stock Purchase and Loan Agreement between the
Company and VenturesTrident II, L.P. ("VT II"), the Company is required to
nominate a designee of VT II as a candidate for Director. Mr. Bailly is the
designee of VT II. He is Chairman of Castle Group, Inc., the successor to
Fulcrum Management, Inc. From 1984 through 1992, he served as President of
Fulcrum Management, Inc., the managing company for two private U.S. venture
capital funds, VenturesTrident L.P. and VenturesTrident II, L.P., which invest
in precious metals companies and projects. He has previously served as President
of Occidental Minerals Corporation and Bear Creek Mining, an exploration
subsidiary of Kennecott Copper. Mr. Bailly received an M.S. Degree in
Geology/Mineralogy and a Geological Engineering Degree from the University of
Nancy in France in 1948 and a Doctor of Science Degree in Geology from Stanford
University in 1951. Mr. Bailly serves as Chairman of Dakota Mining Corporation
(formerly MinVen Gold Corporation); Chairman of Golden Queen Mining Company,
Ltd.; and Director of Golden Sitka Resources, Inc., Minven, Inc., and Olympic
Mining Corporation.
LELAND O. ERDAHL has been a Director of the Company since February 1986. He
served as President and CEO of Stolar, Inc., a privately held service and
communication supply company for the mining industry, from July 1987 to
September 1991, and as President and CEO of Albuquerque Uranium Corporation, a
privately held company engaged in the production and sale of uranium from
November 1987 to January 1992. From October 1984 through October 1987, and from
January 1992 to January 1995, Mr. Erdahl served as an independent management
consultant. From 1970 through July 1984, he was employed by Ranchers'
Exploration and Development Corporation, a mining company, in various capacities
including Treasurer, Vice President-Finance, Senior Vice President, Executive
Vice President, and, from 1982 to 1984, President. Mr. Erdahl holds a B.S.
Degree in Business from the College of Santa Fe and is a Certified Public
Accountant. Mr. Erdahl serves as a Director of Hecla Mining Company, Freeport
McMoRan Copper & Gold Inc., Uranium Resources, Inc., and Original Sixteen to One
Mine, Inc., all publicly held mineral resources companies, and as a trustee of a
group of John Hancock Mutual Funds, all publicly held investment
66
<PAGE> 69
entities. Mr. Erdahl is also a Director of Santa Fe Ingredients Company of
California, Inc. and Santa Fe Ingredients Company, Inc., private food processing
companies.
GEORGE W. HOLBROOK, JR. has been a Director of the Company since 1981.
Since 1984, he has been the Managing Partner of Bradley Resources Company, a
private investment company. Mr. Holbrook received a B.S. Degree in Mechanical
Engineering from Cornell University in 1953. He is a Director of the Merrill
Lynch Institutional Fund and other associated funds, Thoratec Laboratories and
several private companies.
FRANK M. MONNINGER has been a Director of the Company since September 1990.
He is currently a consultant to the mining industry. From 1984 to 1988, he was
Executive Vice President of Operations for Coeur D'Alene Mines Corporation, a
publicly held mining company. From 1982 to 1984, Mr. Monninger was a consultant
for San Francisco Mining Associates. From 1979 to 1982, he was the Vice
President of Development and Operations for Occidental Minerals Corporation. In
addition, Mr. Monninger has held positions of Vice President and General Manager
for Inspiration Consolidated Copper Company, Manager of Mine and Plant
Operations for Bechtel Corporation, Vice President of Anaconda Company, and
President of the Montana Mining Division of Anaconda Company. Mr. Monninger
received a Professional Degree in Metallurgical Engineering from the Colorado
School of Mines in 1949 and an Honorary Degree of Metallurgical Engineering from
Montana College of Mineral Science and Technology in 1973. He currently serves
as Chairman of the Board of ISL Ventures, a Nevada corporation involved in
in-situ leaching and precious metals lixiviants.
WILLIAM C. PARKS has been a Director of the Company since February 1986. He
is currently Executive Vice President and General Manager of R.A. Pearson
Company, a privately held company engaged in the design and manufacture of
packaging machinery. From August 1989 through December 1991, he was the
President of United Management Company, a company involved in providing
management consulting services to the mining, manufacturing, and transportation
industries. From November 1987 through August 1989, he was Vice President of,
through December 1991, a consultant to, and through February 1991, a Director of
Artech Recovery Systems, Inc., a publicly held company engaged in the processing
and extraction of metals from arsenic-bearing ores. From August 1983 through
November 1987, he was President and Director of Nevex Gold Company, Inc., a
publicly held mining company. Mr. Parks received his B.A. Degree in 1965 in
Economics and English from Western Washington University. He currently serves as
a Director of Advanced Recording Instruments, Inc., a manufacturer of on-board
electronic recording equipment for the transportation industry.
CHRISTOPHER M.T. THOMPSON has been a Director of the Company since
September 1990. He is President of Castle Group, Inc., the successor to Fulcrum
Management, Inc. From 1984 through 1992, he served as Executive Vice President
and Chief Financial Officer for Fulcrum Management, Inc., the managing company
for two private U.S. venture capital funds, VenturesTrident L.P. and
VenturesTrident II, L.P., which invest in precious metals companies and
projects. He is also a Director of EMGF Management Company which manages The
Emerging Markets Gold Fund. Castle Group is by subcontract, manager of the
Emerging Markets Gold Fund. From 1982 to 1983, he was Manager of New Business
Development for Gulf Canada, Ltd. From 1978 to 1982, Mr. Thompson was a Partner,
Director, and Mining Analyst for Gordon Securities Limited, a Canadian
institutional brokerage firm. Mr. Thompson received a B.A. Law Degree from
Rhodes University in 1969 and graduated with a M.Sc. from Bradford University in
1971. He currently serves as a Director of Golden Queen Mining Company, Ltd.;
Golden Shamrock Mines, Ltd.; Minven, Inc.; Olympic Mining Corporation; Silver
Standard Resources Inc.; and Santa Elina Gold Inc.
67
<PAGE> 70
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the Company's Proxy
Statement for the 1996 Annual Meeting to be filed within 120 days after the end
of the fiscal year and is incorporated by reference in this Annual Report on
Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table on the next page sets forth information, as of March 1, 1996 with
respect to beneficial ownership of the Company's common stock by each person
known by the Company to be the beneficial owner of more than 5% of its
outstanding common stock, by each director of the Company, by each named
executive officer, and by all officers and directors of the Company as a group.
Unless otherwise noted, each shareholder has sole investment and voting power
over the shares owned.
68
<PAGE> 71
<TABLE>
<CAPTION>
===========================================================================================
NAME AND ADDRESS TYPE OF NUMBER OF PERCENT
OF BENEFICIAL OWNER OWNERSHIP SHARES OF CLASS
===========================================================================================
<S> <C> <C> <C>
VenturesTrident II, L.P.(1) Record and 4,489,473(2) 16.9%
475 Seventeenth Street, Suite 750 Beneficial
Denver, CO 80202-4017
Richard H. De Voto Record and 732,698(3) 2.8%
14142 Denver West Pkwy, Suite 250 Beneficial
Golden, CO 80401
Gary C. Huber Record and 679,124(4) 2.6%
14142 Denver West Pkwy, Suite 250 Beneficial
Golden, CO 80401
William W. Walker Record and 263,137(5) 1.0%
14142 Denver West Pkwy, Suite 250 Beneficial
Golden, CO 80401
Paul A. Bailly(6) Record and 30,000(7) *
475 Seventeenth Street, Suite 750 Beneficial
Denver, CO 80202-4017
Leland O. Erdahl Record and 64,289(8) *
9449 Navy Blue Court Beneficial
Las Vegas, NV 89117
George W. Holbrook, Jr. Record and 1,001,775(9) 3.9%
P.O. Box 761 Beneficial
Southport, CT 06490-0761
Frank M. Monninger Record and 40,000(10) *
150 Quail's Roost Road Beneficial
Sequim, WA 98382
William C. Parks Record and 116,255(11) *
South 5919 Yale Road Beneficial
Spokane, WA 99223
Christopher M.T. Thompson(12) Record and 50,000(13) *
475 Seventeenth Street, Suite 750 Beneficial
Denver, CO 80202-4017
All Officers & Directors as a Group Record and 3,254,644 11.9%
(12 persons) Beneficial
=========================================================================================
</TABLE>
* Less than 1%
69
<PAGE> 72
(1) The general partner of VenturesTrident II, L.P. is Fulcrum Management
Partners II, L.P., a Delaware limited partnership. Mr. Landon T. Clay and
MinVen, Inc., a Delaware corporation are the two general partners of
Fulcrum Management Partners II, L.P.
(2) This number includes (i) 3,889,473 shares owned of record, and (ii) the
right to acquire 650,000 shares of common stock upon the exercise of
650,000 warrants at an exercise price of $3.50 per share.
(3) This number includes (i) 9,719 shares owned of record; (ii) 560,628 shares
held by the Richard H. De Voto Trust No. 1; (iii) 351 shares held as
Co-Trustee of Trust for his mother; (iv) an option to purchase 37,000
shares at an exercise price of $3.00 per share; (v) an option to purchase
50,000 shares at an exercise price of $1.63 per share; and (vi) an option
to purchase 75,000 shares at an exercise price of $3.69 per share.
(4) This number includes (i) 519,124 shares owned of record; (ii) two trusts of
15,000 shares each held by wife, Gwen D. Huber, as Trustee for two minor
children; (iii) an option to purchase 50,000 shares at an exercise price of
$3.00 per share; and (iv) an option to purchase 30,000 shares at an
exercise price of $1.63 per share; and (v) an option to purchase 50,000
shares at an exercise price of $3.69 per share.
(5) This number includes (i) 198,137 shares owned of record; (ii) an option to
purchase 30,000 shares at an exercise price of $3.00 per share; and (iii)
an option to purchase 35,000 shares at an exercise price of $3.69 per
share.
(6) Mr. Bailly is the Chairman of Castle Group, Inc., the management service
company for VenturesTrident II, L.P. Mr. Bailly disclaims beneficial
ownership of the shares held by VenturesTrident II, L.P.
(7) This number includes an option to purchase 30,000 shares at an exercise
price of $2.50 per share.
(8) This number includes (i) 24,289 shares owned of record; (ii) an option to
purchase 30,000 shares at an exercise price of $1.44 per share; and (iii)
an option to purchase 10,000 shares at an exercise price of $2.19 per
share.
(9) This number includes (i) 5,000 shares owned of record; (ii) 694,946 shares
owned of record by Bradley Securities Corporation of which Mr. Holbrook is
the President and major shareholder; (iii) 167,629 shares owned by two
partnerships in which Mr. Holbrook is a controlling partner; (iv) 80,000
shares owned of record by Bradley Resources Company, of which Mr. Holbrook
is the Managing partner; (v) 20,000 shares of common stock issuable to
Bradley Resources Company upon exercise of 20,000 warrants at an exercise
price of $3.50 per share; (vi) 4,200 shares of common stock issuable to a
partnership in which Mr. Holbrook is a controlling partner upon exercise of
warrants at an exercise price of $3.00 per share; and (vii) an option to
purchase 30,000 shares at an exercise price of $2.50 per share.
(10) This number includes (i) an option to purchase 30,000 shares at an exercise
price of $1.44 per share and (ii) an option to purchase 10,000 shares at an
exercise price of $2.19 per share.
(11) This number includes (i) 65,541 shares owned of record; (ii) 714 shares
held by Mr. Parks as custodian for a minor child; (iii) an option to
purchase 20,000 shares at an exercise price of $1.44 per share; and (iv) an
option to purchase 30,000 shares at an exercise price of $3.19 per share.
70
<PAGE> 73
(12) Mr. Thompson is the President of Castle Group, Inc., the management service
company for VenturesTrident II, L.P. Mr. Thompson disclaims beneficial
ownership of the shares held by VenturesTrident II, L.P.
(13) This number includes (i) an option to purchase 20,000 shares at an exercise
price of $1.44 per share; and (ii) an option to purchase 30,000 shares at
an exercise price of $3.19 per share.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTION WITH A DIRECTOR
Keene Valley Minerals, a limited partnership, was a participant in the
Canyon-Minex II Joint Venture. Mr. Holbrook is the sole general partner of a
partnership which is a partner in Keene Valley Minerals. The participation of
his partnership in this joint venture is on the same terms and conditions as
were available to unaffiliated participants. Effective May 12, 1993, the Company
acquired the Minex II parties' 38.25% interest in the venture by issuing 150,000
shares of common stock and warrants to purchase 75,000 shares of common stock at
an exercise price of $3.00 per share, exercisable until May 11, 1996. The fair
market value of the Company's common stock on the acquisition date was $2.38 per
share. Keene Valley Minerals owned 22.5% of the Canyon-Minex II Joint Venture
and had invested $750,000 in the venture as of May 12, 1993.
TRANSACTIONS WITH VENTURESTRIDENT II, L.P.
On January 27, 1989, the Company entered into a Stock Purchase and Loan
Agreement (the Agreement) with VenturesTrident II, L.P., a Delaware limited
partnership (VT II). Pursuant to the Agreement, the Company (i) sold to VT II
1,000,000 shares of its $.01 par value common stock for $2,000,000; and (ii)
accepted a $2,000,000 loan from VT II evidenced by a Variable Interest Secured,
Recourse Convertible Debenture (the "Debenture").
On January 26, 1993, the Company and VT II agreed to amend certain
provisions of the Debenture which included a two year extension of $1.5 million
of the principal. The Company paid $500,000 of the Debenture in early 1993 and,
on July 20, 1993, gave notice of intent to prepay the $1.5 million convertible
debenture otherwise scheduled for payment on January 26, 1995. VT II elected to
receive shares in lieu of cash as consideration for the repayment and was issued
789,473 fully paid and non-assessable shares of the Company's common stock.
Pursuant to the terms of the Agreement, and for so long as VT II owns more
than 4% of the Company's issued and outstanding stock, the Company has agreed to
nominate a designee of VT II as a candidate for Director of the Company. Mr.
Paul A. Bailly, Chairman of Castle Group Inc., Manager of VT II, was elected by
the Board as a Director of the Company, effective as of February 10, 1989, and
has continued in that capacity henceforth. Mr. Bailly's present term as a
Director is scheduled to expire in 1998. On September 18, 1991, the Board also
elected Mr. Christopher M.T. Thompson, President of Castle Group, Inc., as a
member of the Board. Mr. Thompson was re-elected by the Company's shareholders
on June 17, 1993 to serve as a Director until 1996.
71
<PAGE> 74
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) Financial Statements (included in Part II of this Report):
Report of Independent Accountants'
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Operations - Years ended December 31, 1995,
1994, and 1993
Consolidated Statement of Changes in Stockholders' Equity - Years
ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows - Years ended December 31, 1995,
1994, and 1993
Notes to Consolidated Financial Statements
(b) There were no Form 8-K reports filed during the last quarter of the period
covered by this report.
(c) Exhibits, as required by Item 601 of Regulation S-K, are listed on pages 73
to 76. The exhibit numbers correspond to the numbers assigned in Item 601
of Regulation S-K.
72
<PAGE> 75
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Certificate of Incorporation of the Company, as amended (2)
3.1.1 Articles of Amendment to the Company's Certificate of Amendment
as filed with the Delaware Secretary of State on January 23, 1990
(9)
3.1.2 Executed Certificate of Designations, dated December 26, 1990, as
filed with the Delaware Secretary of State on December 26, 1990
(11)
3.2 Bylaws of the Company, as amended (2)
4.1 Specimen Common Stock Certificate (1)
4.2 Variable Interest, Secured, Resource Convertible Debenture (7)
4.3 Specimen Warrant Certificate (10)
4.4 Warrant Agreement dated January 26, 1990 by and between the
Company and American Securities Transfer, Inc. (9)
4.5 Stock and Warrant Purchase Agreement, dated December 26, 1990
among the Company, Kennecott Exploration Company, CR Briggs
Corporation, CR Kendall Corporation, and CR Montana Corporation
(11)
4.6 Executed Common Stock Purchase Warrant, dated December 26, 1990
(11)
4.7 Indenture dated June 2, 1993, between the Company and Bank of
America Arizona, Trustee, with respect to $22,000,000, 6%
Convertible Debentures due June 1, 1998 (15)
4.8 Specimen 6% Convertible Subordinated Note (15)
4.9* Specimen Warrant Certificate
4.10* Warrant Agreement dated March 20, 1996 by and between the Company
and American Securities Transfer, Inc.
10.1 Canyon-Minex Joint Venture Agreement dated March 1, 1983, as
amended, among the Company, Saranac Minerals, EMK Resources II,
Black Hawk Resources Corporation, and Atlantic Associates (3)
10.2 Office Building Lease, dated August 10, 1992, as amended, between
Denver West Office Building No. 51 and the Company (14)
10.3 Canyon-Minex Joint Venture and Meridian Minerals Company
Agreement dated March 23, 1988 (4)
10.4 Mining Venture Agreement between Recursos Canyon Dominicana, S.A.
and Battle Mountain Gold Company dated June 28, 1988 (5)
73
<PAGE> 76
10.4.1 Letter Agreement dated February 16, 1992, among the Company,
through its subsidiary Recursos Canyon Dominicana, S.A., and
Battle Mountain Gold Company (14)
10.5 Agreement between the Company, Meridian Minerals Company, and the
Canyon-Minex Joint Venture dated December 27, 1988 (6)
10.6 Stock Purchase and Loan Agreement between the Company and
VenturesTrident II, L.P., dated January 27, 1989 (7)
10.6.1 Amendment to Stock Purchase and Loan Agreement between the
Company and VenturesTrident II, L.P., dated January 26, 1993 (14)
10.7 Option to Purchase Agreement, dated July 14, 1989, by and between
Addwest Gold, Inc. and Western Energy Company (8)
10.8 Seven-Up Pete Venture Agreement between Addwest Gold, Inc. and
Phelps Dodge Mining Company (8)
10.9 Letter Agreement dated July 8, 1989 between Addwest Gold, Inc.
and Phelps Dodge Mining Company (8)
10.10 Purchase Agreement by and between the Company and Addington
Resources, Inc. dated January 26, 1990 (9)
10.11 Gold Loan Agreement by and between the Company and Bankers Trust
Company dated January 26, 1990 (9)
10.12 Net Smelter Return Royalty Deed from Addwest Gold, Inc. to
Addington Resources, Inc. dated January 26, 1990 (9)
10.13 Covenant Not to Compete between Addwest Gold, Inc. and Addington
Resources, Inc. dated January 26, 1990 (9)
10.14 Master Tax Lease between the Company and Caterpillar Financial
Services Corporation dated June 15, 1990 (12)
10.15 Judith Mountains Memorandum of Understanding between the
Canyon-Minex II Joint Venture and Cominco American Resources,
Inc. dated August 1, 1990 (12)
10.16 Farm-In Agreement, effective December 1, 1990, among Kennecott
Exploration Company, Canyon Resources Corporation, and CR Briggs
Corporation (11)
10.17 Consent, Subordination and Release Agreement, dated December 26,
1990, among Kennecott Exploration Company, Canyon Resources
Corporation, CR Briggs Corporation, CR Kendall Corporation, and
CR Montana Corporation (11)
10.18 Amended and Restated Gold Loan and Letter of Credit Facility
Agreement (without exhibits) by and between the Company and Mase
Westpac Limited dated March 23, 1992 (13)
74
<PAGE> 77
10.19 Amendment No. 1 to Amended and Restated Gold Loan and Letter of
Credit Facility Agreement by and between the Company and Mase
Westpac Limited effective December 31, 1992 (14)
10.20 Change of Control Agreements, dated December 6, 1991 between the
Company and Richard H. De Voto, Gary C. Huber and William W.
Walker (14)
10.21 Amended and Restated Credit Facility Agreement dated May 26,
1993, among N M Rothschild & Sons Limited, Canyon Resources
Corporation, CR Kendall Corporation, CR Briggs Corporation, CR
Montana Corporation, and CR Minerals Corporation (15)
10.22* Loan Agreement dated December 6, 1995 among CR Briggs Corporation
as Borrower and Banque Paribas as Agent.
10.23* Master Tax Lease dated December 27, 1995 between CR Briggs
Corporation and Caterpillar Financial Services Corporation.
11.1* Statement regarding computation of per share earnings
22.1* Subsidiaries of the Registrant
24.1* Consent of Coopers & Lybrand L.L.P.
24.2* Consent of Davy International
24.3* Consent of Roberts and Schaefer Company
24.4* Consent of Mine Reserves Associates, Inc.
24.5* Consent of Remy and Thomas
24.6* Consent of Chamberlin & Associates
27* Financial Data Schedule
* Filed herewith
- -------------------------------------------------------------------------------
(1) Incorporated by reference from the Company's Registration Statement on Form
8-A as declared effective by the Securities and Exchange Commission on
March 18, 1986.
(2) Exhibits 3.1 and 3.2 are incorporated by reference from Exhibits 3.1 and
3.2, respectively, to the Company's Registration Statement on Form S-1
(File No. 33-19264) declared effective by the Securities and Exchange
Commission on February 1, 1988.
(3) Exhibit 10.1 is incorporated by reference from Exhibit 10.1 to the
Company's Registration Statement on Form S-18 (File No. 2-99249-D) declared
effective by the Securities and Exchange Commission on November 8, 1985.
75
<PAGE> 78
(4) Exhibit 10.3 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988.
(5) Exhibit 10.4 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987.
(6) Exhibit 10.5 is incorporated by reference from the Company's Report on the
Form 8-K filed with the Securities and Exchange Commission on January 4,
1989.
(7) Exhibits 4.2 and 10.6 are incorporated by reference from Exhibits 1 and 2
of the Company's Report on Form 8-K filed with the Securities and Exchange
Commission on January 27, 1989.
(8) Exhibits 10.7, 10.8, and 10.9 are incorporated by reference from Exhibits
10.19, 10.20, and 10.21, respectively, to the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended December 31, 1989.
(9) Exhibits 3.1.1, 4.4, 10.10, 10.11, 10.12, and 10.13 are incorporated by
reference from Exhibits 3.1, 4.1, 2.1, 10.1, 28.1, and 28.2, respectively,
to the Company's Report on Form 8-K dated January 26, 1990.
(10) Exhibit 4.3 is incorporated by referenced from Exhibit 4.3 to the Company's
Registration Statement on Form S-2, effective August 13, 1990.
(11) Exhibits 3.1.2, 4.5, 4.7, 10.16 and 10.17 are incorporated by reference
from Exhibits 4, 3, 5, 1, and 2, respectively, of the Company's Report on
Form 8-K filed with the Securities and Exchange Commission on December 26,
1990.
(12) Exhibits 4.6, 10.14 and 10.15 are incorporated by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990.
(13) Exhibit 10.18 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991.
(14) Exhibits 10.2, 10.4.1, 10.6.1, 10.19, and 10.20 are incorporated by
reference from the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992.
(15) Exhibits 4.7, 4.8, and 10.21 are incorporated by reference from Exhibits
4.3, 4.2, and 10.1, respectively, to the Company's report on Form 8-K dated
May 26, 1993.
76
<PAGE> 79
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly authorized.
CANYON RESOURCES CORPORATION
Date: March 27, 1996 /s/ Richard H. De Voto
------------------------------------------
Richard H. De Voto
Principal Executive Officer
Date: March 27, 1996 /s/ Gary C. Huber
------------------------------------------
Gary C. Huber
Principal Financial and Accounting Officer
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 Company
and in the capacities and on the dates indicated.
Date: March 27, 1996 /s/ Richard H. De Voto
------------------------------------------
Richard H. De Voto, Director
Date: March 27, 1996 /s/ Gary C. Huber
------------------------------------------
Gary C. Huber, Director
Date: March 27, 1996 /s/ William W. Walker
------------------------------------------
William W. Walker, Director
Date: March 27, 1996 /s/ Paul A. Bailly
------------------------------------------
Paul A. Bailly, Director
Date: March 27, 1996 /s/ Leland O.Erdahl
------------------------------------------
Leland O. Erdahl, Director
Date: March 27, 1996 /s/ George W. Holbrook, Jr.
------------------------------------------
George W. Holbrook, Jr., Director
77
<PAGE> 80
Date: March 27, 1996 /s/ Frank M. Monninger
------------------------------------------
Frank M. Monninger, Director
Date: March 27, 1996 /s/ William C. Parks
------------------------------------------
William C. Parks, Director
Date: March 27, 1996 /s/ Christopher M.T. Thompson
------------------------------------------
Christopher M.T. Thompson, Director
78
<PAGE> 81
EXHIBIT INDEX
NUMBER DESCRIPTION
- ------- -----------
3.1 Certificate of Incorporation of the Company, as amended (2)
3.1.1 Articles of Amendment to the Company's Certificate of Amendment
as filed with the Delaware Secretary of State on January 23, 1990
(9)
3.1.2 Executed Certificate of Designations, dated December 26, 1990, as
filed with the Delaware Secretary of State on December 26, 1990
(11)
3.2 Bylaws of the Company, as amended (2)
4.1 Specimen Common Stock Certificate (1)
4.2 Variable Interest, Secured, Resource Convertible Debenture (7)
4.3 Specimen Warrant Certificate (10)
4.4 Warrant Agreement dated January 26, 1990 by and between the
Company and American Securities Transfer, Inc. (9)
4.5 Stock and Warrant Purchase Agreement, dated December 26, 1990
among the Company, Kennecott Exploration Company, CR Briggs
Corporation, CR Kendall Corporation, and CR Montana Corporation
(11)
4.6 Executed Common Stock Purchase Warrant, dated December 26, 1990
(11)
4.7 Indenture dated June 2, 1993, between the Company and Bank of
America Arizona, Trustee, with respect to $22,000,000, 6%
Convertible Debentures due June 1, 1998 (15)
4.8 Specimen 6% Convertible Subordinated Note (15)
4.9* Specimen Warrant Certificate
4.10* Warrant Agreement dated March 20, 1996 by and between the Company
and American Securities Transfer, Inc.
10.1 Canyon-Minex Joint Venture Agreement dated March 1, 1983, as
amended, among the Company, Saranac Minerals, EMK Resources II,
Black Hawk Resources Corporation, and Atlantic Associates (3)
10.2 Office Building Lease, dated August 10, 1992, as amended, between
Denver West Office Building No. 51 and the Company (14)
10.3 Canyon-Minex Joint Venture and Meridian Minerals Company
Agreement dated March 23, 1988 (4)
10.4 Mining Venture Agreement between Recursos Canyon Dominicana, S.A.
and Battle Mountain Gold Company dated June 28, 1988 (5)
<PAGE> 82
10.4.1 Letter Agreement dated February 16, 1992, among the Company,
through its subsidiary Recursos Canyon Dominicana, S.A., and
Battle Mountain Gold Company (14)
10.5 Agreement between the Company, Meridian Minerals Company, and the
Canyon-Minex Joint Venture dated December 27, 1988 (6)
10.6 Stock Purchase and Loan Agreement between the Company and
VenturesTrident II, L.P., dated January 27, 1989 (7)
10.6.1 Amendment to Stock Purchase and Loan Agreement between the
Company and VenturesTrident II, L.P., dated January 26, 1993 (14)
10.7 Option to Purchase Agreement, dated July 14, 1989, by and between
Addwest Gold, Inc. and Western Energy Company (8)
10.8 Seven-Up Pete Venture Agreement between Addwest Gold, Inc. and
Phelps Dodge Mining Company (8)
10.9 Letter Agreement dated July 8, 1989 between Addwest Gold, Inc.
and Phelps Dodge Mining Company (8)
10.10 Purchase Agreement by and between the Company and Addington
Resources, Inc. dated January 26, 1990 (9)
10.11 Gold Loan Agreement by and between the Company and Bankers Trust
Company dated January 26, 1990 (9)
10.12 Net Smelter Return Royalty Deed from Addwest Gold, Inc. to
Addington Resources, Inc. dated January 26, 1990 (9)
10.13 Covenant Not to Compete between Addwest Gold, Inc. and Addington
Resources, Inc. dated January 26, 1990 (9)
10.14 Master Tax Lease between the Company and Caterpillar Financial
Services Corporation dated June 15, 1990 (12)
10.15 Judith Mountains Memorandum of Understanding between the
Canyon-Minex II Joint Venture and Cominco American Resources,
Inc. dated August 1, 1990 (12)
10.16 Farm-In Agreement, effective December 1, 1990, among Kennecott
Exploration Company, Canyon Resources Corporation, and CR Briggs
Corporation (11)
10.17 Consent, Subordination and Release Agreement, dated December 26,
1990, among Kennecott Exploration Company, Canyon Resources
Corporation, CR Briggs Corporation, CR Kendall Corporation, and
CR Montana Corporation (11)
10.18 Amended and Restated Gold Loan and Letter of Credit Facility
Agreement (without exhibits) by and between the Company and Mase
Westpac Limited dated March 23, 1992 (13)
<PAGE> 83
10.19 Amendment No. 1 to Amended and Restated Gold Loan and Letter of
Credit Facility Agreement by and between the Company and Mase
Westpac Limited effective December 31, 1992 (14)
10.20 Change of Control Agreements, dated December 6, 1991 between the
Company and Richard H. De Voto, Gary C. Huber and William W.
Walker (14)
10.21 Amended and Restated Credit Facility Agreement dated May 26,
1993, among N M Rothschild & Sons Limited, Canyon Resources
Corporation, CR Kendall Corporation, CR Briggs Corporation, CR
Montana Corporation, and CR Minerals Corporation (15)
10.22* Loan Agreement dated December 6, 1995 among CR Briggs Corporation
as Borrower and Banque Paribas as Agent.
10.23* Master Tax Lease dated December 27, 1995 between CR Briggs
Corporation and Caterpillar Financial Services Corporation.
11.1* Statement regarding computation of per share earnings
22.1* Subsidiaries of the Registrant
24.1* Consent of Coopers & Lybrand L.L.P.
24.2* Consent of Davy International
24.3* Consent of Roberts and Schaefer Company
24.4* Consent of Mine Reserves Associates, Inc.
24.5* Consent of Remy and Thomas
24.6* Consent of Chamberlin & Associates
27* Financial Data Schedule
* Filed herewith
- -------------------------------------------------------------------------------
(1) Incorporated by reference from the Company's Registration Statement on Form
8-A as declared effective by the Securities and Exchange Commission on
March 18, 1986.
(2) Exhibits 3.1 and 3.2 are incorporated by reference from Exhibits 3.1 and
3.2, respectively, to the Company's Registration Statement on Form S-1
(File No. 33-19264) declared effective by the Securities and Exchange
Commission on February 1, 1988.
(3) Exhibit 10.1 is incorporated by reference from Exhibit 10.1 to the
Company's Registration Statement on Form S-18 (File No. 2-99249-D) declared
effective by the Securities and Exchange Commission on November 8, 1985.
<PAGE> 84
(4) Exhibit 10.3 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988.
(5) Exhibit 10.4 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987.
(6) Exhibit 10.5 is incorporated by reference from the Company's Report on the
Form 8-K filed with the Securities and Exchange Commission on January 4,
1989.
(7) Exhibits 4.2 and 10.6 are incorporated by reference from Exhibits 1 and 2
of the Company's Report on Form 8-K filed with the Securities and Exchange
Commission on January 27, 1989.
(8) Exhibits 10.7, 10.8, and 10.9 are incorporated by reference from Exhibits
10.19, 10.20, and 10.21, respectively, to the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended December 31, 1989.
(9) Exhibits 3.1.1, 4.4, 10.10, 10.11, 10.12, and 10.13 are incorporated by
reference from Exhibits 3.1, 4.1, 2.1, 10.1, 28.1, and 28.2, respectively,
to the Company's Report on Form 8-K dated January 26, 1990.
(10) Exhibit 4.3 is incorporated by referenced from Exhibit 4.3 to the Company's
Registration Statement on Form S-2, effective August 13, 1990.
(11) Exhibits 3.1.2, 4.5, 4.7, 10.16 and 10.17 are incorporated by reference
from Exhibits 4, 3, 5, 1, and 2, respectively, of the Company's Report on
Form 8-K filed with the Securities and Exchange Commission on December 26,
1990.
(12) Exhibits 4.6, 10.14 and 10.15 are incorporated by reference from the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1990.
(13) Exhibit 10.18 is incorporated by reference from the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1991.
(14) Exhibits 10.2, 10.4.1, 10.6.1, 10.19, and 10.20 are incorporated by
reference from the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992.
(15) Exhibits 4.7, 4.8, and 10.21 are incorporated by reference from Exhibits
4.3, 4.2, and 10.1, respectively, to the Company's report on Form 8-K dated
May 26, 1993.
<PAGE> 1
WARRANT TO PURCHASE SHARES OF COMMON STOCK OF
CANYON RESOURCES CORPORATION
SEE RESTRICTIVE LEGEND ON REVERSE SIDE
VOID AFTER 5:00 P.M. NEW YORK TIME
ON MARCH 20, 1999
SPECIMEN
NUMBER WARRANTS
WA
THIS CERTIFIES THAT, for value received,
the registered holder hereof (the "Holder"), is entitled to purchase Common
Stock (the "Common Stock") of Canyon Resources Corporation, a Delaware
corporation (the "Company"). This Warrant Certificate initially entitles the
Holder to purchase from the Company on or before the close of business on March
20, 1999, one fully paid and nonassessable share of Common Stock (subject to
adjustment as provided herein) for each whole Warrant represented hereby at the
Warrant exercise price (the "Warrant Exercise Price") of U.S. $3.75 per share of
Common Stock for which such Warrant is exercisable, subject to the terms set
forth herein and in the Warrant Agreement (the "Warrant Agreement"), dated as of
March 20, 1996, between the Company and American Securities Transfer,
Incorporated as Warrant Agent (the "Warrant Agent"); provided, however, that the
number of shares of Common Stock and the kind of securities issuable upon
exercise of the Warrants may as of the date of this Warrant Certificate have
been, or may after such date be, adjusted as a result of the occurrence of
certain events, as more fully provided in the Warrant Agreement.
Each Warrant represented hereby is one of a duly authorized issue of
Warrants of the Company evidencing the right to purchase initially up to an
aggregate 3,250,000 shares (subject to adjustment) of Common Stock and is issued
under and in accordance with, and is subject to the terms and provisions
contained in, the Warrant Agreement, to all of which terms and provisions the
Holder of the Warrants represented hereby consents by acceptance hereof. A copy
of the Warrant Agreement may be obtained for inspection by the Holder hereof
upon written request to the Warrant Agent.
The Warrants represented hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form on the reverse
side hereof duly executed and by simultaneous payment of the Warrant Exercise
Price for the Warrants exercised at the executive offices of the Warrant Agent.
Payment of such Warrant Exercise Price shall be made by cash, or by check drawn
on a U.S. bank in U.S. funds.
Upon any partial exercise of the Warrants represented hereby, there shall
be countersigned and issued to the Holder hereof a new Warrant Certificate in
respect of the shares of Common Stock as to which Warrants represented hereby
shall not have been exercised. At the expense of the Holder hereof, this Warrant
Certificate may be exchanged at the office of the Warrant Agent by surrender of
this Warrant Certificate properly endorsed either separately or in combination
with one or more other Warrant Certificates for one or more new Warrant
Certificates entitling the holder thereof to purchase the same aggregate number
of shares of Common Stock as were purchasable on exercise of the Warrant or
Warrants represented by this Warrant Certificate or by other Warrant
Certificates so exchanged. This Warrant Certificate is transferable at the
office of the Warrant Agent in Denver, Colorado, in the manner and subject to
the limitations set forth in the Warrant Agreement.
No Warrant may be exercised after the close of business on March 20, 1999
(the "Expiration Date").
No fractional shares of Common Stock shall be issued upon the exercise of
rights to purchase hereunder, but the Company shall pay the cash value of any
fraction upon the exercise of one or more Warrants, all as provided in the
Warrant Agreement.
The Company, the Warrant Agent and all other persons dealing with this
Warrant Certificate and the Warrants represented hereby may treat the person in
whose name such Warrant Certificate shall be registered on the books of the
company as the absolute owner hereof for any purpose and as the person entitled
to exercise the Warrants represented hereby, any notice to the contrary
notwithstanding, and the Company may treat such registered Holder as the owner
of such Warrants for all purposes.
This Warrant Certificate does not entitle any Holder hereof to any of the
rights of a shareholder of the Company.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
The rights of the Holder in respect of this Warrant Certificate and the
Warrants represented hereby shall be governed by and construed in accordance
with the laws of the State of New York.
Dated: CANYON RESOURCES CORPORATION
/S/GEORGE S. YOUNG /S/RICHARD H. DEVOTO
- -------------------------- ----------------------------
GEORGE S. YOUNG, SECRETARY [SEAL] RICHARD H. DEVOTO, PRESIDENT
COUNTERSIGNED:
American Securities Transfer, Inc.
P.O. Box 1596
Denver, Colorado 80201
By
-----------------------------------------------
Transfer Agent & Registrar Authorized Signature
<PAGE> 2
SPECIMEN
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1),
(A)(2), (A)(3) OR (A)(7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D)
PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRANSFER AGENT.
CANYON RESOURCES CORPORATION
TRANSFER FEE: $15.00 PER CERTIFICATE ISSUED
The following abbreviations used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM --as tenants in common UNIF GIFT MIN ACT-- Custodian
TEN ENT --as tenants by the entireties -----------------
JT TEN --as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants
in common under Uniform Gifts to Minors
Act
---------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
SUBSCRIPTION FORM
To Be Executed by the Holder
in Order to Exercise Warrants
The undersigned Holder hereby irrevocable elects to exercise
Warrants represented by this Warrant Certificate, and to purchase the shares of
Common Stock issuable upon the exercise of such Warrants, and requests that
certificates for such shares be issued in the name of:
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NIMBER
- ------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please print or type name and address)
and be delivered to
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please print or type name and address)
and, if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Holder at the
address stated below.
Dated: X
-------------- -----------------------------------------------
X
-----------------------------------------------
Address:
-----------------------------------------------
-----------------------------------------------
Signature Guaranteed:
-----------------------------------------------
ASSIGNMENT
(Form of Assignment to be Executed if the Warrant Holder
Desires to Transfer Warrants Evidenced Hereby)
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER FOR VALUE RECEIVED,
hereby sells,
- -------------------------------------------------------------------
assigns and transfers to
------------------------------------------------------
- -------------------------------------------------------------------------------
(Please Print Name and Address Including Zip Code)
- -------------------------------------------------------------------------------
Warrants represented by this Warrant Certificate and does hereby irrevocable
constitute and appoint
---------------------------------------------------------
- -------------------------------------------------------------------------------
Attorney to transfer said Warrants on the books of the Warrant Agent with full
power of substitution in the premises.
Signature X
-------------------------------
X
-------------------------------
Signature(s) Guaranteed
- ----------------------------
The signature(s) should be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee Medallion Program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE> 1
Exhibit 4.10
WARRANT AGREEMENT
BETWEEN
CANYON RESOURCES CORPORATION
AND
AMERICAN SECURITIES TRANSFER, INCORPORATED
AS WARRANT AGENT
DATED AS OF MARCH 20, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Appointment of Warrant Agent ........................................... 1
2. Registration, Transferability and Form of Warrant ...................... 1
2.1. Registration 1
2.2. Transfer ........................................................ 2
2.3. Form of Warrant Certificate ..................................... 2
2.4. Register ........................................................ 2
3. Execution of Warrant Certificates ...................................... 3
4. Countersignature of Warrant Certificates ............................... 3
5. Exchange of Warrant Certificates ....................................... 4
6. Term and Exercise of Warrants .......................................... 4
6.1. Term and Exercise ............................................... 4
6.2. Issuance of Common Stock upon Exercise .......................... 4
6.3. Compliance with Government Regulations .......................... 5
6.4. Additional Warrants ............................................. 5
6.5. Warrant Exercise Price .......................................... 6
7. Certain Adjustments .................................................... 6
7.1. Mathematical Adjustments ........................................ 6
7.2. Voluntary Adjustment by the Company ............................. 11
7.3. Notice of Adjustment ............................................ 11
7.4. No Adjustment for Dividends ..................................... 12
7.5. Preservation of Purchase Rights Upon Merger
Consolidation, etc .............................................. 12
7.6 Statement on Warrant Certificates ................................ 13
8. Rights of the Holders .................................................. 13
8.1. Registration Rights ............................................. 13
8.2. No Rights as Shareholders ....................................... 13
8.3. General Covenants of the Company ................................ 13
9. Meetings of Holders ................................................... 15
10. Reservation of Shares of Common Stock by the
Company ............................................................. 21
11. Expenses ............................................................ 22
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
12. Loss, Theft, Destruction or Mutilation of
Warrant .......................................... .................. 22
13. Fractional Interests ............................ ................... 22
14. Restrictions on Transfer ........................ ................... 22
15. Disposition of Proceeds on Exercise of Warrants;
Inspection of Warrant Agreement ........... ......................... 24
16. Merger or Consolidation or Change of Name of
Warrant Agent ............................. .......................... 24
17. Concerning the Warrant Agent ........................................ 25
17.1. Correctness of Statements ................................. 25
17.2. Breach of Covenants ....................................... 25
17.3. Performance of Duties ..................................... 25
17.4. Reliance on Counsel ....................................... 25
17.5 Proof of Actions Taken .................................... 25
17.6. Compensation .............................................. 26
17.7. Legal Proceedings ......................................... 26
17.8. Other Transactions in Securities of
Company ................................................... 26
17.9. Liability of Warrant Agent ................................ 26
17.10. Reliance on Documents ..................................... 27
17.11. Validity of Agreement ..................................... 27
18. Change of Warrant Agent ............................................. 27
19. Notices ........................................................... 28
20. Supplements and Amendments ........................................ 28
21. Successors and Assigns ............................................ 28
22. Applicable Law .................................................... 28
23. Benefits of this Agreement ........................................ 29
24. Counterparts ...................................................... 29
25. Severability ...................................................... 29
26. Captions .......................................................... 29
</TABLE>
Annex A Form of Warrant Certificate
ii
<PAGE> 4
WARRANT AGREEMENT dated as of March 20, 1996 between Canyon Resources
Corporation, a Delaware corporation ("Company"), and American Securities
Transfer, Incorporated, a Colorado corporation, as Warrant Agent (the "Warrant
Agent").
WITNESSETH:
WHEREAS, the Company has entered into Subscription Agreements, dated as of
March ____, 1996 (each a "Subscription Agreement" and together, the
"Subscription Agreements"), between the Company and the purchasers (the
"Purchasers") named therein, whereby the Company has agreed to issue and sell to
the Purchasers warrants (the "Warrants") for the purchase of (subject to
adjustment as provided herein) up to 3,250,000 shares of its common Stock, $0.01
par value ("Common Stock");
WHEREAS, the Warrants entitle the holders thereof to purchase one share of
Common Stock upon exercise of each whole Warrant and in the aggregate up to
3,250,000 shares (subject to adjustment as provided herein) at a purchase price
of $3.75 per share of Common Stock (subject to adjustment as provided herein);
and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Purchasers, and in connection therewith, to hold all rights and benefits
contained herein for and on behalf of the Purchasers, and the Warrant Agent is
willing so to act, in connection with the issuance of the Warrants as
contemplated hereunder and certain other matters as provided herein;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Purchasers and registrar of the Warrants in
accordance with this Agreement and the Warrant Agent hereby accepts such
appointment.
2. Registration, Transferability and Form of Warrant.
2.1. Registration. The Warrants shall be numbered and shall be
registered on the books of the Company maintained at the principal office of the
Warrant Agent (the "Warrant Register") as they are issued. The Company and the
Warrant Agent shall be entitled to treat each registered holder of the Warrants
(the "Holder") as the owner in fact thereof for all purposes and shall not be
bound to recognize
1
<PAGE> 5
any equitable or other claim to or interest in such Warrant on the part of any
other person. The Holder of any Warrant shall be entitled to the rights
evidenced by that Warrant free from all equities or rights of set-off or
counterclaim between the Company and the original or any intermediate Holder
thereof and all persons may act accordingly, and a receipt from any Holder for
monies obtainable pursuant hereto or the shares of Common Stock issuable upon
the exercise thereof shall be a good discharge to the Company and the Warrant
Agent for the same and neither the Company nor the Warrant Agent shall be bound
to inquire into the title of any Holder.
2.2. Transfer. Subject to compliance with the restrictions on transfer set
forth in Section 13 hereof, the Warrants shall be transferable only on the books
of the Company maintained at the principal office of the Warrant Agent upon
delivery of a Warrant Certificate (as defined in Section 2.3 below) evidencing
Warrants to be transferred, duly endorsed by the holder thereof or by such
holder's duly authorized attorney-in-fact or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer. In all cases
of transfer by an attorney-in-fact, the original power of attorney, duly
approved, or a copy thereof, duly certified, shall be deposited and remain with
the Warrant Agent. In case of transfer by executors, administrators, guardians
or other legal representatives, duly authenticated evidence of their authority
shall be produced, and may be required to be deposited and to remain with the
Warrant Agent in its discretion. Upon any registration of transfer, the Warrant
Agent shall countersign and deliver a new Warrant Certificate or Certificates to
the persons entitled thereto.
2.3. Form of Warrant Certificate. Warrants shall be issued in the form of
Warrant certificates (the "Warrant Certificates"), which shall represent
ownership of the number of Warrants indicated on the face thereof. The form of
the Warrant Certificates and the form of election to exercise the right to
purchase Common Stock arising pursuant to this Agreement (the "Purchase Form")
shall be substantially as set forth in Appendix A annexed hereto.
2.4. Register. The Company shall cause a register to be kept by the Warrant
Agent, and the Warrant Agent agrees to maintain such a register, at its
principal transfer office in the City of Lakewood, Colorado, in which shall be
entered the names and addresses of the Holders of Warrants and other particulars
of the Warrants held by them respectively and of all transfers of Warrants. The
register referred to in this section shall at all reasonable times be
2
<PAGE> 6
open for inspection by the Company, by the Warrant Agent and by any Holder of
Warrants. The Warrant Agent shall, when requested so to do by the Company or a
Holder of Warrants, and at the Company's or the Holder's expense, as the case
may be, furnish the Company or such Holder with a list of names and addresses of
the Holders showing the number of Warrants held by each Holder.
3. Execution of Warrant Certificates. Warrant Certificates shall be
executed on behalf of the Company by any one officer or director of the Company.
Each such signature upon the Warrant Certificate may be in the form of a
facsimile signature of any one officer or director of the Company and may be
imprinted or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been an officer or director of the Company, notwithstanding the fact
that at the time the Warrant Certificates shall be countersigned and delivered
or disposed of such person shall have ceased to hold such office.
In case any officer or director of the Company who shall have signed any of
the Warrant Certificates shall cease to be such officer or director before the
Warrant Certificates so signed shall have been countersigned by the Warrant
Agent or disposed of by the Company, such Warrant Certificates nevertheless may
be countersigned and delivered or disposed of as though such person had not
ceased to be such officer of the Company; and any Warrant Certificate may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of the Company
to sign such Warrant Certificate, although at the date of the execution of this
Warrant Agreement any such person was not such officer.
4. Countersignature of Warrant Certificates. The Warrant Certificates shall
be countersigned by the Warrant Agent (or any successor to the Warrant Agent
then acting as warrant agent under this agreement) and shall not be valid for
any purpose unless so countersigned. Warrant Certificates may be countersigned,
however, by the Warrant Agent (or by its successor as warrant agent hereunder)
and may be delivered by the Warrant Agent, notwithstanding that the persons
whose manual or facsimile signatures appear thereon as proper officers or
directors of the Company shall have ceased to be such officers or directors at
the time of such countersignature, issuance or delivery. The Warrant Agent
shall, upon written instructions of any one officer or director of the Company,
countersign, issue and deliver Warrant Certificates entitling the Holders
thereof to
3
<PAGE> 7
purchase not more than 3,250,000 shares of Common Stock, subject to adjustment
as herein provided, and shall countersign and deliver Warrant Certificates as
otherwise provided in this Agreement.
Warrant Certificates shall be dated the date of countersignature by the
Warrant Agent either upon initial issuance or upon exchange, substitution or
transfer.
5. Exchange of Warrant Certificates. Subject to restrictions on transfer
set forth in this Agreement and on the face of the Warrant Certificate, each
Warrant Certificate may be exchanged for another Certificate or Certificates
entitling the holder thereof to purchase an equal aggregate number of shares of
Common Stock as the Certificate or Certificates surrendered then entitle such
holder to purchase. Any Holder desiring to exchange a Warrant Certificate or
Certificates shall make such request in writing delivered to the Warrant Agent,
and shall surrender, properly endorsed, the Certificate or Certificates to be so
exchanged. Thereupon, the Warrant Agent shall execute and deliver to the Holder
entitled thereto a new Warrant Certificate or Certificates, as the case may be,
so requested.
6. Term and Exercise of Warrants.
6.1. Term and Exercise. Subject to the terms of this Agreement, the
Warrants may be exercised in whole or in part at any time and from time to time
after the date hereof, but in no case later than the close of business on the
third anniversary of the date of the original issuance thereof. Warrants may be
exercised upon surrender of a Warrant Certificate or Certificates evidencing
such Warrants to the Warrant Agent at its executive offices, together with the
Purchase Form attached thereto duly executed, and upon payment to the Warrant
Agent of the Warrant Exercise Price (as defined in Section 6.5 below) for the
number of shares of Common Stock specified in such form. Payment shall be made
by cash, or by check drawn on a U.S. bank.
6.2. Issuance of Common Stock upon Exercise. Subject to Sections 7
and 10 hereof, upon surrender of any Warrant Certificate or Certificates and
receipt of funds for the Warrant Exercise Price for the number of Warrants to be
exercised, the Warrant Agent shall issue and cause to be delivered to or upon
the written order of the Holder exercising such Warrants and in such name or
names as such Holder may designate, a certificate or certificates for the number
of full shares of Common Stock so purchased, together with cash, as provided in
Section 12, in respect of any
4
<PAGE> 8
fractional shares of Common Stock otherwise issuable upon such surrender. Such
certificate or certificates for shares of Common Stock shall be deemed to have
been issued, and any person so designated to be named therein shall be deemed to
have become a holder of record of such shares of Common Stock, as of the date of
surrender of such Warrant Certificate or Certificates and receipt of funds for
the Warrant Exercise Price for the number of Warrants to be exercised. In the
event of exercise of only a portion of Warrants represented by a Warrant
Certificate, a new Warrant Certificate evidencing the remaining Warrants shall
be issued to the Holder. Warrant Certificates surrendered upon the exercise of
the Warrants shall be canceled by the Warrant Agent and delivered to the
Company.
6.3. Compliance with Government Regulations. The Company covenants that if
any shares of Common Stock required to be reserved for purposes of exercise of
Warrants require, under any Federal or state law or applicable governing rule or
regulation of any national securities exchange, registration with or approval of
any governmental authority, or listing on any such national securities exchange
before such shares may be issued upon exercise, the Company will in good faith
and as expeditiously as possible endeavor to cause such shares to be duly
registered, approved or listed on the relevant national securities exchange, as
the case may be, to the extent such action is required on the part of the
Company, subject to the undertakings of the Company set forth in Section 5 of
the Subscription Agreements to prepare and file with the Securities and Exchange
Commission as promptly as possible following the Closing (as defined in the
Subscription Agreements) and in any event within 90 days thereafter (the
"Qualification Deadline") a registration statement with respect to, among other
securities, the shares issuable upon exercise of the Warrants, to use its best
efforts to cause such registration statement to become effective under the
Securities Act of 1933, as amended (the "Act"), and thereafter to keep such
registration statement current and up to date.
6.4 Additional Warrants. If the Company fails to cause the registration
statement referred to in Section 6.3 hereof to be effective prior to the close
of business on the Qualification Deadline, the Company shall issue to each
Holder 1/10 of one Warrant for each unexercised whole Warrant then held by the
Holders of the Warrants and no additional amounts shall be payable to the
Company or the Warrant Agent by the Holders in respect of the issuance of such
Warrants.
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<PAGE> 9
6.5. Warrant Exercise Price. The price per share (the "Warrant
Exercise Price") at which shares of Common Stock shall be purchasable upon
exercise of the Warrants initially shall be $3.75 which price shall be subject
to adjustment pursuant to Section 7 hereof.
7. Certain Adjustments.
The number and kind of securities purchasable upon the exercise of each
Warrant and the Warrant Exercise Price shall be subject to adjustment from time
to time upon the happening of certain events, as hereinafter defined.
7.1. Mathematical Adjustments. The number of shares of Common Stock
purchasable upon the exercise of each Warrant and the Warrant Exercise Price
shall be subject to adjustment as follows:
(a) In case the Company shall at any time after the date of this
Agreement (i) declare or pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock or other securities of the Company
convertible into or exchangeable for or carrying the right to acquire
shares of Common Stock ("Convertible Securities"), (ii) subdivide its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) issue
any shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing entity), the number of shares
of Common Stock purchasable upon exercise of each Warrant then outstanding
shall be adjusted so that the Holder of each unexpired Warrant shall, upon
the exercise thereof, be entitled to receive, in the case of (i), (ii) or
(iii) above, that number of shares of Common Stock which is equal to the
number of Warrants so exercised multiplied by a fraction the numerator of
which is equal to the number of shares of Common Stock outstanding after
giving effect to the events referred to therein (and the conversion of any
Convertible Securities issued pursuant thereto) and the denominator of
which is equal to the number of shares of Common Stock outstanding on the
record date before giving effect to such event and, in the case of (iv)
above, the kind and number of shares of Common Stock or other securities of
the Company which such Holder would have owned or have been entitled to
receive after the happening of any of the events described above, had such
Warrants been exercised immediately prior to the happening of such
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<PAGE> 10
event or any record date with respect thereto. An adjustment made pursuant
to this paragraph (a) shall become effective immediately after the
effective day of such event retroactive to the record date, if any, for
such event.
