<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-------------------------
COMMISSION FILE NUMBER 1-9025
VISTA GOLD CORP.
(Exact name of registrant as specified in its charter)
Province of British Columbia (Not Applicable)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Suite 3000, 370 Seventeenth Street, Denver, Colorado, 80202
(Address of principal executive offices) (Zip Code)
(303) 629-2450
(Registrant's telephone number, including area code)
GRANGES INC.
(Former name, former address, and former fiscal year,
if changed since last report)
-------------------------
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
88,700,405
----------
Common Shares, without par value, outstanding at November 1, 1996
-------------------------
<PAGE> 2
VISTA GOLD CORP.
(FORMERLY GRANGES INC.)
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(i) Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 3
(ii) Consolidated Statements of Earnings (Loss) for the three months ended 4
September 30, 1996 and September 30, 1995 and the nine months ended
September 30, 1996 and September 30, 1995
(iii) Consolidated Statement of Deficit for the nine months ended September 30, 4
1996 and September 30, 1995
(iv) Consolidated Statements of Changes in Cash Resources for the nine months 5
ended September 30, 1996 and September 30, 1995
(v) Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 8
OPERATIONS
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 2. CHANGES IN SECURITIES 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
</TABLE>
SIGNATURES
In this Report, unless otherwise indicated, all dollar amounts are
expressed in United States dollars.
-2-
<PAGE> 3
VISTA GOLD CORP.
(FORMERLY GRANGES INC.)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
(U.S. Dollars in Thousands) 1996 1995
- - ---------------------------------------------------------------------------------------------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $14,122 $15,210
Marketable securities 312 179
Accounts receivable and other 3,443 1,432
Inventories 16,458 11,090
--------------------------
34,335 27,911
Investment in Zamora Gold Corp. 3,214 4,254
Property, plant, and equipment, net 40,091 32,051
--------------------------
$77,640 $64,216
--------------------------
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $10,032 $ 6,239
--------------------------
10,032 6,239
Provisions for future reclamation and closure costs 3,880 3,409
--------------------------
13,912 9,648
--------------------------
SHAREHOLDERS' EQUITY
Common shares without par value 71,706 54,190
(Issued 1996- 55,881,461 shares; 1995 - 46,042,911 shares)
Retained earnings (deficit) (7,074) 1,409
Currency translation adjustment (904) (1,031)
--------------------------
63,728 54,568
--------------------------
$77,640 $64,216
==========================
</TABLE>
Commitments and contingencies (Note 3)
The accompanying notes are an integral part of these
consolidated financial statements.
-3-
<PAGE> 4
VISTA GOLD CORP.
(FORMERLY GRANGES INC.)
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(U.S. Dollars in Thousands, Except Share Data) 1996 1995 1996 1995
- - ---------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUE $ 9,654 $10,095 $26,062 $31,823
------------------------- -------------------------
EXPENSES
Operating costs 8,046 7,906 21,851 25,171
Depreciation, depletion, and provision for
future reclamation and closure costs 1,345 1,069 3,618 2,906
Amortization of deferred stripping 2,508 193 4,629 223
------------------------- -------------------------
11,899 9,168 30,098 28,300
------------------------- -------------------------
RESULTS OF MINING OPERATIONS (2,245) 927 (4,036) 3,523
------------------------- -------------------------
Mineral exploration and property evaluation 793 1,027 2,679 2,642
Corporate administrative 719 588 1,838 1,621
Interest income - net (214) (355) (594) (1,295)
Other expense (income) 282 327 478 629
Gain on sale of mineral properties
and investments (542) (4,888) (840) (5,698)
Equity in loss of Zamora Gold Corp. 349 0 1,040 0
------------------------- -------------------------
1,387 (3,301) 4,601 (2,101)
------------------------- -------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES (3,632) 4,227 (8,637) 5,624
CURRENT INCOME TAXES (RECOVERY) (47) (6) (155) 180
------------------------- -------------------------
NET EARNINGS (LOSS) ($3,585) $4,233 ($8,482) $5,444
========================= =========================
EARNINGS (LOSS) PER SHARE ($0.07) $0.09 ($0.17) $0.13
========================= =========================
WEIGHTED AVERAGE SHARES
OUTSTANDING 54,932,568 45,963,310 49,096,135 40,739,989
========================= =========================
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
(U.S. Dollars in Thousands) 1996 1995
- - ---------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
RETAINED EARNINGS (DEFICIT), BEGINNING OF PERIOD (Note 4) $ 1,409 ($55,275)
AMALGAMATION COSTS --- (1,223)
CAPITAL REDUCTION --- 55,935
------------------------
1,409 (563)
NET EARNINGS (LOSS) (8,482) 5,444
------------------------
DEFICIT, END OF PERIOD ($7,073) $4,881
========================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 4 -
<PAGE> 5
VISTA GOLD CORP.
(FORMERLY GRANGES INC.)
CONSOLIDATED STATEMENTS OF CHANGES IN CASH RESOURCES
<TABLE>
<CAPTION>
Nine Months Ended
September 30
(U.S. Dollars in Thousands) 1996 1995
- - ---------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) ($8,482) $ 5,444
Items not involving cash:
Depreciation, depletion, and amortization 7,776 2,752
Provision for future reclamation and closure costs 471 410
Gain on sale of mineral properties and investments (840) (5,698)
Equity in loss of Zamora Gold Corp. 1,040 --
------------------------
(35) 2,908
Currency translation adjustment (49) (356)
Change in working capital,
excluding cash and cash equivalents (3,719) (13,675)
------------------------
(3,803) (11,123)
------------------------
INVESTING ACTIVITIES
Property, plant, and equipment (15,304) (3,230)
Deferred stripping (512) (3,663)
Proceeds from sale of investments 1,015 5,774
Option payments received 0 29
------------------------
(14,801) (1,090)
------------------------
FINANCING ACTIVITIES
Long-term debt repayments 0 (199)
Amalgamation costs 0 (1,223)
Issue of share-purchase options 208 183
Issue of shares-special warrants exercised 17,308 0
------------------------
17,516 (1,239)
------------------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,088) (13,453)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 15,210 33,045
------------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $14,122 $19,592
========================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-5-
<PAGE> 6
VISTA GOLD CORP.
(FORMERLY GRANGES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS IN THOUSANDS UNLESS SPECIFIED OTHERWISE - UNAUDITED)
SEPTEMBER 30, 1996
1. UNAUDITED INTERIM FINANCIAL INFORMATION
The consolidated financial statements of Granges Inc. (the "Company") for the
nine months ended September 30, 1996 have been prepared by the Company without
audit. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the interim financial
information set forth herein have been made. The results of operations for
interim periods are not necessarily indicative of the operating results of a
full year or of future years.
2. CHANGE IN REPORTING CURRENCY
The consolidated financial statements of the Company have been historically
expressed in Canadian (Cdn) dollars. As a result of sales revenues and a
significant portion of expenses being denominated in United States (U.S.)
dollars, the sale of exploration properties in Canada, the increasing
international focus of the Company's operating activities, and the relocation
of the Company's executive office to Denver, the U.S. dollar has become the
principal currency of Granges' business. Accordingly, the U.S. dollar has been
adopted as the reporting currency for the consolidated financial statements of
the Company effective January 1, 1996. The comparative information for 1995
has been translated into U.S. dollars for the nine months ended September 30,
1995 and at the December 31, 1995 year end at a rate of one U.S. dollar to
Cdn$1.3652.
3. COMMITMENTS AND CONTINGENCIES
A) The Company is committed to payments under certain operating leases for
mining equipment. Future payments under these leases in each of the next five
years and in the aggregate are as follows:
<TABLE>
<S> <C>
1996 $ 499
1997 1,998
1998 1,055
1999 --
2000 --
------
$3,552
======
</TABLE>
Letters of credit totalling $1.4 million (1995-$2.7 million) have been
provided as security under these mine equipment operating leases.
B) As part of its gold hedging program, the Company has entered into
agreements with major financial institutions to deliver gold. Realization
under these agreements is dependent upon the ability of those financial
institutions to perform in accordance with the terms of the agreements. As of
September 30, 1996, the Company's consolidated hedging program consisted of
forward sales contracts totalling 42,000 ounces for deliveries up to November
28, 1997 at an average price of $403 per ounce. In October 1996, the Company
closed all of its outstanding forward sales contracts when the spot price was
$379 per
- 6 -
<PAGE> 7
ounce. The resulting gains totalling $623 thousand will be recorded in the
periods during which the original contracts expired.
4. CAPITAL REDUCTION
At the March 30, 1995 extraordinary meeting, the shareholders of Granges
approved a special resolution to reduce the capital of the Company. Under this
resolution, the share capital and contributed surplus were reduced by $52.5
million and $2.7 million, respectively, with a corresponding decrease to
Granges' accumulated deficit of approximately $55.3 million. The effect of
this capital reduction was to eliminate the consolidated accumulated deficit of
Granges as of December 31, 1994 after giving effect to the estimated costs of
the May 1, 1995 amalgamation of Granges Inc. and Hycroft Resources and
Development, Inc. This deficit was caused primarily by prior write downs of
mining assets.
5. SPECIAL WARRANTS
On April 25, 1996, a private placement of 9,699,800 Special Warrants was
completed at a price of Cdn$2.60 per unit for gross proceeds of Cdn$25,219,480
(US$18,505,367). Each Special Warrant is exercisable into one common share and
one half of one common share purchase warrant of Granges for no additional
consideration. Each whole common share purchase warrant is exercisable into
one common share of Granges at a price of Cdn$3.00 per share until October 31,
1997.
On July 3, 1996, Granges filed a final short form prospectus with the
securities commissions in British Columbia and Ontario relating to the private
placement. The funds held in escrow were released to Granges on July 8, 1996.
Net proceeds received were Cdn$23,684,564 (US$17,308,329). The net proceeds
received will be used to fund the cash payments due upon exercise of the
Guariche option and exploration on the Guariche properties if the option is
exercised, to develop the Brimstone project at the Company's Hycroft Mine, and
to explore the Company's mineral properties in Nevada and Peru. Any remaining
net proceeds, including unused proceeds if the Guariche option is not
exercised, will be used for general corporate purposes including ongoing
exploration and development expenditures and acquisition opportunities as they
arise.
On July 10, 1996, all of the 9,699,800 outstanding special warrants were
exercised, and 9,699,800 common shares in the capital of the Company and
4,849,900 common share purchase warrants were issued to the holders of the
special warrants.
6. SUBSEQUENT EVENT - VISTA GOLD CORP.
On July 31, 1996, the boards of directors of Granges Inc. ("Granges") and Da
Capo Resources Ltd. ("Da Capo") unanimously approved the amalgamation of the
two companies to form a new gold mining company ("Vista Gold Corp."), subject
to shareholder, court, and regulatory approval; entering into a definitive
amalgamation agreement; and satisfactory completion of due diligence by Granges
and Da Capo by August 6, 1996.
The Supreme Court of British Columbia approved the amalgamation, effective
November 1, 1996 under the name "Vista Gold Corp." Under the terms of the
agreement, each holder of Granges shares received one Vista Gold Corp. share
for each Granges share, and each holder of Da Capo shares received two Vista
Gold Corp. shares for each Da Capo share. Vista Gold Corp. is owned 66.25
percent by Granges shareholders and 33.75 percent by Da Capo shareholders on a
fully diluted basis.
- 7 -
<PAGE> 8
VISTA GOLD CORP.
(FORMERLY GRANGES INC.)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Vista Gold Corp. was formed from the amalgamation of Granges Inc. and Da Capo
Resources Ltd. on November 1, 1996, which is described more fully in Note 6 to
the Consolidated Financial Statements. This discussion is on the unamalgamated
results of Granges Inc. (the "Company") for the nine months ended September 30,
1996.
This discussion should be read in conjunction with the consolidated financial
statements of the Company for the nine months ended September 30, 1996 and the
notes thereto, which have been prepared in accordance with accounting
principles generally accepted in Canada. The U.S. dollar has become the
principal currency of the Company's business. Accordingly, the U.S. dollar has
been adopted as the reporting currency for the consolidated financial
statements of the Company effective January 1, 1996 as described more fully in
Note 2 to the consolidated financial statements.
A. RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. THREE MONTHS ENDED SEPTEMBER 30, 1995
Net losses for the three months ended September 30, 1996 were $3.6 million
compared to net earnings of $4.2 million for the same period in 1995. The
current quarter's loss included amortization of deferred stripping of $2.5
million as compared to $193,000 in the previous year. The amortization of
deferred stripping in the third quarter of 1996 resulted from a record 3.4
million tons of ore mined and associated gold placed on pads (in inventory) but
not recovered during the quarter. Net losses for the third quarter 1996
included a gain on the sale of mineral properties of $0.5 million, while during
the same period in 1995, net earnings included a gain on the sale of mineral
properties of $4.9 million.
Revenues for the third quarter 1996 of $9.7 million decreased $0.4 million, or
four percent, from the same period in 1995. Revenue is generated solely from
the Hycroft mine. The decrease in revenues is the result of an eight percent
decrease in gold production in the current quarter compared to the same period
in 1995, partially offset by higher gross realized prices and silver
production. The average gross realized price in the third quarter of 1996 was
$393 per ounce of gold compared to $386 in 1995.
<TABLE>
<CAPTION>
1996 1995
------- --------
(OUNCES)
<S> <C> <C>
Gold 23,523 25,444
Silver 113,116 88,953
</TABLE>
Gold production during the third quarter of 1996 decreased 1,921 ounces, or
eight percent, from the same period of 1995. However, during the third quarter
of 1996, the gold inventory in the leach pads increased by 5,333 ounces. This
resulted from record ore production from the mine which could not be leached at
a commensurate rate due to pumping capacity limitations. The Company has
obtained the requisite environmental permits and will increase the pumping
capacity by the end of 1996. Recoverable ounces placed on the pads during the
current quarter were ten percent greater at 41,608 ounces as compared to 37,711
during the same period in 1995.
- 8 -
<PAGE> 9
Operating costs for the three months ended September 30, 1996 of $8.0 million
were relatively unchanged from the third quarter of 1995. Direct cash
operating costs per ounce were $277 in the third quarter of 1996, compared to
$261 for the same period in 1995.
Depreciation, depletion and provision for future reclamation and mine closure
costs increased $0.3 million from 1995. Amortization of deferred stripping
for the quarter was $2.5 million. The actual strip ratio of 0.5:1 was below
the Central Fault average of 1.8:1, causing the amortization of previously
capitalized deferred stripping in the current quarter. A nominal amount of
deferred stripping was amortized in the same period of 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 VS. NINE MONTHS ENDED SEPTEMBER 30, 1995
Net losses for the nine months ended September 30, 1996 were $8.5 million
compared to net earnings of $5.4 million in the same period of 1995. The 1996
loss was primarily due to lower gold production combined with significantly
higher amortization of deferred stripping, while during the same period in
1995, net earnings included a large gain on the sale of mineral properties.
