<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 JUNE 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-------------------
COMMISSION FILE NUMBER 1-9025
GRANGES INC.
(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)
Not Applicable
(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:
55,881,461
----------
Common Shares, without par value, outstanding at July 10, 1996
------------------
<PAGE> 2
GRANGES INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(i) Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 3
(ii) Consolidated Statements of Earnings (Loss) for the six months ended 4
June 30, 1996 and June 30, 1995
(iii) Consolidated Statement of Deficit for the six months ended June 30, 4
1996 and June 30, 1995
(iv) Consolidated Statements of Changes in Cash Resources for the six 5
months ended June 30, 1996 and June 30, 1995
(v) Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 2. CHANGES IN SECURITIES 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13
ITEM 5. OTHER INFORMATION 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14
SIGNATURES
</TABLE>
In this Report, unless otherwise indicated, all dollar amounts are expressed in
United States dollars.
2
<PAGE> 3
GRANGES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
(U.S. Dollars in Thousands) 1996 1995
- -------------------------------------------------------------------------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,650 $ 15,210
Funds held in escrow, special warrants (Note 5) 18,496 0
Marketable securities 4 179
Accounts receivable and other 3,794 1,432
Inventories 16,680 11,090
------- --------
42,624 27,911
Investment in Zamora Gold Corp. 3,563 4,254
Property, plant and equipment, net 39,831 32,051
------ --------
86,018 64,216
====== ========
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities $14,111 $ 6,239
------- --------
14,111 6,239
Provisions for future reclamation and closure costs 3,699 3,409
-------- --------
17,810 9,648
-------- --------
SHAREHOLDERS' EQUITY
Common shares without par value 54,398 54,190
(Issued 1996- 46,181,661 shares; 1995 - 46,042,911 shares)
Special warrants (Note 5) 18,505 0
Retained earnings (deficit) (3,488) 1,409
Currency translation adjustment (1,207) (1,031)
-------- --------
68,208 54,568
-------- --------
$ 86,018 $ 64,216
======== ========
</TABLE>
Commitments and contingencies (Note 3)
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
GRANGES INC.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
(U.S. Dollars in Thousands, Except Per Share Data) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUE $ 9,739 $ 10,026 $ 16,408 $ 21,728
----------- ----------- ----------- -----------
EXPENSES
Operating costs 8,189 8,453 13,805 17,265
Depreciation, depletion and provision for
future reclamation and closure costs 1,159 944 2,273 1,837
Amortization of deferred stripping 2,121 29 2,121 29
----------- ----------- ----------- -----------
11,469 9,426 18,199 19,131
----------- ----------- ----------- -----------
RESULTS OF MINING OPERATIONS (1,730) 600 (1,791) 2,597
----------- ----------- ----------- -----------
Mineral exploration and property evaluation 765 702 1,886 1,615
Corporate administrative 503 502 1,119 1,033
Interest income - net (221) (474) (380) (940)
Other expense (income) (2) 377 196 303
Gain on sale of investments (157) (810) (298) (810)
Equity in loss of Zamora Gold Corp. 374 0 691 0
----------- ----------- ----------- -----------
1,262 297 3,214 1,201
----------- ----------- ----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES (2,992) 303 (5,005) 1,396
CURRENT INCOME TAXES (RECOVERY) (61) 143 (108) 186
----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $ (2,931) $ 160 $ (4,897) $ 1,210
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE $ (0.06) $ 0.00 $ (0.11) $ 0.03
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 46,181,661 41,946,876 46,145,088 38,085,045
=========== =========== =========== ===========
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
Six Months Ended
June 30
(U.S. Dollars in Thousands, Except Per Share Data) 1996 1995
- ------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
RETAINED EARNINGS (DEFICIT), BEGINNING OF PERIOD (Note 4) $ 1,409 $(55,275)
NET EARNINGS (LOSS) (4,897) 1,210
------- --------
DEFICIT, END OF PERIOD $(3,488) $(54,065)
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
GRANGES INC.
CONSOLIDATED STATEMENTS OF CHANGES IN CASH RESOURCES
<TABLE>
<CAPTION>
Six Months Ended
June 30
(U.S. Dollars in Thousands) 1996 1995
- -------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $(4,897) $ 1,210
Items not involving cash:
Depreciation, depletion and amortization 4,104 1,629
Provision for future reclamation and closure costs 290 260
Gain on sale of investments (298) (810)
Equity in loss of Zamora Gold Corp. 691 0
------- -------
(110) 2,289
Currency translation adjustment (176) (108)
Change in working capital,
excluding cash, cash equivalents and funds held in escrow (80) (8,914)
------- -------
(366) (6,733)
------- -------
INVESTING ACTIVITIES
Property, plant and equipment (11,372) (1,036)
Deferred stripping (512) (2,687)
Proceeds from sale of investments 473 872
Option payments received 0 29
------- -------
(11,411) (2,822)
------- -------
FINANCING ACTIVITIES
Long-term debt repayments 0 (134)
Deferred amalgamation costs 0 (1,209)
Issue of share-purchase options 208 96
Issue of special warrants (Note 5) 18,505 0
------- -------
18,713 (1,247)
------- -------
INCREASE (DECREASE) IN CASH,
CASH EQUIVALENTS AND FUNDS HELD IN ESCROW 6,936 (10,802)
CASH, CASH EQUIVALENTS AND
FUNDS HELD IN ESCROW, BEGINNING OF PERIOD 15,210 33,046
------- -------
CASH, CASH EQUIVALENTS AND
FUNDS HELD IN ESCROW, END OF PERIOD $22,146 $22,244
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
GRANGES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS IN THOUSANDS UNLESS SPECIFIED OTHERWISE - UNAUDITED)
JUNE 30, 1996
1. UNAUDITED INTERIM FINANCIAL INFORMATION
The consolidated financial statements of Granges Inc. (the "Company") for the
six months ended June 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 Company's
recent relocation 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 six months ended June 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 $ 999
1997 1,998
1998 1,055
1999 --
2000 --
------
$4,052
======
</TABLE>
Letters of credit totalling $2.8 million (1995-$3.5 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 June 30, 1996,
the Company's consolidated hedging program consisted of the following:
(i) forward sales contracts totalling 50,000 ounces for deliveries up to
November 28, 1997 at an average price of $403 per ounce;
6
<PAGE> 7
(ii) matching option contracts for 1,000 ounces of gold under which the
Company can require the financial institution to buy gold at $392 per ounce,
while the financial institution can require the Company to sell the same
number of ounces at $465 per ounce. These options expire on July 31, 1996
and result in no net cost to the Company.
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$24,044,730 (US$17,548,336). 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 - AMALGAMATION
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 ("Amalco"), 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.
Under the terms of the agreement, each holder of Granges shares will be
entitled to one Amalco share for each Granges share, and each holder of Da Capo
shares will be entitled to two Amalco shares for each
7
<PAGE> 8
Da Capo share. The amalgamated company will be owned 66.25 percent by Granges
shareholders and 33.75 percent by Da Capo shareholders on a fully diluted basis.
8
<PAGE> 9
GRANGES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion should be read in conjunction with the consolidated financial
statements of Granges Inc. (the "Company") for the six months ended June 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 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 as described more fully in
Note 2 to the consolidated financial statements.
A. RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 VS. THREE MONTHS ENDED JUNE 30, 1995
The net loss for the three months ended June 30, 1996 was $2.9 million compared
to net earnings of $0.2 million for the same period in 1995. The current
quarter's loss included amortization of deferred stripping of $2.1 million as
compared to $29,000 in the previous year. The net loss for the second quarter
1996 included a gain on the sale of marketable securities of $0.2 million,
while during the same period in 1995, net earnings included a gain on the sale
of marketable securities of $0.8 million.
Revenues for the second quarter of 1996 of $9.7 million decreased $0.3 million,
or three percent, from the same period in 1995. Revenue is generated solely
from the Hycroft mine. The decrease in revenues was due to a slight decrease
in production, while gold prices for the two periods were steady. The 1996
gross realized price was unchanged from 1995 at $391 per ounce of gold.
<TABLE>
<CAPTION>
1996 1995
---- ----
(Ounces)
<S> <C> <C>
Gold 23,429 23,867
Silver 110,710 157,244
</TABLE>
Gold production during the second quarter of 1996 returned to normal levels and
was within 438 ounces, or two percent, from the same period in 1995. Ore
production was 16 percent greater at 40,332 recoverable ounces mined and placed
on the leach pads during the second quarter of 1996 as compared to 34,720 for
the same period in 1995. This bodes well for gold leaching and production for
the ensuing quarters.
Operating costs for the three months ended June 30, 1996 decreased $0.3
million, or three percent, from the second quarter of 1995.
<TABLE>
<CAPTION>
1996 1995
---- ----
(Millions)
<S> <C> <C>
Hycroft mine $8.2 $8.5
==== ====
</TABLE>
The decrease in operating costs was attributable to an increase in the use of
lower cost, uncrushed run-of-mine material in the tonnage processed (71
percent of tons processed compared to 57 percent in 1995), partially offset by
higher than normal maintenance costs for major repairs in recent months.
Direct cash
9
<PAGE> 10
operating costs per ounce were $290 in the second quarter of 1996, compared to
$293 for the same period in 1995.
Depreciation, depletion and provision for future reclamation and mine closure
costs increased $0.2 million from 1995. Amortization of deferred stripping
for the quarter was $2.1 million. The actual strip ratio of 0.9:1 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. Mineral
exploration increased $63,000, while corporate administrative expenditures were
unchanged. Interest income decreased 53 percent from 1995 reflecting the
Company's lower average cash balances.
SIX MONTHS ENDED JUNE 30, 1996 VS. SIX MONTHS ENDED JUNE 30, 1995
The net loss for the six months ended June 30, 1996 was $4.9 million compared
to net earnings of $1.2 million in the same period of 1995. The 1996 loss was
primarily due to a significant decrease in gold production during the first
quarter together with the amortization of deferred stripping in the second
quarter.
Revenue for the six months ended June 30, 1996 of $16.4 million decreased $5.3
million, or 24 percent, from the same period in 1995. The decrease in revenues
was primarily due to lower gold and silver production in the first quarter,
which was partially offset by a favorable price variance. The gross realized
price was $394 per ounce of gold for the first six months of 1996 as compared
to $388 for the same period in 1995.
<TABLE>
<CAPTION>
1996 1995
---- ----
(Ounces)
<S> <C> <C>
Gold 39,635 51,360
Silver 150,433 299,111
</TABLE>
The decrease in gold production in the first quarter 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,
and recent ore production has exhibited normal recovery. During the first six
months of the current year, 66,007 recoverable ounces were mined and placed on
the leach pads, compared to 59,754 ounces for the same period in 1995, again
indicating normal leaching expectations for the later quarters.
Direct cash operating costs per ounce produced were $287 and $273 for the six
months ended June 30, 1996 and 1995, respectively. The increase in direct cash
operating costs resulted from lower first quarter gold production.
Depreciation, depletion and provision for future reclamation and mine closure
costs increased $0.4 million from 1995. Amortization of deferred stripping was
$2.1 million in the first six months of 1996 as discussed above. Mineral
exploration increased $0.3 million, while corporate administrative expenditures
increased slightly. Interest income decreased 60 percent as a result of the
Company's lower average cash balances.
10
<PAGE> 11
OUTLOOK
Gold production and mine operating costs at the Hycroft mine returned to normal
levels after mining in the clay-rich area was completed; the year's production
is estimated at 95,000 ounces. Exploration, corporate administrative, and
other costs are expected to remain at current levels.
Management's outlook for the future growth of Granges is through the
acquisition of additional precious metals reserves, primarily in the form of
producing or near-production properties, as well as through the exploration
efforts of the Company. Granges is actively searching for acquisition targets
in North and South America.
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 Company. 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 during the option period satisfy the Company
of the potential of a minimum proven and probable minable reserve of 500,000
ounces of gold, the Company can exercise the option to purchase the property
for $15 million payable as to $5 million in shares and $10 million in cash.
The Company is required to pay for additional proven and probable minable
reserves discovered in excess of the 500,000-ounce minimum at an effective cost
of $30 per ounce.
Subsequent to June 30, 1996, the boards of directors of the Company and Da Capo
Resources Ltd. ("Da Capo") unanimously approved the amalgamation of the two
companies to form a new gold mining company ("Amalco"), subject to shareholder,
court, and regulatory approval; entering into a definitive amalgamation
agreement; and satisfactory completion of due diligence by the Company and Da
Capo by August 6, 1996.
Under the terms of the agreement, each holder of the Company shares will be
entitled to one Amalco share for each Granges Inc. share, and each holder of Da
Capo shares will be entitled to two Amalco shares for each Da Capo share. The
amalgamated company will be owned 66.25 percent by Granges shareholders and
33.75 percent by Da Capo shareholders on a fully diluted basis.
B. LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash balance as of June 30, 1996 was $22.1 million,
an increase of $6.9 million since December 31, 1995. This increase results
from $18.7 million received from share issues offset by $11.8 million used in
capital expenditures primarily for the development of the Brimstone deposit,
including additional mining equipment and construction in progress of a
processing plant and new leach pad. The share issue is described more fully in
Note 5 to the consolidated financial statements.
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
11
<PAGE> 12
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.
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
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 Granges' 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. Pre-stripping of the
Brimstone deposit commenced in February 1996.
In April 1996, a draft environmental assessment for exploration drilling was
submitted to the BLM.
The Nevada Bureau of Mining Regulation and Reclamation requested modifications
to the solution collection ditch on Leach Pad #1 after deteriorated sections of
liner were observed during its quarterly inspection in May. This leach pad is
not currently in production, and the Company intends to reline the entire ditch
at an estimated cost of $100,000.
During the first six months of 1996, there were no material environmental
incidents or non-compliance issues with any applicable environmental
regulations.
12
<PAGE> 13
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
The annual general meeting of Granges Inc. was held on Wednesday,
May 22, 1996. The matters voted upon at the meeting included:
(a) the election of directors to hold office until the next annual
general meeting or until their successors are duly elected or
appointed; and
(b) the re-appointment of Coopers & Lybrand, Chartered Accountants,
Vancouver, British Columbia, as the auditors of Granges Inc. to
hold office until the next annual general meeting at a
remuneration to be fixed by the board of directors.
All nominees for directors as listed in the Management Information and
Proxy Circular dated April 9, 1996 were elected at the meeting and
voting for the election of directors was as follows:
<TABLE>
<CAPTION>
Nominee Votes for Votes against Votes withheld Abstentions
------- --------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
David J. Birkenshaw 22,011,894 - 175,694 30,180
William Calhoun 22,163,174 - 24,414 30,180
C. Thomas Ogryzlo 22,155,174 - 32,414 30,180
Michael B. Richings 22,155,294 - 32,294 30,180
David R. Sinclair 22,160,394 - 27,194 30,180
Keith Steeves 22,161,674 - 25,914 30,180
Alan G. Thompson 22,161,674 - 25,914 30,180
John S. Walton 22,161,894 - 25,694 30,180
Peter Walton 22,161,394 - 26,194 30,180
</TABLE>
The shareholders also approved the re-appointment of Coopers & Lybrand
as auditors of Granges Inc. at a remuneration to be fixed by the board
of directors, with 22,200,604 shares cast in favor of the resolution,
9,600 shares against, 264 shares withheld and 7,300 abstentions.
13
<PAGE> 14
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10(i) Employment Agreement dated January 1, 1996 between Granges
(U.S.) Inc. and Warren Bates.
10(ii) Employment Agreement dated January 1, 1996 between Granges
(U.S.) Inc. and A. J. Ali.
10(iii) Employment Agreement dated June 1, 1996 between Granges
(U.S.) Inc. and Ronald J. McGregor.
10(iv) Underwriting Agreement dated April 25, 1996 between Granges
Inc. and ScotiaMcLeod Inc., First Marathon Securities
Limited, Yorkton Securities Inc. and Geopel Shields and
Partners Inc.
10(v) Special Warrant Indenture dated as of April 25, 1996 between
Granges Inc. and Montreal Trust Company of Canada.
10(vi) Warrant Indenture dated as of April 25, 1996 between Granges
Inc. and Montreal Trust Company of Canada.
11 Statement re: computation of per share earnings.
27 Financial Data Schedule.
(b) Reports on Form 8-K
(i) The Company has filed a report on Form 8-K dated April 1,
1996 which reported under Item 5 (Other Events) and Item 6
(Resignation of Registrant's Directors) the appointment of
C. Thomas Ogryzlo as a new director and the resignation of
Peter Steen.
(ii) The Company has filed a report on Form 8-K dated April 10,
1996 which reported under Item 5 (Other Events) the private
placement of 7,690,000 special warrants.
(iii) The Company has filed a report on Form 8-K dated April 25,
1996 which reported under Item 5 (Other Events) the closing
of the private placement of 9,699,800 special warrants.
(iv) The Company has filed a report on Form 8-K dated
May 2, 1996 which reported under Item 5 (Other Events) an
exploration program update for Ecuador.
(v) The Company has filed a report on Form 8-K dated May 8, 1996
which reported under Item 5 (Other Events) its 1996
first quarter results.
(vi) The Company has filed a report on Form 8-K dated June 7,
1996 which reported under Item 5 (Other Events) that the
Company signed an option agreement for the Guariche Project
in Venezuela.
(vii) The Company has filed a report on Form 8-K dated June 24,
1996 which reported under Item 5 (Other Events) and Item 6
(Resignation of Registrant's Directors) the resignation
of David Birkenshaw on June 21, 1996.
14
<PAGE> 15
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.
GRANGES INC.
(Registrant)
Date: August 13, 1996 By: signed "Michael B. Richings"
-------------------------------------
Michael B. Richings
President and
Chief Executive Officer
Date: August 13, 1996 By: signed "A. J. Ali"
-------------------------------------
A. J. Ali
Vice President Finance and
Chief Financial Officer
15
<PAGE> 16
EXHIBIT INDEX
-------------
Exhibit Number Description
- -------------- -----------
10(i) Employment Agreement dated January 1, 1996 between Granges
(U.S.) Inc. and Warren Bates.
10(ii) Employment Agreement dated January 1, 1996 between Granges
(U.S.) Inc. and A. J. Ali.
10(iii) Employment Agreement dated June 1, 1996 between Granges
(U.S.) Inc. and Ronald J. McGregor.
10(iv) Underwriting Agreement dated April 25, 1996 between Granges
Inc. and ScotiaMcLeod Inc., First Marathon Securities
Limited, Yorkton Securities Inc. and Geopel Shields and
Partners Inc.
10(v) Special Warrant Indenture dated as of April 25, 1996 between
Granges Inc. and Montreal Trust Company of Canada.
10(vi) Warrant Indenture dated as of April 25, 1996 between Granges
Inc. and Montreal Trust Company of Canada.
11 Earnings Per Share Computation
27 Financial Data Schedule
16
<PAGE> 1
5/30/96
EMPLOYMENT AGREEMENT
(Warren Bates)
THIS AGREEMENT is entered into to be effective as of January 1, 1996
("Effective Date") between Granges (U.S.) Inc., a Delaware corporation, whose
address is Republic Plaza, Suite 3000, 370 Seventeenth Street, Denver, CO 80202
("Employer"), and Warren Bates ("Employee").
1. Employment. Employer hereby employs Employee and Employee
hereby accepts employment by Employer upon the terms and conditions hereinafter
set forth.
2. Term. The term of this Agreement shall begin on the Effective
Date and shall continue until terminated in accordance with the terms contained
herein.
3. Compensation.
(a) For services rendered by Employee under this Agreement
during calendar year 1996, Employer shall pay Employee salary, on an annualized
basis, to be pro-rated if the Effective Date is after January 1, 1996, of
$90,000. Subsequent years' compensation for Employee shall be determined by
Employer based upon Employee's performance, but in no event shall Employee's
annualized compensation be reduced below $90,000.
(b) In addition to the foregoing, Employee shall be
entitled to receive other compensation and fringe benefits, to be paid by
Employer, including four (4) weeks paid vacation per year; health, dental,
life, disability and accidental death and dismemberment insurance (it being
understood that Employer shall
<PAGE> 2
5/30/96
make reasonable efforts to avoid waiting periods for Employee under such
insurance, but that all such insurance shall be comparable to insurance
provided to other employees of Employer); a 401K benefit plan on the same basis
as made available to other employees of Employer; dues for professional
organizations of which Employee is a member; a performance bonus in accordance
with the Employer's executive incentive plan; and the following additional
benefits, as determined solely by Employer in its reasonable judgment: company
car or car allowance. Employee acknowledges that Employer has reimbursed or
will reimburse Employee for his and his family's reasonable costs in relocating
from Vancouver to Denver.
4. Duties. Employee is engaged as Exploration Manager of
Employer, his powers and duties in that capacity to be such as may be
determined by Employer from time to time. Employee shall report to the
President and Chief Executive Officer. Employee's duties and responsibilities
shall be comparable to duties and responsibilities of other Exploration
Managers of comparably sized companies in the mining industry. In addition,
Employee shall perform such other duties as Employee's position may require and
as Employer may reasonably request from time to time. Subject to the
provisions of Paragraph 6(b) below regarding "Fundamental Change", the precise
duties of Employee may be extended or curtailed from time to time at the
reasonable discretion of Employer.
5. Extent of Services. Employee shall devote 100% of his business
time, attention and energies to the business of Employer.
2
<PAGE> 3
5/30/96
Employee may not, during the term of this Agreement, engage in other business
activities, whether or not such business activity is pursued for gain, profit
or other pecuniary advantage, if such activities interfere with the performance
of his duties hereunder for Employer.
6. Termination and Severance Pay.
(a) The phrase "just cause" as used in this Agreement
shall include, but not be limited to, breach of any fiduciary duty to Employer,
failure to perform Employee's duties hereunder in a manner reasonably
satisfactory to the President of Employer, death, permanent disability, or
conviction in a criminal proceeding (excepting traffic violations or similar
misdemeanors).
(b) The phrase "Fundamental Change" as used in this
Agreement means:
(i) an adverse change in any of the duties,
powers, rights, discretion, salary or benefits of Employee as they exist at the
Effective Date;
(ii) a diminution of the title of Employee as it
exists at the Effective Date;
(iii) a change in the person or body to whom
Employee reports at the Effective Date, unless the new person or body is:
(w) a person or body who reports to the President and Chief Executive Officer;
(x) of equivalent or higher rank or stature; (y) another person who is
promoted to a position of equivalent or higher rank or stature; or (z) a
person hired to
3
<PAGE> 4
5/30/96
replace a person of equivalent or higher rank or stature; provided, however,
that the provisions of this Paragraph 6(b)(iii) shall not apply to a change
resulting from a promotion of Employee in the normal course of business; or
(iv) a change in the metropolitan area at which the
Employee is regularly required to carry out the terms of his employment with
the Employer at the Effective Date.
(c) Employee may terminate this Agreement upon 30 days
written notice to Employer prior to such date of termination.
(d) Employer may terminate this Agreement without cause at
any time upon 30 days written notice to Employee. Employer may terminate this
Agreement for just cause immediately upon notice to Employee in which event all
benefits to Employee under this Agreement shall cease immediately upon such
notice.
(e) In the event that a Fundamental Change occurs in
Employee's employment other than for just cause or if Employee's employment
hereunder is terminated other than for just cause, Employee shall be entitled
to:
(i) continuation of his salary (less the usual
statutory and other deductions) for twelve months after such Fundamental
Change or termination ("Continuation Period");
(ii) for vacation and retirement savings plan
purposes, the Continuation Period will count as regular employment;
(iii) subject to the approval of Employer's
Compensation Committee and the requirements of Employer's stock
4
<PAGE> 5
5/30/96
option plan, for the purpose of any stock options Employee holds, all options
not yet vested shall be deemed vested as of the date of termination of
Employee's employment, and for purposes of exercise of such options, Employee's
employment shall be deemed to be terminated at the end of the Continuation
Period, unless he has elected the Retirement Option, described in Paragraph
6(g) below, in which event Employee's employment terminates upon the
termination date;
(iv) Employee is eligible for the pro rata portion
of the annual performance bonus, if any, to which he would have been entitled
to the date of termination. This bonus amount, if any (less any statutory
holdback), will be payable when awarded by Employer in the ordinary course of
its business, notwithstanding the date of Employee's termination;
(v) all of Employee's benefits paid by Employer,
as described in Paragraph 3(b), will be continued during the Continuation
Period, to the extent that Employer maintains such benefits for its other
employees during the Continuation Period; provided, however, that if Employee
becomes employed by another employer prior to the expiry of the Continuation
Period, Employee's benefits will be discontinued by Employer upon Employee's
eligibility for benefits with his new employer; and
(vi) Employee may elect to continue long term
disability coverage which is currently at his expense; however, Employee
acknowledges that Employer's insurer may consider that
5
<PAGE> 6
5/30/96
there has been a material change in Employee's employment status that could
increase the amount of the premiums for same. If Employer is paying the
premiums for Employee's disability coverage at the time of Employee's
termination, Employer shall continue to pay during the Continuation Period the
amount of premiums it was paying at the time of termination, it being
understood and agreed that any subsequent increased premium amount shall be at
the sole cost of Employee.
(f) In the event Employee's employment hereunder is terminated
at any time prior to the termination of this Agreement by his voluntary
resignation or for just cause by Employer, Employee shall be entitled to a pro
rata portion of any bonus to which he otherwise would have been entitled to
receive that year, but Employee shall not be entitled to any severance pay or
other benefits after such resignation or termination, except such as may be
payable to him pursuant to the terms of any profit sharing plan of Employer
then in effect (there being no such plan in effect as of the Effective Date).
(g) In the event of a Fundamental Change as provided in
Paragraph 6(e), Employee may elect the "Retirement Option", by so advising
Employer in writing within thirty (30) days after the Fundamental Change
occurs. If Employee so elects, he will receive his salary, vacation pay,
company contribution to his retirement savings plan, and the reasonable present
value of Employee's other
6
<PAGE> 7
5/30/96
Employer-paid benefits for the Continuation Period (less statutory holdbacks)
in a lump sum retiring allowance following termination.
(h) If, within two (2) years after the Effective Date, a
Fundamental Change occurs in the Employee's employment other than for just
cause, or if Employee's employment is terminated other than for just cause,
Employer will pay the cost of returning Employee, and his family and household
effects to Vancouver, B.C., Canada, offset by any moving costs paid by any
other party such as a new employer.
(i) In the event of Employee's death after commencement but
before expiry of the Continuation Period, any unpaid salary, vacation, bonus or
pension amount that would have been payable under this Agreement during the
remainder of the Continuation Period will be paid as a lump sum to Employee's
estate, and for the purposes of all survivor benefits it will be deemed that
Employee died while employed by Employer so that Employee's designated
beneficiaries or Employee's estate receive such survivor benefits.
7. Disclosure of Information. By acceptance of this Agreement,
Employee expressly acknowledges that he has received or will receive certain
confidential information pertaining to the operations and business affairs of
the Employer and, as the same may exist from time to time, such information is
a valuable, special and unique asset of the Employer's business Employee agrees
that he shall not, during his employment under this Agreement or at any time
thereafter, disclose any such information to any person,
7
<PAGE> 8
5/30/96
firm, corporation, association, or other entity for any reason or purpose
whatsoever without the prior written consent of Employer. Employee also hereby
agrees that immediately upon any termination of this Agreement, for any reason
whatsoever, Employee shall return to Employer all copies of any such
information (in whatever form) then in Employee's possession.
8. Assignment. This Agreement and rights and
obligations of the parties hereto may be assigned by Employer and shall bind
and inure to the benefits of the assigns, successor or successors of Employer
and, insofar as payments are to be made to Employee after his death, shall
inure to the benefit of the assigns, heirs, estate or legal representative of
Employee. This Agreement is personal to Employee and may not be assigned by
Employee.
9. Entire Agreement; Modifications. This document contains the
entire agreement of the parties with respect to the subject matter hereof, and
it may only be changed, modified, supplemented or amended by an agreement in
writing signed by the party to be bound thereby. In particular, this Agreement
replaces, terminates and supersedes in its entirety the letter agreement
between Granges Inc. and Employee, dated May 31, 1995.
10. Governing Law. This Agreement shall be interpreted and governed
in accordance with the laws of the State of Colorado.
11. Severability. If any part of this Agreement is for any reason
declared to be illegal, invalid, unconstitutional, void or unenforceable, all
other provisions hereof not so held shall be and
8
<PAGE> 9
5/30/96
remain in full force and effect, and the intention of the parties as expressed
in the stricken provision(s) shall be given effect to the extent possible.
12. Dollar References. All references to "dollars" and "$" shall
mean United States Dollars.
13. Review by Employee's Counsel. Employee acknowledges that this
Agreement has been reviewed on his behalf by a Colorado attorney. Employer
agrees to reimburse Employee for reasonable attorney's fees and expenses
incurred by Employee in such review.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year set forth below their signatures, effective as of the day and year
first above written.
EMPLOYER: GRANGES (U.S.) INC.
By:
-------------------------------------
Michael B. Richings, President
Date:
-----------------------------------
EMPLOYEE: By:
-------------------------------------
Warren Bates
Date:
-----------------------------------
Address:
--------------------------------
----------------------------------------
9
<PAGE> 1
5/30/96
EMPLOYMENT AGREEMENT
(A.J. Ali)
THIS AGREEMENT is entered into to be effective as of January 1, 1996
("Effective Date") between Granges (U.S.) Inc., a Delaware corporation, whose
address is Republic Plaza, Suite 3000, 370 Seventeenth Street, Denver, CO 80202
("Employer"), and A.J. Ali ("Employee").
1. Employment. Employer hereby employs Employee and Employee
hereby accepts employment by Employer upon the terms and conditions hereinafter
set forth.
2. Term. The term of this Agreement shall begin on the Effective
Date and shall continue until terminated in accordance with the terms contained
herein.
3. Compensation.
(a) For services rendered by Employee under this Agreement
during calendar year 1996, Employer shall pay Employee salary, on an annualized
basis, to be pro-rated if the Effective Date is after January 1, 1996, of
$130,000. Subsequent years' compensation for Employee shall be determined by
Employer based upon Employee's performance, but in no event shall Employee's
annualized compensation be reduced below $130,000.
(b) In addition to the foregoing, Employee shall be
entitled to receive other compensation and fringe benefits, to be paid by
Employer, including four (4) weeks paid vacation per year; health, dental,
life, disability and accidental death and dismemberment insurance (it being
understood that Employer shall
<PAGE> 2
5/30/96
make reasonable efforts to avoid waiting periods for Employee under such
insurance, but that all such insurance shall be comparable to insurance
provided to other employees of Employer); a 401K benefit plan on the same basis
as made available to other employees of Employer; dues for professional
organizations of which Employee is or may become a member; a performance bonus
in accordance with the Employer's executive incentive plan; and the following
additional benefits, as determined solely by Employer in its reasonable
judgment: company car or car allowance and club dues. Employee acknowledges
that Employer has reimbursed or will reimburse Employee for his and his
family's reasonable costs in relocating from Vancouver to Denver. Employee
further acknowledges that Employer has made a housing loan to Employee in the
amount of $50,000, with simple interest to accrue thereon at a rate of 2.5% per
annum, with interest due and payable monthly in arrears and all principal due
and payable on the earlier of the following: (1) February 19, 2001; or (ii)
ninety (90) days after Employee ceases to be an employee of Employer.
4. Duties. Employee is engaged as Chief Financial Officer of
Employer, his powers and duties in that capacity to be such as may be
reasonably determined by Employer from time to time and shall be comparable to
duties and responsibilities of other Chief Financial Officers of comparably
sized companies in the mining industry. In addition, Employee shall perform
such other duties as Employee's position may require and as Employer may
reasonably
2
<PAGE> 3
5/30/96
request from time to time. Subject to the provisions of Paragraph 6(b) below
regarding "Fundamental Change", the precise duties of Employee may be extended
or curtailed from time to time at the reasonable discretion of Employer.
Employee shall report to the President and Chief Executive Officer.
5. Extent of Services. Employee shall devote 100% of his business
time, attention and energies to the business of Employer. Employee may not,
during the term of this Agreement, engage in other business activities, whether
or not such business activity is pursued for gain, profit or other pecuniary
advantage, if such activities interfere with the performance of his duties
hereunder for Employer.
6. Termination and Severance Pay.
(a) The phrase "just cause" as used in this Agreement shall
include breach of any fiduciary duty to Employer, gross negligence,
malfeasance, death, permanent disability that prevents Employee from performing
the essential functions of his job with a reasonable accommodation, or
conviction in a criminal proceeding (excepting traffic violations or similar
misdemeanors).
(b) The phrase "Fundamental Change" as used in this
Agreement means:
(i) an adverse change, as reasonably viewed from
the perspective of Employee, in any of the duties, powers, rights, discretion,
salary or benefits of Employee as they exist at the Effective Date;
3
<PAGE> 4
5/30/96
(ii) a diminution of the title of Employee as it
exists at the Effective Date;
(iii) a change in the person or body to whom
Employee reports at the Effective Date, unless the new person or body is: (x)
of equivalent or higher rank or stature; (y) another person who is promoted to
a position of equivalent or higher rank or stature; or (z) a person hired to
replace a person of equivalent or higher rank or stature; provided, however,
that the provisions of this Paragraph 6(b)(iii) shall not apply to a change
resulting from a promotion of Employee in the normal course of business; or
(iv) a change in the metropolitan area at which the
Employee is regularly required to carry out the terms of his employment with
the Employer at the Effective Date.