(b) In case the Company shall issue rights, options or warrants to all
holders of its outstanding Common Stock entitling them (for a period within
45 days after the record date mentioned below) to subscribe for or purchase
shares of Common Stock at a price per share which is lower at the record
date mentioned below than the then current market price per share of Common
Stock (as defined in paragraph (d) below), the number of shares of Common
Stock thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of shares of Common Stock theretofore
purchasable upon exercise of each Warrant (which, prior to the first
adjustment required by this Section 7, shall be one share of Common Stock)
by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on the record date for determining stockholders
entitled to receive such rights, options or warrants, plus the number of
additional shares of Common Stock offered for subscription or purchase or
into which any such Convertible Securities may be converted, and of which
the denominator shall be the number of shares of Common Stock outstanding
on the record date for determining stockholders entitled to receive such
rights, options or warrants, plus the number of shares of Common Stock
which the aggregate offering price or the exercise price of the total
number of shares of Common Stock so offered or into which such rights,
options and warrants are exercisable into would purchase at the current
market price per share of Common Stock at such record date. Such adjustment
shall be made whenever such rights, options or warrants are issued, and
shall become effective as of immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants. Any shares of Common Stock which may be acquired upon the
exercise of the rights, options or warrants referred to in this Section
owned by or held for the account of the Company shall be deemed not to be
outstanding for the purpose of any computation.
(c) In case the Company shall distribute to all holders of it shares
of Common Stock (i) evidences of its indebtedness or assets, (excluding
cash dividends or distributions payable out of earnings or earned
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<PAGE> 11
surplus, dividends), (ii) shares in the capital of the Company other than
shares of Common Stock or distributions referred to in paragraph (a) above,
or (iii) rights, options or warrants (excluding any rights, options or
warrants referred to in paragraph (b) above) then in each case the number
of shares of Common Stock thereafter purchasable upon the exercise of each
Warrant shall be determined by multiplying the number of shares of Common
Stock theretofore purchasable upon the exercise of each Warrant by a
fraction, of which the numerator shall be the then current market price per
share of Common Stock (as defined in paragraph (d) below) on the date of
such distribution, and of which the denominator shall be the then current
market price per share of Common Stock, less the then fair value (as
determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the portion of the evidences of indebtedness or
assets, shares, rights, options or warrants so distributed applicable to
one share of Common Stock after giving effect to the exercise of all
unexercised Warrants and the conversion of all Convertible Securities. Such
adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of distributing retroactive to the record date
for the determination of shareholders entitled to receive such
distribution. Any shares of Common Stock owned by or held for the account
of the Company shall be deemed not to be outstanding for the purpose of any
such computation.
(d) For the purposes of any computation under paragraphs (b) and (c)
of this section, the current market price per share of Common Stock at any
date shall be the average of the daily closing prices for any 10
consecutive trading day period determined by the Board of Directors in its
sole discretion, commencing no more than 30 days prior to the date of such
computation. The closing price for each day shall be the last such reported
sales price or, in case no such reported sale takes place on such day, the
closing bid price for such day, in each case on the principal national
securities exchange or in the NASDAQ-National Market System on which the
shares of Common Stock are listed or admitted for trading, or, if not
listed admitted for trading, or, the closing bid price of the Common Stock
in the over-the-counter market as reported by NASDAQ or any comparable
system, or if the Common Stock is not quoted on NASDAQ or a comparable
system, the average of the closing bid prices as furnished by two members
of the National Association of Securities Dealers, Inc. selected from time
to time by the Board
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<PAGE> 12
of Directors of the Company for that purpose. In the absence of one or more
such quotations, the Board of Directors of the Company shall determine the
current market price on the basis of such quotations as it considers
appropriate. In the case of rights, options or warrants the price per share
of Common Stock shall be determined by dividing (x) the total amount
received or receivable by the Company in consideration of the sale and
issuance of such rights, options, warrants or Convertible Securities, plus
the total consideration payable to the Company upon exercise or conversion
or exchange thereof, by (y) the total number of shares of Common Stock
covered by such rights, options, warrants or Convertible Securities.
(e) Whenever the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted as herein provided, the Warrant
Exercise Price payable upon exercise of each Warrant shall be adjusted by
multiplying such Warrant Exercise Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the number of
shares of Common Stock purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and of which the denominator shall be
the number of shares of Common Stock purchasable immediately thereafter.
(f) No adjustment in the number of shares of common Stock purchasable
hereunder shall be required unless such adjustment would result in an
increase or decrease of at least one percent (1%) of the Warrant Exercise
Price; provided, however, that any adjustments which by reason of this
paragraph (f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations shall be
made to the nearest cent or to the nearest one-thousandth of a share, as
the case may be.
(g) No adjustment in the number of shares of Common Stock purchasable
upon the exercise of each Warrant need be made under paragraphs (b) and (c)
if the Company issues or distributes to each Holder of Warrants the shares,
rights, options, warrants, or evidences of indebtedness or assets referred
to in those paragraphs which each Holder of Warrants would have been
entitled to receive had the Warrants been exercised prior to the happening
of such event or the record date with respect thereto. No adjustment in the
number of shares of Common Stock purchasable upon the exercise of each
Warrant need be made for sales of shares of Common Stock pursuant to a
Company plan for reinvestment of dividends or interest. No adjustment
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<PAGE> 13
need be made for a change in the par value of the common Stock.
(h) For the purpose of this Section 7.1 the term "shares of Common
Stock" shall mean (i) the class of stock designated as the common Stock of
the Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that at any time, as
a result of an adjustment made pursuant to paragraph (a) above, the Holders
shall become entitled to receive any securities of the Company other than
shares of Common Stock, thereafter the number of such other shares so
receivable upon exercise of each Warrant and the Warrant Exercise Price of
such shares shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock purchasable upon exercise of the
Warrants contained in paragraphs (a) through (g), inclusive, above, and the
provisions of Sections 7.2 through 7.4, inclusive, with respect to the
shares of common Stock purchasable upon exercise of the Warrants, shall
apply on like terms to any such other securities; provided, however, that
the Warrant Exercise Price shall at no time be less than the par value of
the Common Stock of the Company, provided, further, that the Company shall
reduce the par value of its Common Stock from time to time as necessary so
that such par value shall not be less than the Warrant Exercise Price then
in effect.
(i) In the case of paragraph (b) and (c) of this Section, upon the
expiration of any rights, options or warrants or if any thereof shall not
have been exercised, the Warrant Exercise Price and the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter be such as it would have
been had it been originally adjusted (or had the original adjustment not
been required as the case may be) as if (A) the only shares of Common Stock
so issued were the shares of Common Stock, if any, actually issued or sold
upon the exercise of such rights, options or warrants and (B) such shares
of Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate
consideration, if any, actually received by the Company for the issuance,
sale or grant of all such rights, options or warrants whether or not
exercised; provided,
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<PAGE> 14
however, that no such readjustment shall have the effect of increasing the
Warrant Exercise Price or decreasing the number of shares of Common Stock
purchasable upon the exercise of each Warrant by an amount in excess of the
amount of the adjustment initially made in respect to the issuance, sale or
grant of such rights, options or warrants.
(j) In the case of paragraph (b) and (c) of this Section 7.1. on any
change in the number of shares of Common Stock deliverable upon exercise of
any such rights, options or warrants, other than a change resulting from
the antidilution provisions hereof, the number of shares of Common Stock
thereafter purchasable upon the exercise of each Warrant shall be
readjusted to such number as would have been obtained had the adjustment
made upon the issuance of such rights, options, or warrants not converted
prior to such change (or rights, options or warrants related to such
securities not converted prior to such change) been made upon the basis of
such change.
7.2. Voluntary Adjustment by the Company. The Company may at its option, at
any time during the term of the Warrants, reduce the then current Warrant
Exercise Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company, including such reductions in the Warrant
Exercise Price as the Company considers to be advisable in order that any event
treated for Federal income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
7.3. Notice of Adjustment. Whenever the number of shares of Common Stock
purchasable upon the exercise of each Warrant or the Warrant Exercise Price of
such shares of Common Stock is required to be adjusted, as herein provided, the
Company shall cause the Warrant Agent promptly to mail by first class, postage
prepaid, to each Holder notice of such adjustment or adjustments and shall
deliver to the Warrant Agent a certificate of a firm of independent public
accountants selected by the Board of Directors of the Company (who may be the
regular accountants employed by the Company) setting forth the number of shares
of Common Stock purchasable upon the exercise of each Warrant and the Warrant
Exercise Price of such share of Common Stock after such adjustment, setting
forth a brief statement of the facts requiring such adjustment and setting forth
the computation by which such adjustment was made. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same,
from time to time, to any Holder desiring an inspection thereof during
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<PAGE> 15
reasonable business hours. The Warrant Agent shall not at any time be under any
duty or responsibility to any Holders to determine whether any facts exist which
may require any adjustment of the Warrant Exercise Price or the number of shares
of Common Stock or other stock or property purchasable on exercise thereof, or
with respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment or reset.
7.4. No Adjustment for Dividends. Except as provided in Section 7.1, no
adjustment in respect of any dividends shall be made during the term of a
Warrant or upon the exercise of a Warrant.
7.5. Preservation of Purchase Rights Upon Merger, Consolidation, etc. In
case of any consolidation of the Company with or merger of the Company into
another person or in case of any sale, transfer or lease to another person of
all or substantially all the property of the Company, the Company or such
successor or purchasing person, as the case may be, shall execute with the
Warrant Agent an agreement that each Holder shall have the right thereafter upon
payment of the Warrant Exercise Price in effect immediately prior to such action
to purchase upon exercise of each Warrant the kind and amount of shares and
other securities and property which he would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale, transfer or
lease had such Warrant been exercised immediately prior to such action (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer is not the same for each share
of Common Stock of the Company, then for the purpose of this Section the kind
and amount of securities, cash and other property receivable upon exercise of
the Warrants immediately after such consolidation, merger, sale or transfer
shall be the kind and amount so receivable per share by a majority of the
holders of Common Stock), and if the successor or purchasing person is not a
corporation, such person shall provide appropriate tax indemnification with
respect to such shares and other securities and property so that upon exercise
of the Warrants, the Holder thereof would have the same benefits he otherwise
would have had if such successor or purchasing person were a corporation. Such
agreement shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 7. The
provisions of this Section 7.5 shall similarly apply to successive
consolidations, mergers, sales, transfers or leases. The Warrant Agent shall be
under no duty or responsibility to determine the correctness of any provisions
contained in any such agreement relating
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<PAGE> 16
either to the kind or amount of shares of stock or other securities or property
receivable upon exercise of Warrants or with respect to the method employed and
provided therein for any adjustments and shall be entitled to rely upon the
provisions contained in any such agreement.
7.6. Statement on Warrant Certificates. Irrespective of any
adjustments in the Warrant Exercise Price or the number or kind of shares
purchasable upon the exercise of the Warrants, Warrant Certificates theretofore
or thereafter issued may continue to express the same price and number and kind
of shares as are stated in the Warrant Certificates initially issuable pursuant
to this Agreement.
8. Rights of the Holders.
8.1. Registration Rights. The Holders of the Warrants shall have
certain registration rights with respect to the Common Stock purchasable upon
the exercise of the Warrants, in accordance with the provisions for such rights
set forth in the Subscription Agreements.
8.2. No Rights as Shareholders. Nothing contained herein shall be
construed as conferring upon the Holders of the Warrants the right to vote or to
receive dividends or to consent or to receive notice as a shareholder in respect
of any meeting of shareholders for the election of directors of the Company or
any other matter, or any rights whatsoever as a shareholder of the Company
except as expressly provided herein or as required by law.
8.3. General Covenants of the Company. The Company represents,
warrants and covenants to the Warrant Agent for the benefit of the Warrant Agent
and the Holders that so long as Warrants remain outstanding:
(a) it will at all times maintain its existence, carry on and conduct its
business in a proper, efficient and business-like manner and in
accordance with good business practice, keep or cause to be kept
proper books of account in accordance with generally accepted
accounting practice and, if and whenever required in writing by the
Warrant Agent, file with the Warrant Agent copies of all annual
financial statements and other materials of the Company furnished to
its shareholders during the term of this Agreement;
(b) it is duly authorized to create and issue the Warrants to be issued
hereunder and the Warrant Certificates when issued and certified as
herein
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<PAGE> 17
provided will be legal, valid and binding obligations of the Company;
(c) subject to the provisions of this Agreement, it will cause the shares
of Common Stock from time to time subscribed for and purchased
pursuant to the exercise of Warrants and the certificates representing
such shares to be duly issued and delivered in accordance with the
Warrants and the terms hereof;
(d) upon the exercise by the Holder of any Warrant of the right of
purchase provided for therein and herein and upon payment of the
Warrant Exercise Price applicable thereto for each share of Common
Stock in respect of which the right of purchase is so exercised, all
shares of Common Stock issuable upon the exercise shall be issued as
fully paid and nonassessable;
(e) it will take all steps necessary to ensure that the shares of Common
Stock issuable upon exercise of the Warrants will continue to be
quoted on NASDAQ upon their issue or listed for trading on a
nationally recognized stock exchange;
(f) the Company will use its best efforts to maintain its status as a
"reporting issuer under Section 13 of the Securities and Exchange Act
of 1934" not in default of the requirements of the securities laws
applicable to it;
(g) the issue of the Warrants does not and will not result in a breach by
the Company of, and does not and will not create a state of facts
which, after notice or lapse of time or both, will result in a breach
by the Company of, any applicable laws, and does not and will not
conflict with any of the terms, conditions or provisions of the
constating documents of the Company including the Company's by-laws or
resolutions of the Company or any trust indenture, loan agreement or
any other agreement or instrument to which the Company is a party or
by which it is contractually bound on the date of this Agreement; and
(h) it shall do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged or delivered all other acts, deeds and
assurances in law as the Warrant Agent may reasonably required for
better accomplishing and effecting the intentions and provisions of
this Agreement.
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<PAGE> 18
9. Meetings of Holders. The Company and Warrant Agent agree that:
(a) The Warrant Agent or the Company may, and the Warrant Agent shall on
receipt of a requisition in writing signed by the Holders sufficient
to purchase not less than 10% of the aggregate number of shares of
Common Stock which would be purchased under the Warrants then
outstanding and upon being indemnified to its reasonable satisfaction
by the Company or by one or more of the Holders signing the
requisition against the costs which may be incurred in connection with
the calling and holding of the meeting, at any time and from time to
time convene a meeting of the Holders.
(b) If the Warrant Agent fails to convene a meeting within 30 days after
receipt of the requisition and indemnity referred to in section 9(a),
the Company or the Holders may convene the meeting.
(c) Every meeting of Holders shall be held in the City of Lakewood,
Colorado, or at such other place as the Warrant Agent shall determine.
(d) At least 14 days' notice specifying the place, day and hour of meeting
and the general nature of business to be transacted shall be given
prior to any meeting of Holders but it shall not be necessary to
specify in the notice the terms of any resolution to be proposed.
(e) Notice of a meeting of Holders shall be given to the Holders in the
manner provided in section 19. Notice shall be given to the Company
unless the meeting is convened by the Company and to the Warrant Agent
unless the meeting is convened by the Warrant Agent. Any accidental
omission in the notice of a meeting shall not invalidate any
resolution passed at the meeting.
(f) The person, who need not be a Holder, nominated in writing by the
Warrant Agent shall be entitled to act as the chairman at any meeting
of Holders but if no such person is nominated or if the person
nominated shall not be present within 15 minutes after the time
appointed for holding the meeting, the Holders present shall choose a
person present to be chairman.
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<PAGE> 19
(g) At any meeting of the Holders a quorum shall consist of two or more
Holders present in person or by proxy holding not less than 20% of the
Warrants then outstanding.
(h) If a quorum of the Holders is not present within half an hour from the
time fixed for holding any meeting, the meeting, if convened by
Holders or by a requisition of Holders, shall be dissolved; but if
otherwise convened, the meeting shall stand adjourned without notice
to the same day in the next week following (unless that day is not a
business day, in which case the meeting shall stand adjourned to the
next business day thereafter) at the same time and place. At the
adjourned meeting, the Holders present in person or by proxy shall
form a quorum and may transact the business for which the meeting was
originally convened notwithstanding that they may not hold 20% of the
Warrants then outstanding.
(i) The chairman of any meeting at which a quorum of Holders if present
may, with the consent of the meeting, adjourn any meeting and no
notice of the adjournment need be given except such notice, if any, as
the meeting may prescribe.
(j) Every question submitted to a meeting other than a question to be
resolved by an extraordinary resolution shall be decided in the first
place by a majority of the votes given on a show of hands and unless a
poll is duly demanded as herein provided, a declaration by the
chairman that a resolution has been carried or carried unanimously or
by a particular majority or lost or not carried by a particular
majority shall be conclusive evidence of that fact.
(k) On every extraordinary resolution to be passed at a meeting and on any
other question submitted to a meeting when directed by the chairman or
when demanded by any Holder after a vote by show of hands, a poll
shall be taken in the manner as the chairman shall direct. Questions
other than those to be resolved by extraordinary resolution shall, if
a poll be taken, be decided by the votes of the holders of a majority
of the Warrants represented at the meeting and voted on the poll. If
at any meeting a poll is so demanded as aforesaid on the election of a
chairman or on a question of adjournment, it shall be taken forthwith.
If at any meeting a poll is so demanded on any other
16
<PAGE> 20
question, or an extraordinary resolution is to be voted upon, a poll
shall be taken in such manner and either at once or after an
adjournment as the chairman directs. The result of a poll shall be
deemed to be the decision of the meeting at which the poll was
demanded and shall be binding on all Holders.
(l) On a show of hands, every person who is present and entitled to vote,
whether as a Holder or as proxy for one or more absent Holders or
both, shall have one vote. On a poll, each Holder present in person or
represented by a proxy duly appointed by instrument in writing shall
be entitled to one vote in respect of each share of Common Stock
purchasable under Warrants of which he shall then be the holder. A
proxy need not be a Holder.
(m) The Company and the Warrant Agent by their respective officers and
directors and the counsel of the Company and the Warrant Agent may
attend any meeting of Holders but shall have no vote as such.
(n) The Warrant Agent, or the Company with the approval of the Warrant
Agent, may from time to time make or vary such regulations as it shall
think fit providing for and governing the following:
(i) the issue of voting certificates:
(A) by any bank, trust company or other depositary approved
by the Warrant Agent, certifying that specified
Warrants have been deposited with it by a named holder
and will remain on deposit until after the meeting;
(B) by any bank, trust company, insurance company,
governmental department or agency approved by the
Warrant Agent, certifying that it is the holder of
specified Warrants and will continue to hold the same
until after the meeting;
which voting certificates shall entitle the holders named
therein to be present and vote at any meeting and at any
adjournment thereof or to appoint a proxy or proxies to
represent them and vote for them at any meeting and at
17
<PAGE> 21
any adjournment thereof, in the same manner and with the
same effect as though the holders named in the voting
certificates were the actual holders of the specified
Warrants;
(ii) the form of the instrument appointing a proxy (which shall be
in writing), the manner in which the same shall be executed
and the form of any authority under which a person executes a
proxy on behalf of a Holders;
(iii) the deposit certificates, instruments appointing proxies or
authorities at such place or places as the Warrant Agent (or
the Company or Holders in case the meeting is convened by the
Company or the Holders, as the case may be) may in the notice
convening the meeting direct and the time (if any) before the
holding of the meeting or adjourned meeting at which the same
shall be deposited;
(iv) the deposit of voting certificates or instruments appointing
proxies at some place or places other than the place at which
the meeting is to be held and for particulars of the voting
certificates or instruments appointing proxies to be cabled
or telegraphed or notified by other means of communication
before the meeting to the Company or to the Warrant Agent and
for the voting of voting certificates and proxies so
deposited as if the voting certificates or the instruments
themselves were produced at the meeting or deposited at any
other place required pursuant to paragraph (iii); and
(v) generally for the calling of meetings of Holders and the
conduct of business thereat.
Any regulations so made shall be binding and effective and votes
given in accordance therewith shall be valid and shall be counted.
Except as the regulations may provide, the only persons who shall
be recognized at any meeting as the Holders, or as entitled to
vote or to be present at the meeting in respect thereof, shall be
registered Holders and persons whom registered Holders have by
instrument in writing duly appointed as their proxies.
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<PAGE> 22
(o) In addition to all other powers conferred on them by the other
provisions of this Agreement or by law, the Holders shall have the
following powers, exercisable from time to time by extraordinary
resolution:
(i) power to agree to any amendment, modification, abrogation,
alteration, compromise or arrangement of the rights of Holders
or the Warrant Agent in that capacity or on behalf of the
Holders against the Company whether the rights arise under
this Indenture or otherwise except that in respect of a change
in the period during which the Warrants may be exercised or
the Warrant Exercise Price the amendment shall not be binding
upon a Holder who does not consent thereto;
(ii) power to agree to any change in or omission from the
provisions of the Warrant Certificate and this Agreement or
any ancillary or supplemental instrument which may be agreed
to by the Company and to authorize the Warrant Agent to concur
in and execute any ancillary or supplemental indenture
embodying any change or omission;
(iii) power to require the Warrant Agent, subject to compliance with
section 17.7 hereof, to enforce any of the obligations of the
Company under this Agreement or any supplemental instrument or
to enforce any of the rights of the Holders in any manner
specified in an extraordinary resolution or to refrain from
enforcing any such covenant or right, upon the Warrant Agent
being furnished with such indemnity as it may in its
discretion require;
(iv) power to remove the Warrant Agent or its successor or
successors in office and to appoint a new Warrant agent or
Warrant Agents to take the place of the Warrant Agent so
removed;
(v) power to waive and direct the Warrant Agent to waive any
default on the part of the Company in complying with any
provision of this Agreement either unconditionally or upon
conditions specified in the extraordinary resolution;
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<PAGE> 23
(vi) power to restrain any Holder from taking or instituting or
continuing any suit, action or proceeding against the Company
for the enforcement of any of the obligations of the Company
under this Agreement or to enforce any right of the Holders;
and
(vii) power to amend, alter or repeal any extraordinary resolution
previously passed or consented to by Holders.
(p) The expression "extraordinary resolution" when used in this
Agreement means a resolution passed at a meeting (including an
adjourned meeting) of Holders duly convened and held in accordance
with the provisions of this Agreement at which a quorum is present
and carried by the affirmative vote of not less than 66-2/3% of the
votes given on a poll or by the consent in writing, which may be in
one or more instruments, of the holders of not less than 66-2/3% of
the Warrants then outstanding.
(q) Every resolution and every extraordinary resolution duly
passed at a meeting of the Holders duly convened and held or any
consent in writing having the effect of an extraordinary resolution
shall be binding upon all the Holders (including their successors
and assigns) whether or not present or represented or voting at the
meting or signatories to the consent, as the case may be, and each
of the Holders and the Warrant Agent, subject to the provisions for
its indemnity contained in this Agreement, shall be bound to give
effect thereto.
(r) In determining whether the requisite number of Holders are present
for the purpose of obtaining a quorum or have voted or consented to
any resolution, extraordinary resolution, consent, waiver, Holders'
Request or other action under this Agreement, Warrants owned by the
Company or any subsidiary of the Company shall be deemed to be not
outstanding.
(s) Minutes of all resolutions and proceedings at every meeting of
Holders shall be made and duly entered in books to be provided for
that purpose by the Warrant Agent at the expense of the Company and
any minutes if purporting to be signed by the chairman of the
meeting, or by the chairman of the next succeeding meeting of
Holders, shall be prima facie evidence of the matters therein stated
and,
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<PAGE> 24
until the contrary is proved, every meeting for which minutes have
been made shall be deemed to have been duly convened and held and all
resolutions passed or proceedings taken thereat to have been duly
passed and taken.
(t) Any one or more of the powers or combination of the powers in this
Warrant Agreement exercisable by the Holders by extraordinary
resolution or otherwise may be exercised from time to time and the
exercise of any one or more of the powers or any combination of
powers from time to time shall not be deemed to exhaust the rights of
the Holders to exercise the same or any other power or powers or
combination of powers then or any power or powers or combinations of
powers thereafter.
(u) All actions that may be taken and all powers that may be exercised by
the Holders at a meeting held as hereinbefore in this section 9
provided may also be taken and exercised by Holders entitled to
acquire two-thirds of the aggregate number of shares of Common Stock
that can be acquired pursuant to all the then outstanding Warrants by
an instrument in writing signed in one or more counterparts by
Holders in person or by attorney duly appointed in writing and the
expression "extraordinary resolution" when used in this Agreement
shall include an instrument so signed.
10. Reservation of Shares of Common Stock by the Company. The Company shall
at all times keep reserved and available, for the purpose of effecting the
exercise of the Warrants, free from preemptive rights, out of its authorized but
unissued Common Stock, the full number of shares of Common Stock sufficient to
provide for the exercise of all the Warrants, including any shares required to
be reserved by reason of adjustments under Section 7; and upon issuance and
delivery of such shares of Common Stock to any Holder or Holders exercising the
Warrants and upon payment of the Warrant Exercise Price therefor, good and valid
title to such shares for which such Warrants are exercised, free and clear of
all liens, encumbrances, equities or claims, shall pass to, such Holder or
Holders. The registrar for the Company's Common Stock shall be irrevocably
authorized and directed at all times to reserve such number of authorized shares
as shall be requisite for such purpose. The Company further represents and
warrants that all of its outstanding shares of Common Stock are duly and validly
issued, fully paid and nonassessable.
21
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11. Expenses. The Company will pay all expenses in connection with, and all
taxes and other governmental charges (other than any taxes on, based on or
measured by, the net income of any Holder or Holders) that may be imposed in
respect of, the issue of delivery of the Common Stock issuable upon exercise of
the Warrants, other than any tax or taxes which may be payable in respect of any
transfer involved in the issue or delivery of any Warrant Certificates or
certificates for the Common Stock issuable upon the exercise of the Warrants in
a name other than that of the Holder of such Warrant Certificates, and the
Warrant Agent shall not be required to deliver certificates for Common Stock
unless and until the person exercising the Warrant or Warrants therefor shall
have paid to the Warrant Agent the amount of such tax or shall have established
to the satisfaction of the Warrant Agent that such tax has been paid or that
there is an available exemption. The Warrant Agent shall be entitled to assess a
reasonable charge for exchanges of outstanding Warrant Certificates for one or
more new Warrant Certificates entitling the Holder to purchase the same
aggregate number of shares of Common Stock as were purchasable on exercise of
the Warrant or Warrants represented by the Warrant Certificate or Warrant
Certificates so exchanged, such charge to be payable by the Holder.
12. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt of
evidence reasonably satisfactory to the Company and the Warrant Agent of the
loss, theft, destruction or mutilation of any Warrant Certificate, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to the Company and the Warrant Agent, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of such Warrant Certificate, if mutilated, the Company shall make and cause the
Warrant Agent to deliver a new Warrant Certificate of like tenor and dated as of
such cancellation date, in lieu of such mutilated Warrant Certificate.
13. Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock on the exercise of the Warrants. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 13, be issuable on the exercise of any of the Warrants, the Company
shall return to the Holder exercising such Warrants an amount in cash equal to
the Warrant Exercise Price multiplied by such fraction.
14. Restrictions on Transfer. Until such time as the Warrants and the
shares of Common Stock issuable upon exercise thereof shall be registered under
the Act, the
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<PAGE> 26
Warrants and such shares of Common Stock will constitute "restricted securities"
under the Federal securities laws inasmuch as they are, or shall be, acquired
from the Company in transactions not involving a public offering and accordingly
may not, under such laws and applicable regulations, be resold or transferred
unless and until registered under the Act, or unless an exemption from
registration under the Act is available. Accordingly, each Warrant Certificate
shall bear the following legend:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) TO AN "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A)(1), (A)(2), (A)(3) OR (A)(7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR
FOR THE ACCOUNT OF SUCH AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT.
In addition, until the shares of Common Stock issued upon exercise of the
Warrants have been registered under the Act, the foregoing legend shall also be
affixed on the face of the certificates for such shares of Common Stock, unless
in the opinion of counsel for the Company such legend is not required.
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<PAGE> 27
15. Disposition of Proceeds on Exercise of Warrants; Inspection of Warrant
Agreement. The Warrant Agent shall promptly inform the Company with respect to
Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of Common Stock through the exercise of such
Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices given
or received hereunder available for inspection by the Holder during normal
business hours at its principal office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
16. Merger of Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger of consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 18. In case at the time such successor to the Warrant
Agent shall succeed to the agency created by this Agreement, any of the Warrant
Certificates representing Warrants shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
Certificates so countersigned; and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant Certificates either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent; and in
all such cases, Warrants shall have the full force provided in the Warrant
Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignatures under its prior
name and deliver such Warrant Certificates as so countersigned; and in case at
that time any of the Warrant Certificates shall not have been countersigned, the
Warrant Agent may countersign such Warrant Certificates either in its prior name
or in its changed name; and in all such cases, such Warrants shall have the full
force provided in the Warrant Certificates and in this Agreement.
24
<PAGE> 28
17. Concerning the Warrant Agent. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance of
Warrants as evidenced by the Warrant Certificates, shall be bound:
17.1.Correctness of Statements. The statements contained herein and in
the Warrant Certificates shall be taken as statements of the Company and
the Warrant Agent assumes no responsibility for the correctness of any of
the same except such as describe the Warrant Agent or action taken by it.
The Warrant Agent assumes no responsibility with respect to the
distribution of the Warrant Certificates except as herein otherwise
provided.
17.2 Breach of Covenants. The Warrant Agent shall not be responsible
for any failure of the Company to comply with the covenants contained in
this Agreement or in the Warrant Certificates to be complied with by the
Company.
17.3 Performance of Duties. The Warrant Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents (which
shall not include its employees) and shall not be responsible for the
misconduct of any agent appointed with due care.
17.4 Reliance on Counsel. The Warrant Agent may consult at any time
with legal counsel satisfactory to it (who may be counsel for the Company)
and the Warrant Agent shall incur no liability or responsibility to the
Company or to any Holder in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with the opinion or
the advice of such counsel.
17.5 Proof of Actions Taken. Whenever in the performance of its duties
under this Agreement the Warrant Agent shall deem it necessary or desirable
that any fact or matter be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed conclusively to be proved and established by a certificate signed by
the Chairman of the Board, the President, one of the Vice Presidents, the
Treasurer or the Secretary of the Company and delivered to the Warrant
Agent; and such certificate shall be full authorization to the Warrant
Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
25
<PAGE> 29
17.6 Compensation. The Company agrees to pay the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the performance
of its duties under this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent in the performance of its duties under this
Agreement, and to indemnify the Warrant Agent and save it harmless against any
and all liabilities, including judgments, costs and counsel fees, for anything
done or omitted by the Warrant Agent in the performance of its duties under this
Agreement, except as a result of the Warrant Agent's negligence or bad faith.
17.7 Legal Proceedings. The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more Holders shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants as expressed in the
Warrant Certificates may be enforced by the Warrant Agent without the possession
of any of the Warrant Certificates or the production thereof at any trial or
other proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant Agent,
and any recovery of judgment shall be for the ratable benefit of the Holders, as
their respective rights or interests may appear.
17.8 Other Transactions in Securities of Company. The Warrant Agent and any
stockholder, director, officer or employee of the Warrant Agent may buy, sell or
deal in any of the Warrants, or other securities of the Company or become
pecuniarily interested in any transactions in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity including, without
limitation, acting as Transfer Agent or as a lender to the company or an
affiliate thereof.
17.9 Liability of Warrant Agent. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything which it may do or
refrain from doing in connection with this Agreement
26
<PAGE> 30
except for its own negligence or bad faith.
17.10 Reliance on Documents. The Warrant Agent shall not incur any
liability or responsibility to the Company or to any Holder for any action
taken in reliance on any notice, resolutions, waiver, consent, order,
certificate, or other paper, document or instrument reasonably believed by
it to be genuine and to have been signed, sent or presented by the proper
party or parties.
17.11 Validity of Agreement. The Warrant Agent shall not be under any
responsibility in respect of the validity or execution of any Warrant
Certificate (except its countersignature thereof); nor shall the Warrant
Agent by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock (or
other stock) to be issued pursuant to this Agreement or upon the exercise
of any Warrant, or as to whether any shares of Common Stock (or other
stock) shall, when issued, be validly issued, fully paid and nonassessable,
or as to the Warrant Exercise Price or the number or amount of shares of
Common Stock or other securities or other property issuable upon exercise
of any Warrant.
18. Change of Warrant Agent. The Warrant Agent may resign and be discharged
from its duties, under this Agreement by giving to the Company 60 days notice in
writing. The Warrant Agent may be removed by like notice to the Warrant Agent
from the Company. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Warrant Agent. If the Company shall fail to make such appointment within a
period of 50 days after such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Warrant Agent
or by any Holder (who shall with such notice submit his Warrant Certificate for
inspection by the Company, then any Holder may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Any
successor Warrant Agent, whether appointed by the company or such a court, shall
be a bank or trust company, in good standing, incorporated under the laws of the
United States of America or any state thereof or the District of Columbia and
having at the time of its appointment as Warrant Agent a combined capital and
surplus of at least $20,000,000. After appointment, the successor Warrant Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Warrant Agent hereunder without further act or
deed; but the former Warrant Agent shall deliver and transfer to the successor
Warrant Agent any property at the
27
<PAGE> 31
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to file any notice
provided for in this Section 18, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
agent or the appointment of the successor Warrant Agent, as the case may be. In
the event of such resignation or removal, the successor Warrant Agent shall
mail, first class, to each Holder, written notice of such removal or resignation
and the name and address of such successor Warrant Agent.
19. Notices. Any notice pursuant to this Agreement by the Company or the
Warrant Agent to the Holders, or by the Company to the Warrant Agent, shall be
in writing and shall be deemed to have been duly given if and when mailed,
first-class, postage prepaid, to the Holders or the Warrant Agent at their
respective addresses shown on the books of the Company.
20. Supplements and Amendments. The Company and the Warrant Agent may from
time to time supplement or amend this Agreement, without the approval of any
Holders, in order to cure any ambiguity or to correct or supplement any
provision contained herein that may be defective or inconsistent with any other
provision herein, or to make any other provisions in regard to matters or
questions arising hereunder that the Company and the Warrant Agent may deem
necessary or desirable that shall not adversely affect the interests of the
Holders.
21. Successors and Assigns. The terms and provisions of this Agreement
shall be binding on and inure to the benefit of the Company and the Warrant
Agent and their respective successors and assigns.
22. Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of New York.
23. Benefits of this Agreement. Nothing in this Agreement, express or
implied, shall be construed to give to any person, other than the Company, the
Warrant Agent and the Holders of Warrants, any benefit or any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the Holders of
Warrants.
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<PAGE> 32
24. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposed be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
25. Severability. The invalidity, illegality or unenforceability of one or
more of the provisions of this Agreement in any jurisdiction shall not affect
the validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of this Agreement,
including any such provisions, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.
26. Captions. The captions of the Sections of this Agreement are for
convenience only and shall have no substantive effect and shall not affect the
construction hereof. References to Section numbers are, unless otherwise
stated, references to Sections hereof.
CANYON RESOURCES CORPORATION
By: /s/ Gary C. Huber
-------------------------
Name: Gary C. Huber
Title: Vice President-Finance
AMERICAN SECURITIES
TRANSFER, INCORPORATED
By: /s/Laura J. Sisneros
-------------------------
Name: Laura J. Sisneros
Title:Vice President/Operations
29
<PAGE> 1
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additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral
as if the Agent were the sole and absolute owner thereof (and the
Borrower agrees to take all such action as may be appropriate to give
effect to such right);
(d) the Agent in its discretion may, in its name or in the
name of the Borrower or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of
or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(e) the Agent may, upon ten business days' prior written
notice to the Borrower of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter
come into the possession, custody or control of the Agent, the other
Secured Parties or any of their respective agents, sell, lease, assign
or otherwise dispose of all or any part of such Collateral, at such
place or places as the Agent deems best, and for cash or for credit or
for future delivery (without thereby assuming any credit risk), at
public or private sale, without demand of performance or notice of
intention to effect any such disposition or of the time or place
thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Agent or any other Secured
Party or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at any public
sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of
whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Borrower, any such demand, notice and
right or equity being hereby expressly waived and released. In the
event of any sale, assignment, or other disposition of any Trademark,
the goodwill connected with and symbolized by the Trademark subject to
such disposition shall be included, and the Borrower shall supply to
the Agent or its designee, for inclusion in such sale, assignment or
other disposition, all Intellectual Property relating to such
Trademark. The Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.05, including by virtue of the exercise of the license granted to the Agent
in Section 4.04(b) hereof, shall be applied in accordance with Section 4.09
hereof.
4.06 Deficiency. If the proceeds of sale, collection or
other realization of or upon the Collateral pursuant to Section 4.05 hereof are
Appendix A-6
<PAGE> 2
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insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, the Borrower shall remain liable
for any deficiency.
4.07 Removals, Etc. Without at least 30 days' prior written
notice to the Agent, the Borrower shall not (i) maintain the Records at any
office or maintain its principal place of business at any place, or permit any
Inventory or Equipment to be located anywhere, other than at the address set
forth in Section 2(a) hereof or (ii) change its name, or the name under which
it does business, from the name shown on the signature pages hereto.
4.08 Private Sale. The Agent and the other Secured Parties
shall incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 4.05 hereof conducted in a
commercially reasonable manner. The Borrower hereby waives any claims against
the Agent or any other Secured Party arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was
less than the price that might have been obtained at a public sale or was less
than the aggregate amount of the Secured Obligations, even if the Agent accepts
the first offer received and does not offer the Collateral to more than one
offeree.
4.09 Application of Proceeds. Except as otherwise herein
expressly provided, if any Event of Default shall have occurred and be
continuing, all amounts held in any of the Accounts, and all payments under or
in connection with the Assigned Agreements or in respect of the Collateral made
to the Borrower and received by or paid over to the Agent or made directly to
the Agent, and all proceeds of any collection, sale or other realization of all
or any part of the Collateral pursuant hereto, and any other cash at the time
held by the Agent under this Section 4, may in the discretion of the Agent, (i)
be held by the Agent as Collateral for the Secured Obligations and/or (ii) then
or at any time thereafter be applied by the Agent:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
out-of-pocket costs and expenses of the Agent and the fees and
expenses of its agents and counsel, and all expenses incurred and
advances made by the Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in
each case equally and ratably in accordance with the respective
amounts thereof then due and owing or as the Secured Parties holding
the same may otherwise agree; and
Finally, to the payment to the Borrower, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
Appendix A-6
<PAGE> 3
- 13 -
As used in this Section 4, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions
in kind of, Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of the Borrower or any issuer
of or obligor on any of the Collateral.
4.10 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Agent while no Potential Default has occurred
and is continuing, upon the occurrence and during the continuance of any
Potential Default the Agent is hereby appointed the attorney-in-fact of the
Borrower for the purpose of carrying out the provisions of this Section 4 and
taking any action and executing any instruments that the Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Agent shall be entitled under
this Section 4 to make collections in respect of the Collateral, the Agent
shall have the right and power to receive, endorse and collect all checks made
payable to the order of the Borrower representing any dividend, payment or
other distribution in respect of the Collateral or any part thereof and to give
full discharge for the same.
4.11 Perfection. Prior to or concurrently with the execution
and delivery of this Agreement, the Borrower shall (i) file such financing
statements and other documents in such offices as the Agent may request to
perfect the security interests granted by Section 3 of this Agreement and (ii)
cause the Agent to be listed as the lienholder on all certificates of title or
ownership relating to Rolling Stock owned by the Borrower.
4.12 Termination. When all Secured Obligations shall have
been paid in full and the Commitments and Hedge Contracts shall have expired or
been terminated, this Agreement shall terminate, and the Agent shall, at the
Borrower's expense, forthwith cause to be assigned, transferred and delivered,
free and clear of any Lien created by, or as a result of, any action by or on
behalf of the Secured Parties, against receipt but without any recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of the Borrower and to be
released and canceled all licenses and rights referred to in Section 4.04(b)
hereof. The Agent shall also, at the Borrower's expense, execute and deliver
to the Borrower upon such termination such Uniform Commercial Code termination
statements, certificates for terminating the Liens on the Rolling Stock and
such other documentation as shall be reasonably requested by the Borrower to
effect the termination and release of the Liens on the Collateral.
4.13 Further Assurances. The Borrower agrees that, from time
to time upon the written request of the Agent, the Borrower will execute and
deliver such further documents and do such other acts and things as the Agent
may reasonably request in order fully to effect the purposes of this Agreement.
Appendix A-6
<PAGE> 4
- 14 -
4.14 Release of Rolling Stock. So long as no Potential
Default shall have occurred and be continuing, upon the request of the
Borrower, the Agent shall execute and deliver to the Borrower such instruments
as the Borrower shall reasonably request to remove the notation of the Agent as
lienholder on any certificate of title for any Rolling Stock; provided that any
such instruments shall be delivered, and the release effective only upon
receipt by the Agent of a certificate from the Borrower stating that the
Rolling Stock the lien on which is to be released is to be sold or has suffered
a casualty loss (with title thereto passing to the casualty insurance company
therefor in settlement of the claim for such loss).
Section 5. Miscellaneous.
5.01 No Waiver. No failure on the part of the Agent or any
other Secured Party to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent or any
other Secured Party of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
remedy. The remedies herein are cumulative and are not exclusive of any
remedies provided by law.
5.02 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telexed, telecopied or delivered to the
intended recipient at the "Address for Notices" specified below its name on the
signature pages hereto or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have
been duly given when transmitted by telex or telecopier or personally delivered
or, in the case of a mailed notice, upon receipt, in each case given or
addressed as aforesaid.
5.03 Expenses. The Borrower agrees to reimburse the Agent
and each of the other Secured Parties for all reasonable costs and expenses of
the Agent and each of the other Secured Parties (including, without limitation,
the reasonable fees and expenses of legal counsel) in connection with (i) any
Potential Default and any enforcement or collection proceeding resulting
therefrom, including, without limitation, all manner of participation in or
other involvement with (w) performance by the Agent of any obligations of the
Borrower in respect of the Collateral that the Borrower has failed or refused
to perform, (x) bankruptcy, insolvency, receivership, foreclosure, winding up
or liquidation proceedings, or any actual or attempted sale, or any exchange,
enforcement, collection, compromise or settlement in respect of any of the
Collateral, and for the care of the Collateral and defending or asserting
rights and claims of the Agent in respect thereof, by litigation or otherwise,
including expenses of insurance, (y) judicial or regulatory proceedings and (z)
workout, restructuring or other negotiations or proceedings (whether or not the
workout, restructuring or transaction contemplated thereby is consummated) and
(ii) the enforcement of this Section 5.03, and all such costs and
Appendix A-6
<PAGE> 5
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expenses shall be Secured Obligations entitled to the benefits of the
collateral security provided pursuant to Section 3 hereof.
5.04 Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
the Borrower and the Agent (with the consent of the Lenders as specified in
Section 11.11 of the Loan Agreement). Any such amendment or waiver shall be
binding upon the Agent, each other Secured Party, each holder of any of the
Secured Obligations and the Borrower.
5.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Borrower, the Agent, the Lenders and each holder of any of the Secured
Obligations (provided, however, that the Borrower shall not assign or transfer
its rights hereunder without the prior written consent of the Agent and
provided further that any successor to any Secured Obligations arising under
any Hedge Contract is a Lender).
5.06 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and either of the parties hereto may execute this Agreement
by signing any such counterpart.
5.08 Agents and Attorneys-in-Fact. The Agent may employ
agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
5.09 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Agent and
the other Secured Parties in order to carry out the intentions of the parties
hereto as nearly as may be possible and (ii) the invalidity or unenforceability
of any provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
5.10 Reinstatement. This Agreement and the Lien created
hereunder shall automatically be reinstated if and to the extent that for any
reason any payment by or on behalf of the Borrower in respect of the Secured
Obligations is rescinded or must otherwise be restored by any holder of the
Secured Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and the Borrower shall indemnify the Agent and
each other Secured Party on demand for all reasonable costs and expenses
(including, without limitation, fees of
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counsel) incurred by the Agent or such Secured Party in connection with such
rescission or restoration.
5.11 NO THIRD PARTY BENEFICIARIES. THE AGREEMENTS OF THE
PARTIES HERETO ARE SOLELY FOR THE BENEFIT OF THE BORROWER, THE AGENT AND THE
OTHER SECURED PARTIES, AND NO PERSON (OTHER THAN THE PARTIES HERETO, THE
LENDERS AND THEIR SUCCESSORS AND ASSIGNS PERMITTED HEREUNDER) SHALL HAVE ANY
RIGHTS HEREUNDER.
5.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, ARE GOVERNED BY THE LAW OF ANY JURISDICTION OTHER THAN THE STATE OF
NEW YORK.
5.13 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT
AND THE OTHER SECURED PARTIES HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
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<PAGE> 7
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IN WITNESS WHEREOF, the parties hereto have caused this
Security Agreement to be duly executed and delivered as of the day and year
first above written.
CR BRIGGS CORPORATION
By _________________________
Title:
Address for Notices:
CR Briggs Corporation
129 East Ridgecrest Boulevard
Ridgecrest, CA 93555
Attention: Gary C. Huber
Vice President
Telecopier: (303) 279-3772
Telephone: (303) 278-8464
Telex:
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
By _________________________
Title:
By _________________________
Title:
Address for Notices:
Banque Paribas,
New York Branch
787 Seventh Avenue
New York, NY 10019
Attention: Thomas K. Emmons
Telecopier: (212) 841-2555
Telephone: (212) 841-2922
Appendix A-6
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18
APPENDIX D
to Loan Agreement
[FORM OF MORTGAGE]
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
MILBANK, TWEED, HADLEY & McCLOY
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Jonathan J. Green, Esq.
STATE OF CALIFORNIA
COUNTY OF INYO
DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT (PERSONAL PROPERTY
INCLUDING MINERAL ORE AND PRODUCTS THEREOF), ASSIGNMENT OF
PRODUCTION AND FIXTURE FILING
THIS DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT (PERSONAL PROPERTY
INCLUDING MINERAL ORE AND PRODUCTS THEREOF), ASSIGNMENT OF PRODUCTION, AND
FIXTURE FILING (this "Instrument"), dated as of December 6, 1995 but effective
as of 7:00 a.m. local time on December 6, 1995 (the "Effective Date"), is from
CR BRIGGS CORPORATION, a Colorado corporation (the "Trustor"), with an address
of 129 East Ridgecrest Blvd., Ridgecrest, California 93555, Attention: Gary C.
Huber, Vice President, to CHICAGO TITLE INSURANCE COMPANY, a California
corporation, as trustee, with an address of 700 South Flower, Suite 920, Los
Angeles, California 90017, (the "Trustee"), for the benefit of BANQUE PARIBAS,
NEW YORK BRANCH, the New York Branch of a banking institution organized under
the laws of France ("Banque Paribas"), with an address at 787 Seventh Avenue,
New York, NY 10019, Attention: Mr. Thomas K. Emmons, as agent for the equal
and ratable benefit of and on behalf of the Secured Parties (as defined in the
first recital below) (in such capacity, together with its successors and
assigns in such capacity, the "Agent") as to any and all portions of the
Mortgage Collateral (as defined in the third recital below).
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
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THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES, IT BEING
CONTEMPLATED THAT THE TRUSTOR MAY HEREAFTER BECOME INDEBTED TO ANY OR ALL OF
THE SECURED PARTIES FOR A FURTHER SUM OR SUMS.
SUBJECT TO THE PROVISIONS OF SECTION 7.14 HEREOF, THOSE PORTIONS OF
THE MORTGAGE COLLATERAL WHICH ARE MINERALS OR OTHER SUBSTANCES OF VALUE WHICH
MAY BE EXTRACTED FROM THE EARTH, AND THE ACCOUNTS RELATING THERETO, WILL BE
FINANCED AT THE MINES OR PITS (THE "GOLD MINE") LOCATED ON THE LAND DESCRIBED
OR REFERRED TO IN EXHIBITS A, B AND C ATTACHED HERETO, WHICH IS INCORPORATED
HEREIN AND MADE A PART HEREOF BY THIS REFERENCE.
PORTIONS OF THE MORTGAGE COLLATERAL ARE GOODS WHICH ARE OR ARE TO
BECOME AFFIXED TO OR FIXTURES ON THE LAND DESCRIBED IN OR REFERRED TO IN
EXHIBITS A, B AND C HERETO. THIS FIXTURE FILING IS TO BE FILED FOR RECORD OR
RECORDED, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OF INYO COUNTY
CALIFORNIA.
THE TRUSTOR IS THE OWNER OF A RECORD INTEREST IN THE REAL ESTATE
CONCERNED.
THE AMOUNT INVOLVED IS $200 OR MORE.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. A POWER OF SALE
MAY ALLOW THE AGENT TO TAKE THE MORTGAGE COLLATERAL AND SELL IT WITHOUT GOING
TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE TRUSTOR UNDER THIS
INSTRUMENT.
RECITALS
1. Capitalized terms used but not defined herein shall have the
meanings assigned them in the Loan Agreement dated as of December 6, 1995 (as
amended, modified, supplemented or replaced from time to time, the "Loan
Agreement"), among the Trustor, the lenders named therein (the "Lenders") and
Banque Paribas, as agent for the Lenders. The Lenders have made or shall make
loans to the Trustor in the aggregate principal amount of up to Thirty-Four
Million Dollars ($34,000,000), in the form of Dollars, or up to the Gold
Commitment Amount, in the form of Gold. Each of the Lenders (or their then
respective successors or assigns), each Hedge Party and any other holder of any
other obligation secured hereby, shall be referred to herein as a "Secured
Party."
2. Each of the Secured Parties is intended to have the ratable
benefit, through the Agent, of its pro rata share of the Mortgage Collateral;
and the Agent and the Trustee are to act hereunder for the ratable benefit of
the Secured Parties in accordance with the terms of this Instrument. All
Persons shall be entitled to rely on the written acts of the Agent or, upon the
appointment of another agent by the Lenders, such other agent as "Agent" with
respect to this Instrument and the Mortgage Collateral without inquiry into the
necessity for or existence of consents or approvals by any of the Lenders
therefor.