Revenue for the nine months ended September 30, 1996 was $26.0 million, a
decrease of $5.8 million, or 18 percent, from the same period in 1995. The
decrease in revenues was primarily due to lower gold and silver production,
partially offset by a favorable price variance. The gross realized price was
$394 per ounce of gold for the first nine months of 1996 as compared to $386
for the same period in 1995.
<TABLE>
<CAPTION>
1996 1995
------- --------
(OUNCES)
<S> <C> <C>
Gold 63,158 76,804
Silver 263,549 388,064
</TABLE>
In addition to the third quarter gold production shortfall discussed above, a
significant portion of the year-to-date decrease in gold production was
attributable to lower-than-normal recovery from a clay-rich ore section
combined with delayed recovery from a significant volume of run-of-mine ore
where solution application was held up until haulage roads could be re-routed
off of the fresh ore. Mining in the clay-rich area was completed in the second
quarter of 1996, with ore production subsequently returning to normal levels.
During the first nine months of the current year, 107,615 recoverable ounces
were mined and placed on the leach pads, compared to 97,465 ounces for the same
period in 1995.
Direct cash operating costs per ounce produced were $283 and $269 for the nine
months ended June 30, 1996 and 1995, respectively. The increase in unit costs
is a result of lower gold production.
Operating costs for the nine months ended September 30, 1996 of $21.9 million
decreased $3.3 million, or 13 percent, from the same period of 1995.
Depreciation, depletion and provision for future reclamation and mine closure
costs increased $0.7 million from 1995. Amortization of deferred stripping was
$4.6 million in the first nine months of 1996. Mineral exploration was
unchanged from the previous year, while corporate administrative expenditures
increased slightly. Interest income decreased 54 percent as a result of the
Company's lower average cash balances.
- 9 -
<PAGE> 10
OUTLOOK
The Company merged with Da Capo Resources Ltd. effective November 1, 1996 and
acquired two development-stage gold properties in addition to excellent
exploration properties in Bolivia. The Company is conducting a final
feasibility study on the Amayapampa and Capa Circa properties and expects to
complete project financing and commence construction by mid-1997 with
production startup expected by mid-1998. The Hycroft mine is also expected to
increase gold production to 112,000 ounces in 1997, resulting from the startup
of production from the new Brimstone pit combined with increased cyanide
solution pumping capacity. The fourth quarter gold production is estimated at
approximately 24,000 ounces, while exploration, corporate administrative, and
other costs are expected to remain at or below current levels.
On February 29, 1996, the Company entered into a Letter of Intent to enter into
an Option Agreement with L.B. Mining Company to acquire the Guariche gold
project in southeastern Venezuela. On June 7, 1996, the Company completed its
due diligence and negotiated the final terms of the option agreement with L.B.
Mining Co. The terms of the executed definitive option agreement provide that
the consideration for the option is $275,000 payable as to $125,000 upon
receipt of the necessary mining concessions for the property and $150,000 upon
receipt of exploration permits and upon the Company being satisfied there are
no remaining overriding interests in the property. If these requirements are
satisfied, then the Company will be required to incur minimum exploration
expenditures on the property of $350,000 over a period of five months.
If drilling and technical studies completed during the option period satisfy
the Company that the property contains a minimum proven and probable mineable
reserve of 500,000 ounces of gold, the Company intends, but will not be
obligated, to exercise the option to purchase the property for $15 million
payable as to $5 million in 2,047,938 common shares of the Company (US$2.44 per
share) and the balance in cash. Subject to certain conditions, the Company may
be required to pay for additional proven and probable mineable reserves in
excess of the 500,000 ounce minimum.
B. LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash balance as of September 30, 1996 was $14.1
million, a decrease of $1.1 million from December 31, 1995. The decrease is
primarily the result of inventory increases of $5.4 million; Brimstone pre-
production stripping of $3.6 million; property, plant and equipment additions
of $11.7 million; and deferred stripping costs of $0.5 million, while the sale
of mineral properties and investments together with the proceeds from the
exercise of special warrants and stock options generated $18.5 million, and
operations generated $1.6 million before changes in inventory.
During the first three months of 1996 the Company, through its subsidiary,
arranged a secured stand-by credit facility. The facility is available for
drawdown until December 31, 1996, in dollars or as a gold loan, to a maximum of
$13.0 million or the gold ounce equivalent thereof (not to exceed 35,000
ounces). Drawdowns under the facility bear interest at LIBOR plus 1.60 percent
for dollar loans and gold lease rates plus 1.60 percent for gold loans. The
loan is repayable in seven semi-annual installments commencing the earlier of
12 months after the first drawdown or June 30, 1997. In the event the Company
generates cash surpluses after debt service, it is required to make annual
mandatory prepayments equal to 25 percent of excess cash flow, up to a maximum
of $2.5 million annually and $5.0 million in aggregate.
- 10 -
<PAGE> 11
In addition to the loan facility, the Company has also arranged a hedging
facility for up to 275,000 ounces of gold for deliveries up to the year 2001.
Both the hedging and credit facilities are secured by the assets at the Hycroft
mine and parent company guarantee.
C. RECLAMATION AND ENVIRONMENTAL
During the first nine months of 1996, there were no material environmental
incidents or non-compliance issues with any applicable environmental
regulations.
As reported in the Company's Form 10-K for 1995, the Nevada Department of
Environmental Protection (NDEP) and the Nevada Bureau of Land Management (BLM)
were notified of the Company's intent to begin mining the private lands
associated with the Brimstone deposit. The NDEP Bureau of Mining Regulation
and Reclamation has granted its approval for this action.
The Brimstone mine development and leach pad construction is complete. All
necessary mining equipment is on site, and plant construction is scheduled for
completion in December 1996.
- 11 -
<PAGE> 12
VISTA GOLD CORP.
(FORMERLY GRANGES INC.)
PART II - OTHER INFORMATION
- - --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*4(i) Granges Inc. and Da Capo Resources Ltd. Joint
Management Information Circular for Extraordinary
General Meetings of Shareholders to be held on
Tuesday, October 22, 1996.
10(i) Support letter dated August 6, 1996, between Granges
Inc. and Da Capo Resources Ltd. in relation to the
amalgamation of Granges Inc. and Da Capo Resources
Ltd.
10(ii) Support letter dated August 16, 1996, between Granges
Inc. and Atlas Corporation in relation to the
amalgamation of Granges Inc. and Da Capo Resources
Ltd.
10(iii) Definitive merger agreement between Granges Inc. and
Da Capo Resources Ltd. dated August 16, 1996.
11 Statement re: computation of per share earnings.
27 Financial Data Schedule.
* Previously filed.
(b) Reports on Form 8-K
(i) The Company has filed a report on Form 8-K dated July
2, 1996, which reported under Item 5 (Other Events)
that the Company appointed a new officer, Ronald J.
(Jock) McGregor, to the position of Vice President
Operations and Development. The Company also
reported that it filed a final short form prospectus
with the securities commissions in British Columbia
and Ontario regarding special warrant financing and
the Guariche project.
- 12 -
<PAGE> 13
(ii) The Company has filed a report on Form 8-K dated July
31, 1996, which reported under Item 5 (Other Events)
that the Company's Board of Directors and Da Capo
Resources' Board of Directors unanimously approved
the amalgamation of the two companies, subject to
shareholder and regulatory approval. The Company
also reported its second quarter 1996 results.
(iii) The Company has filed a report on Form 8-K dated
August 13, 1996, which reported under Item 5 (Other
Events) that the Company and Da Capo Resources have
extended the date for signing a definitive merger
agreement to August 15, 1996.
(iv) The Company has filed a report on Form 8-K dated
August 16, 1996, which reported under Item 5 (Other
Events) that the Company signed a definitive merger
agreement with Da Capo Resources Ltd.
(v) The Company has filed a report on Form 8-K dated
September 17, 1996, which reported under Item 5
(Other Events) that the Company's Board of Directors
and Da Capo Resources' Board of Directors approved
the form of amalgamation agreement to be submitted to
their respective shareholders at special meetings to
be held on October 22, 1996.
- 13 -
<PAGE> 14
VISTA GOLD CORP.
(FORMERLY GRANGES INC.)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VISTA GOLD CORP.
(Registrant)
Date: November 13, 1996 By: signed "Michael B. Richings"
--------------------------------
Michael B. Richings
President and Chief Executive
Officer
Date: November 13, 1996 By: signed "A. J. Ali"
--------------------------------
A. J. Ali
Vice President Finance and Chief
Financial Officer
- 14 -
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
- - -------------- -----------
<S> <C>
*4(i) Granges Inc. and Da Capo Resources Ltd. Joint
Management Information Circular for
Extraordinary General Meetings of
Shareholders to be held on Tuesday, October 22, 1996.
10(i) Support letter dated August 6, 1996, between
Granges Inc. and Da Capo Resources Ltd. in
relation to the amalgamation of Granges Inc.
and Da Capo Resources Ltd.
10(ii) Support letter dated August 16, 1996, between
Granges Inc. and Atlas Corporation in
relation to the amalgamation of Granges Inc.
and Da Capo Resources Ltd.
10(iii) Definitive merger agreement between Granges
Inc. and Da Capo Resources Ltd. dated August 16,
1996.
11 Earnings Per Share Computation
27 Financial Data Schedule
</TABLE>
* Previously Filed
- 15 -
<PAGE> 1
EXHIBIT 10(i)
STRICTLY PRIVATE & CONFIDENTIAL
August 6, 1996
SUPPORT LETTER
TO: EACH OF THE SHAREHOLDERS OF GRANGES INC. AND DA CAPO RESOURCES
LTD. SHOWN IN SCHEDULE A (collectively, the "Shareholders")
Granges Inc. ("Granges") and Da Capo Resources Ltd. ("Da
Capo") propose to enter into an agreement (the "Definitive Agreement")
providing for the amalgamation (the "Amalgamation") of Granges and Da Capo to
become effective under the provisions of the British Columbia Company Act (the
"Act").
Under the Amalgamation, each issued and outstanding common
share of Granges will be exchanged for one common share in the capital of the
amalgamated company ("Amalco") and each issued and outstanding common share of
Da Capo will be exchanged for two common shares in the capital of Amalco.
This letter is intended to set out the terms and conditions of
the agreement of the shareholders (the "Shareholders") of Granges and Da Capo
identified in Schedule "A" hereto on a several basis: (i) to support the
Amalgamation, including any Alternative Transaction (as defined in section
1.3); (ii) to vote their common shares (the "Shares") in Granges or Da Capo as
set out opposite each Shareholder's name in Schedule "A" in favour of the
Amalgamation and any Alternative Transaction; and (iii) to abide by the
restrictions and covenants set forth herein.
-1-
<PAGE> 2
1. SHAREHOLDER COMMITMENTS TO THE AMALGAMATION
1.1 Commitment, Non-Solicitation. Each Shareholder severally
covenants that until the date upon which the certificate is issued under the
Act giving effect to the Amalgamation (the "Effective Date"):
(a) except to the extent permitted hereunder, the Shareholder will
not take any steps, directly or indirectly, which may in any
way adversely affect, and will use his, her or its reasonable
endeavours, as the case may be, to complete successfully, the
transactions contemplated hereby and to be contemplated in the
Definitive Agreement; provided, however, that nothing herein
contained shall restrict or limit any Shareholder from
carrying out his or her duties as an officer, employee or
director of Granges or Da Capo or their respective
subsidiaries in the ordinary course of business;
(b) the Shareholder will not solicit, initiate or encourage
submissions, proposals or offers from any other person, entity
or group relating to, or facilitate or encourage any effort or
attempt with respect to, the acquisition or disposition of all
or any substantial part of the issued or unissued shares of
Granges or Da Capo or their respective subsidiaries, or any
arrangement, amalgamation, merger, sale of all or any
substantial part of their respective assets, take-over bid,
reorganization recapitalization, liquidation or winding-up of,
or other business combination or similar transaction involving
Granges or Da Capo or any of their respective subsidiaries and
any other party (each an "Extraordinary Business
Combination"). The Shareholder will not participate in any
discussions or negotiations regarding, or (except as required
by law) furnish to any other person, entity or group, any
information with respect to, or otherwise cooperate in any way
with, or assist or participate in, any Extraordinary Business
Combination. If the Shareholder receives any such inquiry,
submission, proposal or offer, the
-2-
<PAGE> 3
Shareholder will promptly notify Granges and Da Capo in
writing of all relevant details relating thereto; and
(c) the Shareholders will use all reasonable efforts to assist
Granges and Da Capo to complete the Amalgamation or an
Alternative Transaction as the case may be.
1.2 Voting. Each Shareholder severally covenants that he, she or
it will vote his, her or its Shares in favour of the Amalgamation at each
meeting or adjournment or adjournments thereof (the "Meeting") of holders of
shares of Granges or Da Capo, as the case may be, to be held to consider the
Amalgamation.
1.3 Change In Nature of Transaction. Each Shareholder agrees that
if Granges and Da Capo mutually agree that it is necessary or desirable to
proceed with another form of transaction (an "Alternative Transaction") whereby
either Granges or Da Capo or any of their respective affiliates is effectively
to acquire 100% of the Common Shares of the other and merge such entities on
economic terms (including tax treatment) which, in relation to the
Shareholders, are substantially equivalent to or better than those contemplated
by the Agreement, and provided that the consideration paid to shareholders of
either continues to be satisfied in common shares of the other, such
Shareholder will support the completion of such Alternative Transaction in the
same manner as the Amalgamation.
1.4 Meeting of Shareholders. If the Alternative Transaction
involves a meeting or meetings of holders of shares of Da Capo, each
Shareholder who holds shares of Da Capo agrees to vote in favour of any matters
necessary or ancillary to the completion of the transactions contemplated by
the Alternative Transaction.
1.5 Change of References. In the event of any proposed
Alternative Transaction, the references in this agreement to "Amalgamation"
shall be changed to "Alternative Transaction" and all terms covenants,
representations and warranties of this
-3-
<PAGE> 4
agreement shall be and shall be deemed to have been made in the context of the
Alternative Transaction. All references to the "Effective Date" herein shall
also refer to the date of closing of the transactions contemplated by the
Alternative Transaction.
1.6 No Dissent. Each Shareholder covenants that he, she or it
will not exercise any rights of dissent provided under sections 231 and 273 of
the Act with respect to the Amalgamation or any Alternative Transaction.