(c) Employee may terminate this Agreement upon 30 days
written notice to Employer prior to such date of termination.
(d) Employer may terminate this Agreement for just cause
immediately upon notice to Employee in which event all benefits to Employee
under this Agreement shall cease immediately upon such notice.
(e) Employer may terminate the Employee's employment
without cause at any time upon 30 days written notice to Employee.
(f) In the event that a Fundamental Change occurs in
Employee's employment other than for just cause or if Employee's employment
hereunder is terminated other than for just cause, Employee shall be entitled
to:
4
<PAGE> 5
5/30/96
(i) continuation of his salary (less the usual
statutory and other deductions) for a period ("Continuation Period") equal to
the sum of: (x) fifteen (15) months after termination, and (y) two months for
every full year of employment by Employer after the Effective Date, provided,
however, that in no event shall the Continuation Period exceed twenty-four (24)
months;
(ii) for vacation and retirement savings plan
purposes, the Continuation Period will count as regular employment;
(iii) for the purpose of any stock options Employee
holds, all options not yet vested shall be deemed vested as of the date of
termination of Employee's employment, and for purposes of exercise of such
options, Employee's employment shall be deemed to be terminated at the end of
the Continuation Period, unless he has elected the Retirement Option, described
in Paragraph 6(h) below, in which event Employee's employment terminates upon
the termination date;
(iv) Employee is eligible for the pro rata portion
of the annual performance bonus, if any, to which he would have been entitled
to the date of termination. This bonus amount, if any (less any statutory
holdback), will be payable when awarded by Employer in the ordinary course of
its business, notwithstanding the date of Employee's termination;
(v) all of Employee's benefits paid by Employer,
as described in Paragraph 3(b), will be continued during the Continuation
Period, to the extent that Employer maintains such
5
<PAGE> 6
5/30/96
benefits for its other employees during the Continuation Period; provided,
however, that if Employee becomes employed by another employer prior to the
expiry of the Continuation Period, Employee's benefits will be discontinued by
Employer upon Employee's eligibility for benefits with his new employer; and
(vi) Employee may elect to continue long term
disability coverage which is currently at his expense; however, Employee
acknowledges that, except as provided under applicable law, Employer's insurer
may consider that there has been a material change in Employee's employment
status that could increase the amount of the premiums for same. If Employer is
paying the premiums for Employee's disability coverage at the time of
Employee's termination, Employer shall continue to pay during the Continuation
Period the amount of premiums it was paying at the time of termination, it
being understood and agreed that any subsequent increased premium amount shall
be at the sole cost of Employee.
(g) In the event Employee's employment hereunder is
terminated at any time prior to the termination of this Agreement by his
voluntary resignation or for just cause by Employer, Employee shall be entitled
to a pro rata portion of any bonus to which he otherwise would have been
entitled to receive that year, but Employee shall not be entitled to any
severance pay or other benefits after such resignation or termination, except
such as may be payable to him pursuant to the terms of any profit sharing plan
6
<PAGE> 7
5/30/96
of Employer then in effect (there being no such plan in effect as of the
Effective Date).
(h) In the event that a Fundamental Change occurs in
Employee's employment other than for just cause, or if Employee's employment
hereunder is terminated other than for just cause as provided in Paragraph
6(f), Employee may elect the "Retirement Option", by so advising Employer in
writing within thirty (30) days after the Fundamental Change occurs. If
Employee so elects, he will receive his salary, vacation pay, company
contribution to his retirement savings plan, and the reasonable present value
of Employee's other Employer-paid benefits for the Continuation Period (less
statutory holdbacks) in a lump sum retiring allowance following termination.
(i) If, within two (2) years after the Effective Date, a
Fundamental Change occurs in the Employee's employment other than for just
cause, or if Employee's employment is terminated other than for just cause,
Employer will pay the cost of returning Employee, and his family and household
effects to Vancouver, B.C., Canada, offset by any moving costs paid by any
other party, such as a new employer.
(j) In the event of Employee's death after commencement
but before expiry of the Continuation Period, any unpaid salary, vacation,
bonus or pension amount that would have been payable under this Agreement
during the remainder of the Continuation Period will be paid as a lump sum to
Employee's estate, and for the
7
<PAGE> 8
5/30/96
purposes of all survivor benefits it will be deemed that Employee died while
employed by Employer so that Employee's designated beneficiaries or Employee's
estate receive such survivor benefits.
7. Disclosure of Information. By acceptance of this Agreement,
Employee expressly acknowledges that he has received or will receive certain
confidential information pertaining to the operations and business affairs of
the Employer and, as the same may exist from time to time, such information is
a valuable, special and unique asset of the Employer's business Employee agrees
that he shall not, during his employment under this Agreement or at any time
thereafter, disclose any such information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever, except as
required by applicable law or professional or ethical responsibilities, without
the prior written consent of Employer. Employee also hereby agrees that
immediately upon any termination of this Agreement, for any reason whatsoever,
Employee shall return to Employer all copies of any such information (in
whatever form) then in Employee's possession.
8. Assignment. This Agreement and rights and obligations of the
parties hereto may be assigned by Employer and shall bind and inure to the
benefits of the assigns, successor or successors of Employer and, insofar as
payments are to be made to Employee after his death, shall inure to the benefit
of the assigns, heirs, estate or legal representative of Employee. This
Agreement is personal to Employee and may not be assigned by Employee.
8
<PAGE> 9
5/30/96
9. Entire Agreement; Modifications. This document contains the
entire agreement of the parties with respect to the subject matter hereof, and
it may only be changed, modified, supplemented or amended by an agreement in
writing signed by the party to be bound thereby. In particular, this Agreement
replaces, terminates and supersedes in its entirety the letter agreement
between Granges Inc. and Employee, dated May 31, 1995.
10. Governing Law. This Agreement shall be interpreted and
governed in accordance with the laws of the State of Colorado.
11. Severability. If any part of this Agreement is for any reason
declared to be illegal, invalid, unconstitutional, void or unenforceable, all
other provisions hereof not so held shall be and remain in full force and
effect, and the intention of the parties as expressed in the stricken
provision(s) shall be given effect to the extent possible.
12. Dollar References. All references to "dollars" and "$" shall
mean United States Dollars.
13. Review by Employee's Counsel. Employee acknowledges that this
Agreement has been reviewed on his behalf by a Colorado attorney. Employer
agrees to reimburse Employee for reasonable attorney's fees and expenses
incurred by Employee in such review.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year set forth below their signatures, effective as of the day and year
first above written.
EMPLOYER: GRANGES (U.S.) INC.
9
<PAGE> 10
5/30/96
By:
-------------------------------------
Michael B. Richings, President
Date:
-----------------------------------
EMPLOYEE: By:
-------------------------------------
A. J. Ali
Date:
-----------------------------------
Address:
--------------------------------
----------------------------------------
10
<PAGE> 1
6/4/96
EMPLOYMENT AGREEMENT
(Ronald J. McGregor)
THIS AGREEMENT is entered into to be effective as of June 1, 1996
("Effective Date") between Granges (U.S.) Inc., a Delaware corporation, whose
address is Republic Plaza, Suite 3000, 370 Seventeenth Street, Denver, CO 80202
("Employer"), and Ronald J. McGregor ("Employee").
1. Employment. Employer hereby employs Employee and Employee
hereby accepts employment by Employer upon the terms and conditions hereinafter
set forth.
2. Term. The term of this Agreement shall begin on the
Effective Date and shall continue until terminated in accordance with the terms
contained herein.
3. Compensation.
(a) For services rendered by Employee under this Agreement
during calendar year 1996, Employer shall pay Employee salary, on an annualized
basis, commencing July 1, 1996, of $140,000. Subsequent years' compensation
for Employee shall be determined by Employer based upon Employee's performance,
but in no event shall Employee's annualized compensation be reduced below
$140,000.
(b) In addition to the foregoing, Employee shall be
entitled to receive other compensation and fringe benefits, to be paid by
Employer, including four (4) weeks paid vacation per year; health, dental,
life, disability and accidental death and dismemberment insurance (it being
understood that Employer shall make reasonable efforts to avoid waiting periods
for Employee under
<PAGE> 2
6/4/96
such insurance, but that all such insurance shall be comparable to insurance
provided to other employees of Employer); a 401K benefit plan on the same basis
as made available to other employees of Employer; dues for professional
organizations of which Employee is a member; a performance bonus in accordance
with the Employer's executive incentive plan; and the following additional
benefits, as determined solely by Employer in its reasonable judgment: company
car or car allowance.
4. Duties. Employee is engaged as Vice President of Operations
and Development of Employer, his powers and duties in that capacity to be such
as may be determined by Employer from time to time. Employee shall report to
the President and Chief Executive Officer. Employee's duties and
responsibilities shall be comparable to duties and responsibilities of other
Vice Presidents of Operations and Development of comparably sized companies in
the mining industry. In addition, Employee shall perform such other duties as
Employee's position may require and as Employer may reasonably request from
time to time. Subject to the provisions of Paragraph 6(b) below regarding
"Fundamental Change", the precise duties of Employee may be extended or
curtailed from time to time at the reasonable discretion of Employer.
5. Extent of Services. Employee shall devote 100% of his
business time, attention and energies to the business of Employer. Employee may
not, during the term of this Agreement, engage in other business activities,
whether or not such business activity is
2
<PAGE> 3
6/4/96
pursued for gain, profit or other pecuniary advantage, if such activities
interfere with the performance of his duties hereunder for Employer.
6. Termination and Severance Pay.
(a) The phrase "just cause" as used in this Agreement
shall include, but not be limited to, breach of any fiduciary duty to
Employer, failure to perform Employee's duties hereunder in a manner reasonably
satisfactory to the President of Employer (it being understood that the
Employee shall be provided with not less than ninety (90) days' notice and
opportunity to cure any such failures before they are deemed "just cause"),
death, permanent disability, or conviction in a criminal proceeding (excepting
traffic violations or similar misdemeanors).
(b) The phrase "Fundamental Change" as used in this
Agreement means:
(i) an adverse change in any of the duties,
powers, rights, discretion, salary or benefits of Employee as they exist at
the Effective Date;
(ii) a diminution of the title of Employee as it
exists at the Effective Date;
(iii) a change in the person or body to whom Employee
reports at the Effective Date; provided, however, that the provisions of this
Paragraph 6(b)(iii) shall not apply to a change resulting from a promotion of
Employee in the normal course of business; or
3
<PAGE> 4
6/4/96
(iv) a change in the metropolitan area at which
the Employee is regularly required to carry out the terms of his employment
with the Employer at the Effective Date.
(c) Employee may terminate this Agreement upon 30 days
written notice to Employer prior to such date of termination.
(d) Subject to the provisions of Paragraph 6(e) below,
Employer may terminate this Agreement without cause at any time upon 30 days
written notice to Employee. Employer may terminate this Agreement for just
cause, as defined in Paragraph 6(a) above, immediately upon notice to Employee
in which event all benefits to Employee under this Agreement shall cease
immediately upon such notice.
(e) In the event that a Fundamental Change occurs in
Employee's employment other than for just cause or if Employee's employment
under this Agreement is terminated other than for just cause, Employee shall be
entitled to:
(i) continuation of his salary (less the usual
statutory and other deductions) for twelve months after such Fundamental Change
or termination ("Continuation Period");
(ii) for vacation and retirement savings plan
purposes, the Continuation Period will count as regular employment;
(iii) subject to the approval of Employer's
Compensation Committee and the requirements of Employer's stock option plan,
for the purpose of any stock options Employee holds, all options not yet vested
shall be deemed vested as of the date of
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<PAGE> 5
6/4/96
termination of Employee's employment, and for purposes of exercise of such
options, Employee's employment shall be deemed to be terminated at the end of
the Continuation Period, unless he has elected the Retirement Option, described
in Paragraph 6(g) below, in which event Employee's employment terminates upon
the termination date;
(iv) Employee is eligible for the pro rata
portion of the annual performance bonus, if any, to which he would have been
entitled to the date of termination. This bonus amount, if any (less any
statutory holdback), will be payable when awarded by Employer in the ordinary
course of its business, notwithstanding the date of Employee's termination;
(v) all of Employee's benefits paid by Employer,
as described in Paragraph 3(b), will be continued during the Continuation
Period, to the extent that Employer maintains such benefits for its other
employees during the Continuation Period; provided, however, that if Employee
becomes employed by another employer prior to the expiry of the Continuation
Period, Employee's benefits will be discontinued by Employer upon Employee's
eligibility for benefits with his new employer; and
(vi) If long term disability coverage is available
after termination, Employee may elect to continue that insurance at his
expense; however, Employee acknowledges that Employer's insurer may consider
that there has been a material change in Employee's employment status that
could increase the amount of the premiums
5
<PAGE> 6
6/4/96
for same. If Employer is paying the premiums for Employee's disability
coverage at the time of Employee's termination, Employer shall continue to pay
during the Continuation Period the amount of premiums it was paying at the time
of termination, it being understood and agreed that any subsequent increased
premium amount shall be at the sole cost of Employee.
(f) In the event Employee's employment hereunder is
terminated at any time prior to the termination of this Agreement by his
voluntary resignation or for just cause by Employer, Employee shall be entitled
to a pro rata portion of any bonus to which he otherwise would have been
entitled to receive that year, but Employee shall not be entitled to any
severance pay or other benefits after such resignation or termination, except
such as may be payable to him pursuant to the terms of any profit sharing plan
of Employer then in effect (there being no such plan in effect as of the
Effective Date).
(g) In the event of a Fundamental Change as provided in
Paragraph 6(e) or a termination other than for just cause, Employee may elect
the "Retirement Option", by so advising Employer in writing within thirty (30)
days after the Fundamental Change occurs. If Employee so elects, he will
receive his salary, vacation pay, company contribution to his retirement
savings plan, and the reasonable present value of Employee's other
Employer-paid benefits for the Continuation Period (less statutory holdbacks)
in a lump sum retiring allowance following termination.
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6/4/96
(h) In the event of Employee's death after commencement
but before expiry of the Continuation Period, any unpaid salary, vacation,
bonus or pension amount that would have been payable under this Agreement
during the remainder of the Continuation Period will be paid as a lump sum to
Employee's estate, and for the purposes of all survivor benefits it will be
deemed that Employee died while employed by Employer so that Employee's
designated beneficiaries or Employee's estate receive such survivor benefits.
7. Disclosure of Information. By acceptance of this Agreement,
Employee expressly acknowledges that he has received or will receive certain
confidential information pertaining to the operations and business affairs of
the Employer and, as the same may exist from time to time, such information is
a valuable, special and unique asset of the Employer's business Employee agrees
that he shall not, during his employment under this Agreement or at any time
thereafter, disclose any such information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever without the
prior written consent of Employer. Employee also hereby agrees that
immediately upon any termination of this Agreement, for any reason whatsoever,
Employee shall return to Employer all copies of any such information (in
whatever form) then in Employee's possession.
8. Assignment. This Agreement and rights and obligations of the
parties hereto may be assigned by Employer and shall bind and inure to the
benefits of the assigns, successor or successors of
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<PAGE> 8
6/4/96
Employer and, insofar as payments are to be made to Employee after his death,
shall inure to the benefit of the assigns, heirs, estate or legal
representative of Employee. This Agreement is personal to Employee and may not
be assigned by Employee.
9. Entire Agreement; Modifications. This document contains the
entire agreement of the parties with respect to the subject matter hereof, and
it may only be changed, modified, supplemented or amended by an agreement in
writing signed by the party to be bound thereby.
10. Governing Law. This Agreement shall be interpreted and
governed in accordance with the laws of the State of Colorado.
11. Severability. If any part of this Agreement is for any reason
declared to be illegal, invalid, unconstitutional, void or unenforceable, all
other provisions hereof not so held shall be and remain in full force and
effect, and the intention of the parties as expressed in the stricken
provision(s) shall be given effect to the extent possible.
12. Dollar References. All references to "dollars" and "$" shall
mean United States Dollars.
13. Review by Employee's Counsel. Employee acknowledges that this
Agreement has been reviewed on his behalf by a Colorado attorney. Employer
agrees to reimburse Employee for reasonable attorney's fees and expenses
incurred by Employee in such review.
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6/4/96
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year set forth below their signatures, effective as of the day and year
first above written.
EMPLOYER: GRANGES (U.S.) INC.
By:
-------------------------------------
Michael B. Richings, President
Date: ----------------------------------
EMPLOYEE: By:
-------------------------------------
Ronald J. McGregor
Date:
-----------------------------------
Address:
--------------------------------
----------------------------------------
9
<PAGE> 1
UNDERWRITING AGREEMENT
April 15, 1996
Granges Inc.
Suite 3000
370 17th Street
Denver, Colorado
80202
Dear Sirs:
We, ScotiaMcLeod Inc. ("SMI"), First Marathon Securities Limited,
Yorkton Securities Inc. and Goepel Shields & Partners Inc. (collectively, the
"Underwriters"), understand that Granges Inc. (the "Company") proposes to
create, issue and sell a total of up to 9,700,000 special warrants (the
"Special Warrants") of the Company having the attributes and characteristics
specified herein.
Upon and subject to the terms and conditions set forth herein, the
Underwriters hereby severally offer to purchase from the Company, as more
particularly described in paragraph 11.1 hereof, and by its acceptance hereof
the Company hereby agrees to issue and sell to the Underwriters, 7,690,000 of
the Special Warrants (the "Initial Special Warrants") at a price of $2.60 per
Special Warrant for an aggregate purchase price of $19,994,000. By its
acceptance hereof, the Company also hereby grants to the Underwriters an
irrevocable option (the "Option"), exercisable in whole or in part by notice
given by SMI (on behalf of the Underwriters) to the Company in the manner
provided for in paragraph 11.2 hereof at any time prior to the Closing Date (as
defined below), to purchase from the Company up to an additional 2,010,000 of
the Special Warrants (the "Additional Special Warrants") at the same price as,
and upon and subject to the same terms and conditions as relate to the purchase
of, the Initial Special Warrants, provided that the Option will not be
exercisable unless the Company has obtained the consents referred to in
subparagraph 8.1(a) hereof. In this offer, the "Special Warrants" means the
Initial Special Warrants and any Additional Special Warrants in respect of
which the Option is exercised.
The Company agrees that the Underwriters will be permitted to appoint
other registered dealers (or other dealers duly qualified in their respective
jurisdictions) as their agents to assist in the private placement contemplated
hereby and that the Underwriters may determine the remuneration payable, from
the commission payable to the Underwriters hereunder, to such other dealers
appointed by them.
<PAGE> 2
In consideration of the Underwriters' agreement to purchase the
Special Warrants and the Underwriters' services in effecting the distribution
of the Special Warrants on a private placement basis, the Company agrees to pay
to the Underwriters, at the time and in the manner specified in paragraph 6.3
hereof, a fee (the "Commission") out of the general funds of the Company equal
to 5% of the aggregate purchase price received on the issue and sale of the
Special Warrants.
This offer and all of the Underwriters' obligations hereunder are
subject to the additional terms and conditions set forth below.
1. DEFINITIONS
In this Agreement, unless the context otherwise requires:
(a) "business day" means a day which is not a Saturday, a Sunday or a
statutory holiday in the Provinces of British Columbia or Ontario;
(b) "Closing" means the completion of the issue and sale by the Company
and the purchase by the Purchasers of the Special Warrants pursuant to
this Agreement;
(c) "Closing Date" means April 25, 1996 or such other date as the Company
and the Underwriters may agree;
(d) "Closing Time" means 7:30 a.m. (Vancouver time) on the Closing Date or
such other time on the Closing Date as the Company and the
Underwriters may agree;
(e) "Common Shares" means common shares without par value in the capital
of the Company as constituted on the date hereof;
(f) "Company's Auditors" means Coopers & Lybrand;
(g) "Company's Counsel" means Ladner Downs;
(h) "Exemptions" has the meaning attributed thereto in paragraph 3.1
hereof;
(i) "Expiry Time" means 4:30 p.m. (Vancouver time) on the fifth business
day after the earlier of (i) Qualification Date and (ii) the
Qualification Deadline;
(j) "Final Prospectus" means a final prospectus or final short form
prospectus of the Company relating to the distribution of the
Underlying Securities and, unless the context otherwise requires,
includes any amendment or supplement thereto, any information or
documents incorporated by reference therein and any French language
version thereof;
(k) "Form 10-K" means the annual report on Form 10-K of the Company dated
March 28, 1996 excluding the exhibits thereto;
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<PAGE> 3
(l) "Form 20A" means Form 20A(IP) under the Securities Act (British
Columbia);
(m) "material change", "material fact" and "misrepresentation" have the
respective meanings attributed thereto in any of the Securities Laws;
(n) "Material Subsidiaries" means Hycroft Resources & Development, Inc.,
Hycroft Lewis Mine, Inc. and Zamora Gold Corp.;
(o) "offering memorandum" means an offering memorandum as such term is
defined in subsection 32(1) of the Regulation to the Securities Act
(Ontario) or in other applicable securities legislation;
(p) "Preliminary Prospectus" means a preliminary prospectus or preliminary
short form prospectus of the Company relating to the distribution of
the Underlying Securities and, unless the context otherwise requires,
includes any amendment or supplement thereto, any information or
documents incorporated by reference therein and any French language
version thereof;
(q) "Prospectuses" means the Preliminary Prospectus and the Final
Prospectus;
(r) "Purchasers" has the meaning attributed thereto in paragraph 3.1
hereof;
(s) "Qualification Date" means the day on which a receipt is issued for
the Final Prospectus by the last of the Securities Commissions to
issue a receipt for the Final Prospectus;
(t) "Qualification Deadline" means the day that is 90 days after the
Closing Date or such later date as the Underwriters may determine in a
written notice given to the Company and the Trustee provided that the
Underwriters have obtained the written consent thereto of each of the
Purchasers who purchased Special Warrants at the Closing and have not
resold their Special Warrants;
(u) "Qualifying Jurisdictions" means the Provinces of British Columbia and
Ontario and such other provinces of Canada which are designated by the
Underwriters by written notice given to the Company not less than two
business days prior to the Closing Date;
(v) "Questionnaire and Undertaking" means a private placement
questionnaire and undertaking in the form required by the TSE;
(w) "Securities Commissions" means, collectively, the securities
commission or other securities regulatory authority in each of the
Qualifying Jurisdictions;
(x) "Securities Laws" means, collectively, the applicable securities laws
of each of the Qualifying Jurisdictions and the respective rules and
regulations made and forms prescribed thereunder together with all
applicable published policy statements, notices,
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<PAGE> 4
blanket orders and rulings of the Securities Commissions (including
national policy statements of the Canadian Securities Administrators);
(y) "Special Warrant Indenture" has the meaning attributed thereto in
paragraph 2.1 hereof;
(z) "Stock Exchanges" means the TSE and the American Stock Exchange;
(aa) "Subscription Agreement" means, with respect to each Purchaser who is
not a U.S. Person, a subscription agreement substantially in the form
attached as Schedule D hereto or, with respect to each Purchaser who
is a U.S. Person, a purchase agreement substantially in the form
attached as Schedule E hereto;
(ab) "subsidiary" has the meaning attributed thereto in the Securities Act
(British Columbia) and, in the case of the Company, includes Zamora
Gold Corp.;
(ac) "Supplementary Material" has the meaning attributed thereto in
paragraph 8.1(f) hereof;
(ad) "Term Sheet" means the term sheet attached as Schedule C hereto;
(ae) "this Agreement" means the agreement formed by the acceptance by the
Company of the offer made by the Underwriters in this letter;
(af) "Trustee" means Montreal Trust Company of Canada, or such other
nationally recognized Canadian trust company which is acceptable to
the Underwriters, as trustee under the Special Warrant Indenture or
the Warrant Indenture, as the case may be;
(ag) "TSE" means The Toronto Stock Exchange;
(ah) "Underlying Securities" means the Common Shares and Warrants from time
to time issuable upon the exercise or deemed exercise of the Special
Warrants;
(ai) "Underwriters' Counsel" means McCarthy Tetrault;
(aj) "U.S. Person" has the meaning attributed thereto in Schedule A hereto;
(ak) "Warrants" means the common share purchase warrants of the Company
having the attributes and characteristics specified in paragraph 2.4
hereof;
(al) "Warrant Indenture" has the meaning attributed thereto in paragraph
2.4 hereof; and
(am) "Warrant Shares" means the Common Shares from time to time issuable
upon the exercise of the Warrants.
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<PAGE> 5
2. TERMS OF SPECIAL WARRANTS AND WARRANTS
2.1 The Special Warrants shall be issued under and governed by a special
warrant indenture (the "Special Warrant Indenture") to be dated as of the
Closing Date and made between the Company and the Trustee as trustee
thereunder.
2.2 The Special Warrant Indenture shall contain covenants of the Company
substantially to the effect that:
(a) the Company will, as expeditiously as reasonably practicable, prepare
and file, under the applicable Securities Laws, the Preliminary
Prospectus and other related documents and obtain receipts for the
Preliminary Prospectus from the Securities Commissions;
(b) the Company will use its reasonable best efforts to resolve as
expeditiously as reasonably practicable any comments with respect to
the Preliminary Prospectus made by any of the Securities Commissions;
(c) the Company will, as expeditiously as reasonably practicable after any
comments referred to in subparagraph (b) above are resolved, prepare
and file, under the applicable Securities Laws, the Final Prospectus
and other related documents and will use its reasonable best efforts
to obtain, as expeditiously as reasonably practicable thereafter,
receipts for the Final Prospectus from the Securities Commissions and
will take all other steps and proceedings that may be necessary in
order to qualify, under the applicable Securities Laws, the Underlying
Securities for distribution in each of the Qualifying Jurisdictions
through investment dealers and brokers registered as required under,
and who comply with the relevant provisions of, the applicable
Securities Laws; and
(d) the Company will use its reasonable best efforts to ensure that the
Qualification Date occurs on or before the Qualification Deadline,
provided that if the Qualification Date has not occurred on or before
the Qualification Deadline, the Company will use its reasonable best
efforts to cause the Qualification Date to occur prior to the Expiry
Time.
2.3 The Special Warrant Indenture shall contain provisions substantially
to the effect that:
(a) each Special Warrant will entitle the holder thereof, upon the
exercise or deemed exercise thereof and without payment of any
additional consideration, to be issued one Common Share and one-half
of one Warrant, subject to adjustment as provided in the Special
Warrant Indenture;
(b) each holder of Special Warrants will be entitled to exercise his
Special Warrants during the period commencing on the Closing Date and
ending at the Expiry Time;
(c) if the Qualification Date has not occurred on or before the
Qualification Deadline, each holder of Special Warrants will be
entitled, during the period commencing on the first business day after
the Qualification Deadline and ending at the Expiry Time, to surrender
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<PAGE> 6
his Special Warrants to the Trustee for cancellation and receive
repayment of the original issue price of $2.60 per Special Warrant
plus such holder's proportionate share of the interest earned by the
Trustee on the funds deposited in escrow referred to in paragraph 6.4
below from the Closing Date to and including the day immediately
preceding the date of payment;
(d) any Special Warrant not exercised (unless surrendered as provided in
subparagraph (c) above) prior to the Expiry Time will be deemed to
have been exercised immediately prior to the Expiry Time (without any
further action on the part of the holder thereof or the Company)
whether or not the Qualification Date has occurred and subject to
applicable securities laws; and
(e) upon the occurrence of the Qualification Date or if the Qualification
Date has not occurred on or before the Qualification Deadline, the
Company will, in either case, forthwith, and in any event not later
than the second business day thereafter, give written notice thereof
to the Trustee and the Trustee will forthwith give written notice
thereof to the holders of Special Warrants.
2.4 The Warrants shall be issued under and governed by a warrant indenture
(the "Warrant Indenture") to be dated as of the Closing Date and made between
the Company and the Trustee as trustee thereunder. The Warrant Indenture shall
contain provisions substantially to the effect that each Warrant will entitle
the holder thereof, during the period commencing on the date of its issue and
ending at 4:30 p.m. (Vancouver time) on October 31, 1997, to purchase one
Common Share from the Company at a price of $3.00, subject to adjustment as
provided in the Warrant Indenture.
2.5 The provisions of the Special Warrant Indenture and the Warrant
Indenture and the attributes and characteristics of the Special Warrants and
the Warrants respectively provided for therein shall be substantially as
described herein, with such changes thereto as the Underwriters and the Company
may agree to, and otherwise the Special Warrant Indenture and the Warrant
Indenture shall be in such form and contain such terms and provisions
(including customary anti-dilution provisions) as are satisfactory to the
Company and the Underwriters, acting reasonably.
3. NATURE OF TRANSACTION
3.1 The Company understands that although this offer is presented by the
Underwriters as purchasers, the Underwriters will endeavour prior to the
Closing to arrange for substituted purchasers of the Special Warrants or to
resell the Special Warrants, as principals directly or through their United
States broker-dealer private placement agents, to ultimate purchasers. The
Underwriters covenant and agree with the Company that the sale of the Special
Warrants to such purchasers will be effected in a manner exempt from any
prospectus or offering memorandum filing or delivery requirements of all
securities laws and policies applicable in the various jurisdictions in which
the Special Warrants are offered for sale and sold, without the necessity of
obtaining any order or ruling of any securities regulatory authority.
Accordingly, the Underwriters covenant and agree that each such substituted
purchaser shall purchase Special
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<PAGE> 7
Warrants from the Company and each such ultimate purchaser shall purchase
Special Warrants from the Underwriters directly or through their United States
broker-dealer private placement agents, in each case, insofar as the laws of
the Province of British Columbia are concerned, under prospectus filing
exemptions contained in paragraphs 55(2)(1), (3) or (4) of the Securities Act
(British Columbia) and, insofar as the laws of other provinces of Canada are
concerned, under similar exemptions, if available, provided for in the
applicable securities legislation of such provinces (the "Exemptions"). The
Underwriters will notify the Company with respect to the identity and
jurisdiction of residence of each such purchaser as soon as practicable (and in
any event not later than the second business day prior to the Closing Date) and
with a view to affording sufficient time to allow the Company to secure
compliance with all applicable regulatory requirements of the provinces of
Canada in connection with the sale of the Special Warrants to such purchasers
under the Exemptions. Unless the context otherwise requires, any reference
herein to the "Purchasers" shall be taken to be a reference to the Underwriters
and to any such substituted and ultimate purchasers, provided that nothing in
this paragraph 3.1 shall affect the obligations of the Underwriters, subject to
the terms and conditions hereof, to purchase all of the Special Warrants not
purchased at the Closing by a substituted purchaser or ultimate purchaser.
3.2 The Company shall at its expense comply with all applicable regulatory
requirements (other than any requirement to prepare and file or deliver an
offering memorandum) of the Provinces of British Columbia and Ontario (and of
such other provinces of Canada in which any of the Purchasers are resident as
identified by the Underwriters to the Company not later than the second
business day prior to the Closing Date) in connection with the sale of the
Special Warrants to the Purchasers under the Exemptions, including the filing
of any required reports (without, if and to the extent permitted, the
disclosure therein of the names and addresses of the Purchasers) and the
payment of applicable fees relating thereto, and, notwithstanding paragraph 3.1
hereof, the Company shall use its reasonable best efforts to also comply with
the regulatory requirements (other than any requirement to prepare and file or
deliver an offering memorandum) of any provinces of Canada (in addition to
British Columbia and Ontario (and any provinces so identified by the
Underwriters)) applicable to the sale of the Special Warrants to the Purchasers
under the Exemptions.
3.3 The Underwriters shall conduct their activities (and shall require any
agent appointed as contemplated on page 1 hereof to agree with the
Underwriters, for the benefit of the Company, to conduct its activities) in
connection with the distribution of the Special Warrants in compliance with all
applicable laws and regulatory requirements and, without limiting the
foregoing, the Underwriters, severally and not jointly, represent and agree
(and shall require any such agent to agree with the Underwriters for the
benefit of the Company) that:
(a) all solicitation, offering and other selling efforts carried out by
the Underwriters in connection with the distribution of the Special
Warrants have been and will be made, and all purchases of Special
Warrants will be made, in accordance with the provisions of the
Exemptions in a manner such that no prospectus, registration statement
or offering memorandum need be prepared and filed or delivered by the
Company in connection therewith;
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<PAGE> 8
(b) no advertising of the Special Warrants has been or will be made by the
Underwriters in any media whatsoever (except as may be permitted by
subsection 134(3) of the Rules of the British Columbia Securities
Commission and other than by way of "tombstone" announcement appearing
as a matter of record only after the Closing);
(c) no delivery has been or will be made by the Underwriters to any
prospective purchaser or Purchaser of any document which, individually
or together with any other document, would constitute an offering
memorandum; and
(d) no solicitation, offering or other selling efforts with respect to the
distribution of the Special Warrants have been or will be made, except
as set forth in Schedule A hereto, by the Underwriters or their United
States broker-dealer private placement agents in the United States or
to any U.S. Person and all sales of the Special Warrants in the United
States or to any U.S. Person will be made in accordance with the
provisions of Schedule A;
provided that, for greater certainty, the Company acknowledges that the Term
Sheet, the Form 10-K, copies of annual reports, quarterly reports, information
circulars, material change reports and news releases issued by the Company and
generally available research reports, memoranda and other materials concerning
the Company prepared by others do not, individually or collectively, constitute
an offering memorandum.