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<PAGE> 10
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3. The following are hereinafter collectively referred to as the
"Mortgage Collateral":
A. All of the Trustor's rights, titles and interests in,
to and under mineral estates, mineral leases, mineral subleases,
patented and unpatented lode, placer and millsite mining claims and
other mineral interests and properties, record or possessory in
nature, described in Exhibits A, B and C hereto and incorporated
herein by reference (collectively, the "Mineral Interests") and in the
lands described in Exhibits A, B and C hereto and lands subject to or
described in the Mineral Interests, regardless of whether such lands
are specifically described in Exhibits A, B and C hereto (the
"Lands"), including without limitation the Gold Mine and all other
gold, silver or other mineral mines located on, in or under the Lands
in which the Trustor owns an interest, and all parts thereof,
including without limitation all veins, loads, shafts, ledges,
ditches, drains, dips, spurs, angles, chips, tailings, slurry, stock
piles, waste piles, slag piles, heap leach pads, tailing pads, tailing
ponds, solution ponds, settling ponds, decant ponds, heaps and dumps;
as well as any rights, titles and interests hereafter acquired by the
Trustor in connection with the Mineral Interests and Lands by
operation of law or otherwise, including without limitation rights,
titles and interests to and under the Mineral Interests or Lands as
the same may be enlarged by the discharge of any payments out of
production of Minerals (as defined in paragraph 3.F below) or by the
removal of any charges or Liens to which any such rights, titles and
estates are subject together with any and all renewals and extensions
of any of the Mineral Interests, properties, rights, titles, interests
or estates; all contracts and agreements supplemental to, amendatory
of, or in substitution for or replacement of the contracts and
agreements described or mentioned above; and any and all additional
interests of any kind hereafter acquired by the Trustor in and to the
Mineral Interests and such properties, rights, titles, interests or
estates;
B. All other rights, titles and interests of the Trustor
of whatever kind or character in, to and under the Mineral Interests
or Lands which are described in Exhibits A, B and C hereto, or lands
which are otherwise described in any of the patents, deeds, leases or
subleases, claims or other instruments described in Exhibits A, B and
C hereto, even though such Lands or Mineral Interests may be
incorrectly described in, or omitted from, Exhibits A, B and C hereto;
as well as any lands hereafter acquired by the Trustor in connection
with the Mineral Interests or Lands or any mine located on, in or
under the Lands, by operation of law or otherwise;
C. All rights, titles, interests and estates now owned
or hereafter acquired (by operation of law or otherwise) by the
Trustor in and to (i) any and all pooling, unitization or
communitization agreements, declarations or orders and the units
created thereby covering or affecting the Mineral Interests or Lands;
all contracts and agreements that cover, affect or otherwise relate to
any of the
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Mineral Interests or Lands described or referred to herein or in
Exhibits A, B and C hereto, including without limitation all purchase
and sale agreements, option agreements, forward sales agreements,
drilling agreements, construction agreements, operating agreements,
exploration agreements, lay-back agreements, area of mutual interest
agreements and equipment purchase agreements and leases, and including
without limitation all contracts and agreements that cover, affect or
otherwise relate to the construction of mine and mill facilities or
the production, sale, purchase, exchange, processing, refining,
concentrating, exploiting, extracting, handling, storing, transporting
or marketing of Minerals from or attributable to the Mineral Interests
or Lands (other than any thereof that relate to the Separately
Financed Equipment); (ii) any and all governmental applications,
certificates, permits and approvals necessary to or useful in the
ownership of the Mortgaged Property (as defined in paragraph 3.E
below), the construction of mine and mill facilities, or the mining,
extracting, production or processing of the Minerals and the operation
of the mine and mill facilities, and; (iii) any and all rights,
titles, interests and estates under any agreements hereinafter
acquired by the Trustor in connection with the Mineral Interests or
Lands by operation of law or otherwise, including without limitation
any such contracts and agreements that are supplemental to or
amendatory of or in substitution for any contracts or agreements
referred to in this paragraph (other than any thereof that relate to
the Separately Financed Equipment); the Trustor's and the Agent's
intention herein being to cover and affect hereby all interests which
the Trustor may now own or may hereafter acquire in and to the Mineral
Interests and Lands described in Exhibits A, B and C hereto;
D. Any property that may from time to time hereafter, by
delivery or by writing of any kind, be subjected to the lien and
security interest hereof by the Trustor or by anyone on the Trustor's
behalf; and the Agent is hereby authorized to receive the same at any
time as additional security hereunder;
E. All tenements, hereditaments, appurtenances and
properties in anywise appertaining, belonging, affixed or incidental
to the Mineral Interests, properties, rights, titles, interests and
estates described or referred to in paragraphs A, B, C and D of this
third recital, which are now owned or which may hereafter be acquired
(by operation of law or otherwise) by the Trustor, including, without
limitation, any and all property, real or personal, equipment (other
than Separately Financed Equipment), improvements, fixtures and other
property now owned or hereafter acquired and situated upon, used, held
for use, or useful in connection with the operating, working or
development of any of the Mineral Interests or Lands and including,
without limitation, (i) any and all of Trustor's rights, titles and
interests in all improvements, buildings, structures, fixtures,
apparatus, equipment, appliances, machinery and parts, engines,
boilers, mills, plants, crushers, conveyors, stackers, loaders, tanks,
containers, screens, trucks and other vehicles, meters, tools,
Appendix A-6
<PAGE> 12
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implements, cables, valves, fittings, pumps, pumping units, pipelines,
wires, towers, electrical, power, telephone and telegraph lines and
facilities (other than any thereof that comprise the Separately
Financed Equipment); (ii) any and all inventory, supplies and
materials, including without limitation, cyanide, cyanide solution,
carbon, carbon-in-pulp, sulphur dioxide and other chemicals, chemical
elements and compounds; and (iii) any and all surface estates, surface
leases, rights-of-way, easements, servitudes and other surface rights
situated upon, used, held for use or useful in connection with the
development, construction and operation of the Mineral Interests or
Lands, together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing properties
(the foregoing rights, interests and properties described in
paragraphs A, B, C, D and E of this third recital, and all rights,
estates, powers and privileges appurtenant thereto, collectively, the
"Mortgaged Property"); and
F. All rights, titles, interests and estates now owned
or hereafter acquired by the Trustor in and to all gold, gold ore,
silver, silver ore and other Minerals in whatever form severed,
extracted or produced from the Mortgaged Property, including without
limitation gold, gold ore, silver, silver ore and precious metal dore
retrieved from any mine or related facility on the Lands, whether
discovered at first inspection or as a result of processing, all
products refined therefrom and all other Minerals in and under and
which may be produced from or are attributable to the Mineral
Interests or Lands and the Trustor's interests therein, including all
rents, issues, profits, proceeds, products, revenues and other income
from or attributable to the Mortgaged Property and the Trustor's
interests therein, which are subjected or required to be subjected to
the liens and security interests of this Instrument; and further
including any and all liens and security interests in the Minerals
securing payment of proceeds from the sale of Minerals. The term
"Minerals" as used in this Instrument shall include gold, gold ore,
silver, silver ore, precious metal dore and all other minerals,
mineral concentrates, mineral elements and mineral compounds, water
and geothermal resources, whether the same are known to exist on the
Mortgaged Property or are hereafter discovered thereon, regardless of
the method of extraction, mining or processing the same, whether known
to exist or hereafter discovered, invented or developed.
4. The liens and security interests granted herein by the
Trustor to the Trustee in and to the Mortgage Collateral are for the ratable
benefit of the Secured Parties, through the Agent, as are any proceeds of the
same, and the assignment of production granted herein by the Trustor to the
Agent in and to all Minerals, all products obtained or processed therefrom and
all revenues, proceeds and payments, including, but not limited to, open market
sales of the Minerals on any market, whether already delivered to purchaser or
not, now or hereafter attributable to said Minerals and said products of the
same (said liens, security interests and assignment of production,
collectively, the "Liens").
Appendix A-6
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IN CONSIDERATION of the sum of ten dollars ($10.00) in hand
paid by the Agent to the Trustor, for the performance of the covenants and
obligations herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Trustor
hereby
A. GRANTS, BARGAINS, SELLS, ASSIGNS, TRANSFERS AND CONVEYS
the Mortgage Collateral, which constitutes interests in or to real property,
under the laws of the state in which located, to the Trustee, IN TRUST, WITH
POWER OF SALE, pursuant to this Instrument and applicable law, for the benefit
and security of the Agent, but subject to the rights of the Agent under the
assignment made in paragraph C below; and
B. GRANTS to the Agent a security interest in all of the
portions of the Mortgage Collateral which do not constitute real property
referred to in paragraph A above;
TO HAVE AND TO HOLD the Mortgage Collateral constituting
interests in or to real property to the Trustee, and its successors and
assigns, forever, in trust, for the security and benefit of the Secured
Parties; and the remainder of the Mortgage Collateral to the Agent, its
successors and assigns, forever, subject to all of the terms, conditions,
covenants and agreements herein set forth;
C. ASSIGNS to the Agent any and all of the Trustor's rights
in respect of the Minerals, including without limitation, severed and extracted
gold, silver, precious metal dore and other Minerals and mineral ore extracted
or produced from or attributable to the Mortgage Property, including, without
limitation, all of the proceeds thereof, subject to the terms of Article III
hereof;
AND, in furtherance thereof, the Trustor warrants, represents,
covenants and agrees as follows:
ARTICLE I
OBLIGATIONS
SECTION 1.01 This Instrument is executed, acknowledged and delivered
by the Trustor to secure and enforce the following obligations (collectively,
the "Obligations"):
A. Payment of all indebtedness and liabilities and the
performance of each and every obligation, covenant and agreement of
every kind and character now existing or hereafter arising to any or
all of the Lenders (including, without limitation, those Lenders
listed below) pursuant to the Loan Agreement and/or the other
Financing Documents together with the payment of all sums advanced by
or on behalf of the Trustee or the Agent to protect the Mortgage
Collateral, with interest thereon at the lesser of the rates per annum
Appendix A-6
<PAGE> 14
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set forth in Section 2.13 of the Loan Agreement or the maximum rate
permitted by law;
<TABLE>
<CAPTION>
Lender Amount of Notes Amounts of Notes Amount of Notes
------
for Tranche A for Tranche B for Tranche C
Dollar Loans Dollar Loans Dollar Loans
------------ ------------ ------------
<S> <C> <C> <C>
Banque Paribas 8,333,334 1,666,668 1,333,334
Bayerische Vereinsbank 8,333,333 1,666,666 1,333,333
Rothschild 8,333,333 1,666,666 1,333,333
</TABLE>
The amount of each Lender's Note for any tranche of Gold Loans
shall be an amount of Gold, in troy ounces, the Original Dollar
Equivalent of which shall equal the Dollar amount of the Dollar Loan
from which it was Converted.
B. Payment of all indebtedness and liabilities and the
performance of each and every obligation, covenant and agreement of
every kind and character now existing or hereafter arising to any and
all of the Hedge Parties ( provided that each such Hedge Party is also
a Lender) pursuant to the Hedge Contracts;
C. Payment of all sums advanced and costs and expenses
(including, without limitation, all legal and engineering fees)
incurred by the Agent (whether directly or indirectly) in connection
with the Obligations or any part thereof, any renewal, extension or
change of or substitution for the Obligations or any part thereof, or
the acquisition or perfection of the security therefor, whether such
advances, costs and expenses were made or incurred at the request of
the Trustor or the Agent;
D. Payment of all other indebtedness and liabilities and
performance of all other obligations of the Trustor to any or all of
the Secured Parties arising pursuant to this Instrument or in
connection herewith, each of which (unless otherwise specified in the
writing creating such Obligations) shall be due and payable ten (10)
days after demand for payment is made upon the Trustor by the Agent
and shall bear interest at the rates set forth in Section 2.13 of the
Loan Agreement, but in no event to exceed the maximum rate allowed by
applicable law; and
E. Any and all other indebtedness, obligations and
liabilities of any kind of the Trustor to the Secured Parties relating
to the Financing Documents, now or hereafter existing, arising
directly between the Trustor and the Secured Parties, or acquired
outright, as a participation, conditionally or as collateral security
from another by the Secured Parties, absolute or contingent, joint
and/or several, secured or unsecured, due or not due, arising by
operation of law or otherwise, or direct or indirect, including
indebtedness, obligations and liabilities to the Secured Parties of
the Trustor as a member of any partnership, syndicate, association or
other group, and whether
Appendix A-6
<PAGE> 15
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incurred by the Trustor as principal, surety, endorser, guarantor,
accommodation party or otherwise.
ARTICLE II
WARRANTIES, REPRESENTATIONS AND COVENANTS
The Trustor hereby represents, warrants and covenants as follows:
SECTION 2.01 The Trustor owns title to the Mineral Interests and
Lands as represented and warranted in Sections 7.07 and 7.11 of the Loan
Agreement. The Trustor has full power and lawful authority to bargain, grant,
sell, mortgage, assign, transfer, convey and grant a security interest in all
of the Mortgage Collateral in the manner and form herein provided and without
obtaining the waiver, consent or approval of any lessor, sublessor,
governmental authority or other party or parties whomsoever. All rentals and
royalties due and payable prior to the date hereof in accordance with the terms
of any leases or subleases described in Exhibit C hereto or otherwise
applicable to the Mineral Interests or Lands and all other obligations
contained therein, have been duly paid or performed, and all such leases are in
full force and effect.
SECTION 2.02 The Trustor will warrant (except as to the Permitted
Liens) and defend the title to the Mortgage Collateral against the claims and
demands of all other persons whomsoever and will maintain and preserve the
Liens created hereby so long as any of the Obligations secured hereby remain
unpaid. If the title, interest, lien or encumbrance, as the case may be, of
the Trustor, the Agent or the Trustee to the Mortgage Collateral or any part
thereof, or the security of this Instrument, or the rights or powers of the
Agent or the Trustee hereunder, shall be attacked, either directly or
indirectly, or if any legal proceedings are commenced involving the Trustor or
its properties, the Trustor shall promptly give written notice thereof to the
Agent and at the Trustor's own expense shall take all reasonable steps
diligently to defend against any such attack or proceedings, employing
attorneys reasonably acceptable to the Agent; and each of the Agent or the
Trustee may take such independent action on its own behalf in connection
therewith as it may in its discretion deem advisable, and all costs and
expenses, including, without limitation, reasonable attorneys' fees and legal
expenses, incurred by the Agent and by the Trustee in connection therewith
shall be a part of the Obligations described in Section 1.01E hereof. Such
Obligation shall be payable on demand and shall bear interest from the date of
demand therefor until paid at a per annum rate of interest as set forth in
Section 2.13 of the Loan Agreement, but in no event to exceed the maximum rate
allowed by applicable law.
SECTION 2.03 This Instrument is, and always will be kept, a direct
and first lien and security interest upon the Mortgage Collateral and the
Trustor will not create or suffer to be created or permit to exist any lien,
security interest or charge prior or junior to or on a parity with
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the lien and security interest of this Instrument upon the Mortgage Collateral
or any part thereof or upon the rents, issues, revenues, profits and other
income therefrom except for the Permitted Liens.
SECTION 2.04 The Trustor will not change its name or identity or
change the location of its chief executive office or its chief place of
business or the place where it keeps its books and records concerning the
Mortgage Collateral (including, particularly, the proceeds from the sale of
Minerals) without notifying the Agent or the Trustee of such change in writing
at least thirty (30) days prior to the effective date of such change.
SECTION 2.05 The Trustor shall promptly and, insofar as not contrary
to applicable law, at the Trustor's own expense, file and refile, or cause to
be filed or refiled, in such offices, at such times and as often as may be
necessary, this Instrument and every other instrument in addition or
supplemental hereto, including applicable financing statements, as may be
necessary to create, perfect, maintain and preserve the lien, encumbrance and
security interest intended to be created hereby and the rights and remedies of
the Agent and of the Trustee hereunder, and to create, perfect, maintain and
preserve the assignments made in paragraph C of the granting clause of this
Instrument, and shall promptly furnish to the Agent evidence satisfactory to
the Agent of all such filings and refilings and otherwise shall do or cause to
be done all things necessary or expedient to be done to effectively create,
perfect, maintain and preserve the lien, encumbrance and security interest
intended to be created hereby as a first lien on the real property and as a
first and prior security interest in the personal property which constitute the
Mortgage Collateral (subject in each case to Permitted Liens), and to create,
perfect, maintain and preserve the assignments made in paragraph C of the
granting clause of this Instrument. The Trustor shall execute, acknowledge and
deliver to the Agent such other and further instruments and do such other acts
as in the reasonable opinion of the Agent may be necessary or desirable to more
fully identify (subject to the Liens created hereby), any property intended by
the terms hereof to be covered hereby, to assure the first priority thereof
(subject in each case to Permitted Liens), and otherwise to effect the intent
of this Instrument, promptly upon request of the Agent and at the Trustor's
expense.
SECTION 2.06 The Trustor will at its own expense do or cause to be
done all things necessary in accordance with prudent industry standards and
practices to preserve and keep in full repair, working order and efficiency all
of the Mortgage Collateral constituting personal property or fixtures necessary
for the operation of the Gold Mine, including, without limitation, all
equipment, machinery and facilities, and from time to time will make all the
needful and proper repairs, renewals and replacements so that at all times the
state and condition of the Mortgage Collateral will be fully preserved and
maintained.
SECTION 2.07 The Trustor will promptly pay and discharge, or shall
cause to be paid and discharged, all rentals, delay rentals, royalties and
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indebtedness accruing under, and perform or cause to be performed each and
every act, matter or thing required by, each and all of the assignments, deeds,
leases, sub-leases, contracts, certificates, permits, approvals and agreements
described or referred to herein or affecting the Trustor's interests in the
Mortgage Collateral, and will do all other things necessary to keep unimpaired
the Trustor's rights with respect thereto and prevent any intentional
forfeiture thereof or default with respect thereof other than a default which
might occur as a result of cessation of production thereunder. The Mortgaged
Property has been, to the extent the same could adversely affect the ownership
or operations of the Mortgage Collateral after the Effective Date, constructed,
maintained, operated and developed in a good and workmanlike manner and in
conformity with all applicable laws and all rules, regulations and orders of
all duly constituted authorities having jurisdiction and in conformity with all
Mining Leases and other contracts and agreements forming a part of the Mortgage
Collateral. Without limiting any of the foregoing, Trustor shall timely and
completely make all filings with all appropriate governmental agencies and take
all other actions in accordance with industry standards necessary to maintain
the unpatented lode, placer or millsite mining claims forming part of the
Mortgaged Property and needed in its operations in full force and effect,
subject to Permitted Liens. In the event good United States mining practice so
dictates, after taking into account all circumstances relating to the
particular Lands and the current state of law, Trustor shall initiate and
diligently pursue proceedings to obtain patents from the United States of
America with respect to any Lands subject to or comprising any of the
unpatented mining claims or millsites comprising Mortgaged Property hereunder.
SECTION 2.08 The Trustor will indemnify and hold harmless the Agent,
any other Secured Party and the Trustee from and against all claims, demands,
liabilities, losses, damages, judgments, penalties, causes of action, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses) which may be imposed upon, asserted against or incurred or paid by
any of them on account of or in connection with any bodily injury or death or
property damage occurring in or upon or in the vicinity of the Mortgage
Collateral through any cause whatsoever or asserted against any of them on
account of any act performed or omitted to be performed hereunder or on account
of any transaction arising out of or in any way connected with the Mortgage
Collateral or with this Instrument, save and except for their gross negligence
or willful misconduct. Any amount to be paid hereunder by the Trustor to the
Agent, any other Secured Party or the Trustee shall be a demand obligation
owing by the Trustor (which obligation the Trustor hereby expressly promises to
pay) to the Agent, any other Secured Party or the Trustee, as the case may be,
and shall bear interest from the date such obligation is due until such
obligation is paid, at the lesser of the rates per annum set forth in Section
2.13 of the Loan Agreement or the maximum rate permitted by law.
SECTION 2.09 The Trustor will duly and punctually pay the principal
of and the interest on all of the Obligations as the same shall become due and
payable in accordance with the terms thereof and hereof. The Trustor
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will promptly pay all debts and liabilities (including without limitation all
debts and liabilities for labor, materials and equipment used or furnished for
use on the Mortgaged Property) incurred in the operation, maintenance and
development of the Mortgaged Property; provided that the foregoing covenants
shall not apply to debts and liabilities which are being contested in good
faith and for which adequate reserves have been set aside under generally
accepted accounting principles.
SECTION 2.10 The Trustor is not a "foreign person" within the meaning
of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as amended (the
"Code") (i.e., the Trustor is not a non-resident alien, foreign corporation,
foreign partnership, foreign trust or foreign estate as those terms are defined
in the Code and any regulations promulgated thereunder).
SECTION 2.11 The Trustor agrees that if the Trustor fails to perform
any act or to take any action which the Trustor is required to perform or take
hereunder or pay any money which the Trustor is required to pay hereunder, the
Agent or the Trustee in the Trustor's name or in its or their own name may, but
shall not be obligated to, perform or cause to perform such act or take such
action or pay such money. Any expenses so incurred, and any money so paid, by
the Agent or the Trustee shall be a demand obligation owing by the Trustor to
the Agent or the Trustee, and the Agent or the Trustee, upon making such
payment, shall be subrogated to all of the rights of the Person receiving such
payment. Each amount due and owing by the Trustor to the Agent or the Trustee
pursuant to this Instrument shall bear interest from the date of such
expenditure or payment or other occurrence which gives rise to such amount
being owed to the Agent or the Trustee until paid at the lesser of the rates
per annum set forth in Section 2.13 of the Loan Agreement or the maximum rate
permitted by law, and all such amounts together with such interest thereon
shall be a part of the Obligations described in Section 1.01E hereof and shall
be secured by this Instrument.
SECTION 2.12 To the fullest extent that it lawfully may, the Trustor
hereby agrees that, upon the occurrence and during the continuance of an Event
of Default, the Agent shall be entitled at any time or from time to time to
exercise all of the rights, remedies, powers and privileges vested in the
Trustor under the leases, claims and contracts comprising the Mortgage
Collateral, and to give or withhold or make all consents, directions, notices,
approvals and waivers required or permitted therein which the Trustor would
otherwise be entitled to give or withhold.
SECTION 2.13 In the event that Trustor subsequently acquires any
additional interest in the Mortgage Collateral or acquires any additional
property for mining purposes within Inyo County, California, then Trustor shall
execute and deliver to the Agent a supplemental mortgage substantially in the
form of this Instrument covering such interests in property.
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ARTICLE III
COLLECTION OF PRODUCTION AND PROCEEDS
SECTION 3.01 Pursuant to the assignment made by the Trustor in
paragraph C of the granting clause of this Instrument, subject to the terms and
conditions of the Loan Agreement, the Agent is entitled to receive all of the
Minerals which may be produced, extracted and saved from or attributable to the
Mortgaged Property, together with all of the proceeds thereof, effective as of
the Effective Date at the site of the Mortgaged Property. The Trustor
acknowledges and agrees that said assignment is intended to be an absolute and
unconditional assignment and not merely a pledge of or creation of a security
interest therein or assignment as additional security. The Trustor hereby
authorizes and directs any owner, lessor or party to a lease or other contract
comprising or affecting the Mortgage Collateral and all purchasers of Minerals
therefrom and their respective successors and assigns (collectively, the
"Payors") to treat and regard the Agent as the party entitled, in the Trustor's
place and stead, to receive said Minerals and proceeds and to exercise all
rights of the Trustor with respect thereto; and said parties shall be fully
protected in so treating and regarding the Agent and shall be under no
obligation to see to the application by the Agent of any such proceeds received
by it. The Trustor hereby agrees that all cash, proceeds, instruments and
other property, of whatever kind or character, received by the Trustor on
account of the Mortgage Collateral, whether received by the Trustor in the
exercise of its collection rights hereunder or otherwise, shall, in accordance
with the instructions then given by the Agent and subject to the terms and
conditions of the Loan Agreement, be remitted to the Agent or deposited to an
account with the Agent, in the form received (properly assigned or endorsed to
the order of the Agent or for collection and in accordance with the Agent's
instructions) not later than the first Banking Day following the day of
receipt, to be applied as provided in Section 3.02 hereof and, until so
applied, may be held by the Agent in a separate account on which the Trustor
may not draw. The Trustor agrees not to commingle any such property with any
of its other funds or property and agrees to hold the same upon an express
trust for the Agent until remitted to the Agent.
SECTION 3.02 All of the proceeds received by the Agent pursuant to
Section 3.01 hereof from time to time shall be deposited into the Proceeds
Account established at the Wilmington Trust Company, a Delaware corporation
(the "Depositary") pursuant to the provisions of the Depositary Agreement and
Section 4.05 of the Security Agreement. Upon such deposit, such proceeds shall
constitute part of the Collateral under the Security Agreement and shall be
applied in accordance with the priorities and for the purposes set forth
therein.
SECTION 3.03 Upon any sale of any of the Mortgage Collateral by or
for the benefit of the Agent or the other Secured Parties pursuant to Article V
hereof, the Minerals thereafter produced from and attributed to the part of the
Mortgage Collateral so sold, and the proceeds thereof,
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shall be included in such sale and shall pass to the purchaser free and clear
of the provisions of this Article III.
SECTION 3.04 The Agent and the Trustee are hereby absolved from all
liability for failure to enforce collection of any such proceeds and from all
other responsibility in connection therewith, except the responsibility to
account to the Trustor for proceeds actually received.
SECTION 3.05 The Trustor shall indemnify the Agent and the Trustee
against all claims, actions, liabilities, judgments, costs, attorneys' fees and
other charges of whatsoever kind or nature (collectively, the "Claims") made
against or incurred by the Agent or the Trustee as a consequence of the
assertion, either before or after the payment in full of the Obligations, that
the Agent or the Trustee received Minerals or proceeds pursuant to this Article
III which were claimed by or due to third persons. The Agent and the Trustee
shall have the right to employ attorneys and to defend against any Claims, and
unless furnished with reasonable indemnity, the Agent or the Trustee, in the
case of claims asserted against the Trustee, shall have the right to pay or
compromise and adjust all Claims. The Trustor shall indemnify and pay to the
Agent or the Trustee all such amounts as may be paid in respect thereof or as
may be successfully adjudicated against the Agent or the Trustee. The
liabilities of the Trustor as set forth in this Section 3.05 shall survive the
termination of this Instrument.
SECTION 3.06 The Agent shall have the immediate and continuing right
to demand, collect, receive and receipt for all production, proceeds and
payments assigned hereunder, and the Agent is hereby appointed agent and
attorney-in-fact of the Trustor for the purpose of executing any release,
receipt, division order, transfer order, relinquishment or other instrument
that the Agent deems necessary in order for the Agent to collect and receive
such production, proceeds and payments from any of the Payors. In addition,
the Trustor agrees that it will promptly execute and deliver to the Agent such
transfer orders, payment orders, division orders and other instruments as the
Agent may deem necessary, convenient or appropriate in connection with the
payment and delivery directly to the Agent of all proceeds, production, and
payments assigned hereunder. The Trustor hereby authorizes and directs that
all of the Payors shall, until the Agent directs otherwise, pay and deliver
such proceeds, production or amounts directly to the Agent at the Agent's
address set forth in the introduction to this Instrument, or in such other
manner as the Agent may direct such parties in writing, for deposit into the
Proceeds Account, and this authorization shall continue until this Instrument
is released. The Trustor shall notify each Payor of the foregoing
authorization and instruction. The Trustor agrees that all division orders,
transfer orders, receipts and other instruments that the Agent may from time to
time execute and deliver for the purpose of collecting and receipting for such
proceeds, production or payments may be relied upon in all respects, and that
the same shall be binding upon the Trustor and its successors and assigns.
Should the Agent bring suit against any third party for collection of any
amount or sums included within this assignment (and the Agent shall have
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the right to bring any such suit), it may sue either in its own name or in the
name of the Trustor, or both.
SECTION 3.07 Nothing in this Instrument shall be deemed or construed
to create a delegation to or assumption by the Agent or the Trustee, of the
duties and obligations of the Trustor under any agreement or contract relating
to the Mortgage Collateral or any portion thereof, and all of the parties to
any such contract shall continue to look to the Trustor for performance of all
covenants and other obligations and the satisfaction of all representations and
warranties of the Trustor thereunder, notwithstanding the assignment of
production and proceeds herein made or the exercise by the Agent or by the
Trustee, prior to foreclosure, of any of its rights hereunder or under
applicable law.
SECTION 3.08 The assignment of production and proceeds herein made
shall not be construed to limit in any way the Agent's other rights hereunder
or under the Loan Agreement, including, without limitation, its right to
accelerate the indebtedness evidenced by the Obligations upon an Event of
Default. Monies received under the assignments herein made shall not be deemed
to have been applied in payments of Obligations unless and until such monies
actually are applied thereto by the Agent, but such monies shall be applied by
the Agent as required by and provided for in the Loan Agreement and the
Security Agreement. The assignment of production made pursuant to this
Instrument is limited to the rights, if any, of the Trustor, whether now owned
or hereafter acquired, in and to such production.
ARTICLE IV
TERMINATION
Upon written request of the Agent stating that all Obligations of the
Trustor are paid or performed in full pursuant to the terms and conditions of
this Instrument and the instruments evidencing the Obligations, and upon
surrender of this Instrument to the Trustee for cancellation and retention and
upon payment by the Trustor of the Trustee's fees, the Trustee shall reconvey
to the Trustor, or the Person or Persons legally entitled thereto, without
warranty, any portion of the Mortgage Collateral then held hereunder. The
Trustor shall pay all reasonable legal fees and other reasonable expenses
incurred by the Agent for preparing and reviewing such instruments of
termination and the execution and delivery thereof, and the Agent may require
payment of the same prior to delivery of such instruments. Otherwise, this
Instrument shall remain and continue in full force and effect.
ARTICLE V
DEFAULT
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SECTION 5.01 An " Event of Default" occurs hereunder if any of the
Events of Default shall occur and be continuing under, and as defined in, the
Loan Agreement.
SECTION 5.02 Upon the occurrence and during the continuance of any
Event of Default, in addition to all other rights and remedies herein, the
Trustee shall have all the rights and remedies of a mortgagee and trustee under
a deed of trust granted, conferred or permitted by applicable law, and the
Agent shall have all of the rights of a beneficiary thereunder.
SECTION 5.03 Upon the occurrence and during the continuance of an
Event of Default, the Agent may, at its option, declare all indebtedness
secured hereby to be immediately due and payable without any presentment,
demand, protest or notice of any kind. Thereafter the Agent may (whether or
not such indebtedness has been declared to be due and payable):
(a) Either in person or by agent, with or without bringing
any action or proceeding, or by a receiver appointed by a court and
without regard to the adequacy of its security, enter upon and take
possession of the Mortgage Collateral, or any part thereof, in its own
name or in the name of the Trustee, and do any acts that it deems
necessary or desirable to preserve the value, marketability or
rentability of the Mortgage Collateral or any part thereof or interest
therein, increase the income therefrom or protect the security hereof
and, with or without taking possession of the Mortgage Collateral, sue
for or otherwise collect the proceeds of the sale of the Minerals,
including those past due and unpaid, and apply the same, less costs
and expenses of operation and collection, including, without
limitation, attorneys' fees, upon any indebtedness secured hereby, all
in such order as the Agent may determine. The entering upon and
taking possession of the Mortgage Collateral, the collection of
proceeds of the sale of the Minerals and the application thereof as
aforesaid shall not cure or waive any Event of Default or notice of
default hereunder or invalidate any act done in response to such Event
of Default or pursuant to such notice of default and, notwithstanding
the continuance in possession of all or any portion of the Mortgage
Collateral or the collection, receipt and application of proceeds of
the sale of the Minerals, the Trustee or the Agent shall be entitled
to exercise every right provided for in any of the Financing Documents
or by law upon occurrence of any Event of Default, including the right
to exercise the power of sale;
(b) Commence an action to foreclose this Instrument as a
mortgage, appoint a receiver, or specifically enforce any of the
covenants hereof;
(c) Deliver to the Trustee a written declaration of default
and demand for sale, and a written notice of default and election to
cause the Trustor's interest in the Mortgage Collateral to be sold,
which notice the Trustee or the Agent shall cause to be duly filed for
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record in the official records of the county in which the Mortgage
Collateral is located; or
(d) Exercise all other rights and remedies provided herein,
in any Financing Document or other document or agreement now or
hereafter securing all or any portion of the obligations secured
hereby, or by law.
SECTION 5.04 Upon the occurrence and during the continuance of any
Event of Default, the Trustee, in lieu of or in addition to exercising any
other power, right or remedy herein granted or by law or equity conferred, may,
without notice, demand or declaration of default, which are hereby waived by
the Trustor, proceed by an action or actions in equity or at law for the
seizure and sale of the real property included in the Mortgage Collateral or
any part thereof, for the specific performance of any covenant or agreement
herein contained or in aid of the execution of any power, right or remedy
herein granted or by law or equity conferred, for the foreclosure or sale of
such real property or any part thereof under the judgment or decree of any
court of competent jurisdiction, for the appointment of a receiver pending any
foreclosure hereunder or the sale of such real property or any part thereof, or
for the enforcement of any other appropriate equitable or legal remedy.
SECTION 5.05 Upon the occurrence and during the continuance of any
Event of Default, in addition to all other powers, rights and remedies herein
granted or by law or equity conferred, the Agent shall have all of the rights
and remedies of an assignee and secured party granted by applicable law,
including, without limitation, the Uniform Commercial Code as in effect from
time to time in the State of California. The following presumptions shall
exist and shall be deemed conclusive with regard to the exercise by the Agent
of any of its remedies with respect to personal property:
(a) If notice is required by applicable law, five (5)
days' prior written notice of the time and place of any public sale or
of the time after which any private sale or any other intended
disposition thereof is to be made shall be reasonable notice to the
Trustor. Subject to any mandatory requirements of applicable law, no
such notice is necessary if such property is perishable, threatens to
decline speedily in value or is of a type customarily sold on a
recognized market.
(b) Without in any way limiting the right and authority
of the Agent to sell or otherwise dispose of the collateral in a
commercially reasonable manner, the following, or any of them, shall
be considered commercially reasonable: (i) the Agent may hold a public
sale of the collateral in either the City of Los Angeles or the City
of San Francisco, California, after having provided the Trustor with
five (5) days' notice of such sale and after having published notice
of such sale by an advertisement not less than three inches in height
and one column in width in the Wall Street Journal, as the Agent
determines to
Appendix A-6
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be appropriate (which advertisement may be placed in the "classified"
section), for a period of not less than five (5) consecutive issues
commencing not more than ten (10) days prior to the sale; (ii) the
Mortgage Collateral may be sold for cash; and (iii) the Agent or any
other Person owning, directly or indirectly, any interest in any of
the Obligations may be a purchaser at such sale.
(c) If the Agent in good faith believes that the
Securities Act of 1933, as amended, or any other state or Federal law
prohibits or restricts the customary manner of public sale or
distribution of any of such property, the Agent may sell such property
privately or in any other manner deemed advisable by the Agent at such
price or prices as the Agent determines in the sole discretion of the
Agent. The Trustor recognizes that such prohibition or restriction
may cause such property to have less value than it otherwise would
have and that, consequently, such sale or disposition by the Agent may
result in a lower sales price than if the sale were otherwise held.
SECTION 5.06 Upon the occurrence and during the continuance of any
Event of Default, the Trustee shall, and in response to the Agent's request
(which the Trustor agrees shall be presumed to have been made), subject to any
mandatory requirements of applicable law, sell or have sold the real property
or interests therein included in the Mortgage Collateral or any part thereof at
one or more sales, as an entirety or in parcels, at such place or places and
otherwise in such manner and upon such notice as may be required by law or by
this Instrument, or, in the absence of any such requirement, as the Trustee may
deem appropriate. The Trustee shall make a conveyance to the purchaser or
purchasers thereof, and the Trustor shall warrant title thereto to such
purchaser or purchasers. The Trustee may postpone the sale of such real
property or interests therein or any part thereof by public announcement at the
time and place of such sale, and from time to time thereafter may further
postpone such sale by public announcement made at the time of sale fixed by the
preceding postponement. Sale of a part of such real property or interests
therein or any defective or irregular sale hereunder will not exhaust the power
of sale, and sales may be made from time to time until all such property is
sold without defect or irregularity or the Obligations are paid in full. The
Trustee shall have the right to appoint one or more attorneys-in-fact to act in
conducting the foreclosure sale and executing a deed to the purchaser or
purchasers. It shall not be necessary for any of the Mortgage Collateral at
any such sale to be physically present or constructively in the possession of
the Trustee, and the Trustor shall deliver all of the purchased Mortgage
Collateral to the purchaser or purchasers at such sale on the date of sale, and
if it should be impossible or impracticable to take actual delivery of the
Mortgage Collateral, then the title and right of possession to the Mortgage
Collateral shall pass to the purchaser at such sale as completely as if the
same had been actually present and delivered.
SECTION 5.07 The Agent or any other Secured Party (or any other
Person owning, directly or indirectly, any interest in any of the
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Obligations) shall have the right to become a purchaser at any sale made
pursuant to the provisions of this Article V and shall have the right to credit
upon the amount of the bid made therefor the amount payable to it out of the
net proceeds of such sale. Recitals contained in any conveyance to any
purchaser at any sale made hereunder will conclusively establish the truth and
accuracy of the matters therein stated, including, without limitation,
non-payment of the Obligations and advertisement and conduct of such sale in
the manner provided herein or provided by law. The Trustor does hereby ratify
and confirm all legal acts that the Agent and the Trustee may do in carrying
out the provisions of this Instrument.
SECTION 5.08 Any sale of the Mortgage Collateral or any part thereof
pursuant to the provisions of this Article V will operate to divest all right,
title, interest, claim and demand of the Trustor in and to the property sold
and will be a perpetual bar against the Trustor. Nevertheless, if requested by
the Agent so to do, the Trustor shall join in the execution, acknowledgement
and delivery of all proper conveyances, assignments and transfers of the
property so sold. Any purchaser at a foreclosure sale will receive immediate
possession of the property purchased, and the Trustor agrees that if the
Trustor retains possession of the property or any part thereof subsequent to
such sale, the Trustor will be considered a tenant at sufferance of the
purchaser, and will, if the Trustor remains in possession after demand to
remove, be guilty of forcible detainer and will be subject to eviction and
removal, forcible or otherwise, with or without process of law, and all damages
to the Trustor by reason thereof are hereby expressly waived by the Trustor.
SECTION 5.09 The Trustor acknowledges that it is aware of and has had
the advice of counsel of its choice with respect to its rights, under
applicable law, with respect to this Instrument, the Obligations and the
Mortgage Collateral. Nevertheless, the Trustor hereby waives and relinquishes,
to the maximum extent permitted by law, and subject to any mandatory
requirements of applicable law, and the Trustor hereby agrees that the Trustor
shall not at any time hereafter have or assert, any right under any law
pertaining to the following: marshalling, whether of assets or liens, the sale
of property in the inverse order of alienation, the exemption of homesteads,
the administration of estates of decedents, appraisement, valuation, stay,
extension, redemption, the maturing or declaring due of the whole or any part
of the Obligations, notice (whether of defaults, advances, the creation,
existence, extension or renewal of Obligations, or otherwise), subrogation,
abatement, suspension, deferment, diminution or reduction of any of the
Obligations (including, without limitation, setoff), now or hereafter in force.
The Trustor expressly agrees that the Trustee may offer the Mortgage Collateral
as a whole or in such parcels or lots as the Agent, in its sole discretion
elects, regardless of the manner in which the Mortgage Collateral may be
described.
SECTION 5.10 Should the Agent elect to foreclose by exercise of the
power of sale herein contained, the Agent shall notify the Trustee and shall
deposit with the Trustee this Instrument and such receipts and
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evidence of expenditures made and secured hereby as the Trustee may require
(including the Notes).
(a) Upon receipt of such notice from the Agent, the
Trustee shall cause to be recorded, published and delivered to the
Trustor such notice of default and election to sell as then required
by law and by this Instrument. The Trustee shall, without demand on
the Trustor, after lapse of such time as may then be required by law
and after such recordation of such notice of default and after notice
of sale having been given as required by law, sell the Mortgage
Collateral at the time and place of sale fixed by it in said notice of
sale, either as a whole, or in separate lots or parcels or items as
the Trustee shall deem expedient, and in such order as it may
determine, at public auction to the highest bidder for cash in Dollars
payable at the time of sale. The Trustee shall deliver to such
purchaser or purchasers thereof its good and sufficient deed or deeds
conveying the property so sold, but without any covenant or warranty,
express or implied. The recitals in such deed of any matters or facts
shall be conclusive proof of the truthfulness thereof. Any Person
including, without limitation, the Trustor, the Trustee or the Agent,
may purchase at such sale, and the Trustor hereby covenants to warrant
and defend the title of such purchaser or purchasers.
(b) Subject to California Civil Code Section 2924g, the
Trustee may postpone sale of all or any portion of the Mortgage
Collateral by public announcement at such time and place of sale, and
from time to time thereafter may postpone such sale by public
announcement or subsequently noticed sale, and without further notice
make such sale at the time fixed by the last postponement, or may, in
its discretion, give a new notice of sale.
SECTION 5.11 Upon the occurrence and during the continuance of an
Event of Default, the Agent, as a matter of right and without notice to the
Trustor or anyone claiming under the Trustor, and without regard to the then
current value of the Mortgage Collateral or the adequacy for any security for
the obligations then secured hereby, shall have the right to apply to any court
having jurisdiction to appoint a receiver or receivers of the Mortgage
Collateral, and the Trustor hereby irrevocably consents to such appointment and
waives notice of and application therefor. Any such receiver or receivers
shall have the usual powers and duties of receivers in like or similar cases
and all the powers and duties of the Agent in case of entry as provided herein
and shall continue as such and exercise all such powers until the later of (i)
the date of confirmation of sale of the Mortgage Collateral; (ii) the
disbursement of all proceeds of the Mortgage Collateral collected by such
receiver and the payment of all expenses incurred in connection therewith; or
(iii) the termination of such receivership with the consent of the Agent or
pursuant to an order of a court of competent jurisdiction.
SECTION 5.12 All costs and expenses (including, without limitation,
reasonable attorneys' fees, legal expenses, filing fees, and mortgage,
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transfer, stamp and other excise taxes) incurred by the Agent and by the
Trustee in perfecting, protecting and enforcing its rights hereunder, whether
or not an Event of Default shall have occurred, shall be a part of the
Obligations described in Section 1.01E hereof.
SECTION 5.13 The proceeds of any sale of the Mortgage Collateral or
any part thereof made pursuant to this Article V shall be applied as follows:
A. First, to the payment of all costs and expenses
incident to the enforcement of this Instrument, including, without
limitation, a reasonable compensation to the agents, attorneys and
counsel of the Agent and of the Trustee, not to exceed to the extent
allowed by law;
B. Second, to the payment or prepayment of the
Obligations, in each case equally and ratably in accordance with the
respective amounts then due and owing or as the Secured Parties
holding the same may otherwise agree; and
C. Third, the remainder, if any, shall be paid to the
Trustor or such other Person or Persons as may be entitled thereto by
law.
SECTION 5.14 Upon any sale made under the power of sale herein
granted and conferred, the receipt of the Trustee will be sufficient discharge
to the purchaser or purchasers at any sale for the purchase money, and such
purchaser or purchasers and the heirs, devisees, personal representatives,
successors and assigns thereof will not, after paying such purchase money and
receiving such receipt of the Trustee, be obligated to see to the application
thereof or be in any way answerable for any loss, misapplication or
non-application thereof.
ARTICLE VI
THE TRUSTEE
SECTION 6.01 The Trustee is hereby appointed as trustee of the
Mortgage Collateral; and the Trustee accepts this trust when this Instrument,
duly executed and acknowledged, is made a public record as provided by law.
SECTION 6.02 The Trustee shall not waive the exercise of any rights,
powers, privileges or remedies granted herein or any default by the Trustor
hereunder or give any consent permitted to be given by the Trustee hereunder
unless expressly directed to do so in writing by the Agent.
SECTION 6.03 The Trustee may resign in writing addressed to the Agent
or be removed at any time with or without cause by an instrument in writing
duly executed by the Agent. In case of the death, resignation or removal of
the Trustee, a successor Trustee may be appointed by the Agent without other
formality than an appointment and designation in writing, unless
Appendix A-6
<PAGE> 28
- 38 -
otherwise required by applicable law. Such appointment and designation will be
full evidence of the right and authority to make the same and of all facts
therein recited, and upon the making of any such appointment and designation,
this Instrument will vest in the named successor trustee all the right, title
and interest of the Trustee in all of the Mortgage Collateral, and said
successor will thereupon succeed to all the rights, powers, privileges,
immunities and duties hereby conferred upon the Trustee. All references herein
to the Trustee will be deemed to refer to the Trustee from time to time acting
hereunder.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01 Each and every right, power and remedy hereby granted to
the Agent or to the Trustee shall be cumulative and not exclusive, and each and
every right, power and remedy whether specifically hereby granted or otherwise
existing may be exercised from time to time and as often and in such order as
may be deemed expedient by the Agent or by the Trustee, and the exercise of any
such right, power or remedy will not be deemed a waiver of the right to
exercise, at the same time or thereafter, any other right, power or remedy. No
delay or omission by the Agent or by the Trustee in the exercise of any right,
power or remedy will impair any such right, power or remedy or operate as a
waiver thereof or of any other right, power or remedy then or thereafter
existing. Any and all covenants of the Trustor in this Instrument may from
time to time, by instrument in writing signed by the Agent, be waived to such
extent and in such manner as the Agent may desire, but no such waiver will ever
affect or impair the rights of the Agent or of the Trustee hereunder, except to
the extent specifically stated in such written instrument. All changes to and
modifications of this Instrument must be in writing and signed by the Trustor
and the Agent.
SECTION 7.02 No release from the lien or encumbrance of this
Instrument of any part of the Mortgage Collateral by the Agent or the Trustee
shall in any way alter, vary or diminish the force, effect or lien of this
Instrument on the balance of the Mortgage Collateral.
SECTION 7.03 If any provision hereof or of any of the other documents
constituting, evidencing or creating all or any part of the Obligations is
invalid or unenforceable in any jurisdiction, the other provisions hereof or of
said documents shall remain in full force and effect in such jurisdiction, and
the remaining provisions hereof will be liberally construed in favor of the
Agent and the Trustee in order to carry out the provisions hereof and of such
other documents. The invalidity of any provision of this Instrument in any
jurisdiction will not affect the validity or enforceability of any such
provision in any other jurisdiction. Any reference herein contained to a
statute or law of a state in which no part of the Mortgage Collateral is
situated will be deemed inapplicable to, and not used in, the interpretation
hereof. If any lien, encumbrance or security interest evidenced or created by
this Instrument is invalid or
Appendix A-6
<PAGE> 29
- 39 -
unenforceable, in whole or in part, as to any part of the Obligations, or is
invalid or unenforceable, in whole or in part, as to any part of the Mortgage
Collateral, such portion, if any, of the Obligations as is not secured by the
Mortgage Collateral hereunder shall be paid prior to the payment of the secured
portion of the Obligations, and all payments made on the Obligations
(including, without limitation, cash and/or property received in connection
with sale of Mortgage Collateral pursuant to Article V hereof) shall, unless
prohibited by applicable law or unless the Agent, in its sole and absolute
discretion, otherwise elects, be deemed and considered to have been first paid
on and applied to payment in full of the unsecured or partially secured portion
of the Obligations, and the remainder to the secured portion of the
Obligations.
SECTION 7.04 This Instrument is made with full substitution and
subrogation of the Agent and of the Trustee in and to all covenants and
warranties by others heretofore given or made in respect of the Mortgage
Collateral or any part thereof.
SECTION 7.05 This Instrument will be deemed to be and may be enforced
from time to time as an assignment, chattel mortgage, contract, deed of trust,
financing statement, real estate mortgage, or security agreement, and from time
to time as any one or more thereof, as is appropriate under applicable state
law. A carbon, photographic or other reproduction of this Instrument or any
financing statement in connection herewith shall be sufficient as a financing
statement for any and all purposes.
SECTION 7.06 All interest required hereunder shall be calculated as
provided in the Loan Agreement (subject to the following provisions).
Notwithstanding anything to the contrary contained herein, no rate of interest
required hereunder shall exceed the maximum legal rate under applicable law,
and, in the event any such rate is found to exceed such maximum legal rate, the
Trustor shall be required to pay only such maximum legal rate. All agreements
between the Trustor and the Agent are hereby expressly limited so that in no
contingency or event whatsoever shall the amount paid, or agreed to be paid, by
the Trustor for the use, forbearance, or detention of the money due under the
Notes secured hereby exceed the maximum amount permissible under applicable
law. If, due to any circumstances whatsoever, fulfillment of any provision
shall involve transcending the limit of validity prescribed by law, then the
obligation to be fulfilled shall be reduced to the limit of such validity.
In furtherance thereof such Persons stipulate and agree that
none of the terms and provisions contained herein or in the Loan Agreement or
any other Financing Document shall ever be construed to create a contract to
pay, for the use, forbearance or detention of money, interest in excess of the
maximum amount of interest permitted to be charged by applicable law from time
to time in effect. No present or future guarantors, endorsers, or other
Persons hereafter becoming liable for payment of the Notes or any Obligation
shall ever be liable for unearned interest thereon or shall ever be required to
pay interest thereon in excess of the maximum amount that may be lawfully
charged under applicable law from time to time in effect,
Appendix A-6
<PAGE> 30
- 40 -
and the provisions of this Section 7.06 shall control over all other provisions
herein or in the Loan Agreement or any other Financing Document which may be in
conflict or apparent conflict herewith. The Agent expressly disavows any
intention to charge or collect excessive unearned interest or finance charges
in the event the maturity of the Notes or any Obligation is accelerated. If
(a) the maturity of the Notes or of any Obligation is accelerated for any
reason or (b) the Agent shall otherwise collect monies which are determined to
constitute interest which would otherwise increase the interest on any or all
of the Notes or the Obligations to an amount in excess of that permitted to be
charged by applicable law then in effect, then all such sums determined to
constitute interest in excess of such legal limit shall, without penalty, be
promptly applied to reduce the then outstanding principal of the Notes or, at
the Agent's option, promptly returned to the Trustor or the other payor thereof
upon such determination. In determining whether or not the interest paid or
payable, under any specific circumstance, exceeds the maximum amount permitted
under applicable law, the Trustor and the Agent (and any other payors thereof)
shall, to the greatest extent permitted under applicable law, (i) characterize
any nonprincipal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the
entire contemplated term of the instruments evidencing the Obligations in
accordance with the amounts outstanding from time to time thereunder and the
maximum legal rate of interest from time to time in effect under applicable law
in order to lawfully charge the maximum amount of interest permitted under
applicable law.
SECTION 7.07 THIS INSTRUMENT AND THE OBLIGATIONS SHALL BE CONSTRUED
UNDER AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
SECTION 7.08 This Instrument may be executed in several original
counterparts. Each counterpart shall be deemed to be an original for all
purposes, and all counterparts shall together constitute but one and the same
instrument.
SECTION 7.09 Unless otherwise specified in Exhibit A, B and C hereto,
all recording references in Exhibits A, B and C hereto are to the official real
property records of the county in which the affected land is located. The
reference in Exhibits A, B and C hereto to liens, encumbrances and other
burdens shall not be deemed to recognize or create any rights in third parties.
SECTION 7.10 All notices, consents, and other communications required
or permitted to be given or made herein shall be duly given when delivered in
writing or sent by U.S. mail, postage prepaid, or by personal service
(including courier or express service) or by facsimile transmission (with
written confirmation of receipt) addressed as follows, and the address of the
following Persons shall be deemed to be as set forth below:
Appendix A-6
<PAGE> 31
- 41 -
To the Trustor: CR Briggs Corporation
129 East Ridgecrest Blvd.
Ridgecrest, California 93555
With a copy to: Canyon Resources Corporation
14142 Denver West Parkway
Suite 250
Golden, Colorado 80401
Attention: Gary C. Huber
Facsimile No.: (303) 279-3772
To the Trustee: Chicago Title Insurance Company
700 South Flower, Suite 920
Los Angeles, California 90017
To the Agent: Banque Paribas, New York Branch
787 Seventh Avenue
New York, New York 10019
Attention: Thomas K. Emmons
Facsimile No.: (212) 841-2555
And a copy to: Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Jonathan J. Green, Esq.
Facsimile No.: (212) 530-5219
Any party hereto may, on three (3) days' notice given as
prescribed in this Section 7.10, specify a different address for
communications. Any Person succeeding to all or any part of an interest of the
parties hereto shall specify by written notice the address of such person for
all notices hereunder.
SECTION 7.11 This Instrument shall bind and inure to the benefit of
the respective successors and assigns of the Trustor, the Agent, the Trustee,
the Lenders and each other holder of any of the Obligations (provided, however,
that the Trustor shall not assign or transfer its rights hereunder without the
prior written consent of the Agent and provided further that any successor to
any Obligations arising under any Hedge Contract is a Lender).
SECTION 7.12 Notwithstanding any other provision contained herein,
any future interests created or contemplated by this Instrument which are
determined to be subject to the Rule Against Perpetuities (as applied in
California) shall, if they have not theretofore vested, be extinguished
whenever twenty-one years less one day shall have elapsed after the death of
the survivors of the late Joseph P. Kennedy, United States Ambassador to the
Court of Saint James, and their children and grandchildren, including adopted
children and grandchildren, who are living at the date of the execution of this
Instrument.
Appendix A-6
<PAGE> 32
- 42 -
SECTION 7.13 The Secured Parties may, by agreement among them,
provide for and regulate the exercise of their rights and remedies hereunder,
but, unless and until modified to the contrary in writing executed by the
Secured Parties and recorded in the same counties or offices as this Instrument
is recorded, the Trustor and all others shall be entitled to rely on the
releases, waivers, consents, approvals, notifications and other acts of the
Agent, without inquiry into any such agreements or the existence of required
consents or approvals of the Secured Parties therefor.
SECTION 7.14 The Minerals or other substances of value which may be
extracted from the Mortgaged Property (including, without limitation, gold,
gold ore, silver, silver ore and precious metal dore), and the accounts
relating thereto will be financed at the mine shaft or mine shafts located on
the Lands. This Instrument is to be filed for record in, among other places,
the real estate records of Inyo County, California. The mailing address of the
Trustor, and the Trustee, from which information concerning the security
interest may be obtained, are as set forth in Section 7.10 hereof.
SECTION 7.15 The Agent shall act for and on behalf of each Secured
Party in accordance with Section 10 of the Loan Agreement in connection with
all of the Mortgage Collateral now or hereafter existing.
SECTION 7.16 The Agent shall be entitled to enforce payment of any
indebtedness and performance of any other of the Obligations secured hereby and
to exercise all rights and powers under this Instrument or under the Loan
Agreement or any other Financing Document or any laws now or hereafter in
force, notwithstanding the fact that some or all of said indebtedness and other
Obligations secured hereby may now or hereafter be otherwise secured, whether
by mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the
acceptance of this Instrument nor its enforcement, whether by court action or
pursuant to the power of sale or other powers herein contained shall prejudice
or in any manner affect the Agent's right to realize upon or enforce any other
security now or hereafter held by the Agent, it being agreed that the Agent
shall be entitled to enforce this Instrument and any other security now or
hereafter held by the Agent in such order and manner as it may in its absolute
discretion determine.