2. GENERAL
2.1 Personal Warranties. By executing this Agreement, each
Shareholder severally represents and warrants to Granges that such Shareholder
has the sole right to vote his, her or its Shares at the Meeting. To such
Shareholder's knowledge, Da Capo has not failed to disclose any material
adverse information in regard to the operations of Da Capo and its subsidiaries
which would reasonably have been expected to cause Granges not to enter into
the Definitive Agreement. By executing this Agreement, each Shareholder who
holds shares of Granges represents and warrants to Da Capo that such
Shareholder has the sole right to vote his, her or its Shares at the Meeting.
To such Shareholder's knowledge, Granges has not failed to disclose any
material adverse information in regard to the operations of Granges and its
subsidiaries which would reasonably have been expected to cause Da Capo not to
enter into the Agreement.
2.2 Transfer of Shares. Each Shareholder who accepts this
Agreement agrees with Granges and Da Capo that he, she or it will not during
the term of this Agreement transfer or assign or agree to transfer or assign
any of the Shares without the prior consent of Granges and Da Capo, which
consent shall not be unreasonably withheld if it is sought for bona fide tax,
estate or family asset planning purposes which does not prejudice, directly or
indirectly, Granges or Da Capo; provided however that such consent is not
necessary if the transfer is (i) to a holding company beneficially owned by the
Shareholder; or (ii) a transfer by a Shareholder, which is a holding company,
to a shareholder who controls the holding company, where such holding company
or
-4-
<PAGE> 5
shareholder of such holding company, as the case may be, executes this
Agreement. Where the Shareholder is a corporation, family member or other
entity and the employee which is associated with such corporation, family
member or entity also executes such agreement, the employee agrees that except
as hereinbefore contemplated:
(i) he or she will not transfer or assign or agree to
transfer or assign and will cause any other person
not to transfer or assign or agree to transfer or
assign any shares of such corporation and not to
transfer or assign or agree to transfer or assign any
interests in such entity which owns securities of
Granges or Da Capo; and
(ii) he or she will cause any family member not to
transfer or assign or agree to transfer or assign any
securities of Granges or Da Capo;
without the prior consent of Granges and Da Capo.
2.3 Shareholders Which are Not Individuals. Where the Shares are
not owned by an employee of Granges or Da Capo or a subsidiary of Granges or Da
Capo but are owned by a Shareholder which is a corporation, family member or
other entity with whom such employee is associated, then the acceptance of this
Agreement by such Shareholder shall be effective only if this Agreement is also
executed by such employee. The execution of this Agreement by an employee of
Granges or Da Capo or a subsidiary of Granges or Da Capo who is associated with
the Shareholder which owns the Shares will also constitute an unconditional
guarantee by such employee of the obligations of the Shareholder under this
Agreement.
2.4 Acquired Shares. Each Shareholder agrees that any shares of
Granges or Da Capo purchased or as to which the Shareholder acquires beneficial
ownership after the execution of this Agreement, shall be subject to the terms
of this Agreement to the
-5-
<PAGE> 6
same extent as if they constituted Shares. Each Shareholder agrees not to
purchase or sell any shares of Granges or Da Capo until the Amalgamation
becomes effective or the Definitive Agreement is terminated.
2.5 Standstill. Granges agrees not to purchase or sell any shares
of Da Capo until the Amalgamation becomes effective or the Definitive Agreement
is terminated. Da Capo agrees not to purchase or sell any Shares of Granges
until the Amalgamation becomes effective or the Definitive Agreement is
terminated.
2.6 Disclosure. No disclosure of this Agreement and any resulting
agreement shall be made by Granges, Da Capo or the Shareholders or any
corporation, family member or other entity which is associated with the
Shareholders except as may be required by applicable law or regulatory
authorities. The parties shall coordinate the making and dissemination of any
public announcement relating to the subject matter of this Agreement.
2.7 Time of the Essence. Time shall be of the essence of this
Agreement.
2.8 Termination Date. It is intended that the Effective Date
shall occur as soon as is practicable following receipt of the appropriate
shareholder, court and regulatory approvals but not later than December 31,
1996 unless such date is extended under the Definitive Agreement.
-6-
<PAGE> 7
2.9 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
-------------------------
If the terms and conditions of this letter are acceptable to
you please indicate your acceptance by dating and signing the same as noted
above.
Yours very truly,
GRANGES INC.
By:
---------------------------
DA CAPO RESOURCES LTD.
By: /s/ ROSS BEATY
---------------------------
------------------------
We irrevocably agree with and accept the terms of this letter.
ATLAS CORPORATION
/s/ ROSS BEATY
-------------------------------
ROSS BEATY
By: 416554 B.C. LTD.
--------------------------
By: /s/ ROSS BEATY
----------------------------
KESTREL HOLDINGS LTD.
By: /s/ ROSS BEATY
----------------------------
-7-
<PAGE> 1
EXHIBIT 10(ii)
STRICTLY PRIVATE & CONFIDENTIAL
August 16, 1996
SUPPORT LETTER
TO: ATLAS CORPORATION (the "Shareholder")
Granges Inc. ("Granges") and Da Capo Resources Ltd. ("Da
Capo") propose to enter into an agreement (the "Definitive Agreement")
providing for the amalgamation (the "Amalgamation") of Granges and Da Capo to
become effective under the provisions of the British Columbia Company Act (the
"Act").
Under the Amalgamation, each issued and outstanding common
share of Granges will be exchanged for one common share in the capital of the
amalgamated company ("Amalco") and each issued and outstanding common share of
Da Capo will be exchanged for two common shares in the capital of Amalco.
This letter is intended to set out the terms and conditions of
the agreement of Atlas Corporation (the "Shareholder"): (i) to support the
Amalgamation, including any Alternative Transaction (as defined in section
1.3); (ii) to vote its common shares (the "Shares") in Granges as set out
opposite its name in Schedule "A" in favour of the Amalgamation and any
Alternative Transaction; and (iii) to abide by the restrictions and covenants
set forth herein.
1. SHAREHOLDER COMMITMENTS TO THE AMALGAMATION
1.1 Commitment, Non-Solicitation. Subject to the covenants of
Granges herein, the Shareholder covenants that until the date upon which the
certificate is issued under the Act giving effect to the Amalgamation (the
"Effective Date"):
-1-
<PAGE> 2
(a) except to the extent permitted hereunder, the Shareholder will
not take any steps, directly or indirectly, which may in any
way adversely affect the transactions contemplated hereby and
to be contemplated in the Definitive Agreement;
(b) the Shareholder will not solicit, initiate or encourage
submissions, proposals or offers from any other person, entity
or group relating to, or facilitate or encourage any effort or
attempt with respect to, the acquisition or disposition of all
or any substantial part of the issued or unissued shares of
Granges or Da Capo or their respective subsidiaries, or any
arrangement, amalgamation, merger, sale of all or any
substantial part of their respective assets, take-over bid,
reorganization recapitalization, liquidation or winding-up of,
or other business combination or similar transaction involving
Granges or Da Capo or any of their respective subsidiaries and
any other party (each an "Extraordinary Business
Combination"). The Shareholder will not participate in any
discussions or negotiations regarding, or (except as required
by law) furnish to any other person, entity or group, any
information with respect to, or otherwise cooperate in any way
with, or assist or participate in, any Extraordinary Business
Combination. If the Shareholder receives any such inquiry,
submission, proposal or offer, the Shareholder will promptly
notify Granges and Da Capo in writing of all relevant details
relating thereto; and
(c) the Shareholder will use all reasonable efforts to assist
Granges and Da Capo to complete the Amalgamation or an
Alternative Transaction as the case may be.
1.2 Voting. The Shareholder covenants that it will vote its
Shares in favour of the Amalgamation at each meeting or adjournment or
adjournments thereof (the "Meeting") of holders of shares of Granges to be held
to consider the Amalgamation.
-2-
<PAGE> 3
1.3 Change In Nature of Transaction. The Shareholder agrees that
if Granges and Da Capo mutually agree that it is necessary or desirable to
proceed with another form of transaction (an "Alternative Transaction") whereby
either Granges or Da Capo or any of their respective affiliates is effectively
to acquire 100% of the Common Shares of the other and merge such entities on
economic terms (including tax treatment) which, in relation to the Shareholder,
are substantially equivalent to or better than those contemplated by the
Agreement, and provided that the consideration paid to shareholders of either
continues to be satisfied in common shares of the other, the Shareholder will
support the completion of such Alternative Transaction in the same manner as
the Amalgamation.
1.4 Meeting of Shareholders. If the Alternative Transaction
involves a meeting or meetings of holders of shares of Granges, the Shareholder
agrees to vote in favour of any matters necessary or ancillary to the
completion of the transactions contemplated by the Alternative Transaction.
1.5 Change of References. In the event of any proposed
Alternative Transaction, the references in this agreement to "Amalgamation"
shall be changed to "Alternative Transaction" and all terms covenants,
representations and warranties of this agreement shall be and shall be deemed
to have been made in the context of the Alternative Transaction. All
references to the "Effective Date" herein shall also refer to the date of
closing of the transactions contemplated by the Alternative Transaction.
1.6 No Dissent. The Shareholder covenants that it will not
exercise any rights of dissent provided under sections 231 and 273 of the Act
with respect to the Amalgamation or any Alternative Transaction.
2. GENERAL
2.1 Personal Warranties. By executing this Agreement, the
Shareholder represents and warrants to Granges and Da Capo that the Shareholder
has the sole right to vote its Shares at the Meeting.
-3-
<PAGE> 4
2.2 Transfer of Shares. The Shareholder agrees with Granges and
Da Capo that it will not during the term of this Agreement transfer or assign
or agree to transfer or assign any of the Shares without the prior consent of
Granges and Da Capo, which consent shall not be unreasonably withheld if it is
sought for bona fide tax, planning purposes which does not prejudice, directly
or indirectly, Granges or Da Capo; provided however that such consent is not
necessary if the transfer is (i) to a holding company beneficially owned by the
Shareholder; or (ii) a transfer by the Shareholder, which is a holding company,
to a shareholder who controls the holding company, where such holding company
or shareholder of such holding company, as the case may be, executes this
Agreement.
2.3 Acquired Shares. The Shareholder agrees that any shares of
Granges or Da Capo purchased or as to which the Shareholder acquires beneficial
ownership after the execution of this Agreement, shall be subject to the terms
of this Agreement to the same extent as if they constituted Shares. The
Shareholder agrees not to purchase or sell any shares of Granges or Da Capo
until the Amalgamation becomes effective or the Definitive Agreement is
terminated.
2.4 Standstill. Granges agrees not to purchase or sell any shares
of Da Capo until the Amalgamation becomes effective or the Definitive Agreement
is terminated. Da Capo agrees not to purchase or sell any Shares of Granges
until the Amalgamation becomes effective or the Definitive Agreement is
terminated.
2.5 Covenants of Granges. Granges covenants and agrees with the
Shareholder, and Granges' compliance with such covenants shall be a condition
to the Shareholders' obligations hereunder, as follows:
(a) to use all reasonable efforts to assist the Shareholder in
reducing the number of Shares pledged by the Shareholder as
security for the 7% Exchangeable Debentures due October 25,
2000 issued by the Shareholder;
(b) to negotiate in good faith an amendment to the Gold Bar joint
venture agreement between Granges and the Shareholder
consistent with discussions
-4-
<PAGE> 5
between Granges and the Shareholder immediately prior to the
signing of this Agreement;
(c) to file and use its reasonable best efforts to cause to become
effective not later than November 30, 1996 all registration
statements and other filings (federal, provincial or state) as
shall be necessary on the part of Granges to enable the
Shareholder to dispose of its Shares on The Toronto Stock
Exchange and American Stock Exchange without restriction of
any kind whatsoever under applicable securities laws and to
maintain, in the case of any registration statement filed with
the U.S. Securities and Exchange Commission, the effectiveness
of such registrations and other filings until at least
December 31, 2000, with the costs incurred by Granges in
connection with the preparation of such registration
statements and filings to be borne by Granges;
(d) to cause Mike Richings, if and when requested by the
Shareholders, to resign from the Board of Directors of the
Shareholder; and
(e) to reimburse promptly all expenses incurred by the Shareholder
in connection with this Agreement, the Amalgamation or any
Alternative Transaction or any of sub-paragraphs (a) to (d)
above including, without limitation, all reasonable fees of
the Shareholder's counsel in connection with any such matter.
2.6 Disclosure. No disclosure of this Agreement and any resulting
agreement shall be made by Granges, Da Capo or the Shareholder or any
corporation or other entity which is associated with the Shareholder except as
may be required by applicable law or regulatory authorities. The parties shall
coordinate the making and dissemination of any public announcement relating to
the subject matter of this Agreement.
-5-
<PAGE> 6
2.7 Time of the Essence. Time shall be of the essence of this
Agreement.
2.8 Termination Date. It is intended that the Effective Date
shall occur as soon as is practicable following receipt of the appropriate
shareholder, court and regulatory approvals but not later than December 31,
1996 and (except with the written consent of the Shareholder) if the Effective
Date does not occur by such date, the Agreement shall be of no further force
and effect.
2.9 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
------------------------
If the terms and conditions of this letter are acceptable to
you please indicate your acceptance by dating and signing the same as noted
above.
Yours very truly,
GRANGES INC.
By: /s/ MICHAEL B. RICHINGS
---------------------------
DA CAPO RESOURCES LTD.
By: /s/ ROSS BEATY
---------------------------
------------------------
We irrevocably agree with and accept the terms of this letter.
ATLAS CORPORATION
By: /s/ JEROME CAIN
-------------------------
-6-
<PAGE> 7
SCHEDULE A
DA CAPO SHAREHOLDERS
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF DA CAPO COMMON SHARES
- - ----------- -------------------------------
<S> <C>
Ross Beaty 800,000
416554 B.C. Ltd. 3,497,308
Kestrel Holdings Ltd. 124,000
</TABLE>
GRANGES SHAREHOLDERS
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF GRANGES COMMON SHARES
- - ----------- -------------------------------
<S> <C>
Atlas Corporation 12,714,900
</TABLE>
-7-
<PAGE> 1
EXHIBIT 10 (iii)
GRANGES INC.
TO: DA CAPO RESOURCES LTD.
This Agreement sets out the terms and conditions upon which
Granges Inc. ("Granges") and Da Capo Resources Ltd. ("Da Capo") will amalgamate
under the British Columbia Company Act into a single corporate entity
("Amalco") at 12:00 midnight (the "Effective Time") on October 31, 1996 or such
other date as Granges and Da Capo agree upon (the "Effective Date") subject to
the terms herein. Granges and Da Capo agree to act reasonably and in good
faith to ensure all actions are taken to effect the transaction (the
"Amalgamation") in a timely manner and that:
(a) an amalgamation agreement (the "Amalgamation Agreement") in a
form satisfactory to each of Granges and Da Capo, acting
reasonably, is entered into and approved by their respective
Boards of Directors by not later than September 17, 1996 and
which substantially reflects the terms herein;
(b) an extraordinary general meeting of their respective
shareholders (the "Granges Shareholders Meeting" and the "Da
Capo Shareholders Meeting") is called for October 22, 1996 to
approve the Amalgamation; and
(c) a joint information circular (the "Joint Proxy Statement") for
the solicitation of proxies in favour of the Amalgamation at
the Granges Shareholders Meeting and Da Capo Shareholders
Meeting by management of each of Granges and Da Capo is
prepared and mailed to the shareholders of Granges and Da
Capo, respectively, in compliance with all applicable
securities and other laws and regulations by not later than
September 20, 1996.