3.4 The Underwriters shall obtain from each Purchaser a properly completed
and duly executed Subscription Agreement and Questionnaire and Undertaking and
(if such Purchaser is an individual) Form 20A in accordance with the provisions
of this Agreement. In order to facilitate organization for the Closing, the
Underwriters will use their reasonable best efforts to provide copies of such
documents to the Company's Counsel not less than 24 hours prior to the Closing
Time, provided that no provision of such documents shall constitute a delivery
thereof for purposes of paragraph 6.2 hereof.
4. REPRESENTATIONS AND WARRANTIES OF COMPANY
4.1 The Company represents and warrants to the Underwriters and the
Purchasers, and acknowledges that the Purchasers will be relying upon such
representations and warranties in purchasing the Special Warrants, that:
(a) the Company and each of the Material Subsidiaries has been duly
incorporated or amalgamated and organized and is validly existing and
in good standing under the laws of its jurisdiction of incorporation,
is duly qualified to carry on its business as it is presently carried
on and is duly qualified and authorized to carry on business and is in
good standing as a foreign corporation in each jurisdiction in which
the character of its properties or the nature of its business makes
such qualification or authorization necessary and has all requisite
power and authority to carry on its business as it is now carried and
to own, lease and operate its properties and assets, and, in the case
of the Company, to execute and deliver this Agreement, the
Subscription Agreements, the
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<PAGE> 9
Special Warrant Indenture and the Warrant Indenture, to consummate the
transactions contemplated hereby and thereby and to duly observe and
perform all of its covenants and obligations herein and therein set
forth;
(b) to the best of the knowledge of the Company, the Company and each of
the Material Subsidiaries has conducted and is conducting its business
in compliance in all material respects with all applicable licensing,
resource mining and extraction and environmental protection
legislation, rules, regulations and bylaws and other similar
legislation and all other laws, rules, regulations and other lawful
requirements of any governmental or regulatory bodies which are
applicable to the Company and the Material Subsidiaries, and the
Company is not aware of any legislation, regulation, rule or lawful
requirements presently in force or proposed to be brought into force
which the Company anticipates the Company or any of the Material
Subsidiaries will be unable to comply with without materially
adversely affecting the financial condition, results of operations,
business or prospects of the Company and its subsidiaries, taken as a
whole;
(c) the Company and the Material Subsidiaries hold the direct and indirect
interests in the mineral resource properties and the rights to revenue
generated therefrom as described in the Form 10-K, such interests are
held upon the terms and conditions and are subject to the security
interests referred to in the Form 10-K, and, to the best of the
knowledge of the Company, such mineral resource properties are being
maintained, explored, developed and operated in all material respects
in accordance with all applicable legislation, rules, regulations,
bylaws and other lawful requirements and contractual requirements, and
there are no royalty or similar payments to be made in connection with
such mineral resources properties other than such payments as are
described in the Form 10-K;
(d) the Company has no subsidiaries which are carrying on active business
or which hold material assets or have any material liabilities other
than the Material Subsidiaries, the Company legally and beneficially
owns, directly or indirectly, the issued and outstanding shares in the
capital of each of the Material Subsidiaries in each case as described
in the Form 10- K, subject to no security interests except as
described in the Form 10-K, all of such shares have been duly
authorized and validly issued and are outstanding as fully paid and
non-assessable shares and no person has any right, agreement or
option, present or future, contingent or absolute, or any right
capable of becoming a right, agreement or option, for the purchase
from the Company or any of the Material Subsidiaries of any interest
in any of such shares or for the issue or allotment of any unissued
shares in the capital of any Material Subsidiary or any other security
convertible into or exchangeable or exercisable for any such shares;
(e) the Company is a reporting issuer for the purposes of and is not in
default of any of the requirements relating thereto under the
securities legislation of the Provinces of British Columbia and
Ontario;
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<PAGE> 10
(f) the Form 10-K and any material change reports and press releases of
the Company issued since March 28, 1996, at their respective dates,
were true, correct and accurate in all material respects, contained no
misrepresentation and were prepared in accordance with and complied
with all securities laws, regulations, rules and policy statements
applicable thereto;
(g) the audited consolidated balance sheets of the Company as at December
31, 1995 and 1994 and the audited statements of earnings, retained
earnings (deficit) and changes in cash resources of the Company for
each of the years in the three year period ended December 31, 1995,
including the notes and any schedules thereto, all as set forth in the
Form 10-K, were prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
covered thereby (after giving retroactive effect to any accounting
changes described in the notes thereto) and accurately and fairly
present the assets, liabilities (contingent or otherwise) and
financial condition and position and the revenue, earnings, results of
operations and changes in financial position of the Company as at such
dates and during the periods covered thereby;
(h) the authorized capital of the Company consists of 750,000,000 Common
Shares, of which 46,181,661 are issued and outstanding on the date
hereof as fully paid and non-assessable shares, and 750,000,000
preferred shares without par value, none of which are issued or
outstanding on the date hereof, and such Common Shares are listed and
posted for trading on the Stock Exchanges, and, except with respect to
options currently outstanding to directors and employees of the
Company to purchase up to 1,177,500 Common Shares from the Company on
the terms set forth in the Form 10-K and up to 2,047,938 Common Shares
which may be issued by the Company to L.B. Mining Company in
connection with the acquisition by the Company of the Guariche
property in Venezuela pursuant to an agreement (the "Option
Agreement") to be entered into between the Company and L.B. Mining
Company, plus that number of Common Shares which is equal to the
quotient of US $5,000,000 divided by the closing price of the Common
Shares on the TSE on the date of the Option Agreement which thereafter
may be issued to L.B. Mining Company under the terms of such
acquisition, no person has any right, agreement or option, present or
future, contingent or absolute, or any right capable of becoming a
right, agreement or option, for the issue or allotment of any unissued
shares in the capital of the Company or any other security convertible
into or exchangeable or exercisable for any such shares or to require
the Company to purchase, redeem or otherwise acquire any of the issued
and outstanding Common Shares;
(i) neither the Company nor any of its subsidiaries is in breach or
violation of or default under (and no event has occurred and is
continuing which with the giving of notice or lapse of time or both
would constitute an event of default under), and neither the execution
and delivery by the Company of this Agreement, the Subscription
Agreements, the Special Warrant Indenture or the Warrant Indenture,
nor the consummation of the transactions contemplated hereby or
thereby nor the due observance and performance by the Company of any
of its covenants or obligations contained herein or therein conflicts
or will conflict with, results or will result in a breach or violation
of, or constitutes or
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<PAGE> 11
will constitute a default (or any event which with the giving of
notice or lapse of time or both would constitute an event of default)
under, any of the terms or provisions of the constating documents of
the Company or any of its subsidiaries or of any resolutions of the
directors or shareholders of the Company or any of its subsidiaries,
or of any of the terms or provisions of any agreement or instrument to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of
their respective properties or assets are subject or of any judgment,
decree, order, law, rule or regulation by which the Company or any of
its subsidiaries is bound or to which any of their respective
properties or assets are subject, the effect of any of which breaches,
violations, conflicts or defaults, singularly or in the aggregate,
might materially adversely affect the financial condition, results of
operations, business or prospects of the Company and its subsidiaries,
taken as a whole, or would impair the ability of the Company to
consummate the transactions contemplated hereby or to duly observe and
perform any of its covenants or obligations contained herein or in the
Subscription Agreements, the Special Warrant Indenture or the Warrant
Indenture;
(j) no litigation, administrative proceeding, arbitration or other
proceeding before or of any court, tribunal, arbitrator or regulatory
or other governmental body or dispute with any regulatory or other
governmental body is presently in process, pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries, which, if determined adversely to the Company or any
such subsidiary, might have a material adverse effect on the financial
condition, results of operations, business or prospects of the Company
and its subsidiaries, taken as a whole, or which would impair the
ability of the Company to consummate the transactions contemplated
hereby or to duly observe and perform any of its covenants or
obligations contained herein or in the Subscription Agreements, the
Special Warrant Indenture or the Warrant Indenture;
(k) there has not occurred any adverse material change and there exists no
adverse material fact, financial or otherwise, in the assets
(including information or data relating to the estimated or book value
of assets), liabilities (contingent or otherwise), business, affairs,
ownership, management, operations, financial condition, capital or
prospects of the Company and its subsidiaries, taken as a whole, since
December 31, 1995 which has not been generally disclosed by way of
appropriate filings (on a non-confidential basis) with applicable
securities regulatory authorities; and
(l) since December 31, 1995, except as described in the Form 10-K or as
has been generally disclosed by way of appropriate filings (on a
non-confidential basis) with applicable securities regulatory
authorities:
(i) there has not been any material change in the assets,
liabilities (contingent or otherwise), business, operations,
financial condition or prospects of the Company and its
subsidiaries, taken as a whole;
(ii) there has not been any material change in the capital or
indebtedness of the Company or of any of the Material
Subsidiaries and neither the Company nor any
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<PAGE> 12
of the Material Subsidiaries has received or been informed that
it will receive any demand for repayment of any such
indebtedness;
(iii) there has not been any adverse material change in the
financial position of the Company and its subsidiaries on a
consolidated basis, and there has not been and there is
currently not contemplated any material revaluation of any
assets or any write down or write up (except in the ordinary
course of business and consistent with past practice) of the
value of any inventory of the Company or of any of the
Material Subsidiaries or any cancellation of any debt or
waiver or release of any rights or claims owed to or held by
the Company or any of the Material Subsidiaries (except for
cancellations, waivers and releases in the ordinary course of
business which in the aggregate are not material) or any
material increase in the age of outstanding accounts
receivable, the allowance for doubtful accounts or the bad
debt losses of the Company or of any of the Material
Subsidiaries;
(iv) there has not been any termination or amendment of, or any
failure in any material respect to perform any obligations
under, any material contract, lease or agreement to which the
Company or any of the Material Subsidiaries is a party or by
which the Company or any of the Material Subsidiaries is
bound; and
(v) the Company and each of the Material Subsidiaries has carried
on its business and operated and maintained its assets in the
ordinary course of business and consistent with past practice,
has not entered into and does not currently contemplate
entering into any material transaction not in the ordinary
course of business and has not made any material capital
expenditures or commitments for material capital expenditures.
5. CONDITIONS TO PURCHASE OBLIGATIONS
5.1 The following are conditions to the obligations of the Underwriters
and the Purchasers to complete the transactions contemplated hereby, which
conditions the Company covenants to satisfy or fulfil at or prior to the
Closing Time and which conditions may be waived in writing in whole or in part
by the Underwriters on behalf of the Purchasers:
(a) all actions required to be taken by or on behalf of the Company,
including the passing of all requisite resolutions of directors of the
Company, shall have been taken so as to validly create, issue and sell
the Special Warrants, the Underlying Securities and the Warrant
Shares;
(b) the Company shall have made all necessary filings and obtained all
necessary approvals, consents and acceptances of appropriate
regulatory authorities (including the Stock Exchanges) required to be
made or obtained prior to the Closing Time in order to permit the
Company to issue and sell the Special Warrants to the Purchasers as
contemplated hereby, subject only to such conditions as may be
required by the Stock Exchanges and are satisfactory to the
Underwriters;
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<PAGE> 13
(c) the Common Shares issuable upon exercise of the Special Warrants and
the Warrants shall have been conditionally accepted for listing on the
TSE, subject to the filing of usual documentation and payment of fees;
(d) the Special Warrant Indenture and the Warrant Indenture shall each
have been entered into by and be in effect between the Company and the
Trustee;
(e) the Company shall have duly accepted, unless it would be unlawful to
do so, each Subscription Agreement submitted to it by the Underwriters
in accordance with this Agreement;
(f) the Company shall have caused a favourable legal opinion, addressed to
the Underwriters, the Purchasers and the Underwriters' Counsel and
dated the Closing Date, and in form and content reasonably acceptable
to the Underwriters and the Underwriters' Counsel, to be delivered to
the Underwriters by the Company's Counsel with respect to such matters
as the Underwriters may reasonably request, including, without
limiting the generality of the foregoing, the matters set forth in
Schedule B hereto;
(g) the Underwriters shall have received a favourable legal opinion,
addressed to the Underwriters and the Purchasers and dated the Closing
Date, from the Underwriters' Counsel with respect to such matters as
the Underwriters may reasonably request, including, without limiting
the generality of the foregoing, the matters set forth in Schedule B
hereto (except clauses 12 and 18 thereof);
(h) if the Underwriters provide a certificate in the form of Exhibit I to
Schedule A hereto, the Company shall have caused a favourable legal
opinion, addressed to the Underwriters and dated the Closing Date, and
in form and content reasonably acceptable to the Underwriters and the
Underwriters' Counsel, to be delivered to the Underwriters by the
Company's United States counsel with respect to such matters of United
States federal securities laws as the Underwriters may reasonably
request;
(i) the Company shall have delivered to the Underwriters a certificate
signed on behalf of the Company by the President and Chief Executive
Officer and the Vice President Finance and Chief Financial Officer of
the Company, or by such other officers of the Company as are
acceptable to the Underwriters, addressed to the Underwriters and the
Purchasers and dated the Closing Date, and in a form reasonably
satisfactory to the Underwriters and the Underwriters' Counsel,
certifying that, to the best of the knowledge, information and belief
of such officers, having made due inquiry:
(i) no order ceasing or suspending trading in any securities of
the Company or prohibiting the sale of the Special Warrants or
the issuance of the Underlying Securities is in effect (except
for any such order based upon the activities or alleged
activities of the Underwriters and not of the Company) and, to
the knowledge of such officers, no proceedings for such
purpose are pending or threatened;
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<PAGE> 14
(ii) the representations and warranties of the Company contained in
paragraph 4.1 hereof are true, correct and accurate in all
material respects and contain no misrepresentation as of the
Closing Time as if such representations and warranties had
been made at and as of the Closing Time;
(iii) the Company has in all material respects complied with all of
the covenants and satisfied all of the terms and conditions of
this Agreement on its part to be complied with or satisfied at
or prior to the Closing Time; and
(iv) the Company is a reporting issuer for the purposes of the
securities legislation of the Provinces of British Columbia
and Ontario and there is no material change in the affairs of
the Company which presently requires disclosure under
subsection 67(1) of the Securities Act (British Columbia) and
no such disclosure has been made on a confidential basis; and
(j) the representations and warranties of the Company contained in
paragraph 4.1 hereof, and the statements in any officer's certificate
of the Company delivered pursuant hereto or in connection herewith,
shall be, and the Underwriters shall be reasonably satisfied (based on
their due diligence investigations and examinations) that such
representations, warranties and statements are, true, correct and
accurate in all material respects and contain no misrepresentation as
of the Closing Time as if such representations, warranties and
statements had been made at and as of the Closing Time.
5.2 The Company agrees that copies of the legal opinions and certificates
referred to in paragraph 5.1 hereof addressed to the Purchasers and delivered
to the Underwriters at the Closing may also be delivered to any persons to whom
the Underwriters resell any of the Special Warrants within 30 days after the
Closing Date. The Underwriters shall utilize their reasonable best efforts to
deliver to the Company an original Questionnaire and Undertaking and, if
applicable, Form 20A in respect of any such person not later than five business
days after the date any of the Special Warrants are resold to such person.
6. CLOSING
6.1 The closing of the transactions contemplated hereby shall be completed
at the offices of the Company's Counsel in Vancouver at the Closing Time.
6.2 At the Closing, the Underwriters shall deliver or cause to be
delivered to the Trustee a certified cheque or bank draft made payable to the
Trustee on the Closing Date in an amount equal to the aggregate purchase price
for the Special Warrants and the Underwriters shall also deliver to the Company
properly completed and duly executed original or facsimile copies of the
Subscription Agreements and Questionnaires and Undertakings and, to the extent
applicable, Form 20As relating to the Special Warrants, and the Company shall
deliver or cause to be delivered to or upon the direction of the Underwriters
one Special Warrant certificate evidencing all of the Special Warrants
registered in the name of SMI (or its nominee) on behalf of the Purchasers and
the Company shall also deliver or cause to be delivered to the Underwriters the
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<PAGE> 15
requisite certificates, opinions and other documents as contemplated hereby.
The Underwriters shall deliver to the Company at the Closing an original
Questionnaire and Undertaking in respect of any Special Warrants purchased by
them and the Underwriters shall utilize their reasonable best efforts to
deliver to the Company an original Questionnaire and Undertaking and, if
applicable, Form 20A in respect of each Purchaser not later than five business
days after the Closing Date.
6.3 At the Closing, upon payment of the amount referred to in paragraph
6.2 hereof to the Trustee, the Company shall deliver or cause to be delivered
to the Underwriters a certified cheque or bank draft made payable to SMI, on
behalf of the Underwriters, in an amount equal to the Commission payable to the
Underwriters hereunder.
6.4 The Special Warrant Indenture shall contain provisions to the effect
that the amount referred to in paragraph 6.2 hereof paid to the Trustee will be
deposited with and held in escrow by the Trustee and invested by it in
accordance with the terms of the Special Warrant Indenture and that such
deposited funds and interest earned thereon (i) if the Qualification Date
occurs on or before the Qualification Deadline, will be released from escrow
and paid by the Trustee to the Company as soon as practicable after the Company
delivers a written certificate to the Trustee to the effect that the
Qualification Date has so occurred or (ii) if the Qualification Date has not
occurred on or before the Qualification Deadline, will initially be applied by
the Trustee to repay to any holder of Special Warrants, who exercises the right
referred to in subparagraph 2.3(c) to surrender his Special Warrants for
cancellation, the original issue price of such Special Warrants together with
such holder's proportionate share of such interest and, after all amounts due
to holders of Special Warrants who exercise such right have been paid or
provided for, the remaining balance of such deposited funds and interest earned
thereon will be released from escrow and paid by the Trustee to the Company.
6.5 The Company will at the Closing Time make all necessary arrangements
for the exchange of the Special Warrant certificate referred to in paragraph
6.2 hereof, at the principal offices of the Trustee in Vancouver and Toronto,
for Special Warrant certificates in such denominations and registered in such
names as shall be designated by the Underwriters by written direction to the
Trustee not less than 24 hours prior to the Closing Time. All such exchanges
shall be made without cost to the Underwriters. It is understood and agreed
that no charge will be made by the Trustee (other than to the Company) in
respect of any transfer, exchange or registration of any of the Special
Warrants if carried out within a period of 30 days following the Closing Date.
7. TERMINATION RIGHTS
7.1 Each of the Underwriters shall be entitled, at its option, to
terminate and cancel, without any liability on the Underwriters' part, its
obligations under this Agreement, and on behalf of the Purchasers arranged for
by the Underwriters, to terminate and cancel, without any liability on the
Purchasers' part, their respective obligations to purchase the Special
Warrants, by giving written notice to the Company:
(a) at any time prior to the Closing Time, if at any time prior to the
Closing:
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<PAGE> 16
(i) there shall have occurred any adverse material change or
adverse material fact in relation to the Company or a
development that could result in an adverse material change or
adverse material fact in relation to the Company; or
(ii) there shall have occurred any change in the applicable laws or
regulations of Canada or any province thereof or the United
States or any state thereof, or any inquiry, investigation or
other proceeding is made or any order is issued under or
pursuant to any statute of Canada or any province thereof or
of the United States or any state thereof or under or pursuant
to the rules of any stock exchange, or any such change,
inquiry, investigation or other proceeding or order is
announced, commenced or threatened, in relation to the Company
or any of its securities (except for any inquiry,
investigation or other proceeding or order based upon
activities of the Underwriters and not upon activities of the
Company);
which, in the opinion of the Underwriters, acting reasonably, operates
or would operate to prevent or restrict trading in or the distribution
of the Special Warrants or the Underlying Securities or adversely
affects or might reasonably be expected to adversely affect the
ability of the Company and its subsidiaries to carry on business or
the investment quality or marketability of the Special Warrants or the
Underlying Securities;
(iii) there should develop, occur or come into effect or existence
any event, action, state, condition or major financial
occurrence of national or international consequence or any law
or regulation, which, in the opinion of the Underwriters,
acting reasonably, seriously adversely affects, or involves,
or will seriously adversely affect or involve, the financial
markets or the business, operations or affairs of the Company
and its subsidiaries, taken as a whole; or
(iv) a cease trading order is made by any Securities Commission or
other competent authority by reason of the fault of the
Company or its directors, officers or agents and such cease
trading order is not rescinded within 48 hours; or
(b) at any time prior to the third business day before the Closing Date,
if the Underwriters are not reasonably satisfied with the results of
any due diligence investigations and examinations with respect to the
Company and its subsidiaries conducted by or on behalf of the
Underwriters.
7.2 The rights of termination contained in paragraph 7.1 hereof may be
exercised by any of the Underwriters and are in addition to any other rights or
remedies the Underwriters or the Purchasers may have in respect of any default,
act or failure to act or non- compliance by the Company in respect of any of
the matters contemplated by this Agreement.
7.3 If the obligations of the Underwriters and the Purchasers hereunder
are terminated pursuant to paragraph 7.1 hereof, the respective obligations of
the parties hereunder will terminate and none of the Underwriters, the
Purchasers or (subject to the rights or remedies
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<PAGE> 17
referred to in paragraph 7.2 hereof) the Company will have any liability to the
other, except that the Company's obligations under paragraphs 9.1 and 10.1 to
10.5 shall survive and continue.
8. ADDITIONAL COVENANTS
8.1 The Company covenants with the Underwriters as follows:
(a) the Company will use its reasonable best efforts to obtain written
consents, in the form required by the TSE, of holders of in excess of
50% of the outstanding Common Shares to the issue of the Additional
Special Warrants;
(b) the Company will comply with the covenants referred to in paragraph
2.2 hereof and, with respect to the filing of the Prospectuses as
contemplated therein, will fulfil all legal requirements required to
be fulfilled by the Company in connection therewith, which
requirements shall include the execution (as required by the
applicable Securities Laws) and filing of each of the Prospectuses in
each of the Qualifying Jurisdictions, in each case in form and
substance reasonably satisfactory to the Underwriters as evidenced by
their execution thereof;
(c) prior to the filing of each of the Prospectuses, the Company will
allow the Underwriters to conduct all due diligence investigations and
examinations which the Underwriters may require in order to fulfil
their obligations as a statutory underwriter and in order to enable
the Underwriters responsibly to execute the certificates required to
be executed by the Underwriters in such documents;
(d) the Company will deliver or cause to be delivered to the Underwriters:
(i) at the time of execution of each of the Prospectuses by the
Underwriters:
(A) the Prospectus (in the English and, if Quebec is a
Qualifying Jurisdiction, French languages) to be
executed, duly executed by officers and directors of
the Company in the form required by the Securities
Laws; and
(B) if Quebec is a Qualifying Jurisdiction:
(1) an opinion of the Company's Quebec counsel,
addressed to the Underwriters and the
Underwriters' Counsel and dated the date of
the Prospectus to be executed, to the effect
that the signed version of such Prospectus
(including any information or documents
incorporated by reference therein) in the
French language (other than financial
information in such Prospectus specified in
such opinion (the "Financial Information"))
is in all material respects a complete and
proper translation of the signed version of
such Prospectus in the English language and
that such versions are not
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<PAGE> 18
susceptible of any materially different
interpretation with respect to any material
matter contained therein; and
(2) an opinion of the Company's Auditors,
addressed to the Underwriters and the
Underwriters' counsel and dated the date of
the Prospectus to be executed, to the effect
that the Financial Information contained in
the version of such Prospectus in the French
language is in all material respects a
complete and proper translation of the
Financial Information contained in the
version of such Prospectus in the English
language; and
(ii) at the time of execution of the Final Prospectus by the
Underwriters:
(A) a comfort letter of the Company's Auditors, addressed
to the Underwriters and the directors of the Company
and dated the date of the Final Prospectus, and in
form and substance satisfactory to the Underwriters,
relating to the verification of the financial
information and accounting data contained or
incorporated by reference in the Final Prospectus and
matters involving changes or developments thereto
since the respective dates as of which specified
financial information is given in the Final
Prospectus to a date not more than three business
days prior to the date of such letter; and
(B) if the legal opinion referred to in subparagraph
5.1(f) hereof delivered at the Closing included an
opinion with respect to any of the statutes referred
to in paragraph 17 of Schedule B hereto, a legal
opinion, addressed to the Underwriters and the
Company and dated the date of the Final Prospectus,
and in form and content reasonably acceptable to the
Underwriters and the Underwriters' Counsel, of the
Company's Counsel to the effect that the Underlying
Securities, if issued on the date of the Final
Prospectus, would be eligible investments, without
resort to any applicable "basket" provisions, or
would not be precluded as investments under such
statutes;
(e) the Company will deliver or cause to be delivered to the Underwriters
duly executed copies of any Supplementary Material required to be
filed by the Company in accordance with subparagraph (f) below and,
from the date hereof until the completion of the distribution of the
Underlying Securities, copies of all letters, submissions and any
other materials filed by or on behalf of the Company with any of the
Securities Commissions, the Stock Exchanges or the United States
Securities and Exchange Commission. Opinions as to translation
similar to those required by clause (i)(B) of subparagraph (d) above
shall be delivered to the Underwriters, addressed to the Underwriters
and the Underwriters' counsel, with respect to any amendment to the
version of either of the Prospectuses or other relevant document in
the French language at the time the same is presented to the
Underwriters for execution or, if such execution is not required, at
or prior to the time the same is filed with the Quebec Securities
Commission, and if any
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<PAGE> 19
financial or accounting information is contained in any such
Supplementary Material, a comfort letter similar to that required by
clause (ii)(A) of subparagraph (d) above shall be delivered to the
Underwriters, addressed to the Underwriters and the directors of the
Company, at the time the same is presented to the Underwriters for
execution;
(f) from and after the date hereof until the completion of the
distribution of the Underlying Securities, the Company will promptly
notify the Underwriters (which notification will be confirmed in
writing if reasonably requested) of any material change or any change
in a material fact in either case whether actual, anticipated,
contemplated or threatened, or any event or development involving a
prospective material change, in any or all of the business, affairs,
ownership, management, operations, assets (including information or
data relating to the estimated or book value of assets), liabilities
(contingent or otherwise), financial condition, capital or prospects
of the Company and its subsidiaries, taken as a whole, or of any
change which is of such a nature as to result in, or could result in,
a misrepresentation in either of the Prospectuses or any Supplementary
Material. The Company will promptly, and in any event within any
applicable time limitation, comply with all filing and other
requirements under the Securities Laws, and with the rules of the
Stock Exchanges, applicable to the Company as a result of any such
change, event or development, provided that the Company shall not file
any amendment to either of the Prospectuses or any other material
supplementary to or to become incorporated by reference into the
Prospectuses (all such amendments and material being herein called the
"Supplementary Material") without first obtaining from the
Underwriters their approval as to the form and content thereof, such
approval not to be unreasonably withheld. In addition to the
foregoing, the Company will in good faith discuss with the
Underwriters any event or change in circumstances which is of such a
nature that there is or ought to be consideration given by the Company
as to whether notice in writing of such event or change need be given
to the Underwriters pursuant to this subparagraph;
(g) the Company will from time to time, without charge to the
Underwriters, deliver to the Underwriters as many copies of each of
the Prospectuses (and in the event of any amendment to either of the
Prospectuses, copies of such amendment) as the Underwriters may
reasonably request for the purposes contemplated hereunder, provided
that, in the case of the Preliminary Prospectus and any amendment
thereto, such copies need not be in commercial form unless the
Underwriters own any of the Special Warrants, and such delivery shall
constitute the consent of the Company to the use of such documents by
the Underwriters in connection with the distribution of the Underlying
Securities, subject to compliance by the Underwriters with the
applicable provisions of the Securities Laws; and
(h) the delivery by the Company to the Underwriters of each of the
Prospectuses and any Supplementary Material shall constitute the
Company's representation and warranty to the Underwriters that all
material information and statements (except information and statements
relating solely to the Underwriters) contained or incorporated by
reference in such documents, at the respective dates of initial
delivery thereof, were prepared in
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<PAGE> 20
accordance with and comply with all applicable Securities Laws and are
true, correct and accurate in all material respects, and that such
documents, at such dates, contain no misrepresentation and constitute
full, true and plain disclosure of all material facts relating to the
Company and to the Underlying Securities as required by the Securities
Laws.
8.2 The Underwriters covenant with the Company as follows:
(a) subject to paragraph 8.1 hereof and provided that, if the Prospectuses
qualify the distribution of securities to L.B. Mining Company, the
Underwriters have received an indemnity from the Company and a waiver
from L.B. Mining Company satisfactory to the Underwriters acting
reasonably, the Underwriters will, upon the request of the Company,
execute each of the Prospectuses and any Supplementary Material (in
the English and, if Quebec is a Qualifying Jurisdiction, French
languages) presented to the Underwriters for execution and will,
acting in good faith, use their reasonable best efforts to do all
things within the control of the Underwriters as may be necessary to
assist the Company in obtaining any requisite regulatory approvals in
connection with the preparation and filing of such documents and in
meeting its obligation to obtain receipts for the Final Prospectus on
or before the Qualification Deadline;
(b) the Underwriters will not make use of any "green sheet" or other
marketing material in connection with the distribution of the
Underlying Securities without obtaining the prior consent of the
Company;
(c) the Underwriters will use all reasonable efforts to complete the
distribution of the Underlying Securities as soon as practicable after
the Qualification Date and will, upon the request of the Company,
deliver copies of the Final Prospectus to holders of the Special
Warrants and assist the Company in facilitating the exercise of the
Special Warrants and the issuance of the Underlying Securities to the
holders thereof; and
(d) the Underwriters will give prompt written notice to the Company when,
in the Underwriters' opinion, the distribution of the Underlying
Securities has been completed and will provide a breakdown of the
Underlying Securities distributed in each of the Qualifying
Jurisdictions where such breakdown is required for the purpose of
calculating fees payable to the Securities Commissions.
8.3 The Company covenants with the Underwriters and the Purchasers as
follows:
(a) the Company will apply the proceeds from the sale of the Special
Warrants, when released to the Company by the Trustee under the
provisions of the Special Warrant Indenture, substantially in the
manner set forth under "Use of Proceeds" in the Final Prospectus;
(b) the Company will maintain its status as a reporting issuer not in
default under the Securities Laws of the Qualifying Jurisdictions and
will maintain the listing of the
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<PAGE> 21
Common Shares on The Toronto Stock Exchange until 12 months after the
expiry of the Warrants;
(c) from the date hereof until 90 days after the Closing Date, the Company
shall, not without the prior written consent of the Underwriters (such
consent not to be unreasonably withheld), directly or indirectly,
allot, issue, offer, sell or grant any option or other right to
purchase, or agree, become bound or announce any intention to allot,
issue, offer, sell or grant any option or other right to purchase, any
Common Shares (or any securities convertible into or exchangeable or
exercisable for Common Shares) other than as contemplated hereby or in
connection with director, officer or employee stock options or
employee stock purchase plans or the issue of Common Shares upon the
exercise of special warrants to be issued to L.B. Mining Company; and
(d) in the event that any holder of Special Warrants who acquires
Underlying Securities upon the exercise of his Special Warrants is or
becomes entitled under applicable Securities Laws to the remedy of
rescission by reason of the Final Prospectus or any amendment thereto
containing a misrepresentation, such holder shall be entitled to
rescission not only of such holder's exercise of such Special Warrants
but also of the purchase of such Special Warrants hereunder, and shall
be entitled in connection with such rescission to a full refund of all
consideration paid to the Company on the acquisition of such Special
Warrants. In the event that such holder is a permitted assignee of
the interest of the original Purchaser of such Special Warrants, such
permitted assignee shall be entitled to exercise the rights of
rescission and refund granted hereunder as if such permitted assignee
was such original Purchaser. The foregoing is in addition to any
other right or remedy available to a holder of the Special Warrants
under section 114 of the Securities Act (British Columbia), section
130 of the Securities Act (Ontario) or a corresponding provision of
other securities legislation or otherwise at law.
9. PAYMENT OF EXPENSES
9.1 Whether or not the transactions herein contemplated shall be
completed, the Company shall pay or cause to be paid all expenses of or
incidental to the issuance and sale of the Special Warrants and the
distribution of the Underlying Securities and all other matters in connection
with the transactions contemplated hereby, including, without limitation, the
reasonable out-of-pocket expenses from time to time incurred by or on behalf of
the Underwriters (including the reasonable fees and disbursements of the
Underwriters' Counsel to a maximum of $35,000).