SECTION 7.17 Upon the occurrence and during the continuance of an
Event of Default, the Trustor hereby designates the Agent as its
attorney-in-fact and grants to the Agent appropriate powers of attorney to act
for and on behalf of the Trustor with the Department of Interior and all other
agencies, departments and subdivisions of the United States of America and of
all states, in all transactions relating to the Mortgage Collateral or any part
thereof. The Trustor hereby authorizes and directs all such agencies,
departments and subdivisions to rely upon any writing from the Agent asserting
that an Event of Default hereunder has occurred, without inquiry into whether
or not such Event of Default actually occurred, and the Trustor agrees that the
exercising by the Agent of such powers of
Appendix A-6
<PAGE> 33
- 43 -
attorney may be relied upon in all respects and, as between the Trustor and
such agency, department or subdivision, shall be binding upon the Trustor.
SECTION 7.18 The Trustor shall, within ten (10) days after written
notice thereof from the Agent, deliver to the Agent a written statement stating
the unpaid principal of and interest on the Notes and any other amounts secured
by this Instrument and stating whether any offset or defense exists against
such principal and interest.
SECTION 7.19 The Trustor hereby requests that a copy of any notice of
sale hereunder be mailed to it at the address of the Trustor first set forth
above.
SECTION 7.20 Should any of the terms or conditions of this Instrument
conflict with the express terms and conditions of the Loan Agreement, those
terms and conditions contained within the Loan Agreement shall control.
SECTION 7.21 This Instrument cannot be modified, changed or
discharged except by an agreement in writing, duly acknowledged, in form for
recording, signed by the party against whom enforcement of such modification,
change or discharge is sought.
Appendix A-6
<PAGE> 34
- 44 -
IN WITNESS WHEREOF, the Trustor has, on the date set forth in the
acknowledgement hereto, effective as of the date and time first above written,
caused this Instrument to be duly executed.
TRUSTOR
CR BRIGGS CORPORATION,
a Colorado corporation
By ___________________________
Name:
Title:
By ___________________________
Name:
Title:
Appendix A-6
<PAGE> 35
ACKNOWLEDGEMENTS
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On this _____ day of December, 1995, before me,
________________________________, Notary Public, personally appeared
_______________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he/she executed the same in
his/her signature on the instrument and the person, or the entity upon behalf
of which the person acted, executed the instrument.
__________________________________
Notary Public, State of New York
My commission expires:_____________
[SEAL]
<PAGE> 36
ACKNOWLEDGEMENTS
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
On this _____ day of December, 1995, before me,
________________________________, Notary Public, personally appeared
_______________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he/she executed the same in
his/her signature on the instrument and the person, or the entity upon behalf
of which the person acted, executed the instrument.
__________________________________
Notary Public, State of New York
My commission expires:_____________
[SEAL]
<PAGE> 37
- 47 -
EXHIBIT A
CR BRIGGS OWNED MINING CLAIMS
The following unpatented lode mining claims located in Sections 13-16, 21-28,
33-36, T. 21 South, Range 44 East, Sections 29-32, T. 21 South, Range 45 East,
Sections 1-2, 10-15, 22-27, 34-36, T. 23 South, Range 44 East, Sections 4, 9,
11-14, T. 22 South, Range 44 East, MDB&M, Inyo County, California.
<TABLE>
<CAPTION>
Claim Name Book Page BLM No. (CAMC)
- ---------- ---- ---- --------------
<S> <C> <C> <C>
PN 1-49 89 388-436 220106-220154
PN 60-61 89 3253-3254 225674-225675
PN 72-77 89 3265-3270 225686-225691
PN 85-96 89 3278-3289 225699-225710
PN 102-113 89 3295-3306 225716-225727
PN 123-134 89 3316-3327 225737-225748
PN 149-159 89 3352-3362 225763-225773
PN 160 89 3333 225774
PN 177-188 89 3370-3381 225791-225802
PN 203-206 89 3396-3399 225817-225820
PN 217-220 89 3410-3413 225831-225834
PN 229-231 89 3422-3424 225843-225845
PN 233 89 3426 225847
PN 241 89 3434 225855
PN 252-264 89 3445-3457 225866-225878
PN 275-288 89 3468-3481 225889-225902
PN 289 89 4605 228054
PN 301-309 89 3482-3490 225903-225911
PN 310-314 89 3491-3495 225912-225916
PN 315-316 89 4842-4843 228183-228184
PN 327-335 89 3496-3504 225917-225925
PN 336-340 89 3505-3509 225926-225930
PN 341-343 89 4606-4608 228055-228057
PN 357-364 89 3510-3517 225931-225938
PN 365-368 89 4611-4614 228060-228063
PN 377-383 89 3518-3524 225939-225945
PN 384-385 89 4616-4617 228065-228066
PN 396-399 89 3525-3528 225946-225949
PN 400-403 89 4621-4624 228070-228073
PN 414-419 89 3529-3534 225950-225955
PN 420-421 89 4626-4627 228075-228076
PN 431-446 89 3535-3550 225956-225971
PN 447-451 89 4628-4632 228077-228081
PN 455-456 89 3551-3552 225972-225973
PN 457-460 89 4636-4639 228085-228088
PN 461-462 89 3553-3554 225974-225975
</TABLE>
Appendix A-6
<PAGE> 38
- 48 -
<TABLE>
<S> <C> <C> <C>
PN 463-466 89 4640-4643 228089-228092
PN 473 89 3555 225976
PN 473A 91 3350 246356
PN 474-476 89 3556-3558 225977-225979
PN 485-498 89 3560-3573 225981-225994
PN 505-518 89 3575-3588 225996-226009
PN 528-540 89 3594-3606 226015-226027
PN 546-565 89 3608-3627 226029-226048
PN 578-604 89 3636-3662 226057-226083
PN 614-635 89 3672-3693 226093-226114
PN 645-646 89 3703-3704 226124-226125
PN 647-664 89 3706-3723 226127-226144
PN 677-700 89 3737-3760 226158-226181
PN 715-737 89 3775-3797 226196-226218
PN 754-773 89 3814-3833 226235-226254
PN 788-800 89 3848-3860 226269-226281
PN 819-831 89 3879-3891 226300-226312
PN 852-858 89 3912-3918 226333-226339
PN 875-881 89 3935-3941 226356-226362
PN 898-903 89 3958-3963 226379-226384
PN 934-944 89 3994-4004 226415-226425
PN 970-980 89 4030-4040 226451-226461
PN 1010-1014 89 4674-4678 228123-228127
PN 2010-2013 89 7546-7549 231633-231636
PN 2016-2023 89 7552-7559 231639-231646
PN 2036-2042 89 7572-7578 231659-231665
CHUCK 92 6538 257755
DAWN 92 6537 257756
BOB 1-6 91 3359-3364 246331-246336
BOB 7-10 91 3365-3368 246337-246340
BOB 11-15 91 3375-3379 246341-246345
BRIGGS 1-6 91 3369-3374 246346-246351
BRIGGS 7-8 (NOT YET 267057-267058
AVAILABLE)
NAP 1-6 89 8240-8245 232318-232323
NAP 7-10 91 3380-3383 246352-246355
KEN 1-3 91 2116-2118 244873-244875
MK 5-7* 85 2310-2312 168017-168019
*Undivided one-third interest
MK 8-9 89 1951-1952 224950-224951
MK 10-14 89 1953-1957 22495-224956
WTL 6-16 85 272-282 164557-164567
WTL 21-23 85 287-289 164572-164574
WTL 29-36 85 290-297 164575-164582
GOLD TOOTH LODE 36 48 39920
GOLD TOOTH EXT. LODE 39 414 39921
SALLIE J. LODE 42 223 39922
SALLIE J. EXT. LODE 42 222 39923
SALLIE J. EXT. #2 LODE 42 299 39924
</TABLE>
Appendix A-6
<PAGE> 39
- 49 -
The following unpatented placer claims located in Sections 11, 12, 13, 14, 23,
and 24, Township 23 South, Range 44 East, MDB&M, Inyo County, California
<TABLE>
<CAPTION>
Claim Name Book Page BLM No. (CAMC)
- ---------- ---- ---- --------------
<S> <C> <C> <C>
PNP 1 93 6093 262156
Amendment 95 0154
Amendment 95 3297
PNP 2 93 6094 262157
PNP 3 93 6095 262158
Amendment 95 0155
Amendment 95 0693
Amendment 95 3298
PNP 4-53 93 6096-6145 262159-262208
</TABLE>
<PAGE> 40
- 50 -
EXHIBIT B
CR BRIGGS OWNED MILLSITES AND TUNNEL SITE
The following Millsite and Tunnel Site Claims are located in Sections 10, 11,
13, 14, 15, 23 and 24, Township 23 South, Range 45 East, MDB&M, Inyo County,
California.
<TABLE>
<CAPTION>
Claim Name Book Page BLM No. (CAMC)
- ---------- ---- ---- --------------
<S> <C> <C> <C>
PN 1-38 89 437-474 220155-220192
PN 39 89 4604 228053
PN 45 89 7409 231496
PN 52-53 89 7416-7417 231503-231504
PN 60-62 89 7424-7426 231511-231513
PN 68-70 89 7432-7434 231519-231521
PN 76-78 89 7440-7442 231527-231529
PN 84-85 89 7448-7449 231535-231536
PN 92-93 89 7456-7457 231543-231544
PN 100-101 89 7464-7465 231551-231552
AMS 1-3 83 4556-4558 133914-133916
AMS 4 84 498 142805
AMS 6 84 499 142806
AMS 7 84 497 142807
Mike 1-3 92 5544-5547 257757-257759
Gold Tooth C 232 39925
Gold Tooth
Tunnel Site C 339 47013
</TABLE>
<PAGE> 41
- 51 -
EXHIBIT C
MINING LEASES AND AGREEMENTS
I. Concerning the following unpatented lode mining claims owned by Keith
Kummerfeld; et al., located in Sections 14 and 23, Township 23 South, Range 44
East, MDB&M, Inyo County, California:
<TABLE>
<CAPTION>
COUNTY RECORDING
CLAIM NAME INFORMATION BLM FILE #
<S> <C> <C>
Cecil R 1 108/315 38478
Amendment 92-1414
Cecil R 2 108/316 38479
WTL 1 117/300 38477
WTL 3 117/302 38475
WTL 5 117/304 38473
Amendment 92-1640
WTL 24 117/323 38466
WTL 26 117/325 38464
WTL 28 117/327 38462
</TABLE>
a. Mining Lease dated January 15, 1988 between Billiton Minerals U.S.A.,
Inc., Lessee, and Keith R. Kummerfeld, Daniel J. V. Greeley, John B. Higman,
John L. Doerfler (and their respective spouses) and Marvin E. Gillispie, Lessors
(the "Kummerfeld Lease"). The original Kummerfeld Lease was not recorded.
However, a complete executed copy appears as an exhibit to the Assignment
described in paragraph (b) immediately below.
b. Assignment between Billiton Minerals U.S.A., Inc., and Camindex Resources,
Inc., dated March 28, 1988 and recorded as Document No. 88-4128 on September 8,
1988. This Assignment transfers to Camindex Billiton's interest, as Lessee, in
the Kummerfeld Lease, without any reservations.
c. Claim Acquisition Agreement dated September 12, 1988, among David L.
Pruett, Camindex Resources, Inc., an Alaska corporation, and First Sierra Gold
Corporation, a California corporation (the "Claim Acquisition Agreement"). A
Memorandum of Claim Acquisition Agreement, evidencing this agreement, was
recorded as Document No. 88-6867 on November 14, 1988.
d. Claim Option Agreement dated November 23, 1988, between First Sierra Gold
Corporation and Addwest Gold, Inc.
<PAGE> 42
- 52 -
e. Assignment, Bill of Sale, Deed and Conveyance dated November 30, 1990,
from CR Montana Corporation (successor by merger to Addwest Gold Corporation) to
CR Briggs Corporation. This deed was recorded as Document 91-0034 in the Inyo
County, California, records on January 3, 1991.
II. Concerning the following unpatented lode mining claims owned by Ivanhoe
Investment Corporation, a Nevada corporation, doing business in California as
Ivanhoe Resources Company, located in Sections 2, 11-13, 18 and 24, Township 23
South, Range 44 East; and Sections 15, 22-27, 34 and 25, Township 22 South,
Range 44 East, MDB&M, Inyo County, California:
<TABLE>
<CAPTION>
COUNTY
RECORDING
CLAIM NAME INFORMATION BLM FILE #
<S> <C> <C>
Argonaut 1 58/527 1725
Amendment 126/197
Amendment 92/1638
Argonaut 2 58/528 1724
Amendment 126/198
Amendment 92/1637
Argonaut 3 58/529 1726
Amendment 126/199
Amendment 92/1251
Argonaut 4 58/530 1728
Amendment 126/200
Argonaut 5 58/531 1727
Amendment 126/201
Amendment 92/1636
Argonaut 6 58/532 1729
Amendment 126/202
Argonaut 7 58/533 1730
Amendment 126/203
Amendment 92/1253
Argonaut 8 58/534 1731
Amendment 126/204
Amendment 92/1254
Argonaut 9 116/531 1744
Amendment 126/205
Amendment 92/1255
Argonaut 10 59/245 1732
Amendment 126/206
Amendment 92/1256
</TABLE>
<PAGE> 43
- 53 -
<TABLE>
<CAPTION>
COUNTY
RECORDING
CLAIM NAME INFORMATION BLM FILE #
<S> <C> <C>
Argonaut 11 108/719 1743
Amendment 126/207
Amendment 92/1635
Argonaut 12 108/720 1742
Amendment 126/208
Argonaut 13 108/721 1734
Amendment 126/209
Argonaut 14 108/722 1735
Amendment 126/210
Argonaut 15 108/723 1741
Amendment 126/211
Argonaut 16 111/868 1740
Amendment 126/212
Argonaut 17 111/870 1739
Amendment 126/213
Argonaut 18 111/872 1738
Amendment 126/214
Argonaut 19 111/874 1737
Amendment 126/215
Argonaut 20 111/876 1736
Amendment 126/216
Amendment 92/1639
Wet Spot* 58/534 1733
</TABLE>
(*One-half interest may be owned by others.)
<PAGE> 44
- 54 -
<TABLE>
<CAPTION>
CLAIM NAME BOOK PAGE BLM NO. (CAMC)
<S> <C> <C> <C>
PAN 3-38 125 800-835 28358-28393
PAN 45-57 125 836-848 28394-28406
PAN 101-124 126 158-181 33613-33636
AM 1-3 82 238-240 107066-107068
AM 12-17 82 250-255 107079-107084
</TABLE>
a. Agreement with Respect to Mining Claims between Resource Associates of
Alaska, Inc. (RAA), and David L. Pruett, dated February 21, 1985 (the
"RAA-Pruett Agreement"). Ivanhoe Investment Corporation is the successor in
interest to Resource Associates of Alaska, and by virtue of the Claim
Acquisition Agreement and Claim Option Agreement described below, CR Briggs
Corporation is the successor in interest to David L. Pruett under the RAA-Pruett
Agreement.
b. Claim Acquisition Agreement dated September 12, 1988, among David L.
Pruett, Camindex Resources, Inc. an Alaska corporation, and First Sierra Gold
Corporation, a California corporation (the "Claim Acquisition Agreement"). A
Memorandum of Claim Acquisition Agreement, evidencing this agreement, was
recorded as Document No. 88-6867 on November 14, 1988.
c. Claim Option Agreement dated November 23, 1988, between First Sierra Gold
Corporation and Addwest Gold, Inc.
d. Assignment, Bill of Sale, Deed and Conveyance dated November 30, 1990,
from CR Montana Corporation (successor by merger to Addwest Gold Corporation) to
CR Briggs Corporation. This deed was recorded as Document 91-0034 in the Inyo
County, California, records on January 3, 1991.
III. Concerning the following patented lode mining claims and millsite:
<TABLE>
<CAPTION>
Claim Name Mineral Survey No.
---------- ------------------
<S> <C>
Comet Lode 4556 A
Shooting Star Lode 4556 A
Scotchman Millsite 4556 B
</TABLE>
Mining Lease dated March 1, 1995, between Merril P. Womach, Lessor, and
CR Briggs Corporation, Lessee, a Memorandum of which was recorded on April 24,
1995, as Document No. 95-1281.
<PAGE> 45
- 55 -
APPENDIX E
TO LOAN AGREEMENT
[Form of Guarantee and Pledge Agreement]
================================================================================
GUARANTEE, EQUITY CONTRIBUTION AND PLEDGE AGREEMENT
Dated as of December 6, 1995
among
CANYON RESOURCES CORPORATION,
as Guarantor,
CR BRIGGS CORPORATION,
as Borrower,
and
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
================================================================================
<PAGE> 46
1
GUARANTEE, EQUITY CONTRIBUTION AND PLEDGE AGREEMENT (this "Agreement")
dated as of December 6, 1995 among CANYON RESOURCES CORPORATION, a corporation
duly organized and validly existing under the laws of the State of Delaware (the
"Guarantor"); CR BRIGGS CORPORATION, a Colorado corporation (the "Borrower");
and BANQUE PARIBAS, NEW YORK BRANCH, a banking institution organized under the
laws of France, as agent for the Secured Parties referred to below (in such
capacity, together with its successors in such capacity, the "Agent").
The Borrower, the lenders referred to therein (the "Lenders") and the
Agent are parties to a Loan Agreement dated as of December 6, 1995 (as modified
and supplemented and in effect from time to time, the "Loan Agreement"),
providing, subject to the terms and conditions thereof, for extensions of credit
(by making loans) by the Lenders to the Borrower in an aggregate principal
amount not exceeding the equivalent of U.S.$34,000,000.
The Guarantor owns, directly or indirectly, 100% of the shares of the
outstanding capital stock of the Borrower and will benefit from the making of
such loans to the Borrower. To induce the Lenders to enter into the Loan
Agreement and to extend credit thereunder, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Guarantor has agreed to guarantee the Guaranteed Obligations (as hereinafter
defined), to make certain equity contributions to the Borrower and to pledge and
grant a security interest in the Collateral (as hereinafter defined) as security
for the Secured Obligations (as hereinafter defined). Accordingly, the parties
hereto agree as follows:
Section 1. Definitions. Each capitalized term used herein and not
otherwise defined has the meaning assigned thereto in the Loan Agreement. Terms
used in Article 9 of the Uniform Commercial Code (as hereinafter defined) are
used herein as defined therein. Unless otherwise stated, any reference in this
Agreement to any Person shall include its permitted successors and assigns and,
in the case of any Governmental Body, any Person succeeding to its functions and
capacities. In addition, as used herein the following terms shall have the
following respective meanings (all terms defined in this Section 1 and in the
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Canyon Contingency Account" shall have the meaning ascribed
thereto in Section 8.01 hereof.
"Cash Collateral" shall mean U.S.$2,000,000.
Guarantee and Pledge Agreement
<PAGE> 47
- 2 -
"Collateral" shall have the meaning ascribed thereto in
Section 4 hereof.
"Consolidated Subsidiary" shall mean, with respect to any
Person, each Subsidiary of such Person (now existing or hereafter
created or acquired) the financial statements of which shall be (or
should have been) consolidated with the financial statements of such
Person in accordance GAAP.
"Debentures" shall mean the Guarantor's "6% Convertible
Subordinated Notes due June 2, 1998" issued under the Indenture dated
as of June 2, 1993 between the Guarantor and Bank of America Arizona,
an Arizona corporation, as trustee, as amended and in effect from time
to time.
"Equity Contribution" shall have the meaning ascribed thereto
in Section 2.02 hereof.
"ERISA Affiliate" shall mean any corporation or trade or
business which is a member of any group of organizations: (a) described
in Section 414(b) or (c) of the Code of which the Guarantor is a member
and (b) solely for purposes of potential liability under Section
302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien
created under Section 302(f) of ERISA and Section 412(n) of the Code,
described in Section 414(m) or (o) of the Code of which the Guarantor
is a member.
"Guaranteed Obligations" shall mean, collectively, (a) the
principal of, and interest or Gold Funding Fees (as the case may be)
on, the Loans to, and the Note(s) of, the Borrower, (b) all other
amounts from time to time owing to the Lenders or the Agent by the
Borrower under the Loan Agreement, the Notes and the Security
Documents, (c) all amounts at any time owing to any Hedge Party under
any Hedge Contract, and (d) any deferral, renewal, extension, refunding
or refinancing of any of the foregoing, in each case whether direct or
indirect, absolute or contingent, due or to become due.
"Leverage Ratio" shall mean, at any time, the ratio of Total
Liabilities to Tangible Net Worth at such time.
"Multiemployer Plan" shall mean a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have been made
by the Guarantor or any ERISA Affiliate and which is covered by Title
IV of ERISA.
"Plan" shall mean an employee benefit or other plan
established or maintained by the Guarantor or
Guarantee and Pledge Agreement
<PAGE> 48
- 3 -
any ERISA Affiliate and which is covered by Title IV of ERISA, other
than a Multiemployer Plan.
"Pledged Stock" shall have the meaning ascribed thereto in
Section 4(a) hereof.
"Records" shall have the meaning ascribed thereto in Section
3.11 hereof.
"Secured Obligations" shall mean, collectively, (a) the
Guaranteed Obligations, (b) all obligations of the Guarantor to the
Agent and the other Secured Parties hereunder and (c) any deferral,
renewal, extension, refunding or refinancing of any of the foregoing,
in each case whether direct or indirect, absolute or contingent, due or
to become due.
"Secured Parties" shall mean on any date of determination,
each Lender, the Agent and each Hedge Party.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority
of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions of such
corporation, partnership or other entity (irrespective of whether or
not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall
have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled
by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person.
"Tangible Net Worth" shall mean, as at any date for the
Guarantor, the sum for the Guarantor and its Consolidated Subsidiaries
(determined on a consolidated basis without duplication in accordance
with GAAP), of the following:
(a) the amount of capital stock; plus
(b) the aggregate outstanding principal amount of the
Debentures; plus
(c) the amount of surplus and retained earnings (or, in the
case of a surplus and retained earnings
Guarantee and Pledge Agreement
<PAGE> 49
- 4 -
deficit, minus the amount of such deficit); minus
(d) the sum of the following: cost of treasury shares and the
book value of all assets that should be classified as
intangibles (without duplication of deductions in respect of
items already deducted in arriving at surplus and retained
earnings) but in any event including goodwill, minority
interest, research and development costs, trademarks, trade
names, copyrights, patents and franchises, unamortized debt
discount and expense, all reserves and any write-up in the
book value of assets resulting from a revaluation thereof
subsequent to December 31, 1994.
"Total Liabilities" shall mean, as at any date, the sum, for
the Guarantor and its Consolidated Subsidiaries, of the following: (a)
all Indebtedness and (b) all other liabilities (other than the
Debentures) that should be classified as liabilities on a balance
sheet, including, without limitation, all reserves (other than general
contingency reserves) and all deferred taxes and other deferred items.
"Warrants" shall mean, collectively, (i) the 2,923,732
warrants to purchase 2,923,732 shares of the common stock, $.01 par
value, of the Guarantor (the "Guarantor's Common Stock"), issued under
a Warrant Agreement dated as of January 26, 1990 and offered pursuant
to the Registration Statement on Form S-2 filed with the Securities and
Exchange Commission on April 29, 1990 (Registration No. 33-34560) and
(ii) the 1,200,000 warrants to purchase 1,200,000 shares of the
Guarantor's Common Stock issued under a Warrant Agreement dated as of
March 18, 1992 and offered pursuant to the Registration Statement on
Form S-3 filed with the Securities and Exchange Commission on March 27,
1992 (Registration No. 33- 45909).
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect from time to time in the State of New York.
Guarantee and Pledge Agreement
<PAGE> 50
- 5 -
Section 2. The Guarantee and Equity Contribution.
2.01 The Guarantee. The Guarantor hereby unconditionally
guarantees to the Agent and each other Secured Party and their respective
successors and assigns the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Guaranteed Obligations. The
Guarantor hereby further unconditionally agrees that if the Borrower shall fail
to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, the Guarantor will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.
2.02 The Equity Contribution.
(a) Cash Collateral Deposit. On the date hereof, the Guarantor
shall deposit the Cash Collateral in the Canyon Contingency Account in
accordance with the Deposit and Disbursement Agreement.
(b) Transfer from Canyon Contingency Account. The Guarantor
hereby irrevocably agrees that, and instructs the Agent and the Depositary to,
immediately upon the date that the Tranche A Commitments and Tranche B
Commitments are fully borrowed, without the need for any further action by the
Guarantor, transfer from the Canyon Contingency Account to the Invested Capital
Account an amount equal to the excess (if any) of (i) the Cash Collateral minus
(ii) the sum of the Project Costs reasonably estimated by the Agent (in
consultation with the Independent Engineer) to be incurred to achieve Project
Completion (after giving effect to the application of Tranche A Loans and
Tranche B Loans on such date) plus the Expansion Required Amount. Any amount so
transferred shall be deemed to be a cash capital contribution by the Guarantor
to the Borrower. On the Expansion Completion Date, after the payment in full of
all Expansion Costs, the remaining balance (if any) in the Canyon Contingency
Account shall be transferred to, or at the order of, the Guarantor
(c) The Additional Equity Contribution. In addition to, and
without limitation of the transfer referred to in Section 2.02(b) hereof, in the
event that, at any time prior to the Completion Date or Expansion Completion,
actual Project Costs and Expansion Costs to be incurred by the Borrower and the
amounts to be transferred pursuant to Section 2.02(b) hereof exceed the sum of
the aggregate Commitments, the Guarantor hereby agrees to make a cash capital
contribution in Dollars in immediately available funds (together with the
amounts to be transferred pursuant to Section 2.02(b) hereof, the "Equity
Contribution"), in an amount equal to such excess, to the Borrower, as
Guarantee and Pledge Agreement
<PAGE> 51
- 6 -
provided in Section 7 hereof, such capital contribution to be made on or prior
to the date such Project Costs or Expansion Costs are incurred.
(d) Use of Equity Contribution Proceeds. In accordance with
Section 4.04(b) of the Loan Agreement, the Borrower may use the proceeds of an
Equity Contribution deposited in the Invested Capital Account pursuant to
Section 7 hereof solely for the purpose of making payments of Project Costs and
Expansion Costs, as incurred.
2.03 Obligations Unconditional. The obligations of the
Guarantor under this Section 2 hereof are absolute and unconditional
irrespective of the value, genuineness, validity, regularity or enforceability
of the Loan Agreement, any other Financing Document, any Project Document or any
other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 2.03 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not alter or
impair the liability of the Guarantor hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantor, the time for any performance of or compliance with any of
the Guaranteed Obligations or the Equity Contribution shall be
extended, or such performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of the
Loan Agreement, any other Financing Document, any Project Document or
any other agreement or instrument referred to herein or therein shall
be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations or the
Equity Contribution shall be accelerated, or any of the Guaranteed
Obligations shall be modified, supplemented or amended in any respect,
or any right under the Loan Agreement, any other Financing Document,
any Project Document or any other agreement or instrument referred to
herein or therein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of,
the Agent or any other Secured
Guarantee and Pledge Agreement
<PAGE> 52
- 7 -
Party or Secured Parties as security for any of the Guaranteed
Obligations shall fail to be perfected.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the Agent
or any other Secured Party exhaust any right, power or remedy or proceed
against the Borrower under the Loan Agreement, any other Financing Document,
any Project Document or any other agreement or instrument referred to herein or
therein, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations or the Equity Contribution.
2.04 Reinstatement. The obligations of the Guarantor under this Section
2 shall be automatically reinstated if and to the extent that for any reason any
payment made pursuant to this Agreement is rescinded or must be otherwise
restored by any holder of any of the Guaranteed Obligations, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise, and the
Guarantor agrees that it will indemnify the Agent and each other Secured Party
on demand for all reasonable costs and expenses (including, without limitation,
fees of counsel) incurred by the Agent or such Secured Party in connection with
such rescission or restoration, including any such costs and expenses incurred
in defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
2.05 Subrogation. The Guarantor hereby waives all rights of subrogation
or contribution, whether arising by contract or operation of law (including,
without limitation, any such right arising under the Federal Bankruptcy Code of
1978, as amended from time to time) or otherwise by reason of any payment by the
Guarantor pursuant to the provisions of Section 2.01 hereof and further agrees
with the Borrower for the benefit of each of the Borrower's creditors
(including, without limitation, the Agent and each other Secured Party) that any
such payment by the Guarantor shall constitute a contribution of capital by the
Guarantor to the Borrower (or an investment in the equity capital of the
Borrower by the Guarantor).
2.06 Remedies. The Guarantor agrees that, as between the Guarantor and
the Lenders, the obligations of the Borrower under the Loan Agreement and the
Notes may be declared to be forthwith due and payable as provided in Section
9.02(a) of the Loan Agreement (and shall be deemed to have become automatically
due and payable in the circumstances provided in said Section 9.02(a) of the
Loan Agreement) for purposes of Section 2.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against the Borrower and that,
in the event of such declaration (or such obligations being deemed to have
become automatically due and payable), such obligations (whether or not due
Guarantee and Pledge Agreement
<PAGE> 53
- 8 -
and payable by the Borrower) shall forthwith become due and payable by the
Guarantor for purposes of said Section 2.01.
2.07 Specific Performance. The Guarantor hereby irrevocably waives, to
the extent that it may do so under applicable law, any defense based on the
adequacy of a remedy at law which may be asserted as a bar to the remedy of
specific performance in any action brought against the Guarantor for specific
performance of this Agreement by the Agent, on behalf of the Secured Parties, or
by the Borrower or for any of their benefit by a receiver, custodian or trustee
appointed for the Borrower or in respect of all or a substantial part of the
Borrower's assets under the bankruptcy or insolvency laws of any jurisdiction to
which the Borrower or its assets are subject.
2.08 Instrument for the Payment of Money. The Guarantor hereby
acknowledges that the obligations set forth in this Section 2 constitute an
instrument for the payment of money, and consents and agrees that the Agent or
any other Secured Party, at its sole option, in the event of a dispute by the
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring motion-action under New York Civil Practice Law and Rules Section 3213.
2.09 Continuing Guarantee. The guarantee in Section 2.01 hereof is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
Section 3. Representations and Warranties. The Guarantor represents and
warrants to the Agent and the other Secured Parties that:
3.01 Corporate Existence. The Guarantor and each of its Consolidated
Subsidiaries: (a) is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation; (b) has all requisite corporate
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business under the laws
of each jurisdiction in which such qualification is required.
3.02 Financial Condition. The Guarantor has heretofore furnished to
each of the Lenders the consolidated and consolidating balance sheets of the
Guarantor and its Consolidated Subsidiaries as at December 31, 1994 and the
related consolidated and consolidating statements of income, retained earnings
and cash flow of the Guarantor and its Consolidated Subsidiaries for the fiscal
year ended on said date, with the opinion thereon (in the case of said
consolidated balance sheet and statements) of Coopers & Lybrand, L.L.P., and the
unaudited consolidated and consolidating balance sheets of the Guarantor and its
Guarantee and Pledge Agreement
<PAGE> 54
- 9 -
Consolidated Subsidiaries as at June 30, 1995 and the related consolidated and
consolidating statements of income, retained earnings and cash flow of the
Guarantor and its Consolidated Subsidiaries for the three-month period ended on
such date. All such financial statements are complete and correct and fairly
present the consolidated financial condition of the Guarantor and its
Consolidated Subsidiaries, and (in the case of said consolidating financial
statements) the respective unconsolidated financial condition of the Guarantor
and of each of its Consolidated Subsidiaries, as at said date and the
consolidated and unconsolidated results of their operations for the fiscal year
and three-month period ended on said dates (subject, in the case of such
financial statements as at June 30, 1995, to normal year-end audit
adjustments), all in accordance with generally accepted accounting principles
and practices applied on a consistent basis. None of the Guarantor nor any of
its Consolidated Subsidiaries has on the date hereof any material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in said balance sheets as at said
dates. Since December 31, 1994, there has been no material adverse change in
the consolidated financial condition, operations, business or prospects of the
Guarantor and its Consolidated Subsidiaries from that set forth in said
financial statements as at said date.
3.03 Litigation. There are no legal or arbitral proceedings or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Guarantor) threatened against the Guarantor
or any of its Subsidiaries that could (either individually or in the aggregate)
reasonably be expected to have a Material Adverse Effect.
3.04 No Breach. None of the execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws of the
Guarantor, or any applicable law, rule or regulation, or any Governmental
Approval applicable to the Guarantor or the Project, or any agreement or
instrument to which the Guarantor or any of its Subsidiaries is a party or by
which any of them is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the revenues or assets of the Guarantor or
any of its Subsidiaries pursuant to the terms of any such agreement or
instrument.
3.05 Corporate Action. The Guarantor has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Agreement; the execution, delivery and performance by the Guarantor of this
Agreement have been duly authorized by all necessary corporate action on its
part; and this Agreement has been duly and validly executed and delivered by the
Guarantor and constitutes its legal, valid and binding obligation, enforceable
in accordance with its
Guarantee and Pledge Agreement
<PAGE> 55
- 10 -
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights.
3.06 Approvals. Except as set forth in Schedule I hereto, no
Governmental Approval of, and no filings or registrations with, any Governmental
Body are necessary for the execution, delivery or performance by the Guarantor
of this Agreement or for the validity or enforceability hereof.
3.07 ERISA. Each Plan, and, to the knowledge of the Guarantor, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or state law, and no event
or condition has occurred and is continuing as to which the Guarantor would be
under an obligation to furnish a report to the Lenders under Section 5.01(e)
hereof.
3.08 Taxes. Each of the Guarantor and each of its Consolidated
Subsidiaries has filed or caused to be filed all tax returns required to be
filed by it, and has paid all taxes shown to be due and payable pursuant to such
returns or pursuant to any assessment made against it or any of its Properties,
and all other taxes, assessments, fees, liabilities or other charges imposed on
it or on its Properties by any governmental authority having jurisdiction which
are then due and payable (other than those which may be paid at a later date
without accrual of interest or penalty). There are no questions or disputes
pending or, to its knowledge, threatened, between the Guarantor or any of its
Consolidated Subsidiaries and any governmental taxing authority.
3.09 Pledged Stock.
(a) The Guarantor is the sole beneficial owner of the Pledged Stock and
no Lien exists or will exist upon the Pledged Stock at any time (and no right or
option to acquire the same exists in favor of any other Person), except for the
pledge and security interest in favor of the Agent for the benefit of the
Secured Parties created or provided for herein, which pledge and security
interest constitute a first priority perfected pledge and security interest in
and to all of the Pledged Stock.
(b) The Pledged Stock represented by certificate no. 1 is, and all
other Pledged Stock in which the Guarantor shall hereafter grant a security
interest pursuant to Section 4 hereof will be, duly authorized, validly
existing, fully paid and non-assessable and none of such Pledged Stock is or
will be subject to any contractual restriction, or any restriction under the
charter or by-laws of the Borrower, upon the transfer of such Pledged Stock
(except for any such restriction contained herein).
Guarantee and Pledge Agreement
<PAGE> 56
- 11 -
(c) The Pledged Stock represented by certificate no. 1 constitutes all
of the issued and outstanding shares of capital stock of any class of the
Borrower, said certificate represents 100 shares of the common stock, having a
par value of $.01 per share, of the Borrower, and the Guarantor is the
registered and beneficial owner of all such shares on the date hereof.
3.10 Investment Company Act. The Guarantor is not an "investment
company", or a company "controlled" by an "investment company", or an
"investment advisor", within the meaning of the Investment Company Act of 1940,
as amended.
3.11 Principal Place of Business. As of the date of this Agreement, the
chief executive office and principal place of business of the Guarantor and the
office where the Guarantor keeps all of its books and records concerning the
Collateral (hereinafter, collectively, the "Records") is located at 14142 Denver
West Parkway, Suite 250, Golden, Colorado.
3.12 Feasibility Study. To the best knowledge of the Guarantor after
due inquiry, the Feasibility Study (not including any forecasts of gold or other
prices or projections of cash flows, financial results, debt repayment, debt
cover or other similar forward-looking information that may be included therein)
does not include any untrue statement of a material fact or omit a material fact
necessary to make the information therein not misleading. The Guarantor believes
that (i) the Construction Budget, Construction and Payment Schedule and the
Feasibility Study taken as a whole, are fair and reasonable in light of the
Guarantor's and the Borrower's current expectations with respect to the Project
and (ii) except for the assumptions relating to gold prices, costs of materials
and labor, interest rates and the rate of inflation (which assumptions reflect
solely a choice of a convenient manner of calculation and presentation), the
cash flow calculations contained in the Feasibility Study are based on
assumptions which, at the date thereof, were fair and reasonable in light of the
Guarantor's and the Borrower's expectations with respect to the Project. There
are no facts or circumstances (other than matters of a general economic nature
or matters otherwise relating to general market conditions) known to the
Guarantor which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect. No facts are known to the Guarantor that have
caused it to believe that the assessment of mineral reserves contained in the
Feasibility Study are materially inaccurate or that the procedures described
therein were not conducted in accordance with established engineering principles
and practices.
Section 4. The Collateral and the Pledge. As collateral security for
the prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) of the Secured Obligations, the Guarantor hereby pledges, assigns,
transfers and grants to
Guarantee and Pledge Agreement
<PAGE> 57
- 12 -
the Agent, for the benefit of the Secured Parties as hereinafter
provided, a Lien on and prior perfected security interest in, all of the
Guarantor's right, title and interest in, to and under the following property,
whether now owned by the Guarantor or hereafter acquired and whether now
existing or hereafter coming into existence (all being collectively referred to
herein as "Collateral"):
(a) the shares of common stock of the Borrower, having a par
value of $.01 per share, represented by certificate no. 1 and all other
shares of capital stock of whatever class of the Borrower, now or
hereafter owned by the Guarantor, in each case together with the
certificates evidencing the same (collectively, the "Pledged Stock");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Guarantor or the
Borrower under any provision prohibiting such action hereunder or under
the Loan Agreement, in the event of any consolidation or merger in
which the Borrower is not the surviving corporation, all shares of each
class of the capital stock of the successor corporation (unless such
successor corporation is the Guarantor itself) formed by or resulting
from such consolidation or merger;
(d) all proceeds of and to any of the property of the
Guarantor described in the preceding clauses of this Section 4
(including, without limitation, all causes of action, claims and
warranties now or hereafter held by the Guarantor in respect of any of
the items listed above) and, to the extent related to any property
described in said clauses or such proceeds, all books, correspondence,
credit files, records, invoices and other papers; and
(e) the Canyon Contingency Account and all cash, cash
equivalents, instruments, Permitted Investments and securities at any
time held or maintained therein, whether now owned by the Guarantor or
hereafter acquired and whether now existing or hereafter coming into
existence, and wherever located.
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Section 5. Covenants. The Guarantor agrees that, until the payment and
satisfaction in full of the Secured Obligations and the expiration or
termination of the Commitments:
5.01 Financial Statements. The Guarantor shall deliver to the
Agent and each of the Lenders:
(a) as soon as available and in any event within 45 days after
the end of each of the first three quarterly fiscal periods of each
fiscal year of the Guarantor, consolidated and consolidating statements
of operations, stockholders' equity and cash flows of the Guarantor and
its Consolidated Subsidiaries for such period and for the period from
the beginning of the respective fiscal year to the end of such period,
and the related consolidated and consolidating balance sheets of the
Guarantor and its Consolidated Subsidiaries as at the end of such
period, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the
corresponding periods in the preceding fiscal year, accompanied by a
certificate of the chief financial officer of the Guarantor, which
certificate shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of
operations of the Guarantor and its Consolidated Subsidiaries, and said
consolidating financial statements fairly present the respective
individual unconsolidated financial condition and results of operations
of the Guarantor and each of its Consolidated Subsidiaries in each case
in accordance with GAAP, consistently applied, as at the end of, and
for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Guarantor, consolidated and
consolidating statements of operations, stockholders' equity and cash
flows of the Guarantor and its Consolidated Subsidiaries for such
fiscal year and the related consolidated and consolidating balance
sheets of the Guarantor and its Consolidated Subsidiaries as at the end
of such fiscal year, setting forth in each case in comparative form the
corresponding consolidated and consolidating figures for the preceding
fiscal year, and accompanied (i) in the case of said consolidated
statements and balance sheet of the Guarantor, by an opinion thereon of
Coopers & Lybrand, L.L.P., (or such other independent certified public
accountants of recognized national standing as is acceptable to the
Majority Lenders), which opinion shall state that said consolidated
financial statements fairly present the consolidated financial
condition and results of operations of the Guarantor and its
Consolidated Subsidiaries as at the end of, and for, such fiscal year
in accordance with GAAP, and a certificate of such accountants stating
that, in making the examination necessary
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for their opinion, they obtained no knowledge, except as specifically
stated, of any Potential Default, and (ii) in the case of said
consolidating statements and balance sheets, by a certificate of the
chief financial officer of the Guarantor, which certificate shall state
that said consolidating financial statements fairly present the
respective individual unconsolidated financial condition and results of
operations of the Guarantor and each of its Consolidated Subsidiaries,
in each case in accordance with GAAP, consistently applied, as at the
end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Guarantor shall have filed with the Securities and Exchange Commission
(or any governmental agency substituted therefor) or any national
securities exchange;
(d) promptly upon the mailing thereof to the shareholders of
the Guarantor generally or to holders of subordinated Indebtedness of
the Guarantor generally, copies of all financial statements, reports
and proxy statements so mailed;
(e) as soon as possible, and in any event within ten days
after the Guarantor knows or has reason to know that any of the events
or conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, a statement signed by a senior financial
officer of the Guarantor setting forth details respecting such event or
condition and the action, if any, that the Guarantor or its ERISA
Affiliate proposes to take with respect thereto (and a copy of any
report or notice required to be filed with or given to PBGC by the
Guarantor or an ERISA Affiliate with respect to such event or
condition):
(i) any reportable event, as defined in Section 4043(c) of
ERISA and the regulations issued thereunder, with respect to a
Plan, as to which PBGC has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event (provided that
a failure to meet the minimum funding standard of Section 412
of the Code or Section 302 of ERISA, including, without
limitation, the failure to make on or before its due date a
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required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code); and any request for a waiver
under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by the
Guarantor or an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the
Guarantor or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Guarantor or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by the Guarantor or any
ERISA Affiliate of notice from a Multiemployer Plan that it is
in reorganization or insolvency pursuant to Section 4241 or
4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
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Multiemployer Plan against the Guarantor or any ERISA
Affiliate to enforce Section 515 of ERISA, which proceeding is
not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan that pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA would
result in the loss of tax-exempt status of the trust of which
such Plan is a part if the Guarantor or an ERISA Affiliate
fails to timely provide security to the Plan in accordance
with the provisions of said Sections;
(f) promptly after the Guarantor knows or has reason to
believe that any Potential Default has occurred, a notice of such
Potential Default describing the same in reasonable detail and,
together with such notice or as soon thereafter as possible, a
description of the action that the Guarantor or Borrower has taken or
proposes to take with respect thereto; and
(g) as promptly as possible following a request, such
additional information relating to the Project and relevant to the
ability of the Guarantor to perform its obligations under this
Agreement, as the Agent or any other Secured Party from time to time
may reasonably request.
The Guarantor will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of
the chief financial officer of the Guarantor to the effect that no Potential
Default has occurred and is continuing (or, if any Potential Default has
occurred and is continuing, describing the same in reasonable detail and
describing the action that the Guarantor or Borrower has taken or proposes to
take with respect thereto).
5.02 Litigation. The Guarantor will promptly give to each
Lender notice of all legal or arbitral proceedings, and of all proceedings by or
before any governmental or regulatory authority or agency, affecting the
Guarantor or any of its Subsidiaries, except proceedings that, if adversely
determined, would not (either individually or in the aggregate) have a Material
Adverse Effect.
5.03 Corporate Existence, Etc. The Guarantor will, and will
cause each of its Subsidiaries, other than Minera
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Hispaniola S.A., a Dominican Republic societe anonima, CR International
Corporation, a Colorado corporation, Canyon de Chile, S.A., a Chile societe
anonima, Canyon Resources Venezuela C.A., a Venezuela compania anonima, Canyon
de Panama, S.A., a Panama societe anonima, Canyon Resources Tanzania LTD., a
Tanzania corporation, to: preserve and maintain its corporate existence and
all of its material rights, privileges and franchises; comply with the
requirements of all applicable laws, rules, regulations and orders of
governmental or regulatory authorities if failure to comply with such
requirements could (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect; pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its income
or profits or on any of its Property prior to the date on which penalties
attach thereto, except for any such tax, assessment, charge or levy the payment
of which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained; maintain all of its Properties
used or useful in its business in good working order and condition, ordinary
wear and tear excepted, and in accordance with generally accepted prudent
operating practices; permit representatives of any Lender or the Agent, during
normal business hours, to examine, copy and make extracts from its books and
records, to inspect its Properties, and to discuss its business and affairs
with its officers, all to the extent reasonably requested by any Lender or the
Agent (as the case may be); and keep insured by financially sound and reputable
insurers all Property of a character usually insured by corporations engaged in
the same or similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against by such corporations and
carry such other insurance as is usually carried by such corporations.
5.04 Maintenance of the Project; Coordination. At all times,
the Guarantor shall (either directly or indirectly through the Borrower) control
the development, construction, operation and maintenance of the Project,
including, without limitation, the maintenance of operating, management and
financial control of the Project and the provision of such administrative and
operational support as is necessary to operate and maintain the Project in
accordance with the Feasibility Study. From the date of commencement of
construction of the Project until Expansion Completion, the Guarantor will
monitor, coordinate and evaluate the progress of the Contractors and their
material compliance with the terms and conditions of the Construction Contracts
and the Construction and Payment Schedule. The Guarantor will name and maintain
at all times a single individual to act as the representative of the Guarantor
and the Borrower under all of the Construction Contracts. The Guarantor will
provide the Agent monthly reports evaluating the Contractors' performance and
comparing actual progress (in terms of time and cost) to planned progress as set
forth in the Construction and Payment Schedule. The Guarantor's monthly reports
to the Agent shall be in a format acceptable for incorporation into the monthly
reports which the Borrower is required to deliver to the Agent under the Loan
Agreement. At all times until Expansion Completion, those officers of the
Guarantor which have been identified to the Agent as being involved in the
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development of the Project shall direct the majority of their time and efforts
to assist in the construction and operation of the Project. Other officers and
management personnel of the Guarantor shall direct such portion of their time
and efforts as are reasonably necessary to assist in the construction and
operation of the Project.
5.05 Limitation on Liens. At all times prior to Expansion
Completion, the Guarantor shall not, and shall cause each of its Subsidiaries to
not, create, assume or suffer to exist any Lien upon any Property, assets or
contractual rights of the Guarantor or such Subsidiary in each case whether now
owned or hereafter acquired, and wherever located, except for the following
Liens:
(a) Liens created pursuant to this Agreement or otherwise for
the benefit of the Secured Parties;
(b) Permitted Liens;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or which are being contested in good
faith and by appropriate proceedings (and against which adequate
reserves are being maintained by the Guarantor or such Subsidiary, as
the case may be);
(d) deposits or pledges to secure the obligations of the
Guarantor or any of its Subsidiaries under workmen's compensation,
social security or similar laws, or under unemployment insurance;
(e) mechanic's, workmen's, materialmen's or other like liens
arising in the ordinary course of business with respect to obligations
which are not due or which are being contested in good faith and by
appropriate proceedings (and against which adequate reserves are being
maintained by the Guarantor or such Subsidiary, as the case may be);
(f) the rights of a buyer of identified goods of the Guarantor
or such Subsidiary pursuant to Section 2-501 of the Uniform Commercial
Code or any other similar provision of applicable law;
(g) good faith deposits in connection with bids, tenders,
leases or contracts; deposits to secure surety or performance bonds
given in the ordinary course of business; and margin deposits under
mineral hedge contracts; and
(h) liens arising out of any agreement hereafter entered into
by the Guarantor or such
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Subsidiary in its ordinary course of business for the acquisition or
disposition of or right to acquire minerals or any interest therein in
which agreement there is reserved or which obligates the Guarantor or
such Subsidiary, as the case may be, to offer or transfer to a third
party a working or joint venture interest or to pay a royalty, rent or
percentage of profits or proceeds and which secures such obligation
with a Lien on such minerals or interest therein or otherwise provides
for the transfer of an interest therein.
5.06 Tangible Net Worth. The Guarantor will not at any time
permit its Tangible Net Worth to be less than $38,000,000.
5.07 Working Capital. The Guarantor shall maintain at all
times the ratio of (i) aggregate consolidated current assets of the Guarantor
and its Consolidated Subsidiaries to (ii) aggregate consolidated current
liabilities of the Guarantor and its Consolidated Subsidiaries, calculated as
the terms "current assets" and "current liabilities" are defined for purposes of
the Guarantor's most recent annual audited consolidated financial statements
prepared in accordance with GAAP and delivered to the Lenders pursuant to
Section 5.01(b) hereof at least equal to 1.75 to 1.0.
5.08 Leverage Ratio. The Guarantor will not permit the
Leverage Ratio to exceed the ratio of 1.22 to 1 at any time during the term of
this Agreement.
5.09 Transfer of Interest in the Borrower. The Guarantor will
not at any time dispose of or otherwise transfer any of its ownership interest
in the Borrower without the prior written consent of the Majority Lenders.
5.10 Resale Restrictions. The Guarantor shall cause each of
its senior officers and members of its board of directors to comply at all times
with the requirements of the resale restrictions contained in the Securities Act
of 1933, as amended.
5.11 Fiscal Years. The Guarantor will not change the last day
of its fiscal year from December 31 of each year, or the last days of the first
three fiscal quarters in each of its fiscal years from March 31, June 30 and
September 30, respectively.
5.12 Warrants. The Guarantor will extend the expiration date
of the Warrants for a period of at least three months upon the request of the
Majority Lenders at any time and from time to time, prior to the Completion
Date, provided, that any such Majority Lenders' request be made at least three
weeks prior to the expiration date of the Warrants as then in effect.
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Section 6. Further Assurances; Remedies. In furtherance of the grant of
the pledge and security interest pursuant to Section 4 hereof, the Guarantor
hereby agrees with the Agent and each other Secured Party as follows:
6.01 Delivery and Other Perfection. The Guarantor shall:
(a) if any of the shares, securities, moneys or property
required to be pledged by the Guarantor under clauses (a), (b) and (c)
of Section 4 hereof are received by the Guarantor, forthwith either (x)
transfer and deliver to the Agent such shares or securities so received
by the Guarantor (together with the certificates for any such shares
and securities duly endorsed in blank or accompanied by undated stock
powers duly executed in blank), all of which thereafter shall be held
by the Agent, pursuant to the terms of this Agreement, as part of the
Collateral or (y) take such other action as the Agent shall deem
necessary or appropriate to duly record the Lien created hereunder in
such shares, securities, moneys or property in said clauses (a), (b)
and (c);
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate the security interest granted pursuant
hereto or to enable the Agent to exercise and enforce its rights
hereunder with respect to such pledge and security interest, including,
without limitation, causing any or all of the Collateral to be
transferred of record into the name of the Agent or its nominee (and
the Agent agrees that if any Collateral is transferred into its name or
the name of its nominee, the Agent will thereafter promptly give to the
Guarantor copies of any notices and communications received by it with
respect to the Collateral);
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Agent may reasonably require in order to reflect the
security interests granted by this Agreement;
(d) permit representatives of the Agent, upon reasonable
notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Agent to be present at the Guarantor's
place of business to receive copies of all communications and
remittances relating to the Collateral, and forward copies of any
notices or communications
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received by the Guarantor with respect to the Collateral, all in such
manner as the Agent may require; and
(e) pay all filing, registration and recording fees or
refiling, reregistration and rerecording fees, and all expenses
incident to the transactions contemplated hereby, any assurance, and
all Federal, state, county and municipal stamp taxes and other taxes,
duties, imports, assessments and charges arising out of or in
connection with the execution and delivery of this Agreement and the
transactions contemplated hereby, any agreement supplemental hereto and
any instruments of further assurance and the transactions contemplated
hereby or thereby.
6.02 Other Financing Statements and Liens. Without the prior
written consent of the Agent (granted with the authorization of the Lenders as
specified in Section 10.09 of the Loan Agreement), the Guarantor shall not file
or suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Agent is not named as the sole secured party for the
benefit of the Secured Parties.
6.03 Preservation of Rights. The Agent shall not be required
to take steps necessary to preserve any rights against prior parties to any of
the Collateral.
6.04 Collateral.
(a) The Guarantor will cause the Pledged Stock to constitute
at all times 100% of the total number of shares of each class of capital stock
of the Borrower then outstanding.
(b) So long as no Event of Default shall have occurred and be
continuing, the Guarantor shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Pledged Stock for all
purposes not inconsistent with the terms of this Agreement, the Loan Agreement,
any other Financing Document, any Project Document or any other instrument or
agreement referred to herein or therein, provided that the Guarantor agrees that
it will not vote the Pledged Stock in any manner that is inconsistent with the
terms of this Agreement, the Loan Agreement, any other Financing Document, any
Project Document or any such other instrument or agreement; and the Agent shall
execute and deliver to the Guarantor or cause to be executed and delivered to
the Guarantor all such proxies, powers of attorney, dividend and other orders,
and all such instruments, without recourse, as the Guarantor may reasonably
request for the purpose of enabling the Guarantor to exercise the rights and
powers that it is entitled to exercise pursuant to this Section 6.04(b).