-1-
<PAGE> 2
ARTICLE 1
AMALGAMATION
1.1 AMALCO'S SHARE CAPITAL. The share capital of Amalco will
consist of 750,000,000 common shares without par value ("Amalco Common Shares")
and 750,000,000 preferred shares ("Amalco Preferred Shares"). The Amalco
Common Shares and the Amalco Preferred Shares shall have the special rights,
restrictions and attributes as are presently attached to the common shares
without par value (the "Granges Common Shares") and the preferred shares
("Granges Preferred Shares") in the capital of Granges, respectively.
1.2 SHARE EXCHANGE. Upon the Amalgamation becoming effective,
each issued and outstanding Granges Common Share will be exchanged for one
Amalco Common Share and each issued and outstanding common share ("Da Capo
Common Share") in the capital of Da Capo will be exchanged for two Amalco
Common Shares. All authorized but unissued shares in the capital of Granges
and Da Capo, respectively, will be cancelled.
1.3 SHAREHOLDER SUPPORT LETTERS. Not later than the execution of
this Agreement, shareholder support letters (the "Support Letters") in the form
attached as Schedule 1 shall be executed by the shareholders of Da Capo and
Granges set forth in Schedule 1 pursuant to which such shareholders shall agree
to vote in favour of the Amalgamation and against any other Extraordinary
Business Combination (hereinafter defined) all Da Capo Common Shares and
Granges Common Shares, respectively, over which they exercise voting power.
1.4 EMPLOYEE AND DIRECTOR OPTIONS. As of the Effective Date, each
outstanding option and warrant to purchase a Granges Common Share shall become
an option or warrant to purchase one Amalco Common Shares at the same exercise
price. As of the Effective Date, each outstanding option and warrant to
purchase a Da Capo
-2-
<PAGE> 3
Common Shares shall become options or warrants to purchase two of Amalco Common
Shares at one-half of the original exercise price.
1.5 OFFICERS AND DIRECTORS OF AMALCO. Upon the Effective Time,
the officers and directors of Amalco shall be as set forth in Schedule 2. Such
officers shall hold office at the pleasure of the Board of Directors of Amalco.
Such directors shall hold office until the first annual general meeting of
Amalco which shall be held not later than April 30, 1997.
1.6 FISCAL YEAR END. The fiscal year end of Amalco will be
December 31. The first fiscal year of Amalco shall commence at the Effective
Time and shall end at 12:00 midnight on December 31, 1996.
1.7 STOCK OPTION PLAN. Upon the Effective Date, Amalco will adopt
a stock option plan (the "Amalco Stock Option Plan") substantially in the form
of the existing Stock Option Plan of Granges.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF DA CAPO
Except as disclosed in a document delivered by Da Capo to
Granges prior to the execution of this Agreement, Da Capo represents and
warrants to Granges as follows:
2.1 ORGANIZATION, STANDING AND POWER. Each of Da Capo and its
subsidiaries (the "Da Capo Subsidiaries") is a company or corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as are now
being conducted, and is duly qualified and in good standing to conduct business
in each jurisdiction in which a failure to so qualify would have a
-3-
<PAGE> 4
material adverse effect on the business of Da Capo. Da Capo has delivered to
Granges complete and correct copies of the memorandum, articles, certificates
and bylaws or other charter and organizational documents ("Charter Documents")
of Da Capo and each of the Da Capo Subsidiaries, in each case, as amended to
the date hereof.
2.2 CAPITAL STRUCTURE. The authorized capital of Da Capo consists
of 100,000,000 common shares without par value ("Da Capo Common Shares"). As
of the date hereof, there are 14,515,472 Da Capo Common Shares issued and
outstanding, 580,000 Da Capo Common Shares have been authorized for issuance
upon the exercise of outstanding stock options ("Da Capo Options") under Da
Capo's Stock Option Plan (the "Da Capo Stock Option Plan"), 1,700,000 Da Capo
Common Shares have been authorized for issuance upon the exercise of
outstanding special warrants ("Special Warrants") and no Da Capo Common Shares
are held by Da Capo in its treasury or by any Da Capo Subsidiary. All
outstanding Da Capo Common Shares are, and any Da Capo Common Shares issued
upon exercise of any Da Capo Options or Special Warrants, will be validly
issued as fully paid and non-assessable shares which are not subject to any
preemptive rights or to any agreement to which Da Capo or any of the Da Capo
Subsidiaries is a party or by which Da Capo or any of the Da Capo Subsidiaries
may be bound. Except for the Da Capo Common Shares described above issuable
pursuant to Da Capo Options and Special Warrants, there are no options,
warrants, calls, conversion rights, commitments, agreements, contracts,
understandings, restrictions, arrangements or rights of any character to which
Da Capo or any Da Capo Subsidiary is a party or by which any of them may be
bound obligating Da Capo or any Da Capo Subsidiary to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of Da Capo or of
any Da Capo Subsidiary or obligate Da Capo or any Da Capo Subsidiary to grant,
extend or enter into any such option, warrant, call, conversion right,
commitment, agreement, contract, understanding, restriction, arrangement or
right. Da Capo is the legal and beneficial owner, directly or indirectly, of
all outstanding shares of the capital of each of the Da Capo Subsidiaries free
and clear of all liens, pledges, security interests, claims or other
encumbrances and all such shares are duly authorized, validly issued, fully
paid and non-assessable, except that Da Capo holds 80% and Mr.
-4-
<PAGE> 5
David A. O'Connor ("O'Connor") holds 20% of the shares of Sociedad Industrial
Minera Yamin Ltda. ("Yamin"). Under the terms of a trust agreement dated March
1, 1996 between Da Capo and O'Connor, O'Connor holds his shares of Yamin as
trustee for the benefit of Da Capo, with the result of that Da Capo is
effectively the beneficial owner of 100 percent of the shares of Yamin.
2.3 CORPORATE AUTHORITY. Da Capo has all requisite corporate
power and authority to enter into this Agreement and, subject to approval of
the Amalgamation by the shareholders of Da Capo and the British Columbia
Supreme Court (the "Court"), to consummate the transactions contemplated
hereby. The execution and delivery by Da Capo of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Da Capo, including the
approval of the Board of Directors of Da Capo, subject only to approval of the
Amalgamation and other transactions contemplated hereby by the shareholders of
Da Capo at the Da Capo Shareholders Meeting and by the Court. This Agreement
has been duly executed and delivered by Da Capo and constitutes a valid and
binding obligation of Da Capo enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the rights and remedies of creditors generally and to
general principles of equity. Subject to the satisfaction of the conditions
set forth in Sections 7.1 and 7.3, the execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will
not, conflict with or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or the creation of a lien, pledge, security interest,
charge or other encumbrance on assets (any such conflict, violation, default,
right, loss or creation being referred to herein as a "Violation") pursuant to
(i) the Charter Documents of Da Capo or of any Da Capo Subsidiary or (ii) any
loan or credit agreement, notice, bond, mortgage, indenture, contract, lease or
other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Da Capo or any Da Capo Subsidiary or their respective properties or assets,
other than, in the
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case of (ii), any such Violation which individually or in the aggregate would
not have a material adverse effect on the business of Da Capo. No consent,
approval, order or authorization of or registration, declaration or filing with
or exemption by, any court, administrative agency or commission or other
governmental authority or instrumentality, whether domestic or foreign (each a
"Governmental Entity") is required by or with respect to Da Capo in connection
with the execution and delivery of this Agreement by Da Capo or the
consummation by Da Capo of the transactions contemplated hereby, except for the
consent of the Vancouver Stock Exchange and applicable securities regulatory
authorities, an order of the Court, the consents of creditors and the approval
by the shareholders of Da Capo.
2.4 DOCUMENTS AND FINANCIAL STATEMENTS. Da Capo has furnished
Granges with a true and complete copy of each financial statement, report,
prospectus and definitive proxy or information statement filed by Da Capo with
any Canadian or United States securities regulatory authority or stock exchange
since January 1, 1995 (the "Da Capo Securities Documents"), which are all the
documents that Da Capo was required to so file. As of their respective filing
dates, the Da Capo Securities Documents complied in all material respects with
the requirements of any applicable Canadian and United States securities laws,
and the rules, regulations and policy statements of any Canadian and United
States securities regulatory authority applicable thereto and none of the Da
Capo Securities Documents contained any misrepresentations (within the meaning
of the British Columbia Securities Act) or any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements (the "Da Capo Financial Statements") of Da Capo included in the Da
Capo Securities Documents comply as to form in all material respects with all
applicable accounting requirements and with the published rules and regulations
or any policy statements of Canadian and United States securities regulatory
authorities, if applicable, with respect thereto and have been prepared in
accordance with generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of Da Capo and the Da
Capo Subsidiaries as at the dates thereof and
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the results of their operations and cash flows for the periods then ended.
There has been no change in Da Capo's accounting policies or the methods of
making accounting estimates or changes in estimates that are material to the Da
Capo Financial Statements, except as described in the notes thereto.
2.5 ACCURACY OF DOCUMENTS AND INFORMATION. All documents and
written information delivered and to be delivered to Granges or its
representatives by Da Capo or its representatives are and will be complete and
correct in all material respects as of the date of this Agreement and as of the
Effective Date.
2.6 NO DEFAULT. Neither Da Capo nor any Da Capo Subsidiary is, or
has received notice that it would be with the passage of time, in default of
any term, condition or provision of (i) the Charter Documents of Da Capo or any
Da Capo Subsidiary; (ii) any judgment, decree or order applicable to Da Capo or
any Da Capo Subsidiary; or (iii) any loan or credit agreement, note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, concession or
other instrument to which Da Capo or any Da Capo Subsidiary is now a party or
to which it or any of its properties or assets may be subject, except for
defaults and violations which, individually or in the aggregate, would not have
a material adverse effect on the business of Da Capo.
2.7 LITIGATION. There is no claim, action, suit or proceeding
pending or, to the knowledge of Da Capo, threatened, which would, if adversely
determined, individually or in the aggregate, have a material adverse effect on
the business of Da Capo, nor is there any judgment, decree, injunction, rule or
order of any governmental entity or arbitrator outstanding against Da Capo or
any of the Da Capo Subsidiaries having or which, insofar as reasonably can be
foreseen, in the future could have, any such effect. To the knowledge of Da
Capo, there is no investigation pending or threatened against Da Capo or any Da
Capo Subsidiary, before any Canadian, United States or foreign federal,
provincial, state, municipal or other governmental department, commission,
board, bureau, agency, instrumentality or other Government Entity.
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2.8 NO MATERIAL ADVERSE CHANGE. Since April 30, 1996, Da Capo and
the Da Capo Subsidiaries have conducted their respective businesses in the
ordinary course and there has not occurred: (i) any adverse material change
(as defined in the British Columbia Securities Act) in the business of Da Capo
or any development or combination of developments of which management of Da
Capo has knowledge which is reasonably likely to result in such a change; (ii)
any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the business of Da Capo; (iii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, shares or property) with respect to the share capital of Da
Capo; (iv) any increase or change in the compensation or benefits payable or to
become payable by Da Capo or any Da Capo Subsidiary to any of their employees,
except in the ordinary course of business consistent with past practice; (v)
any acquisition or sale of a material asset or property of Da Capo or any Da
Capo Subsidiaries, except in the ordinary course of business or as described in
the Da Capo Financial Statements; or (vi) any increase or modification in any
bonus, pension, insurance or other employee benefit plan, payment or
arrangement (including, but not limited to, the granting of stock options,
restricted shares awards or shares appreciation rights) made to, for or with
any of its employees, except in the ordinary course of business consistent with
Da Capo's past practice.
2.9 ABSENCE OF UNDISCLOSED LIABILITIES. Da Capo and the Da Capo
Subsidiaries, taken as a whole, have no liabilities or obligations (whether
absolute, accrued or contingent) except (i) liabilities, obligations or
contingencies that are accrued or reserved against in the consolidated balance
sheet of Da Capo and Da Capo Subsidiaries as of April 30, 1996 or reflected in
the notes thereto; or (ii) additional liabilities incurred or obligations or
contingencies reserved against since April 30, 1996 that: (x) amount in the
aggregate to less than 5% of the shareholders' equity of Da Capo as of April
30, 1996; (y) have arisen in the ordinary course of business; and (z) are
accrued or reserved against on the books and records of Da Capo and the Da Capo
Subsidiaries.
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<PAGE> 9
2.10 NO VIOLATIONS. The businesses of Da Capo and the Da Capo
Subsidiaries are not being conducted in violation of, or in a manner which
could cause liability under, any applicable law, rule or regulation, judgment,
decree or order of any Government Entity, except for any violations or
practices which, individually or in the aggregate, have not had and, to Da
Capo's knowledge, will not have a material adverse effect on the business of Da
Capo.
2.11 CERTAIN AGREEMENTS. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation, termination, "golden parachute", bonus or otherwise)
becoming due to any director, employee or independent contractor of Da Capo or
any Da Capo Subsidiary, under any plan, agreement or otherwise, (ii) materially
increase any benefits otherwise payable under any plan or agreement, or (iii)
result in the acceleration of the time of payment or vesting of any such
benefits or (iv) result in acceleration in the vesting of Da Capo Options.
2.12 MATERIAL RELATIONS. To Da Capo's knowledge, none of the
parties to any contracts that are material to Da Capo or any of the Da Capo
Subsidiaries have terminated, or have in any way expressed an intent to
materially reduce or terminate the amount of its business with Da Capo in the
future.
2.13 MATERIAL ADVERSE INFORMATION. Da Capo has not failed to
disclose any material adverse information in regard to the operations of Da
Capo and the Da Capo Subsidiaries which would have been reasonably expected to
cause Granges not to enter into this Agreement.
2.14 BROKERS AND FINDERS. Other than Salman Partners Inc., none of
Da Capo or any of the Da Capo Subsidiaries nor any of their respective
directors, officers or employees has employed any broker or finder or incurred
any liability for any financial
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<PAGE> 10
advisory fees, brokerage fees, commissions or similar payments in connection
with the transactions contemplated by this Agreement.