10. INDEMNITY
10.1 The Company shall indemnify and save the Underwriters and each of the
Underwriters' directors, officers, employees and agents (collectively, the
"Indemnified Persons"), harmless against and from all liabilities, claims,
demands, losses (other than losses of profit in connection with the
distribution of the Special Warrants), costs, damages and expenses to which any
of the Indemnified Persons may be subject or which any of the Indemnified
Persons may suffer or
- 21 -
<PAGE> 22
incur, whether under the provisions of any statute or otherwise, in any way
caused by, or arising directly or indirectly from or in consequence of:
(a) any misrepresentation or alleged misrepresentation (except a
misrepresentation relating solely to the Underwriters) contained in
either of the Prospectuses, any Supplementary Material or any document
filed on or before the Qualification Date with any of the Securities
Commissions or any other securities regulatory authority or contained
in this Agreement or any certificate or other document delivered by or
on behalf of the Company to the Underwriters or the Purchasers
hereunder (collectively, the "Disclosure Documents");
(b) any prohibition or restriction of trading in the securities of the
Company or any prohibition or restriction affecting the distribution
of the Special Warrants or the distribution of the Underlying
Securities upon exercise of the Special Warrants imposed by any of the
Securities Commissions or any other competent authority if such
prohibition or restriction is based on any misrepresentation or
alleged misrepresentation (except a misrepresentation relating solely
to the Underwriters) in the Disclosure Documents;
(c) any order made or any inquiry, investigation (whether formal or
informal) or other proceeding commenced or threatened by any of the
Securities Commissions or any other competent authority relating to
the Company or any of its directors or officers or relating to or
affecting the distribution of the Special Warrants or the distribution
of Underlying Securities upon exercise of the Special Warrants other
than any such order, enquiry, investigation or other proceeding based
solely upon the activities or alleged activities of the Underwriters;
or
(d) any breach of, default under or non-compliance by the Company with any
representation, warranty, covenant, term or condition of this
Agreement or of any agreement or instrument relating to the
transactions contemplated hereby or with any requirement of applicable
legislation of Canada or the United States or of any of the Qualifying
Jurisdictions.
10.2 If any claim contemplated by paragraph 10.1 hereof shall be asserted
against any of the Indemnified Persons in respect of which indemnification is
or might reasonably be considered to be provided for in such paragraph, such
Indemnified Person shall notify the Company as soon as possible of the nature
of such claim (provided that any failure to so notify shall not affect the
Company's liability hereunder) and the Company shall be entitled (but not
required) to assume the defence of any suit brought to enforce such claim,
provided however, that the defence shall be through legal counsel selected by
the Company and reasonably acceptable to the Indemnified Person and that no
settlement may be made by the Company or the Indemnified Person without the
prior written consent of the other, such consent not to be unreasonably
withheld. The Indemnified Person shall have the right to retain its own
counsel in any proceeding relating to a claim contemplated by paragraph 10.1
hereof if:
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<PAGE> 23
(a) the Indemnified Person has been advised by counsel that there may be
legal defences available to the Indemnified Person which are different
from or additional to defences available to the Company (in which case
the Company shall not have the right to assume the defence of such
proceedings on the Indemnified Person's behalf);
(b) the Company shall not have taken the defence of such proceedings and
employed counsel within ten days after notice of commencement of such
proceedings; or
(c) the employment of such counsel has been authorized by the Company in
connection with the defence of such proceedings;
and, in any such event, the reasonable fees and expenses of such Indemnified
Person's counsel shall be paid by the Company.
10.3 In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Agreement is
due in accordance with its terms but is, for any reason, held by a court to be
unavailable from the Company, each of the Company and the Indemnified Person
seeking indemnification shall contribute to the aggregate liabilities, claims,
demands, losses (other than losses of profit in connection with the
distribution of the Special Warrants), costs, damages and expenses (including
legal or other expenses reasonably incurred in connection with investigation or
defence of the same) to which they may be subject or which they may suffer or
incur:
(a) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand, and by the Indemnified Person
seeking indemnity on the other hand, from the sale of the Special
Warrants; or
(b) if the allocation provided by subparagraph (a) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in subparagraph (a) above but
also to reflect the relative fault of the Indemnified Person seeking
indemnity, on the one hand, and the Company, on the other hand, in
connection with the statements or omissions or other matters which
resulted in such liabilities, claims, demands, losses, costs, damages
or expenses as well as any other relevant equitable considerations.
The relevant benefits received by the Company, on the one hand, and the
Underwriters on the other hand shall be deemed to be in the same proportion
that the total proceeds of the sale of the Special Warrants received by the
Company (net of the Commission but before deducting expenses) bear to the
Commission received by the Underwriters. In the case of liability arising out
of the Preliminary Prospectus or the Final Prospectus, the relative fault of
the Company, on the one hand, and of the Underwriters, on the other hand, shall
be determined by reference, among other things, to whether the untrue or
alleged untrue statement or omission or other matter relates to information
supplied or which ought to have been supplied by the Company or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement, omission or other matter.
The Company
- 23 -
<PAGE> 24
agrees that it would not be just and equitable if contributions pursuant to
this Agreement were determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The rights to contribution provided in this paragraph 10.3
shall be in addition to, and without prejudice to, any other right to
contribution which the Indemnified Persons may have.
10.4 The Company will not make any claim for, and hereby irrevocably waives
any right by statute or common law to, contribution against the Underwriters or
any of the other Indemnified Persons with respect to any matter in respect of
which the Company has agreed to indemnify the Indemnified Persons hereunder.
10.5 The rights to indemnity and contribution herein provided shall be in
addition to and not in derogation of any other right to indemnity or
contribution which any Indemnified Person may have by statute or otherwise at
law. It is the intention of the Company to constitute the Underwriters
trustees for their respective directors, officers, employees and agents of the
covenants of the Company under paragraphs 10.1 to 10.4 hereof with respect to
such persons and the Underwriters agree to accept such trust and to hold and
enforce such covenants on behalf of such persons.
11. MISCELLANEOUS
11.1 The obligations of the Underwriters to purchase the Special Warrants
shall be several and not joint in that:
(a) each Underwriter shall severally be obligated to purchase only the
percentage of the aggregate number of Special Warrants set opposite
its name as follows:
ScotiaMcLeod Inc. 38%
First Marathon Securities Limited 28.5%
Yorkton Securities Inc. 28.5%
Goepel Shields & Partners Inc. 5%
(b) if any Underwriter for whatever reason defaults in its obligation to
take up and pay for its respective percentage of the Special Warrants,
any or all of the other Underwriters may, at their option, take up and
pay for all the Special Warrants themselves or, with the consent of
the Company, together with any other underwriter.
An Underwriter which stands ready to purchase its percentage (as stipulated in
(a) above) of the aggregate number of Special Warrants required to be purchased
by the Underwriters under this Agreement (before giving effect to the sale of
Special Warrants to any Purchasers) will have no liability to the Company if
any of the other Underwriters defaults in its obligation to take up and pay for
its percentage of such Special Warrants. Nothing in this paragraph 11.1 shall
oblige the Company to sell hereunder less than all the Special Warrants or
shall relieve from responsibility to the Company hereunder any Underwriter
which shall have so defaulted in its obligation to purchase its applicable
percentage of the Special Warrants hereunder.
- 24 -
<PAGE> 25
11.2 Any notice to be given hereunder shall be in writing and shall be
given by telex or facsimile (if receipt of any such facsimile notice is
confirmed) or by personal delivery to an officer of the party to whom notice is
given and shall, in the case of notice to the Company, be addressed and sent
to:
Granges Inc.
Suite 3000
370 Seventeenth Street
Denver, Colorado
80202 U.S.A.
Attention: Michael B. Richings
President and Chief Executive Officer
Facsimile No.: (303) 629-2499
and in the case of notice to the Underwriters, be addressed and sent to:
ScotiaMcLeod Inc.
Suite 1100 - 609 Granville Street
P.O. Box 10342
Vancouver, British Columbia
V7Y 1H6
Attention: John A. Macdonald
Facsimile No.: (604) 661-7496
First Marathon Securities Limited
Commerce Place
Suite 2200 - 400 Burrard Street
Vancouver, B.C.
V6C 3A8
Attention: Keith Peck
Facsimile No.: (604) 682-2132
Yorkton Securities Inc.
10th Floor, 4 Bentall Centre
1055 Dunsmuir Street
P.O. Box 49333
Vancouver, B.C.
V7X 1L4
- 25 -
<PAGE> 26
Attention: Gordon Keep
Facsimile No.: (604) 640-0512
Goepel Shields & Partners Inc.
P.O. Box 10111
Suite 1100 - Pacific Centre
701 West Georgia Street
Vancouver, B.C.
V7Y 1C6
Attention: Ross Cory
Facsimile No.: (604) 684-0475
and any such notice given in accordance with the foregoing will be deemed to
have been received on the date of telex or facsimile transmission or the date
of delivery, as the case may be. The Company and the Underwriters may change
their respective addresses for notice by notice given in the manner aforesaid.
Any acceptance, agreement, order, notice, direction, receipt or other action to
be made, taken or given by the Underwriters hereunder (other than pursuant to
paragraphs 7.1 to 7.3, 10.1 to 10.5 and 11.4 hereof) may be made, taken or
given by SMI on behalf of all of the Underwriters.
11.3 The Company represents and warrants to the Underwriters that no fees
or commissions are or will be payable by the Company to any person (other than
the Underwriters) in connection with the issue and sale of the Special Warrants
or the transactions contemplated hereby and the Company agrees to indemnify and
hold harmless the Underwriters against any claims, demands and losses in
respect of any such fees or commissions.
11.4 All terms and conditions of this Agreement shall be construed as
conditions, and any material breach or failure to comply with any such terms or
conditions shall entitle each of the Underwriters, without limitation of any
other remedies of the Underwriters, to terminate such Underwriter's and any
Purchaser's obligations to purchase the Special Warrants by giving written
notice to that effect to the Company prior to the Closing Time notwithstanding
any act taken by the Underwriters including, without limitation, any act of the
Underwriters related to the offering or continued offering of the Special
Warrants and the Underwriters shall only be considered to have waived or be
estopped from relying upon any of their rights hereunder if such waiver or
estoppel is in writing and specifically waives or estops such exercise of
reliance.
11.5 The representations, warranties, covenants, obligations and agreements
of the Company contained herein or delivered pursuant hereto shall survive the
purchase by the Underwriters and the Purchasers of the Special Warrants and
shall continue in full force and effect notwithstanding any subsequent exercise
or disposition by the Underwriters or the Purchasers of the Special Warrants or
Underlying Securities, and the Underwriters and the Purchasers shall be
entitled to rely on the representations and warranties of the Company contained
herein or delivered
- 26 -
<PAGE> 27
pursuant hereto notwithstanding any investigation which the Underwriters or the
Purchasers may undertake or which may be undertaken on the their behalf,
provided that after the Qualification Date the rights of the Purchasers (other
than the Underwriters) with respect to such representations and warranties
shall merge with the rights of such Purchasers granted under subparagraph
8.3(d) hereof.
11.6 The Schedules hereto are incorporated into and form part of this
Agreement and any reference herein to "this Agreement" and to the words
"herein", "hereof", "hereunder" and other words of similar import refer to this
Agreement, including the Schedules hereto, as a whole.
11.7 This Agreement shall be governed by and interpreted in accordance with
the laws of the Province of British Columbia and the laws of Canada applicable
therein.
11.8 Time shall be of the essence hereof.
11.9 This Agreement shall be effective as of and from April 10, 1996
notwithstanding the actual date or dates this letter was signed and delivered
by the Underwriters and accepted by the Company.
11.10 This Agreement may be executed in any number of counterparts, each of
which when delivered, either in original or facsimile form, shall be deemed to
be an original and all of which together shall constitute one and the same
document.
If the foregoing is in accordance with your understanding and agreed
to by you, please signify your acceptance on the accompanying counterparts of
this letter and return the same to us whereupon this letter as so accepted will
constitute an agreement between the Company and the Underwriters in accordance
with the foregoing and will supersede in its entirety the letter agreement
dated April 10, 1996 between the Company and the Underwriters.
Yours very truly,
SCOTIAMCLEOD INC.
By: /s/ John A. MacDonald
-------------------------------------
FIRST MARATHON SECURITIES LIMITED
By: /s/ Keith L. Peck
-------------------------------------
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<PAGE> 28
YORKTON SECURITIES INC.
By: /s/ Gordon B. Keep
-------------------------------------
GOEPEL SHIELDS & PARTNERS INC.
By: /s/ K. Ross Cory
-------------------------------------
The foregoing is accepted and agreed to April 25, 1996.
GRANGES INC.
By: /s/ N. A. Larson
-------------------------------------
- 28 -
<PAGE> 29
SCHEDULE A
UNITED STATES SALES
For the purpose of this Schedule A:
(i) "Placement Agent" means ScotiaMcLeod (USA) Inc. as, or any
other U.S. broker-dealer who acts as, private placement agent
for the Underwriters for purposes of offering and selling the
Special Warrants in the United States;
(ii) "Regulation D" means Regulation D adopted by the SEC pursuant
to the U.S. Securities Act;
(iii) "Regulation S" means Regulation S adopted by the SEC pursuant
to the U.S. Securities Act;
(iv) "SEC" means the United States Securities and Exchange
Commission;
(v) "Securities" means the Special Warrants, the Underlying
Securities and the Warrant Shares;
(vi) "U.S. Person" has the meaning given to such term in Regulation
S;
(vii) "U.S. Purchase Agreement" means the form of Subscription
Agreement to be entered into with the Purchasers of Special
Warrants who are U.S. Persons; and
(viii) "U.S. Securities Act"means the United States Securities Act
of 1933, as amended.
(a) The Company represents, warrants, covenants and agrees to and with the
Underwriters that:
(i) the Company is a "foreign issuer" with no "substantial U.S.
market interest" with respect to the Securities as such terms
are defined in Regulation S.
(ii) none of the Company, its affiliates (as defined in the U.S.
Securities Act) or any person acting on its or their behalf
has engaged or will engage in any directed selling efforts in
the United States within the meaning of Regulation S or has
engaged or will engage in any form of general solicitation or
general advertising (as such terms are used in Regulation D)
with respect to the Securities.
(b) Each of the Underwriters severally, and not jointly, represents,
warrants and covenants to the Company that, in connection with all offers and
sales of the Special Warrants in the United States:
(i) it acknowledges that the Securities have not been and will not
be registered under the U.S. Securities Act and may not be
offered or sold within the United States or to, or for the
account or benefit of, U.S. Persons, except in accordance with
Regulation S or pursuant to an exemption from the registration
requirements of the U.S. Securities Act; it has not offered or
sold, and will not offer or sell, any of the Special Warrants
constituting a part of its allotment within the United States
or to, or for the account or benefit of, U.S. Persons, except
in accordance with Regulation S or as provided in section (d)
below; accordingly, none of it, its affiliates or any person
acting on its or their behalf (including any Placement Agent)
has engaged or will engage in any directed selling efforts in
the United States with respect to the Special Warrants; terms
used in this clause have the meanings given to them by
Regulation S.
(ii) it has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Special
Warrants, except with its affiliates, any Placement Agent or
any banking
<PAGE> 30
or selling group members or with the prior written consent of
the Company not to be unreasonably withheld, provided,
however, that nothing in this clause shall in any way
restrict offers and sales outside the United States.
(c) The Underwriters shall require each member of any banking or selling
group formed by the Underwriters to agree, for the benefit of the Company, to
comply with, and the Underwriters shall use their respective best efforts to
ensure that each such member complies with, the provisions of clauses (b)(i)
and (ii) above as if such provisions applied to such member.
(d) Each of the Underwriters agrees severally, and not jointly, with the
Company that:
(i) all offers and sales of the Special Warrants in the United
States will be effected through one or more Placement Agents,
in accordance with all applicable U.S. broker-dealer
requirements.
(ii) with respect to any offers and sales of the Special Warrants
in the United States, each Underwriter will cause each
Placement Agent to solicit offers for the Special Warrants
only from, and offer the Special Warrants only to, persons who
it reasonable believes to be institutional "accredited
investors" (as such term is defined in Rule 501(a)(1), (2),
(3) or (7) under the U.S. Securities Act) and will also cause
each Placement Agent to solicit offers for the Special
Warrants only from, and offer the Special Warrants only to,
persons that in purchasing such Special Warrants enter into a
U.S. Purchase Agreement and thereby represent and agree as
provided in clauses (iv)(1) through (9) below (to the extent
such representations are applicable to the Purchaser
concerned).
(iii) each Underwriter will not, either directly or indirectly or
through any Placement Agent, solicit offers for, or offer to
sell, the Special Warrants in the United States by means of
any form of general solicitation or general advertising (as
those terms are used in Regulation D) or in any manner
involving a "public offering" within the meaning of Section
4(2) of the U.S. Securities Act.
(iv) the U.S. Purchase Agreement to be entered into with each
Purchaser of Special Warrants who is a U.S. Person, prior to
any sale of Securities, shall contain representations,
warranties and covenants to the Company of such Purchaser as
follows:
(1) It is authorized to consummate the purchase of the
Securities.
(2) It is aware that the Securities have not been and
will not be registered under the U.S. Securities Act
or the securities laws of any state and the sale
contemplated thereby is being made in reliance on a
private placement exemption to Institutional
Accredited Investors (as defined below) and pursuant
to exemptions from the registration requirements of
applicable state securities laws.
(3) It is an institutional "accredited investor" as
defined in Rule 501(a)(1), (2), (3) or (7) under the
U.S. Securities Act ("Institutional Accredited
Investors") and it is acquiring such Special Warrants
and the related other Securities for its own account
for an aggregate purchase price of at least U.S
$250,000 or for the account of one or more
Institutional Accredited Investors with respect to
which it exercises sole investment discretion (where
each such account is purchasing Special Warrants for
such an aggregate purchase price), and not with a
view to any resale, distribution or other disposition
of such Securities in violation of the United States
federal or state securities laws.
- 2 -
<PAGE> 31
(4) It acknowledges that it has not purchased such
Special Warrants as a result of any general
solicitation or general advertising, including
advertisements, articles, notices or other
communications published in any newspaper, magazine
or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees
have been invited by any general solicitation or
general advertising.
(5) It has received a copy of the Form 10-K, for its
information only, together with a U.S. covering
memorandum, and has had access to such additional
information, if any, concerning the Company as it has
considered necessary in connection with its decision
to invest in such Special Warrants.
(6) It has such knowledge and experience in business
matters as to be capable of evaluating the merits and
risks of its investment in such Special Warrants and
is able to bear the economic risks of such
investment.
(7) It understands and agrees that if it decides to
offer, sell or otherwise transfer such Special
Warrants or the related other Securities, such
Special Warrants and other Securities may be offered,
sold or otherwise transferred only (A) to the
Company, (B) outside the United States in accordance
with Rule 904 of Regulation S under the U.S.
Securities Act and in compliance with applicable
local laws and regulations, or (C) inside the United
States (i) if (x) the sale is to an Institutional
Accredited Investor and is of a number of such
Special Warrants or other Securities having an
aggregate market value at the time of such sale of
not less than U.S. $250,000, (y) a purchaser's letter
containing representations, warranties and covenants
similar to those contained in this clause (iv)
(except such purchaser's letter need not contain the
representation set forth in subclause (5) above),
satisfactory to the Placement Agent and the Company,
is executed by the purchaser and delivered to the
Placement Agent and the Company prior to the sale and
(z) all offers or solicitations in connection with
the sale are arranged and conducted solely by the
Placement Agent or the Company, (ii) in accordance
with the exemption from registration under the U.S.
Securities Act provided by Rule 144 thereunder, if
available, or (iii) if the sale is a transaction that
does not require registration under the U.S.
Securities Act or any applicable United States state
laws and regulations governing the offer and sale of
securities, and it has therefore furnished to the
Placement Agent and the Company an opinion of counsel
of recognized standing reasonably satisfactory to the
Placement Agent and the Company.
(8) It understands and acknowledges that upon the
original issuance thereof, and until such time as the
same is no longer required under applicable
requirements of the U.S. Securities Act or
applicable state laws, the certificates representing
such Special Warrants, and all certificates issued in
exchange therefor or in substitution thereof,
including certificates representing the related
Securities, shall bear the following legend:
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<PAGE> 32
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, OR (C) INSIDE THE UNITED STATES IN
ACCORDANCE WITH (1) CERTAIN PROCEDURES SATISFACTORY
TO THE COMPANY OR (2) RULE 144 UNDER THE SECURITIES
ACT, IF AVAILABLE. DELIVERY OF THIS CERTIFICATE MAY
NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH
WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM
MONTREAL TRUST COMPANY OF CANADA UPON DELIVERY OF
THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN
A FORM SATISFACTORY TO MONTREAL TRUST COMPANY OF
CANADA AND THE COMPANY, TO THE EFFECT THAT THE SALE
OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT;"
provided, that if any such Special Warrants or other
Securities, as the case may be, are being sold under
subclause (7)(B) above, such legend may be removed by
providing a declaration to Montreal Trust Company of
Canada as registrar and transfer agent, in the
following form (or in such form as the Company may
prescribe from time to time):
"The undersigned (A) acknowledges that the sale of
the securities, represented by certificate numbers
_______________, to which this declaration relates is
being made in reliance on Rule 904 of Regulation S
under the United States Securities Act of 1933, as
amended (the "Securities Act") and (B) certifies that
(1) it is not an "affiliate" of Granges Inc. (as
defined in Rule 405 under the Securities Act), (2)
the offer of such securities was not made to a person
in the United States and either (a) at the time the
buy order was originated, the buyer was outside the
United States, or the seller and any person acting on
its behalf reasonably believed that the buyer was
outside the United States or (b) the transaction was
executed on or through the facilities of The Toronto
Stock Exchange and neither the seller nor any person
acting on its behalf knows that the transaction has
been prearranged with a buyer in the United States
and (3) neither the seller nor any person acting on
its behalf engaged in any directed selling efforts in
connection with the offer and sale of such
securities. Terms used herein have the meanings
given to them by Regulation S."
and provided further, that if any such Special
Warrants or other Securities, as the case may be, are
being sold under subclause 7(C)(ii) above, such
legend may be removed by delivery to Montreal Trust
- 4 -
<PAGE> 33
Company of Canada of an opinion of counsel, of
recognized standing reasonably satisfactory to the
Company, to the effect that such legend is no longer
required under the applicable requirements of the U.S.
Securities Act or state securities laws.
(9) It consents to the Company making a notation on its
records or giving instructions to any transfer agent
or trustee of the Securities in order to implement
the restrictions on transfer set forth and described
herein.
(v) each offeree will be provided with a copy of the Form 10-K,
together with a U.S. covering memorandum.
(vi) each Underwriter shall cause each Placement Agent to agree,
for the benefit of the Company, to the same provisions as are
contained in this Schedule A.
(vii) at the Closing Time, each Underwriter, together with each
Placement Agent selling Special Warrants in the United States,
will provide a certificate, substantially in the form of
Exhibit I hereto, relating to the manner of the offer and sale
of the Special Warrants in the United States.
- 5 -
<PAGE> 34
EXHIBIT I
UNDERWRITER'S CERTIFICATE
Gentlemen:
In connection with the private placement in the United States
of special warrants (the "Special Warrants") exercisable for common shares and
common share purchase warrants of Granges Inc. (the "Company") with U.S.
institutional investors (the "U.S. Private Placees") pursuant to U.S. Purchase
Agreements between such U.S. Private Placees and ScotiaMcLeod (USA) Inc. (the
"Placement Agent"), the undersigned, ScotiaMcLeod Inc., First Marathon
Securities Limited, Yorkton Securities Inc. and Goepel Shields & Partners Inc.,
as the underwriters (the "Underwriters") referred to in the Underwriting
Agreement (the "Underwriting Agreement") dated April 15, 1996 among the Company
and the Underwriters, and the Placement Agent, do hereby certify, that:
(i) the Placement Agent is a duly registered broker or
dealer with the United States Securities and Exchange Commission and is a
member of, and in good standing with, the National Association of Securities
Dealers, Inc. on the date hereof;
(ii) each U.S. Private Placee was provided with a copy of
the U.S. Purchase Agreement, the Company's Form 10-K and a U.S. covering
memorandum relating to the Special Warrants;
(iii) immediately prior to our transmitting the U.S.
Purchase Agreement to such U.S. Private Placees, we had reasonable grounds to
believe and did believe that each U.S. Private Placee was an institutional
"accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
U.S. Securities Act of 1933) and, on the date hereof, we continue to believe
that each U.S. Private Placee is an institutional "accredited investor";
(iv) no form of general solicitation or general
advertising was used by us, including advertisements, articles, notices or
other communications published in any newspaper, magazine or similar media or
broadcast over radio or television, or any seminar or meeting whose attendees
had been invited by general solicitation or general advertising, in connection
with the offer or sale of the Special Warrants in the United States; and
(v) the offering of the Special Warrants in the United
States has been conducted in accordance with the Underwriting Agreement; and
(vi) all offers and sales of the Special Warrants in the
United States were made to a maximum of 50 institutional "accredited
investors".
Terms in this certificate have the meanings given to them in
the Underwriting Agreement.
Dated April 25, 1996.
SCOTIAMCLEOD INC. FIRST MARATHON SECURITIES LIMITED
By: By:
--------------------------------- -------------------------------
YORKTON SECURITIES INC. GOEPEL SHIELDS & PARTNERS INC.
By: By:
--------------------------------- -------------------------------
SCOTIAMCLEOD (USA) INC.
By:
---------------------------------
<PAGE> 35
SCHEDULE B
SUMMARY OF LEGAL OPINIONS
The opinions of the Company's Counsel and the Underwriters'
Counsel shall be substantially to the following effect:
1. The Company is a company duly amalgamated and validly existing
under the laws of the Province of British Columbia and is in good standing in
the office of the Registrar of Companies for British Columbia with respect to
the filing of annual reports.
2. Each Material Subsidiary is a corporation duly incorporated
and validly existing as a corporation and is in good standing under the laws of
its jurisdiction of incorporation.
3. According to the register of shareholders of each Material
Subsidiary (other than Zamora Gold Corp.), the Company or a wholly-owned
subsidiary of the Company is the registered holder of all of the issued and
outstanding shares of such Material Subsidiary. According to the register of
shareholders of Zamora Gold Corp., the Company or a wholly-owned subsidiary of
the Company is the registered holder of 8,000,000 of the 19,601,637 issued and
outstanding shares of Zamora Gold Corp.
4. Each of the Company and the Material Subsidiaries has the
necessary corporate power and capacity to carry on the business which it
carries on and to own, lease and operate its properties and assets.
5. The Company has the necessary corporate power and capacity to
enter into this Agreement, the Subscription Agreements, the Special Warrant
Indenture and the Warrant Indenture (collectively, the "Documents") and to
observe and perform its covenants and obligations hereunder and thereunder, to
create, issue and sell the Special Warrants, to issue the Common Shares and
create and issue the Warrants issuable upon the exercise or deemed exercise of
the Special Warrants and to issue the Warrant Shares issuable upon the exercise
of the Warrants.
6. The authorized capital of the Company consists of 750,000,000
Common Shares, of which (based on certificates of the transfer agent and
registrar for the Common Shares and of a senior officer of the Company) were
issued and outstanding at the close of business on the day prior to the Closing
Date as fully paid and non-assessable shares, and 750,000,000 preferred shares
without par value, none of which (based on a certificate of a senior officer of
the Company) are issued and outstanding on the Closing Date.
7. The Documents have each been duly authorized, executed and
delivered by the Company and are each a legal, valid and binding obligation of,
and each is enforceable in accordance with its terms against, the Company,
subject to the usual qualifications with respect to bankruptcy, insolvency and
other similar laws of general application relating to creditors' rights and
equitable remedies and, with respect to this Agreement, subject to the usual
exceptions with respect to rights of indemnity and waiver of contributions.
8. The forms of certificates evidencing the Special Warrants and
the Warrants have each been duly approved by the Company and comply with all
requirements of the Special Warrant Indenture and the Warrant Indenture,
respectively.
9. The attributes and characteristics of the Special Warrants and
the Warrants conform in all material respects with the descriptions thereof in
this Agreement and the Subscription Agreements.
10. The Special Warrants have been duly authorized and created by
the Company and validly issued in accordance with the provisions of the Special
Warrant Indenture and the certificates evidencing the Special Warrants have
been duly executed and delivered by the Company, and, in the case of the single
such certificate
- 1 -
<PAGE> 36
evidencing all of the Special Warrants delivered to SMI today, duly certified
and delivered by the Trustee, in accordance with such provisions and constitute
valid and legally binding direct obligations of the Company enforceable against
the Company, subject to the usual qualifications referred to in clause 7 above,
entitling the holders thereof to the benefits of the Special Warrant Indenture.
11. The Warrants issuable upon the exercise or deemed exercise of
the Special Warrants have been duly authorized and created by the Company for
issuance upon the exercise or deemed exercise of the Special Warrants and such
Warrants, when issued pursuant to the Special Warrant Indenture and the Warrant
Indenture upon the exercise or deemed exercise of the Special Warrants in
accordance with the terms thereof, will be validly issued in accordance with
the provisions of the Warrant Indenture, and the certificates evidencing such
Warrants, when duly executed and delivered by the Company and duly certified
and delivered by the Trustee in accordance with such provisions, will
constitute valid and binding direct obligations of the Company enforceable
against the Company, subject to the usual qualifications referred to in clause
7 above, entitling the holders thereof to the benefits of the Warrant
Indenture. The Common Shares issuable upon the exercise or deemed exercise of
the Special Warrants and the Warrant Shares issuable upon the exercise of the
Warrants have been duly authorized and allotted for issuance upon the exercise
or deemed exercise of the Special Warrants or upon the exercise of the
Warrants, as the case may be, and such Common Shares and Warrant Shares, when
issued pursuant to the Special Warrant Indenture upon the exercise or deemed
exercise of the Special Warrants in accordance with the terms thereof or issued
pursuant to the Warrant Indenture upon the exercise of the Warrants in
accordance with the terms thereof, will be validly issued and outstanding as
fully paid and non-assessable shares in the capital of the Company.
12. Neither the execution and delivery by the Company of any of
the Documents, or the fulfilment of or compliance with the terms of any of them
by the Company, nor the sale of the Special Warrants to the Purchasers as
contemplated in this Agreement and the Subscription Agreements, or the issue of
Common Shares and Warrants upon the exercise or deemed exercise of the Special
Warrants in accordance with the terms thereof or of Warrant Shares upon the
exercise of the Warrants in accordance with the terms thereof, conflicts or
will conflict with or results or will result in a breach of or a default under
any of the provisions of the Memorandum or Articles of the Company or of any
resolutions of the directors or shareholders of the Company or, so far as the
Company's Counsel is aware (subject to the usual qualifications and limitations
with respect to the knowledge of the Company's Counsel), of any material
license or permit issued to the Company or any Material Subsidiary or any
essential term of any agreement or instrument to which the Company or any
Material Subsidiary is a party or by which the Company or any Material
Subsidiary is bound or to which any of its properties or assets are subject.
13. Based on the representations and warranties of the Purchasers
contained in the Subscription Agreements, the sale of the Special Warrants by
the Company to the Purchasers in accordance with the terms of this Agreement
and the Subscription Agreements is exempt from the prospectus requirements of
the securities laws of the Provinces of British Columbia and Ontario and of
such other provinces of Canada as may be relevant on the basis of the
Exemptions and no prospectus, offering memorandum or other document is required
to be filed, no proceeding is required to be taken and no approval, permit,
consent, or authorization is required to be obtained by the Company under such
securities laws in connection with such sale except for the filing by the
Company, within prescribed time periods, of required reports of such sale and
the payment by the Company of applicable fees relating thereto.
14. The issue by the Company of the Common Shares and Warrants
issuable upon the exercise or deemed exercise of the Special Warrants, when
issued pursuant to the Special Warrant Indenture upon the exercise or deemed
exercise of the Special Warrants in accordance with the terms thereof, and the
issue by the Company of the Warrant Shares issuable upon the exercise of the
Warrants, when issued pursuant to the Warrant Indenture upon the exercise of
the Warrants in accordance with the terms thereof, in either case if such issue
upon the exercise or deemed exercise of the Special Warrants occurs before the
Qualification Date, will be exempt from the registration and prospectus
requirements of the securities laws of the Provinces of British Columbia and
Ontario and of such other provinces of Canada as may be relevant and, subject
to compliance by the Underwriters with paragraph 3.3 of the Underwriting
Agreement, no prospectus, offering memorandum or other document will be
required to be filed, no proceeding will be required to be taken and no
approval, permit, consent or authorization will be required to be obtained by
the Company under such securities laws in connection with any such issue,
subject to the usual provisos with respect to the absence of any orders
restricting trades in such Common Shares,
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<PAGE> 37
Warrants and Warrant Shares and that no commission or other remuneration is
paid or given to others in respect of such issue except for administrative,
ministerial or professional services or for services performed by a registered
dealer or broker.