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(c) Unless and until a Potential Default has occurred and is
continuing, the Guarantor shall be entitled to receive and retain (and the
pledge hereunder shall not apply to) any dividends on the Pledged Stock
permitted to be paid by the Borrower under Section 8.20 of the Loan Agreement.
(d) If any Potential Default shall have occurred, then so long
as such Potential Default shall continue, and whether or not the Agent or any
other Secured Party exercises any available right to declare any Secured
Obligation due and payable or seeks or pursues any other relief or remedy
available to it under applicable law or under this Agreement, the Loan
Agreement, any other Financing Document, any Project Document or any other
agreement relating to such Secured Obligation, all dividends and other
distributions on the Collateral shall be paid directly to the Agent and retained
by it as part of the Collateral, subject to the terms of this Agreement and the
Loan Agreement, and, if the Agent shall so request in writing, the Guarantor
agrees to execute and deliver to the Agent appropriate additional dividend,
distribution and other orders and documents to that end.
(e) The Guarantor shall maintain the Canyon Contingency
Account in accordance with Section 8 hereof and the Deposit and Disbursement
Agreement throughout the term of this Agreement.
6.05 Event of Default, Etc. During the period during which an
Event of Default shall have occurred and be continuing:
(a) the Agent shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral
as if the Agent were the sole and absolute owner thereof (and the
Guarantor agrees to take all such action as may be appropriate to give
effect to such right);
(b) the Agent in its discretion may, in its name or in the
name of the Guarantor or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of
or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
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(c) the Agent may, upon ten business days' prior written
notice to the Guarantor of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter
come into the possession, custody or control of the Agent, the other
Secured Parties or any of their respective agents, sell, lease, assign
or otherwise dispose of all or any part of such Collateral, at such
place or places as the Agent deems best, and for cash or for credit or
for future delivery (without thereby assuming any credit risk), at
public or private sale, without demand of performance or notice of
intention to effect any such disposition or of the time or place
thereof (except such notice as is required above or by applicable
statute and cannot be waived), and the Agent or any other Secured Party
or anyone else may be the purchaser, lessee, assignee or recipient of
any or all of the Collateral so disposed of at any public sale (or, to
the extent permitted by law, at any private sale) and thereafter hold
the same absolutely, free from any claim or right of whatsoever kind,
including any right or equity of redemption (statutory or otherwise),
of the Guarantor, any such demand, notice and right or equity being
hereby expressly waived and released. The Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed
for the sale, and such sale may be made at any time or place to which
the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
6.05 shall be applied in accordance with Section 6.09 hereof.
The Guarantor recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Agent may be compelled, with respect to any sale of all or
any part of the Pledged Stock, to limit purchasers to those who will agree,
among other things, to acquire the Pledged Stock for their own account, for
investment and not with a view to the distribution or resale thereof. The
Guarantor acknowledges that any such private sales may be at prices and on terms
less favorable to the Agent than those obtainable through a public sale without
such restrictions, and, notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner and that the Agent shall have no obligation to engage in public sales and
no obligation to delay the sale of any Pledged Stock for the period of time
necessary to permit the Borrower or issuer thereof to register the Pledged Stock
for public sale.
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6.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 6.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Guarantor shall remain liable for any
deficiency.
6.07 Removals, Etc. Without at least 30 days' prior written
notice to the Agent, the Guarantor shall not (i) maintain the Records at any
office or maintain its principal place of business at any place other than at
the address set forth in Section 3.11 hereof or (ii) change its corporate name,
or the name under which it does business, from the name shown on the signature
pages hereto.
6.08 Private Sale. The Agent and the other Secured Parties
shall incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 6.05 hereof conducted in a
commercially reasonable manner. The Guarantor hereby waives any claims against
the Agent or any other Secured Party arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if the Agent accepts the
first offer received and does not offer the Collateral to more than one offeree
so long as any such action is commercially reasonable.
6.09 Application of Proceeds. Except as otherwise herein
expressly provided, the proceeds of any collection, sale or other realization of
all or any part of the Collateral pursuant hereto, and any other cash at the
time held by the Agent under this Section 6, shall be applied by the Agent:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
out-of-pocket costs and expenses of the Agent and the reasonable fees
and expenses of its agents and counsel, and all reasonable expenses
incurred and advances made by the Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in
each case equally and ratably in accordance with the respective amounts
thereof then due and owing or as the Secured Parties holding the same
may otherwise agree; and
Finally, to the payment to the Guarantor, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
As used in this Section 6, "proceeds" of Collateral shall mean
cash, securities and other property
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realized in respect of, and distributions in kind of, Collateral, including any
thereof received under any reorganization, liquidation or adjustment of debt of
the Guarantor or any issuer of or obligor on any of the Collateral.
6.10 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Agent while no Potential Default has occurred
and is continuing, upon the occurrence and during the continuance of any
Potential Default the Agent is hereby appointed the attorney-in-fact of the
Guarantor for the purpose of carrying out the provisions of this Section 6 and
taking any action and executing any instruments that the Agent may deem
necessary or advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Agent shall be entitled under
this Section 6 to make collections in respect of the Collateral, the Agent shall
have the right and power to receive, endorse and collect all checks made payable
to the order of the Guarantor representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
6.11 Perfection. Prior to or concurrently with the execution
and delivery of this Agreement, the Guarantor shall deliver to the Agent all
certificates identified in Section 4(a) hereof, accompanied by undated stock
powers duly executed in blank.
6.12 Termination. When all Secured Obligations shall have been
paid in full and the Commitments and Hedge Contracts shall have expired or been
terminated, this Agreement shall terminate, and the Agent shall, at the
Guarantor's expense, forthwith cause to be assigned, transferred and delivered,
free and clear of any Lien created by, or as a result of, any action by or on
behalf of the Secured Parties, against receipt but without any other recourse,
warranty or representation whatsoever, any remaining Collateral and money
received in respect thereof, to or on the order of the Guarantor.
6.13 Further Assurances. The Guarantor agrees that, from time
to time upon the written request of the Agent, the Guarantor will execute and
deliver such further documents and do such other acts and things as the Agent
may reasonably request in order fully to effect the purposes of this Agreement.
Section 7. Assignment Instructions and Consent
7.01 Consent and Agreement.
(a) The Guarantor consents to the terms and provisions of the
Security Agreement, including the assignment by the Borrower of its rights under
this Agreement, and the right to receive
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monies hereunder, and agrees to deposit the Cash Collateral on the date hereof
in the Canyon Contingency Account and to make all other payments pursuant to
Section 2.02 hereof to the Agent for deposit in the Invested Capital Account.
(b) The Guarantor agrees that the Agent (acting for the
benefit of the Secured Parties) and any assignee thereof shall be entitled to
exercise any and all rights of the Borrower under this Agreement in accordance
with the terms hereof (in its own name or in the name of the Borrower), and the
Guarantor shall comply in all respects with such exercise. Without limiting the
generality of the foregoing, the Agent and any assignee thereof shall have the
full right and power to enforce directly against the Guarantor all obligations
of the Guarantor under this Agreement and otherwise to exercise all remedies
hereunder and to make all demands and give all notices and make all requests
required or permitted to be made by the Borrower (in its own name or in the name
of the Borrower) under this Agreement. If the Guarantor shall receive
inconsistent directions from the Borrower and the Agent, the directions from the
Agent shall be deemed the effective directions. Unless and until the Guarantor
receives such an inconsistent direction from the Agent, any directions received
from the Borrower that are not manifestly inconsistent with the provisions of
this Agreement or the Security Agreement shall be deemed effective directions
and the Guarantor shall be fully protected with respect to any actions taken in
reliance thereon.
7.02 Use of Proceeds of Equity Contributions. The Borrower
agrees with the Agent that the entire proceeds of the Equity Contributions made
by the Guarantor pursuant to Section 2.02 hereof will, upon their receipt, be
applied to the payment of Project Costs and Expansion Costs in accordance with
the terms of the Loan Agreement.
Section 8. Establishment of Canyon Contingency Account.
8.01 Creation of Canyon Contingency Account. Concurrently with
the execution and delivery of this Agreement, the Agent and the Guarantor shall
establish and maintain at the Depositary in accordance with the Deposit and
Disbursement Agreement a special, segregated and irrevocable cash collateral
account (the "Canyon Contingency Account"), to be maintained at all times until
the earlier of (i) the termination of this Agreement pursuant to Section 6.12
hereof and (ii) the transfer of the remaining balance of the Canyon Contingency
Account to the Guarantor upon Expansion Completion pursuant to Section 2.02(b)
hereof. Except as otherwise expressly provided herein, the Canyon Contingency
Account shall be held by the Depositary and shall be under the exclusive
dominion and control of the Agent. The Guarantor shall have no right to withdraw
funds therefrom and hereby irrevocably authorizes the Agent to deposit funds
into, and withdraw funds from, the Canyon Contingency Account in accordance with
the terms of this Agreement and the Deposit and Disbursement Agreement.
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8.02 Deposits into Canyon Contingency Account.
(a) The Guarantor hereby instructs the Agent to deposit the
Cash Collateral to be received by the Agent directly into the Canyon Contingency
Account, and further instructs the Borrower and the Agent to deposit any
additional Equity Contributions to be received by either the Borrower or the
Agent directly into the Invested Capital Account.
(b) Each deposit made into the Canyon Contingency Account
hereunder shall be irrevocable (except if made as a result of manifest error).
8.03 Withdrawal from Canyon Contingency Account. The Agent
shall withdraw (or cause to be withdrawn) all moneys in the Canyon Contingency
Account solely in accordance with the following disbursement procedures:
(a) If and so long as the Agent is not aware of the occurrence
and continuance of an Event of Default, the Agent will transfer all moneys on
deposit in the Canyon Contingency Account to the Invested Capital Account, in
accordance with Section 2.02(b) hereof, for the payment of Project Costs or
Expansion Costs.
(b) If the Agent is aware that an Event of Default shall have
occurred and is continuing, the Agent may (in its sole discretion) or, if the
Agent is so directed in writing by the Majority Lenders (in their sole
discretion), shall, (i) hold as collateral security for the Secured Obligations
any and all funds on deposit in the Canyon Contingency Account or otherwise
received by the Agent hereunder and/or (ii) at such time or at any time
thereafter, apply all or any of such funds in the manner and priority set forth
in Section 6.09 hereof.
8.05 Investment of Funds in Accounts.
(a) Unless an Event of Default shall have occurred and be
continuing, the Guarantor shall direct the Depositary to invest funds (and vary
and redeem such investments) in the Canyon Contingency Account, provided in each
case that the designated investment is a Permitted Investment. After the
occurrence and during the continuance of an Event of Default, investments in
Permitted Investments shall be made as directed by the Majority Lenders, or as
directed by the Guarantor or the Agent if the Majority Lenders so agree.
Earnings on Permitted Investments shall be retained in the Canyon Contingency
Account.
(b) Whenever the Agent is directed or authorized in accordance
with the terms hereof to make a transfer of funds from the Canyon Contingency
Account, if liquidation of a Permitted Investment is necessary to make any such
transfer, the Agent is authorized to liquidate
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such Permitted Investment. The Agent shall liquidate all those Permitted
Investments which can be liquidated without interest cost or penalty before it
shall liquidate any Permitted Investment the liquidation of which would involve
an interest cost or penalty. The Agent shall have no liability with respect to
any interest cost or penalty on the liquidation of any Permitted Investment
pursuant to this Section 8.05(b).
(c) The Agent shall have no liability with respect to
Permitted Investments (or any losses resulting therefrom) made at the direction
of the Guarantor or the Majority Lenders pursuant to clause (a) or (b) of this
Section 8.05.
(d) All references in this Agreement to the Canyon Contingency
Account and to cash, moneys or funds therein or balances thereof shall include
the investments in which such moneys are then invested. All investments shall be
under the sole dominion and control of the Agent, subject to the terms and
conditions of this Agreement and the Security Documents.
Section 9. Miscellaneous.
9.01 No Waiver. No failure on the part of the Agent or any
other Secured Party to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Agent or any
other Secured Party of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
9.02 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telexed, telecopied or delivered to the
intended recipient at the "Address for Notices" specified beneath its name on
the signature pages hereof or, as to either party, at such other address as
shall be designated by such party in a notice to the other party. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telex or telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
9.03 Expenses. The Guarantor agrees to reimburse the Agent and
each of the other Secured Parties for all reasonable costs and expenses of the
Agent and each of the other Secured Parties (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (i) any
Potential Default and any enforcement or collection proceeding resulting
therefrom, including, without limitation, all manner of participation in or
other involvement with (w) performance by the Agent of any obligations of the
Guarantor in respect of the Collateral that the Guarantor has failed or refused
to perform, (x)
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bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral and defending or asserting rights and claims of
the Agent in respect thereof, by litigation or otherwise, (y) judicial or
regulatory proceedings and (z) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section
9.03, and all such costs and expenses shall be Secured Obligations entitled to
the benefits of the collateral security provided pursuant to Section 4 hereof.
9.04 Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by the
Guarantor, and the Agent (with the consent of the Lenders as specified in
Section 10.09 of the Loan Agreement). Any such amendment or waiver shall be
binding upon the Agent and each other Secured Party, each holder of any of the
Secured Obligations, the Borrower and the Guarantor.
9.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Guarantor, the Borrower, the Agent, the Lenders and each holder of any of the
Secured Obligations (provided, however, that neither the Guarantor nor the
Borrower shall assign or transfer its rights hereunder without the prior written
consent of the Agent and provided further that any successor to any Secured
Obligations arising under any Hedge Contract is a Lender).
9.06 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
9.07 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
9.08 Governing Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR
REMEDIES HEREUNDER, ARE GOVERNED BY THE LAW OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK. THE GUARANTOR AND THE BORROWER HEREBY SUBMIT TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW
YORK FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE
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TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE GUARANTOR AND THE BORROWER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
9.09 Waiver of Jury Trial. EACH OF THE GUARANTOR, THE
BORROWER, THE AGENT AND THE OTHER SECURED PARTIES HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
9.10 Service of Process. The Guarantor and the Borrower hereby
irrevocably appoint CT Corporation, with offices at 1633 Broadway, New York, New
York, as of the date of this Agreement, as its authorized agent on which any and
all legal process may be served in any such action, suit or proceeding brought
in any Federal or State court located in New York County in The City of New
York. The Guarantor and the Borrower agree that service of process in respect of
it upon such agent, together with written notice of such service given to it in
the manner provided in Section 9.02 hereof, shall be deemed to be effective
service of process upon it in any such action, suit or proceeding. The Guarantor
and the Borrower agree that the failure of such agent to give notice to it of
any such service shall not impair or affect the validity of such service or any
judgment rendered in any action, suit or proceeding based thereon. If for any
reason such agent shall cease to be available to act as such, the Guarantor and
the Borrower agree to designate a new agent in New York County in The City of
New York, on the terms and for the purposes of this Section 9.10. Nothing herein
shall be deemed to limit the ability of the Agent or any other Secured Party to
serve any such legal process in any other manner permitted by applicable law or
to obtain jurisdiction over the Guarantor or the Borrower or bring actions,
suits or proceedings against the Guarantor or the Borrower in such other
jurisdictions, and in such manner, as may be permitted by applicable law.
9.11 Agents and Attorneys-in-Fact. The Agent may employ agents
and attorneys-in-fact in connection herewith and shall not be responsible for
the negligence or misconduct of any such agents or attorneys-in-fact selected by
it in good faith.
9.12 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be construed in order to carry out the intentions of the
parties hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
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9.13 No Third Party Beneficiaries. THE AGREEMENTS OF THE
PARTIES HERETO ARE SOLELY FOR THE BENEFIT OF THE GUARANTOR, THE BORROWER, THE
AGENT AND THE OTHER SECURED PARTIES AND NO PERSON (OTHER THAN THE PARTIES
HERETO, THE LENDERS AND THEIR SUCCESSORS AND ASSIGNS PERMITTED HEREUNDER) SHALL
HAVE ANY RIGHTS HEREUNDER.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
CANYON RESOURCES CORPORATION
By ________________________
Name:
Title:
Address for Notices:
Canyon Resources Corporation
14142 Denver West Parkway
Suite 250
Golden, Colorado 80401
Attention: Gary C. Huber
Vice President
Telephone: (303) 278-8464
Facsimile: (303) 279-3772
CR BRIGGS CORPORATION
By_________________________
Name:
Title:
Address for Notices:
CR Briggs Corporation
129 East Ridgecrest Blvd.
Ridgecrest, CA 93555
Attention: Gary C. Huber
Vice President
Telecopier: (303) 278-8464
Telephone: (303) 279-3772
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BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
By ________________________
Name:
Title:
By ________________________
Name:
Title:
Address for Notices:
Banque Paribas, New York Branch
787 Seventh Avenue
New York, NY 10019
Attention: Thomas K. Emmons
Telephone: (212) 841-2922
Facsimile: (212) 841-2555
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34
Schedule I
to Guarantee and
Pledge Agreement
Governmental Approvals
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<PAGE> 80
- 35 -
APPENDIX F-1
TO LOAN AGREEMENT
[Form of Contractor Consent]
********************************************************************************
CONSENT AND AGREEMENT
Dated as of December 6, 1995
among
[CONTRACTOR],
CR BRIGGS CORPORATION,
and
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
********************************************************************************
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<PAGE> 81
1
CONSENT AND AGREEMENT (this "Consent and Agreement") dated as
of December 6, 1995 among [CONTRACTOR], a ____________ duly organized and
validly existing under the laws of ___________ (the "Contractor"), CR BRIGGS
CORPORATION, a corporation duly organized and validly existing under the laws of
the State of Colorado (the "Company") and BANQUE PARIBAS, NEW YORK BRANCH, a
banking organization organized under the laws of France, as agent (in such
capacity, together with its successors in such capacity, the "Agent") for the
benefit of the Secured Parties (as defined in the Security Agreement referred to
below).
W I T N E S S E T H
WHEREAS, the Company intends to develop, construct, own and
operate an open-pit heap leach gold mining project in Inyo County, California
(the "Project");
WHEREAS, in order to finance the development and construction
of the Project, the Company, the lenders referred to therein (the "Lenders") and
the Agent are parties to a Loan Agreement dated as of December 6, 1995 (the
"Loan Agreement");
WHEREAS, in connection with the Project, the Contractor and
the Company have entered into the [NAME OF CONSTRUCTION CONTRACT] dated as of
December 6, 1995 (as amended, supplemented or modified and in effect from time
to time, the "Assigned Agreement");
WHEREAS, the assignment of the Assigned Agreement to the Agent
and the execution and delivery of this Consent and Agreement are conditions to
the extension of financing under the Loan Agreement by the Lenders;
NOW, THEREFORE, in consideration of the premises and for other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
(9) Definitions. Each capitalized term used herein and not
otherwise defined shall have the meaning assigned to such term (whether by
reference to another agreement or otherwise) in the Security Agreement dated as
of December 6, 1995 (as amended, supplemented or modified and in effect from
time to time, the "Security Agreement") between the Company and the Agent.
(10) Consent to Assignment. The Contractor hereby acknowledges
notice and receipt of, and consents to the terms and provisions (including the
assignment of the Assigned Agreement pursuant to such terms and provisions) of,
the Security Agreement.
(11) Representations and Warranties. The Contractor hereby
represents and warrants that:
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<PAGE> 82
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A. The Contractor is a _________ duly organized, validly
existing and in good standing under the laws of the __________. The
Contractor is duly qualified to do business and is in good standing in
all jurisdictions where necessary in light of the business it conducts
and the property it owns and intends to conduct and own and in light of
the transactions contemplated by the Assigned Agreement.
B. The Contractor has the full power, authority and legal
right to execute, deliver and perform its obligations hereunder and
under the Assigned Agreement. The execution, delivery and performance
by the Contractor of this Consent and Agreement and the Assigned
Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate and
shareholder action. This Consent and Agreement and the Assigned
Agreement have been duly executed and delivered by the Contractor and
constitute the legal, valid and binding obligations of the Contractor
enforceable against the Contractor in accordance with their respective
terms.
C. The execution, delivery and performance by the Contractor
of this Consent and Agreement and the Assigned Agreement do not and
will not (i) require any consent or approval of the board of directors
of the Contractor or any shareholder of the Contractor or of any other
Person which has not been obtained, (ii) violate any provision of any
law, rule, regulation, order, writ, judgment, decree, determination or
award having applicability to the Contractor or any provision of the
certificate of incorporation or by-laws of the Contractor, or (iii)
conflict with, result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other material agreement,
lease or instrument to which the Contractor is a party or by which the
Contractor or its properties and assets are bound or affected.
D. Each authorization, consent, approval, license, permit,
filing, notice to or registration by or with any national, state or
local governmental authority (collectively, "Government Approvals")
required for the execution, delivery or performance of this Consent and
Agreement and the Assigned Agreement by the Contractor has been validly
issued and duly obtained, taken or made, is not subject to any
condition, does not impose restrictions or requirements inconsistent
with the terms hereof or of the Assigned Agreement, is in full force
and effect and is not subject to appeal. Each such Government Approval
is listed on Exhibit A hereto.
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<PAGE> 83
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E. There is no action, suit or proceeding now pending or, to
the best knowledge of the Contractor, threatened against or affecting
the Contractor which (i) if adversely determined, individually or in
the aggregate, could materially and adversely affect its ability to
perform its obligations hereunder or under the Assigned Agreement or
(ii) questions the validity, binding effect or enforceability hereof or
of the Assigned Agreement.
F. The Contractor is not in default under any material
covenant or obligation hereunder or under the Assigned Agreement and no
such default has occurred prior to the date hereof. To the best
knowledge of the Contractor, the Company is not in default under any
material covenant or obligation of the Assigned Agreement and no such
default has occurred prior to the date hereof and there exists no event
or condition which would, with the giving of notice or lapse of time or
both, constitute a default under the Assigned Agreement. The Contractor
and the Company have satisfied each of the conditions precedent
contained in the Assigned Agreement.
(12) Consent and Agreement. Notwithstanding anything to the
contrary in Article 1 of the Assigned Agreement, the Contractor hereby
acknowledges and agrees that:
A. The Agent and any assignee thereof shall be entitled to
exercise any and all rights of the Company under the Assigned Agreement
in accordance with their respective terms and the Contractor shall
comply in all respects with such exercise.
B. The Contractor will not, without the prior written consent
of the Agent, take any action to (i) cancel or terminate, or suspend
performance under, the Assigned Agreement unless such cancellation,
termination or suspension is expressly provided for in the Assigned
Agreement and the Contractor shall have first delivered to the Agent
written notice stating that it intends to exercise such right on a date
not less than 60 days after the date of such notice, (ii) consent to or
accept any cancellation, termination or suspension of the Assigned
Agreement, (iii) amend, supplement or otherwise modify the Assigned
Agreement (as in effect on the date hereof), except as set forth in
Section 5(e) hereof, or (iv) sell, assign or otherwise dispose of (by
operation of law or otherwise) any part of its interest in the Assigned
Agreement.
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<PAGE> 84
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C. The Contractor shall deliver to the Agent at the address
set forth on the signature pages hereof, or at such other address as
the Agent may designate in writing from time to time to the Contractor,
concurrently with the delivery thereof to the Company, a copy of each
material notice, request or demand given by the Contractor pursuant to
the Assigned Agreement.
D. In the event that the Agent or its designee(s) succeeds to
the Company's interest under the Assigned Agreement, whether by
foreclosure or otherwise, the Agent or its designee(s) shall assume
liability for all of the Company's obligations under the Assigned
Agreement arising after the date of such succession. Except as
otherwise set forth in the immediately preceding sentence, none of the
Agent or any of the other Secured Parties shall have any duties or
obligations whatsoever to the Contractor under the Assigned Agreement
or with respect to any of the transactions contemplated hereby or
thereby.
E. Upon the exercise by the Agent of any of the remedies set
forth in Section 4 of the Security Agreement, the Agent may assign its
rights and interests and the rights and interests of the Company under
the Assigned Agreement to any purchaser or transferee of the Project,
if such purchaser or transferee shall assume all of the obligations of
the Company under the Assigned Agreement. Upon such assignment and
assumption, the Agent shall be relieved of all obligations under the
Assigned Agreement arising after such assignment and assumption.
F. In the event that (i) the Assigned Agreement is rejected by
a trustee or debtor-in-possession in any bankruptcy or insolvency
proceeding involving the Company or (ii) the Assigned Agreement is
terminated as a result of any bankruptcy or insolvency proceeding
involving the Company and, if within 90 days after such rejection or
termination, the Agent or its designee(s) shall so request and shall
certify in writing to the Contractor that it intends to perform the
obligations of the Company as and to the extent required under the
Assigned Agreement, the Contractor will execute and deliver to the
Agent or such designee(s) a new Assigned Agreement which shall be for
the balance of the remaining term under the original Assigned Agreement
before giving effect to such rejection or termination and shall contain
the same conditions, agreements, terms, provisions and limitations as
the original Assigned Agreement (except for any requirements which have
been fulfilled by the Company and the Contractor prior to such
rejection or termination). References in this Consent and
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<PAGE> 85
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Agreement to the "Assigned Agreement" shall be deemed also to refer to
the new Assigned Agreement.
G. In the event that the Agent or its designee(s), or any
purchaser, transferee, grantee or assignee of the interests of the
Agent or its designee(s) in the Project shall assume or be liable under
the Assigned Agreement (as contemplated in subsection (d), (e) or (f)
above or otherwise), liability in respect of any and all obligations of
any such party under the Assigned Agreement shall be limited solely to
such party's interest in the Project (and no officer, director,
employee, shareholder or agent thereof shall have any liability with
respect thereto).
(13) Special Agreements. Notwithstanding anything to the
contrary in Article 1 of the Assigned Agreement, the Contractor hereby further
acknowledges and agrees that:
A. The Contractor hereby (i) approves the appointment of
Pincock, Allen & Holt as the Independent Engineer (for purposes of and
as defined in the Assigned Agreement) and (ii) confirms that Pincock,
Allen & Holt is entitled to all rights of the Independent Engineer as
contemplated under the Assigned Agreement.
B. The term "Lenders," as defined in the Assigned Agreement,
shall mean and include, collectively and individually, the Lenders
under the Loan Agreement.
C. Contractor hereby agrees that any waiver, consent,
approval, election or other action permitted to be given or taken by
the Company under the Assigned Agreement, in connection with (i)
Mechanical Completion, Project Acceptance or the performance of the
Completion Test and Performance Trial (as each such term is defined in
the Assigned Agreement), (ii) Section 1.6 of the General Conditions of
the Assigned Agreement, to the extent relating to approval of major
subcontracts, (iii) Articles XIX, XX and XXI of such General
Conditions, relating to termination and suspension, or (iv) Section
25.1 of such General Conditions, relating to the Company's right to
consent to the assignment of the Assigned Agreement, shall require the
prior written consent of the Agent and any purported exercise by the
Company of any such rights without the prior written consent of the
Agent shall be null and void.
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<PAGE> 86
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D. Contractor hereby agrees to defend, indemnify and hold
harmless each Secured Party (and each director, officer, employee or
agent of each Secured Party) from and against all claims, damages,
losses and expenses from and against which the Company is indemnified
and held harmless by Contractor under Article XXII of the General
Conditions of the Assigned Agreement.
E. Contractor hereby agrees that it shall not, without the
prior written consent of the Agent, enter into any Change Notice (as
defined in the Assigned Agreement), the cost of which change exceeds
$25,000 or which causes the aggregate cost of all changes under Change
Notices theretofore made, together with the cost of such change, to
exceed $100,000. Contractor will give the Agent simultaneous written
notice of any request for a Change Notice.
F. Contractor has reviewed the form of the Construction
Certificate attached hereto as Exhibit B and hereby agrees that it
shall furnish a duly completed copy of the same in connection with each
request for payment under Section 6.2 of the Assigned Agreement.
(14) Arrangements Regarding Payments. All payments to be made
by the Contractor to the Company under the Assigned Agreement shall be made in
lawful money of the United States of America, directly to the Wilmington Trust
Company, (ABA #031100092) for deposit into Account No. 35706-0, for the account
of the Agent, Attention: R. Maney (Reference: CR Briggs Gold Project), and shall
be accompanied by a notice from the Contractor stating that such payments are
made under the Assigned Agreement.
(15) Miscellaneous.
A. No failure on the part of the Agent or any of its agents to
exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege hereunder shall operate as a
waiver thereof, and no single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
B. All notices, requests and other communications provided for
herein and under the Assigned Agreement (including, without limitation,
any modifications of, or waivers or
FORM OF CONTRACTOR CONSENT
<PAGE> 87
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consents under, this Consent and Agreement) shall be given or made in
writing (including, without limitation, by telex or telecopy) delivered
to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof or, as to any party, at such
other address as shall be designated by such party in a notice to each
other party. Except as otherwise provided in this Consent and
Agreement, all such communications shall be deemed to have been duly
given when transmitted by telex or telecopier or personally delivered
or, in the case of a mailed notice, upon receipt, in each case given or
addressed as aforesaid.
C. No amendment or waiver of any provision of this Consent and
Agreement or consent to any departure herefrom by any party hereto
shall in any event be effective against any party hereto unless the
same shall be in writing and signed by the party against whom
enforcement is sought and then such amendment or waiver shall be
effective only in the specific instance and for the specific purpose
for which it was given.
D. This Consent and Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and assigns.
E. This Consent and Agreement may be executed in any number of
counterparts, all of which when taken together shall constitute one and
the same instrument and any of the parties hereto may execute this
Consent and Agreement by signing any such counterpart.
F. If any provision hereof shall be held to be invalid,
illegal or unenforceable, then, to the fullest extent permitted by law,
the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired.
G. Headings appearing herein are used solely for convenience
and are not intended to affect the interpretation of any provision of
this Consent and Agreement.
H. THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
I. EACH OF THE CONTRACTOR, THE COMPANY AND THE AGENT HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN NEW
FORM OF CONTRACTOR CONSENT
<PAGE> 88
- 8 -
YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS CONSENT AND AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. EACH OF THE CONTRACTOR, THE COMPANY AND THE AGENT HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. EACH OF THE CONTRACTOR, THE COMPANY AND THE AGENT
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS CONSENT AND AGREEMENT OR THE ASSIGNED AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
FORM OF CONTRACTOR CONSENT
<PAGE> 89
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Consent and Agreement to be duly executed and delivered by its duly authorized
officer as of the date first written above.
[CONTRACTOR]
By ________________________
Title:
Address for Notices:
Telecopier No.:
Telephone No.:
Attention:
FORM OF CONTRACTOR CONSENT
<PAGE> 90
- 10 -
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
By _______________________
Title:
By _______________________
Title:
Address for Notices:
Banque Paribas, New York Branch
787 Seventh Avenue
New York, NY 10019
Telecopier No.: (212) 841-2555
Telephone No.: (212) 841-2922
Attention: Thomas K. Emmons
CR BRIGGS CORPORATION,
By _______________________
Title:
Address for Notices:
CR Briggs Corporation
129 East Ridgecrest Boulevard
Ridgecrest, CA 93555
Telecopier No.: (303) 279-3772
Telephone No.: (303) 278-8464
Attention: Gary C. Huber
FORM OF CONTRACTOR CONSENT
<PAGE> 91
1
EXHIBIT A to
Consent and Agreement
GOVERNMENT APPROVALS
[TO BE PROVIDED.]
<PAGE> 92
- 2 -
APPENDIX F-2
TO LOAN AGREEMENT
[Form of Metalor Consent]
********************************************************************************
CONSENT AND AGREEMENT
Dated as of December 6, 1995
among
METALOR U.S.A. REFINING CORPORATION,
CR BRIGGS CORPORATION,
and
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
********************************************************************************
FORM OF CONTRACTOR CONSENT
<PAGE> 93
1
CONSENT AND AGREEMENT (this "Consent and Agreement") dated as
of December 6, 1995 among METALOR U.S.A. REFINING CORPORATION (the "Project
Party"), CR BRIGGS CORPORATION, a corporation duly organized and validly
existing under the laws of the State of Colorado (the "Company"), and BANQUE
PARIBAS, NEW YORK BRANCH, a banking organization organized under the laws of
France, as agent (in such capacity, together with its successors in such
capacity, the "Agent") for the benefit of the Secured Parties (as defined in the
Security Agreement referred to below).
W I T N E S S E T H
WHEREAS, the Company intends to develop, construct, own and
operate an open-pit heap leach gold mining project in Inyo County, California
(the "Project");
WHEREAS, in order to finance the development and construction
of the Project, the Company, the lenders referred to therein (the "Lenders") and
the Agent are parties to a Loan Agreement dated as of December 6, 1995 (the
"Loan Agreement");
WHEREAS, in connection with the Project, the Project Party and
the Company have entered into the Refining Proposal Prepared for Briggs Corp.
dated August 11, 1995 (as amended, supplemented or modified and in effect from
time to time, the "Assigned Agreement");
WHEREAS, the assignment of the Assigned Agreement to the Agent
and the execution and delivery of this Consent and Agreement are conditions to
the extension of financing under the Loan Agreement by the Lenders;
NOW, THEREFORE, in consideration of the premises and for other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
(1) Consent to Assignment. The Project Party hereby
acknowledges notice of, and consents to the assignment of the Assigned Agreement
pursuant to the terms and provisions of, the Security Agreement dated as of
December 6, 1995, between the Company and the Agent, as amended or modified and
in effect from time to time (the "Security Agreement").
(2) Consent and Agreement. The Project Party hereby
acknowledges and agrees that:
(1) The Agent and any assignee thereof shall be entitled to
exercise any and all rights of the Company under the Assigned Agreement
in
METALOR CONSENT
<PAGE> 94
- 2 -
accordance with its terms and the Project Party shall comply in all
respects with such exercise.
(2) The Project Party will not, without prior written notice
to the Agent, take any action to (i) cancel or terminate, or suspend
performance under, the Assigned Agreement or (ii) amend, supplement or
otherwise modify the Assigned Agreement (as in effect on the date
hereof), or (iii) sell, assign or otherwise dispose of (by operation of
law or otherwise) any part of its interest in the Assigned Agreement.
(3) The Project Party shall deliver to the Agent at the
address set forth on the signature pages hereof, or at such other
address as the Agent may designate in writing from time to time to the
Project Party, concurrently with the delivery thereof to the Company, a
copy of each material notice, request or demand given by the Project
Party pursuant to the Assigned Agreement.
(4) In the event that the Agent or its designee(s) succeeds to
the Company's interest under the Assigned Agreement, whether by
foreclosure or otherwise, the Agent or its designee(s) shall assume
liability for all of the Company's obligations under the Assigned
Agreement arising after the date of such succession. Except as
otherwise set forth in the immediately preceding sentence, none of the
Agent or any of the other Secured Parties shall have any duties or
obligations whatsoever to the Project Party under the Assigned
Agreement or with respect to any of the transactions contemplated
hereby or thereby.
(5) Upon the exercise by the Agent of any of the remedies set
forth in the Security Agreement, the Agent may assign its rights and
interests and the rights and interests of the Company under the
Assigned Agreement to any purchaser or transferee of the Project, if
such purchaser or transferee shall assume all of the obligations of the
Company under the Assigned Agreement. Upon such assignment and
assumption, the Agent shall be relieved of all obligations
METALOR CONSENT
<PAGE> 95
- 3 -
under the Assigned Agreement arising after such assignment and
assumption.
(6) In the event that the Agent or its designee(s), or any
purchaser, transferee, grantee or assignee of the interests of the
Agent or its designee(s) in the Project shall assume or be liable under
the Assigned Agreement (as contemplated in subsection (d), (e) or (f)
above or otherwise), liability in respect of any and all obligations of
any such party under the Assigned Agreement shall be limited solely to
such party's interest in the Project (and no officer, director,
employee, shareholder or agent thereof shall have any liability with
respect thereto).
(7) All references in the Assigned Agreement to "Briggs Corp."
or the "Customer" shall be deemed to refer to the Company.
(3) Arrangements Regarding Payments. All payments to be made
by the Project Party to the Company under the Assigned Agreement shall be made
in lawful money of the United States of America, directly to the Wilmington
Trust Company, (ABA #031100092) for deposit into Account No. 35706-0, for the
account of the Agent, Attention: R. Maney (Reference: CR Briggs Gold Project),
and shall be accompanied by a notice from the Project Party stating that such
payments are made under the Assigned Agreement.
(4) Miscellaneous.
(1) No failure on the part of the Agent or any of its agents
to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege hereunder shall operate as a
waiver thereof, and no single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
(2) All notices, requests and other communications provided
for herein and under the Assigned Agreement (including, without
limitation,
METALOR CONSENT
<PAGE> 96
- 4 -
any modifications of, or waivers or consents under, this Consent and
Agreement) shall be given or made in writing (including, without
limitation, by telex or telecopy) delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature
pages hereof or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as
otherwise provided in this Consent and Agreement, all such
communications shall be deemed to have been duly given when transmitted
by telex or telecopier or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as
aforesaid.
(3) No amendment or waiver of any provision of this Consent
and Agreement or consent to any departure herefrom by any party hereto
shall in any event be effective against any party hereto unless the
same shall be in writing and signed by the party against whom
enforcement is sought and then such amendment or waiver shall be
effective only in the specific instance and for the specific purpose
for which it was given.
(4) This Consent and Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and assigns.
(5) This Consent and Agreement may be executed in any number
of counterparts, all of which when taken together shall constitute one
and the same instrument and any of the parties hereto may execute this
Consent and Agreement by signing any such counterpart.
(6) If any provision hereof shall be held to be invalid,
illegal or unenforceable, then, to the fullest extent permitted by law,
the validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired.
METALOR CONSENT
<PAGE> 97
- 5 -
(7) THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(8) THE PROJECT PARTY HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS CONSENT AND AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. THE PROJECT PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE PROJECT PARTY HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS CONSENT AND AGREEMENT OR THE ASSIGNED AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
METALOR CONSENT
<PAGE> 98
- 6 -
IN WITNESS WHEREOF, each of the parties hereto has caused this
Consent and Agreement to be duly executed and delivered by its duly authorized
officer as of the date first written above.
METALOR U.S.A. REFINING
CORPORATION,
By ________________________
Title:
Address for Notices:
Metalor U.S.A. Refining
Corporation
255 John L. Dietsch Boulevard
North Attleborough Industrial
Park
P.O. Box 255
North Attleborough, MA 02761
Telecopier No.: (508) 695-1603
Telephone No.: (508) 699-8800
Attention: Bruce Edwards
METALOR CONSENT
<PAGE> 99
- 7 -
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
By _______________________
Title:
By _______________________
Title:
Address for Notices:
Banque Paribas, New York Branch
787 Seventh Avenue
New York, NY 10019
Telecopier No.: (212) 841-2555
Telephone No.: (212) 841-2922
Attention: Thomas K. Emmons
CR BRIGGS CORPORATION,
By _______________________
Title:
Address for Notices:
CR Briggs Corporation
129 East Ridgecrest Boulevard
Ridgecrest, CA 93555
Telecopier No.: (303) 279-3772
Telephone No.: (303) 278-8464
METALOR CONSENT
<PAGE> 100
- 8 -
Attention: Gary C. Huber
Vice President
METALOR CONSENT
<PAGE> 101
APPENDIX F-3
TO LOAN AGREEMENT
[Form of Caterpillar Consent]
********************************************************************************
CONSENT AND AGREEMENT
Dated as of December 6, 1995
among
CATERPILLAR FINANCIAL SERVICES CORPORATION,
CR BRIGGS CORPORATION,
and
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
********************************************************************************
METALOR CONSENT
<PAGE> 102
1
CONSENT AND AGREEMENT (this "Consent and Agreement") dated as
of December 6, 1995 among CATERPILLAR FINANCIAL SERVICES CORPORATION, a
corporation duly organized and validly existing under the laws of the State of
Delaware (the "Project Party"), CR BRIGGS CORPORATION, a corporation duly
organized and validly existing under the laws of the State of Colorado (the
"Borrower") and BANQUE PARIBAS, NEW YORK BRANCH, a banking organization duly
organized and validly existing under the laws of France, as agent (in such
capacity, together with its successors in such capacity, the "Agent") for the
benefit of the Secured Parties referred to below.
1. Definitions. Each capitalized term used herein and not
otherwise defined herein shall have the definition assigned to such term in the
Assigned Agreement referred to below. As used in this Consent and Agreement, the
following terms shall have the following respective meanings (all terms defined
in this Consent and Agreement in the singular to have the same meanings when
used in the plural and vice versa):
"Assigned Agreement" shall mean the Master Tax Lease dated
December 6, 1995 between the Borrower and the Project Party, as such
agreement may be amended, supplemented or modified and in effect from
time to time, and all other schedules, exhibits, appendices and annexes
thereto.
"Enforcement Direction" shall have the meaning ascribed
thereto in the Loan Agreement.
"Event of Default" shall have the meaning ascribed thereto in
the Loan Agreement.
"Lender" shall have the meaning ascribed thereto in the Loan
Agreement.
"Loan Agreement" shall mean the Loan Agreement dated as of
December 6, 1995 among the Borrower, the Agent and the Lenders, as
amended, supplemented or otherwise modified from time to time.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government agency or political subdivision thereof.
"Secured Obligations" shall have the meaning ascribed thereto
in the Security Agreement.
CATERPILLAR CONSENT
<PAGE> 103
- 2 -
"Secured Parties" shall have the meaning ascribed thereto in
the Security Agreement.
"Security Agreement" shall mean the Security Agreement dated
as of December 6, 1995 between the Borrower and the Agent, as amended,
supplemented or otherwise modified from time to time.
2. Consent to Assignment. The Project Party hereby
acknowledges notice and receipt of, and consents to the terms and provisions
(including the assignment of the Assigned Agreement pursuant to such terms and
provisions) of, the Security Agreement.
3. Representations and Warranties. The Project Party hereby
represents and warrants that:
(a) The execution, delivery and performance by the Project
Party of this Consent and Agreement and the Assigned Agreement have
been duly authorized by all necessary corporate action, and do not and
will not (i) require any consent or approval of the board of directors
of the Project Party or any shareholders of the Project Party or of any
other Person which has not been obtained and each such consent and
approval that has been obtained is in full force and effect, (ii)
violate any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award having
applicability to the Project Party or any provision of the certificate
of incorporation or by-laws of the Project Party, or (iii) result in a
breach of or constitute a default under any agreement relating to the
management or affairs of the Project Party, or any indenture or loan or
credit agreement or any other material agreement, lease or instrument
to which the Project Party is a party or by which the Project Party or
its properties or assets may be bound or affected.
(b) Each of this Consent and Agreement and the Assigned
Agreement has been duly executed and delivered by the Project Party, is
in full force and effect and constitutes the legal, valid and binding
obligation of the Project Party enforceable against the Project Party
in accordance
CATERPILLAR CONSENT
<PAGE> 104
- 3 -
with its terms, except as the enforceability thereof may be limited by
the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and by
general equitable principles.
(c) Each of this Consent and Agreement and the Assigned
Agreement (assuming the due authorization, execution and delivery by,
and binding effect on, the parties to each such agreement other than
the Project Party) is in full force and effect.
(d) There are no suits or proceedings at law or in equity or
by or before any governmental or regulatory authority or agency, now
pending or, to its knowledge threatened, against or affecting the
Project Party or any of its properties, rights or assets which (i) if
adversely determined, individually or in the aggregate, could
reasonably be expected to have a material and adverse effect on its
ability to perform its obligations hereunder or (ii) questions the
validity, binding effect or enforceability hereof or of any action
taken or to be taken pursuant hereto or any of the transactions
contemplated hereby.
(e) The Project Party is not in default in any material
respect under any material covenant or obligation under the Assigned
Agreement, no such default has occurred prior to the date hereof and
prior to the date hereof the Project Party has complied in all material
respects with all conditions precedent to the obligations of the
Borrower to be performed prior to the date hereof. To the current
actual knowledge of the officer of the Project Party who is executing
this Consent and Agreement, and without any independent investigation,
the Borrower is not in default in any material respect under any
material covenant or obligation under the Assigned Agreement and no
such default has occurred prior to the date hereof and, the Borrower
has complied in all material respects with all conditions precedent to
the obligations of
CATERPILLAR CONSENT
<PAGE> 105
- 4 -
the Project Party to perform under the Assigned Agreement.
(f) This Consent and Agreement and the Assigned Agreement
constitute and include all agreements entered into by the Project Party
with the Borrower relating to the transactions contemplated by this
Consent and Agreement and the Assigned Agreement.
4. Consent and Agreement. Subject to Section 6(b) hereof, the
Project Party hereby acknowledges and agrees that:
(a) If the Agent has given written notice to the Project Party
that an Event of Default has occurred and that the Agent has received
an Enforcement Direction in respect of the Assigned Agreement and such
notice has not been rescinded, the Agent and any assignee thereof on
behalf of the Secured Parties shall be entitled to exercise any and all
rights of the Borrower under the Assigned Agreement in accordance with
its terms and the Project Party shall, subject to the terms and
conditions of the Assigned Agreement, comply in all respects with such
exercise. Without limiting the generality of the foregoing, after
receipt of such notice from the Agent, the Agent (and any assignee
thereof permitted in accordance with the terms hereof and thereof)
shall have the full right and power subject to the terms and conditions
of the Assigned Agreement, to enforce directly against the Project
Party all obligations of the Project Party under the Assigned Agreement
and otherwise to exercise all remedies thereunder and to make all
demands and give all notices and make all requests required or
permitted to be made by the Borrower under the Assigned Agreement.
(b) The Project Party will not take any action to (i) cancel
or terminate, or suspend performance under, the Assigned Agreement or
consent to or accept any cancellation, termination or suspension
thereof or (ii) exercise any of its rights set forth in the Assigned
Agreement to cancel or terminate, or suspend or discontinue performance
or withhold deliveries under, the
CATERPILLAR CONSENT
<PAGE> 106
- 5 -
Assigned Agreement unless the Project Party shall have delivered to the
Agent written notice stating that it intends to exercise such right on
a date not less than 30 days (or in the case of a payment default, 10
days) after the date of such notice, specifying the nature of the
default giving rise to such right (and, in the case of a payment
default, specifying the amount thereof) and permitting the Agent on
behalf of the Secured Parties to cure such default by making a payment
in the amount in default or by performing or causing to be performed
the obligation in default (or if such default is not capable of being
cured within said time, then diligently and continuously pursuing all
reasonable actions necessary to effect cure, so long as the Agent or
the Borrower perform or cause to be performed all other obligations of
the Borrower (including, without limitation, all payment obligations)
under the Assigned Agreement). Without the consent of the Agent, the
Project Party will not amend, supplement or otherwise modify the
Assigned Agreement (as in effect on the date hereof), except to the
extent such amendment, supplement or modification does not materially
affect the terms and conditions of the Assigned Agreement or the
respective rights and obligations provided for thereunder.
(c) The Project Party shall deliver to the Agent, concurrently
with the delivery thereof to the Borrower, a copy of any material
notice, request, demand or other document given by the Project Party in
connection with the Assigned Agreement (including, without limitation,
relating to expirations, cancellation and changes in insurance coverage
required by the Assigned Agreement).
(d) In the event that the Agent or its designee(s) succeeds to
the Borrower's interest under the Assigned Agreement, whether by
foreclosure or otherwise, the Agent or its designee(s) may elect by
written notice of assumption delivered to the Project Party to assume
liability for all of the Borrower's obligations under the Assigned
Agreement including the payment
CATERPILLAR CONSENT
<PAGE> 107
- 6 -
of all amounts due and owing to the Project Party (other than damages
or penalties incurred by the Borrower that are not provided for in the
Assigned Agreement) under the Assigned Agreement (and the Project Party
shall not be obligated to recognize any such succession until it has
received such written notice of assumption); provided, however that
such liability shall not include any liability for claims of the
Project Party against the Borrower arising from the Borrower's failure
to perform during the period prior to the Agent's or such designee's
succession to the Borrower's interest in and under the Assigned
Agreement (other than pursuant to Section 4(b) hereof). The Agent shall
not be liable for the performance or observance of any of the
obligations or duties of the Borrower under the Assigned Agreement, nor
shall the grant of a security interest in the Assigned Agreement by the
Borrower to the Agent on behalf of the Secured Parties pursuant to the
Security Agreement, give rise to any duties or obligations whatsoever
on the part of the Agent owing to the Project Party, except as
otherwise set forth in the immediately preceding sentence, and except
that, insofar as the Agent or its designee exercises any rights under
the Assigned Agreement or makes any claims with respect to any
payments, deliveries or other obligations under the Assigned Agreement,
the terms and conditions of the Assigned Agreement applicable to such
exercise of such rights or claims shall apply to, and be binding upon,
the Agent or such designee to the same extent as the Borrower.
(e) Upon the exercise by the Agent on behalf of the Secured
Parties of any of the remedies set forth in such Loan Agreement or the
Security Agreement (following the Project Party's receipt of notice
from the Agent that an Event of Default has occurred and is continuing
and the Agent has received an Enforcement Direction in respect of the
Assigned Agreement), the Agent may assign its rights and interests and
the rights and interests of the Borrower under the Assigned Agreement
to any purchaser or transferee of the Project, if such purchaser or
transferee shall (i)
CATERPILLAR CONSENT
<PAGE> 108
- 7 -
expressly assume in writing all of the obligations of the Borrower
under the Assigned Agreement and (ii) be, in the reasonable opinion of
the Project Party, at least as creditworthy as the Borrower is on the
date hereof. Upon such assignment and assumption, the Agent and the
Secured Parties shall be relieved of all obligations under the Assigned
Agreement arising after such assignment and assumption.
(f) In the event that (i) the Assigned Agreement is rejected
by a trustee or debtor-in-possession in any bankruptcy or insolvency
proceeding involving the Borrower or (ii) the Assigned Agreement is
terminated as a result of any bankruptcy or insolvency proceeding
involving the Borrower and, if within 60 days after such rejection or
termination, the Agent or its designee(s) shall so request and shall
certify in writing to the Project Party that such party intends to
perform the obligations of the Borrower as and to the extent required
under the Assigned Agreement and, such designee is, in the reasonable
opinion of the Project Party, at least as creditworthy as the Borrower
is on the date hereof, the Project Party will execute and deliver to
the Agent or such designee(s) a new Assigned Agreement which shall be
for the balance of the remaining term under the original Assigned
Agreement before giving effect to such rejection or termination and
shall contain the same conditions, agreements, terms, provisions and
limitations as the original Assigned Agreement (except for any
requirements which have been fulfilled by the Borrower and the Project
Party prior to such rejection or termination); provided that the
Project Party shall not be obligated to enter into any such new
Assigned Agreement unless (i) all amounts due and payable to the
Project Party under the original Assigned Agreement have been paid and
(ii) such modifications and additional terms and conditions have been
incorporated into the new Assigned Agreement as may be reasonably
necessary to reflect materially changed circumstances resulting from,
arising out of or relating to the rejection or termination of the
original Assigned Agreement and
CATERPILLAR CONSENT
<PAGE> 109
- 8 -
the substitution of the new contracting party. References in this
Consent and Agreement to such "Assigned Agreement" shall be deemed also
to refer to such new Assigned Agreement.
5. Arrangements Regarding Payments. In the event any payments
are to be made by the Project Party to the Borrower under the Assigned Agreement
they shall be made in lawful money of the United States of America, directly to
Wilmington Trust Company (ABA #031100092), for deposit into Account No. 35706-0
for the account of the Agent, Attention: R. Maney (Reference: CR Briggs Gold
Project), and shall be accompanied by a notice from the Project Party stating
that such payments are made under the Assigned Agreement.
6. Miscellaneous.
(a) This Consent and Agreement shall be binding upon the
Project Party, its successors and assigns and shall inure, together
with the rights and remedies of the Agent hereunder, to the benefit of
the Borrower, the Agent, each Secured Party and their respective
successors, transferees and assigns.
(b) This Consent and Agreement and the obligations of the
Project Party hereunder shall terminate and be of no further force and
effect on the earlier of the date on which the Project Party shall have
received notice in writing from the Agent that the Loan Agreement has
terminated and the date on which the Assigned Agreement has been
terminated in accordance with its terms and the terms of this Consent
and Agreement. The notice set forth in this subsection (b) shall be
delivered by the Agent to the Project Party upon the later of (i) the
expiration of all Commitments (as defined in the Loan Agreement) and
(ii) the fulfillment of all Obligations (as defined in the Loan
Agreement).
(c) No amendment, modification or waiver of any provision of
this Consent and Agreement shall be effective unless the same shall be
in writing and signed by the parties hereto and then such waiver shall
be effective only in the specific instance and for the specific purpose
for which it was given.
CATERPILLAR CONSENT
<PAGE> 110
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(d) THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(e) If any provision of this Consent and Agreement shall be
held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions in such jurisdiction and
the validity, legality and enforceability of such provision in any
other jurisdiction shall not in any way be affected or impaired.
(f) The headings used in this Consent and Agreement are for
convenience only and will not affect the construction or interpretation
of any of the terms of this Consent and Agreement.
(g) This Consent and Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this
Consent and Agreement by signing any such counterpart.