2.15 VOTE REQUIRED. There is no consent or approval of
shareholders of Da Capo, other than the affirmative vote of the holders of 75%
of the outstanding Da Capo Common Shares present at a meeting at which a quorum
is present, necessary to approve the Amalgamation and the consummation of the
transactions contemplated hereby.
2.16 INFORMATION TO BE SUPPLIED. None of the information to be
supplied by Da Capo or the Da Capo Subsidiaries, auditors, counsel, financial
advisors or other consultants or advisors for inclusion in the Joint Proxy
Statement to be mailed to Da Capo's shareholders in connection with the Da Capo
Shareholders Meeting will, at the time of mailing of the Joint Proxy Statement
or any amendment or supplement thereto, and at the time of the Granges
Shareholders Meeting, contain any misrepresentation (within the meaning of the
British Columbia Securities Act) or any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they are
made, not misleading, except that no representation is made by Da Capo with
respect to information supplied by Granges specifically for inclusion therein.
2.17 RELIANCE. The foregoing representations and warranties are
made by Da Capo with the knowledge and expectation that Granges is placing
reliance thereon.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF GRANGES
Except as disclosed in a document delivered by Granges to Da
Capo prior to the execution of this Agreement, Granges represents and warrants
to Da Capo as follows:
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<PAGE> 11
3.1 ORGANIZATION, STANDING AND POWER. Each of Granges and its
subsidiaries (the "Granges Subsidiaries") is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite power and authority to own, lease and operate
its properties and to carry on its businesses as are now being conducted, and
is duly qualified and in good standing to conduct business in each jurisdiction
in which a failure to so qualify would have a material adverse effect on the
business of Granges. Granges has delivered to Da Capo complete and correct
copies of the Charter Documents of Granges and each of the Granges
Subsidiaries, in each case, as amended to the date hereof.
3.2 CAPITAL STRUCTURE. The authorized capital of Granges consists
of 1,500,000,000 shares divided into 750,000,000 common shares ("Granges Common
Shares") and 750,000,000 preferred shares ("Granges Preferred Shares") issuable
in series. As of the date hereof, there are 55,881,461 Granges Common Shares
issued and outstanding, 1,320,000 Granges Common Shares have been authorized
for issuance upon the exercise of outstanding stock options ("Granges Options")
under Granges' stock option plan (the "Granges Stock Option Plan"), 9,426,999
Granges Common Shares have been authorized for issuance upon the exercise of
outstanding common share purchase warrants (the "Warrants") and no Granges
Common Shares are held by Granges in its treasury or by any Granges Subsidiary.
There are no Granges Preferred Shares outstanding. All outstanding Granges
Common Shares are, and any Granges Common Shares issued upon exercise of any
Granges Options will be, validly issued as fully paid and non-assessable shares
which are not subject to any pre-emptive rights or to any agreement to which
Granges or any of the Granges Subsidiaries are a party or by which Granges or
any of the Granges Subsidiaries may be bound. Except for the Granges Common
Shares described above issuable pursuant to Granges Options and the Warrants,
there are no options, warrants, calls, conversion rights, commitments,
agreements, contracts, understandings, restrictions, arrangements or rights of
any character to which Granges or any Granges Subsidiary is a party or by which
any of them may be bound obligating Granges or any Granges Subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
Granges or of any Granges
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<PAGE> 12
Subsidiary or obligating Granges or any Granges Subsidiary to grant, extend or
enter into any such option, warrant, call, conversion right, commitment,
agreement, contract, understanding, restriction, arrangement or right. Granges
is the legal and beneficial owner, directly or indirectly, of all outstanding
shares of the capital of each of the Granges Subsidiaries free and clear of all
liens, pledges, security interests, claims or other encumbrances (except a
pledge of such shares in favour of Deutsche Bank AG) and all such shares are
duly authorized, validly issued, fully paid and non- assessable.
3.3 AUTHORITY. Granges has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by Granges of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Granges, including
the approval of Granges's Board of Directors, subject only to approval of the
Amalgamation and other transactions contemplated hereby of the shareholders of
Granges at the Granges Shareholders Meeting and of the Amalgamation by the
Court. This Agreement has been duly executed and delivered by Granges and
constitutes a valid and binding obligation of Granges enforceable in accordance
with its terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting the rights and remedies of
creditors generally and to general principles of equity. Subject to
satisfaction of the conditions set forth in Sections 7.1 and 7.2, the execution
and delivery of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any Violation of (i)
any Charter Document of Granges or (ii) any loan or credit agreement note,
bond, mortgage, indenture, contract, lease, or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Granges or its properties or assets
other than, in the case of (ii), any such Violation which individually or in
the aggregate would not have a material adverse effect on the business of
Granges. No consent, approval, order or authorization of or registration,
declaration or filing with or exemption by any Government Entity is required by
or with respect to Granges in connection with the execution and delivery of
this Agreement by Granges or the consummation by Granges
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<PAGE> 13
of the transactions contemplated hereby or thereby, except for consents, if
any, required by The Toronto Stock Exchange, the American Stock Exchange and
applicable securities regulatory authorities, an order of the Court, the
consents of creditors and the approval by the shareholders of Granges.
3.4 DOCUMENTS AND FINANCIAL STATEMENTS. Granges has furnished Da
Capo with a true and complete copy of each financial statement, report,
prospectus and definitive proxy or information statement filed by Granges with
any Canadian, provincial securities regulatory authority or stock exchange
since January 1, 1995 ("Granges Securities Documents"). As of their respective
filing dates, the Granges Securities Documents complied in all material
respects with the requirements of any applicable Canadian and United States
securities laws, and the rules, regulations and policy statements of any
Canadian and United States securities regulatory authority applicable thereto
and none of the Granges Securities Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Granges included in the Granges Securities Documents (the
"Granges Financial Statements") comply as to form in all material respects with
all applicable accounting requirements and with the published rules and
regulations of the Canadian and United States securities regulatory
authorities, if applicable, with respect thereto and have been prepared in
accordance with generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of Granges as at the
dates thereof and the results of their operations and cash flows for the
periods then ended. There has been no change in Granges' accounting policies
or the methods of making accounting estimates or changes in estimates that are
material to the Granges Financial Statements, except as described in the notes
thereto.
3.5 ACCURACY OF DOCUMENTS AND INFORMATION. All documents and the
written information delivered or to be delivered to Da Capo or its
representatives by Granges or
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<PAGE> 14
its representatives are and will be complete and correct in all material
respects as of the date of this Agreement and as of the Effective Date.
3.6 NO DEFAULT. Neither Granges nor any Granges Subsidiary is, or
has received notice that it would be with the passage of time, in default of
any term, condition or provision of (i) the Charter Documents of Granges or any
Granges Subsidiary; (ii) any judgment, decree or order applicable to Granges or
any Granges Subsidiary; or (iii) any loan or credit agreement, note, bond,
mortgage, indenture, contract, agreement, lease, license or other instrument to
which Granges or any Granges Subsidiary is now a party or by which it or any or
its properties or assets may be bound, except for defaults and violations
which, individually or in the aggregate, would not have a material adverse
effect on the business of Granges.
3.7 LITIGATION. There is no claim, action, suit or proceeding
pending or, to the knowledge of Granges, threatened, which would, if adversely
determined, individually or in the aggregate, have a material adverse effect on
the business of Granges nor is there any judgment decree, injunction, rule or
order of any governmental entity or arbitrator outstanding against Granges or
any of the Granges Subsidiaries having or which insofar as reasonably can be
foreseen in the future could have any such effect. To the knowledge of Granges
there is no investigation pending or threatened against Granges or any Granges
Subsidiary, before any Canadian, United States or foreign federal, provincial,
state, municipal or other governmental department, commission board, bureau,
agency, instrumentality or other Government Entity.
3.8 NO MATERIAL ADVERSE CHANGE. Since December 31, 1995, Granges
and the Granges Subsidiaries have conducted their respective businesses in the
ordinary course and there has not occurred: (i) any adverse material change
(as defined in the British Columbia Securities Act) in the business of Granges
or any development or combination of developments of which management of
Granges has knowledge which is reasonably likely to result in such a change;
(ii) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the business of Granges; (iii) any
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<PAGE> 15
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, shares or property) with respect to the share capital of
Granges; (iv) any increase or change in the compensation or benefits payable or
to become payable by Granges or any Granges Subsidiary to any of their
employees, except in the ordinary course of business consistent with past
practice; (v) any acquisition or sale of a material asset or property of
Granges or any Granges Subsidiaries, except in the ordinary course of business
or as described in the Granges Financial Statements; or (vi) any increase or
modification in any bonus, pension, insurance or other employee benefit plan,
payment or arrangement (including, but not limited to, the granting of stock
options, restricted shares awards or shares appreciation rights) made to, for
or with any of its employees, except in the ordinary course of business
consistent with Granges' past practice.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Granges and the Granges
Subsidiaries, taken as a whole, have no liabilities or obligations (whether
absolute, accrued or contingent) except (i) liabilities, obligations or
contingencies that are accrued or reserved against in the consolidated balance
sheet of Granges and Granges Subsidiaries as of December 31, 1995 or reflected
in the notes thereto; or (ii) additional liabilities incurred or obligations or
contingencies reserved against since December 31, 1995 that: (x) amount in the
aggregate to less than 5% of the shareholders' equity of Granges as of December
31, 1995; (y) have arisen in the ordinary course of business; and (z) are
accrued or reserved against on the books and records of Granges and the Granges
Subsidiaries.
3.10 NO VIOLATIONS. The business of Granges and the Granges
Subsidiaries are not being conducted in violation of or in a manner which could
cause liability under any applicable, law, rule or regulation, judgment, decree
or order of any Governmental Entity, except for any violations or practices,
which, individually or in the aggregate, have not had and, to Granges'
knowledge will not have a material adverse effect on the business of Granges.
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<PAGE> 16
3.11 CERTAIN AGREEMENTS. Neither the execution or delivery of this
Agreement nor the consummation or the transactions contemplated hereby will (i)
result in any payment (including, without limitation, severance, unemployment
compensation, termination, "golden parachute", bonus or otherwise) becoming due
to any director, employee or independent contractor of Granges or the Granges
Subsidiaries under any plan, agreement or otherwise, (ii) materially increase
any benefits otherwise payable under any plan or agreement, or (iii) result in
the acceleration at the time of payment or vesting of any such benefits or (iv)
result in the acceleration in the vesting of Granges Options.
3.12 MATERIAL RELATIONS. To Granges' knowledge, none of the
parties to any contracts that are material to Granges or any of the Granges
Subsidiaries have terminated, or have in any way expressed an intent to
materially reduce or terminate, the amount of its business with Granges in the
future.
3.13 MATERIAL ADVERSE INFORMATION. Granges has not failed to
disclose any material adverse information in regard to the operations of
Granges and the Granges Subsidiaries which would have been reasonably expected
to cause Da Capo not to enter into this Agreement.
3.14 BROKERS AND FINDERS. Other than Goepel Shields and Partners
Inc., none of Granges or any of the Granges Subsidiaries nor any of their
respective directors, officers, or employees has employed any broker or finder
or incurred any liability for any financial advisory fees, brokerage fees,
commissions or similar payments in connection with the transactions
contemplated by this Agreement.
3.15 VOTE REQUIRED. There is no consent or approval of the
shareholders of Granges, other than the affirmed vote of the holders of 75% of
the outstanding Granges Common Shares present at a meeting at which a quorum is
present, necessary to approve the Amalgamation and the consummation of the
transactions contemplated hereby.
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3.16 INFORMATION TO BE SUPPLIED. None of the information to be
supplied by Granges or its auditors, counsel, financial advisors, other
consultants or advisors for inclusion in the Joint Proxy Statement will, at the
time of the mailing of the Joint Proxy Statement and any amendment or
supplement thereto, and at the time of the Da Capo Shareholders Meeting to vote
upon the Amalgamation and the transactions contemplated hereby, contain any
misrepresentation (within the meaning of the British Columbia Securities Act)
or any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading.
3.17 RELIANCE. The foregoing representations and warranties are
made by Granges with the knowledge and expectation that Da Capo is placing
reliance thereon.
ARTICLE IV
COVENANTS OF DA CAPO
During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement and the
Effective Time, Da Capo agrees (except as expressly contemplated by this
Agreement or with Granges' prior written consent, which will not be
unreasonably withheld taking into account the mutual interests of the parties)
that:
4.1 CONDUCT OF BUSINESS
4.1.1 ORDINARY COURSE. Da Capo and the Da Capo Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent with such businesses, use all reasonable efforts consistent with
past practice and policies to preserve intact their present business
organizations, keep available the services of their present officers,
consultant, and employees and preserve their relationships with customers,
suppliers, distributors, parties to exploration, option or joint venture
agreements and others having
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business dealings with them. Da Capo shall promptly notify Granges of any
event or occurrence or emergency not in the ordinary course of business of Da
Capo or the Da Capo Subsidiaries, that is material and adverse to the business
of Da Capo. Neither Da Capo nor any of the Da Capo Subsidiaries shall:
(a) terminate the employment of any officer or director or, except
as required by law or in the ordinary course of business
consistent with past practices, terminate the employment of
any other employee or, except as required by law, grant any
severance or termination pay to any officer, director or
employee of Da Capo or any of the Da Capo Subsidiaries; or
(b) except in the ordinary course of business or with the prior
consent of Granges, enter into or terminate any material
contracts, arrangements, plans, agreements, leases, insurance
policies, licenses, franchises, permits, concessions,
indentures, authorizations, instruments, commitments or rights
or amend or otherwise change the terms thereof.
4.1.2 DIVIDENDS AND CHANGES IN SHARES. Da Capo shall not, and
shall not permit any of the Da Capo Subsidiaries to: (i) declare or pay any
dividends on or make other distributions (whether in cash, shares or property)
in respect to any of its shares; (ii) subdivide, combine or reclassify any of
its shares or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of Da Capo; (iii)
repurchase or otherwise acquire, directly or indirectly, any of its shares; or
(iv) propose any of the foregoing.
4.1.3 ISSUANCE OF SECURITIES. Da Capo shall not, and shall not
permit any Da Capo Subsidiaries to, issue, deliver or sell, or authorize,
propose or agree to, or commit to the issuance, delivery or sale of, any of its
shares or any securities convertible into its shares, any options, warrants,
calls, conversion rights, commitments, agreements, contracts, understandings,
restrictions, arrangements or rights of any character obligating it or any of
Da Capo Subsidiaries to issue any such shares or other convertible securities,
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except the issuance of Da Capo Common Shares upon the exercise of the Special
Warrants or to employees through the exercise of existing Da Capo Options.
4.1.4 GOVERNING DOCUMENTS. Da Capo shall not, nor shall it cause or
permit any of the Da Capo Subsidiaries to, amend its Charter Documents.