15. Upon the delivery of the Final Prospectus to the Purchasers or
to any subsequent holders of the Special Warrants in connection with the
exercise or deemed exercise of such Special Warrants in accordance with the
terms thereof on or after the Qualification Date, the Common Shares and
Warrants issuable upon the exercise or deemed exercise of such Special Warrants
in accordance with the terms thereof and the Warrant Shares issuable upon the
exercise of such Warrants in accordance with the terms thereof will not be
subject to any statutory hold period under the securities laws of the Provinces
of British Columbia and Ontario and of such other provinces of Canada as may be
relevant and no prospectus, offering memorandum or other document will be
required to be filed, no proceeding will be required to be taken and no
approval, permit, consent or authorization will be required to be obtained by
the holders of such Common Shares, Warrants or Warrant Shares under such
securities laws in connection with the resale of such Common Shares, Warrants
or Warrant Shares by such holders in such provinces through a registered dealer
or broker, subject to the usual provisos with respect to the absence of any
orders restricting trades in such Common Shares, Warrants or Warrant Shares and
the requirements for the filing of reports by, and certain general restrictions
relating to, any such holders who are insiders of or persons in a special
relationship with the Company or who own 10% or more of the outstanding Common
Shares and that such resale does not constitute a distribution from the
holdings of a "control person" and, in the case of the resale of such Warrant
Shares, no unusual effort is made to prepare the market or create a demand for
such Warrant Shares, no extraordinary commission of consideration is paid in
respect of such resale and the Company is a reporting issuer under the
securities laws of the Province of Ontario at the time of such resale.
16. All documents required to be filed and proceedings required to
be taken by the Company before the Closing Date have been filed and taken in
order for the Common Shares issuable upon the exercise or deemed exercise of
the Special Warrants and the Warrant Shares issuable upon the exercise of the
Warrants to be listed and posted for trading on the TSE upon the issuance
thereof pursuant to the Special Warrant Indenture or the Warrant Indenture, as
the case may be.
17. The Common Shares and Warrants issuable upon the exercise or
deemed exercise of the Special Warrants, if issued on the Closing Date, would
be eligible investments, without resort to "basket" provisions permitting
otherwise ineligible investments up to specified limits, or would not be
precluded as investments, in each case subject to general investment provisions
and in certain cases subject to prudent investment requirements and additional
requirements relating to investment or lending policies or goals, for
Purchasers whose investments are governed by the Insurance Companies Act
(Canada), the Trust and Loan Companies Act (Canada), the Pension Benefits
Standards Act, 1985 (Canada), the Loan and Trust Corporations Act (Ontario),
the Pension Benefits Act (Ontario), the Pension Benefits Standards Act (British
Columbia), the Financial Institutions Act (British Columbia) and other similar
statutes, subject to the usual qualifications with respect thereto (provided
that this opinion need not be delivered in respect of any statute which is not
applicable to any of the Purchasers).
18. The Special Warrants and the Underlying Securities do not
constitute "foreign property" under Part XI of the Income Tax Act (Canada) (the
"Tax Act") and, if the current proposed amendments to the Tax Act announced by
the Minister of Finance (as proposed to be modified) become enacted, will not
constitute "foreign property" under such amendments.
In giving such opinions, (i) the Company's Counsel and the Underwriters'
Counsel may rely, to the extent appropriate in the circumstances, (A) as to
matters of fact on certificates of the Company's Auditors and certificates of
the Company duly executed on its behalf by any senior officer of the Company
and (B) on opinions of local counsel acceptable to the Underwriters' Counsel
with respect to matters of law of jurisdictions other than British Columbia and
(ii) the Underwriters' Counsel may rely on the opinion of the Company's Counsel
with respect to matters which relate specifically to the Company.
- 3 -
<PAGE> 38
SCHEDULE C
TERM SHEET
GRANGES INC.
OFFERING OF SPECIAL WARRANTS
<TABLE>
<S> <C>
Issuer: Granges Inc. ("Granges").
Issue: Special warrants ("Special Warrants") offering issued
pursuant to private placement prospectus exemptions. Each
Special Warrant is exchangeable into one common share and
one-half common share purchase warrant ("Warrant").
Warrant: Exercisable at $3.00 until October 31, 1997.
Amount: $19,994,000 million with a greenshoe option, exercisable
prior to the Closing Date, to increase to $25,220,000
million.
Price: $2.60 per Unit.
Closing Date: April 25, 1996 (the "Closing Date").
Transaction Structure: Private placement of Special Warrants in Canada, Europe
and the United States under applicable exemptions from
prospectus and registration requirements. The Special
Warrants are to be issued under a special warrant
indenture to be approved by the Underwriters.
Prospectus Filings: Granges will use its best efforts to file a prospectus as
soon as practicable after the Closing Date in all
provinces of Canada designated by the Underwriters
qualifying the issue of Shares and Warrants on exercise of
the Special Warrants and to obtain final receipts therefor
within 90 days or such later date as is stipulated by the
Underwriters (the "Qualification Deadline"). Even if
final prospectus receipts are not obtained by the
Qualification Deadline, Granges will continue to use its
reasonable best efforts to clear the prospectus as soon as
practicable.
Retraction: If a prospectus has not been filed by the Qualification
Deadline Special Warrant holders will be entitled to
retract their Special Warrant for the full price plus
interest.
Escrow Provision: 100% of the net proceeds of the Issue will be held in
escrow and released on exercise or deemed exercise of the
Special Warrants prior to the Qualification Deadline or to
Special Warrant holders exercising their retraction right
thereafter.
</TABLE>
<PAGE> 39
<TABLE>
<S> <C>
Foreign Property: Granges will provide an opinion of its counsel at Closing
confirming that its Special Warrants, Common Shares and
Warrants will not constitute foreign property pursuant to
certain amendments to the Income Tax Act (Canada).
Syndication: ScotiaMcLeod Inc., First Marathon Securities Limited,
Yorkton Securities Inc. and Goepel Shields & Partners Inc.
</TABLE>
- 2 -
<PAGE> 40
SCHEDULE D
SUBSCRIPTION AGREEMENT
A COMPLETED AND ORIGINALLY EXECUTED COPY OF THIS SUBSCRIPTION AGREEMENT AND THE
ATTACHED PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING AND (IF THE PURCHASER
IS AN INDIVIDUAL) THE ATTACHED FORM 20A (1P) MUST BE DELIVERED BY NO LATER THAN
12:00 NOON ON APRIL 22, 1996 TO SCOTIAMCLEOD INC., ON BEHALF OF THE
UNDERWRITERS, AT EITHER OF THE FOLLOWING ADDRESSES:
ScotiaMcLeod Inc. ScotiaMcLeod Inc.
36th Floor 10th Floor
40 King Street West 609 Granville Street
Scotia Plaza Vancouver, B.C.
Toronto, Ontario V7Y 1H6
M5H 3Y2
Attention: David Nesbitt Attention: John A. Macdonald
Tel:(416) 863-7216 Tel:(604) 661-7481
Fax:(416) 862-3037 Fax:(604) 661-7496
- --------------------------------------------------------------------------------
TO: GRANGES INC.
AND TO: SCOTIAMCLEOD INC.
FIRST MARATHON SECURITIES LIMITED
YORKTON SECURITIES INC.
GOEPEL SHIELDS & PARTNERS INC.
1. SUBSCRIPTION. The undersigned (the "Purchaser") hereby
tenders to Granges Inc. (the "Company") this subscription offer which, upon
acceptance by the Company, will constitute an agreement (the "Subscription
Agreement") of the Purchaser to subscribe for, take up, purchase and pay for,
and, on the part of the Company, to issue and sell to the Purchaser, the number
of Special Warrants of the Company set out on page 11 hereof (the "Purchaser's
Special Warrants") at the price (the "Purchase Price") of $2.60 per Special
Warrant, all on the terms and subject to the conditions set forth in this
Subscription Agreement.
2. UNDERWRITTEN PRIVATE PLACEMENT. The Purchaser acknowledges
that the Purchaser's Special Warrants will be issued in connection with the
creation, issue and sale of an aggregate of 7,690,000 Special Warrants of the
Company for an aggregate subscription price of $19,994,000 to be sold by the
Company by private placement pursuant to an agreement (the "Underwriting
Agreement") dated as of April 15, 1996 among the Company and ScotiaMcLeod Inc.
("SMI"), First Marathon Securities Limited, Yorkton Securities Inc. and Goepel
Shields & Partners Inc. (collectively the "Underwriters") and that the
definitive terms and conditions of the Special Warrants will be set forth in
the Special Warrant Indenture referred to in paragraph 4 below. The
Underwriters have an option (the "Option") excerciseable prior to the Closing
Date (defined below) to increase the number of Special Warrants to be issued by
the Company by up to an additional 2,010,000 Special Warrants for a total
subscription price of $25,220,000.
<PAGE> 41
3. CERTAIN DEFINITIONS. As used in this Subscription Agreement,
unless the context otherwise requires:
(a) "BUSINESS DAY" means a day which is not a Saturday, a Sunday
or a statutory holiday in the Provinces of British Columbia or
Ontario;
(b) "CLOSING" means the completion of the issue and sale by the
Company and the purchase by the Purchasers (including the Purchaser)
of the Special Warrants pursuant to the Underwriting Agreement and the
Subscription Agreements (including this Subscription Agreement);
(c) "CLOSING DATE" means April 25, 1996 or such other date as the
Company and the Underwriters may agree pursuant to the Underwriting
Agreement;
(d) "CLOSING TIME" means 7:30 a.m. (Vancouver time) on the Closing
Date or such other time on the Closing Date as the Company and the
Underwriters may agree pursuant to the Underwriting Agreement;
(e) "COMMON SHARES" means common shares without par value in the
capital of the Company;
(f) "EXPIRY TIME" means 4:30 p.m. (Vancouver time) on the fifth
business day after the earlier of (i) the Qualification Date and (ii)
the Qualification Deadline;
(g) "FINAL PROSPECTUS" means a final prospectus or final short
form prospectus of the Company relating to the distribution of the
Underlying Securities and, unless the context otherwise requires,
includes any amendment or supplement thereto, any information or
documents incorporated by reference therein and any French language
version thereof;
(h) "PRELIMINARY PROSPECTUS" means a preliminary prospectus or
preliminary short form prospectus of the Company relating to the
distribution of the Underlying Securities and, unless the context
otherwise requires, includes any amendment or supplement thereto, any
information or documents incorporated by reference therein and any
French language version thereof;
(i) "PROSPECTUSES" means the Preliminary Prospectus and the Final
Prospectus;
(j) "PURCHASERS" means the Underwriters, as the initially
committed Purchasers, and the Substitute Purchasers, if any;
(k) "QUALIFICATION DATE" means the day on which a receipt is
issued for the Final Prospectus by the last of the Securities
Commissions to issue a receipt for the Final Prospectus;
(l) "QUALIFICATION DEADLINE" means the day that is 90 days after
the Closing Date or such later date as the Underwriters may determine
in a written notice given to the Company and the Trustee provided that
the Underwriters have obtained the written consent thereto of each of
the Substitute Purchasers who purchased Special Warrants at the
Closing and have not resold their Special Warrants;
(m) "QUALIFYING JURISDICTIONS" means the Provinces of British
Columbia and Ontario and such other provinces of Canada which are
designated by the Underwriters by written notice given to the Company
not less than two business days prior to the Closing Date;
(n) "SECURITIES COMMISSIONS" means, collectively, the securities
commission or other securities regulatory authority in each of the
Qualifying Jurisdictions;
- 2 -
<PAGE> 42
(o) "SPECIAL WARRANTS" means the 7,690,000 special warrants of the
Company (and if the Option is exercised by the Underwriters, up to an
additional 2,010,000 special warrants of the Company) to be created
and issued pursuant to the Special Warrant Indenture and to be sold by
the Company pursuant to the Underwriting Agreement;
(p) "SPECIAL WARRANT INDENTURE" has the meaning attributed thereto
in paragraph 4 hereof;
(q) "SUBSCRIPTION AGREEMENTS" means the subscription agreements or
purchase agreements to be entered into among the Substitute Purchasers
of Special Warrants, the Company and the Underwriters (and, in the
case of purchase agreements, the United States private placement agent
of the Underwriters) in respect of the purchase and sale of the
Special Warrants;
(r) "SUBSTITUTE PURCHASERS" means purchasers of any Special
Warrants who, at the Closing, purchase such Special Warrants in the
place and stead of the Underwriters or purchase such Special Warrants
from the Underwriters through their United States private placement
agent;
(s) "TRUSTEE" means Montreal Trust Company of Canada, as trustee
under the Special Warrant Indenture or the Warrant Indenture, as the
case may be;
(t) "UNDERLYING SECURITIES" means the Common Shares and Warrants
from time to time issuable upon the exercise or deemed exercise of the
Special Warrants;
(u) "WARRANTS" means the common share purchase warrants of the
Company having the attributes and characteristics specified in
paragraph 4 hereof;
(v) "WARRANT INDENTURE" has the meaning attributed thereto in
paragraph 4 hereof; and
(w) "WARRANT SHARES" means the Common Shares from time to time
issuable upon the exercise of the Warrants.
4. SPECIAL WARRANTS. The Purchaser understands and acknowledges
that the Special Warrants and the Warrants will be issued under and governed by
a special warrant indenture (the "Special Warrant Indenture") and a warrant
indenture (the "Warrant Indenture"), respectively, each to be dated as of the
Closing Date and made between the Company and the Trustee, as trustee
thereunder, and to contain provisions to the following effect:
(a) RIGHT TO COMMON SHARES AND WARRANTS. Each Special Warrant
will entitle the holder thereof, upon the exercise or deemed exercise
thereof and without payment of any additional consideration, to be
issued one Common Share and one-half of one Warrant, subject to
adjustment as provided in the Special Warrant Indenture.
(b) WARRANTS. Each Warrant will entitle the holder thereof,
during the period commencing on the date of its issue and ending 4:30
p.m. (Vancouver time) on October 31, 1997, to purchase one Common
Share from the Company at a price of $3.00, subject to adjustment as
provided in the Warrant Indenture.
(c) EXERCISE. Each holder of Special Warrants will be entitled to
exercise his Special Warrants during the period commencing on the
Closing Date and ending at the Expiry Time.
(d) RETRACTION. If the Qualification Date has not occurred on or
before the Qualification Deadline, each holder of Special Warrants
will be entitled, during the period commencing on the first business
day after the Qualification Deadline and ending at the Expiry Time, to
surrender his Special Warrants to the Trustee for cancellation and
receive repayment of the original issue price of $2.60 per Special
Warrant plus
- 3 -
<PAGE> 43
such holder's proportionate share of the interest earned by the
Trustee on the funds deposited in escrow referred to in paragraph 8
below from the Closing Date to and including the day immediately
preceding the date of payment.
(e) DEEMED EXERCISE. Any Special Warrant not exercised (unless
surrendered as provided in clause (d) above) prior to the Expiry Time
will be deemed to have been exercised immediately prior to the Expiry
Time (without any further action on the part of the holder thereof or
the Company) whether or not the Qualification Date has occurred and
subject to applicable securities laws.
(f) NOTICES. Upon the occurrence of the Qualification Date or if
the Qualification Date has not occurred on or before the Qualification
Deadline, the Company will, in either case, forthwith, and in any
event not later than the second business day thereafter, give written
notice thereof to the Trustee and the Trustee will forthwith give
written notice thereof to the holders of Special Warrants.
(g) OTHER PROVISIONS. The provisions of the Special Warrant
Indenture and the Warrant Indenture and the attributes and
characteristics of the Special Warrants and the Warrants respectively
provided for therein shall be substantially as described herein, with
such changes thereto as the Underwriters and the Company may agree to,
and otherwise the Special Warrant Indenture and the Warrant Indenture
shall be in such form and contain such terms and provisions (including
customary anti-dilution provisions) as are satisfactory to the Company
and the Underwriters, acting reasonably.
5. CLOSING OF PURCHASE. The Purchaser acknowledges and agrees
that the Closing shall be completed at the place and in the manner set forth in
the Underwriting Agreement at the Closing Time. The Purchaser hereby
irrevocably appoints and authorizes SMI on behalf of the Underwriters to act as
its agent to represent it at the Closing for the purpose of all closing
matters, including the execution and completion of all documents as required or
deemed necessary and the approval of all opinions, certificates and other
documents addressed to the Purchaser, and for the purpose of all deliveries of
documents and payment of funds and the Purchaser hereby authorizes the
Underwriters to extend such time periods (except the Qualification Deadline)
and modify or waive such conditions as may be contemplated herein or in the
Underwriting Agreement as the Underwriters, in their absolute discretion, may
deem appropriate. The Purchaser hereby irrevocable authorizes SMI to correct
manifest errors or omissions in the information provided by the Purchaser in
this Subscription Agreement, the Private Placement Questionnaire and
Undertaking (attached as Exhibit I hereto) and (if the Purchaser is an
individual) the Form 20A (1P) (attached as Exhibit II hereto). The Purchaser
will take up, purchase and pay for the Purchaser's Special Warrants at the
Closing upon acceptance of this offer by the Company and the satisfaction by
the Company, or waiver by the Underwriters, of the conditions referred to in
paragraph 6 below.
6. CONDITIONS OF CLOSING. The obligations of the Purchaser to
complete the purchase of the Purchaser's Special Warrants as contemplated
hereby shall be conditional upon the fulfilment at or before the Closing Time
of each of the conditions of the Closing set forth in the Underwriting
Agreement except those conditions that are waived by the Underwriters.
7. PAYMENT AND DELIVERY. Prior to 3:00 p.m. on April 24, 1996,
the Purchaser will deliver to SMI, at either of its addresses set forth on page
1 hereof (or to such other person or at such other address as SMI may direct by
notice to the Purchaser), a certified cheque or bank draft made payable on or
before the Closing Date to or to the order of "ScotiaMcLeod Inc." in an amount
equal to the total Purchase Price for the Purchaser's Special Warrants as set
forth on page 11 hereof (the "Subscription Funds") or will make such other
arrangements for the payment of the Subscription Funds as may be acceptable to
SMI. The Purchaser acknowledges and agrees that this offer, the Subscription
Funds and any other documents delivered in connection herewith will be held by
SMI until such time as the conditions referred to in paragraph 6 above are
satisfied by the Company or waived by the Underwriters. Upon such satisfaction
or waiver, at the Closing SMI will, on behalf of the Purchaser, deliver this
offer and any other documents required to be delivered in connection herewith
to the Company and will pay to the
- 4 -
<PAGE> 44
Company the Subscription Funds and, subject to paragraph 9 below, the Company
will thereupon issue and sell the Purchaser's Special Warrants to the Purchaser
and cause to be issued and delivered to or upon the direction of SMI, for
delivery to the Purchaser in accordance with its "Delivery Instructions" on
page 11 hereof, a definitive certificate representing the Purchaser's Special
Warrants registered in the name of the Purchaser (or in such other name or
names as are set forth under "Registration Instructions" on page 11 hereof).
The Purchaser acknowledges and agrees with and for the benefit of the
Underwriters that, in the event that the Purchaser fails to make payment of the
Subscription Funds to SMI in the manner and by the time stipulated above and
the Underwriters in their discretion elect to pay the Subscription Funds on
behalf of the Purchaser to the Company at the Closing, such payment will
constitute a loan made by SMI, on behalf of the Underwriters, to the Purchaser
and, in such event, the Purchaser agrees to repay such loan to SMI by
delivering to SMI (or to such other person as SMI may direct by notice to the
Purchaser), on the Closing Date, a certified cheque or bank draft made payable
on the Closing Date to or to the order of "ScotiaMcLeod Inc." in an amount
equal the Subscription Funds or by making such other arrangements for the
payment of the Subscription Funds as may be acceptable to SMI, against delivery
to the Purchaser in accordance with its "Delivery Instructions" on page 11
hereof of the certificate representing the Purchaser's Special Warrants
referred to above. In the event that this offer is not accepted by the Company
or the conditions referred to in paragraph 6 above are not satisfied by the
Company, or waived by the Underwriters, within the time therein provided, this
offer, the Subscription Funds (if paid to SMI) and any other documents
delivered in connection herewith will be returned to the Purchaser at the
address under "Name and Address of Purchaser" set forth on page 11 hereof.
8. DEPOSIT OF GROSS PROCEEDS IN ESCROW. The Purchaser
acknowledges that the aggregate subscription price for the Special Warrants to
be paid to the Company at the Closing will be deposited with the Trustee at the
Closing to be held in escrow and invested by the Trustee in accordance with the
terms of the Special Warrant Indenture and that the Special Warrant Indenture
will contain provisions to the effect that such deposited funds and interest
earned thereon (i) if the Qualification Date occurs on or before the
Qualification Deadline, will be released from escrow and paid by the Trustee to
the Company as soon as practicable after the Company delivers a written
certificate to the Trustee to the effect that the Qualification Date has so
occurred or (ii) if the Qualification Date has not occurred on or before the
Qualification Deadline, will initially be applied by the Trustee to repay to
any holder of Special Warrants, who exercises the right referred to in clause
(d) of paragraph 4 above to surrender his Special Warrants for cancellation,
the original issue price of such Special Warrants together with such holder's
proportionate share of such interest and, after all amounts due to holders of
Special Warrants who exercise such right have been paid or provided for, the
remaining balance of such deposited funds and interest thereon will be released
from escrow and paid by the Trustee to the Company.
9. ACCEPTANCE OR REJECTION. The Company will have the right to
accept this offer at any time at or prior to the Closing Time, but will only be
entitled to reject this offer if, at the Closing Time, each of the conditions
referred to in paragraph 6 above shall have been satisfied by the Company, or
waived by the Underwriters, and the Underwriters shall have failed to comply
with their obligation under the Underwriting Agreement to purchase all of the
Special Warrants which are subject to the Underwriting Agreement and which are
not purchased at the Closing by the Purchaser or by other Substitute
Purchasers, or if it would be unlawful for the Company to accept this offer.
Notwithstanding the foregoing, the Purchaser acknowledges and agrees that the
acceptance of this offer will be conditional upon the sale of the Purchaser's
Special Warrants to the Purchaser being exempt from any prospectus or offering
memorandum requirements of all applicable securities laws.
10. INFORMATION AND DOCUMENTS. The Purchaser will, as soon as
practicable and in any event by no later than noon on April 22, 1996, deliver
or arrange to have delivered to SMI, at either of its addresses set forth on
page 1 hereof (or to such other person or at such other address as SMI may
direct by notice to the Purchaser), completed and originally executed copies of
the Private Placement Questionnaire and Undertaking (attached as Exhibit I
hereto) and, if the Purchaser is an individual, the Form 20A(IP) (attached as
Exhibit II hereto) and will, promptly upon request by the Company or the
Underwriters, provide the Company or the Underwriters with such information and
execute and deliver to the Company or the Underwriters such additional
undertakings, questionnaires and other documents as the Company or the
Underwriters may request and as may be required in
- 5 -
<PAGE> 45
connection with the issue and sale of the Special Warrants and the filing of
the Prospectuses. The Purchaser acknowledges and agrees that such
undertakings, questionnaires and other documents, when executed and delivered
by the Purchaser, will form part of and will be incorporated into this
Subscription Agreement with the same effect as if each constituted a
representation and warranty or covenant of the Purchaser hereunder in favour of
the Company and the Underwriters. The Purchaser consents to the filing of such
documents as may be required to be filed with any stock exchange or securities
regulatory authority in connection with the transactions contemplated hereby.
The Purchaser acknowledges and agrees that the Underwriters or the Company or
both may be required to provide to applicable securities regulatory authorities
or to The Toronto Stock Exchange a list setting forth the identities of the
beneficial purchasers of the Special Warrants (on a confidential basis except
in the Province of British Columbia). Notwithstanding that the Purchaser may
be purchasing Special Warrants as an agent on behalf of an undisclosed
principal, the Purchaser agrees to provide, on request, particulars as to the
identity of such undisclosed principal as may be required by the Underwriters
or the Company or both in order to comply with the foregoing.
11. PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Purchaser
represents and warrants to the Company and the Underwriters, as representations
and warranties that are true as of the date of this offer and will be true as
of the date of this Subscription Agreement and as of the Closing Date, that:
(a) AUTHORIZATION AND EFFECTIVENESS. If the Purchaser is a
corporation, the Purchaser is a valid and subsisting corporation, has
the necessary corporate capacity and authority to execute and deliver
this offer and to observe and perform its covenants and obligations
hereunder and has taken all necessary corporate action in respect
thereof, or, if the Purchaser is an individual or a partnership,
syndicate or other form of unincorporated organization, the Purchaser
has the necessary legal capacity and authority to execute and deliver
this offer and to observe and perform its covenants and obligations
hereunder and has obtained all necessary approvals in respect thereof,
and, in either case, upon acceptance by the Company, this offer
constitutes a legal, valid and binding contract of the Purchaser
enforceable against the Purchaser in accordance with its terms.
(b) RESIDENCE. The Purchaser is a resident of the jurisdiction
referred to under "Name and Address of Purchaser" on page 11 hereof
and is not (and is not purchasing the Purchaser's Special Warrants for
the account of) a U.S. person (as such term is defined in Regulation S
under the United States Securities Act of 1933, as amended).
(c) PURCHASING AS PRINCIPAL. Except to the extent contemplated in
clauses (e) and (f)(iii) below, the Purchaser is purchasing the
Purchaser's Special Warrants (and the Underlying Securities in respect
thereof) as principal (as defined in applicable securities
legislation) for its own account, and not for the benefit of any other
person.
(d) PURCHASING FOR INVESTMENT ONLY. The Purchaser is purchasing
the Purchaser's Special Warrants (and the Underlying Securities in
respect thereof) for investment only and not with a view to resale or
distribution.
(e) PURCHASING AS AGENT OR TRUSTEE. In the case of the purchase
by the Purchaser of the Purchaser's Special Warrants as agent or
trustee for any principal whose identity is disclosed or undisclosed
or identified by account number only, each beneficial purchaser of the
Purchaser's Special Warrants for whom the Purchaser is acting, except
to the extent contemplated clause (f)(iii) below, is purchasing its
Purchaser's Special Warrants (and the Underlying Securities in respect
thereof) as principal for its own account, and not for the benefit of
any other person, for investment only and not with a view to resale or
distribution, and the Purchaser has due and proper authority to act as
agent or trustee for and on behalf of such beneficial purchaser in
connection with the transactions contemplated hereby.
- 6 -
<PAGE> 46
(f) PURCHASER HAS BENEFIT OF PRIVATE PLACEMENT EXEMPTIONS. The
Purchaser, and in the case of the purchase by the Purchaser of the
Purchaser's Special Warrants as agent or trustee for any principal
whose identity is disclosed or undisclosed or identified by account
number only, each beneficial purchaser of the Purchaser's Special
Warrants for whom the Purchaser is acting:
(i) is purchasing as principal a sufficient number of
Special Warrants so that the aggregate acquisition costs of
the Purchaser or beneficial purchaser will not be less than
the amount indicated below as required under the applicable
statute of the province of Canada in which the Purchaser or
beneficial purchaser is resident:
<TABLE>
<CAPTION>
Minimum Amount Applicable
Province of Residence of Purchase Exemption Section*
--------------------- -------------- ------------------
<S> <C> <C>
British Columbia $97,000 55(2)(1), (3) or (4)
Alberta $97,000 107(1)(a), (c) or (d)
Saskatchewan $150,000 81(1)(a), (c) or (d)
Manitoba $97,000 19(1)(c) and 19(3)
Ontario $150,000 72(1)(a), (c) or (d)
Quebec $150,000 51 or 43, 44 and 45
New Brunswick N/A 7(c)
Nova Scotia $150,000 77(1)(a), (c) or (d)
Prince Edward Island $97,000 13(1)(a), (c) or (d)
Newfoundland $97,000 73(1)(a), (c) or (d)
</TABLE>
* Refers to exemption provisions applicable to
clauses (i), (ii) or (iii)
(ii) has status as an exempt purchaser or the equivalent
under the securities legislation applicable to it, which
status has the effect of eliminating any requirement for a
prospectus in respect of the sale of Special Warrants to the
Purchaser or beneficial purchaser and the issue of Underlying
Securities upon the exercise or deemed exercise of such
Special Warrants; or
(iii) is purchasing as agent or trustee pursuant to a
statutory exemption or an exemption order permitting such
purchase, which may include the circumstances described in
section 55(1)(b) of the Securities Act (British Columbia) or
the equivalent provision in the securities legislation of
other provinces.
(g) CORPORATION OR UNINCORPORATED ORGANIZATION. If the Purchaser,
or any beneficial purchaser referred to in clause (e) above, is a
corporation or a partnership, syndicate or other form of
unincorporated organization, the Purchaser or such beneficial
purchaser was not incorporated or created solely or is not used
primarily to permit purchases without a prospectus under section
72(1)(d) of the Securities Act (Ontario) or similar prospectus
exemptions available under other securities legislation and, if the
Purchaser or such beneficial purchaser is a partnership, syndicate or
other form of unincorporated organization (other than a pension plan
or group of pension plans under common management resident in Ontario)
the aggregate acquisition cost to each member thereof of its
proportionate interest in the Purchaser's Special Warrants is not less
than $150,000 (or, if such beneficial purchaser is a resident of
British Columbia, Alberta, Manitoba, Prince Edward Island or
Newfoundland, $97,000).
(h) ABSENCE OF OFFERING MEMORANDUM. The offering and sale of the
Purchaser's Special Warrants to the Purchaser were not, so far as the
Purchaser is aware, made through an advertisement of the Special
Warrants in printed media of general and regular paid circulation,
radio or television or any other form of advertisement or as part of a
general solicitation and, except for this Subscription Agreement, the
only documents, if any, delivered or otherwise furnished to the
Purchaser in connection with such offering and
- 7 -
<PAGE> 47
sale were the Term Sheet (attached as Exhibit III hereto) and annual
or interim reports and other documents the contents of which are
prescribed by statute or regulation and generally available research
reports, memoranda and other materials concerning the Company prepared
by others, which documents the Purchaser acknowledges do not,
individually or collectively, constitute an offering memorandum or
similar document (including an offering memorandum as such term is
defined in section 32(1) of the Regulation to the Securities Act
(Ontario)) and have not been independently verified by the
Underwriters. The Purchaser acknowledges and agrees that the Company
and the Underwriters take no responsibility for the accuracy or
completeness of the information contained in any such research
reports, memoranda or other materials concerning the Company.
(i) NO UNDISCLOSED INFORMATION. The Purchaser's Special Warrants
are not being purchased by the Purchaser as a result of any material
information concerning the Company that has not been publicly
disclosed and the Purchaser's decision to tender this offer and
acquire the Purchaser's Special Warrants has not been made as a result
of any verbal or written representation as to fact or otherwise made
by or on behalf of the Company, the Underwriters or any other person
and is based entirely upon currently available public information
concerning the Company.
(j) INVESTMENT SUITABILITY. The Purchaser, and any beneficial
purchaser referred to in clause (e) above, has such knowledge and
experience in financial and business affairs as to be capable of
evaluating the merits and risks of the investment hereunder in the
Purchaser's Special Warrants (and the Underlying Securities in respect
thereof) and is able to bear the economic risk of loss of such
investment.
(k) MANITOBA RESIDENTS. If the Purchaser is a resident of
Manitoba, and if the Purchaser is not an individual and is a
corportion, partnership, unincorporated association, organization or
syndicate, a trustee, an executor, an administrator or other legal
personal representative, the Purchaser is purchasing the Purchaser's
Special Warrants for investment only and not with a view to resale or
distribution and will not resell or otherwise transfer or dispose of
the Purchaser's Special Warrants except in accordance with the
provisions of applicable securities legislation and regulations.
(1) OWNERSHIP OF COMMON SHARES. The Purchaser, together with any
of the Purchaser's affiliates or associates or any other person with
whom the Purchaser is acting jointly or in concert, after giving
effect to the exercise of any Special Warrants (and the Warrants
issuable thereunder) being purchased by the Purchaser and such
persons, will not beneficially own more than 9,236,332 Common Shares.
12. NO INVESTIGATION BY UNDERWRITERS. The Purchaser acknowledges
and agrees that the Underwriters assume no responsibility or liability of any
nature whatsoever for the accuracy or adequacy of any publicly available
information concerning the Company or as to whether all information concerning
the Company required to be disclosed by it has been generally disclosed. The
Purchaser further acknowledges and agrees that the Underwriters have not
engaged in or conducted any independent investigation with respect to the
Company or any such information.
13. RESALE RESTRICTIONS. The Purchaser understands and
acknowledges that the Purchaser's Special Warrants (and, if the Purchaser's
Special Warrants are exercised or deemed to be exercised before the
Qualification Date, the Underlying Securities issued upon such exercise or
deemed exercise and the Warrant Shares issuable upon the exercise of the
Warrants) will be subject to certain resale restrictions under applicable
securities laws and the Private Placement Questionnaire and Undertaking
(attached as Exhibit I hereto), and the Purchaser agrees to comply with such
restrictions. The Purchaser also acknowledges and understands that it should
consult its own legal advisors with respect to applicable resale restrictions
and that it is solely responsible (and that the Company and the Underwriters
are not in any manner responsible) for complying with such restrictions.
14. NO REVOCATION. The Purchaser agrees that this offer is made
for valuable consideration and may not be withdrawn, cancelled, terminated or
revoked by the Purchaser.