CATERPILLAR CONSENT
<PAGE> 111
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Consent and Agreement to be duly executed and delivered by its duly authorized
officer as of the date first written above.
CATERPILLAR FINANCIAL SERVICES
CORPORATION,
By ________________________
Title:
Address for Notices:
1855 West Baseline Rd.
Suite 270
Mesa, AZ 85202
Telecopier No.: (602) 820-8327
Telephone No.: (602) 345-4240
Attention: Regional Credit Manager
CATERPILLAR CONSENT
<PAGE> 112
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BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
By _______________________
Title:
By _______________________
Title:
Address for Notices:
Banque Paribas, New York Branch
787 Seventh Avenue
New York, NY 10019
Telecopier No.: 212-841-2555
Telephone No.: 212-841-2922
Attention: Thomas K. Emmons
CR BRIGGS CORPORATION,
By _______________________
Title:
Address for Notices:
CR Briggs Corporation
129 East Ridgecrest Boulevard
Ridgecrest, CA 93555
Telecopier No.: 303-279-3772
Telephone No.: 303-278-8464
CATERPILLAR CONSENT
<PAGE> 113
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Attention: Gary C. Huber
Vice President
CATERPILLAR CONSENT
<PAGE> 114
- 13 -
APPENDIX F-4
TO LOAN AGREEMENT
[Form of Consent and Agreement for Hedge Party]
********************************************************************************
CONSENT AND AGREEMENT
Dated as of [___________], 199_
among
[HEDGE PARTY],
CR BRIGGS CORPORATION,
and
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
********************************************************************************
CATERPILLAR CONSENT
<PAGE> 115
1
CONSENT AND AGREEMENT (this "Consent and Agreement") dated as
of [__________], 199_, by [HEDGE PARTY], a banking institution organized under
the laws of [__________________], solely in its capacity as a Hedge Party (as
defined in the Loan Agreement referred to below) under the Assigned Agreement
referred to below and not as a Lender [or an Agent] under and as defined in the
Loan Agreement (in such capacity, together with its respective successors and
permitted assigns in such capacity, the "Hedge Party"). The Hedge Party hereby
acknowledges notice of, and consents to the assignment of the Assigned Agreement
pursuant to the Security Agreement referred to below, and hereby agrees as
follows:
1. Definitions. Each capitalized term used herein and not
otherwise defined herein shall have the definition assigned to such term in the
Assigned Agreement. As used in this Consent and Agreement, the following terms
shall have the following respective meanings (all terms defined in this Consent
and Agreement in the singular to have the same meanings when used in the plural
and vice versa):
"Agent" shall mean Banque Paribas, New York Branch, a banking
institution organized under the laws of France, as Agent for the
Secured Parties.
"Assigned Agreement" shall mean the [Hedge Contract] [ISDA
Master Agreement] dated as of [________], 199_, [together with the
Confirmation related thereto,] between the Borrower and the Hedge
Party, as such agreement may be amended, supplemented or modified and
in effect from time to time.
"Borrower" shall mean CR Briggs Corporation, a corporation
duly organized and validly existing under the laws of Colorado.
"Loan Agreement" shall mean the Loan Agreement dated as of
December 6, 1995 among the Borrower, the Agent and certain other
financial institutions and parties, as amended or supplemented from
time to time.
"Secured Parties" shall have the meaning ascribed thereto in
the Security Agreement.
HEDGE PARTY CONSENT
<PAGE> 116
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"Security Agreement" shall mean the Security Agreement dated
as of December 6, 1995, between the Borrower and the Agent, as such
agreement may be amended, supplemented or otherwise modified from time
to time.
2. Consent and Agreement. The Hedge Party hereby acknowledges
and agrees that:
(a) If the Agent has given written notice to the Hedge Party
that an Event of Default (as defined in the Loan Agreement) has
occurred and that the Agent has received an Enforcement Direction (as
defined in the Loan Agreement) in respect of the Assigned Agreement and
such notice has not been rescinded, the Agent and any assignee thereof
on behalf of the Secured Parties shall be entitled to exercise any and
all rights of the Borrower under the Assigned Agreement in accordance
with its terms.
(b) The Hedge Party shall deliver to the Agent, concurrently
with the delivery thereof to the Borrower, a copy of any material
written notice, request, demand or other document given by the Hedge
Party in connection with the Assigned Agreement. However, provided the
Hedge Party does not act in bad faith the Hedge Party shall not incur
any liability to the Agent for any failure by the Hedge Party to comply
with the foregoing.
(c) Upon the exercise by the Agent on behalf of the Secured
Parties of any of the remedies set forth in the Loan Agreement or the
Security Agreement, the Agent may assign its rights and interests and
the rights and interests of the Borrower under the Assigned Agreement
to any purchaser or transferee of the Project, if such purchaser or
transferee shall (i) expressly assume in writing all of the obligations
of the Borrower under the Assigned Agreement, (ii) be, if the Assigned
Agreement contains obligations of the Borrower, in the absolute
discretion of the Hedge Party, acceptable to the Hedge Party and (iii)
the
HEDGE PARTY CONSENT
<PAGE> 117
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Hedge Party is provided with collateral security that is, in its
reasonable judgment, substantially equivalent to that provided by the
Security Agreement prior to such assignment. Upon such assignment and
assumption, the Agent and the Secured Parties shall be relieved of all
obligations under the Assigned Agreement arising after such assignment
and assumption, provided that any obligations which have arisen under
the Assigned Agreement before the date of any such assignment and
assumption are settled or secured to the satisfaction of the Hedge
Party before any such assignment or assumption becomes effective.
3. Assignment. The Hedge Party and the Borrower hereby further
acknowledge and agree that the Hedge Party will not, without the prior written
consent of the Agent, sell, assign, or otherwise dispose of any part of its
interest in the Assigned Agreement if the effect of any such sale, assignment or
other disposal is to relieve the Hedge Party of any obligation or liability
which it would otherwise have had to the Borrower under the Assigned Agreement,
had such sale, assignment or other disposal not been effected.
4. Arrangements Regarding Payments. All payments to be made by
the Hedge Party to the Borrower under the Assigned Agreement shall be made, in
lawful money of the United States of America, directly to Wilmington Trust
Company, (ABA #031100092), for deposit into Account No. 35706-0, for the account
of the Agent, Attention: R. Maney (Reference: CR Briggs Gold Project). The
Borrower and the Agent expressly acknowledge that any payment made by the Hedge
Party pursuant to this Section 4 shall be in full satisfaction of the Hedge
Party's payment obligations pursuant to the Assigned Agreement.
5. Miscellaneous.
(a) No amendment, modification or waiver of any provision of
this Consent and Agreement shall be effective unless the same shall be
in writing and signed by the parties hereto and then such waiver shall
be effective only in the specific instance and for the specific purpose
for which it was given.
HEDGE PARTY CONSENT
<PAGE> 118
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(b) THIS CONSENT AND AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
(c) If any provision of this Consent and Agreement shall be
held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions in such jurisdiction and
the validity, legality and enforceability of such provision in any
other jurisdiction shall not in any way be affected or impaired.
(d) This Consent and Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this
Consent and Agreement by signing any such counterpart.
(E) THE HEDGE PARTY IRREVOCABLY CONSENTS AND AGREES THAT ANY
LEGAL ACTION, SUIT OR PROCEEDING AGAINST IT WITH RESPECT TO ITS
OBLIGATIONS, LIABILITIES OR ANY OTHER MATTER ARISING OUT OF THIS
CONSENT AND AGREEMENT MAY BE BROUGHT IN ANY FEDERAL OR STATE COURT
LOCATED IN NEW YORK COUNTY IN THE CITY OF NEW YORK AND HEREBY
IRREVOCABLY ACCEPTS AND SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
SUCH COURT WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING. THE
HEDGE PARTY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS, SUITS OR
PROCEEDINGS, BROUGHT IN ANY SUCH COURT AND HEREBY FURTHER WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION,
SUIT OR PROCEEDING BROUGHT THEREIN HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(f) For the purposes of Section 2(a) hereof, the Borrower
confirms that the Hedge Party shall be entitled for all purposes to act
in accordance with and to rely upon any notice given to the Hedge Party
under said Section 2(a) notwithstanding any dispute or disagreement
between the Borrower and the Agent relating to the validity
HEDGE PARTY CONSENT
<PAGE> 119
- 5 -
of any Event of Default, notice or otherwise. The Borrower confirms
that the Hedge Party shall not incur any liability to the Borrower
under the Assigned Agreement or otherwise by acting in accordance with
any such notice given pursuant to said Section 2(a).
(g) If there is any inconsistency or conflict between the
terms of this Consent and Agreement and the Assigned Agreement, this
Consent and Agreement shall prevail.
(h) Until such time, if any, as notice is served on the Hedge
Party by the Agent under Section 2(a) hereof, nothing contained in this
Consent and Agreement shall preclude or restrict the Hedge Party from
exercising any right available to it under the Assigned Agreement,
including the right to terminate the Assigned Agreement in whole or in
part and/or to close out any transaction entered into under the
Assigned Agreement.
HEDGE PARTY CONSENT
<PAGE> 120
- 6 -
IN WITNESS WHEREOF, the undersigned has caused this Consent
and Agreement to be duly executed and delivered by its duly authorized officers
as of the date first written above.
[HEDGE PARTY],
solely in its capacity as
Hedge Party
By_______________________
Name:
Title:
By_______________________
Name:
Title:
Accepted:
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
By_____________________________
Name:
Title:
By_____________________________
Name:
Title:
Address for Notices:
787 Seventh Avenue
New York, N.Y. 10019
Attention: Thomas K. Emmons
Acknowledged and Agreed:
CR BRIGGS CORPORATION
By___________________________
Name:
Title:
HEDGE PARTY CONSENT
<PAGE> 121
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HEDGE PARTY CONSENT
<PAGE> 122
- 8 -
Appendix G-1, G-2, G-3
HEDGE PARTY CONSENT
<PAGE> 123
- 9 -
APPENDIX G-4
to Loan Agreement
December 11, 1995
To the Lenders party to the
Loan Agreement referred
to below and Banque Paribas,
New York Branch, as Agent
Ladies and Gentlemen:
We have acted as your special New York and California counsel
in connection with the execution and delivery of (i) the Loan Agreement (the
"Loan Agreement") dated as of December 6, 1995, among CR Briggs Corporation, a
Colorado corporation (the "Borrower"), the lenders named therein (the "Lenders")
and Banque Paribas, New York Branch, a banking institution organized under the
laws of France, as agent for the Lenders (in such capacity, together with its
successors and assigns in such capacity, the "Agent") and (ii) the various other
agreements and instruments referred to in the next paragraph. Terms defined in
the Loan Agreement are used herein as defined therein. This opinion is being
delivered to you pursuant to Section 6.01(j)(4) of the Loan Agreement.
In rendering the opinions expressed below, we have examined
the following agreements, instruments and other documents:
(a) the Loan Agreement;
(b) the Notes;
(c) the Security Agreement;
(d) the Guarantee and Pledge Agreement;
(e) the Mortgage; and
(f) such corporate records of the Borrower and the
Guarantor (collectively, the "Obligors") and such
other documents as
HEDGE PARTY CONSENT
<PAGE> 124
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we have deemed necessary as a basis for the opinions
expressed below.
The agreements, instruments and other documents referred to in the foregoing
lettered clauses (other than clause (f) above) are collectively referred to as
the "Covered Documents".
In our examination, we have assumed the genuineness of all
signatures, the authenticity of documents submitted to us as originals and the
conformity with the original documents of all documents submitted to us as
copies. When relevant facts were not independently established, we have relied
upon statements of governmental officials and upon representations made in or
pursuant to the Covered Agreements and certificates of appropriate
representatives of the Obligors.
In rendering the opinions expressed below, we have assumed,
with respect to all of the documents referred to in this opinion letter, that:
(i) such documents have been duly authorized, executed
and delivered by, and (except to the extent set forth
in the opinions below as to the Obligors) constitute
legal, valid, binding and enforceable obligations of,
all of the parties to such documents;
(ii) all signatories to such documents have been duly
authorized;
(iii) each party to such documents is duly organized and
validly existing under the laws of the jurisdiction
of its organization and has full power, authority
(corporate or other) and legal right to execute,
deliver and perform such documents; and
(iv) the execution, delivery and performance of each such
document by the respective
HEDGE PARTY CONSENT
<PAGE> 125
- 11 -
parties thereto do not, in the case of any such
party, contravene, and such documents are not invalid
or unenforceable under, the law of the jurisdiction
of organization of such party.
Based upon and subject to the foregoing, and subject to the
qualifications and comments set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that each of the Covered Documents (other
than the Notes) constitutes, and the Notes when executed and delivered for value
will constitute, the legal, valid and binding obligation of each Obligor party
thereto, enforceable against such Obligor in accordance with its terms, except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights of creditors generally, to
governmental action affecting the enforcement of creditors' rights, and to the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), including
without limitation (a) the possible unavailability of specific performance,
injunctive relief or any other equitable remedy and (b) concepts of materiality,
reasonableness, good faith and fair dealing.
The foregoing opinion is subject to the following comments and
qualifications:
(A) The enforceability of Section 10.05 of the Loan Agreement
and Section 2.04 of the Guarantee and Pledge Agreement (and any other
similar provisions in any of the other Covered Documents) may be
limited by laws rendering unenforceable (i) indemnification contrary to
United States Federal or state securities laws and the public policy
underlying such laws and (ii) the release of a party from, or the
indemnification of a party against, liability for its own wrongful or
negligent acts under certain circumstances.
(B) The enforceability of provisions in the Covered Documents
to the effect that terms may not be waived or modified except in
writing may be limited under certain circumstances.
(C) We express no opinion as to (i) the effect of the law of
any jurisdiction (other than
HEDGE PARTY CONSENT
<PAGE> 126
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the States of New York and California) wherein any Lender may be
located which limits the interest, fees or other charges such Lender
may impose; (ii) Section 2.20(c) of the Loan Agreement; (iii) Section
2.08 of the Guarantee and Pledge Agreement; (iv) Section 2.04 of the
Guarantee and Pledge Agreement and Section 5.10 of the Security
Agreement; (v) Section 11.10(a) of the Loan Agreement, Section 9.08 of
the Guarantee and Pledge Agreement and Section 5.12 of the Security
Agreement, to the extent such provisions relate to the subject matter
jurisdiction of United States Federal courts to adjudicate any matter
under or arising out of or in connection with the Covered Agreements;
or (vi) the waiver of inconvenient forum set forth in Section 11.10(a)
of the Loan Agreement and Section 9.08 of the Guarantee and Pledge
Agreement with respect to proceedings in the United States District
Court for the Southern District of New York or the United States
District Court for the Eastern District of California.
(D) We wish to point out that the obligations of the Obligors,
and the rights and remedies of the Agent and the Secured Parties (as
defined, respectively, in the Security Agreement, the Guarantee and
Pledge Agreement and the Mortgage), under the Security Agreement, the
Guarantee and Pledge Agreement and the Mortgage may be subject to
possible limitations upon the exercise of remedial or procedural
provisions contained in the Security Agreement, the Guarantee and
Pledge Agreement and the Mortgage, provided that such limitations do
not, in our opinion (but subject to the other comments and
qualifications set forth in this opinion letter), make the remedies and
procedures that will be afforded to the Agent and such Secured Parties
inadequate for the practical realization of the substantive benefits
purported to be provided to the Agent and such Secured Parties by the
Security Agreement, the Guarantee and Pledge Agreement and the
Mortgage.
(E) We express no opinion herein as to the existence of, or
the right, title
HEDGE PARTY CONSENT
<PAGE> 127
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or interest of the Obligors in, to or under, any of the Collateral (as
defined, respectively, in the Security Agreement and the Guarantee and
Pledge Agreement) or the Mortgage Collateral (as defined in the
Mortgage) or as to the creation, perfection or priority of any security
interest in, or other Lien on, such Collateral.
(F) Section 726 of the California Code of Civil Procedure
provides that any action to recover on a debt or other right secured by
a mortgage or a deed of trust on real property must comply with the
provisions of that section, which provisions relate to and specify the
procedures for the sale of encumbered property, the application of
proceeds, the rendition in certain cases of a deficiency judgments, and
other related matters. We advise you that in such an action or
proceeding, the debtor may require the creditor to exhaust all of its
security before a personal judgment may be obtained against the debtor
for a deficiency. We also advise you that failure to comply with the
provisions of Section 726 (including an attempt to exercise a right of
set-off with respect to any funds of the Borrower that may be deposited
with you from time to time and with respect to which you do not hold a
perfected security interest) may result in the loss of your liens on
the real and personal property collateral and the loss of your right to
a deficiency judgment. See e.g., Walker v Community Bank, 10 Cal.3d
729, 518 P.2d 329, 111 Cal.Rptr. 897 (1974); Bank of America v. Daily,
152 Cal.App.3d 767, 199 Cal.Rptr. 557 (1984). However, in our opinion,
the limitations of Section 726 do not prevent enforcement of your
rights with respect to the Real Property described in the Mortgage
provided you proceed in accordance with California law, nor do such
limitations prevent enforcement of your rights with respect to the
other Collateral referred to in the Mortgage and the Security Agreement
in which you have a perfected security interest provided you proceed in
accordance with the requirements of Article 9 of the Uniform Commercial
Code of the
HEDGE PARTY CONSENT
<PAGE> 128
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State of New York and Division 9 of the Uniform Commercial Code of the
State of California.
(G) Section 580d of the California Code of Civil Procedure
provides that no deficiency judgment shall be rendered upon a note
secured by a deed of trust or mortgage on real property after sale of
the real property under the power of sale contained in such deed of
trust or mortgage.
(H) Section 2924c of the California Civil Code provides that
whenever the maturity of an obligation secured by a deed of trust or
mortgage on real property is accelerated by reason of a default in the
payment of interest or in the payment of any installment of principal
or other sums secured thereby, or by reason of failure of the trustor
or mortgagor to pay taxes, assessments, or insurance premiums, the
trustor or mortgagor and certain other entitled persons have the right
to be exercised at any time within the reinstatement period described
in such section, to cure such default by paying the entire amount then
due (including certain reasonable costs and expenses incurred in
enforcing such obligations but excluding any principal amount that
would not then be due had no default occurred) and thereby cure the
default and reinstate such deed of trust or mortgage and the
obligations secured thereby to the same effect as if no acceleration
had occurred. If the power of sale in the deed of trust or mortgage is
not to be exercised, such reinstatement right may be exercised at any
time prior to entry of the decree of foreclosure.
(I) An incorrect or omitted description may render a deed of
trust or mortgage (and any subsequent sale) void as to the property
whose description is incorrect or omitted. Saterstrom v. Glick Bros.
Sash, Door & Mill Co., 118 Cal.App. 379, 5 P.2d 21 (1931). As between
the parties, however, an incorrect or omitted description can be
reformed by a corrective instrument, or by reformation or other
appropriate court action.
HEDGE PARTY CONSENT
<PAGE> 129
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(J) Although a deed of trust or mortgage may cover
after-acquired property, Perego v. Seltzer, 260 Cal.App. 2d 825, 67
Cal.Rptr. 636 (1968), it is binding only on the trustor or mortgagor
and those who have knowledge of the deed of trust or mortgage.
Recordation of the deed of trust or mortgage before the date of the
trustor's or mortgagor's acquisition of title to the after-acquired
property does not constitute constructive notice to subsequent
purchasers from the trustor or mortgagor. We further advise you that
our previous comments regarding incorrect or omitted descriptions apply
to after-acquired property.
The foregoing opinions are limited to matters involving the
Federal laws of the United States, the laws of the State of New York and the
laws of the State of California, and we do not express any opinion as to the
laws of any other jurisdiction.
This opinion letter is, pursuant to Section 6.01(j)(4) of the
Loan Agreement, provided to you by us in our capacity as special New York and
California counsel to the Agent and may not be relied upon by any Person for any
purpose other than in connection with the transactions contemplated by the Loan
Agreement without, in each instance, our prior written consent.
Very truly yours,
JJG/DAL
HEDGE PARTY CONSENT
<PAGE> 130
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Appendix G-5
HEDGE PARTY CONSENT
<PAGE> 131
- 17 -
APPENDIX H
TO LOAN AGREEMENT
HEDGE PARTY CONSENT
<PAGE> 132
- 18 -
Appendix G-5
HEDGE PARTY CONSENT
<PAGE> 133
APPENDIX H
TO LOAN AGREEMENT
[Form of Construction Certificate]
CONSTRUCTION CERTIFICATE NO. [__]
[Certificates to be numbered
consecutively in chronological order]
[DATE]
Re: CR BRIGGS CORPORATION
Banque Paribas,
New York Branch,
as Agent under the
Loan Agreement
787 Seventh Avenue
New York, New York 10019
Attention: Thomas Emmons
Ladies and Gentlemen:
Reference is made to the Loan Agreement dated as of December
6, 1995 (as amended, modified and supplemented and in effect from time to time,
the "Loan Agreement") among CR Briggs Corporation, a corporation duly organized
and validly existing under the laws of the State of Colorado (the "Borrower"),
the Lenders named therein and Banque Paribas, New York Branch, as agent for said
Lenders (in such capacity, together with its successors in such capacity, the
"Agent"). Terms defined in the Loan Agreement are used herein as defined
therein.
This Construction Certificate is delivered pursuant to Section
6.02(e) of the Loan Agreement. A copy of this Construction Certificate has also
been provided to the Independent Engineer.
HEDGE PARTY CONSENT
<PAGE> 134
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This Construction Certificate covers (a) the period from
[__________] [the date of the immediately preceding Construction Certificate No.
[__] dated [__________]] to and including the date hereof (the "Relevant
Period") and (b) where indicated, the period from and including [INSERT DATE
CONSTRUCTION INITIATED] to and including the date hereof (the "Construction
Period"). The Borrower hereby certifies, after due inquiry and to induce the
Lenders to take action in reliance hereon, as follows:
1. The representations and warranties of the Borrower in
Article VII of the Loan Agreement are true and
correct in all material respects on and as of the
date hereof as if made on and as of the date hereof
(or, if stated to have been made solely as of an
earlier date, were true and correct as of such date).
2. No Potential Default has occurred and is continuing
on the date hereof.
3. All Government Approvals which are required to be
obtained for the current stage of development of the
Project have been obtained on or prior to the date
hereof and are in full force and effect and not
subject to appeal.
4. During the Relevant Period, the Borrower incurred the
Project Costs or Expansion Costs listed on Schedule I
to this Construction
HEDGE PARTY CONSENT
<PAGE> 135
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Certificate. Each such Project Cost or Expansion Cost
is evidenced by an invoice of the relevant Contractor
or other party to a Project Document, a copy of which
has been delivered to the Independent Engineer.
5. The Borrower has, during the Construction Period
ending on the date of the immediately preceding
Construction Certificate, applied the proceeds of the
Loans to the payment of Project Costs and Expansion
Costs listed on Schedule I to each prior Construction
Certificate. The Borrower will, during the Relevant
Period, apply the proceeds of the Loans to the
payment of the Project Costs and Expansion Costs
listed on Schedule I hereto.
6. Except as set forth in Exhibit A to Schedule I
hereto, the aggregate amount of Project Costs and
Expansion Costs paid and/or payable by the Borrower
and incurred during the Construction Period (after
giving effect to such Project Costs and/or Expansion
Costs paid with the proceeds of the Loans in respect
of which this Construction Certificate is delivered)
is equal to
HEDGE PARTY CONSENT
<PAGE> 136
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or less than the aggregate amount of Project Costs
and Expansion Costs scheduled, in the Construction
and Payment Schedule, to have been incurred during
such Construction Period. Any variance between the
amount actually paid and/or payable by the Borrower
and the amount so scheduled to be paid is explained
in Exhibit A to Schedule I.
7. The work under the Construction Contract(s), in
respect of which payment is requested and in
connection with which this Construction Certificate
is delivered, has been performed in accordance with
such Construction Contract(s) and the plans and
specifications specified therein.
8. Set forth in Schedule II to this Construction
Certificate is a narrative summary description of the
following:
a. during the Relevant Period, each Change
Notice, amendment or modification of, or
supplement to, or exercise of any option
under, the Project Documents;
HEDGE PARTY CONSENT
<PAGE> 137
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b. during the Relevant Period, each making, or
anticipated making thereafter, of an
Additional Project Document; and
c. each Government Approval required to be
obtained by or on behalf of the Borrower
pursuant to Section 8.10 of the Loan
Agreement (including, without limitation,
those listed on Schedule V to the Loan
Agreement) that has been applied for,
obtained or impaired during the Relevant
Period.
9. Except as set forth in Schedule III-A to this
Construction Certificate, the Borrower is not aware
of any event that has occurred or is likely to occur
(a) that has resulted, or could result, in a Material
Adverse Effect or (b) the occurrence of which is
likely to cause the Completion Date to occur 15
months after the date of the Loan Agreement or
Expansion Completion to occur 25 months after the
date of the Loan Agreement. The Borrower estimates,
after reasonable investigation, that the Start-up of
Commercial Production will occur on or prior to
[__________] [IF AFTER DATE INSERTED ABOVE INCLUDE
PROVISION REQUIRING EXPLANATION AS TO CAUSE FOR
DELAY], the Completion Date will
HEDGE PARTY CONSENT
<PAGE> 138
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occur on or prior to[__________] and Expansion
Completion will occur on or prior to [__________] [IF
AFTER DATE INSERTED ABOVE INCLUDE PROVISION REQUIRING
EXPLANATION AS TO CAUSE FOR DELAY].
10. All Loan proceeds received by the Borrower pursuant
to Construction Certificates dated prior to the date
hereof on account of Project Costs or Expansion Costs
have been paid to the Persons entitled thereto in
cash or by duly honored check and all amounts due and
owing to such Persons have been paid in full except
to the extent that such payments are currently the
subject of dispute (which payments and disputes are
described in Schedule III-B hereto), in which case
such payments remain on deposit in the Proceeds
Account. The Borrower is in compliance with the
provisions of Section 8.14 of the Loan Agreement in
connection with each such dispute.
11. Schedule IV to this Construction Certificate is a
true and complete copy of each Certificate of each
Contractor submitted to the Borrower
HEDGE PARTY CONSENT
<PAGE> 139
- 25 -
in connection with this Construction Certificate.
12. All conditions set forth in Sections 6.01 and 6.02 of
the Loan Agreement to the making of the Loans
contemplated by this Construction Certificate have
been (or, on or prior to the date of the proposed
extension of credit, will be) satisfied.
The Borrower hereby certifies, after due inquiry, that the
facts stated by the Borrower in this Construction Certificate are true and
complete and the determinations of the Borrower contained herein are made on a
reasonable basis.
Very truly yours,
CR BRIGGS CORPORATION
By _________________________
Name:
Title:
[APPROPRIATE MODIFICATIONS WILL BE MADE IN CONNECTION WITH THE INITIAL
EXTENSION OF CREDIT.]
HEDGE PARTY CONSENT
<PAGE> 140
1
Schedule I to
Construction Certificate
<TABLE>
<CAPTION>
TOTAL LOANS
(1)
(8) (9)
(2) (3) (4) (5) (6) (7)
Current Expected
Component Cumulative Scheduled Budget Bank
Current Balance
of at Prior This Requests Cumulative
Variance Requests Requests Approved Estimated to
Expenditure Budget Budget (1) + (2) Requests (4) - (3)
- ----------- ------ ------ ------------------ ---------
Closing Complete
(8) - (3)
---------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
HEDGE PARTY CONSENT
<PAGE> 141
2
1. Loans Outstanding: U.S.$[__________]
2. Estimated date of Start-up of Commercial
Production: ______________
3. Estimated Completion Date: [__________]
4. Estimated date of Expansion Completion:
5. Estimated aggregate Project Costs to
achieve Start-up of Commercial
Production: U.S.$__________________
6. Estimated aggregate Project Costs and
Expansion Costs (excluding Project Costs
in respect of operating costs funded or
to be funded from revenues) to achieve
the Completion Date and Expansion
Completion U.S.$ ___________
HEDGE PARTY CONSENT
<PAGE> 142
3
EXHIBIT A to
Schedule I to
Construction Certificate
Current and projected variances as of the date hereof of the
aggregate amount of Project Costs or Expansion Costs scheduled to be paid under
the schedule of drawdowns for the Construction Period from the aggregate amount
of Project Costs or Expansion Costs payable in accordance with the Construction
and Payment Schedule are detailed and described below:
CONSTRUCTION CERTIFICATE
<PAGE> 143
1
Schedule II to
Construction Certificate
The categories set forth below should be completed with reference to Paragraph 5
and Paragraph 9 of the Construction Certificate to which this document is
attached as Appendix II.
1. Amendments or supplements to, or modifications of, any Project
Documents
2. Additional Project Document(s)
3. Government Approvals
CONSTRUCTION CERTIFICATE
<PAGE> 144
1
Schedule III-A to
Construction Certificate
List of Exceptions:
CONSTRUCTION CERTIFICATE
<PAGE> 145
1
Schedule III-B to
Construction Certificate
List of Disputes:
CONSTRUCTION CERTIFICATE
<PAGE> 146
1
Schedule IV to
Construction Certificate
[Form of Certificate of Contractor]
CERTIFICATE OF CONTRACTOR
REFERENCE: CONSTRUCTION CERTIFICATE NO. [__]
[DATE]
Re: CR BRIGGS CORPORATION
Banque Paribas,
New York Branch,
as Agent under the
Loan Agreement
787 Seventh Avenue
New York, New York 10019
Attention: Thomas Emmons
Ladies and Gentlemen:
Reference is made to the Loan Agreement dated as of December
6, 1995 (as amended, modified and supplemented and in effect from time to time,
the "Loan Agreement") among CR Briggs Corporation, a corporation duly organized
and validly existing under the laws of the State of Colorado (the "Borrower"),
the Lenders named therein and Banque Paribas, New York Branch, as agent for said
Lenders (in such capacity, together with its successors in such capacity, the
"Agent"). As used herein, "Construction Period" and "Relevant Period" shall have
the meanings assigned to such terms in the Construction Certificate of the
Borrower referred to below.
This Certificate is delivered by the undersigned, [NAME OF
CONTRACTOR], a [__________] duly organized and validly existing under the laws
of the [State] [Commonwealth] of [__________] (the "Contractor"), in connection
with Construction Certificate No. [__] being delivered by the Borrower pursuant
to the Loan Agreement.
The Contractor hereby certifies, after due inquiry and to
induce the Lenders to take action in reliance hereon, that, as of the date
hereof:
CONSTRUCTION CERTIFICATE
<PAGE> 147
- 2 -
1. The [IDENTIFY CONSTRUCTION CONTRACT] (the "Contract")
is in full force and effect and except as set forth
in Attachment I hereto, has not been amended,
supplemented or otherwise modified, and attached
hereto are all true and complete copies of all Change
Notices not heretofore delivered to the Agent.
2. The Contractor has performed all of its obligations
under the Contract in accordance with the provisions
thereof.
3. Except as set forth in Attachment I hereto, no event
has occurred or failed to occur or is likely to fail
to occur which occurrence or non-occurrence, as the
case may be, could cause the
CONSTRUCTION CERTIFICATE
<PAGE> 148
- 3 -
Completion Date (as defined in the Contract) to occur
after the Scheduled Completion Date (as defined in
the Contract).
4. Except as set forth in Attachment I hereto, no event
or condition exists that permits or requires
cancellation, suspension or termination of the
Contractor's performance under the Contract or that
could excuse the Contractor from liability for
non-performance thereunder. Except as set forth in
Attachment I hereto, no Force Majeure Event (as
defined in the Contract) has occurred during the
Relevant Period.
5. Except with respect to amounts that are the subject
of a bona fide dispute (such amounts and such
disputes being described in reasonable detail in
Attachment II hereto), all amounts due and
CONSTRUCTION CERTIFICATE
<PAGE> 149
- 4 -
owing to the Contractor have been paid in full
through the date of the immediately preceding
Construction Certificate and are not overdue. To the
extent payment to the Contractor has been or will be
made from the proceeds of the Loans with respect to
which this and the immediately preceding Construction
Certificates were delivered, there are and will be no
mechanics' liens on any property in respect of the
work which has or will be performed under the
Contract.
6. Each government approval, permit, license or filing
required to have been made or obtained by the
Contractor (or by the Borrower on behalf of the
Contractor) as of the date hereof has been duly made
or obtained, has been validly
CONSTRUCTION CERTIFICATE
<PAGE> 150
- 5 -
issued and is in full force and effect, is not
subject to appeal, and is not subject to condition.
The work under the Contract conforms to and complies
with all covenants, conditions, restrictions and
reservations in such government approvals, permits,
licenses and filings and all applicable laws, rules
or regulations.
7. All amounts due and payable to any of the
Contractor's subcontractors or suppliers in
connection with the Project have been paid in full or
are not overdue, and the Contractor, each such
subcontractor and supplier that has performed work in
connection with the Project has provided appropriate
lien waivers and releases either prior to the
commencement of
CONSTRUCTION CERTIFICATE
<PAGE> 151
- 6 -
their work (in the form of a full waiver) or as
payment is made (in the form of either a partial
release effective upon delivery or a partial release
effective upon receipt of payment). [Attached hereto
are true and complete copies of all such lien waivers
and releases provided by the Contractor, such
subcontractors and suppliers not heretofore delivered
to the Agent.](1)
8. The work under the Contract in respect of which
payment is requested by delivery of said Construction
Certificate has been performed by the Contractor in a
good and workmanlike manner in accordance with (a)
generally accepted engineering practice
- -----------------------
1 Include if lien waivers have been requested.
CONSTRUCTION CERTIFICATE
<PAGE> 152
- 7 -
and generally accepted construction procedures and
(b) the Contract and the plans and specifications
specified therein.
9. All insurance required under the Contract is in full
force and effect and all premiums due thereon have
been paid.
The Contractor hereby certifies, after due inquiry, that the
facts stated by the Contractor in this Certificate are true and complete and the
determinations contained herein are made on a reasonable basis.
Very truly yours,
[NAME OF CONTRACTOR]
By ____________________________
Name:
Title:
CONSTRUCTION CERTIFICATE
<PAGE> 153
1
ATTACHMENT I to
Schedule IV to
Construction Certificate
List of Exceptions:
CONSTRUCTION CERTIFICATE
<PAGE> 154
1
ATTACHMENT II to
Schedule IV to
Construction Certificate
List of Disputes:
CONSTRUCTION CERTIFICATE
<PAGE> 155
- 2 -
APPENDIX I
TO LOAN AGREEMENT
[Form of Certificate of
Independent Engineer]
CERTIFICATE OF INDEPENDENT ENGINEER
REFERENCE: CONSTRUCTION CERTIFICATE NO. /__/
[DATE]
Re: CR BRIGGS CORPORATION
Banque Paribas,
New York Branch,
as Agent under the
Loan Agreement
787 Seventh Avenue
New York, New York 10019
Attention: Thomas Emmons
Ladies and Gentlemen:
Reference is made to the Loan Agreement dated as of December
6, 1995 (as amended, modified and supplemented and in effect from time to time,
the "Loan Agreement") among CR Briggs Corporation, a corporation duly organized
and validly existing under the laws of the State of Colorado (the "Borrower"),
the Lenders named therein and Banque Paribas, New York Branch, as agent for said
Lenders (in such capacity, together with its successors in such capacity, the
"Agent"). Terms defined in the Loan Agreement are used herein as defined
therein. In addition, as used herein, "Construction Period" shall have the
meaning assigned to such term in said Construction Certificate.
This Certificate is delivered in connection with Construction
Certificate No. [__] being delivered by the Borrower pursuant to Section 6.02(e)
of the Loan Agreement.
We have reviewed (a) on [__________] the progress of
construction of the Project during the Construction Period, (b) said
Construction Certificate to which
CONSTRUCTION CERTIFICATE
this certificate is attached and (c) the Contractors' Certificates attached as
Schedule IV to the Construction Certificate. Our review and observations were
performed in accordance with generally accepted technical consulting practice
and included such
<PAGE> 156
- 3 -
investigations, observations and review as we in our professional capacity
deemed necessary under the circumstances within the scope of our service.
Based upon the foregoing, we are of the opinion that, as of the date of this
certificate:
1. Except as set forth in Exhibit A to Schedule I to the
Construction Certificate, the aggregate amount of
Project Costs and/or Expansion Costs payable by the
Borrower and incurred during the Construction Period
(after giving effect to the Project Costs and
Expansion Costs paid with the proceeds of the Loans
and in respect of which the Construction Certificate
referred to herein is delivered) of which we are
aware during the course of our review is equal to or
less than the aggregate amount of Project Costs
and/or Expansion Costs scheduled, in the Construction
and Payment Schedule, to
CONSTRUCTION CERTIFICATE
<PAGE> 157
- 4 -
have been incurred during the Construction Period.
Any variance between the amount paid and the amount
scheduled to be paid is explained in Exhibit A to
Schedule I to the Construction Certificate.
2. The aggregate amount of Project Costs and Expansion
Costs to be paid by the Borrower on and after the
date of this Certificate in order to cause the
Completion Date and Expansion Completion to occur
(the aggregate amount of such Project Costs and
Expansion Costs related to construction, equipment
and material having been determined for purposes of
this certificate by the Independent Engineer) should
not reasonably be expected to exceed the
CONSTRUCTION CERTIFICATE
<PAGE> 158
- 5 -
amount of $[----------] minus the aggregate amount of
Project Costs or Expansion Costs heretofore paid by
the Borrower.
3. Work performed under each Construction Contract in
respect of which payment is requested by delivery of
said Construction Certificate and major construction
and operation activities performed during the
Construction Period have been performed in accordance
with (1) such Construction Contract, (2) the
Construction and Payment Schedule and (3) generally
accepted engineering and construction practices [IF
NOT, SPECIFY].
4. Except as set forth in Schedule III to said
Construction Certificate, we
CONSTRUCTION CERTIFICATE
<PAGE> 159
- 6 -
are aware of no event that has occurred or is likely
to occur (a) that has resulted, or could be
reasonably expected to result, in a Material Adverse
Effect or (b) the occurrence of which is likely to
cause the Start-up of Commercial Production to occur
after [-----------], the Completion Date to occur 15
months after the date of the Loan Agreement or
Expansion Completion to occur after 25 months after
the date of the Loan Agreement.
CONSTRUCTION CERTIFICATE
<PAGE> 160
- 7 -
5. The Completion Date should reasonably be expected to
occur on or prior to [----------] and Expansion
Completion should reasonably be expected to occur on
or prior to [-------------].
Very truly yours,
[NAME OF INDEPENDENT ENGINEER]
By ___________________________
Name:
Title:
CONSTRUCTION CERTIFICATE
<PAGE> 161
- 8 -
APPENDIX J
TO LOAN AGREEMENT
Project Completion shall be achieved by satisfaction of the Notification and
Information Requirements set forth in Item 1 below and the successful passing of
each of the following tests (except as provided in Item 6 below), which will be
certified by the Independent Engineer (except for the Legal Compliance Test):
the Mechanical Completion Test described in Item 2 below, the Physical
Performance Test described in Item 3 below, the Technical/Operating Cost
Performance Test described in Item 4 below, the Legal Compliance Test described
in Section 5 below and the Economic Test described in Item 6 below. Once all the
items of the Mechanical Completion Test have been passed successfully, the
Performance Test components (comprised of the Physical Performance Test and the
Technical/Operating Cost Performance Test) shall be carried out simultaneously
according to the specified time schedule of events.
1. NOTIFICATION AND INFORMATION REQUIREMENTS
A. The Borrower shall advise the Agent in writing that the
physical construction and installation of all facilities have
been completed in all material respects, including planned ore
and waste mining facilities, stockpile, reclaim, crushing,
agglomeration, conveying and stacking, leach pad, pad piping,
gold recovery and refining plant, and required infrastructure
including electric power supply and distribution, water supply
and distribution, and other items deemed critical to the final
effectiveness and efficiency of the Project.
The Borrower shall certify that all the facilities have been
constructed, erected, installed and acquired in accordance
with the Feasibility Study except for such changes which are
permitted by the Loan Agreement or which have been approved in
writing by the Agent (after consultation with the Independent
Engineer), and are in accordance with good mining,
CONSTRUCTION CERTIFICATE
<PAGE> 162
- 9 -
leaching, processing and engineering practice in the United
States.
B. The Borrower shall certify that all costs incurred in
connection with the construction and installation of the
facilities as set forth in Item 1(A) above have been paid.
C. The Borrower shall certify that all supply contracts,
licenses, permits and agreements necessary for the continuous
operation of the facilities have been obtained, duly approved
and are in good standing or, if not so obtained, approved and
in good standing, that the Borrower has no reason to believe
any such supply contract, license, permit or agreement will
not be obtained and approved in due course on or prior to the
time at which it is necessary for the continuous operation of
the facilities.
D. The Borrower will notify the Agent and the Independent
Engineer when physical construction of the facilities has been
completed and Start-up of Commercial Production has begun. The
Borrower will further notify the Agent and the Independent
Engineer when it is ready to commence the Performance Test
(the "Performance Test Notice"). The Independent Engineer's
representative will report on the site within a reasonable
time after receipt of the Performance Test Notice, and the
Performance Tests shall commence no later than ten days
thereafter. The Performance Tests, as described in Items 3 and
4 of this document, shall
CONSTRUCTION CERTIFICATE
<PAGE> 163
- 10 -
consist of two parts: (1) the Physical Performance Test and
(2) the Technical/Operating Cost Performance Test.
The Independent Engineer shall be present for such period of
time as the Independent Engineer deems adequate to monitor,
measure and evaluate the results, but in no case for fewer
than 25 (in the aggregate) days at the Project site, for the
Mechanical Completion Test outlined in Item 2 and the
Performance Tests as outlined in Items 3 and 4. During this
time, the Independent Engineer will have full access to all
reports, data sheets and documentation pertaining to the
operation of the Project and full cooperation of all of the
Borrower's personnel at the Project site.
E. No later than twenty days after the end of Mechanical
Completion Test, the Physical Performance Test and the
Technical/Operating Cost Performance Test, the Independent
Engineer shall certify to the Agent and the Lenders, without
significant qualification or exception, whether or not in the
Independent Engineer's judgement, each Test has been
successfully passed. A copy of such certification shall be
provided to the Borrower.
2. MECHANICAL COMPLETION TEST
The Borrower and/or each Contractor will perform the Mechanical
Completion Test, which shall be the Mechanical Completion and
Performance Trial as agreed with each Contractor pursuant to the
Construction Contracts, to guarantee the Project meets the design
criteria described in the
CONSTRUCTION CERTIFICATE
<PAGE> 164
- 11 -
Feasibility Study. When the Borrower satisfactorily meets the criteria
of the Mechanical Completion Test as witnessed by the Independent
Engineer, the Borrower and the Independent Engineer will each so
certify to the Agent, and the Agent will provide written acceptance to
the Borrower.
3. PHYSICAL PERFORMANCE TEST
The Independent Engineer will determine, without material qualification
or exception, that in the Independent Engineer's judgment the
facilities have met or exceeded the following Physical Performance Test
criteria during the consecutive 120 days of the Performance Test
period. All averages, flows, deliveries and the like will be calculated
based upon the scheduled test period for each of the physical Project
components.
A. The Borrower, upon selecting a starting date for the
Performance Test and notifying the Agent and Independent
Engineer of such date, will supply a production schedule for
ore and waste during the 120-day test period. Mining
performance will be based upon the demonstrated ability of the
operations to mine and haul an average monthly total of
750,000 tons of ore and waste beginning in month 1 of year 1
and ending in month 4 of year 1, as shown in the Cash Flow
Projection Schedule, dated [________]. If the Borrower
notifies the Agent of a different starting date for this test,
the monthly tonnages will, with approval of the Agent, be
adjusted accordingly.
Ore tonnage will be delivered to the primary crusher receiving
pocket or the coarse ore stock pile at the average
CONSTRUCTION CERTIFICATE
<PAGE> 165
- 12 -
rate of 60,000 d.s.t.p.w. for a minimum of the last 12 weeks
(based upon a work week of five days) of the 120-day test
period. Ore production tonnages shall be not less than 95% of
those indicated on the 120-day plan as noted above. The ore
tonnage will be based upon truck counts and tertiary crusher
scale to truck count correlations. Waste tonnages shall be
determined utilizing truck count, and estimated tonnages
calculated from actual measured ore tonnage/truck count
correlations.
B. The crushing system will have continuously produced crushed,
nominal minus 1/4 inch, ore to the leach pad feed stock pile
at the rate supplied by the mine or from the coarse ore
stockpile in accordance with the 120-day test schedule. The
crusher will demonstrate an 85% mechanical availability during
the 120-day test period, and will have operated at an average
production rate, through the tertiary crusher, of 60,000
d.s.t.p.w. for a minimum of the last 12 weeks (based upon a
work week of five days) of the 120-day test.
C. The conveying, agglomeration and stacking system will have
continuously delivered crushed, agglomerated ore to the leach
pad at the rate supplied by the crushing plant in accordance
with the 120-day test schedule. The conveying, agglomeration
and stacking system will demonstrate a minimum 85% mechanical
availability during the 120-day test period, and will have
operated at an average production rate, through the heap
conveyor stacker, of 60,000 d.s.t.p.w.
CONSTRUCTION CERTIFICATE
<PAGE> 166
- 13 -
for a minimum of the last 12 weeks (based upon a work week of
five days) of the 120-day test.
D. The average grade of the ore placed on the leach pad during
the 120-day test period, as measured by daily shift samples
taken by the tertiary crusher discharge belt sampler, shall be
within 90% of that predicted by the mine planning block model
or stockpile inventories and the operations schedule as
supplied to the Agent at the beginning of the 120-day test
period. i.e., [____] o.p.t. Au (x .90) if the Base Case Cash
Flow Forecast is used for months 1 through 4 of year 1.
E. The heap leach barren solution pumping system will have
demonstrated a 99% of design mechanical availability during
the 120-day test period, and will have delivered leach
solutions at an average rate of (i) 1,000 u.s.g.p.m. for a
minimum of ten consecutive days during the same period and
(ii) 2,000 u.s.g.p.m. for a minimum of five consecutive hours
on three separate occasions during the same period. Daily
shift logs of measured flow rates of barren solution delivered
will be maintained during the 120- day test period.
F. The gold recovery plant will have processed an average
pregnant solution flow of (1000 u.s.g.p.m.) ([______] m3/hr) a
minimum of the last 30 days of the 120-day test period.
Throughout the 120-day test period, the gold recovery plant
will demonstrate recoveries of at least 98% and produce an
average barren solution grade
CONSTRUCTION CERTIFICATE
<PAGE> 167
- 14 -
not greater than 0.0015 o.p.t. Au.
The carbon adsorption, elution, and electrowinning plant will
have demonstrated a mechanical availability of 95% during the
120-day test period.
G. In the reasonable opinion of the Independent Engineer, the
Project has been shown to comply substantially with, and meet,
the specified standards defined in the Feasibility Study with
respect to the technical aspects of the operation, safety and
environmental requirements.
H. The facilities have been acquired, delivered, constructed,
tested, commissioned, operated and maintained in accordance
with the Feasibility Study, engineering design, vendor
recommendations for warranty protection, drawings, criteria
specifications, safety and environmental requirements
including good industry practice in the United States.
4. TECHNICAL/OPERATING COST PERFORMANCE TEST
The Independent Engineer will determine, without material qualification
or exception, that in the Independent Engineer's judgement, the Project
has achieved the following Technical/Operating Cost Performance Test
criteria during the 120 days of the Performance Test period and shall
so certify.
A. The Project operating costs will have been measured over four
monthly periods and average monthly costs determined for
labor, electric power, reagents, maintenance materials, heavy
consumables,
CONSTRUCTION CERTIFICATE
<PAGE> 168
- 15 -
operating supplies and over heads. Unit cost per ton for the
above mentioned variables will be evaluated for the last 60
days of the 120-day test period and compared with the base
case economic model delivered pursuant to Section 6.01(n) of
the Loan Agreement. Total unit operating costs will be deemed
to pass the completion criteria if they represent not more
than 110% of the total unit operating costs set forth in the
base case model as represented in the 120-day test plan
furnished by the Borrower and approved by the Agent.
B. The production plans and projected operating budget for the
facilities will have been developed for at least the next
six-month period following the completion of the 120-day
Performance Test.
C. In the opinion of the Independent Engineer sufficient stocks
of consumables, wear parts, and critical capital spares are on
hand or supported by adequate inventory control systems to
assure continuous production after the completion of the
120-day test period.
D. The carbon adsorption, elution, electrowinning and
regeneration circuits shall have operated satisfactorily
during the 120- day test period at within +/- 10% of design
criteria as established in the final flow sheets and material
balances for the process plant.
E. A gold leach recovery equivalent to at least 72% of the ore
gold head grade as specified in the production plan for the
120-day test shall
CONSTRUCTION CERTIFICATE
<PAGE> 169
- 16 -
have been predicted by column testing from samples
representing the total ore tonnage placed on the leach pad
during the 120 days of the completion test.
It is assumed that from commissioning of the Project it will
take several months for the heap to reach equilibrium for both
solution flow and extraction rate as they are defined in the
Feasibility Study. Gold recovery data, as obtained from column
testing, will be used to affirm recovery assumptions as
indicated on the plan of operations submitted at the beginning
of the 120-day test period. The following schedule represents
the assumed rates, based upon previous column tests of the
deposit:
<TABLE>
<CAPTION>
Schedule
Month % Recovery % of Total Recovery
<S> <C> <C>
1 67 85.9
2 2 88.5
3 2 91.0
4 1 92.3
</TABLE>
F. All major commodities consumed in the Project will be
accounted for on a monthly basis during the 120-day
Performance Test period. Consumption rates for mining and
processing supplies, including drill bits, explosives, wear
parts, reagents, and maintenance and operating supplies will
be calculated and compared with the design criteria for each
commodity. Unit costs as calculated based upon a
CONSTRUCTION CERTIFICATE
<PAGE> 170
- 17 -
pertinent divisor, i.e., tons of ore, total tons,
gallons of solution, etc., will be expected to average +/- 10%
of those indicated in the mining and process design criteria,
and reflected in the base case economic model or accepted 120-
day production plan.
G. The following laboratory column leach testing methodology will
be used to furnish data used to predict the performance of
leaching ore as mined and placed on heaps from the inception
of mining to the end of the 120-day test period:
Samples of ore, as produced from the crusher, will begin being
composited as weekly samples during month 1 of crusher
operations. There will be four (4) weekly composites,
representing the first 30 days or calendar month of crusher
operations (whichever is longer) taken and prepared for column
leach testing utilizing sampling and testing procedures
identical to those used by McClelland in the feasibility phase
of the Project. The four columns will represent the ore mined
during each of the weeks respectively. The four columns tested
each week will be of 6" to 8" diameter x 10' size in order to
facilitate testing at the mine site, and to reduce the costs
associated with large diameter column tests.
During month 2 of ore production through the crusher, two
parallel splits of head samples taken over the entire period
will be used to run two column tests. The two columns will
represent ore mined in month 2.
CONSTRUCTION CERTIFICATE
<PAGE> 171
- 18 -
During month 3 of ore production through the crusher, two
parallel splits of head samples taken over the entire period
will be used to run two column tests. The two columns will
represent ore mined in month 3.
During month 4 of ore production through the crusher, two
parallel splits of head samples taken over the entire period
will be used to run two column tests. The two columns will
represent ore mined in month 4.
Data for predicting heap recovery will be available as
follows:
<TABLE>
<CAPTION>
Period Column ID Days Under Leach
<S> <C> <C>
Month 1 Week 1 21
Week 2 14
Week 3 7
Week 4 0
Month 2 Week 1 51+
Week 2 44+
Week 3 37+
Week 4 30+
Month 2A 0
Month 2B 0
Month 3 Week 1 81+
Week 2 74+
Week 3 67+
Week 4 0+
Month 2 A 30+
Month 2 B 30+
Month 3 A 0
Month 3 B 0
Month 4 Week 1 111+
Week 2 104+
Week 3 97+
Week 4 90+
Month 2 A 60+
Month 2 B 60+
Month 3 A 30+
</TABLE>
CONSTRUCTION CERTIFICATE
<PAGE> 172
- 19 -
<TABLE>
<S> <C>
Month 3 B 30+
Month 4 A 0
Month 4 B 0
</TABLE>
SCHEDULE DATES SHOWN IN THE PREVIOUS TABLE ARE MEANT FOR ILLUSTRATIVE
PURPOSES ONLY. ACTUAL RESULTS WILL BE SKEWED BY COLUMN AND SAMPLE
PREPARATION TIME. EVERY OTHER COLUMN WILL BE BROKEN DOWN AT 60 DAYS
LEACH TIME FOR TAIL ASSAY.
At the end of the 120-day Performance Test period, the Borrower will
prepare a leach test report detailing the extraction progress for each
column, and comparing the results achieved to data received from
initial heap leaching and process plant operations. The column leach
test series may continue for a maximum of an additional 90 days at the
discretion of the Agent and the Independent Engineer.
Metallurgical recoveries calculated for each weekly and monthly
composite column test shall be done in accordance with test procedures
as developed by McClelland Laboratories. Assay and calculated recovery
calculations shall be as used in the Feasibility Study.