4.1.5 EXCLUSIVITY. During the term of this Agreement, Da Capo will
not solicit, initiate or encourage submissions, proposals or offers from any
other person, entity or group relating to, or facilitate or encourage any
effort or attempt with respect to, the acquisition or disposition of all or any
substantial part of the issued or unissued shares of Da Capo and of the Da Capo
Subsidiaries, or any arrangement, amalgamation, merger, sale of all or any
substantial part of their respective assets, take-over bid, reorganization,
recapitalization, liquidation or winding-up of, or other business combination
or similar transaction involving, Da Capo or Da Capo Subsidiaries and any other
party except Granges (each an "Extraordinary Business Combination"). Da Capo
will not participate in any discussions or negotiations regarding, or (except
as required by law) furnish to any other person, entity or group, any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, any Extraordinary Business Combination. Notwithstanding the
above, the directors and officers of Da Capo are entitled to respond to an
unsolicited proposal for an Extraordinary Business Combination if such a
response is required by their fiduciary duties to Da Capo. If Da Capo receives
any such inquiry, submission, proposal or offer, Da Capo will promptly notify
Granges in writing of all relevant details relating thereto.
4.1.6 NO ACQUISITIONS. Da Capo shall not, and shall not permit any
Da Capo Subsidiary to, acquire or agree to acquire by amalgamation,
arrangement, merger or consolidation with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the business of Da Capo without
the prior approval of Granges.
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4.1.7 NO DISPOSITIONS. Da Capo shall not, and shall not permit any
Da Capo Subsidiary to sell, lease, license, transfer, mortgage, encumber or
otherwise dispose of any of their assets or cancel, release or assign any
indebtedness or claim, except in the ordinary course of business consistent
with prior practice.
4.1.8 INDEBTEDNESS. Da Capo shall not, and shall not permit any Da
Capo Subsidiary to, incur any indebtedness for borrowed money by way of direct
loan, sale of debt securities, purchase money obligation, conditional sale,
guarantee, or otherwise, except pursuant to existing bank credit agreements or
with the consent of Granges.
4.1.9 PLANS. Da Capo shall not, and shall not permit any Da Capo
Subsidiary to, adopt or amend in any material respect any employee
compensation, pension or benefit plan, or pay any pension or retirement
allowance not required by any existing plan and except for such amendments as
may be required by any existing plan and except for such amendments as may be
required for the qualification or continued qualification of such plan under
any applicable statute or regulation, Da Capo shall not and shall not permit
any Da Capo Subsidiary to, enter into any employment contracts, pay any special
bonuses or special remuneration to officers, directors or employees, or
increase the salaries, wage rates or fringe benefits of its officers or
employees other than pursuant to scheduled reviews under Da Capo's normal
compensation review cycle, in all cases consistent with Da Capo's existing
policies and past practice.
4.2 BREACH OF REPRESENTATION AND WARRANTIES. Da Capo will not
take any action which would cause or constitute a breach of any of the
representations and warranties set forth in Article 2 or which would cause any
of such representations and warranties to be inaccurate in any material
respect. In the event of, and promptly after becoming aware of, the occurrence
of or the pending or threatened occurrence of any event which would cause or
constitute such a breach or inaccuracy, Da Capo will give detailed notice
thereof to Granges and will use its best efforts to prevent or promptly remedy
such breach or inaccuracy.
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4.3 CONSENTS. Da Capo will promptly apply for or otherwise seek,
and use its best efforts to obtain all consents and approvals, and make all
filings, required with respect to Da Capo for the consummation of the
Amalgamation.
4.4 INFORMATION FOR GRANGES DISCLOSURE. Da Capo will promptly
provide to Granges and its counsel for inclusion within the Joint Proxy
Statement and any disclosure document required to be filed by Granges in a form
reasonably satisfactory to Granges and its counsel, such information concerning
Da Capo, its operations, capitalization, share ownership and such other
information as Granges or its counsel may reasonably request.
4.5 RETURNS. Da Capo shall promptly provide Granges with copies
of all tax returns, reports and information statements after their filing along
with all other tax data reasonably requested by Granges.
4.6 TRANSFER OF PARTICIPATION QUOTAS. Mr. David A. O'Connor
("O'Connor") transfer his ownership of 20% of the outstanding participation
quotas of Sociedad Industrial Minera Yamin Ltda. ("Yamin") prior to the
consummation of the Amalgamation to a nominee of Granges specified in writing.
ARTICLE 5
COVENANTS OF GRANGES
During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement and the
Effective Time, Granges agrees (except as expressly contemplated by this
Agreement or with Da Capo's prior written consent which will not be
unreasonably withheld taking into account the mutual interests of the parties)
that:
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5.1 COURSE OF BUSINESS.
5.1.1 ORDINARY COURSE. Granges and the Granges subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent with such businesses, use all reasonable efforts consistent with
past practice and policies to preserve intact their present business
organizations, keep available the services of their present officers,
consultants and employees and preserve their relationships with customers,
suppliers, distributors, parties to exploration, option or joint venture
agreements and others having business dealings with them. Granges shall
promptly notify Da Capo of any event or occurrence or emergency not in the
ordinary course of business of Granges or the Granges Subsidiaries that is
material and adverse to the business of Granges. Neither Granges nor any of
the Granges Subsidiaries shall:
(a) terminate the employment of any officer or director or, except
as required by law or in the ordinary course of business
consistent with past practices, terminate the employment of
any other employee or, except as required by law, grant any
severance or termination pay to any officer, director or
employee of Granges or any of the Granges Subsidiaries; or
(b) except in the ordinary course of business or with the prior
consent of Da Capo, enter into or terminate any material
contracts, arrangements, plans, agreements, leases, insurance
policies, licences, franchises, permits, concessions,
indentures, authorizations, instruments, commitments or rights
or amend or otherwise change the terms thereof.
5.1.2 DIVIDENDS AND CHANGES IN SHARES. Granges shall not and shall
not permit any of the Granges Subsidiaries to: (i) declare or pay any dividends
on or make other distributions (whether in cash, shares or property) in respect
to any of its shares; (ii) subdivided, combine or reclassify any of its shares;
(iii) repurchase or otherwise acquire, directly or indirectly, any of its
shares; or (iv) propose any of the foregoing.
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5.1.3 ISSUANCE OF SECURITIES. Granges shall not, and shall not
permit any Granges Subsidiaries to, issue, deliver or sell, or authorize,
propose or agree to, or commit to the issuance, delivery or sale of, any of its
shares or any securities convertible into its shares, any options, warrants,
calls, conversion rights, commitments, agreements, contracts, understandings,
restrictions, arrangements or rights of any character obligating it or any of
Granges Subsidiaries to issue any such shares or other convertible securities,
except the issuance of Granges Common Shares upon the exercise or deemed
exercise of outstanding common share purchase warrants or to employees through
the exercise of existing Granges Options.
5.1.4 GOVERNING DOCUMENTS. Granges shall not, nor shall it cause or
permit any of the Granges Subsidiaries to, amend its Charter Documents.
5.1.5 EXCLUSIVITY. During the terms of this Agreement, Granges
will not solicit, initiate or encourage submissions, proposals or offers from
any other person, entity or group relating to, or facilitate or encourage any
effort or attempt with respect to, the acquisition or disposition of all or any
substantial part of the issued or unissued shares of Granges and of the Granges
Subsidiaries, or any arrangement, amalgamation, merger, sale of all or any
substantial part of their respective assets, take-over bid, reorganization,
recapitalization, liquidation or winding-up of, or other business combination
or similar transaction involving, Granges or Granges Subsidiaries and any other
party except Da Capo (each an "Extraordinary Business Combination"). Granges
will not participate in any discussions or negotiations regarding, or (except
as required by law) furnish to any other person, entity or group, any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, any Extraordinary Business Combination. Notwithstanding the
above, the directors and officers of Granges are entitled to respond to an
unsolicited proposal for an Extraordinary Business Combination if such a
response is required by their fiduciary duties to Granges. If Granges receives
any such inquiry, submission, proposal or offer, Granges will promptly notify
Da Capo in writing of all relevant details relating thereto.
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5.1.6 ACQUISITIONS. Granges shall not, and shall not permit any
Granges Subsidiary to, acquire or agree to acquire by amalgamation,
arrangement, merger or consolidation with or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the business of Granges without
the consent of Da Capo.
5.1.7 NO DISPOSITIONS. Granges shall not, and shall not permit any
Granges Subsidiary to sell, lease, license, transfer, mortgage, encumber or
otherwise dispose of any of their assets or cancel, release or assign any
indebtedness or claim, except in the ordinary course of business consistent
with prior practice.
5.1.8 INDEBTEDNESS. Granges shall not, and shall not permit any
Granges Subsidiary to, incur any indebtedness for borrowed money by way of
direct loan, sale of debt securities, purchase money obligation, conditional
sale, guarantee, or otherwise, except pursuant to existing bank credit
agreements or with the consent of Da Capo.
5.1.9 PLANS. Granges shall not, and shall not permit any Granges
Subsidiary to, adopt or amend in any material respect any employee
compensation, pension or benefit plan, or pay any pension or retirement
allowance not required by any existing plan and except for such amendments as
may be required by any existing plan and except for such amendments as may be
required for the qualification or continued qualification of such plan under
any applicable statute or regulation, Granges shall not and shall not permit
any Granges Subsidiary to, enter into any employment contracts, pay any special
bonuses or special remuneration to officers, directors or employees, or
increase the salaries, wage rates or fringe benefits of its officers or
employees other than pursuant to scheduled reviews under Granges' normal
compensation review cycle, in all cases consistent with Granges' existing
policies and past practice.
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5.2 BREACH OF REPRESENTATIONS AND WARRANTIES. Granges will not
take any action which would cause or constitute a breach of any of the
representations and warranties set forth in Article 3 or which would cause any
of such representations and warranties to be inaccurate in any material
respect. In the event of, and promptly after becoming aware of, the occurrence
of or the pending or threatened occurrence of any event which would cause or
constitute such a breach or inaccuracy, Granges will give detailed notice
thereof to Da Capo and will use its best efforts to prevent or promptly remedy
such breach or inaccuracy.
5.3 CONSENTS. Granges will promptly apply for or otherwise seek
and use its best efforts to obtain all consents and approvals, and make all
filings, required with respect to Granges for the consummation of the
Amalgamation.
5.4 INFORMATION FOR DA CAPO DISCLOSURE. Granges will promptly
provide to Da Capo and its counsel for inclusion within the Joint Proxy
Statement and any disclosure document required to be filed by Da Capo in a form
reasonably satisfactory to Da Capo and its counsel, such information concerning
Granges, its operations, capitalization, share ownership and such other
information as Da Capo or its counsel may reasonably request.
5.5 RETURNS. Granges shall promptly provide Da Capo with copies
of all tax returns, reports and information statements after their filing along
with all other tax data reasonably requested by Da Capo.
ARTICLE 6
ADDITIONAL AGREEMENTS
In addition to the foregoing, Granges and Da Capo each agree
to take the following actions after the execution of this Agreement:
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6.1 PREPARATION OF JOINT PROXY STATEMENT. As promptly as
practicable after the date hereof, Da Capo shall prepare that portion of the
Joint Proxy Statement which relates to Da Capo and any other documents
necessary to discharge its obligations under applicable corporate and
securities laws in connection with the Amalgamation and the transactions
contemplated hereby. As promptly as practicable after the date hereof, Granges
shall prepare that portion of the Joint Proxy Statement which relates to
Granges and to the Amalgamation and other transactions contemplated hereby and
any other documents necessary to discharge its obligations under applicable
corporate and securities laws in connection with the Amalgamation and the
transactions contemplated hereby. The complete Joint Proxy Statement shall be
prepared and mailed by Granges after having received the prior consent of Da
Capo.
6.2 ACCESS TO INFORMATION. Da Capo and Granges each shall,
subject to applicable law, afford the other and its accountants, counsel and
other representatives, reasonable access during normal business hours during
the period prior to the Effective Date: to (a) all of its Subsidiaries'
properties, books, contracts, commitments and records; and (b) all other
information concerning its business, properties and personnel, as the other may
reasonably request. Da Capo and Granges each agrees to provide the other and
its accountants, counsel and representatives copies of internal financial
statements promptly upon the request therefor. No information or knowledge
obtained after the date hereof in any investigation pursuant to this Section
6.2 shall affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the Amalgamation.
6.3 PUBLIC ANNOUNCEMENTS. Granges and Da Capo shall cooperate
with each other in releasing information concerning this Agreement and the
transactions contemplated herein. Each of the parties shall furnish to the
other drafts of all releases prior to publication for approval, which approval
shall not be unreasonable withheld. Nothing contained herein shall prevent
either party at any time from furnishing any information to any governmental
agency or from issuing any release when it believes it is legally required to
do so.
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6.4 SHAREHOLDERS' MEETINGS. Granges and Da Capo shall each call,
give notice of, convene and hold a meeting of its Shareholders as promptly as
practicable and to be held on October 22, 1996 for the purpose of voting upon a
special resolution approving the Amalgamation and the transactions contemplated
hereby. Granges and Da Capo shall, through their respective Board of
Directors, recommend to their respective shareholders that they vote in favour
of the Amalgamation. Granges and Da Capo shall coordinate and cooperate with
respect to the timing of such meetings and use their respective best efforts to
secure the approval of their respective shareholders and creditors and the
Court for the transactions contemplated herein.
6.5 STOCK EXCHANGE LISTINGS. The common shares in the capital of
Amalco shall be listed on The Toronto Stock Exchange and the American Stock
Exchange.
ARTICLE 7
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
AMALGAMATION. The respective obligation of each party thereto to complete the
Amalgamation shall be subject to the satisfaction prior to the Effective Date
of the following conditions:
7.1.1 SHAREHOLDER AND CREDITOR APPROVAL. The Amalgamation and the
transactions contemplated hereby shall have been approved as required by their
respective shareholders and creditors.
7.1.2 GOVERNMENTAL AND COURT APPROVALS. Consents and approvals
legally required for the consummation of the Amalgamation and the transactions
contemplated by this Agreement shall have been filed, occurred or been
obtained, including all required approvals of securities regulatory authorities
and an order of the Court, other than such consents and approvals, the failure
to obtain which would have no material
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adverse effect on the consummation of the Amalgamation or other transactions
contemplated hereby or on the business of Granges or Da Capo.
7.1.3 NO RESTRAINTS. No statute, rule, regulation, order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
court or Governmental Entity of competent jurisdiction which enjoins or
prohibits the consummation of the Amalgamation.