- 8 -
<PAGE> 48
15. INDEMNITY. The Purchaser agrees to indemnify and hold
harmless the Company and the Underwriters and their respective directors,
officers, employees, agents, advisors and shareholders from and against any and
all loss, liability, claim, damage and expense whatsoever (including, but not
limited to, any and all fees, costs and expenses whatsoever reasonably incurred
in investigating, preparing or defending against any claim, law suit,
administrative proceeding or investigation whether commenced or threatened)
arising out of or based upon any representation or warranty of the Purchaser
contained herein or in any document furnished by the Purchaser to the Company
or the Underwriters in connection herewith being untrue in any material respect
or any breach or failure by the Purchaser to comply with any covenant or
agreement made by the Purchaser herein or in any document furnished by the
Purchaser to the Company or the Underwriters in connection herewith.
16. MODIFICATION. Subject to paragraph 5 above, neither this
Subscription Agreement nor any provision hereof shall be modified, changed,
discharged or terminated except by an instrument in writing signed by the party
against whom any waiver, change, discharge or termination is sought.
17. BENEFIT OF CERTAIN REPRESENTATIONS. By its acceptance of this
offer, the Company covenants, agrees and confirms that the Purchaser will have
the benefit of all of the representations, warranties, covenants and conditions
provided to or for the benefit of the Purchasers by the Company under the
Underwriting Agreement.
18. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION. By its acceptance
of this offer, the Company agrees to provide a right of rescission as
hereinafter set forth, which right shall be exercisable by the Purchaser and
any subsequent holders from time to time of the Purchaser's Special Warrants:
In the event that any holder of Special Warrants who acquires
Underlying Securities upon the exercise or deemed exercise of
his Special Warrants is or becomes entitled under applicable
securities legislation to the remedy of rescission by reason
of the Final Prospectus or any amendment thereto containing a
misrepresentation, such holder shall be entitled to rescission
not only of such holder's exercise of such Special Warrants
but also of the purchase of such Special Warrants hereunder,
and shall be entitled in connection with such rescission to a
full refund of all consideration paid to the Company on the
acquisition of such Special Warrants. In the event such
holder is a permitted assignee of the interest of the original
Purchaser of such Special Warrants, such permitted assignee
shall be entitled to exercise the rights of rescission and
refund granted hereunder as if such permitted assignee were
such original Purchaser. The foregoing is in addition to any
other right or remedy available to a holder of the Special
Warrants under section 114 of the Securities Act (British
Columbia), section 130 of the Securities Act (Ontario) or a
corresponding provision of other securities legislation or
otherwise at law.
19. WAIVER OF RIGHTS OF WITHDRAWAL. The Purchaser expressly
waives and releases the Company and the Underwriters from all rights of
withdrawal to which it might otherwise be entitled pursuant to section 66(3) of
the Securities Act (British Columbia), section 71(2) of the Securities Act
(Ontario) or a corresponding provision of other securities legislation.
20. ASSIGNMENT. This Subscription Agreement and any interest
herein or any of the rights arising hereunder may be assigned only together
with a transfer of the Special Warrants purchased hereunder and in accordance
with applicable securities laws and the rules of any stock exchanges on which
the Common Shares are listed, and provided that the assignment is made and the
assignee resides either outside Canada or in one of the Qualifying
Jurisdictions and the assignee agrees to be bound by the terms and conditions
of this Subscription Agreement by completing and executing the Transfer Form
attached to the certificate representing the Special Warrants and delivering it
to the Company or the Trustee.
- 9 -
<PAGE> 49
21. MISCELLANEOUS. The agreement resulting from the acceptance of
this offer by the Company contains the whole agreement between the Company, the
Underwriters and the Purchaser in respect of the subject matters hereof and
there are no warranties, representations, terms, conditions or collateral
agreements, express, implied or statutory, other than as expressly provided for
herein and in any amendments hereto. All representations, warranties,
agreements and covenants made or deemed to be made by the Purchaser herein will
survive the execution and delivery, and acceptance, of this offer and the
Closing. Time shall be of the essence of this Subscription Agreement. This
Subscription Agreement and the rights and obligations of the parties hereunder
will be governed by and construed according to the laws of the Province of
British Columbia. This Subscription Agreement may be executed in any number of
counterparts, each of which when delivered, either in original or facsimile
form, shall be deemed to be an original and all of which together shall
constitute one and the same document.
22. RELIANCE ON FACSIMILE. The Company and the Underwriters shall
be entitled to rely on delivery of a facsimile copy of this Subscription
Agreement, and acceptance by the Company of a facsimile copy of this
Subscription Agreement shall create a legal, valid and binding agreement
between the Purchaser and the Company in accordance with the terms hereof.
23. LANGUAGE. The Purchaser acknowledges its consent and request
and the parties hereto agree that all documents evidencing or relating in any
way to its purchase of Special Warrants be drawn up in the English language
only. Nous reconnaissons par les presentes avoir consenti et demande que tous
les documents faisant foi ou se rapportant de quelque maniere a notre achat
soient rediges en anglais seulement.
IN WITNESS WHEREOF the undersigned executes and agrees to be
bound by this Subscription Agreement by executing the Signature Page and
Registration and Delivery Instructions attached as page 11 hereto on the date
therein indicated.
NOTE: PURCHASER MUST EXECUTE AND COMPLETE ATTACHED SIGNATURE PAGE AND
REGISTRATION AND DELIVERY INSTRUCTIONS
A C C E P T A N C E
The foregoing is acknowledged, accepted and agreed to this
____ day of April, 1996.
GRANGES INC.
Per:
--------------------------------------
Title:
SCOTIAMCLEOD INC. on behalf of the
Underwriters
Per:
--------------------------------------
- 10 -
<PAGE> 50
SIGNATURE PAGE AND
REGISTRATION AND DELIVERY INSTRUCTIONS
(PURCHASER TO COMPLETE)
ISSUER: Granges Inc. ISSUE: Special Warrants exchangeable for Common
Shares and Warrants.
NUMBER OF SPECIAL WARRANTS:
-------------------
TOTAL PURCHASE PRICE: $
------------------
SIGNATURE OF PURCHASER: Dated April ____, 1996
-------------------------
Name of Purchaser
Per:
---------------------
Title:
NAME AND ADDRESS OF PURCHASER:
Name: Address:
-------------------------- ---------------------------
(Street Address)
-------------------------- ---------------------------
(City and Province or Country)
---------------------------
(Postal Code)
REGISTRATION INSTRUCTIONS: If other than in the name of the Purchaser:
Name: Address:
-------------------------- ---------------------------
(Street Address)
-------------------------- ---------------------------
(City and Province or Country)
---------------------------
(Postal Code)
DELIVERY INSTRUCTIONS: If other than to the Purchaser at its address above:
Name: Address:
-------------------------- ---------------------------
(Street Address)
Contact Name:
------------------ ---------------------------
(City and Province or Country)
Telephone No.:
------------------ ---------------------------
(Postal Code)
NAME OF PORTFOLIO ADVISOR (MONEY MANAGER):
-------------------------------
GOVERNING "ELIGIBILITY FOR INVESTMENT" STATUTE:
--------------------------
THE TOTAL PURCHASE PRICE (IN THE AMOUNT SPECIFIED ABOVE) MUST BE PAID TO
SCOTIAMCLEOD INC. BY CERTIFIED CHEQUE OR BANK DRAFT MADE PAYABLE ON OR BEFORE
THE CLOSING DATE TO OR TO THE ORDER OF "SCOTIAMCLEOD INC.". THE CERTIFIED
CHEQUE OR BANK DRAFT MUST BE DELIVERED TO SCOTIAMCLEOD INC. PRIOR TO 3:00 P.M.
ON APRIL 24, 1996.
- 11 -
<PAGE> 51
EXHIBIT I
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
QUESTIONNAIRE
1. DESCRIPTION OF TRANSACTION
(a) Name of Issuer of the Securities
GRANGES INC.
(b) Number and Class of Securities to be Purchased
_______________ Special Warrants
(c) Purchase Price
$2.60 per Special Warrant
2. DETAILS OF PURCHASER
(a) Name of Purchaser
---------------------------------------------------------------
(b) Address
---------------------------------------------------------------
---------------------------------------------------------------
(c) Names and addresses of persons having a greater than 10%
beneficial interest in the Purchaser
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
<PAGE> 52
3. RELATIONSHIP TO ISSUER
(a) Is the Purchaser (or any person named in response to 2(c)
above) an insider of the Issuer for the purposes of the
Ontario Securities Act (before giving effect to this private
placement)? If so, state the capacity in which the Purchaser
(or person named in response to 2(c)) qualifies as an insider.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
(b) If the answer to (a) is "no", are the Purchaser and the Issuer
controlled by the same person or company? If so, give
details.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the Purchaser, as principal, in
the securities of the Issuer (other than debt securities which
are not convertible into equity securities), directly or
indirectly, within the 60 days preceding the date hereof.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
- 2 -
<PAGE> 53
UNDERTAKING
TO: The Toronto Stock Exchange
The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for the period that
ends on the earlier of:
(a) six months from the date of the closing of the transaction
herein or for such period as is prescribed by applicable
securities legislation, whichever is longer, and
(b) the date that a receipt for a final prospectus relating to the
said securities or securities derived therefrom has been
issued by the Ontario Securities Commission,
without the prior consent of The Toronto Stock Exchange and any other
regulatory body having jurisdiction.
Dated at ____________________, this _____ day of April, 1996.
-------------------------------------------
(Name of Purchaser - please print)
-------------------------------------------
(Authorized Signature)
-------------------------------------------
(Official Capacity - please print)
-------------------------------------------
(please print here name of individual whose
signature appears above, if different from
name of Purchaser printed above)
- 3 -
<PAGE> 54
EXHIBIT II
This is the form required under section 135 of the Rules and, if applicable, by
an order issued under section 59 of the Securities Act.
FORM 20A (IP)
SECURITIES ACT
ACKNOWLEDGEMENT OF INDIVIDUAL PURCHASER
1. I have agreed to purchase from Granges Inc. (the "Issuer")
_____________ Special Warrants (the "Securities") of the Issuer.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I (CIRCLE ONE) have/have not received an offering memorandum
describing the Issuer and the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities, AND
(b) there is no government or other insurance covering the
Securities, AND
(c) I may lose all of my investment, AND
(d) there are restrictions on my ability to resell the Securities
and it is my responsibility to find out what those
restrictions are and to comply with them before selling the
Securities, AND
(e) I will not receive a prospectus that the British Columbia
Securities Act (the "Act") would otherwise require be given to
me because the Issuer has advised me that it is relying on a
prospectus exemption, AND
(f) because I am not purchasing the Securities under a prospectus,
I will not have the civil remedies that would otherwise be
available to me, AND
(g) the Issuer has advised me that it is using an exemption from
the requirement to sell through a dealer registered under the
Act, except purchases referred to in paragraph 5(g), and as a
result I do not have the benefit of any protection that might
have been available to me by having a dealer act on my behalf.
5. I also acknowledge that: (CIRCLE ONE)
(a) I am purchasing Securities that have an aggregate acquisition
cost of $97,000 or more, OR
(b) my net worth, or my net worth jointly with my spouse at the
date of the agreement of purchase and sale of the security, is
not less than $400,000, OR
(c) my annual net income before tax is not less than $75,000, or
my annual net income before tax jointly with my spouse is not
less than $125,000, in each of the two most recent calendar
years, and I reasonably expect to have annual net income
before tax of not less than $75,000 or annual net income
before tax jointly with my spouse of not less than $125,000 in
the current calendar year, OR
<PAGE> 55
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior
officer or director of the Issuer, or of an affiliate of the
Issuer, OR
(f) I am a close personal friend of a senior officer or director
of the Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000 -
registrant required) of the Rules, and I have spoken to a
person (NAME OF REGISTERED PERSON: (THE "REGISTERED PERSON))
who has advised me that the Registered Person is registered to
trade or advise in the Securities and that the purchase of the
Securities is a suitable investment for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d),1
acknowledge that, on the basis of information about the Securities
furnished by the Issuer, I am able to evaluate the risks and merits of
the Securities because: (CIRCLE ONE)
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person (NAME OF ADVISER:
_________________ (THE "ADVISER")) who has advised me that the
Adviser is:
(i) registered to advise, or exempted from the
requirement to be registered to advise, in respect of
the Securities, and
(ii) not an insider of, or in a special relationship
with, the Issuer.
The statements made in this report are true.
DATED April _______, 1996.
-------------------------------------------
Signature of Purchaser
-------------------------------------------
Name of Purchaser
-------------------------------------------
-------------------------------------------
Address of Purchaser
- 2 -
<PAGE> 56
SCHEDULE E
PURCHASE AGREEMENT
A COMPLETED AND ORIGINALLY EXECUTED COPY OF THIS PURCHASE AGREEMENT, THE
ATTACHED PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING AND (IF THE PURCHASER
IS AN INDIVIDUAL) THE ATTACHED FORM 20A (IP) MUST BE DELIVERED BY NO LATER THAN
12:00 NOON ON APRIL 22, 1996 TO SCOTIAMCLEOD (USA) INC., AS PLACEMENT AGENT ON
BEHALF OF THE UNDERWRITERS, AT THE FOLLOWING ADDRESS:
ScotiaMcLeod (USA) Inc.
1 Liberty Plaza
25th Floor
165 Broadway
New York, NY
10006
Attention: Stacey Siegel
Tel: (212) 225-6604
Fax: (212) 225-6615
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TO: SCOTIAMCLEOD (USA) INC.
AS PLACEMENT AGENT ON BEHALF OF THE UNDERWRITERS
AND TO: SCOTIAMCLEOD INC.
FIRST MARATHON SECURITIES LIMITED
YORKTON SECURITIES INC.
GOEPEL SHIELDS & PARTNERS INC.
AND TO: GRANGES INC.
1. PURCHASE. The undersigned (the "Purchaser") hereby tenders to
ScotiaMcLeod (USA) Inc., as private placement agent (the "Placement Agent") for
ScotiaMcLeod Inc. ("SMI"), First Marathon Securities Limited, Yorkton
Securities Inc. and Goepel Shields & Partners Inc. ("collectively, the
"Underwriters"), this offer to purchase which, upon acceptance by the Placement
Agent on behalf of the Underwriters, will constitute an agreement (the
"Purchase Agreement") of the Purchaser to take up, purchase and pay for, and,
on the part of the Placement Agent on behalf of the Underwriters, to transfer
and sell to the Purchaser, the number of Special Warrants of Granges Inc. (the
"Company") set out on page 12 hereof (the "Purchaser's Special Warrants") at
the price (the "Purchase Price") of Cdn. $2.60 per Special Warrant, all on the
terms and subject to the conditions set forth in this Purchase Agreement.
2. UNDERWRITTEN PRIVATE PLACEMENT. The Purchaser acknowledges
that the Purchaser's Special Warrants will be issued in connection with the
creation, issue and sale of an aggregate of 7,690,000 Special Warrants of the
Company for an aggregate subscription price of Cdn. $19,994,000 to be sold by
the Company by private placement pursuant to an agreement (the "Underwriting
Agreement") dated as of April 15, 1996 among the Company and the Underwriters
and that the definitive terms and conditions of the Special Warrants will be
set forth in the Special Warrant Indenture referred to in paragraph 4 below.
The Underwriters have an option (the "Option") exerciseable prior to the
Closing Date (defined below) to increase the number of Special Warrants to be
issued by the Company by up to an additional 2,010,000 Special Warrants for a
total subscription price of Cdn. $25,220,000.
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3. CERTAIN DEFINITIONS. As used in this Purchase Agreement,
unless the context otherwise requires:
(a) "BUSINESS DAY" means a day which is not a Saturday, a Sunday
or a statutory holiday in the Provinces of British Columbia or
Ontario;
(b) "CLOSING" means the completion of the issue and sale by the
Company and the purchase by the Purchasers (including the Purchaser)
of the Special Warrants pursuant to the Underwriting Agreement and the
Subscription Agreements (including this Purchase Agreement);
(c) "CLOSING DATE" means April 25, 1996 or such other date as the
Company and the Underwriters may agree pursuant to the Underwriting
Agreement;
(d) "CLOSING TIME" means 7:30 a.m. (Vancouver time) on the Closing
Date or such other time on the Closing Date as the Company and the
Underwriters may agree pursuant to the Underwriting Agreement;
(e) "COMMON SHARES" means common shares without par value in the
capital of the Company;
(f) "EXPIRY TIME" means 4:30 p.m. (Vancouver time) on the fifth
business day after the earlier of (i) the Qualification Date and (ii)
the Qualification Deadline;
(g) "FINAL PROSPECTUS" means a final prospectus or final short
form prospectus of the Company relating to the distribution of the
Underlying Securities and, unless the context otherwise requires,
includes any amendment or supplement thereto, any information or
documents incorporated by reference therein and any French language
version thereof;
(h) "PRELIMINARY PROSPECTUS" means a preliminary prospectus or
preliminary short form prospectus of the Company relating to the
distribution of the Underlying Securities and, unless the context
otherwise requires, includes any amendment or supplement thereto, any
information or documents incorporated by reference therein and any
French language version thereof;
(i) "PROSPECTUSES" means the Preliminary Prospectus and the Final
Prospectus;
(j) "PURCHASERS" means the Underwriters, as the initially
committed Purchasers, and the Substitute Purchasers, if any;
(k) "QUALIFICATION DATE" means the day on which a receipt is
issued for the Final Prospectus by the last of the Securities
Commissions to issue a receipt for the Final Prospectus;
(l) "QUALIFICATION DEADLINE" means the day that is 90 days after
the Closing Date or such later date as the Underwriters may determine
in a written notice given to the Company and the Trustee provided that
the Underwriters have obtained the written consent thereto of each of
the Substitute Purchasers who purchased Special Warrants at the
Closing and have not resold their Special Warrants;
(m) "QUALIFYING JURISDICTIONS" means the Provinces of British
Columbia and Ontario and such other provinces of Canada which are
designated by the Underwriters by written notice given to the Company
not less than two business days prior to the Closing Date;
(n) "REGULATION D" means Regulation D adopted by the SEC pursuant
to the U.S. Securities Act;
(o) "REGULATION S" means Regulation S adopted by the SEC pursuant
to the U.S. Securities Act;
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<PAGE> 58
(p) "SEC" means the United States Securities and Exchange
Commission;
(q) "SECURITIES" means the Special Warrants, the Underlying
Securities and the Warrant Shares;
(r) "SECURITIES COMMISSIONS" means, collectively, the securities
commission or other securities regulatory authority in each of the
Qualifying Jurisdictions;
(s) "SPECIAL WARRANTS" means the 7,690,000 special warrants of the
Company (and if the Option is exercised by the Underwriters, up to an
additional 2,010,000 special warrants of the Company) to be created
and issued pursuant to the Special Warrant Indenture and to be sold by
the Company pursuant to the Underwriting Agreement;
(t) "SPECIAL WARRANT INDENTURE" has the meaning attributed thereto
in paragraph 4 hereof;
(u) "SUBSCRIPTION AGREEMENTS" means the subscription agreements or
purchase agreements to be entered into among the Substitute Purchasers
of Special Warrants, the Company and the Underwriters (and, in the
case of purchase agreements, the Placement Agent) in respect of the
purchase and sale of the Special Warrants;
(v) "SUBSTITUTE PURCHASERS" means purchasers of any Special
Warrants who, at the Closing, purchase such Special Warrants in the
place and stead of the Underwriters or purchase such Special Warrants
from the Underwriters through the Placement Agent;
(w) "TRUSTEE" means Montreal Trust Company of Canada, as trustee
under the Special Warrant Indenture or the Warrant Indenture, as the
case may be;
(x) "UNDERLYING SECURITIES" means the Common Shares and Warrants
from time to time issuable upon the exercise or deemed exercise of the
Special Warrants;
(y) "U.S. PERSON" has the meaning given to such term in Regulation
S;
(z) "U.S. SECURITIES ACT" means the United States Securities Act
of 1933, as amended;
(aa) "WARRANTS" means the common share purchase warrants of the
Company having the attributes and characteristics specified in
paragraph 4 hereof;
(ab) "WARRANT INDENTURE" has the meaning attributed thereto in
paragraph 4 hereof; and
(ac) "WARRANT SHARES" means the Common Shares from time to time
issuable upon the exercise of the Warrants.
4. SPECIAL WARRANTS. The Purchaser understands and acknowledges
that the Special Warrants and the Warrants will be issued under and governed by
a special warrant indenture (the "Special Warrant Indenture") and a warrant
indenture (the "Warrant Indenture"), respectively, each to be dated as of the
Closing Date and made between the Company and the Trustee, as trustee
thereunder, and to contain provisions to the following effect:
(a) RIGHT TO COMMON SHARES AND WARRANTS. Each Special Warrant
will entitle the holder thereof, upon the exercise or deemed exercise
thereof and without payment of any additional consideration, to be
issued one Common Share and one-half of one Warrant, subject to
adjustment as provided in the Special Warrant Indenture.
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<PAGE> 59
(b) WARRANTS. Each Warrant will entitle the holder thereof,
during the period commencing on the date of its issue and ending 4:30
p.m. (Vancouver time) on October 31, 1997, to purchase one Common
Share from the Company at a price of Cdn. $3.00, subject to
adjustment as provided in the Warrant Indenture.
(c) EXERCISE. Each holder of Special Warrants will be entitled to
exercise his Special Warrants during the period commencing on the
Closing Date and ending at the Expiry Time.
(d) RETRACTION. If the Qualification Date has not occurred on or
before the Qualification Deadline, each holder of Special Warrants
will be entitled, during the period commencing on the first business
day after the Qualification Deadline and ending at the Expiry Time, to
surrender his Special Warrants to the Trustee for cancellation and
receive repayment of the original issue price of Cdn. $2.60 per
Special Warrant plus such holder's proportionate share of the interest
earned by the Trustee on the funds deposited in escrow referred to in
paragraph 8 below from the Closing Date to and including the day
immediately preceding the date of payment.
(e) DEEMED EXERCISE. Any Special Warrant not exercised (unless
surrendered as provided in clause (d) above) prior to the Expiry Time
will be deemed to have been exercised immediately prior to the Expiry
Time (without any further action on the part of the holder thereof or
the Company) whether or not the Qualification Date has occurred and
subject to applicable securities laws.
(f) NOTICES. Upon the occurrence of the Qualification Date or if
the Qualification Date has not occurred on or before the Qualification
Deadline, the Company will, in either case, forthwith, and in any
event not later than the second business day thereafter, give written
notice thereof to the Trustee and the Trustee will forthwith give
written notice thereof to the holders of Special Warrants.
(g) OTHER PROVISIONS. The provisions of the Special Warrant
Indenture and the Warrant Indenture and the attributes and
characteristics of the Special Warrants and the Warrants respectively
provided for therein shall be substantially as described herein, with
such changes thereto as the Underwriters and the Company may agree to,
and otherwise the Special Warrant Indenture and the Warrant Indenture
shall be in such form and contain such terms and provisions (including
customary anti-dilution provisions) as are satisfactory to the Company
and the Underwriters, acting reasonably.
5. CLOSING OF PURCHASE. The Purchaser acknowledges and agrees
that the Closing shall be completed at the place and in the manner set forth in
the Underwriting Agreement at the Closing Time. The Purchaser hereby
irrevocably appoints and authorizes SMI on behalf of the Underwriters to act as
its agent to represent it at the Closing for the purpose of all closing
matters, including the execution and completion of all documents as required or
deemed necessary and the approval of all opinions, certificates and other
documents addressed to the Purchaser, and for the purpose of all deliveries of
documents and payment of funds and the Purchaser hereby authorizes the
Underwriters to extend such time periods (except the Qualification Deadline)
and modify or waive such conditions as may be contemplated herein or in the
Underwriting Agreement as the Underwriters, in their absolute discretion, may
deem appropriate. The Purchaser hereby irrevocably authorizes SMI to correct
manifest errors or omissions in the information provided by the Purchaser in
this Purchase Agreement, the Private Placement Questionnaire and Undertaking
(attached as Exhibit I hereto) and (if the Purchaser is an individual) the Form
20A (IP) (attached as Exhibit II hereto). The Purchaser will take up, purchase
and pay for the Purchaser's Special Warrants at the Closing upon acceptance of
this offer by the Placement Agent on behalf of the Underwriters and the
satisfaction by the Company, or waiver by the Underwriters, of the conditions
referred to in paragraph 6 below.
6. CONDITIONS OF CLOSING. The obligations of the Purchaser to
complete the purchase of the Purchaser's Special Warrants as contemplated
hereby shall be conditional upon the fulfilment at or before the Closing Time
of each of the conditions of the Closing set forth in the Underwriting
Agreement except those conditions that are waived by the Underwriters.
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7. PAYMENT AND DELIVERY. Prior to 3:00 p.m. on April 24, 1996,
the Purchaser will deliver to the Placement Agent, at its address set forth on
page 1 hereof (or to such other person or at such other address as the
Placement Agent may direct by notice to the Purchaser), a certified cheque or
bank draft made payable on or before the Closing Date to or to the order of
"ScotiaMcLeod (USA) Inc." in an amount equal to the total Purchase Price for
the Purchaser's Special Warrants as set forth on page 12 hereof (the
"Subscription Funds") or will make such other arrangements for the payment of
the Subscription Funds as may be acceptable to the Placement Agent. The
Purchaser acknowledges and agrees that this offer, the Subscription Funds and
any other documents delivered in connection herewith will be delivered to and
held by SMI until such time as the conditions referred to in paragraph 6 above
are satisfied by the Company or waived by the Underwriters. Upon such
satisfaction or waiver, at the Closing SMI will, on behalf of the Purchaser,
deliver this offer and any other documents required to be delivered in
connection herewith to the Placement Agent and will pay to the Placement Agent
the Subscription Funds and, subject to paragraph 9 below, the Placement Agent,
on behalf of the Underwriters, will thereupon transfer and sell the Purchaser's
Special Warrants to the Purchaser and cause to be issued and delivered to the
Purchaser, in accordance with its "Delivery Instructions" on page 12 hereof, a
definitive certificate representing the Purchaser's Special Warrants registered
in the name of the Purchaser (or in such other name or names as are set forth
under "Registration Instructions" on page 12 hereof). In the event that this
offer is not accepted by the Placement Agent or the conditions referred to in
paragraph 6 above are not satisfied by the Company, or waived by the
Underwriters, within the time therein provided, this offer, the Subscription
Funds and any other documents delivered in connection herewith will be returned
to the Purchaser at the address under "Name and Address of Purchaser" set forth
on page 12 hereof.
8. DEPOSIT OF GROSS PROCEEDS IN ESCROW. The Purchaser
acknowledges that the aggregate subscription price for the Special Warrants to
be paid to the Company at the Closing will be deposited with the Trustee at the
Closing to be held in escrow and invested by the Trustee in accordance with the
terms of the Special Warrant Indenture and that the Special Warrant Indenture
will contain provisions to the effect that such deposited funds and interest
earned thereon (i) if the Qualification Date occurs on or before the
Qualification Deadline, will be released from escrow and paid by the Trustee to
the Company as soon as practicable after the Company delivers a written
certificate to the Trustee to the effect that the Qualification Date has so
occurred or (ii) if the Qualification Date has not occurred on or before the
Qualification Deadline, will initially be applied by the Trustee to repay to
any holder of Special Warrants, who exercises the right referred to in clause
(d) of paragraph 4 above to surrender his Special Warrants for cancellation,
the original issue price of such Special Warrants together with such holder's
proportionate share of such interest and, after all amounts due to holders of
Special Warrants who exercise such right have been paid or provided for, the
remaining balance of such deposited funds and interest thereon will be released
from escrow and paid by the Trustee to the Company.
9. ACCEPTANCE OR REJECTION. The Placement Agent, on behalf of
the Underwriters, will have the right to accept this offer at any time at or
prior to the Closing Time, but will only be entitled to reject this offer if,
at the Closing Time, the Purchaser's Special Warrants shall not have been
issued and sold by the Company and purchased by the Underwriters or if it would
be unlawful for the Placement Agent to accept this offer. Notwithstanding the
foregoing, the Purchaser acknowledges and agrees that the acceptance of this
offer will be conditional upon the sale of the Purchaser's Special Warrants to
the Purchaser being exempt from any registration, prospectus or offering
memorandum requirements of all applicable securities laws.
10. INFORMATION AND DOCUMENTS. The Purchaser will, as soon as
practicable and in any event by no later than noon on April 22, 1996, deliver
or arrange to have delivered to the Placement Agent, at its address set forth
on page 1 hereof (or to such other person or at such other address as the
Placement Agent may direct by notice to the Purchaser), completed and
originally executed copies of the Private Placement Questionnaire and
undertaking (attached as Exhibit I hereto) and, if the Purchaser is an
individual, the Form 20A(IP) (attached as Exhibit II hereto) and will, promptly
upon request by the Company, the Placement Agent or the Underwriters, provide
the Company, the Placement Agent or the Underwriters with such information and
execute and deliver to the Company, the Placement Agent or the Underwriters
such additional undertakings, questionnaires and other documents as the
Company, the Placement Agent or the Underwriters may request and as may be
required in
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connection with the issue and sale of the Special Warrants and the filing of
the Prospectuses. The Purchaser acknowledges and agrees that such
undertakings, questionnaires and other documents, when executed and delivered
by the Purchaser, will form part of and will be incorporated into this
Purchase Agreement with the same effect as if each constituted a
representation and warranty or covenant of the Purchaser hereunder in favour
of the Company, the Placement Agent and the Underwriters. The Purchaser
consents to the filing of such documents as may be required to be filed with
any stock exchange or securities regulatory authority in connection with the
transactions contemplated hereby. The Purchaser acknowledges and agrees that
the Underwriters or the Company or both may be required to provide to
applicable securities regulatory authorities or to The Toronto Stock Exchange
a list setting forth the identities of the beneficial purchasers of the
Special Warrants (on a confidential basis except in the Province of British
Columbia). Notwithstanding that the Purchaser may be purchasing Special
Warrants as an agent on behalf of an undisclosed principal, the Purchaser
agrees to provide, on request, particulars as to the identity of such
undisclosed principal as may be required by the Underwriters or the Company or
both in order to comply with the foregoing.
11. PURCHASER'S REPRESENTATIONS AND WARRANTIES. The Purchaser
represents and warrants to the Company, the Placement Agent and the
Underwriters, as representations and warranties that are true as of the date of
this offer and will be true as of the date of this Purchase Agreement and as of
the Closing Date, and the Purchaser agrees with each of such persons, that:
(a) AUTHORIZATION AND EFFECTIVENESS. If the Purchaser is a
corporation, the Purchaser is a valid and subsisting corporation, has
the necessary corporate capacity and authority to execute and deliver
this offer and to observe and perform its covenants and obligations
hereunder and has taken all necessary corporate action in respect
thereof, or, if the Purchaser is an individual or a partnership,
syndicate or other form of unincorporated organization, the Purchaser
has the necessary legal capacity and authority to execute and deliver
this offer and to observe and perform its covenants and obligations
hereunder and has obtained all necessary approvals in respect thereof,
and, in either case, upon acceptance by the Placement Agent, this
offer constitutes a legal, valid and binding contract of the Purchaser
enforceable against the Purchaser in accordance with its terms.
(b) RESIDENCE. The Purchaser is a U.S. Person and is a resident
of the jurisdiction referred to under "Name and Address of Purchaser"
on page 12 hereof and is not (and is not purchasing the Purchaser's
Special Warrants for the account of) a Canadian resident.
(c) PURCHASING AS PRINCIPAL. Except to the extent contemplated in
clause (e) below, the Purchaser is purchasing the Purchaser's Special
Warrants (and the Underlying Securities in respect thereof) as
principal (as defined in applicable securities legislation) for its
own account, and not for the benefit of any other person.
(d) PURCHASING FOR INVESTMENT ONLY. The Purchaser is purchasing
the Purchaser's Special Warrants (and the Underlying Securities in
respect thereof) for investment only and not with a view to resale or
distribution.
(e) PURCHASING AS AGENT OR TRUSTEE. In the case of the purchase
by the Purchaser of the Purchaser's Special Warrants as agent or
trustee for any principal whose identity is disclosed or undisclosed
or identified by account number only, each beneficial purchaser of the
Purchaser's Special Warrants for whom the Purchaser is acting, is
purchasing its Purchaser's Special Warrants (and the Underlying
Securities in respect thereof) as principal for its own account, and
not for the benefit of any other person, for investment only and not
with a view to resale or distribution, and the Purchaser has due and
proper authority to act as agent or trustee for and on behalf of such
beneficial purchaser in connection with the transactions contemplated
hereby.
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(f) PURCHASER HAS BENEFIT OF CANADIAN PRIVATE PLACEMENT
EXEMPTIONS. The Purchaser, and in the case of the purchase by the
Purchaser of the Purchaser's Special Warrants as agent or trustee for
any principal whose identity is disclosed or undisclosed or
identified by account number only, each beneficial purchaser of the
Purchaser's Special Warrants for whom the Purchaser is acting, is
purchasing as principal a sufficient number of Special Warrants so
that the aggregate acquisition costs of the Purchaser or beneficial
purchaser will not be less than Cdn. $97,000.