The completion test gold recovery criteria will be accepted by the
Independent Engineer if the following is achieved:
For a weighted feed grade value as composited for each column
test, as compares within +/- 10% of the production plan
predicted head grade, the gold recovery shall meet or exceed
the value as indicated by paragraph 4E of this document.
Column leach test results representing 120 days of leaching
shall demonstrate a recovery of a minimum of 72%.
H. The Borrower has produced and sold Gold during the 120-
day test period and received payment to the Proceeds
Account, and the aggregate amount and value of gold
produced, sold and/or in the process of being refined (as
certified by Metalor USA Refining Corporation) by the
Project during the test period is substantially in
accordance with that predicted in the Feasibility Study,
and shall in any event be not less than 90% of the
planned Ounces as indicated in months 1 through 4 of the
base case economic model.
COMPLETION TEST REPORT
A final report describing the findings during the Performance
Test will be issued as indicated below:
No later than 20 days after the end of each of the Physical
Performance Test and the Technical/Operating Cost Performance
Test (including any additional testing
CONSTRUCTION CERTIFICATE
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period agreed by the Independent Engineer, the Agent and the
Borrower), the Independent Engineer shall certify to the Agent
without material qualification or exception, whether or not,
in the Independent Engineer's judgement, such test has been
satisfied. A copy of such certification shall be provided to
the Borrower.
PERSONNEL
The Independent Engineer will confirm without material
qualification or exception that the work force including
management are, in the Independent Engineer's judgement,
employed or otherwise retained with appropriate experience or
qualifications to operate the Project as contemplated by
updates to the Feasibility Study.
RESERVE DEPLETION
The Independent Engineer will confirm that the remaining ore
reserves at the end of the 120-day test period shall not, in
the Independent Engineer's judgement, have been depleted to
the extent that they do not comply with the terms of the
Feasibility Study.
5. LEGAL COMPLIANCE TEST
At the end of the 120-day Performance Test period (and any
additional testing periods agreed by the Independent Engineer,
the Agent and the Borrower), and without material
qualification, the Borrower shall certify that as of the date
thereof:
A. Each Financing Document and each Project Document remains
in full force and effect;
B. The Governmental Approvals listed in the Schedule V of the
Loan Agreement required as of such date, and any other
material Governmental Approvals that are required as of such
date, for operation of the Project as contemplated in the
Feasibility Study are in full force and effect in all material
respects;
C. No Default and no Event of Default has occurred and is
continuing; and
D. The Borrower is in compliance with the requirements set
forth in Section 8.25 of the Loan Agreement; and no
occurrence or condition of which the Borrower is or
(after reasonably diligent investigation) should be aware
has existed at any time prior to such date which may
constitute a failure to comply with the environmental
requirements set forth in said Section 8.25 (or, if aware
of any such failure in compliance, such failure and any
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adverse consequences thereof have been remedied as
prescribed by said environmental requirements).
6. ECONOMIC TEST
The Economic Test will be calculated at the end of the 120-day
Performance Test period and will incorporate Project
performance data based on the average operating performance
during the 120-day test period. The operating performance
parameters to be used in the Economic Test shall reflect the
realistic and sustainable operating performance of the Project
(in the reasonable opinion of the Independent Engineer and as
agreed to by the Agent and the Borrower). All variances to the
Feasibility Study parameters demonstrated by the Project
performance data over the 120-day test period will be used in
the economic test, to the extent that the Performance Test
requirements outlined in Items 3 and 4 above are not met and
their use is agreed among the Agent, the Borrower and the
Independent Engineer.
Notwithstanding the Borrower's failure to satisfy the
requirements of Items 3 and 4 above or any other provision in
this Appendix J, Project Completion shall nevertheless be
satisfied upon the satisfaction of the Economic Test.
The Economic Test shall be satisfied if, at the end of the
120-day Performance Test period (and any additional testing
period agreed by the Independent Engineer, the Agent and the
Borrower), the Agent, after consultation with the Borrower and
the Independent Engineer, shall certify that the Future Debt
Cover Ratio is greater than or not materially less than 1.6:1,
as calculated from the base case economic model which
incorporates agreed changes with respect to the operating,
technical and economic assumptions contained therein and
reflecting (a) 95% of the then-estimated operating performance
and (b) 110% of the then-estimated Project operation costs.
CONSTRUCTION CERTIFICATE
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APPENDIX K
TO LOAN AGREEMENT
[Form of Expansion Completion Certificate]
CERTIFICATE OF INDEPENDENT ENGINEER
[DATE]
Banque Paribas,
New York Branch,
as Agent under the
Loan Agreement
787 Seventh Avenue
New York, New York 10019
Attention: Thomas K. Emmons
Re: CR BRIGGS CORPORATION
Ladies and Gentlemen:
Reference is made to the Loan Agreement dated as of December
6, 1995 (as amended, modified and supplemented and in effect from time to time,
the "Loan Agreement") among CR Briggs Corporation, a corporation duly organized
and validly existing under the laws of the State of Colorado (the "Borrower"),
the Lenders named therein and Banque Paribas, New York Branch, as agent for said
Lenders (in such capacity, together with its successors in such capacity, the
"Agent"). Terms defined in the Loan Agreement are used herein as defined
therein.
We have reviewed on [__________] all work in connection with
the Expansion. Our review and observations were performed in accordance with
generally accepted technical consulting practice and included such
investigations, observations and review as we in our professional capacity
deemed necessary under the circumstances within the scope of our service. Based
upon the foregoing, we are of the opinion that, as of the date of this
certificate:
1. The work performed under the Liner Contract and all other
work and services performed in connection with the Expansion has been
performed in accordance with (1) the Liner Contract, (2) the
Construction and Payment Schedule and (3) generally accepted
engineering and construction practices.
2. The Expansion complies in all material respects with the
specifications for the heap leach pad as described in the Feasibility
Study and the heap leach pad is capable of meeting
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the performance projections set forth in the Feasibility
Study.
3. The Expansion Completion Date occurred on or prior
to [____________].
Very truly yours,
[NAME OF INDEPENDENT ENGINEER]
By ____________________________
Name:
Title:
CONSTRUCTION CERTIFICATE
<PAGE> 177
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APPENDIX L
TO LOAN AGREEMENT
================================================================================
DEPOSIT AND DISBURSEMENT AGREEMENT
DATED AS OF DECEMBER 6, 1995
AMONG
CR BRIGGS CORPORATION,
A WHOLLY-OWNED SUBSIDIARY OF
CANYON RESOURCES CORPORATION,
AS BORROWER
AND
CANYON RESOURCES CORPORATION,
AS GUARANTOR
AND
BANQUE PARIBAS, NEW YORK BRANCH,
AS AGENT
AND
WILMINGTON TRUST COMPANY,
AS DEPOSITARY
===============================================================================
CONSTRUCTION CERTIFICATE
<PAGE> 178
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DEPOSIT AND DISBURSEMENT AGREEMENT dated as of December 6,
1995, among CR BRIGGS CORPORATION, a corporation duly organized and validly
existing under the laws of the State of Colorado (the "Borrower"); CANYON
RESOURCES CORPORATION, a corporation duly organized and validly existing under
the laws of the State of Delaware (the "Guarantor"); BANQUE PARIBAS, NEW YORK
BRANCH, a banking institution organized under the laws of France, as agent for
the Secured Parties (as defined in the Security Agreement referred to below) (in
such capacity, together with its successors and assigns in such capacity, the
"Agent"); and WILMINGTON TRUST COMPANY, a banking corporation organized under
the laws of the State of Delaware, as depositary bank (in such capacity,
together with its successors and assigns in such capacity, the "Depositary").
Except as otherwise expressly defined in this Agreement, terms defined in the
Loan Agreement referred to below are used herein as defined therein.
W I T N E S S E T H :
WHEREAS, the Borrower, the lenders referred to therein (the
"Lenders") and the Agent, are party to a Loan Agreement dated as of December 6,
1995 (the "Loan Agreement");
WHEREAS, the Borrower and the Agent are party to a Security
Agreement dated as of December 6, 1995 (the "Security Agreement");
WHEREAS, the Guarantor, the Agent and the Borrower are party
to the Guarantee, Equity Contribution and Pledge Agreement dated as of December
6, 1995 (the "Guarantee and Pledge Agreement");
WHEREAS, the Agent, the Guarantor and the Borrower desire to
appoint the Depositary to hold and administer money in accordance with the terms
of this Agreement, and the Depositary wishes to so act;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
ARTICLE (1)
DEPOSITARY BANK;
ESTABLISHMENT OF ACCOUNTS
Section A. Appointment and Acceptance of Depositary.
1. The Borrower, the Guarantor and the Agent hereby appoint the
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Depositary, and the Depositary hereby agrees, to act as depositary bank and to
accept all cash, payments and other amounts to be delivered to or held by the
Depositary pursuant to the terms of this Agreement. The Depositary agrees to
hold and safeguard the Canyon Contingency Account, the Accounts and the
Sub-Accounts during the term of this Agreement and shall treat the moneys,
instruments and securities in the Canyon Contingency Account, the Accounts and
Sub-Accounts as moneys, instruments and securities pledged by the Guarantor and
the Borrower to the Agent for the benefit of the Secured Parties to be held in
the custody of the Depositary in accordance with the provisions of this
Agreement. In performing its functions and duties under this Agreement, the
Depositary shall act as agent for the Agent.
2. For the avoidance of doubt, all moneys and other Property held in
the Accounts and Sub-Accounts shall be the Property of the Borrower.
Notwithstanding the above, the Borrower shall not have any right to withdraw or
requisition, pledge, assign or transfer moneys or any Property held in the
Accounts or Sub-Accounts, except as permitted by this Agreement, the Loan
Agreement and the Security Agreement, provided that the Borrower shall have the
ability to direct the investment of moneys held in the Accounts and Sub-Accounts
as permitted by Section 2.4 hereof. Each of the Accounts and Sub-Accounts shall
at all times be in the exclusive possession of, and under the exclusive domain
and control of, the Depositary, as agent for the Agent acting on behalf of the
Secured Parties.
(c) For the avoidance of doubt, all moneys and other Property held in
the Canyon Contingency Account shall be the Property of the Guarantor.
Notwithstanding the above, the Guarantor shall not have any right to withdraw or
requisition, pledge, assign or transfer moneys or any Property held in the
Canyon Contingency Account except as permitted by this Agreement, the Loan
Agreement and the Guarantee and Pledge Agreement, provided that the Guarantor
shall have the ability to direct the investment of moneys held in the Canyon
Contingency Account as permitted by Section 2.4 hereof. The Canyon Contingency
Account shall at all times be in the exclusive possession of, and under the
exclusive domain and control of, the Depositary, as agent for the Agent acting
on behalf of the Secured Parties.
Section B. Establishment of Accounts. The Depositary hereby agrees to
open and maintain the Canyon Contingency Account as directed by the Agent and
set forth in detail in Section 8 of the Guaranty and Pledge Agreement, and the
segregated Accounts and Sub-Accounts as directed by the Agent and set forth in
detail in Article IV of the Loan Agreement, which Canyon Contingency Account and
Accounts shall be maintained at all times until the termination of this
Agreement pursuant to Section 1.4 hereof. Certain additional Accounts and/or
Sub-Accounts may be
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established and created at the direction of the Agent from time to time in
accordance with the Loan Agreement.
All amounts held from time to time in the Canyon Contingency Account,
each Account and each Sub-Account shall be held in the custody of the Depositary
for the purposes and on the terms set forth in this Agreement. All such amounts
shall constitute part of the Collateral and shall not constitute payment of any
Indebtedness or any other obligation of the Borrower until applied as set forth
in the Loan Agreement.
Section C. Security Interest. As collateral security for the prompt and
complete payment and performance when due of all their respective obligations,
each of the Borrower and the Guarantor has pledged, assigned and transferred to
the Agent for the benefit of the Secured Parties, and has granted to the Agent
for the benefit of the Secured Parties a Lien on and security interest in and
to, and in furtherance thereof hereby pledges, assigns and transfers to the
Depositary for the benefit of the Agent, and hereby grants to the Depositary,
for the benefit of the Agent and the other Secured Parties, a Lien on and
security interest in and to, (i) each Account and Sub-Account, and the Canyon
Contingency Account (as the case may be), and (ii) all cash, investments and
securities at any time on deposit in any Account or Sub-Account, and the Canyon
Contingency Account (as the case may be), including all income or gain earned
thereon; provided that the Depositary shall not be responsible to take any
action to perfect or maintain the perfection of such Lien except through the
performance of its express obligations hereunder or upon the written direction
of the Agent complying with this Agreement.
Section D. Termination. This Agreement shall remain in full force and
effect until the termination of the Security Agreement and the Guarantee and
Pledge Agreement pursuant to the terms thereof.
ARTICLE (2)
DUTIES OF DEPOSITARY
Section 2.1 Instructions; Standard of Care. The Depositary is hereby
authorized and directed with respect to all sums of money and other Property
held in the Canyon Contingency Account, the Accounts and Sub-Accounts to make
the transfers directed by the Agent in the amounts and to the Persons so
directed. In fulfilling its duties hereunder with respect to operation of the
Canyon Contingency Account, the Accounts and Sub-Accounts, the Depositary shall
be required to use the degree
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- 4 -
of care used by it with respect to its own property of a similar nature.
Section 2.2 Appointment of Depositary, Powers and Immunities. The
Depositary shall not have any duties or responsibilities except those expressly
set forth in this Agreement. The Depositary shall not be responsible to the
Agent for any recitals, statements, representations or warranties made by the
Borrower or by the Guarantor contained in any Project Document or Financing
Document or in any certificate or other document referred to or provided for in,
or received by the Agent under, the Loan Agreement, this Agreement or any
Project Document or any other Financing Document, for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of the moneys or
investments in the Canyon Contingency Account, the Accounts or the Sub-Accounts,
this Agreement, any Project Document, any Financing Document or any other
document referred to or provided for herein or therein or for any failure by the
Borrower or by the Guarantor to perform their respective obligations hereunder
or thereunder. The Depositary shall not be required to ascertain or inquire as
to the performance by the Borrower or by the Guarantor of any of their
respective obligations under the Loan Agreement, any other Financing Document,
this Agreement or any Project Document or any other document or agreement
contemplated hereby or thereby. The Depositary shall not be (a) required to
initiate or conduct any litigation or collection proceeding hereunder or under
any other Financing Document or (b) responsible for any action taken or omitted
to be taken by it hereunder (except for its own gross negligence or willful
misconduct or as provided in Section 2.1) or in connection with any other
Financing Document. Except as otherwise provided under this Agreement, the
Depositary shall take action under this Agreement only as it shall be directed
in writing by the Agent. Whenever in the administration of this Agreement the
Depositary shall deem it necessary or desirable that a factual matter be proved
or established in connection with the Depositary taking, suffering or omitting
to take any action hereunder, such matter (unless otherwise evidence in respect
thereof is herein specifically prescribed) may be deemed to be conclusively
proved or established by a certificate of any authorized representative of the
Agent and such certificate shall be full warranty to the Depositary for any
action taken, suffered or omitted. The Depositary shall have the right at any
time to seek instructions concerning the administration of this Agreement from
the Agent or any court of competent jurisdiction.
Section 2.3 Reliance by Depositary. The Depositary shall be entitled to
rely upon any certificate, officer's certificate, notice or other document
(including any cable, telegram, telecopy or telex) of the Agent believed by it
to be genuine and to have been signed or sent by or on behalf of the
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<PAGE> 182
- 5 -
Agent, and upon advice and statements of legal counsel, independent accountants
and other experts selected by the Depositary and shall have no liability for its
actions taken thereupon, unless due to the Depositary's willful misconduct or
gross negligence. Without limiting the generality of the foregoing, the
Depositary shall be required to make payments to the Agent only as set forth
herein. As to any matters not expressly provided for by this Agreement, the
Depositary shall not be required to take any action or exercise any discretion,
but shall be required to act or to refrain from acting solely upon the
instructions of the Agent, and shall in all such cases be fully protected in
acting, or in refraining from acting, hereunder in accordance with or pursuant
to the terms of this Agreement or the instructions of the Agent, and such
instructions of the Agent and any action taken or failure to act pursuant
thereto shall be binding on all of the Secured Parties. The Depositary shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement in accordance with a request of the Agent, and such request and any
action taken or failure to act pursuant thereto shall be binding upon the Agent
and the other Secured Parties.
Section 2.4 Investment of Funds in Accounts. Unless an Event of Default
shall have occurred and be continuing, the Borrower may direct the Depositary to
invest funds in the Accounts and Sub-Accounts, and the Guarantor may direct the
Depositary to invest funds in the Canyon Contingency Account, provided in each
case that the designated investment is a Permitted Investment. After the
occurrence and during the continuance of an Event of Default, investments by the
Depositary in Permitted Investments shall be made solely as directed by the
Agent. The Depositary shall not be charged with notice of an Event of Default
unless an officer in the Corporate Trust Administration of the Depositary
receives written notice of such default from the Agent.
ARTICLE (3)
EXPENSES; INDEMNIFICATION; FEES
Section A. Expenses. The Agent agrees to pay or reimburse all
reasonable out-of-pocket expenses of the Depositary (including reasonable fees
and expenses for legal services of every kind) in respect of, or incident to,
the administration or enforcement of any of the provisions of this Agreement or
in connection with any amendment, waiver or consent relating to this Agreement.
Section B. Indemnification. The Agent agrees to indemnify the
Depositary from and against any and all claims,
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<PAGE> 183
- 6 -
losses, liabilities and expenses (including the fees and expenses of counsel)
growing out of or resulting from (a) this Agreement (including, without
limitation, performance under or enforcement of this Agreement, but excluding
any such claims, losses or liabilities resulting solely from the Depositary's
gross negligence or willful misconduct) or (b) any refund or adjustment of any
amount paid or payable to the Depositary under or in respect of this Agreement
which may be ordered or otherwise required by any Person. The foregoing
indemnity includes, without limitation, any action taken or omitted to be taken
upon the instructions of the Agent or the Borrower in accordance with this
Agreement. This indemnity shall survive the termination of this Agreement.
Section C. Fees. The Depositary shall be entitled to such fees as are
agreed to in a separate agreement between the Depositary and the Agent.
ARTICLE (4)
EXCULPATION; RESIGNATION AND REMOVAL
Section A. Exculpation. Notwithstanding anything to the contrary
contained in this Agreement, the liability and obligation of the Depositary to
perform and observe and make good the obligations contained in this Agreement
shall not be enforced by any action or proceeding wherein damages or any money
judgment or any deficiency judgment or any judgment establishing any personal
obligation or liability shall be sought, collected or otherwise obtained against
any past, present or future officer, director, shareholder or employee of the
Depositary. Each of the Borrower, the Guarantor and the Agent, for itself and
its successors and assigns, irrevocably waives any and all right to sue for,
seek or demand any such damages, money judgment, deficiency judgment or personal
judgment against any past, present or future officer, director, shareholder or
employee of the Depositary under or by reason of or in connection with this
Agreement and agrees to look solely to the Depositary for the enforcement of any
liability and obligation of the Depositary. Nothing contained in this paragraph
shall be construed as modifying, qualifying or affecting in any manner
whatsoever the lien and security interests created by this Agreement and the
other Financing Documents or the enforcement thereof by the Agent.
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<PAGE> 184
- 7 -
Section 4.2 Concerning The Depositary.
(a) No implied covenants or obligations shall be inferred from this
Agreement against the Depositary, nor shall the Depositary be bound by the
provisions of any agreement among the Agent and any other person beyond the
specific terms hereof.
(b) The Depositary shall in no event have any liability in connection
with its investment or reinvestment, in good faith and in accordance with the
terms hereof, of any moneys held by it hereunder, including without limitation
any liability for any delay not resulting from gross negligence or bad faith in
such investment or reinvestment, or for any loss of income incident to any such
delay.
(c) In no event shall the Depositary be liable (i) for acting in
accordance with instructions from the Agent or any agent of the Agent, (ii) for
special or consequential damages, or (iii) for the acts or omissions of its
nominees, correspondents, designees, subagents or sub-custodians.
(d) In no event shall the Depositary be liable for any interest on
funds deposited in the Canyon Contingency Account, the Accounts or the
Sub-Accounts unless invested with the Depositary in its commercial capacity.
(e) The Depositary shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other Property deposited hereunder.
(f) No provisions of this Agreement shall require the Depositary to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
Section 4.3 Resignation or Removal of Depositary.
(a) The Depositary may resign at any time by giving at least 30 days
written notice to the Agent. Until all fees, costs and expenses or other
obligations due and payable to the Depositary hereunder are paid, the Depositary
shall hold the Property held hereunder, pending delivery to a successor
Depositary appointed by the Agent. If a successor Depositary has not been
appointed or has not accepted such appointment by the end of such 30-day period,
the Depositary may apply to a court of competent jurisdiction for the
appointment of a successor Depositary, or for other appropriate relief and the
costs, expenses and reasonable attorney's fees which the Depositary incurs in
connection with such a proceeding shall be paid by the Agent.
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<PAGE> 185
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(b) The Agent may remove the Depositary upon written notice to the
Depositary signed by the Agent. Such removal shall take effect upon delivery of
the Property held hereunder to a successor Depositary designated in writing by
the Agent, and the Depositary shall thereupon be discharged from all obligations
under this Agreement and shall have no further duties or responsibilities in
connection herewith. Upon the payment of all fees, costs and expenses or other
obligations due and payable to the Depositary, the Depositary shall deliver the
Property held hereunder without unreasonable delay after receiving the Agent's
designation of a successor Depositary.
(c) If after 40 days from the date of delivery of its written notice of
intent to resign or of the Agents' notice of removal the Depositary has not
received a written designation of a successor Depositary, the Depositary's sole
responsibility shall be in its sole discretion either to retain custody of the
Property held hereunder without any obligation to invest or reinvest any such
Property until it receives such designation, or to apply to a court of competent
jurisdiction for appointment of a successor Depositary and after such
appointment to have no further duties or responsibilities in connection
herewith.
ARTICLE (5)
MISCELLANEOUS
Section A. Amendments; Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by the Depositary herefrom shall in
any event be effective unless the same shall be in writing and signed by the
Agent, the Borrower, the Guarantor and the Depositary. Any such amendment,
waiver or consent shall be effective only in the specific instance and for the
specified purpose for which given.
Section B. Addresses for Notices. All notices, requests and other
communications provided for hereunder shall be in writing and, except as
otherwise required by the provisions of this Depositary Agreement, shall be
given to the Borrower and the Agent as provided in Section 11.06 of the Loan
Agreement, to the Guarantor as provided in Section 8.02 of the Guarantee and
Pledge Agreement, and in the case of notices or communications to or with the
Depositary, to the following address, or such other address as the Depositary
may from time to time designate in writing to the other parties hereto as herein
required:
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Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Telecopier: (302) 651-8882
Section C. Governing Law; Submission to Jurisdiction. THIS AGREEMENT
AND THE LEGAL RELATIONS AMONG THE PARTIES SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE. To the
fullest extent permitted by applicable law, each of the parties to this
Agreement hereby irrevocably and unconditionally (i) consents to submit to the
nonexclusive jurisdiction of the courts of the State of Delaware for purposes of
any action or proceeding arising out of or in connection with this Agreement,
and (ii) agrees, to the extent such party is not a resident of the State of
Delaware, to service of all legal process by certified mail to the address
described in Section 5.2 hereof and by all other methods of service permitted
under applicable law.
Section D. Headings. Headings used in this Agreement are for
convenience of reference only and do not constitute part of this Agreement for
any purpose.
Section E. No Third Party Beneficiaries. The agreements of the parties
hereto are solely for the benefit of the Guarantor, the Borrower, the
Depositary, the Agent, the other Secured Parties and their respective successors
and assigns (provided that any successor to any Secured Obligations arising
under any Hedge Contract is a Lender) and no Person (other than the parties
hereto and such Secured Parties) shall have any rights hereunder.
Section F. No Waiver. No failure on the part of the Depositary or the
Agent or any of their nominees or representatives to exercise, and no course of
dealing with respect to, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof.
Section G. Severability. If any provision of this Agreement or the
application thereof shall be invalid or unenforceable to any extent, (a) the
remainder of this Agreement and the application of such remaining provisions
shall not be affected thereby and (b) each such remaining provision shall be
enforced to the greatest extent permitted by law.
Section H. Successors and Assigns. All covenants, agreements,
representations and warranties in this Agreement by the Depositary, the Agent,
the Guarantor and the Borrower shall bind and, to the extent permitted hereby,
shall inure to the
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benefit of and be enforceable by their respective successors and
assigns, whether so expressed or not.
Section I. Execution in Counterparts. This instru- ment may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.
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IN WITNESS WHEREOF, the parties thereto have caused this
Agreement to be duly executed as of the day and year first above written.
CR BRIGGS CORPORATION,
as Borrower
By_________________________
Name:
Title:
CANYON RESOURCES CORPORATION,
as Guarantor
By_________________________
Name:
Title:
BANQUE PARIBAS, NEW YORK BRANCH,
as Agent
By_________________________
Name:
Title:
By_________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Depositary
By_________________________
Name:
Title:
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<PAGE> 1
CATERPILLAR FINANCIAL SERVICES CORPORATION
MASTER TAX LEASE
This Lease dated as of December 27, 1995, is between Caterpillar
Financial Services Corporation, a Delaware corporation whose address is 1855 W.
Baseline Rd. Ste. 270, Mesa, AZ 85202 ("Lessor") and CR Briggs Croporation,
whose address is 1525 No. Norma Street, Suite C, Ridgecrest, CA 93555
("Lessee").
Lessor agrees to acquire and lease to Lessee, and Lessee agrees to
lease from Lessor, the personal property ("Units" and individually "Unit")
described in any schedule ("Schedule") attached or which may in the future be
attached (any Schedule upon execution by Lessee and Lessor becoming a part of
this Lease), upon the following terms and conditions:
SECTION 1 ACQUISITION AND DELIVERY
1.1 Lessee shall select each Unit it desires to lease from Lessor and
the vendor of the Unit. Lessor, in reliance on these selections and subject to
Section 1.3, will, on or prior to the Delivery Date (as hereafter defined) of
the Unit, either (a) enter into a purchase agreement for the Unit with the
vendor, or (b) accept assignment from Lessee, using Lessor's standard form, of
all of Lessee's right, title and interest in and to the Unit and any existing
purchase agreement with the vendor. The Delivery Date of each Unit shall be the
date on which (a) Lessor executes the Schedule covering the Unit, (b) Lessor
takes title to the Unit, or (c) Lessee or its agent takes control or physical
possession of the Unit, whichever is latest.
1.2 If Lessee has taken title to a Unit, then Section 1.2 shall apply
with respect to the Unit in lieu of Section 1.1. On a date agreed upon by Lessor
and Lessee (the "Delivery Date"), Lessor agrees to purchase from (subject to
Section 1.3) and lease back to Lessee and Lessee agrees to sell to and lease
back from Lessor the Unit, provided Lessee has executed and delivered to Lessor
or its designee a bill of sale, in Lessor's standard form, with respect to the
Unit. Lessee warrants that as of the Delivery Date the Unit and Lessee's right,
title and interest in and to the Unit shall be free from all claims, liens,
security interests and encumbrances.
1.3 The obligation of Lessor to purchase and pay for a Unit leased
under any Schedule is subject to (a) Lessee having accepted the Unit on the
Delivery Date; (b) the Delivery Date of the Unit being on or before the
utilization date stated in the Schedule; (c) no Event of Default (as hereinafter
defined) or any event which with notice or lapse of time would become an Event
of Default, existing as of the Delivery Date of the Unit; and (d) no material
adverse change in Lessee's financial or operating condition having occurred
after the execution of any Schedule and before the Delivery Date of the Unit. If
any of the foregoing conditions are not met, Lessee shall, upon request,
promptly discharge any obligation to pay for the Unit which Lessor may have
assumed or incurred and, upon discharge, Lessor shall assign to Lessee, without
recourse or warranty, any interest of Lessor in the Unit.
1.4 Lessee shall execute and send Lessor's delivery supplement
promptly after delivery of a Unit.
SECTION 2 TERM, RENT AND PAYMENT
2.1 The term of this Lease as to each Unit shall start on its
Delivery Date and continue as stated in the applicable Schedule.
2.2 Lessee shall pay to Lessor, at the location designated by Lessor
in writing, rent for each Unit in the amounts and at the times stated in the
applicable Schedule. Lessee shall pay to Lessor, on demand, a late payment
charge equal to that stated in the applicable Schedule on the amount of any
payment not made when due under this Lease from the date due until payment is
received by Lessor.
2.3 An amount equal to the first rent payment for all of the Units
Lessee desires to lease pursuant to a Schedule must accompany the Schedule,
executed by Lessee, when submitted to Lessor. If Lessor executes the Schedule,
the amount shall be the first rent payment. If Lessor does not execute the
Schedule, the amount will be returned to Lessee.
2.4 Lessee shall not be entitled to any abatement or reduction of
rent or any setoff against rent for any reason whatsoever. Except as otherwise
provided, this Lease shall not terminate, nor shall the obligations of Lessor or
Lessee be affected, by reason of any defect in, damage to, destruction of, or
loss of possession or use of a Unit; by the attachment of any lien, encumbrance,
security interest or other claim of any third party to a Unit; by restriction of
or interference with Lessee's use of a Unit; by the insolvency of or the
commencement by or against Lessee of any bankruptcy, reorganization or similar
proceeding, or for any other cause, whether similar or dissimilar to the
foregoing. It is the intention of the parties that all rent and other amounts
payable by Lessee shall be paid in the manner and at the times provided.
SECTION 3 WARRANTY DISCLAIMER
Lessee acknowledges and agrees that (a) each Unit is of a size,
design and make selected by Lessee, (b) each Unit is suitable for Lessee's
purposes, (c) each Unit contains all safety features deemed necessary by Lessee,
(d) Lessor is not the manufacturer of any Unit, (e) the vendor of any Unit is
not an agent of Lessor, and (f) LESSOR HAS NOT MADE, AND DOES NOT HEREBY MAKE,
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
MERCHANTABILITY, CONDITION, QUALITY, DESCRIPTION OR DURABILITY OF A UNIT, OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor assigns to Lessee, to the extent
assignable, any warranties of a Unit by its manufacturer and/or vendor, provided
that any action taken by Lessee by reason thereof shall be at the expense of
Lessee.
SECTION 4 POSSESSION, USE AND MAINTENANCE
4.1 Lessee shall not (a) use, operate, maintain or store a Unit
improperly, carelessly, unsafely or in violation of any applicable law or
regulation of any governmental authority or for any purpose other than in the
conduct of its business; (b) abandon a Unit; (c) except as may be provided in a
Rider to this Lease, sublease a Unit or permit its use by anyone other than
Lessee without the prior written consent of Lessor; (d) permit the use of a Unit
to be changed from that specified in the Application Survey attached to the
applicable Schedule without the prior written consent of Lessor; (e) permit the
location of a Unit to be changed from that specified in the applicable Schedule
without the prior written consent of Lessor; or (f) create, incur or allow to
exist any lien, claim, security interest or encumbrance on any of its rights
hereunder or a Unit.
4.2 Lessee, at its expense, shall maintain each Unit in good
operating order, repair and condition and shall perform maintenance at least as
frequently as set forth in any applicable operator's guide, service manual, or
lubrication and maintenance guide for each Unit.
4.3 Lessee shall not alter a Unit or affix any accessory or
<PAGE> 2
equipment to it if doing so will impair its originally intended function or use
or reduce its value. Lessee shall not make any "non-severable" addition (as
defined for federal income tax purposes) to a Unit without the prior written
consent of Lessor. Any alteration or addition to a Unit, including the
alteration of any safety feature, shall be at the sole risk and responsibility
of Lessee. If an Event of Default occurs and is continuing, all parts,
accessories and equipment affixed to a Unit, excluding temporary replacements,
shall become property of Lessor. If no Event of Default has occurred and is
continuing, Lessee may remove at its expense any such parts, accessories and
equipment at the expiration of the term of this Lease with respect to the Unit,
provided that removal will not impair its originally intended function or use.
4.4 If Lessor supplies Lessee with labels stating that the Unit is
leased from Lessor, Lessee shall affix and keep them in a prominent place on the
Unit.
4.5 Lessor and its agents shall have the right to inspect a Unit,
observe its use and inspect any maintenance records relating to it at all
reasonable times. Lessor assumes no responsibility and waives no rights as a
result of any inspection or observation.
4.6 Each Unit shall remain the personal property of Lessor regardless
of its use or manner of attachment to realty.
SECTION 5 TAXES
5.1 Lessee shall promptly pay or reimburse Lessor for all fees and
taxes of any nature, together with any penalties, fines or additions to tax and
interest hereon (all of the foregoing hereafter the "Impositions"), levied upon
Lessor by any taxing authority with respect to or in connection with a Unit from
the time it is purchased by Lessor until it is returned to Lessor. Excluded,
however, are taxes measured by Lessor's net income, but not excluded are net
income taxes which by the terms of the statute imposing the tax expressly
relieve Lessee or Lessor from the payment of any Impositions which Lessee would
otherwise be obligated to pay or reimburse. If Lessor is not entitled to equal
deduction with respect to any Imposition which Lessee is required to pay or
reimburse hereunder and payment or reimbursement constitutes income to Lessor,
then Lessee shall also pay to Lessor the amount of any Impositions which Lessor
is obligated to pay in respect of (a) the payment or reimbursement by Lessee and
(b) any payment by Lessee made pursuant to this sentence. Lessee shall prepare
and file, in a manner satisfactory to Lessor, any reports or returns which may
be required with respect to a Unit.
5.2 This Lease is entered into on the basis that Lessor shall be
entitled to (a) depreciation deductions with respect to the Unit, in accordance
with Section 168(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), based upon the applicable depreciation method and recovery period
specified in Sections 168(b) and (c) of the Code as identified by Lessee; and
(b) for state income tax purposes, deductions analogous to (a) (all of the
foregoing hereinafter the "Tax Benefits"). If Lessor, for any reason other than
those stated in (i) through (iv) below, shall lose or lose the right to claim
or, if there shall be disallowed, deferred or recaptured with respect to Lessor,
any of the Tax Benefits with respect to any Unit (any of the foregoing hereafter
a "Loss"), then within thirty (30) days after written notice to Lessee by Lessor
that a Loss has occurred, Lessee shall pay Lessor an amount which, in the
reasonable opinion of Lessor, will cause Lessor's net after tax rate of return
over the term of this Lease in respect to the Unit to equal the net after tax
rate of return that would have been realized if Lessor had been entitled to its
anticipated utilization of all of the Tax Benefits. Lessor shall not be entitled
to payment for any Loss arising solely as a direct result of any of the
following: (i) a failure of Lessor to timely or properly claim the Tax Benefits
for a Unit; (ii) a foreclosure by any person holding a lien through Lessor on
any Unit, which foreclosure results solely from an act of Lessor; (iii) a
Casualty Occurrence, if the Casualty Value in connection therewith has been paid
by Lessee; or (iv) the failure of Lessor to have sufficient taxable income or
tax liability to utilize the Tax Benefits. Lessor shall be under no obligation
to contest any action which may result in a Loss. Lessee acknowledges and
confirms that Lessor's classification of the Unit in accordance with Section
168(e) of the Code and Lessor's entitlement to the Tax Benefits is based solely
upon Lessee's representations as to the proper classification of the Unit as
aforesaid.
5.3 For purposes of Sections 5.1 and 5.2, "Lessor" shall include any
affiliated group (within the meaning of Section 1504 of the Code) of which
Lessor is a member for any year in which a consolidated or combined income tax
return is filed for the affiliated group.
SECTION 6 LOSS OR DAMAGE
6.1 Lessee shall bear the risk of any Casualty Occurrence (the Unit
is worn out, lost, stolen, destroyed, taken by governmental action or, in
Lessors opinion, irreparably damaged) or other damage from the time it is
purchased by Lessor until it is returned to Lessor. Lessee shall give Lessor
prompt notice of a Casualty Occurrence or other damage. If, in Lessor's opinion,
the damage is not a Casualty Occurrence, Lessee shall, at its expense, promptly
restore the Unit to the condition required by Section 4. If a Casualty
Occurrence, Lessee shall pay to Lessor on the first rent payment date following
the Casualty Occurrence (thirty (30) days after the Casualty Occurrence if there
is no rent payment date remaining) all amounts then due under this Lease with
respect to the Unit, plus a sum equal to the applicable Casualty Value of the
Unit as shown in the Exhibit attached to the applicable Schedule. Upon making
this payment, the term of this Lease with respect to the Unit shall terminate
and Lessor shall be entitled to possession of the Unit. Lessee shall be entitled
to any recovery for the Unit from insurance or otherwise to the extent it does
not exceed the amount of the Casualty Value paid by Lessee.
6.2 LESSEE AGREES TO DEFEND, INDEMNIFY AND HOLD LESSOR, ITS
EMPLOYEES, DIRECTORS AND OFFICERS HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS
OF LESSEE AND/OR THIRD PARTIES (INCLUDING, BUT NOT LIMITED TO, CLAIMS RELATING
TO PATENT INFRINGEMENT, BASED UPON STRICT LIABILITY IN TORT AND FOR
CONSEQUENTIAL DAMAGES), LOSSES, LIABILITIES, DEMANDS, SUITS, JUDGMENTS AND
CAUSES OF ACTION, AND ANY COSTS OR EXPENSES IN CONNECTION THEREWITH, INCLUDING
REASONABLE ATTORNEY'S FEES AND EXPENSES WHICH MAY RESULT FROM OR ARISE IN ANY
MANNER OUT OF THE DELIVERY (INCLUDING ANY DELAY IN, OR FAILURE OF, DELIVERY),
SELECTION, PURCHASE, ACCEPTANCE OR REJECTION, OWNERSHIP, POSSESSION, CONDITION,
USE, OPERATION, MAINTENANCE OR REPAIR OF A UNIT FROM THE TIME IT IS PURCHASED BY
LESSOR UNTIL IT IS RETURNED TO LESSOR OR WHICH MAY BE ATTRIBUTABLE TO A DEFECT
IN A UNIT, THE MATERIAL USED THEREIN OR THE DESIGN, MANUFACTURE OR TESTING
THEREOF, REGARDLESS OF WHEN THE DEFECT IS DISCOVERED, WHETHER OR NOT THE UNIT IS
IN THE POSSESSION OF LESSEE AND WHERE IT IS LOCATED.
SECTION 7 INSURANCE
Lessee, at its expense, shall keep each Unit insured for the benefit
of Lessor against all risks for not less than its Casualty Value and shall
maintain comprehensive public liability insurance (including product and broad
form contractual liability) covering the Unit for not less than $500,000
combined coverage for bodily injury and property damage. All insurance shall be
in a form and with companies as Lessor shall approve, shall specify Lessor and
Lessee as named insureds, shall
<PAGE> 3
be primary, without right of the contribution from any other insurance carried
by Lessor, and shall provide that the insurance may not be canceled or altered
so as to affect the interest of Lessor without at least ten (10) days' prior
written notice to Lessor. All insurance covering loss or damage to a Unit shall
name Lessor as loss payee. Lessee shall not make adjustments with insurers
except with Lessor's prior written consent and hereby irrevocably appoints
Lessor as Lessee's attorney-in-fact to receive payment of and to endorse all
checks, drafts and other documents and to take any other actions necessary to
pursue insurance claims and recover payments if Lessee fails to do so. Lessee
shall promptly notify Lessor of any occurrence which may become the basis of a
claim and shall provide Lessor with all requested pertinent data. Lessee shall
deliver to Lessor evidence of such insurance coverage.
SECTION 8 DEFAULT
8.1 Each of the following constitutes an event of default ("Event of
Default"): (a) Lessee fails to make any payment when due; (b) any representation
or warranty to Lessor which is incorrect or misleading; (c) Lessee fails to
observe or perform any covenant, agreement or warranty made by Lessee and the
failure continues for ten (10) days after written notice to Lessee (d) any
default occurs under any other agreement between Lessee and Lessor or any
affiliate of Lessor; (e) Lessee or any guarantor of this Lease ceases to do
business, becomes insolvent, makes an assignment for the benefit of creditors or
files any petition or action under any bankruptcy, reorganization, insolvency or
moratorium law, or any other law or laws for the relief of, or relating to,
debtors; (f) filing of an involuntary petition under any bankruptcy statute
against Lessee or any guarantor of this Lease, or appointment of a receiver,
trustee, custodian or similar official to take possession of the properties of
Lessee or any guarantor of this Lease, unless the petition or appointment ceases
to be in effect within thirty (30) days after filing or appointment; and (g)
breach or repudiation of a guaranty obtained by Lessor in connection with this
Lease.
8.2 If an Event of Default occurs, Lessor may (a) proceed by court
action to enforce performance by Lessee of the covenants of this Lease or to
recover damages for their breach or (b) by notice in writing to Lessee terminate
this Lease, in which event all rights of Lessee to use the Unit shall terminate,
but Lessee shall remain liable as provided herein and Lessor may do one or more
of the following: (i) require Lessee to return each Unit pursuant to Section 9;
(ii) enter the premises where any Unit may be and take possession of it without
notice, liability or legal process; (iii) recover from Lessee (whether or not
Lessor takes possession of a Unit) all amounts due or accrued on the date of
termination; (iv) recover as damages for loss of bargain and not as a penalty a
sum equal to the Casualty Value of the Unit; and (v) recover any other damages
incurred by Lessor because of the breach of any covenant, representation or
warranty other than payment of rent.
8.3 If an Event of Default occurs, and Lessee returns a Unit pursuant
to Section 9, Lessor shall undertake commercially reasonable efforts to sell or
re-lease it and the proceeds of any sale or re-lease shall be applied in the
following order: (a) to reimburse Lessor for all expenses of retaking, holding,
preparing for sale or re-lease and selling or re-leasing the Unit, including any
taxes, charges, costs, expenses and reasonable attorney's fees incurred by
Lessor; (b) to pay Lessor all amounts which under the terms of this Lease are
due or have accrued as of the date of Lessor's receipt of the proceeds; and (c)
to reimburse Lessee for any sums previously paid to Lessor as damages for loss
of bargain. Any surplus shall be retained by Lessor, to the extent permitted by
law. Lessee shall promptly pay any deficiency to Lessor. Lessee acknowledges
that the sale of a Unit to a wholesaler, retailer or user for cash or credit are
all commercially reasonable.
8.4 Lessee agrees to pay all charges, costs, expenses and reasonable
attorney's fees incurred by Lessor in enforcing this Lease.
8.5 The remedies provided to Lessor shall be cumulative and shall be
in addition to all other remedies existing at law or in equity.
8.6 If Lessee fails to perform any of its obligations under this
Lease, Lessor may perform the obligation and the expenses incurred by Lessor as
a result shall be payable by Lessee upon demand.
SECTION 9 RETURN OF UNIT
Upon expiration of the term of this Lease with respect to a Unit, or
if Lessor shall rightfully demand possession of a Unit, Lessee, at its expense,
shall promptly deliver possession of the Unit to Lessor, properly protected and
in the condition required by Section 4, at the option of Lessor, (a) to the
premises of the nearest Caterpillar dealer selling equipment of the same type as
the Unit, or (b) on board a carrier named by Lessor and shipping it, freight
collect, to the destination designated by Lessor. If the Unit is not in the
condition required by Section 4, Lessee shall pay to Lessor, on demand, all
costs and expenses incurred by Lessor to bring the Unit into the required
condition.
SECTION 10 ASSIGNMENT
All or any of the rights of Lessor under this Lease and title to a
Unit may be assigned by Lessor at any time. If notified by Lessor, Lessee shall
make all payments due under this Lease to the party designated without offset or
deduction. No assignment of this Lease, or any right or obligation under it, may
be made by Lessee or any assignee of Lessee, without the prior written consent
of Lessor. This Lease shall be binding upon and benefit Lessor and Lessee and
their respective successors and assigns. If this Lease is assigned by Lessor to
a partnership or trust, the term "Lessor" shall mean and include the partnership
or trust and shall also include (a), for purposes of Sections 3, 4, 5.1, 5.2, 6,
7, 8 and 9, each partner in or beneficiary of the partnership or trust and (b),
for purposes of Sections 5.1 and 5.2, any affiliated group of which a partner or
beneficiary is a member for any year in which a consolidated or combined income
tax return is filed for the affiliated group.
SECTION 11 FURTHER ASSURANCES
11.1 Lessee shall, at its expense, do any act and execute,
acknowledge, deliver, file, register and record any documents which Lessor may
reasonably request in order to protect Lessor's title to a Unit and Lessor's
right and benefits under this Lease.
11.2 Lessee represents and warrants to Lessor that (a) Lessee has the
power to make, deliver and perform under this Lease and all documents
contemplated by this Lease; (b) Lessee has taken all action needed to authorize
the execution, delivery and performance of this Lease and all documents
contemplated by this Lease; (c) the person or persons executing and delivering
this Lease and documents contemplated by this Lease are authorized to do so; (d)
this Lease constitutes a valid obligation of Lessee, legally binding upon it and
enforceable in accordance with its terms; and (e) the execution, delivery and
performance of this Lease and all documents contemplated by this Lease do not
require any consent or approval which has not been obtained. At the request of
Lessor, Lessee shall provide a certificate as to the foregoing representations
and warranties in a form satisfactory to Lessor.
SECTION 12 EFFECT OF WAIVER
A delay or omission by Lessor to exercise any right, power or remedy
shall not impair the right, power or remedy and shall not be construed to be a
waiver of any breach or default. Any waiver or consent by Lessor of or to any
breach or default must be in writing.
<PAGE> 4
SECTION 13 SEVERABILITY AND SURVIVAL OF COVENANTS
If any provision of this Lease shall be invalid under any law, it
shall be inapplicable and deemed omitted but the remaining provisions shall be
given effect in accordance with the intent of the Lease. All obligations of
Lessee shall survive the expiration or termination of this Lease to the extent
required for their full observance and performance.
SECTION 14 EFFECT AND MODIFICATION OF LEASE
This Lease exclusively and completely states the rights of Lessor and
Lessee with respect to the leasing of a Unit and supersedes all prior
agreements, oral or written. No variation or modification of this Lease shall be
valid unless in writing.
SECTION 15 FINANCIAL INFORMATION
Lessee shall keep its books and records in accordance with generally
accepted accounting principles and practices and shall deliver to Lessor its
annual audited financial statements and those unaudited financial statements
reasonably requested by Lessor. Lessee represents and warrants to Lessor that
all credit, financial and other information submitted to Lessor is and shall be
true, correct and complete.
SECTION 16 NOTICES
All demands and notices shall be in writing and deemed given when
personally delivered or received by mail, postage prepaid, addressed to the
other party at the address stated above or at any other address as may be
furnished in writing by a party to the other.
SECTION 17 COPIES
Two copies of this Lease have been executed by the parties. One has
been marked "Lessor's Copy" and the other has been marked "Lessee's Copy". Only
the copy marked "Lessor's Copy" shall evidence a monetary obligation of Lessee.
IN WITNESS WHEREOF, the parties have executed this Lease.
C R BRIGGS CORPORATION CATERPILLAR FINANCIAL SERVICES CORPORATION
("LESSEE") ("LESSOR")
Signature Signature
----------------------------- ------------------------
Name (Print) Richard H. De Voto Name (Print) F. Lynn McPheeters
----------------------- --------------------
Title President Title Executive Vice President
----------------------------- ----------------------------
Date December 4, 1995 Date December 27, 1995
----------------------------- -----------------------------
LESSEE COPY
<PAGE> 5
SCHEDULE NO. 1
TO MASTER TAX LEASE DATED AS OF DEC 27 1995
BETWEEN CATERPILLAR FINANCIAL SERVICES CORPORATION AND
C R BRIGGS CORPORATION
A. TERM AND RENT: The Lease term of each Unit shall start on its Delivery Date
and shall continue for 60 months. During the Lease term, Lessee shall pay rent
in advance [__] in arrears [X] ('X' one -- see payment alternatives on reverse
side) for each Unit at the rate set forth in Section B. Payments will start
accounting to the payment alternative and on the same date of each month
thereafter during the term of the Lease, except for the months of (__n/a__).
<TABLE>
<CAPTION>
RENT PURCHASE
B. DESCRIPTION OF UNIT(S) SERIAL# RATE PRICE
<S> <C> <C> <C> <C>
(1) NEW 777C CATERPILLAR OFF-HIGHWAY TRUCK 4XJ00795 10,526.00 230,819.00
(1) NEW 777C CATERPILLAR OFF-HIGHWAY TRUCK 4XJ00790 10,526.00 230,819.00
(1) NEW 777C CATERPILLAR OFF-HIGHWAY TRUCK 4XJ00772 10,526.00 230,819.00
(1) NEW 777C CATERPILLAR OFF-HIGHWAY TRUCK 4XJ00792 10,526.00 230,819.00
(1) NEW 992D CATERPILLAR WHEEL LOADER 7MJ00433 16,238.00 228,441.00
(1) NEW 992D CATERPILLAR WHEEL LOADER 7MJ00434 16,238.00 228,441.00
(1) NEW D10N CATERPILLAR TRACK-TYPE TRACTOR WITH 3SK00894 10,612.00 155,515.00
DOZER S/N:7RH00585 AND RIPPER S/N:7MH00626
(1) new D9R CATERPILLAR TRACK-TYPE TRACTOR WITH 8BL00668 8,192.00 129,420.00
DOZER S/N:1LP00252 AND RIPPER S/N:1PP00453
(1) NEW 16G CATERPILLAR MOTOR GRADER WITH 93U03678 6,805.00 95,532.00
RIPPER S/N n/a
----------
(1) NEW D6H CATERPILLAR TRACK-TYPE TRACTOR WITH 3ZF06187 3,258.00 45,053.00
DOZER S/N:1DH00916 AND RIPPER S/N:1EH01737
(1) NEW 426B CATERPILLAR BACKHOE LOADER 6KL01416 963.00 15,486.00
(1) NEW DM45E/1050 INGERSOLL RAND BLASTHOLE DRILL 7003 7,355.00 61,598.00
(1) NEW DM45E/1050 INGERSOLL RAND BLASTHOLE DRILL 7047 7,355.00 61,598.00
(1) NEW KODIAK CHEVROLET LUBE TRUCK WITH NEW EVERGREEN LUBE 1GBT7H4J0SJ103978 $2,358.00 19,746.00
BODY
</TABLE>
SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS
<TABLE>
<CAPTION>
<S> <C>
Lessee: C R BRIGGS CORPORATION Lessor: CATERPILLAR FINANCIAL SERVICES CORPORATION
By /s/ RICHARD H. DE VOTO By /s/ F. LYNN MC PHEETERS
---------------------------------------------------- -------------------------------------------------------
Name (PRINT) RICHARD H. DE VETO Name (PRINT) F. LYNN MC PHEETERS
------------------------------------------- ----------------------------------------------
Title PRESIDENT Title EXECUTIVE VICE PRESIDENT
------------------------------------------------- -----------------------------------------------------
Date DEC. 4, 1995 Date DEC. 27, 1995
-------------------------------------------------- ------------------------------------------------------
</TABLE>
LESSEE COPY
<PAGE> 6
C. PURCHASE OPTIONS: (See below) 'X' one: [ ] FMV Option [X] CAT Value
Option [ ] None
D. DEPRECIATION PERIOD: The Lease is entered into on the basis that Lessor
shall be entitled to depreciation deduction with respect to each Unit for
property with a recovery period of 7 years.
E. UTILIZATION DATE: January 31, 1996
F. LATE RENT PAYMENT CHARGE: Five percent (5%) of the amount not paid when due
or the highest charge allowed by law, whichever is less.
G. LOCATION OF UNIT(S): C R BRIGGS MINE SITE 7 MI S OF
BALLARAT, CA (INYO COUNTY)
H. ADDITIONAL PROVISIONS: RIDERS:
Construction Equipment Application Survey Rider
PAYMENT ALTERNATIVES:
If rent is due IN ADVANCE: The first payment for each Unit shall be due on its
Delivery Date.
If rent is due IN ARREARS: The first payment for each Unit shall be due one
month (or other period as stated in Section A) after its Delivery Date.
PURCHASE OPTIONS:
If FAIR MARKET VALUE (FMV) is checked: If no Event of Default shall have
occurred and be continuing, Lessee may, by notice delivered to Lessor not less
than six (6) months prior to the end of the term of the Lease of a Unit, elect
to purchase it AS IS, WHERE IS, WITH ALL FAULTS, for a purchase price equal to
the then Fair Market Value of the Unit. Fair Market Value is the amount which
would be obtained in an arm's length transaction between an informed and willing
buyer under no compulsion to buy (other than a used equipment dealer or a buyer
currently in possession) and an informed and willing seller under no compulsion
to sell and, in the determination thereof, costs of removal from the current
location shall not be a deduction from such value. If Lessor and Lessee have not
agreed upon the Fair Market Value of the Unit four (4) months prior to the end
of the term, Lessee shall either (a) rescind the election to purchase it, or (b)
apply to the American Arbitration Association for appointment of an appraiser
with instructions to determine its Fair Market Value within thirty (30) days
after his appointment and communicate the determination in writing to Lessor and
Lessee. The determination shall be conclusively binding upon Lessor and Lessee.