7.1.4 LEGAL ACTION. There shall not be overtly threatened or
pending any action, proceeding or other application before any court or
Governmental Entity: (i) challenging or seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement, or seeking to
obtain any material damages from Granges or Da Capo or any of their
subsidiaries; or (ii) seeking to prohibit or impose any material limitations on
Granges' or Da Capo's ownership or operation of all or any material portion of
its business or assets, or to compel Granges or Da Capo to dispose of or hold
separate all or any material portion of Granges' or Da Capo's business or
assets as a result of the transactions contemplated by this Agreement.
7.1.5 SHAREHOLDER PROTECTION RIGHTS AGREEMENT. Amalco expressly
assumes by supplemental agreement the due and punctual performance and
observance of each and every covenant and condition to be performed and
observed by Granges under the Shareholder Protection Rights Agreement made as
of May 1, 1995 between Granges and Montreal Trust Company of Canada and Amalco
executing and delivering such supplemental agreement to Montreal Trust Company
of Canada in a form satisfactory to Montreal Trust Company of Canada.
7.2 CONDITIONS TO OBLIGATIONS OF GRANGES. The obligation of
Granges to complete the Amalgamation is subject to the satisfaction of the
following conditions unless waived by Granges:
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7.2.1 REPRESENTATIONS AND WARRANTIES OF DA CAPO. The
representations and warranties of Da Capo set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement as
though made on and as of the Effective Date, except as otherwise contemplated
by this Agreement.
7.2.2 PERFORMANCE OF OBLIGATIONS OF DA CAPO. Da Capo shall have
performed in all material respects all agreements and covenants required to be
performed by it under this Agreement prior to the Effective Date.
7.2.3 SUPPORT LETTERS. Each of the shareholders of Da Capo
identified in Schedule 1 shall have executed and delivered a Support Letter and
no representation and warranty of any shareholder of Da Capo contained in any
such Support Letter shall be untrue as at the Effective Date.
7.2.4 TRANSFER OF PARTICIPATION QUOTAS. O'Connor shall have
transferred his ownership of 20% of the outstanding participation quotas of
Yamin to a nominee of Granges specified in writing.
7.3 CONDITIONS OF OBLIGATION OF DA CAPO. The obligation of Da
Capo to complete the Amalgamation is subject to the satisfaction of the
following conditions unless waived by Da Capo:
7.3.1 REPRESENTATIONS AND WARRANTIES OF GRANGES. The
representations and warranties of Granges set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Effective Date as though made on and as of the Effective Date, except
as otherwise contemplated by this Agreement.
7.3.2 PERFORMANCE OF OBLIGATIONS OF GRANGES. Granges shall have
performed in all material respects all agreements and covenants required to be
performed by it under this Agreement prior to the Effective Date.
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7.3.3 SUPPORT LETTERS. Each of the shareholders of Granges
identified in Schedule 1 shall have executed and delivered a Support Letter and
no representation and warranty of any shareholder of Granges contained in any
such Support Letter shall be untrue as at the Effective Date.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Date, whether before or after approval of the
Amalgamation by the shareholders of Granges and Da Capo:
(a) by mutual consent of Granges and Da Capo;
(b) by either Granges or Da Capo (provided that the terminating
party is not then in material breach of any representation,
warranty, covenant or agreement contained in this Agreement)
if there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on
the part of the other party, and such breach has not been
cured or best efforts are not being employed to cure such
breach, within 10 days after notice is given to the party
committing such breach;
(c) by either Granges or Da Capo if the Amalgamation has not been
consummated on or before December 31, 1996;
(d) by either Granges or Da Capo if the Amalgamation has not been
approved by the shareholders of Granges or Da Capo or the
Court on or before December 31, 1996;
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(e) by either Granges or Da Capo if: (i) the conditions
to such party's obligation to complete shall have become
impossible to satisfy; or (ii) any permanent injunction or
other order of a court or other competent authority preventing
the Amalgamation shall have become final and non-appealable;
(f) by Granges if the Board of Directors of Da Capo shall have
withdrawn or modified in a manner adverse to Granges its
approval or recommendation of the Amalgamation, this Agreement
or the transactions contemplated hereby or shall fail to
reaffirm such approval or recommendation upon the other
party's request, or shall have resolved to do any of the
foregoing;
(g) by either Granges or Da Capo if the holders of more than 5% of
the outstanding Granges Common Shares have exercised rights of
dissent which have not been withdrawn;
(h) by Da Capo if the board of directors of Granges shall have
withdrawn or modified in a manner adverse to Da Capo its
approval or recommendation of the Amalgamation, this Agreement
or the transactions contemplated hereby or shall fail to
reaffirm such approval or recommendation upon the other
parties' request, or shall have resolved to do any of the
foregoing; or
(i) by either Da Capo or Granges, if the holders of more than 5%
of the outstanding Da Capo Common Shares who have exercised
rights of dissent which have not been withdrawn.
8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Da Capo or Granges as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, and there shall be no
liability or obligation on the part of Granges or Da Capo to proceed with the
Amalgamation, except that no party shall be
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released or relieved from any liability arising from the breach by such party
of any of its representations, warranties, covenants or agreements as set forth
in this Agreement.
8.3 BREAK FEE. If the shareholders of Granges fail to approve the
Amalgamation or the Amalgamation fails to complete as a result of fault on the
part of or anything with the control of Granges, Granges will pay $250,000
(U.S.) to Da Capo.
8.4 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken by their respective Board of Directors, at any time
before or after approval of the Amalgamation by the shareholders of Granges and
Da Capo, but after any such shareholder approval, no amendment shall be made
which by law requires the further approval of shareholders without obtaining
such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.5 EXTENSION, WAIVER. At any time prior to the Effective Date,
any party hereto, by action taken by its Board of Directors, may to the extent
legally allowed: (i) extend the time for the performance of any of the
obligations or other acts of the other party hereto; (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements, covenants or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 9
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreement in this Agreement or in any
instrument
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delivered pursuant to this Agreement shall be deemed to be conditions to the
Arrangement and shall survive the Effective Date of the Arrangement.
9.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, by facsimile
(receipt confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Granges:
Granges Inc.
3000 - 370 Seventeenth Street
Denver, Colorado
80202
Fax No.: (303) 629-2499
Attn: President and Chief Executive Officer
(b) if to Da Capo:
Da Capo Resources Ltd.
1500 - 625 Howe Street
Vancouver, British Columbia
V6C 2T6
Fax No.: (604) 684-0147
Attn: President
9.3 MISCELLANEOUS. This Agreement, each of the agreements
attached as an exhibit hereto and any other documents referred to herein or
contemplated hereby: (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to
the subject matter hereof, except for the confidentiality
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agreements between Granges and Da Capo accepted April 11, 1996 and June 21,
1996 which shall remain in force; (b) is not intended to confer upon any other
person any rights or remedies hereunder (except as otherwise expressly provided
herein); and (c) shall not be assigned by operation of law or otherwise except
as otherwise specifically provided.
9.4 GOVERNING LAW. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of British
Columbia.
9.5 EXPENSES. Each party shall bear its own expenses and costs
in connection with the transactions contemplated hereby.
9.6 TIME OF THE ESSENCE. Time is of the essence of this
Agreement.
If the terms and conditions of this letter are acceptable to
you, please indicate your agreement by dating and signing below.
Yours very truly,
GRANGES INC.
By: /s/ MICHAEL B. RICHINGS
-------------------------
We hereby irrevocably agree to accept the terms of this letter
this 16th day of August, 1996.
DA CAPO RESOURCES LTD.
By: /s/ ROSS BEATY
---------------------------
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SCHEDULE 1
STRICTLY PRIVATE & CONFIDENTIAL
August 16, 1996
SUPPORT LETTER
TO: ATLAS CORPORATION (the "Shareholder")
Granges Inc. ("Granges") and Da Capo Resources Ltd. ("Da
Capo") propose to enter into an agreement (the "Definitive Agreement")
providing for the amalgamation (the "Amalgamation") of Granges and Da Capo to
become effective under the provisions of the British Columbia Company Act (the
"Act").
Under the Amalgamation, each issued and outstanding common
share of Granges will be exchanged for one common share in the capital of the
amalgamated company ("Amalco") and each issued and outstanding common share of
Da Capo will be exchanged for two common shares in the capital of Amalco.
This letter is intended to set out the terms and conditions of
the agreement of Atlas Corporation (the "Shareholder"): (i) to support the
Amalgamation, including any Alternative Transaction (as defined in section
1.3); (ii) to vote its common shares (the "Shares") in Granges as set out
opposite its name in Schedule "A" in favour of the Amalgamation and any
Alternative Transaction; and (iii) to abide by the restrictions and covenants
set forth herein.
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1. SHAREHOLDER COMMITMENTS TO THE AMALGAMATION
1.1 Commitment, Non-Solicitation. Subject to the covenants of
Granges herein, the Shareholder covenants that until the date upon which the
certificate is issued under the Act giving effect to the Amalgamation (the
"Effective Date"):
(a) except to the extent permitted hereunder, the Shareholder will
not take any steps, directly or indirectly, which may in any
way adversely affect the transactions contemplated hereby and
to be contemplated in the Definitive Agreement;
(b) the Shareholder will not solicit, initiate or encourage
submissions, proposals or offers from any other person, entity
or group relating to, or facilitate or encourage any effort or
attempt with respect to, the acquisition or disposition of all
or any substantial part of the issued or unissued shares of
Granges or Da Capo or their respective subsidiaries, or any
arrangement, amalgamation, merger, sale of all or any
substantial part of their respective assets, take-over bid,
reorganization recapitalization, liquidation or winding-up of,
or other business combination or similar transaction involving
Granges or Da Capo or any of their respective subsidiaries and
any other party (each an "Extraordinary Business
Combination"). The Shareholder will not participate in any
discussions or negotiations regarding, or (except as required
by law) furnish to any other person, entity or group, any
information with respect to, or otherwise cooperate in any way
with, or assist or participate in, any Extraordinary Business
Combination. If the Shareholder receives any such inquiry,
submission, proposal or offer, the Shareholder will promptly
notify Granges and Da Capo in writing of all relevant details
relating thereto; and
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(c) the Shareholder will use all reasonable efforts to assist
Granges and Da Capo to complete the Amalgamation or an
Alternative Transaction as the case may be.
1.2 Voting. The Shareholder covenants that it will vote its
Shares in favour of the Amalgamation at each meeting or adjournment or
adjournments thereof (the "Meeting") of holders of shares of Granges to be held
to consider the Amalgamation.
1.3 Change In Nature of Transaction. The Shareholder agrees that
if Granges and Da Capo mutually agree that it is necessary or desirable to
proceed with another form of transaction (an "Alternative Transaction") whereby
either Granges or Da Capo or any of their respective affiliates is effectively
to acquire 100% of the Common Shares of the other and merge such entities on
economic terms (including tax treatment) which, in relation to the Shareholder,
are substantially equivalent to or better than those contemplated by the
Agreement, and provided that the consideration paid to shareholders of either
continues to be satisfied in common shares of the other, the Shareholder will
support the completion of such Alternative Transaction in the same manner as
the Amalgamation.
1.4 Meeting of Shareholders. If the Alternative Transaction
involves a meeting or meetings of holders of shares of Granges, the Shareholder
agrees to vote in favour of any matters necessary or ancillary to the
completion of the transactions contemplated by the Alternative Transaction.
1.5 Change of References. In the event of any proposed
Alternative Transaction, the references in this agreement to "Amalgamation"
shall be changed to "Alternative Transaction" and all terms covenants,
representations and warranties of this agreement shall be and shall be deemed
to have been made in the context of the Alternative Transaction. All
references to the "Effective Date" herein shall also refer to the date of
closing of the transactions contemplated by the Alternative Transaction.
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1.6 No Dissent. The Shareholder covenants that it will not
exercise any rights of dissent provided under sections 231 and 273 of the Act
with respect to the Amalgamation or any Alternative Transaction.
2. GENERAL
2.1 Personal Warranties. By executing this Agreement, the
Shareholder represents and warrants to Granges and Da Capo that the Shareholder
has the sole right to vote its Shares at the Meeting.
2.2 Transfer of Shares. The Shareholder agrees with Granges and
Da Capo that it will not during the term of this Agreement transfer or assign
or agree to transfer or assign any of the Shares without the prior consent of
Granges and Da Capo, which consent shall not be unreasonably withheld if it is
sought for bona fide tax, planning purposes which does not prejudice, directly
or indirectly, Granges or Da Capo; provided however that such consent is not
necessary if the transfer is (i) to a holding company beneficially owned by the
Shareholder; or (ii) a transfer by the Shareholder, which is a holding company,
to a shareholder who controls the holding company, where such holding company
or shareholder of such holding company, as the case may be, executes this
Agreement.
2.3 Acquired Shares. The Shareholder agrees that any shares of
Granges or Da Capo purchased or as to which the Shareholder acquires beneficial
ownership after the execution of this Agreement, shall be subject to the terms
of this Agreement to the same extent as if they constituted Shares. The
Shareholder agrees not to purchase or sell any shares of Granges or Da Capo
until the Amalgamation becomes effective or the Definitive Agreement is
terminated.
2.4 Standstill. Granges agrees not to purchase or sell any shares
of Da Capo until the Amalgamation becomes effective or the Definitive Agreement
is terminated. Da Capo agrees not to purchase or sell any Shares of Granges
until the Amalgamation becomes effective or the Definitive Agreement is
terminated.
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2.5 Covenants of Granges. Granges covenants and agrees with the
Shareholder, and Granges' compliance with such covenants shall be a condition
to the Shareholders' obligations hereunder, as follows:
(a) to use all reasonable efforts to assist the Shareholder in
reducing the number of Shares pledged by the Shareholder as
security for the 7% Exchangeable Debentures due October 25,
2000 issued by the Shareholder;
(b) to negotiate in good faith an amendment to the Gold Bar joint
venture agreement between Granges and the Shareholder
consistent with discussions between Granges and the
Shareholder immediately prior to the signing of this
Agreement;
(c) to file and use its reasonable best efforts to cause to become
effective not later than November 30, 1996 all registration
statements and other filings (federal, provincial or state) as
shall be necessary on the part of Granges to enable the
Shareholder to dispose of its Shares on The Toronto Stock
Exchange and American Stock Exchange without restriction of
any kind whatsoever under applicable securities laws and to
maintain, in the case of any registration statement filed with
the U.S. Securities and Exchange Commission, the effectiveness
of such registrations and other filings until at least
December 31, 2000, with the costs incurred by Granges in
connection with the preparation of such registration
statements and filings to be borne by Granges;
(d) to cause Mike Richings, if and when requested by the
Shareholders, to resign from the Board of Directors of the
Shareholder; and
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<PAGE> 40
(e) to reimburse promptly all expenses incurred by the Shareholder
in connection with this Agreement, the Amalgamation or any
Alternative Transaction or any of sub-paragraphs (a) to (d)
above including, without limitation, all reasonable fees of
the Shareholder's counsel in connection with any such matter.