(g) U.S. PRIVATE PLACEMENT EXEMPTION. The Purchaser is aware that
the Securities have not been and will not be registered under the U.S.
Securities Act or the securities laws of any state and the sale
contemplated thereby is being made in reliance on a private placement
exemption to Institutional Accredited Investors (as defined below) and
pursuant to exemptions from the registration requirements of
applicable state securities laws.
(h) INSTITUTIONAL ACCREDITED INVESTOR. The Purchaser is an
institutional "accredited investor" as defined in Rule 501(a)(1), (2),
(3) or (7) under the U.S. Securities Act ("Institutional Accredited
Investor") and it is acquiring the Purchaser's Special Warrants and
the related other Securities for its own account for an aggregate
purchase price of at least U.S $250,000 or for the account of one or
more Institutional Accredited Investors with respect to which it
exercises sole investment discretion (where each such account is
purchasing Special Warrants for such an aggregate purchase price), and
not with a view to any resale, distribution or other disposition of
such Securities in violation of the United States federal or state
securities laws.
(i) NO GENERAL SOLICITATION OR ADVERTISING. The Purchaser
acknowledges that it has not purchased the Purchaser's Special
Warrants as a result of any general solicitation or general
advertising, including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media
or broadcast over radio or television, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(j) INFORMATION AVAILABILITY. The Purchaser has received a copy of
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, for its information only, together with a U.S.
covering memorandum, and has had access to such additional
information, if any, concerning the Company as it has considered
necessary in connection with its decision to invest in the Purchaser's
Special Warrants.
(k) INVESTMENT SUITABILITY. The Purchaser has such knowledge and
experience in business matters as to be capable of evaluating the
merits and risks of its investment in the Purchaser's Special Warrants
and is able to bear the economic risks of such investment.
(l) RESALE. The Purchaser understands and agrees that if it
decides to offer, sell or otherwise transfer the Purchaser's Special
Warrants or the related other Securities, such Special Warrants and
other Securities may be offered, sold or otherwise transferred only
(A) to the Company, (B) outside the United States in accordance with
Rule 904 of Regulation S under the U.S. Securities Act and in
compliance with applicable local laws and regulations, or (C) inside
the United States (i) if (x) the sale is to an Institutional
Accredited Investor and is of a number of such Special Warrants or
other Securities having an aggregate market value at the time of such
sale of not less than U.S. $250,000, (y) a purchaser's letter
containing representations, warranties and covenants similar to those
contained in clauses (g) through (n) of this paragraph 11 (except such
purchaser's letter need not contain the representation set forth in
clause (j) above), satisfactory to the Placement Agent and the
Company, is executed by the purchaser and delivered to the Placement
Agent and the Company prior to the sale and (z) all offers or
solicitations in connection with the sale are arranged and conducted
solely by the Placement Agent or the Company, (ii) in accordance with
the exemption from registration under the U.S. Securities Act provided
by Rule 144 thereunder, if available, or (iii) if the sale is a
transaction that does not require registration under the U.S.
Securities Act or any applicable United States state laws and
regulations governing the offer and sale of securities, and it has
therefore furnished
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to the Placement Agent and the Company an opinion of counsel of
recognized standing reasonably satisfactory to the Placement Agent
and the Company.
(m) LEGEND. The Purchaser understands and acknowledges that upon
the original issuance thereof, and until such time as the same is no
longer required under applicable requirements of the U.S. Securities
Act or applicable state laws, the certificates representing the
Purchaser's Special Warrants, and all certificates issued in exchange
therefor or in substitution thereof, including certificates
representing the related Securities, shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, OR (C) INSIDE THE UNITED STATES IN
ACCORDANCE WITH (1) CERTAIN PROCEDURES SATISFACTORY
TO THE COMPANY OR (2) RULE 144 UNDER THE SECURITIES
ACT, IF AVAILABLE. DELIVERY OF THIS CERTIFICATE MAY
NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH
WILL CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM
MONTREAL TRUST COMPANY OF CANADA UPON DELIVERY OF
THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN
A FORM SATISFACTORY TO MONTREAL TRUST COMPANY OF
CANADA AND THE COMPANY, TO THE EFFECT THAT THE SALE
OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT;"
provided, that if any such Special Warrants or other Securities, as
the case may be, are being sold under subclause (l)(B) above, such
legend may be removed by providing a declaration to Montreal Trust
Company of Canada as registrar and transfer agent, in the following
form (or in such form as the Company may prescribe from time to time):
"The undersigned (A) acknowledges that the sale of the securities,
represented by certificate numbers ____________, to which this
declaration relates is being made in reliance on Rule 904 of
Regulation S under the United States Securities Act of 1933, as
amended (the "Securities Act") and (B) certifies that (1) it is not an
"affiliate" of Granges Inc. (as defined in Rule 405 under the
Securities Act), (2) the offer of such securities was not made to a
person in the United States and either (a) at the time the buy order
was originated, the buyer was outside the United States, or the seller
and any person acting on its behalf reasonably believed that the buyer
was outside the United States or (b) the transaction was executed on
or through the facilities of The Toronto Stock Exchange and neither
the seller nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United States and
(3) neither the seller nor any person acting on its behalf engaged in
any directed selling efforts in connection with the offer and sale of
such securities. Terms used herein have the meanings given to them by
Regulation S."
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and provided further, that if any such Special Warrants or other
Securities, as the case may be, are being sold under subclause
11(l)(C)(ii) above, such legend may be removed by delivery to Montreal
Trust Company of Canada of an opinion of counsel, of recognized
standing reasonably satisfactory to the Company, to the effect that
such legend is no longer required under the applicable requirements
of the U.S. Securities Act or state securities laws.
(n) TRANSFER RESTRICTIONS. The Purchaser consents to the Company
making a notation on its records or giving instructions to any
transfer agent or trustee of the Securities in order to implement the
restrictions on transfer set forth and described herein.
(o) ABSENCE OF OFFERING MEMORANDUM. The offering and sale of the
Purchaser's Special Warrants to the Purchaser were not, so far as the
Purchaser is aware, made through an advertisement of the Special
Warrants in printed media of general and regular paid circulation,
radio or television or any other form of advertisement or as part of a
general solicitation and, except for this Purchase Agreement, the only
documents, if any, delivered or otherwise furnished to the Purchaser
in connection with such offering and sale were the Term Sheet
(attached as Exhibit III hereto) and annual or interim reports and
other documents the contents of which are prescribed by statute or
regulation and generally available research reports, memoranda and
other materials concerning the Company prepared by others, which
documents the Purchaser acknowledges do not, individually or
collectively, constitute an offering memorandum or similar document
(including an offering memorandum as such term is defined in section
32(1) of the Regulation to the Securities Act (Ontario)) and have not
been independently verified by the Placement Agent or the
Underwriters. The Purchaser acknowledges and agrees that the Company,
the Placement Agent and the Underwriters take no responsibility for
the accuracy or completeness of the information contained in any such
research reports, memoranda or other materials concerning the Company.
(p) NO UNDISCLOSED INFORMATION. The Purchaser's Special Warrants
are not being purchased by the Purchaser as a result of any material
information concerning the Company that has not been publicly
disclosed and the Purchaser's decision to tender this offer and
acquire the Purchaser's Special Warrants has not been made as a result
of any verbal or written representation as to fact or otherwise made
by or on behalf of the Company, the Placement Agent, the Underwriters
or any other person and is based entirely upon currently available
public information concerning the Company.
(q) OWNERSHIP OF COMMON SHARES. The Purchaser, together with any
of the Purchaser's affiliates or associates or any other person with
whom the Purchaser is acting jointly or in concert, after giving
effect to the exercise of any Special Warrants (and the Warrants
issuable thereunder) being purchased by the Purchaser and such
persons, will not beneficially own more than 9,236,332 Common Shares.
12. NO INVESTIGATION BY UNDERWRITERS. The Purchaser acknowledges
and agrees that neither the Placement Agent nor the Underwriters assume any
responsibility or liability of any nature whatsoever for the accuracy or
adequacy of any publicly available information concerning the Company or as to
whether all information concerning the Company required to be disclosed by it
has been generally disclosed. The Purchaser further acknowledges and agrees
that neither the Placement Agent nor the Underwriters have engaged in or
conducted any independent investigation with respect to the Company or any such
information.
13. ADDITIONAL RESALE RESTRICTIONS. The Purchaser understands and
acknowledges that the Purchaser's Special Warrants (and, if the Purchaser's
Special Warrants are exercised or deemed to be exercised before the
Qualification Date, the Underlying Securities issued upon such exercise or
deemed exercise and the Warrant Shares issuable upon the exercise of the
Warrants) will be subject to certain resale restrictions under applicable
Canadian securities laws and the Private Placement Questionnaire and
Undertaking (attached as Exhibit I hereto) and the Purchaser agrees to comply
with such restrictions. The Purchaser also acknowledges and understands that
it should consult its own legal advisors with respect to applicable resale
restrictions and that it is
- 9 -
<PAGE> 65
solely responsible (and that the Company, the Placement Agent and the
Underwriters are not in any manner responsible) for complying with such
restrictions.
14. NO REVOCATION. The Purchaser agrees that this offer is made
for valuable consideration and may not be withdrawn, cancelled, terminated or
revoked by the Purchaser.
15. INDEMNITY. The Purchaser agrees to indemnify and hold
harmless the Company, the Underwriters and the Placement Agent and their
respective directors, officers, employees, agents, advisors and shareholders
from and against any and all loss, liability, claim, damage and expense
whatsoever (including, but not limited to, any and all fees, costs and expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any claim, law suit, administrative proceeding or investigation whether
commenced or threatened) arising out of or based upon any representation or
warranty of the Purchaser contained herein or in any document furnished by the
Purchaser to the Company, the Underwriters or the Placement Agent in connection
herewith being untrue in any material respect or any breach or failure by the
Purchaser to comply with any covenant or agreement made by the Purchaser herein
or in any document furnished by the Purchaser to the Company, the Underwriters
or the Placement Agent in connection herewith.
16. MODIFICATION. Subject to paragraph 5 above, neither this
Purchase Agreement nor any provision hereof shall be modified, changed,
discharged or terminated except by an instrument in writing signed by the party
against whom any waiver, change, discharge or termination is sought.
17. BENEFIT OF CERTAIN REPRESENTATIONS. By its acknowledgement of
this offer, the Company covenants, agrees and confirms that the Purchaser will
have the benefit of all of the representations, warranties, covenants and
conditions provided to or for the benefit of the Purchasers by the Company
under the Underwriting Agreement.
18. CONTRACTUAL RIGHT OF ACTION FOR RESCISSION. By its
acknowledgement of this offer, the Company agrees to provide a right of
rescission as hereinafter set forth, which right shall be exercisable by the
Purchaser and any subsequent holders from time to time of the Purchaser's
Special Warrants:
In the event that any holder of Special Warrants who acquires
Underlying Securities upon the exercise or deemed exercise of
his Special Warrants is or becomes entitled under applicable
securities legislation to the remedy of rescission by reason
of the Final Prospectus or any amendment thereto containing a
misrepresentation, such holder shall be entitled to rescission
not only of such holder's exercise of such Special Warrants
but also of the purchase of such Special Warrants hereunder,
and shall be entitled in connection with such rescission to a
full refund of all consideration paid to the Company on the
acquisition of such Special Warrants. In the event such
holder is a permitted assignee of the interest of the original
Purchaser of such Special Warrants, such permitted assignee
shall be entitled to exercise the rights of rescission and
refund granted hereunder as if such permitted assignee were
such original Purchaser. The foregoing is in addition to any
other right or remedy available to a holder of the Special
Warrants under section 114 of the Securities Act (British
Columbia), section 130 of the Securities Act (Ontario) or a
corresponding provision of other securities legislation or
otherwise at law.
19. WAIVER OF RIGHTS OF WITHDRAWAL. The Purchaser expressly
waives and releases the Company, the Placement Agent and the Underwriters from
all rights of withdrawal to which it might otherwise be entitled pursuant to
section 66(3) of the Securities Act (British Columbia), section 71(2) of the
Securities Act (Ontario) or a corresponding provision of other securities
legislation.
- 10 -
<PAGE> 66
20. ASSIGNMENT. This Purchase Agreement and any interest herein
or any of the rights arising hereunder may be assigned only together with a
transfer of the Special Warrants purchased hereunder and in accordance with
applicable securities laws and the rules of any stock exchanges on which the
Common Shares are listed, and provided that the assignment is made and the
assignee resides either outside Canada or in one of the Qualifying
Jurisdictions and the assignee agrees to be bound by the terms and conditions
of this Purchase Agreement by completing and executing the Transfer Form
attached to the certificate representing the Special Warrants and delivering
it to the Company or the Trustee.
21. MISCELLANEOUS. The agreement resulting from the acceptance of
this offer by the Placement Agent on behalf of the Underwriters contains the
whole agreement between the Placement Agent, the Company, the Underwriters and
the Purchaser in respect of the subject matters hereof and there are no
warranties, representations, terms, conditions or collateral agreements,
express, implied or statutory, other than as expressly provided for herein and
in any amendments hereto. All representations, warranties, agreements and
covenants made or deemed to be made by the Purchaser herein will survive the
execution and delivery, and acceptance, of this offer and the Closing. Time
shall be of the essence of this Purchase Agreement. This Purchase Agreement
and the rights and obligations of the parties hereunder will be governed by and
construed according to the laws of the Province of British Columbia. This
Purchase Agreement may be executed in any number of counterparts, each of which
when delivered, either in original or facsimile form, shall be deemed to be an
original and all of which together shall constitute one and the same document.
22. RELIANCE ON FACSIMILE. The Placement Agent, the Company and
the Underwriters shall be entitled to rely on delivery of a facsimile copy of
this Purchase Agreement, and acceptance by the Placement Agent of a facsimile
copy of this Purchase Agreement shall create a legal, valid and binding
agreement between the Purchaser and the Placement Agent in accordance with the
terms hereof.
IN WITNESS WHEREOF the undersigned executes and agrees to be
bound by this Purchase Agreement by executing the Signature Page and
Registration and Delivery Instructions attached as page 12 hereto on the date
therein indicated.
NOTE: PURCHASER MUST EXECUTE AND COMPLETE ATTACHED SIGNATURE PAGE AND
REGISTRATION AND DELIVERY INSTRUCTIONS
A C C E P T A N C E
The foregoing is acknowledged, accepted and agreed to
this ____ day of April, 1996.
SCOTIAMCLEOD (USA) INC., as Placement Agent
on behalf of the Underwriters
Per:
---------------------------------------
SCOTIAMCLEOD INC. on behalf of the
Underwriters
Per:
---------------------------------------
GRANGES INC.
- 11 -
<PAGE> 67
Per:
---------------------------------------
Title:
- 12 -
<PAGE> 68
SIGNATURE PAGE AND
REGISTRATION AND DELIVERY INSTRUCTIONS
(PURCHASER TO COMPLETE)
ISSUER: Granges Inc. ISSUE: Special Warrants exchangeable for Common
Shares and Warrants.
NUMBER OF SPECIAL WARRANTS:
-------------------------
TOTAL PURCHASE PRICE: Cdn. $
-------------------
SIGNATURE OF PURCHASER:
------------------------- Dated April ___, 1996
Name of Purchaser
Per:
---------------------
Title:
NAME AND ADDRESS OF PURCHASER:
Name: Address:
---------------------------- -----------------------------
(Street Address)
---------------------------- -----------------------------
(City and State)
-----------------------------
(Zip Code)
REGISTRATION INSTRUCTIONS: If other than in the name of the Purchaser:
Name: Address:
---------------------------- -----------------------------
(Street Address)
---------------------------- -----------------------------
(City and State)
-----------------------------
(Zip Code)
DELIVERY INSTRUCTIONS: If other than to the Purchaser at its address above:
Name: Address:
---------------------------- -----------------------------
(Street Address)
Contact Name:
-------------------- -----------------------------
(City and State)
Telephone No.:
------------------- -----------------------------
(Zip Code)
NAME OF PORTFOLIO ADVISOR (MONEY MANAGER):
--------------------------
THE TOTAL PURCHASE PRICE (IN THE AMOUNT SPECIFIED ABOVE) MUST BE PAID TO
SCOTIAMCLEOD (USA) INC. BY CERTIFIED CHEQUE OR BANK DRAFT MADE PAYABLE ON OR
BEFORE THE CLOSING DATE TO OR TO THE ORDER OF "SCOTIAMCLEOD (USA) INC.". THE
CERTIFIED CHEQUE OR BANK DRAFT MUST BE DELIVERED TO SCOTIAMCLEOD (USA) INC.
PRIOR TO 3:00 P.M. ON APRIL 24, 1996.
- 13 -
<PAGE> 69
EXHIBIT I
THE TORONTO STOCK EXCHANGE
PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING
To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.
QUESTIONNAIRE
1. DESCRIPTION OF TRANSACTION
(a) Name of Issuer of the Securities
GRANGES INC.
(b) Number and Class of Securities to be Purchased
_______________ Special Warrants
(c) Purchase Price
Cdn. $2.60 per Special Warrant
2. DETAILS OF PURCHASER
(a) Name of Purchaser
---------------------------------------------------------------
(b) Address
---------------------------------------------------------------
---------------------------------------------------------------
(c) Names and addresses of persons having a greater than 10%
beneficial interest in the Purchaser
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
<PAGE> 70
3. RELATIONSHIP TO ISSUER
(a) Is the Purchaser (or any person named in response to 2(c)
above) an insider of the Issuer for the purposes of the
Ontario Securities Act (before giving effect to this private
placement)? If so, state the capacity in which the Purchaser
(or person named in response to 2(c)) qualifies as an insider.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
(b) If the answer to (a) is "no", are the Purchaser and the Issuer
controlled by the same person or company? If so, give
details.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
4. DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
Give details of all trading by the Purchaser, as principal, in
the securities of the Issuer (other than debt securities which
are not convertible into equity securities), directly or
indirectly, within the 60 days preceding the date hereof.
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
- 2 -
<PAGE> 71
UNDERTAKING
TO: The Toronto Stock Exchange
The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.
The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for the period that
ends on the earlier of:
(a) six months from the date of the closing of the transaction
herein or for such period as is prescribed by applicable
securities legislation, whichever is longer, and
(b) the date that a receipt for a final prospectus relating to the
said securities or securities derived therefrom has been
issued by the Ontario Securities Commission,
without the prior consent of The Toronto Stock Exchange and any other
regulatory body having jurisdiction.
Dated at ____________________, this _____ day of April, 1996.
----------------------------------------
(Name of Purchaser - please print)
----------------------------------------
(Authorized Signature)
----------------------------------------
(Official Capacity - please print)
----------------------------------------
(please print here name of individual
whose signature appears above, if
different from name of Purchaser
printed above)
- 3 -
<PAGE> 72
EXHIBIT II
This is the form required under section 135 of the Rules and, if applicable, by
an order issued under section 59 of the Securities Act.
FORM 20A (IP)
SECURITIES ACT
ACKNOWLEDGEMENT OF INDIVIDUAL PURCHASER
1. I have agreed to purchase from Granges Inc. (the "Issuer")
____________ Special Warrants (the "Securities") of the Issuer.
2. I am purchasing the Securities as principal and, on closing of the
agreement of purchase and sale, I will be the beneficial owner of the
Securities.
3. I (CIRCLE ONE) have/have not received an offering memorandum
describing the Issuer and the Securities.
4. I acknowledge that:
(a) no securities commission or similar regulatory authority has
reviewed or passed on the merits of the Securities, AND
(b) there is no government or other insurance covering the
Securities, AND
(c) I may lose all of my investment, AND
(d) there are restrictions on my ability to resell the Securities
and it is my responsibility to find out what those
restrictions are and to comply with them before selling the
Securities, AND
(e) I will not receive a prospectus that the British Columbia
Securities Act (the "Act") would otherwise require be given to
me because the Issuer has advised me that it is relying on a
prospectus exemption, AND
(f) because I am not purchasing the Securities under a prospectus,
I will not have the civil remedies that would otherwise be
available to me, AND
(g) the Issuer has advised me that it is using an exemption from
the requirement to sell through a dealer registered under the
Act, except purchases referred to in paragraph 5(g), and as a
result I do not have the benefit of any protection that might
have been available to me by having a dealer act on my behalf.
5. I also acknowledge that: (CIRCLE ONE)
(a) I am purchasing Securities that have an aggregate acquisition
cost of $97,000 or more, OR
(b) my net worth, or my net worth jointly with my spouse at the
date of the agreement of purchase and sale of the security, is
not less than $400,000, OR
(c) my annual net income before tax is not less than $75,000, or
my annual net income before tax jointly with my spouse is not
less than $125,000, in each of the two most recent calendar
years, and I reasonably expect to have annual net income
before tax of not less than $75,000 or annual
<PAGE> 73
net income before tax jointly with my spouse of not less than
$125,000 in the current calendar year, OR
(d) I am registered under the Act, OR
(e) I am a spouse, parent, brother, sister or child of a senior
officer or director of the Issuer, or of an affiliate of the
Issuer, OR
(f) I am a close personal friend of a senior officer or director
of the Issuer, or of an affiliate of the Issuer, OR
(g) I am purchasing securities under section 128(c) ($25,000 -
registrant required) of the Rules, and I have spoken to a
person (NAME OF REGISTERED PERSON: (THE "REGISTERED PERSON))
who has advised me that the Registered Person is registered to
trade or advise in the Securities and that the purchase of the
Securities is a suitable investment for me.
6. If I am an individual referred to in paragraph 5(b), 5(c), or 5(d),1
acknowledge that, on the basis of information about the Securities
furnished by the Issuer, I am able to evaluate the risks and merits of
the Securities because: (CIRCLE ONE)
(a) of my financial, business or investment experience, OR
(b) I have received advice from a person (NAME OF ADVISER:
_________________ (THE "ADVISER")) who has advised me that the
Adviser is:
(i) registered to advise, or exempted from the
requirement to be registered to advise, in respect of
the Securities, and
(ii) not an insider of, or in a special relationship
with, the Issuer.
The statements made in this report are true.
DATED April _______, 1996.
----------------------------------------
Signature of Purchaser
----------------------------------------
Name of Purchaser
----------------------------------------
----------------------------------------
Address of Purchaser
- 2 -
<PAGE> 1
GRANGES INC.
- and -
MONTREAL TRUST COMPANY OF CANADA
_____________________________
SPECIAL WARRANT INDENTURE
Providing for the Issue of
9,699,800 Special Warrants
_____________________________
April 25, 1996
LADNER DOWNS
McCARTHY TETRAULT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE ONE
Interpretation . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Words Importing the Singular and Gender . . . . . . . . . . . . . 7
1.3 Interpretation Not Affected by Headings . . . . . . . . . . . . . 7
1.4 Day Not a Business Day . . . . . . . . . . . . . . . . . . . . . 7
1.5 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . 7
1.6 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.7 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.8 English Language . . . . . . . . . . . . . . . . . . . . . . . . 8
1.9 Meaning of "outstanding" for Certain Purposes . . . . . . . . . . 8
ARTICLE TWO
Issue of Special Warrants . . . . . . . . . . 9
2.1 Creation and Issue of Special Warrants . . . . . . . . . . . . . 9
2.2 Terms of Special Warrants . . . . . . . . . . . . . . . . . . . . 9
2.3 Special Warrant Certificates . . . . . . . . . . . . . . . . . . 9
2.4 Issue in Substitution for Lost Special Warrants . . . . . . . . . 11
2.5 Special Warrantholder not a Shareholder . . . . . . . . . . . . . 11
2.6 Special Warrants to Rank Pari Passu . . . . . . . . . . . . . . . 11
2.7 Signing of Special Warrant Certificates . . . . . . . . . . . . . 12
2.8 Certification by the Trustee or Co-transfer Agent . . . . . . . . 12
ARTICLE THREE
Exchange and Ownership of Special Warrants . . . . . . 12
3.1 Exchange of Special Warrants . . . . . . . . . . . . . . . . . . 12
3.2 Charges for Exchange or Transfer . . . . . . . . . . . . . . . . 13
3.3 Ownership of Special Warrants . . . . . . . . . . . . . . . . . . 13
3.4 Registration and Transfer of Special Warrants . . . . . . . . . . 14
ARTICLE FOUR
Exercise of Special Warrants . . . . . . . . . 16
4.1 Exercise During Exercise Period . . . . . . . . . . . . . . . . . 16
4.2 Notice of Compliance or Non-Compliance . . . . . . . . . . . . . 16
4.3 Notice of Retraction Right . . . . . . . . . . . . . . . . . . . 17
4.4 Retraction of Special Warrants . . . . . . . . . . . . . . . . . 17
4.5 Notice of Exercise Period . . . . . . . . . . . . . . . . . . . . 18
4.6 Method of Exercise of Special Warrants . . . . . . . . . . . . . 18
4.7 Effect of Exercise of Special Warrants . . . . . . . . . . . . . 19
4.8 Partial Exercise of Special Warrants . . . . . . . . . . . . . . 20
4.9 No Fractional Shares or Warrants . . . . . . . . . . . . . . . . 21
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
4.10 Deemed Exercise of Special Warrants . . . . . . . . . . . . . . . 21
4.11 Accounting and Recording . . . . . . . . . . . . . . . . . . . . 21
4.12 Cancellation of Surrendered Special Warrants . . . . . . . . . . 21
4.13 Exercise Restrictions . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE FIVE
Adjustment of Exercise Number . . . . . . . . . 22
5.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 Adjustment of Exercise Number . . . . . . . . . . . . . . . . . . 22
5.3 Subscription Rights Adjustment Rules . . . . . . . . . . . . . . 26
5.4 Postponement of Subscription . . . . . . . . . . . . . . . . . . 28
5.5 Notice of Certain Events . . . . . . . . . . . . . . . . . . . . 28
5.6 Protection of Trustee . . . . . . . . . . . . . . . . . . . . . . 29
5.7 Proceedings Prior to Any Action Requiring Adjustment . . . . . . 29
ARTICLE SIX
Rights and Covenants . . . . . . . . . . . 29
6.1 Purchase of Special Warrants . . . . . . . . . . . . . . . . . . 29
6.2 General Covenants of the Company . . . . . . . . . . . . . . . . 29
6.3 Trustee's Remuneration and Expenses . . . . . . . . . . . . . . . 31
6.4 Escrow of Funds . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.5 Right to Dividends or Distributions . . . . . . . . . . . . . . . 33
6.6 Investment of Funds . . . . . . . . . . . . . . . . . . . . . . . 34
6.7 Performance of Covenants by Trustee . . . . . . . . . . . . . . . 34
6.8 Certificate of the Company . . . . . . . . . . . . . . . . . . . 34
6.9 Rescission Right . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE SEVEN
Enforcement . . . . . . . . . . . . . . 35
7.1 Suits by Special Warrantholders . . . . . . . . . . . . . . . . . 35
7.2 Immunity of Shareholders . . . . . . . . . . . . . . . . . . . . 35
7.3 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE EIGHT
Meetings of Special Warrantholders . . . . . . . . 36
8.1 Right to Convene Meetings . . . . . . . . . . . . . . . . . . . . 36
8.2 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5 Power to Adjourn . . . . . . . . . . . . . . . . . . . . . . . . 37
8.6 Show of Hands . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.7 Poll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.8 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.9 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.10 Company and Trustee may be Represented . . . . . . . . . . . . . 39
8.11 Powers Exercisable by Extraordinary Resolution . . . . . . . . . 39
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C> <C>
8.12 Meaning of "Extraordinary Resolution" . . . . . . . . . . . . . . 40
8.13 Powers Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 41
8.14 Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.15 Instruments in Writing . . . . . . . . . . . . . . . . . . . . . 42
8.16 Binding Effect of Resolutions . . . . . . . . . . . . . . . . . . 42
8.17 Holdings by Company Disregarded . . . . . . . . . . . . . . . . . 42
ARTICLE NINE
Supplemental Indentures and Successor Companies . . . . . 43
9.1 Provision for Supplemental Indentures for Certain Purposes . . . 43
9.2 Successor Companies . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE TEN
Concerning the Trustee . . . . . . . . . . . 44
10.1 Trust Indenture Legislation . . . . . . . . . . . . . . . . . . . 44
10.2 Rights and Duties of Trustee . . . . . . . . . . . . . . . . . . 45
10.3 Evidence, Experts and Advisers . . . . . . . . . . . . . . . . . 45
10.4 Securities, Documents and Monies Held by Trustee . . . . . . . . 46
10.5 Action by Trustee to Protect Interests . . . . . . . . . . . . . 47
10.6 Trustee not Required to Give Security . . . . . . . . . . . . . . 47
10.7 Protection of Trustee . . . . . . . . . . . . . . . . . . . . . . 47
10.8 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . 48
10.9 Conflict of Interest . . . . . . . . . . . . . . . . . . . . . . 49
10.10 Acceptance of Trust . . . . . . . . . . . . . . . . . . . . . . . 50
10.11 Trustee not to be Appointed Receiver . . . . . . . . . . . . . . 50
10.12 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE ELEVEN
General . . . . . . . . . . . . . . . 50
11.1 Notice to Company and Trustee . . . . . . . . . . . . . . . . . . 50
11.2 Notice to Special Warrantholders . . . . . . . . . . . . . . . . 52
11.3 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . 53
11.4 Sole Benefit of Parties and Special Warrantholders . . . . . . . 53
11.5 Discretion of Directors . . . . . . . . . . . . . . . . . . . . . 53
11.6 Counterparts and Formal Date . . . . . . . . . . . . . . . . . . 53
</TABLE>
- iii -
<PAGE> 5
THIS SPECIAL WARRANT INDENTURE is dated as of April 25, 1996,
BETWEEN:
GRANGES INC., a company incorporated under the laws of the Province of
British Columbia, having its head office at Suite 3000, 370 Seventeenth
Street, Denver, Colorado, U.S.A., 80202
(the "Company")
AND:
MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated under the
laws of Canada, having an office at 510 Burrard Street, Vancouver, British
Columbia, V6C 3B9
(the "Trustee").