The expenses and fees of the appraiser shall be paid by Lessee. Upon receipt of
the purchase price, plus any taxes due in connection with the sale of the Unit,
Lessor shall deliver to Lessee upon request a bill of sale without warranties
except that the Unit is free of all encumbrances of any person claiming through
Lessor. Failure of Lessee to apply for appointment of an appraiser shall be
deemed a rescission of the election to purchase the Unit.
If CAT VALUE OPTION is checked: If no Event of Default shall have occurred and
be continuing, Lessee may, by notice delivered to Lessor not less than sixty
(60) days prior to the end of the term of the Lease with respect to a Unit,
elect to purchase it at the end of the term for the Purchase Price stated in
Section B. Lessor and Lessee agree the Purchase Price is a reasonable estimate
of the Fair Market Value of the Unit at the end of the term. Upon receipt of the
Purchase Price, plus any taxes due in connection with the sale of the Unit,
Lessor shall deliver to Lessee, upon request, a bill of sale without warranties
except that the Unit is free of all encumbrances of any person claiming through
the Lessor. Lessee shall purchase the Unit "AS IS, WHERE IS, WITH ALL FAULTS."
<PAGE> 7
ADDENDUM TO SCHEDULE NO. 1
TO MASTER TAX LEASE DATED DECEMBER 27, 1995
BETWEEN CATERPILLAR FINANCIAL SERVICES CORPORATION AND
C R BRIGGS CORPORATION
This addendum changes the serial number, the rent rate, and the purchase price
for the Chevrolet Kodiak Lube Truck with Evergreen Lube Body to the following:
SERIAL # RENT RATE PURCHASE PRICE
1GBT7H4J00J103978 2,358.00 19,746.00
IN WITNESS HEREOF, the parties hereto have caused this Addendum to be executed
by the signatures of their authorized representatives in the places provided
below.
Caterpillar Financial
C R Briggs Corporation Services Corporation
By: /s/ RICHARD T. PHILLIPS By: /s/ SCOTT E. HARRIS
------------------------------ --------------------------------
Title: TREASURER Title: REG CREDIT MGR.
--------------------------- -----------------------------
Date: 12/28/95 Date: 12/28/95
---------------------------- ------------------------------
LESSEE COPY
<PAGE> 8
SCHEDULE NO. 2
TO MASTER TAX LEASE DATED AS OF DEC 27, 1995
BETWEEN CATERPILLAR FINANCIAL SERVICES CORPORATION AND
C R BRIGGS CORPORATION
A. TERM AND RENT: The Lease term of each Unit shall start on its Delivery Date
and shall continue for 36 months. During the Lease term, Lessee shall pay rent
in advance [__] in arrears [X] ('X' one -- see payment alternatives on
reverse side) for each Unit at the rate set forth in Section B. Payments will
start according to the payment alternative and on the same date of each month
thereafter during the term of the Lease, except for the months of (n/a).
<TABLE>
<CAPTION>
RENT PURCHASE
B. DESCRIPTION OF UNIT(S) SERIAL # RATE PRICE
<S> <C> <C> <C> <C>
(1) USED 7778 1990 CATERPILLAR OFF-HIGHWAY TRUCK COMPLETE S/N:4YC01391 2,908.00 54,819.45
WITH NEW EVERGREEN 18,000 GALLON WATER TANK S/N:553138
</TABLE>
SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS
<TABLE>
<S> <C>
Lessee: C R BRIGGS CORPORATION Lessor: CATERPILLAR FINANCIAL SERVICES CORPORATION
By /s/ RICHARD T. PHILLIPS By /s/ SCOTT E. HARRIS
---------------------------------------- ---------------------------------------
Name (PRINT) RICHARD T. PHILLIPS Name (PRINT) SCOTT E. HARRIS
------------------------------ ------------------------------
Title TREASURER Title REGIONAL CREDIT MANAGER
------------------------------------- -------------------------------------
Date 12/22/95 Date 12/27/95
-------------------------------------- --------------------------------------
</TABLE>
LESSEE COPY
<PAGE> 9
C. PURCHASE OPTIONS: (See below) 'X' one: [___] FMV Option [_X_] CAT Value
Option [___] None
D. DEPRECIATION PERIOD: The Lease is entered into on the basis that Lessor
shall be entitled to depreciation deduction with respect to each Unit for
property with a recovery period of 7 years.
E. UTILIZATION DATE: DECEMBER 31, 1995
F. LATE RENT PAYMENT CHARGE: Five percent (5%) of the amount not paid when due
or the highest charge allowed by law, whichever is less.
G. LOCATION OF UNIT(S): C R BRIGGS MINE SITE, 7 MI S OF
BALLARAT, CA
H. ADDITIONAL PROVISIONS: RIDERS:
Construction Equip Application Survey/Equip
Return Rider
Construction Equipment Application Survey Rider
PAYMENT ALTERNATIVES:
If rent is due IN ADVANCE: The first payment for each Unit shall be due on its
Delivery Date.
If rent is due IN ARREARS: The first payment for each Unit shall be due one
month (or other period as stated in Section A) after its Delivery Date.
PURCHASE OPTIONS:
If FAIR MARKET VALUE (FMV) is checked: If no Event of Default shall have
occurred and be continuing, Lessee may, by notice delivered to Lessor not less
than six (6) months prior to the end of the term of the Lease of a Unit, elect
to purchase it AS IS, WHERE IS, WITH ALL FAULTS, for a purchase price equal to
the then Fair Market Value of the Unit. Fair Market Value is the amount which
would be obtained in an arm's length transaction between an informed and
willing buyer under no compulsion to buy (other than a used equipment dealer
or a buyer currently in possession) and an informed and willing seller under no
compulsion to sell and, in the determination thereof, costs of removal from the
current location shall not be a deduction from such value. If Lessor and Lessee
have not agreed upon the Fair Market Value of the Unit four (4) months prior to
the end of the term, Lessee shall either (a) rescind the election to purchase
it, or (b) apply to the American Arbitration Association for appointment of an
appraiser with instructions to determine its Fair Market Value within thirty
(30) days after his appointment and communicate the determination in writing
to Lessor and Lessee. The determination shall be conclusively binding upon
Lessor and Lessee. The expenses and fees of the appraiser shall be paid by
Lessee. Upon receipt of the purchase price, plus any taxes due in connection
with the sale of the Unit, Lessor shall deliver to Lessee upon request a bill
of sale without warranties except that the Unit is free of all encumbrances of
any person claiming through Lessor. Failure of lessee to apply for appointment
of an appraiser shall be deemed a rescission of the election to purchase the
Unit.
If CAT VALUE OPTION is checked: If no Event of Default shall have occurred and
be continuing, Lessee may, by notice delivered to Lessor not less than sixty
(60) days prior to the end of the term of the Lease with respect to a Unit,
elect to purchase it at the end of the term for the Purchase Price stated in
Section B. Lessor and Lessee agree the Purchase Price is a reasonable estimate
of the Fair Market Value of the Unit at the end of the term. Upon receipt of
the Purchase Price, plus any taxes due in connection with the sale of the Unit,
Lessor shall deliver to lessee, upon request, a bill of sale without warranties
except that the Unit is free of all encumbrances of any person claiming through
the Lessor. Lessee shall purchase the Unit "AS IS, WHERE IS, WITH ALL FAULTS."
<PAGE> 10
SCHEDULE NO. 3
TO MASTER TAX LEASE DATED AS OF DECEMBER 27, 1995
BETWEEN CATERPILLAR FINANCIAL SERVICES CORPORATION AND
C R BRIGGS CORPORATION
A. TERM AND RENT: The Lease term of each Unit shall start on its Delivery Date
and shall continue for 60 months. During the Lease term, Lessee shall pay rent
in advance [___] in arrears [ X ] ("X" one -- see payment alternatives on
reverse side) for each Unit at the rate set forth in Section B. Payments will
start according to the payment alternative and on the same date of each month
thereafter during the term of the Lease, except for the months of (___ n/a ___).
<TABLE>
<CAPTION>
RENT PURCHASE
B. DESCRIPTION OF UNIT(S) SERIAL# RATE PRICE
<S> <C> <C> <C> <C>
(1) NEW IT28F 1995 CATERPILLAR INTEGRATED
TOOL CARRIER WITH ATTACHMENTS 3CLO1567 1,919.00 35,711.00
</TABLE>
SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS
<TABLE>
<CAPTION>
<S> <C>
Lessee: C R BRIGGS CORPORATION Lessor: CATERPILLAR FINANCIAL SERVICES CORPORATION
By /s/ RICHARD T. PHILLIPS By /s/ LISA LOPEZ MCKINN
__________________________________________________ __________________________________________________
Name (PRINT) RICHARD T. PHILLIPS Name (PRINT) LISA LOPEZ MCKINN
________________________________________ ____________________________________
Title TREASURER Title OPERATIONS MANAGER
_______________________________________________ ___________________________________________
Date 1/10/96 Date JAN 11 1996
________________________________________________ ____________________________________________
</TABLE>
LESSEE COPY
<PAGE> 11
C. PURCHASE OPTIONS: (See below) 'X' one: [___] FMV Option [_X_] CAT Value
Option [___] None
D. DEPRECIATION PERIOD: The Lease is entered into on the basis that Lessor
shall be entitled to depreciation deduction with respect to each Unit for
property with a recovery period of 7 years.
E. UTILIZATION DATE: APRIL 30, 1996
F. LAST RENT PAYMENT CHARGE: Five percent (5%) of the amount not paid when due
or the highest charge allowed by law, whichever is less.
G. LOCATION OF UNIT(S): C R BRIGGS MINE SITE 7 MI S OF
BALLARAT, CA (INYO COUNTY)
H. ADDITIONAL PROVISIONS: RIDERS:
Construction Equipment Application
Survey Rider
PAYMENT ALTERNATIVES:
If rent is due IN ADVANCE: The first payment for each Unit shall be due on its
Delivery Date.
If rent is due IN ARREARS: The first payment for each Unit shall be due one
month (or other period as stated in Section A) after its Delivery Date.
PURCHASE OPTIONS:
If FAIR MARKET VALUE (FMV) is checked: If no Event of Default shall have
occurred and be continuing, Lessee may, by notice delivered to Lessor not less
than six (6) months prior to the end of the term of the Lease of a Unit, elect
to purchase it AS IS, WHERE IS, WITH ALL FAULTS, for a purchase price equal to
the then Fair Market Value of the Unit. Fair Market Value is the amount which
would be obtained in an arm's length transaction between an informed and willing
buyer under no compulsion to buy (other than a used equipment dealer or a
buyer currently in possession) and an informed and willing seller under no
compulsion to sell and, in the determination thereof, costs of removal from the
current location shall not be a deduction from such value. If Lessor and Lessee
have not agreed upon the Fair Market Value of the Unit four (4) months prior to
the end of the term, Lessee shall either (a) rescind the election to purchase
it, or (b) apply to the American Arbitration Association for appointment of an
appraiser with instructions to determine its Fair Market Value within thirty
(30) days after his appointment and communicate the determination in writing to
Lessor and Lessee. The determination shall be conclusively binding upon Lessor
and Lessee. The expenses and fees of the appraiser shall be paid by Lessee.
Upon receipt of the purchase price, plus any taxes due in connection with the
sale of the Unit, Lessor shall deliver to Lessee upon request a bill of sale
without warranties except that the Unit is free of all encumbrances of any
person claiming through Lessor. Failure of Lessee to apply for appointment of
an appraiser shall be deemed a rescission of the election to purchase the Unit.
If CAT VALUE OPTION is checked: If no Event of Default shall have occurred and
be continuing, Lessee may, by notice delivered to Lessor not less than sixty
(60) days prior to the end of the term of the Lease with respect to a Unit,
elect to purchase it at the end of the term for the Purchase Price stated in
Section B. Lessor and Lessee agree the Purchase Price is a reasonable estimate
of the Fair Market Value of the Unit at the end of the term. Upon receipt of
the Purchase Price, plus any taxes due in connection with the sale of the Unit,
Lessor shall deliver to Lessee, upon request, a bill of sale without warranties
except that the Unit is free of all encumbrances of any person claiming through
the Lessor, Lessee shall purchase the Unit "AS IS, WHERE IS, WITH ALL FAULTS."
<PAGE> 12
C. PURCHASE OPTIONS: (See below) 'X' one: [___] FMV Option [_X_] CAT Value
Option [___] None
D. DEPRECIATION PERIOD: The Lease is entered into on the basis that Lessor
shall be entitled to depreciation deduction with respect to each Unit for
property with a recovery period of 7 years.
E. UTILIZATION DATE: APRIL 30, 1996
F. LATE RENT PAYMENT CHARGE: Five percent (5%) of the amount not paid when due
or the highest charge allowed by law, whichever is less.
G. LOCATION OF UNIT(S): C R BRIGGS MINE SITE, 7 MI S OF
BALLARAT, CA (INYO COUNTY)
H. ADDITIONAL PROVISIONS: RIDERS:
Construction Equipment Application Survey Rider
Construction Equip Application Survey/Equip
Return Rider
Construction Equipment Application Survey Rider
PAYMENT ALTERNATIVES:
If rent is due IN ADVANCE: The first payment for each Unit shall be due on its
Delivery Date.
If rent is due IN ARREARS: The first payment for each Unit shall be due one
month (or other period as stated in Section A) after its Delivery Date.
PURCHASE OPTIONS:
If FAIR MARKET VALUE (FMV) is checked: If no Event of Default shall have
occurred and be continuing, Lessee may, by notice delivered to Lessor not less
than six (6) months prior to the end of the term of the Lease of a Unit, elect
to purchase it AS IS, WHERE IS, WITH ALL FAULTS, for a purchase price equal to
the then Fair Market Value of the Unit. Fair Market Value is the amount which
would be obtained in an arm's length transaction between an informed and
willing buyer under no compulsion to buy (other than a used equipment dealer
or a buyer currently in possession) and an informed and willing seller under no
compulsion to sell and, in the determination thereof, costs of removal from the
current location shall not be a deduction from such value. If Lessor and Lessee
have not agreed upon the Fair Market Value of the Unit four (4) months prior to
the end of the term, Lessee shall either (a) rescind the election to purchase
it, or (b) apply to the American Arbitration Association for appointment of an
appraiser with instructions to determine its Fair Market Value within thirty
(30) days after his appointment and communicate the determination in writing
to Lessor and Lessee. The determination shall be conclusively binding upon
Lessor and Lessee. The expenses and fees of the appraiser shall be paid by
Lessee. Upon receipt of the purchase price, plus any taxes due in connection
with the sale of the Unit, Lessor shall deliver to Lessee upon request a bill
of sale without warranties except that the Unit is free of all encumbrances of
any person claiming through Lessor. Failure of lessee to apply for appointment
of an appraiser shall be deemed a rescission of the election to purchase the
Unit.
If CAT VALUE OPTION is checked: If no Event of Default shall have occurred and
be continuing, Lessee may, by notice delivered to Lessor not less than sixty
(60) days prior to the end of the term of the Lease with respect to a Unit,
elect to purchase it at the end of the term for the Purchase Price stated in
Section B. Lessor and Lessee agree the Purchase Price is a reasonable estimate
of the Fair Market Value of the Unit at the end of the term. Upon receipt of
the Purchase Price, plus any taxes due in connection with the sale of the Unit,
Lessor shall deliver to lessee, upon request, a bill of sale without warranties
except that the Unit is free of all encumbrances of any person claiming through
the Lessor. Lessee shall purchase the Unit "AS IS, WHERE IS, WITH ALL FAULTS."
<PAGE> 13
SCHEDULE NO. 4
TO MASTER TAX LEASE DATED AS OF DECEMBER 27, 1995
BETWEEN CATERPILLAR FINANCIAL SERVICES CORPORATION AND
C R BRIGGS CORPORATION
A. TERM AND RENT: The Lease term of each Unit shall start on its Delivery Date
and shall continue for 60 months. During the Lease term, Lessee shall pay rent
in advance [___] in arrears [ X ] ("X" one -- see payment alternatives on
reverse side) for each Unit at the rate set forth in Section B. Payments will
start according to the payment alternative and on the same date of each month
thereafter during the term of the Lease, except for the months of (___ n/a ___).
<TABLE>
<CAPTION>
RENT PURCHASE
B. DESCRIPTION OF UNIT(S) SERIAL# RATE PRICE
<S> <C> <C> <C> <C>
(1) NEW 1996 CHEVROLET SERVICE TRUCK 1GBM7H1JOTJ103176 1,487.00 12,385.80
WITH NEW EVERGREEN SERVICE BODY
</TABLE>
SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS
<TABLE>
<CAPTION>
<S> <C>
Lessee: C R BRIGGS CORPORATION Lessor: CATERPILLAR FINANCIAL SERVICES CORPORATION
By /s/ RICHARD PHILLIPS By /s/ LISA LOPEZ MCKINN
__________________________________________________ __________________________________________________
Name (PRINT) RICHARD T. PHILLIPS Name (PRINT) LISA LOPEZ MCKINN
________________________________________ ____________________________________
Title TREASURER Title OPERATIONS MANAGER
_______________________________________________ ___________________________________________
Date 1/17/96 Date FEB 01 1996
________________________________________________ ____________________________________________
</TABLE>
LESSEE COPY
<PAGE> 14
CONTINUING COLLATERALIZED GUARANTY OF PAYMENT
This Guaranty ("Guaranty") is made and entered into as of December 27, 1995 by
Canyon Resources Corporation, 14142 Denver West Pkwy. Ste 250 Golden, CO 80401
(hereinafter, referred to as "Guarantor"), in favor of Caterpillar Financial
Services Corporation, 3322 West End Avenue, Nashville, Tennessee 37203-0983
(hereinafter referred to as "Caterpillar Financial"), guaranteeing the
Indebtedness (as hereinafter defined) of C R Briggs Corporation (hereinafter
referred to as "Obligor").
Witnesseth:
For Value Received, and/or as an inducement to Caterpillar Financial to now or
hereafter enter into, purchase or otherwise acquire the agreements, accounts
and/or other obligations evidencing and/or securing Obligor's Indebtedness and
in consideration of and for credit and financial accommodations now or hereafter
extended to or for the account of the Obligor (which includes Caterpillar
Financial's consent to an assignment and/or assumption of the Indebtedness),
which is in the best interest of Guarantor and which would not have been
extended but for this Guaranty, the Guarantor agrees as follows:
Section 1. Guaranty of Obligor's Indebtedness. Guarantor hereby absolutely,
irrevocably and unconditionally agrees to, and by these presents does hereby:
(a) guarantee the prompt and punctual payment, performance and satisfaction of
all present and future indebtedness and obligations of Obligor to Caterpillar
Financial which Obligor now owes Caterpillar Financial or which Obligor shall at
any time or from time to time hereafter owe Caterpillar Financial when the same
shall become due, whether in connection with or arising out of conditional sales
contracts, leases with existing and future additional schedules thereto, notes
or other instruments or agreements, whether direct or contingent, due or to
become due, joint or several primary or secondary, liquidated or unliquidated,
secured or unsecured, original or renewed or extended, or by open account or
otherwise, and whether representing rentals, principal, interest and/or late
charges or other charges of an original balance, an accelerated balance, a
balance reduced by part payment or a deficiency after sale of collateral or
otherwise; (b) guarantee due regular and punctual payment and prompt performance
of any other debt or obligation of any kind or character of Obligor to
Caterpillar Financial; and (c) undertake and guarantee to pay on demand and
indemnify Caterpillar Financial against all liabilities, losses, costs,
attorney's fees, and expenses which may be suffered by Caterpillar Financial by
reason of Obligor's default or default of the Guarantor (with all of Obligor's
indebtedness and/or obligations as stated above (including all costs, fees and
expenses) being hereinafter individually and collectively referred to under this
Guaranty as Obligor's "Indebtedness", which Indebtedness shall be conclusively
presumed to have been created in reliance upon this Guaranty).
Section 2. Joint, Several and Solidary Liability. Guarantor further agrees that
its obligations and liabilities for the prompt and punctual payment, performance
and satisfaction of Obligor's Indebtedness are independent of any agreement or
transaction with any third parties and shall be on a "joint and several" and
"solidary" basis along with Obligor to the same degree and extent as if
Guarantor had been and/or will be a co-borrower, co-principal obligor and/or
co-maker of Obligor's Indebtedness. In the event that there is more than one
guarantor under this Guaranty, or in the event that there are other guarantors,
endorsers, sureties or any other party who may at
<PAGE> 15
any time become liable for all or any portion of Obligor's Indebtedness (each,
an "Other Obligor"), the provisions hereof shall be read with all grammatical
changes thereby rendered necessary and each reference to the Guarantor shall
include each and every one of those parties liable for all or any portion of
Obligor's Indebtedness and each Guarantor's obligations and liabilities
hereunder shall be on a "joint and several" and "solidary" basis along with such
Other Obligors.
Section 3. Duration; Cancellation of Guaranty. This Guaranty and Guarantor's
obligations and liabilities hereunder shall remain in full force and effect
until such time as Obligor's Indebtedness shall be fully and finally paid,
performed and/or satisfied, until such time as this Guaranty may be canceled by
Caterpillar Financial under a written cancellation instrument in favor of
Guarantor or otherwise as stated herein.
Section 4. Default by Obligor. Immediately upon Obligor's default under any of
its Indebtedness in favor of Caterpillar Financial, Caterpillar Financial may
make demand upon Guarantor and Guarantor unconditionally and absolutely agrees
to pay the full then unpaid amount of all of Obligor's Indebtedness (whether at
stated maturity, by required prepayment, declaration, acceleration or otherwise)
and/or perform any covenant or agreement hereunder guaranteed. Such payment or
payments shall be made immediately following demand by Caterpillar Financial at
Caterpillar Financial's offices indicated above.
Section 5. Collateralization. To secure payment and performance of all of
Guarantor's current and future debts, liabilities and obligations to Caterpillar
Financial, whether under this Guaranty or any other agreement between Guarantor
and Caterpillar Financial, whether direct or contingent, the Guarantor does
assign, pledge and give to Caterpillar Financial a security interest in the
property described below, and all substitutions, replacements, additions and
accessions thereto:
(1) 1990 Caterpillar D8N Track-Type Tractor S/N:9TC04091
(4) 1990 Caterpillar 777B Off-Highway Trucks S/N:4YC01392, S/N:4YC01392,
S/N:4YC01400, S/N:4YC01391
(1) 1990 Caterpillar 992C Wheel Loader S/N: 49Z01714
(1) 1989 Caterpillar 16G Motor Grader S/N:93U02979
(1) 1990 Caterpillar D9N Track-Type Tractor S/N:1JD02328
(1) 1990 Caterpillar IT14B Intergrated Tool Carrier S/N:3NJ00111
(1) 1991 Caterpillar D5H Track-Type Tractor S/N:8RC04209
(herein called the "Property") and all accounts, chattel paper, deposit
accounts, security agreements, instruments, contract rights, policies and
certificates of insurance, documents and general intangibles (including all
monies and credits now due or to become due to Guarantor from, and all claims
against, manufacturers, purchasers or other parties) with respect to thereto,
and, whether or not installed thereon, all exchanges, parts, returns and
attachments therefor, whether any of the foregoing is now owned or hereafter
acquired, and all proceeds and products of any of the foregoing. All of the
above shall hereinafter be called the "Collateral" and are defined pursuant to
the provisions of the Uniform Commercial Code.
<PAGE> 16
Guarantor agrees not to remove any Property from California and Montana without
the prior written consent of Caterpillar Financial. Guarantor shall immediately
notify Caterpillar Financial of any condition or event that may change the
proper location for the filing of any financing statements or other public
notices or recordings for the purposes of perfecting security interests in the
Collateral, including any change in Guarantor's name or business organization or
the location Guarantor's place of business.
Caterpillar Financial shall have the right, but not the obligation, from time to
time, as Caterpillar Financial in its sole discretion may determine, and all
without any advance notice to Guarantor to: (a) examine the Collateral; (b)
appraise it as security; (c) verify its condition and use; (d) verify that all
Collateral has been properly accounted for and this Guaranty complied with; and
(e) assess, examine, check and make copies of any and all of Guarantor's books,
records and files and Guarantor shall also complete and return audit forms
submitted by Caterpillar Financial from time to time within five (5) days of
receipt thereof.
If Guarantor does not comply with any of the terms of this Guaranty, or
Guarantor fails to fulfill any obligation to Caterpillar Financial with respect
to any other agreement between Obligor and Caterpillar Financial, or the
Guarantor becomes insolvent or ceases to do business as a going concern, or a
bankruptcy, insolvency proceeding, arrangement or reorganization if filed by or
against Guarantor, or any of the Guarantor's property is attached or seized, or
a receiver is appointed for Guarantor, or Guarantor commits any act or a
material adverse change with respect to Guarantor's financial condition shall
occur which impairs the prospect of full performance or satisfaction of the
Guarantor's obligations to Caterpillar Financial, or Guarantor shall lose any
franchise, permission, license or right to conduct its business, or Guarantor
misrepresents its financial condition or organizational structure, or whenever
Caterpillar Financial deems the debt or Collateral to be insecure:
a) Caterpillar Financial may call all or any part of the amount Guarantor or
Obligor owes Caterpillar Financial or its affiliates due and payable
immediately, if permitted by applicable law, together with court costs and all
costs and expenses of Caterpillar Financial's repossession and collection
activity, including, but not limited to attorney's fees.
(b) Guarantor will hold and keep the Collateral in trust, in good order and
repair, for Caterpillar Financial's benefit and shall not use the Collateral for
any purpose other than exhibition without Caterpillar Financial's prior written
consent.
(c) Upon Caterpillar Financial's demand, Guarantor will immediately deliver the
Collateral to Caterpillar Financial, in good order and repair, at a place
reasonably convenient to Caterpillar Financial, together with all related
documents; or Caterpillar Financial may, in its sole discretion and without
notice or demand, take immediate possession of the Collateral, together with all
related documents.
(d) Guarantor waives and releases: (i) any and all claims and causes of action
which Guarantor may now or ever have against Caterpillar Financial as a result
of any possession, repossession, collection or sale by Caterpillar Financial of
any of the Collateral notwithstanding the effect of such possession,
repossession, collection or sale upon Guarantor's business; (ii) all rights of
redemption
<PAGE> 17
from any such sale; and (iii) the benefit of all valuation, appraisal and
exemption laws. If Caterpillar Financial seeks to take possession of any of the
Collateral by replevin or other court process, Guarantor irrevocably waives any
notice, bonds, surety and security relating thereto required by any statute,
court rule or otherwise as a incident to such possession and any demand for
possession of the Collateral prior to the commencement of any suit or action to
recover possession thereof.
(e) Guarantor appoints Caterpillar Financial or any person Caterpillar Financial
may delegate as its duly authorized Attorney-in-Fact (without notifying
Guarantor and Caterpillar Financial) to do, in its sole discretion, any of the
following: (i) sell, assign, transfer, negotiate or pledge any and all accounts,
chattel paper, or contract rights; (ii) endorse Guarantor's name on any and all
notes, checks, drafts, or other forms of exchange received as payment on any
accounts, chattel paper and contract rights, for deposit in Caterpillar
Financial's account; (iii) grant any extension, rebate or renewal on any and all
accounts, chattel paper or contract rights, or enter into any settlement
thereof; (iv) demand, collect and receive any and all amounts due on accounts ,
chattel paper and contract rights; and (v) exercise any and all rights Guarantor
and Caterpillar Financial have in the Collateral.
(f) In the event Guarantor brings any action or asserts any claim against
Caterpillar Financial which arises out of this Agreement, any other agreement or
any of Caterpillar Financial's business dealings, in which Guarantor does not
prevail, Guarantor agrees to pay Caterpillar Financial all court costs and all
costs and expenses of Caterpillar Financial's defense of such action or claim
including, but not limited to, attorney's fees.
Caterpillar Financial may also declare a default under this Guaranty and
exercise any and all rights and remedies available herein, if, in Caterpillar
Financial's sole discretion, Caterpillar Financial determines that the
Collateral has materially decreased in value, and Guarantor and Caterpillar
Financial have been unable to either: (a) provide Caterpillar Financial with
additional collateral in a form and substance satisfactory to Caterpillar
Financial; or (b) reduce the total indebtedness of Obligor by an amount
sufficient to Caterpillar Financial.
Caterpillar Financial has and will always possess all the rights and remedies of
a secured party under law, and its rights and remedies are and will always be
cumulative. Guarantor hereby acknowledges that sales for cash or on credit to a
wholesaler, retailer or user, and with or without the Collateral being present,
are all commercially reasonable dispositions of the Collateral.
Guarantor promises that (a) the Collateral is now or, at the time it becomes
part of the Collateral, owned by Guarantor by good and marketable title, shall
not be rented, leased, transferred, lent or sold and shall remain free from all
claims and liens except Caterpillar Financial's; (b) Guarantor shall defend the
Collateral against all other claims and demands; and (c) Guarantor will notify
Caterpillar Financial before it signs, or authorizes the signing of any
financing statement regardless of its coverage. Where permitted by law,
Caterpillar Financial may perfect its security interest in the Collateral by
filing a financing statement signed only by Caterpillar Financial. Guarantor
will execute any and all documents Caterpillar Financial may request to confirm,
maintain or perfect Caterpillar Financial's title or security interest in the
Collateral. Guarantor agrees that Caterpillar Financial may file, and sign
Guarantor's name to, any such financing statements and other documents which
Caterpillar Financial deems to be necessary or appropriate to evidence and
properly secure
<PAGE> 18
Caterpillar Financial's Interest in the Collateral. Guarantor agrees to pay all
costs, including attorney's fees, incurred in connection with such filings and
otherwise preserving and protecting Caterpillar Financial's interest in the
Collateral. A reproduction of the Guaranty may be used as a financing statement.
Guarantor will pay all taxes, license fees, assessments and charges on the
Collateral when due. Guarantor will be responsible for any loss, damage or
destruction of or to the Collateral for any reason whatsoever. Guarantor, at its
sole expense, shall maintain the Property in good repair and operating
condition. The Property is and shall remain personal property at all times
notwithstanding the manner in which it is attached or affixed to realty.
Guarantor will keep the Property insured for its full insurable value against
all risks. Guarantor will obtain insurance under such terms and in amounts as
Caterpillar Financial may specify, from time to time, with companies reasonably
acceptable to Caterpillar Financial. Such insurance shall be primary, without
right of contribution from any insurance carried by Caterpillar Financial, shall
name Caterpillar Financial as additional insured, and shall provide that it may
not be canceled or altered so as to affect the interest of Caterpillar Financial
without at least thirty (30) days prior written notice to Caterpillar Financial.
All insurance covering loss or damage to Property shall name Caterpillar
Financial (or its designee) as sole loss payee. Guarantor further agrees to
provide Caterpillar Financial with written evidence of the required Insurance
coverage. Guarantor assigns to Caterpillar Financial all sums not in excess of
the unpaid debt owed to Caterpillar Financial and directs any insurance company
to make payment directly to Caterpillar Financial to be applied to the unpaid
debt owed Caterpillar Financial. Guarantor further grants Caterpillar Financial
an irrevocable power of attorney to endorse any draft and sign and file all of
the necessary papers, forms and documents to initiate and settle any and all
claims with respect to the Property. If Guarantor fails to pay any of the
above-referenced costs, charges or any insurance premiums, or if it fails to
insure the Property, Caterpillar Financial may pay such costs, charges or any
insurance premiums, and the amounts paid shall be considered an additional debt
owed by Guarantor to Caterpillar Financial. Guarantor will promptly notify
Caterpillar Financial of any loss, theft or destruction of or damage to any of
the Collateral.
SECTION 6. Additional Covenants. Guarantor further agrees that Caterpillar
Financial may, at its sole option, at any time, and from time to time, without
the consent of or notice to Guarantor, or to any other party, and without
incurring any responsibility to Guarantor or to any other party, and without
affecting, impairing or releasing the obligations of Guarantor under this
Guaranty: (a) discharge or release any party (including, but not limited to,
Obligor, secondary obligors of Obligor's indebtedness or any co-guarantor under
this Guaranty) who is or may be liable to Caterpillar Financial for Obligor's
indebtedness; (b) sell at public or private sale, exchange, release, impair,
surrender, substitute, realize upon or otherwise deal with, in any manner and in
any order and upon such terms and conditions as Caterpillar Financial deems best
at its uncontrolled discretion, any leased equipment and/or any collateral
listed in the Contract or now or hereafter otherwise directly or indirectly
securing repayment of obligor's indebtedness (all such leased equipment and/or
all such collateral shall hereinafter be referred to as the "Equipment"),
including without limitation, the purchase of all or any part of such collateral
for Caterpillar Financial's own account; (c) change the manner, place, or terms
of payment and/or available credit (including without limitation increase or
decrease in the amount of such payments, available credit or any interest rate
adjustments), or change or extend the time of payment of or renew, as often and
for such periods as Caterpillar Financial may
<PAGE> 19
determine, or alter Obligor's indebtedness or grant any other indulgence to
Obligor and/or any secondary obligors of Obligor's indebtedness or any
co-guarantor under this Guaranty; (d) settle or compromise Obligor's
indebtedness with Obligor and/or any third party or refuse any offer of
performance with respect to, or substitutions for, the indebtedness; (e) take or
accept any other security or guaranty for any or all of Obligor's indebtedness;
and/or (f) enter into, deliver, modify, amend or waive compliance with, any
instrument, agreement or arrangement evidencing, securing or otherwise
affecting, all or any part of Obligor's indebtedness.
SECTION 7. No Release of Guarantor. Guarantor's obligations and liabilities
under this Guaranty shall not be released, impaired, reduced or otherwise
affected by, and shall continue in full force and effect, notwithstanding the
occurrence of any event, including without limitation any one or more of the
following events: (a) death, insolvency, bankruptcy, arrangement adjustment,
composition, liquidation, disability, dissolution or lack of authority (whether
corporate partnership or trust) of Obligor (or any person acting on Obligor's
behalf) or any Other Obligor or any other defense based on or arising out of the
lack of validity or unenforceability of the indebtedness or any agreement or
instrument relating thereto or any provisions thereof and/or Obligor's absence
or cessation of liability thereunder for any reason, including without
limitation, Caterpillar Financial's failure to preserve any right or remedy
against Obligor; (b) any change in Obligor's financial condition; (c) partial
payment or payments of any amount due and/or outstanding under Obligor's
indebtedness (d) any change in Obligor's management, ownership, identity or
business or organizational structure; (e) any payment by Obligor or any other
party to Caterpillar Financial that is held to constitute a preferential
transfer or a fraudulent conveyance under any applicable law, or for any reason,
Caterpillar Financial is required to fund such payment or pay such amount to
Obligor or to any other person; (f) any sale, lease or transfer, whether or not
commercially reasonable, of all or any part of Obligor's assets and/or any
assignment, transfer or delegation of Obligor's indebtedness to any third party
(whereby this Guaranty shall continue to extend to all sums due from or for the
account of Obligor and/or the new or substituted legal entity); (g) any failure
to perfect any lien or security interest securing the indebtedness or preserve
any right, priority or remedy against any Equipment; (h) any interruption,
change or cessation of relations between Guarantor and Obligor; (i) any defect
in, damage to, destruction of or loss of or interference with possession or use
of any Equipment for any reason by Obligor or any other person; (j) any act or
omission by Caterpillar Financial which increases the scope of Guarantor's risk,
including without limitation, negligent administration of transactions with
Obligor; and/or (k) any other occurrence or circumstance whatsoever, whether
similar or dissimilar to the foregoing, which might otherwise constitute a legal
or equitable discharge, release or defense of a guarantor or surety or which
might otherwise limit recourse against Guarantor.
SECTION 8. Waivers by Guarantor. Guarantor waives, for the benefit of
Caterpillar Financial (which waivers shall survive until this Guaranty is
released or terminated in writing by Caterpillar Financial): (a) notice of the
acceptance of this Guaranty; (b) notice of the existence, creation or incurrence
of new and/or additional debt owing from Obligor to Caterpillar Financial; (c)
presentment, protest and demand, and notice of protest, demand, nonpayment,
nonperformance and dishonor of any and all agreements, notes or other
obligations signed, accepted, endorsed or assigned to or by Caterpillar
Financial or agreed to between Obligor and Caterpillar Financial; (d) notice of
adverse change in Obligor's financial condition or any other fact which might
materially increase the risk of Guarantor; (e) any and all rights in and notices
or demands relating to any
<PAGE> 20
Equipment, including without limitation, all rights, notices, advertisements or
demands relating, whether directly or indirectly, to the foreclosure, sale or
other disposition of any or all such Equipment or the manner of such sale or
other disposition; (f) any claim, right or remedy which Guarantor may now have
or hereafter acquire against the Obligor that arises hereunder and/or from the
performance by any Other Obligor including, without limitation, any claim,
remedy or right of subrogation, reimbursement, exoneration, contribution,
indemnification, or participation in any claim, right or remedy of Caterpillar
Financial against the Obligor or any security which Caterpillar Financial now
has or hereafter acquires with respect to the Obligor, whether or not such
claim, right or remedy arises in equity, under contract (express or implied), by
statute under common law or otherwise; (g) notice of any default by Obligor or
any other person obligated in any manner for all or any portion of Obligor's
indebtedness and notice of any legal proceedings against such parties; (h) any
right of contribution from any Other Obligors; (i) notice and hearing as to any
prejudgment remedies; (j) any defense which is premised on an alleged lack of
consideration of the obligation undertaken by Guarantor, including without
limitation, any defense to the enforcement of this Guaranty based upon the
timing of execution of this Guaranty and/or that the Guaranty had been executed
after the execution date of any agreements evidencing the indebtedness; (k) all
exemptions and homestead laws; (l) any other demands and notices required by
law; (m) all setoffs and counterclaims against Caterpillar Financial and/or
Obligor; (n) any defense based on the claim that Guarantor's liabilities and
obligations exceed or are more burdensome than those of Obligor; (o) any defense
which the Obligor may assert or be able to assert on the underlying indebtedness
or which may be asserted by Guarantor, including but not limited to (i) breach
of warranty, (ii) fraud, (iii) statute of frauds (iv) infancy, (v) statute of
limitations, (vi) lender liability (vii) accord and satisfaction, (viii) payment
and/or (ix) usury.
SECTION 9. Enforcement of Guarantor's Obligations and Liabilities. Guarantor
agrees that, should Caterpillar Financial deem it necessary to file an
appropriate collection action to enforce Guarantor's obligations and liabilities
under this Guaranty, Caterpillar Financial may commence such a civil action
against Guarantor without the necessity of first (i) attempting to collect
Obligor's indebtedness from Obligor or from any Other Obligor, whether through
filing of suit or otherwise (ii) attempting to exercise any rights Caterpillar
Financial may have against any Equipment, whether through release, the filing of
an appropriate foreclosure action or otherwise (iii) including Obligor or any
Other Obligor as an additional party defendant in such a collection action
against Guarantor, or (iv) pursuing any other remedy in Caterpillar Financial's
power or to mitigate damages. If there is more than one guarantor under this
Guaranty, each Guarantor additionally agrees that Caterpillar Financial may file
an appropriate collection and/or enforcement action against any one or more of
them, without impairing the rights of Caterpillar Financial against any other
guarantor under this Guaranty.
SECTION 10. Construction. This writing is intended as a final expression of this
Guaranty agreement and is a complete and exclusive statement of the terms of
that agreement, provided however, that the provisions of this Guaranty shall be
in addition to and cumulative of, and not in substitution, novation or discharge
of, any and all prior or contemporaneous written guaranties or other written
agreements by Guarantor (or any one or more of them), in favor of Caterpillar
Financial or assigned to Caterpillar Financial by others, all of which shall be
construed as complementing each other. Nothing herein contained shall prevent
Caterpillar Financial from enforcing any and all such other guaranties or
agreements in accordance with their respective terms.
<PAGE> 21
SECTION 11. Successors and Assigns Bound. Guarantor's obligations and
liabilities under this Guaranty shall be binding upon Guarantor's successors,
heirs, legatees, devisees, administrators, executors and assigns. Caterpillar
Financial may assign this Guaranty and any and all rights and interests included
herein in Caterpillar Financial's sole discretion without notice to Guarantor
and the rights and remedies granted to Caterpillar Financial under this Guaranty
shall also inure to the benefit of Caterpillar Financial's successors and
assigns, as well as to any and all subsequent holder or holders of any of
Obligor's indebtedness subject to this Guaranty, without setoff, counterclaim,
reduction recoupment, abatement, deduction or defense based on any claim
Guarantor may have against Caterpillar Financial, such successors and assigns or
subsequent holders of Obligor's indebtedness. Guarantor shall not assign this
Guaranty without the prior written consent of Caterpillar Financial.
SECTION 12. Termination. This Guaranty is irrevocable and may be terminated only
as to indebtedness created sixty (60) days after actual receipt by Caterpillar
Financial of written notice of termination hereof, provided however, that all
indebtedness incurred, created or arising pursuant to a commitment of
Caterpillar Financial made prior to the effective date of such termination (the
"Termination Date") and any extensions, renewals or modifications of such
indebtedness (including without limitation loan and/or other commitments) agreed
to or instituted by Caterpillar Financial prior to the Termination Date shall
not be effected by such termination and shall be deemed to have been incurred
prior to termination (irrespective of whether indebtedness arising thereunder
occurs after the Termination Date) and shall be fully covered by this Guaranty.
Any termination of this Guaranty shall be ineffective unless upon the
Termination Date Guarantor deposits with Caterpillar Financial collateral in the
form of cash in an amount not less than the amount of the Indebtedness
outstanding on the Termination Date. Such cash shall be held by Caterpillar
Financial in a separate account and shall be returned to Guarantor upon the full
and indefeasible payment of all of the indebtedness.
SECTION 13. Governing Law; Waiver of Jury. This Guaranty shall be construed
liberally in favor of Caterpillar Financial and shall be governed and construed
in accordance with the substantive laws of the State of Tennessee without regard
to the conflicts of laws principles thereof. ANY ACTION, SUIT OR PROCEEDING
RELATING DIRECTLY OR INDIRECTLY TO THIS GUARANTY OR THE RELATIONSHIP BETWEEN
GUARANTOR AND CATERPILLAR FINANCIAL WILL BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE WITHOUT A JURY. AS SUCH, GUARANTOR HEREBY WAIVES ANY
RIGHT TO A JURY TRIAL IN ANY SUCH ACTION, SUIT OR PROCEEDING. IN THE EVENT OF
LITIGATION, THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY THE
COURT.
SECTION 14. Severability. If an provision of this Guaranty is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable, this Guaranty shall be
construed and enforceable as if the illegal, invalid, or unenforceable provision
had never comprised a part of it, and the remaining provisions of this Guaranty
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty in favor of Caterpillar
Financial
<PAGE> 22
on the day, month and year first written above.
GUARANTOR HAS READ AND FULLY UNDERSTANDS ALL OF
THE PROVISIONS OF THIS GUARANTY.
Guarantor: CANYON RESOURCES CORPORATION
Signature: Address: 14142 Denver West Pkwy,
Suite 250
Name (Print): Richard H. De Voto Golden, CO 80404
Title: President Phone: (303) 278-8464
I
<PAGE> 1
EXHIBIT NO. 11
CANYON RESOURCES CORPORATION
CALCULATION OF PRIMARY AND FULLY-DILUTED
EARNINGS PER SHARE
For the years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
PRIMARY EARNINGS PER SHARE (A)
Computation for Statement of Income
- -------------------------------------------
<S> <C> <C> <C>
Adjustment to net income (loss) per statements
of income to amount used in primary earnings
per share computation:
Net income (loss) ($6,143,200) ($337,700) $920,700
Add-interest on convertible debentures,
net of tax effect (B) (B) (B)
--------------- ----------------- --------------
Net income (loss), as adjusted ($6,143,200) ($337,700) $920,700
=============== ================= ==============
Adjustment to weighted average shares outstanding
to amount used in primary earnings per share
computation:
Weighted average shares outstanding 25,696,800 25,470,400 24,636,100
Add-shares issuable from assumed exercise of
convertible debentures (B) (B) (B)
Add-shares issuable from assumed exercise
of options and warrants (B) (B) 390,000
--------------- ----------------- ---------------
Weighted average shares outstanding, as adjusted 25,696,800 25,470,400 25,026,100
=============== ================= ===============
Net income (loss) per share ($0.24) ($0.01) $0.04
=============== ================= ===============
</TABLE>
(A) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
(B) Effect is antidilutive, so amounts are not included in the earnings
(loss) per share calculation.
<PAGE> 2
Exhibit No. 11
CANYON RESOURCES CORPORATION
CALCULATION OF PRIMARY AND FULLY-DILUTED
EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the years Ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
FULLY DILUTED EARNINGS PER SHARE (A)
Computation for Statement of Income
- -------------------------------------------
Adjustment to net income (loss) per statements
of income to amount used in fully-diluted
earnings per share computation:
Net income (loss) ($6,143,200) ($337,700) $920,700
Add-interest on convertible debentures,
net of tax effect (B) (B) (B)
--------------- ---------------- --------------
Net income (loss), as adjusted ($6,143,200) ($337,700) $920,700
=============== ================ ===============
Adjustment to weighted average shares outstanding
to amount used in fully-diluted earnings per
share computation:
Weighted average shares outstanding 25,696,800 25,470,400 24,636,100
Add-shares issuable from assumed exercise of
convertible debentures (B) (B) (B)
Add-shares issuable from assumed exercise
of options and warrants (B) (B) 1,297,100
--------------- ----------------- --------------
Weighted average shares outstanding, as adjusted 25,696,800 25,470,400 25,933,200
=============== ================= ==============
Net income (loss) per share ($0.24) ($0.01) $0.04
============== ================= ===============
</TABLE>
(A) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
(B) Effect is antidilutive, so amounts are not included in the earnings
(loss) per share calculation.
<PAGE> 1
Exhibit 22.1
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE REGISTRANT
==========================================================================================
Date of Place of Ownership
Incorporation Incorporation %
======================================================
<S> <C> <C> <C>
Minera Hispaniola, S.A. 4-23-87 Dominican Republic 40
CR Minerals Corporation 10-02-87 Colorado, U.S.A. 100
CR Kendall Corporation 3-24-88 Colorado, U.S.A. 100
CR Montana Corporation 4-23-90 Colorado, U.S.A. 100
CR Briggs Corporation 7-25-90 Colorado, U.S.A. 100
CR International Corporation 10-06-93 Colorado, U.S.A. 100
Canyon Resources Africa Ltd. 3-29-94 Colorado, U.S.A. 90
Canyon de Panama, S.A. 4-15-94 Panama 100
Canyon Resources Venezuela, C.A. 8-19-94 Venezuela 90
Canyon Resources (Chile) S.A. 9-06-94 Chile 100
Canyon Resources Tanzania 9-06-94 Tanzania 90
CR Brazil Corporation 6-07-95 Colorado, U.S.A. 100
=========================================================================================
</TABLE>
<PAGE> 1
Exhibit 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Canyon Resources Corporation on Form S-3 (File Nos. 33-34560, 33-45909 and
33-65028) and Form S-8 (File No. 33-37306) of our report dated March 27, 1996,
on our audits of the consolidated financial statements of Canyon Resources
Corporation as of December 31, 1995 and 1994 and for the years ended December
31, 1995, 1994 and 1993, which report is included in this Annual Report on Form
10-K.
/s/Coopers & Lybrand L.L.P.
- ---------------------------
COOPERS & LYBRAND L.L.P.
Denver, Colorado
March 27, 1996
<PAGE> 1
Exhibit 24.2
Murray N. Hutchison San Ramon, CA 94583
Senior Vice President Tel: (510) 866-1166
Telex: 470670
Fax: (510) 866-6520
March 20, 1996
Canyon Resources Corporation
14142 Denver West Parkway, Suite 250
Golden, CO 80401
Gentlemen:
We hereby consent to the incorporation by reference into the Registration
Statement of Canyon Resources Corporation (the "Company") on Form S-8 (File No.
33-37306); Form S-3 (File No. 33-34560); Form S-3 (File No. 33-45909); and Form
S-3 (File No. 33-65028) of our report dated September 1993 pertaining to the
McDonald Gold Project Feasibility Study as referred to in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995.
Very truly yours,
/s/Murray N. Hutchison
- ----------------------
Murray N. Hutchison
MNH:smr
<PAGE> 1
Exhibit 24.3
Engineers & Contractors
ROBERTS & SCHAEFER COMPANY WESTERN OPERATION
5225 WILEY POST WAY #300
SALT LAKE CITY, UTAH 84116
PHONE (801) 364-0900
FAX (801) 364-0909
March 19, 1996
6263-008
Canyon Resources Corporation
14142 Denver West Parkway, Suite 250
Golden, Colorado 80401
Ref: Letter of Consent
Briggs Gold Project Feasibility Study
Gentlemen:
We hereby consent to the incorporation by reference into the Registration
Statements of Canyon Resources Corporation (the "Company"), on Form S-8 (File
No. 33-37306); Form S-3 (File No. 33-34560); Form S-3 (File No. 33-45909); and
Form S-3 (File No. 33-65028), of our reports entitled "Fatal Flaw Review of the
Briggs Gold Project Feasibility Study" and "Briggs Gold Project Feasibility
Study - Volume 1 - Executive Summary", both dated February 1994, as referred to
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.
Sincerely,
Roberts & Schaefer Company
/s/ Brian C. Petersen
- ---------------------
Brian C. Petersen
Manager -- Western Operations
cc: File 6263-C1
<PAGE> 1
Exhibit 24.4
MINE RESERVES ASSOCIATES, INC.
4860 Ward Road, Suite 202
Wheat Ridge, Colorado 80033-2122
Phone: (303) 421-9656 FAX: (303) 421-9470
- --------------------------------------------------------------------------------
March 21, 1996
Canyon Resources Corporation
14142 Denver West Parkway, Suite 250
Golden, CO 80401
Gentlemen:
We hereby consent to the incorporation by reference into the Registration
Statements of Canyon Resources Corporation (the "Company") on Form S-8 (File No.
33-37306); Form S-3 (File No. 33-34560); Form S-3 (File No. 33-45909); and Form
S-3 (File No. 33-65028) of our report dated February 1994 pertaining to Ore
Reserves and Mine Plan Review of the Briggs Gold Project Feasibility Study as
referred to in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995.
Very truly yours,
MINE RESERVES ASSOCIATES, INC.
/s/ William L. Rose
-------------------
William L. Rose
Vice President and Principal Mining Engineer
<PAGE> 1
Exhibit 24.5
REMY, THOMAS and MOOSE
Attorneys at Law
Michael H. Remy 455 Capitol Mall, Suite 210
Tina A. Thomas Sacramento, California 95814
James G. Moose Georganna Foondos
Whitman F. Manley (916) 443-2745 Land Use Analyst
John H. Mattox FAX (916) 443-9017
Courtney A. Kaylor
Danae J. Aitchison
Andrea M. Klein
March 20, 1996
Canyon Resources Corporation
14142 Denver West Parkway, Suite 250
Golden, Colorado 80401
Gentlemen:
We hereby consent to the incorporation by reference into the Registration
Statements of Canyon Resources Corporation (the "Company") on Form S-8 (File No.
33-37306); Form S-3 (File No. 33-34560); Form S-3 (File No. 33-45909); and Form
S-3 (File No. 33-65028) of our report dated January 31, 1994, pertaining to the
environmental and permitting issues in the Briggs Gold Project Feasibility Study
as referred to in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995.
Very truly yours,
/s/Tina A. Thomas
- -----------------
Tina A. Thomas
Counsel to Canyon Resources Corporation
TAT:aj
6030229.001
<PAGE> 1
Exhibit 24.6
Chamberlin & Associates
- --------------------------------------------------------------------------------
7463 W. Otero Place
Littleton, CO 80123
Tele/FAX - 303-979-6753
March 19, 1996
Canyon Resources Corporation
14142 Denver West Parkway, Suite 250
Golden, CO 80401
Gentlemen:
We hereby consent to the incorporation by reference into the Registration
Statement of Canyon Resources Corporation (the "Company") on Form S-8 (File No.
33-37306); Form S-3 (File No. 33-34560); Form S-3 (File No. 33-45909); and Form
S-3 (File 33-65028) of our report dated February 1994 pertaining to metallurgy
review of the Briggs Gold Project Feasibility Study as referred to in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995.
Very truly yours,
CHAMBERLIN & ASSOCIATES
/s/Paul Chamberlin
------------------
Paul D. Chamberlin
P.E., Colorado #12727
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 27,106,400
<SECURITIES> 0
<RECEIVABLES> 586,300
<ALLOWANCES> 0
<INVENTORY> 664,200
<CURRENT-ASSETS> 28,654,800
<PP&E> 39,883,500
<DEPRECIATION> 1,359,100
<TOTAL-ASSETS> 72,424,200
<CURRENT-LIABILITIES> 2,867,400
<BONDS> 47,371,800
0
0
<COMMON> 257,900
<OTHER-SE> 46,072,500
<TOTAL-LIABILITY-AND-EQUITY> 72,424,200
<SALES> 9,006,600
<TOTAL-REVENUES> 9,006,600
<CGS> 7,393,600
<TOTAL-COSTS> 7,393,600
<OTHER-EXPENSES> 3,400,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,679,300
<INCOME-PRETAX> (6,143,200)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,143,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,143,200)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