2.6 Disclosure. No disclosure of this Agreement and any resulting
agreement shall be made by Granges, Da Capo or the Shareholder or any
corporation or other entity which is associated with the Shareholder except as
may be required by applicable law or regulatory authorities. The parties shall
coordinate the making and dissemination of any public announcement relating to
the subject matter of this Agreement.
2.7 Time of the Essence. Time shall be of the essence of this
Agreement.
2.8 Termination Date. It is intended that the Effective Date
shall occur as soon as is practicable following receipt of the appropriate
shareholder, court and regulatory approvals but not later than December 31,
1996 and (except with the written consent of the Shareholder) if the Effective
Date does not occur by such date, the Agreement shall be of no further force
and effect.
-40-
<PAGE> 41
2.9 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
________________________
If the terms and conditions of this letter are acceptable to
you please indicate your acceptance by dating and signing the same as noted
above.
Yours very truly,
GRANGES INC.
By: ___________________________
DA CAPO RESOURCES LTD.
By: ___________________________
________________________
We irrevocably agree with and accept the terms of this letter.
ATLAS CORPORATION
By: _________________________
-41-
<PAGE> 42
SCHEDULE A
DA CAPO SHAREHOLDERS
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF DA CAPO COMMON SHARES
- - ----------- -------------------------------
<S> <C>
Ross Beaty 800,000
416554 B.C. Ltd. 3,497,308
Kestrel Holdings Ltd. 124,000
</TABLE>
GRANGES SHAREHOLDERS
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF GRANGES COMMON SHARES
- - ----------- -------------------------------
<S> <C>
Atlas Corporation 12,714,900
</TABLE>
-42-
<PAGE> 43
STRICTLY PRIVATE & CONFIDENTIAL
August 6, 1996
SUPPORT LETTER
TO: EACH OF THE SHAREHOLDERS OF GRANGES INC. AND DA CAPO RESOURCES
LTD. SHOWN IN SCHEDULE A (collectively, the "Shareholders")
Granges Inc. ("Granges") and Da Capo Resources Ltd. ("Da
Capo") propose to enter into an agreement (the "Definitive Agreement")
providing for the amalgamation (the "Amalgamation") of Granges and Da Capo to
become effective under the provisions of the British Columbia Company Act (the
"Act").
Under the Amalgamation, each issued and outstanding common
share of Granges will be exchanged for one common share in the capital of the
amalgamated company ("Amalco") and each issued and outstanding common share of
Da Capo will be exchanged for two common shares in the capital of Amalco.
This letter is intended to set out the terms and conditions of
the agreement of the shareholders (the "Shareholders") of Granges and Da Capo
identified in Schedule "A" hereto on a several basis: (i) to support the
Amalgamation, including any Alternative Transaction (as defined in section
1.3); (ii) to vote their common shares (the "Shares") in Granges or Da Capo as
set out opposite each Shareholder's name in Schedule "A" in favour of the
Amalgamation and any Alternative Transaction; and (iii) to abide by the
restrictions and covenants set forth herein.
-43-
<PAGE> 44
1. SHAREHOLDER COMMITMENTS TO THE AMALGAMATION
1.1 Commitment, Non-Solicitation. Each Shareholder severally
covenants that until the date upon which the certificate is issued under the
Act giving effect to the Amalgamation (the "Effective Date"):
(a) except to the extent permitted hereunder, the Shareholder will
not take any steps, directly or indirectly, which may in any
way adversely affect, and will use his, her or its reasonable
endeavours, as the case may be, to complete successfully, the
transactions contemplated hereby and to be contemplated in the
Definitive Agreement; provided, however, that nothing herein
contained shall restrict or limit any Shareholder from
carrying out his or her duties as an officer, employee or
director of Granges or Da Capo or their respective
subsidiaries in the ordinary course of business;
(b) the Shareholder will not solicit, initiate or encourage
submissions, proposals or offers from any other person, entity
or group relating to, or facilitate or encourage any effort or
attempt with respect to, the acquisition or disposition of all
or any substantial part of the issued or unissued shares of
Granges or Da Capo or their respective subsidiaries, or any
arrangement, amalgamation, merger, sale of all or any
substantial part of their respective assets, take-over bid,
reorganization recapitalization, liquidation or winding-up of,
or other business combination or similar transaction involving
Granges or Da Capo or any of their respective subsidiaries and
any other party (each an "Extraordinary Business
Combination"). The Shareholder will not participate in any
discussions or negotiations regarding, or (except as required
by law) furnish to any other person, entity or group, any
information with respect to, or otherwise cooperate in any way
with, or assist or participate in, any Extraordinary Business
Combination. If the Shareholder receives any such inquiry,
submission, proposal or offer, the
-44-
<PAGE> 45
Shareholder will promptly notify Granges and Da Capo in
writing of all relevant details relating thereto; and
(c) the Shareholders will use all reasonable efforts to assist
Granges and Da Capo to complete the Amalgamation or an
Alternative Transaction as the case may be.
1.2 Voting. Each Shareholder severally covenants that he, she or
it will vote his, her or its Shares in favour of the Amalgamation at each
meeting or adjournment or adjournments thereof (the "Meeting") of holders of
shares of Granges or Da Capo, as the case may be, to be held to consider the
Amalgamation.
1.3 Change In Nature of Transaction. Each Shareholder agrees that
if Granges and Da Capo mutually agree that it is necessary or desirable to
proceed with another form of transaction (an "Alternative Transaction") whereby
either Granges or Da Capo or any of their respective affiliates is effectively
to acquire 100% of the Common Shares of the other and merge such entities on
economic terms (including tax treatment) which, in relation to the
Shareholders, are substantially equivalent to or better than those contemplated
by the Agreement, and provided that the consideration paid to shareholders of
either continues to be satisfied in common shares of the other, such
Shareholder will support the completion of such Alternative Transaction in the
same manner as the Amalgamation.
1.4 Meeting of Shareholders. If the Alternative Transaction
involves a meeting or meetings of holders of shares of Da Capo, each
Shareholder who holds shares of Da Capo agrees to vote in favour of any matters
necessary or ancillary to the completion of the transactions contemplated by
the Alternative Transaction.
1.5 Change of References. In the event of any proposed
Alternative Transaction, the references in this agreement to "Amalgamation"
shall be changed to "Alternative Transaction" and all terms covenants,
representations and warranties of this
-45-
<PAGE> 46
agreement shall be and shall be deemed to have been made in the context of the
Alternative Transaction. All references to the "Effective Date" herein shall
also refer to the date of closing of the transactions contemplated by the
Alternative Transaction.
1.6 No Dissent. Each Shareholder covenants that he, she or it
will not exercise any rights of dissent provided under sections 231 and 273 of
the Act with respect to the Amalgamation or any Alternative Transaction.
2. GENERAL
2.1 Personal Warranties. By executing this Agreement, each
Shareholder severally represents and warrants to Granges that such Shareholder
has the sole right to vote his, her or its Shares at the Meeting. To such
Shareholder's knowledge, Da Capo has not failed to disclose any material
adverse information in regard to the operations of Da Capo and its subsidiaries
which would reasonably have been expected to cause Granges not to enter into
the Definitive Agreement. By executing this Agreement, each Shareholder who
holds shares of Granges represents and warrants to Da Capo that such
Shareholder has the sole right to vote his, her or its Shares at the Meeting.
To such Shareholder's knowledge, Granges has not failed to disclose any
material adverse information in regard to the operations of Granges and its
subsidiaries which would reasonably have been expected to cause Da Capo not to
enter into the Agreement.
2.2 Transfer of Shares. Each Shareholder who accepts this
Agreement agrees with Granges and Da Capo that he, she or it will not during
the term of this Agreement transfer or assign or agree to transfer or assign
any of the Shares without the prior consent of Granges and Da Capo, which
consent shall not be unreasonably withheld if it is sought for bona fide tax,
estate or family asset planning purposes which does not prejudice, directly or
indirectly, Granges or Da Capo; provided however that such consent is not
necessary if the transfer is (i) to a holding company beneficially owned by the
Shareholder; or (ii) a transfer by a Shareholder, which is a holding company,
to a shareholder who controls the holding company, where such holding company
or
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<PAGE> 47
shareholder of such holding company, as the case may be, executes this
Agreement. Where the Shareholder is a corporation, family member or other
entity and the employee which is associated with such corporation, family
member or entity also executes such agreement, the employee agrees that except
as hereinbefore contemplated:
(i) he or she will not transfer or assign or agree to
transfer or assign and will cause any other person
not to transfer or assign or agree to transfer or
assign any shares of such corporation and not to
transfer or assign or agree to transfer or assign any
interests in such entity which owns securities of
Granges or Da Capo; and
(ii) he or she will cause any family member not to
transfer or assign or agree to transfer or assign any
securities of Granges or Da Capo;
without the prior consent of Granges and Da Capo.
2.3 Shareholders Which are Not Individuals. Where the Shares are
not owned by an employee of Granges or Da Capo or a subsidiary of Granges or Da
Capo but are owned by a Shareholder which is a corporation, family member or
other entity with whom such employee is associated, then the acceptance of this
Agreement by such Shareholder shall be effective only if this Agreement is also
executed by such employee. The execution of this Agreement by an employee of
Granges or Da Capo or a subsidiary of Granges or Da Capo who is associated with
the Shareholder which owns the Shares will also constitute an unconditional
guarantee by such employee of the obligations of the Shareholder under this
Agreement.
2.4 Acquired Shares. Each Shareholder agrees that any shares of
Granges or Da Capo purchased or as to which the Shareholder acquires beneficial
ownership after the execution of this Agreement, shall be subject to the terms
of this Agreement to the
-47-
<PAGE> 48
same extent as if they constituted Shares. Each Shareholder agrees not to
purchase or sell any shares of Granges or Da Capo until the Amalgamation
becomes effective or the Definitive Agreement is terminated.
2.5 Standstill. Granges agrees not to purchase or sell any shares
of Da Capo until the Amalgamation becomes effective or the Definitive Agreement
is terminated. Da Capo agrees not to purchase or sell any Shares of Granges
until the Amalgamation becomes effective or the Definitive Agreement is
terminated.
2.6 Disclosure. No disclosure of this Agreement and any resulting
agreement shall be made by Granges, Da Capo or the Shareholders or any
corporation, family member or other entity which is associated with the
Shareholders except as may be required by applicable law or regulatory
authorities. The parties shall coordinate the making and dissemination of any
public announcement relating to the subject matter of this Agreement.
2.7 Time of the Essence. Time shall be of the essence of this
Agreement.
2.8 Termination Date. It is intended that the Effective Date
shall occur as soon as is practicable following receipt of the appropriate
shareholder, court and regulatory approvals but not later than December 31,
1996 unless such date is extended under the Definitive Agreement.
-48-
<PAGE> 49
2.9 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
________________________
If the terms and conditions of this letter are acceptable to
you please indicate your acceptance by dating and signing the same as noted
above.
Yours very truly,
GRANGES INC.
By: ___________________________
DA CAPO RESOURCES LTD.
By: ___________________________
________________________
We irrevocably agree with and accept the terms of this letter.
<TABLE>
<S> <C>
ATLAS CORPORATION ____________________________
ROSS BEATY
By: _________________________ 416554 B.C. LTD.
By: _________________________
KESTREL HOLDINGS LTD.
By: _________________________
</TABLE>
-49-
<PAGE> 50
SCHEDULE A
DA CAPO SHAREHOLDERS
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF DA CAPO COMMON SHARES
- - ----------- -------------------------------
<S> <C>
Ross Beaty 800,000
416554 B.C. Ltd. 3,497,308
Kestrel Holdings Ltd. 124,000
</TABLE>
GRANGES SHAREHOLDERS
<TABLE>
<CAPTION>
SHAREHOLDER NUMBER OF GRANGES COMMON SHARES
- - ----------- -------------------------------
<S> <C>
Atlas Corporation 12,714,900
</TABLE>
-50-
<PAGE> 51
SCHEDULE 2
DIRECTORS AND OFFICERS OF AMALCO
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C>
David R. Sinclair Director and Chairman of the Board
Ross J. Beaty Director and Vice Chairman of the Board
Michael B. Richings Director, President and Chief Executive
Officer
William M. Calhoun Director
James H. Dunnett Director
C. Thomas Ogryzlo Director
Keith Steeves Director
Alan G. Thompson Director
Peter Walton Director
Amjad J. Ali Vice President, Finance and Chief
Financial Officer
Nancy A. Larson Corporate Secretary/Manager Investor
Relations
Ronald J. McGregor Vice President, Operations and Development
</TABLE>
-51-
<PAGE> 1
EXHIBIT 11
EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1995 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C> <C>
1. CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
1.0(a) BASIC EARNINGS PER SHARE
Net earnings (loss) (3,585,000) 4,233,000 (8,482,000) 5,444,000
Weighted average shares outstanding 54,932,568 45,963,310 49,096,135 40,739,989
---------------------------------------------------------------
Basic Earnings Per Share (0.07) 0.09 (0.17) 0.13
===============================================================
1.0(b) FULLY DILUTED EARNINGS PER SHARE
Net earnings (loss) (3,585,000) 4,233,000 (8,482,000) 5,444,000
Interest income from cash from stock options 17,468 15,916 52,403 31,831
---------------------------------------------------------------
Adjusted net earnings (loss) (3,567,532) 4,248,916 (8,429,597) 5,475,831
---------------------------------------------------------------
Weighted average shares outstanding 54,932,568 45,963,310 49,096,135 40,739,989
Stock options deemed exercised 30,000 551,250 30,000 551,250
---------------------------------------------------------------
Adjusted weighted average shares outstanding 54,962,568 46,514,560 49,126,135 41,291,239
---------------------------------------------------------------
Fully diluted earnings per share (0.07) 0.09 (0.17) 0.13
===============================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 14,122
<SECURITIES> 312
<RECEIVABLES> 3,443
<ALLOWANCES> 0
<INVENTORY> 16,458
<CURRENT-ASSETS> 34,335
<PP&E> 81,418
<DEPRECIATION> 41,329
<TOTAL-ASSETS> 77,640
<CURRENT-LIABILITIES> 10,032
<BONDS> 3,880
0
0
<COMMON> 71,706
<OTHER-SE> (7,978)
<TOTAL-LIABILITY-AND-EQUITY> 77,640
<SALES> 26,062
<TOTAL-REVENUES> 26,062
<CGS> 30,098
<TOTAL-COSTS> 30,098
<OTHER-EXPENSES> 4,601
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,637)
<INCOME-TAX> (155)
<INCOME-CONTINUING> (8,482)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,482)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