WHEREAS:
A. The Company proposes to create and issue 9,699,800 Special Warrants
exercisable by the holders thereof on the terms hereinafter set forth for the
acquisition of Shares in the capital of the Company and Warrants exercisable to
acquire Shares in the capital of the Company;
B. The Company is duly authorized to create and issue the Special Warrants to
be issued as herein provided;
C. All things necessary have been done and performed to make the Special
Warrants, when certified by the Trustee and issued and delivered as in this
Indenture provided, legal, valid and binding upon the Company with the benefits
of and subject to the terms of this Indenture;
D. The Trustee has agreed to enter into this Indenture and to hold all rights,
interests and benefits contained herein for and on behalf of those persons who
become holders of Special Warrants from time to time issued pursuant to this
Indenture;
NOW THEREFORE THIS INDENTURE WITNESSES that in consideration of the
premises and the covenants of the parties, the Company hereby appoints the
Trustee as trustee for the Special Warrantholders, to hold all rights,
interests and benefits contained herein for and on behalf of those persons who
become holders of Special Warrants from time to time issued pursuant to this
Indenture and it is hereby agreed and declared as follows:
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ARTICLE ONE
Interpretation
1.1 Definitions
In this Indenture and in the recitals and schedules hereto, unless there
is something in the subject matter or context inconsistent therewith, the
following phrases and words shall have the following meanings:
(a) "Applicable Legislation" means the provisions of any statute of
Canada or a province thereof, and the regulations under any such
statute, relating to trust indentures or the rights, duties or
obligations of corporations and trustees under trust indentures as
are from time to time in force and applicable to this Indenture;
(b) "board" means the Board of Directors of the Company;
(c) "business day" means a day that is not a Saturday, Sunday, or civic
or statutory holiday in the Cities of Toronto, Ontario and Vancouver,
British Columbia;
(d) "Company" means Granges Inc. and its lawful successors from time to
time as provided for in section 9.2;
(e) "Company's auditors" means the firm of chartered accountants duly
appointed as auditors of the Company from time to time;
(f) "Convertible Security" means a security of the Company (other than
the Special Warrants) convertible into or otherwise carrying the
right to acquire authorized but unissued Shares;
(g) "Co-transfer Agent" has the meaning given in section 2.1;
(h) "counsel" means a barrister or solicitor (who may be an employee of
the Company) or a firm of barristers and solicitors (who may be
counsel for the Company) in both cases acceptable to the Trustee;
(i) "Current Market Price" at any date, means the weighted average price
per Share at which the Shares have traded:
(i) on The Toronto Stock Exchange;
(ii) if the Shares are not listed on The Toronto Stock Exchange, on
any stock exchange upon which the Shares are listed as may be
selected for this purpose by the directors and approved by the
Trustee; or
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(iii) if the Shares are not listed, on any over-the-counter market as
may be selected for this purpose by the directors and approved
by the Trustee;
during the 20 consecutive trading days (on each of which at least 500
Shares are traded in board lots) ending the 15th trading day before
such date, and the weighted average price shall be determined by
dividing the aggregate sale price of all Shares sold in board lots on
the exchange or market, as the case may be, during the 20 consecutive
trading days by the aggregate number of Shares sold;
(j) "director" means a director of the Company for the time being, and
reference without more to action by the directors means action by the
directors of the Company as a board or, whenever duly empowered,
action by an executive committee of the board, in each case by
resolution duly passed;
(k) "dividends" means dividends or distributions (payable in cash or in
securities, property or assets of equivalent value) declared payable
on the Shares;
(l) "dividends paid in the ordinary course" means such dividends or
distributions declared payable on Shares in any fiscal year of the
Company to the extent that such dividends or distributions in the
aggregate do not exceed on a per Share basis 5% of the Special
Warrant Purchase Price and for such purposes the amount of any
dividends or distributions paid in other than cash or shares shall be
the fair market value of such dividends as determined by the
directors;
(m) "Exchange Right" means the right to acquire Shares and Warrants upon
due exercise of the rights attached to the Special Warrants as herein
provided;
(n) "Exercise Number" at any time, means that number of Shares that
Special Warrantholders are entitled to receive from time to time for
each Special Warrant held upon exercise of the rights attached to the
Special Warrant as that number may be adjusted by Article Five hereof
and that number, as at the date hereof, is equal to one Share for
each Special Warrant;
(o) "Exercise Date" with respect to any Special Warrant means the earlier
of:
(i) the date on which the Special Warrant Certificate evidencing
such Special Warrant is duly surrendered in accordance with the
provisions of section 4.6; and
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(ii) the date of deemed exercise of the Special Warrants pursuant to
section 4.10;
(p) "Exercise Period" means the period commencing on the date hereof and
ending at 4:30 p.m. (local time) on the fifth business day after the
earlier of:
(i) the Qualification Date; and
(ii) the Qualification Deadline;
(q) "Extraordinary Resolution" has the meaning given in sections 8.12 and
8.15;
(r) "Final Prospectus" means the final version of the prospectus to be
filed with each of the Securities Commissions relating to the
distribution of the Shares and Warrants issuable to the holders of
the Special Warrants upon exercise of the Special Warrants and
includes any amendments or supplements thereto;
(s) "Notice of Compliance" means notice in writing from the Company to
the Trustee and to the Underwriters to the effect that the
Qualification Date has occurred on or before the Qualification
Deadline;
(t) "Notice of Non-Compliance" means notice in writing from the Company
to the Trustee and to the Underwriters to the effect that the
Qualification Date has not occurred on or before the Qualification
Deadline;
(u) "person" means an individual, a corporation, a partnership, a trust
or any unincorporated organization, and words importing persons have
a similar meaning;
(v) "Provinces" means the provinces of British Columbia and Ontario;
(w) "Qualification Date" means the day on which a receipt is issued for
the Final Prospectus by the last of the Securities Commissions to do
so under the applicable Securities Laws of each of the Provinces;
(x) "Qualification Deadline" means July 24, 1996 or such later date as
the Underwriters may determine in a written notice delivered to the
Company and the Trustee provided that the Underwriters have obtained
the written consent thereto of each initial purchaser of the Special
Warrants who has not resold such Special Warrants;
(y) "Registrar" means a registrar, from time to time, of the Special
Warrants appointed pursuant to subsection 3.4(1);
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(z) "Regulation S" means Regulation S under the U.S. Securities Act;
(aa) "Retraction Period" means the period commencing on the first business
day following the Qualification Deadline and ending at 4:30 p.m.
(local time) on the date that is five business days after the
Qualification Deadline;
(ab) "Securities Commissions" means, collectively, the securities
commission or other securities regulatory authority under the
applicable Securities Laws of each of the Provinces;
(ac) "Securities Laws" means, collectively, the applicable securities laws
of each of the Provinces and the respective regulations and rules
made and forms prescribed thereunder together with all applicable
published policy statements, notices, blanket orders and rulings of
the Securities Commissions;
(ad) "Shares" means fully paid and non-assessable common shares without
par value in the capital of the Company; provided that if the
Exchange Rights are subsequently adjusted or altered pursuant to
subsection 5.2(4) or (5), "Shares" shall thereafter mean the shares
or other securities or property that a Special Warrantholder is
entitled to on an exchange after the adjustment;
(ae) "shareholder" means an owner of record of one or more Shares or
shares of any other class or series of the Company;
(af) "Special Warrantholders" or "holders" means the registered holders of
Special Warrants;
(ag) "Special Warrantholders' Request" means an instrument signed in one
or more counterparts by a Special Warrantholder or Special
Warrantholders entitled to acquire, upon exercise of the Exchange
Rights, in the aggregate, not less than 25% of the aggregate number
of Shares and Warrants that could be acquired pursuant to the
exercise of all of the Special Warrants then outstanding requesting
the Trustee to take some action or proceeding specified therein;
(ah) "Special Warrants" means the special warrants authorized to be
created by the Company under section 2.1 and issued and certified
under this Indenture entitling the holders thereof to acquire Shares
and Warrants evidenced by Special Warrant Certificates;
(ai) "Special Warrant Certificates" means certificates substantially in
the form attached as Schedule A hereto,
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<PAGE> 10
or such other form as may be approved under subsection 2.3(1),
evidencing Special Warrants;
(aj) "Special Warrant Purchase Price" means $2.60 per Special Warrant;
(ak) "subsidiary of the Company" means a corporation, more than 50% of the
outstanding voting shares of which are owned, directly or indirectly,
other than by way of security only, by the Company or by one or more
subsidiaries of the Company; and, as used in this definition, "voting
shares" means shares of a class or classes ordinarily entitled to
vote for the election of a majority of the directors of a corporation
irrespective of whether or not shares of any other class or classes
shall have or might have the right to vote for directors by reason of
the happening of any contingency;
(al) "this Special Warrant Indenture", "this Indenture", "herein" "hereby"
and similar expressions mean or refer to this Special Warrant
Indenture and any indenture, deed or instrument supplemental or
ancillary hereto; and the expressions "Article", "section",
"subsection", "paragraph" or "clause" followed by a number or letter
mean and refer to the specified Article, section, subsection,
paragraph or clause of this Indenture;
(am) "trading day" with respect to a stock exchange means a day on which
Shares may be traded through the facilities of such stock exchange;
(an) "Transfer Agent" means the transfer agent for the time being of the
Shares;
(ao) "Trustee" means Montreal Trust Company of Canada, or any lawful
successor thereto in the trusts hereby created including through the
operation of section 10.8;
(ap) "Underwriters" means ScotiaMcLeod Inc., First Marathon Securities
Limited, Yorkton Securities Inc. and Goepel Shields & Partners Inc.,
the underwriters of the Special Warrants;
(aq) "U.S. Person" means a U.S. person as that term is defined in
Regulation S;
(ar) "U.S. Securities Act" means the Securities Act of 1933, as amended,
of the United States;
(as) "United States" means the United States as that term is defined in
Regulation S;
(at) "Warrants" means the common share purchase warrants authorized to be
created by the Company and issued and
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<PAGE> 11
certified pursuant to the Warrant Indenture and entitling the holder
thereof, subject to adjustment in accordance with the terms of the
Warrant Indenture, to acquire one Share at any time from the date
hereof until 4:30 p.m., (local time) on October 31, 1997, at the
price of $3.00 per Share;
(au) "Warrantholders" means the registered holders of the Warrants for the
time being;
(av) "Warrant Indenture" means the warrant indenture dated the date hereof
between the Company and the Trustee, pursuant to which the Warrants
will be created and issued;
(aw) "written order of the Company", "written request of the Company",
"written consent of the Company" and "certificate of the Company"
mean respectively a written order, request, consent and certificate
signed in the name of the Company by any one director or officer and
may consist of one or more instruments so executed.
1.2 Words Importing the Singular and Gender
Words importing the singular include the plural and vice versa and words
importing a particular gender include all genders.
1.3 Interpretation Not Affected by Headings
The division of this Indenture into Articles, sections, subsections and
paragraphs, the provision of a table of contents and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Indenture.
1.4 Day Not a Business Day
In the event that any day on which the Exercise Period expires or on or
before which any action is required to be taken hereunder is not a business
day, then the Exercise Period shall expire on or the action shall be required
to be taken on the next succeeding day that is a business day.
1.5 Time of the Essence
Time shall be of the essence in all respects in this Indenture, the
Special Warrants and the Special Warrant Certificates.
1.6 Currency
Except as otherwise stated, all dollar amounts herein are expressed in
Canadian dollars.
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<PAGE> 12
1.7 Applicable Law
This Indenture, the Special Warrants and the Special Warrant Certificates
shall be governed by, construed and enforced in accordance with the laws of the
Province of British Columbia and shall be treated in all respects as British
Columbia contracts.
1.8 English Language
The parties hereby confirm that they accept this Indenture as well as
notices and certificates relating directly or indirectly to the subject matter
hereof as drawn in the English language.
Les parties confirment par les presentes qu'elles acceptent la presente
convention ainsi que les avis et certificats se rapportant directement ou
indirectement a l'objet des presentes tels que rediges en langue anglaise.
1.9 Meaning of "outstanding" for Certain Purposes
Except as provided in sections 4.8 and 4.10, every Special Warrant
Certificate certified and delivered by the Trustee hereunder shall be deemed to
be outstanding until it has been surrendered to the Trustee pursuant to this
Indenture, provided however that:
(a) a Special Warrant that has been partially exercised shall be deemed
to be outstanding only to the extent of the unexercised part of the
Special Warrants;
(b) where a Special Warrant Certificate has been issued in substitution
for a Special Warrant Certificate that has been lost, stolen or
destroyed, only the latest Special Warrant Certificate issued shall
be counted for the purpose of determining the Special Warrants
outstanding; and
(c) for the purpose of any provision of this Indenture entitling holders
of outstanding Special Warrants to vote, sign consents, requests or
other instruments or take any other action under this Indenture,
Special Warrants owned legally or equitably by the Company or any
subsidiary of the Company shall be disregarded, except that:
(i) for the purpose of determining whether the Trustee shall be
protected in relying on any vote, consent, request or other
instrument or other action, only the Special Warrants of which
the Trustee has notice that they are so owned shall be so
disregarded; and
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(ii) Special Warrants so owned that have been pledged in good faith
other than to the Company or any subsidiary of the Company shall
not be so disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right to vote the
Special Warrants in the pledgee's discretion free from the
control of the Company or any subsidiary of the Company pursuant
to the terms of the pledge.
ARTICLE TWO
Issue of Special Warrants
2.1 Creation and Issue of Special Warrants
A total of 9,699,800 Special Warrants, each entitling the holder thereof
to acquire from the Company on exercise thereof, subject to the conditions in
Article Four and adjustment as provided for in section 4.7 and Article Five,
one Share and one-half Warrant, are hereby authorized to be created and issued
by the Company and, upon receipt by the Company of the Special Warrant Purchase
Price for the Special Warrants, of which 100% shall be held in trust by the
Trustee in accordance with the provisions of section 6.4, the Special Warrant
Certificates shall be executed by the Company and certified by or on behalf of
the Trustee, or by such other person as the Company may from time to time
appoint with the approval of the Trustee (hereinafter referred to as the
"Co-transfer Agent"), and delivered by the Trustee in accordance with
subsection 2.3(3).
2.2 Terms of Special Warrants
(1) Subject to the provisions of Articles Four and Five, each of the
Special Warrants issued under section 2.1 shall entitle the holder thereof to
acquire from the Company, on exercise or deemed exercise hereunder, from the
Company, without further payment therefor one-half Warrant together with that
number of Shares equal to the Exercise Number in effect at the Exercise Date,
and to any entitlement under sections 6.4 and 6.5;
(2) Fractional Special Warrants shall not be issued or otherwise provided
for.
2.3 Special Warrant Certificates
(1) Special Warrants shall be issued in registered form only and shall be
evidenced only by Special Warrant Certificates, which shall be substantially in
the form attached as Schedule A hereto, with such additions, variations or
omissions as may be permitted by the provisions of this Indenture or may from
time to time be agreed upon between the Company and the Trustee, shall be dated
as of the date hereof (regardless of their actual dates of issue), shall bear
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<PAGE> 14
such legends and distinguishing letters and numbers as the Company shall, with
the approval of the Trustee, prescribe, shall be issuable in any denomination
excluding fractions, and, if applicable, shall bear the additional legends set
forth under section 2.3(2).
(2) Each Special Warrant Certificate originally issued to a U.S. Person or
a person within the United States, and all certificates issued in exchange
therefor or in substitution thereof will bear a legend to the following effect
(the "U.S. Legend"):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, OR (C) INSIDE THE
UNITED STATES IN ACCORDANCE WITH (1) CERTAIN PROCEDURES SATISFACTORY
TO THE COMPANY OR (2) RULE 144 UNDER THE SECURITIES ACT, IF
AVAILABLE. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.
A NEW CERTIFICATE BEARING NO LEGEND, DELIVERY OF WHICH WILL
CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM MONTREAL TRUST
COMPANY OF CANADA UPON DELIVERY OF THIS CERTIFICATE AND A DULY
EXECUTED DECLARATION, IN A FORM SATISFACTORY TO MONTREAL TRUST
COMPANY OF CANADA AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE
SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT;
provided, that if any such Special Warrants are being sold or transferred in
compliance with Rule 904 of Regulation S, the U.S. Legend may be removed by
providing a declaration to the Trustee substantially in the form set forth in
Schedule D attached hereto, and provided, further, that if any such Special
Warrants are being sold in compliance with Rule 144 under the U.S. Securities
Act, the U.S. Legend may be removed by delivery to the Trustee of an opinion of
counsel, of recognized standing reasonably satisfactory to the Company, to the
effect that such legend is no longer required under the applicable requirements
of the U.S. Securities Act or state securities laws.
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(3) The Trustee shall maintain and make available to the Company lists of
all persons who are entitled to Special Warrant Certificates, and the Trustee
shall mail or deliver Special Warrant Certificates evidencing whole Special
Warrants to those persons or as directed by the Company.
2.4 Issue in Substitution for Lost Special Warrants
(1) If a Special Warrant Certificate becomes mutilated or is lost,
destroyed or stolen, the Company, subject to applicable law and to subsection
2.4(2), shall issue and thereupon the Trustee shall countersign or certify and
deliver a new Special Warrant Certificate of like date and tenor as the one
mutilated, lost, destroyed or stolen upon surrender of and in place of and upon
cancellation of the mutilated Special Warrant Certificate or in lieu of and in
substitution for the lost, destroyed or stolen Special Warrant Certificate and
the substituted Special Warrant Certificate shall be in a form approved by the
Trustee and shall be entitled to the benefit hereof, rank equally in accordance
with its terms with all other Special Warrant Certificates issued or to be
issued hereunder and will bear the same legends as the Special Warrant
Certificate being replaced.
(2) The applicant for the issue of a new Special Warrant Certificate
pursuant to this section 2.4 shall bear the cost of the issue thereof and in
case of loss, destruction or theft shall, as a condition precedent to the issue
thereof, furnish to the Company and to the Trustee such evidence of ownership
and of the loss, destruction or theft of the Special Warrant Certificate so
lost, destroyed or stolen as shall be satisfactory to the Company and to the
Trustee in their discretion, and if required, furnish an indemnity in amount
and form satisfactory to them in their discretion, and pay the reasonable
charges of the Company and the Trustee in connection therewith.
2.5 Special Warrantholder not a Shareholder
Nothing in this Indenture or in the holding of a Special Warrant evidenced
by a Special Warrant Certificate, or otherwise, shall be construed as
conferring upon a Special Warrantholder any right or interest whatsoever as a
shareholder of the Company, including but not limited to the right to vote at,
to receive notice of, or to attend meetings of shareholders or any other
proceedings of the Company or the right to receive any dividend and other
distribution, except as provided in sections 6.4 and 6.5.
2.6 Special Warrants to Rank Pari Passu
Except as otherwise provided herein, a Special Warrant shall rank pari
passu with all other Special Warrants issued under this Indenture, whatever may
be the actual date of issue of the Special Warrant Certificates that evidence
them.
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<PAGE> 16
2.7 Signing of Special Warrant Certificates
The Special Warrant Certificates shall be signed by two of the directors
or officers of the Company and need not be under the seal of the Company. The
signatures of any of these directors or officers may be mechanically reproduced
in facsimile and Special Warrant Certificates bearing those facsimile
signatures shall be binding upon the Company as if they had been manually
signed by the directors or officers. Notwithstanding that any of the persons
whose manual or facsimile signature appears on any Special Warrant Certificate
as an officer or director may no longer hold office at the date of the Special
Warrant Certificate or at the date of certification or delivery thereof, any
Special Warrant Certificate signed as aforesaid shall, subject to section 2.8,
be valid and binding upon the Company.
2.8 Certification by the Trustee or Co-transfer Agent
(1) The Trustee shall certify Special Warrant Certificates upon the
written direction of the Company. No Special Warrant Certificate shall be
issued or, if issued, shall be valid or entitle the holder to the benefit
hereof until it has been certified by manual signature by or on behalf of the
Trustee, or by manual signature by the Co-transfer Agent, substantially in the
form approved by the Company and the Trustee and the certification by the
Trustee or by the Co-transfer Agent upon any Special Warrant Certificate shall
be conclusive evidence as against the Company that the Special Warrant
Certificate so certified has been duly issued hereunder and that the holder is
entitled to the attributes and characteristics of the Special Warrants provided
for in this Indenture.
(2) The certification of the Trustee or of the Co-transfer Agent on
Special Warrant Certificates issued hereunder shall not be construed as a
representation or warranty by the Trustee or by the Co-transfer Agent as to the
validity of this Indenture or of the Special Warrant Certificates (except the
due certification thereof) and the Trustee or the Co-transfer Agent shall in no
respect be liable or answerable for the use made of the Special Warrants or any
of them or of the consideration therefor, except as otherwise specified herein.
ARTICLE THREE
Exchange and Ownership of Special Warrants
3.1 Exchange of Special Warrants
(1) Upon the request of a Special Warrantholder one or more Special
Warrant Certificates may, upon compliance with the reasonable requirements of
the Trustee, be exchanged for one or more Special Warrant Certificates of
different denominations evidencing, in the aggregate, the same number of
Special Warrants
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<PAGE> 17
as the Special Warrant Certificate or Special Warrant Certificates being
exchanged and shall bear the same legends as the Special Warrant Certificates
being exchanged.
(2) Special Warrants may be exchanged only at the principal transfer
offices of the Trustee in either of the Cities of Toronto or Vancouver or at
the principal transfer office of the Co-transfer Agent designated by the
Company or at any other place that is designated by the Company with the
approval of the Trustee. Any Special Warrant Certificates tendered for exchange
shall be surrendered to the Trustee or to its agent or the Co-transfer Agent
and, upon issuance of new Special Warrants in exchange therefor, cancelled. The
Company shall sign all Special Warrant Certificates necessary to carry out
exchanges as aforesaid and those Special Warrant Certificates shall be
certified by or on behalf of the Trustee.
3.2 Charges for Exchange or Transfer
For each Special Warrant transferred or Special Warrant Certificate
exchanged, other than on the exchange by the Underwriters of a global
certificate representing all Special Warrants and the transfer of all such
Special Warrants by the Underwriters, the Trustee, or the Co-transfer Agent
except as otherwise herein provided, shall charge if required by the Company a
reasonable sum in respect of each Special Warrant transferred or Special
Warrant Certificate exchanged. The party requesting the transfer or exchange,
as a condition precedent thereto, shall pay such charges and shall pay or
reimburse the Trustee, the Co-transfer Agent or the Company for all exigible
transfer taxes or governmental or other similar transfer charges required to be
paid in connection therewith.
3.3 Ownership of Special Warrants
The Company and the Trustee and their respective agents may deem and treat
the holder of any Special Warrant as the absolute owner of that Special Warrant
for all purposes, and the Company and the Trustee and their respective agents
shall not be affected by any notice or knowledge to the contrary except as
required by statute or by order of a court of competent jurisdiction. The
holder of any Special Warrant shall be entitled to the rights evidenced by that
Special Warrant free from all equities or rights of set-off or counterclaim
between the Company and the original or any intermediate holder thereof and all
persons may act accordingly and the receipt from any holder for the Shares,
Warrants or monies obtainable pursuant thereto shall be a good discharge to the
Company and the Trustee for the same and neither the Company nor the Trustee
shall be bound to inquire into the title of any such registered holder.
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3.4 Registration and Transfer of Special Warrants
(1) The Company hereby appoints the Trustee as Registrar of the Special
Warrants. The Company may hereafter, with the consent of the Trustee, appoint
one or more other additional Registrars of the Special Warrants, including any
Co-transfer Agent.
(2) The Company shall cause a register to be kept by the Trustee, and the
Trustee agrees to maintain such a register, at its principal transfer office in
the City of Vancouver, in which shall be entered alphabetically the names and
addresses of the holders of Special Warrants and other particulars of the
Special Warrants held by them respectively and a register of all transfers of
Special Warrants and the date and other particulars of each transfer. Such
registration shall be noted on the Special Warrant Certificates by the Trustee
or other Registrar duly appointed pursuant to subsection 3.4(1). The Company
shall also cause transfer agencies (each a "Transfer Agency") to be maintained
by the Trustee, and the Trustee shall maintain such Transfer Agencies at its
principal transfer offices in the Cities of Toronto and Vancouver and in such
other place or places and by such other agent as the Company with the approval
of the Trustee may designate.
(3) No transfer of a Special Warrant shall be valid unless made on any one
of the registers upon surrender of the Special Warrant Certificate to the
Trustee or other Registrar duly appointed pursuant to subsection 3.4(1)
accompanied by a written instrument of transfer in form satisfactory to the
Trustee or other Registrar duly appointed pursuant to subsection 3.4(1)
executed by the registered holder or his executors, administrator or other
legal representatives or his attorney duly appointed by an instrument in
writing in form and execution satisfactory to the Trustee or other Registrar
duly appointed pursuant to subsection 3.4(1) and upon compliance with such
reasonable requirements as the Trustee or other Registrar duly appointed
pursuant to subsection 3.4(1) may prescribe, nor shall a transfer of a Special
Warrant be valid, except in the case where a new Special Warrant Certificate is
issued upon a transfer, unless the transfer shall have been noted on the
Special Warrant Certificate by the Trustee or other Registrar duly appointed
pursuant to subsection 3.4(1), provided however and notwithstanding the
provisions of this subsection 3.4(3), an Underwriter shall be entitled to be
entered on any one of the registers as the holder of Special Warrants evidenced
by a particular Special Warrant Certificate upon delivery by that Underwriter
to the Trustee of:
(a) the particular Special Warrant Certificate; and
(b) a certificate of that Underwriter to the effect that the purchaser of
the Special Warrants evidenced by the particular Special Warrant
Certificate has declined or refused to accept delivery of, and make
payment for, the Special Warrants evidenced by the particular Special
Warrant Certificate in accordance with the subscription
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<PAGE> 19
or purchase agreement between such purchaser, the Company and
ScotiaMcLeod Inc. (and ScotiaMcLeod (USA) Inc. in the case of a
United States purchaser).
(4) The registers referred to in this section 3.4 shall at all reasonable
times be open for inspection by the Company, by the Trustee and by any Special
Warrantholder.
(5) The registered holder of a Special Warrant may at any time and from
time to time have the registration of the Special Warrant transferred from the
register in which the registration thereof appears to another authorized
register upon compliance with such reasonable requirements as the Trustee or
other Registrar duly appointed pursuant to subsection 3.4(1) may prescribe.
(6) Subject to subsections 3.4(7), 3.4(8) and 3.4(9), the holder of a
Special Warrant may at any time and from time to time have the Special Warrant
transferred at any Transfer Agency in accordance with the conditions herein,
such reasonable requirements as the trustee or other Registrar duly appointed
pursuant to subsection 3.4(1) may prescribe and all applicable securities
legislation and requirements of regulatory authorities, provided however that
the transfer of Special Warrants shall be accompanied by a transfer form in the
form set forth in Schedule C hereto.
(7) If the Special Warrant Certificate tendered for transfer bears the
U.S. Legend, the Trustee or other Registrar shall authenticate, register and
deliver in the name of the transferee a new Special Warrant Certificate,
representing the number of Special Warrants so transferred, bearing the U.S.
Legend; provided, that if the Special Warrants are being sold in accordance
with Rule 904 of Regulation S and the transferor has delivered to the Trustee
or other Registrar a declaration substantially in the form set forth in
Schedule D attached hereto, the Trustee or other Registrar shall authenticate,
register and deliver in the name of the transferee a new Special Warrant
Certificate, representing the Special Warrants so transferred, without the U.S.
Legend and, provided, further, that if the Special Warrants are being sold
pursuant to Rule 144 under the U.S. Securities Act and the transferor has
delivered to the Trustee or other Registrar an opinion of counsel, of
recognized standing reasonably satisfactory to the Company, to the effect that
the U.S. Legend is no longer required under applicable requirements of the U.S.
Securities Act or state securities laws, then the Trustee or other Registrar
shall authenticate, register and deliver in the name of the transferee a new
Special Warrant Certificate, representing the number of Special Warrants so
transferred, without the U.S. Legend.
(8) Except as required by law, neither the Trustee nor any other Registrar
duly appointed pursuant to subsection 3.4(1) nor the Company shall be charged
with notice of or be bound to see to the execution of any trust, whether
express, implied or constructive, in respect of any Special Warrant and may
transfer any Special Warrant on the written direction of the person
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registered as the holder thereof, whether named as trustee or otherwise, as
though that person were the beneficial owner thereof.
(9) The registers required to be kept at the Cities of Vancouver and
Toronto shall not be closed at any time. In the event that an office of the
Transfer Agent or a Co-transfer Agent in any place is closed, notice of the
closing shall be given, in the manner provided in section 11.2, to the Special
Warrantholders.
(10) The Trustee and every Registrar duly appointed pursuant to subsection
3.4(1) shall from time to time, when requested so to do by the Company, by the
Trustee or by any Special Warrantholder, furnish the Company, the Trustee or,
upon payment by the Special Warrantholder of a reasonable fee, the Special
Warrantholder, as the case may be, with a list of names and addresses of the
holders of Special Warrant entered on the register kept by such Trustee or
Registrar showing the number of Special Warrants held by each such holder.
ARTICLE FOUR
Exercise of Special Warrants
4.1 Exercise During Exercise Period
A Special Warrantholder may exercise the Special Warrants represented by a
Special Warrant Certificate, unless the Special Warrants are retracted in
accordance with section 4.4, at any time and from time to time in whole or in
part during the Exercise Period in accordance with and subject to section 4.6.
Any such exercise, or any deemed exercise pursuant to section 4.10, shall be
subject to the holder providing such assurances and executing such documents as
may, in the reasonable opinion of the Company or the Trustee, be required to
ensure compliance with all applicable securities legislation.
4.2 Notice of Compliance or Non-Compliance
If the Qualification Date occurs on or before the Qualification Deadline,
the Company shall forthwith, and in any event not later than the second
business day thereafter, deliver a Notice of Compliance to the Trustee and to
the Underwriters and shall deliver to the Trustee the certificate set out in
section 6.8. If the Qualification Date does not occur on or before the
Qualification Deadline, the Company shall forthwith, and in any event not later
than the second business day thereafter, deliver a Notice of Non-Compliance to
the Trustee and to the Underwriters and shall deliver to the Trustee the
certificate set out in section 6.8.
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4.3 Notice of Retraction Right
Upon receipt by the Trustee of a Notice of Non-Compliance in accordance
with and subject to section 4.2, the Trustee shall on the same day give notice
to the Special Warrantholders specifying:
(a) that the Qualification Date has not occurred on or before the
Qualification Deadline;
(b) the duration and expiry of the Retraction Period;
(c) that each Special Warrantholders may elect to retract all but not
less than all of his Special Warrants in accordance with and subject
to section 4.4 or, alternatively, to exercise his Special Warrants in
accordance with and subject to section 4.6.
4.4 Retraction of Special Warrants
(1) If the Qualification Date has not occurred on or before the
Qualification Deadline, each Special Warrantholder may elect, by delivering a
duly completed and executed election form, in the form attached as Schedule F
hereto, to the Trustee at its principal transfer office in either of the Cities
of Toronto or Vancouver or any other additional place or places that may be
designated by the Company with the approval of the Trustee, or to the
Co-transfer Agent at its principal transfer office designated by the Company,
during the Retraction Period either to:
(a) retract all but not less than all of his Special Warrants and receive
payment from the Trustee of the Special Warrant Purchase Price for
each Special Warrant retracted plus all interest earned thereon in
the hands of the Trustee from the date hereof to the date immediately
preceding the date of payment in accordance with section 6.4; or
(b) exercise all of his Special Warrants pursuant to section 4.6 and in
accordance with the terms of this Indenture acquire the Shares and
the Warrants which the Special Warrantholder is entitled to acquire
upon such exercise, subject to any applicable hold periods, resale
restrictions and other requirements of the Securities Laws.
(2) If the Qualification Date has not occurred on or before the
Qualification Deadline and a Special Warrantholder has not delivered to the
Trustee his duly completed election form during the Retraction Period as
provided for in subsection 4.4(1), that Special Warrantholder shall be deemed
to have elected to have exercised all of his Special Warrants pursuant to
section 4.10 and upon such deemed exercise acquire the Shares and Warrants
which the Special Warrantholder is entitled to acquire upon such deemed
exercise of his Special Warrants, subject to any applicable hold
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periods, resale restrictions and other requirements of the Securities Laws.
(3) If a Special Warrantholder delivers a duly completed election form in
accordance with and subject to subsection 4.4(1) and surrenders a Special
Warrant Certificate or Special Warrant Certificates representing the Special
Warrants held by such holder that are to be retracted to the Trustee at its
principal transfer office in either of the Cities of Toronto or Vancouver or
any other place or places that may be designated by the Company with the
approval of the Trustee, or to the Co-Transfer Agent at its principle transfer
office designed by the Company, during the Retraction Period, the Trustee
shall, on or before the fifth business day after the end of the Retraction
Period, deliver to such Special Warrantholder, or to such person as such
Special Warrantholder may otherwise specify in its exercise form delivered
pursuant to subsection 4.4(1), at the address of such Special Warrantholder or,
if so specified, of such person, or, if specified in the duly completed
election form delivered pursuant to subsection 4.4(1), to such holder or person
at the place where such election form was delivered, a cheque made payable to
the order of such Special Warrantholder or, if so specified, such person, in an
amount equal to the Special Warrant Purchase Price multiplied by each Special
Warrant retracted plus all interest earned thereon in the hands of the Trustee
from the date hereof to and including the day immediately preceding the date of
such payment (less any tax required to be withheld therefrom) in accordance
with section 6.4. Any payment made in accordance with the provision of this
subsection 4.4(3) shall, to the extent of the sum represented thereby (plus the
amount of any tax so withheld), satisfy and discharge all liability of the
Company with respect to such payment, unless such cheque is not paid at par on
presentation. In the event of non-receipt of any such cheque by the person so
whom it is so delivered, or the loss or destruction thereof, the Trustee will
issue to such person a replacement cheque for a like amount upon being
furnished with such evidence of non-receipt, loss or destruction and with such
indemnity as the Trustee may reasonably require.
4.5 Notice of Exercise Period
Upon receipt by the Trustee of a Notice of Compliance in accordance with
and subject to section 4.2, the Trustee shall forthwith give notice to the
Special Warrantholders specifying:
(a) that the Qualification Date has occurred on or before the
Qualification Deadline; and
(b) the duration and expiry of the Exercise Period.
4.6 Method of Exercise of Special Warrants
(1) Subject to section 4.13, the holder of any Special Warrants that are
not retracted may, during the Exercise Period,
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exercise the right thereby conferred to acquire Shares and Warrants by
surrendering to the Trustee at its principal transfer offices in either of the
Cities of Toronto and Vancouver or at any other place or places that may be
designated by the Company with the approval of the Trustee, or to the
Co-transfer Agent at its principal transfer office designated by the Company, a
Special Warrant Certificate or Special Warrant Certificates representing the
Special Warrants held by such holder that are to be exercised, together with a
duly completed and executed exercise form in the form set out in Schedule B
hereto. Except as provided in section 4.10, Special Warrant Certificates shall
only be deemed to have been surrendered upon personal delivery thereof to, or
if sent by mail or other means of transmission upon actual receipt thereof by,
the Trustee or the Co-transfer Agent at one of the offices specified in this
section.
(2) Any exercise form delivered pursuant to subsection 4.6(1) shall be
signed by the Special Warrantholder or the Special Warrantholder's executors or
administrators or other legal representatives or an attorney of the Special
Warrantholder duly appointed by an instrument in writing satisfactory to the
Trustee or the Co-transfer Agent, as the case may be. The exercise form
attached to the Special Warrant Certificate shall specify the number of Special
Warrants being exercised, the person or persons in whose name or names the
Shares and Warrants to be issued upon exercise are to be issued, the person's
or persons' address or addresses and the number of Shares and Warrants to be
issued to each person if more than one is so specified. If any of the Shares
and Warrants to be acquired are to be issued to a person or persons other than
the Special Warrantholder, the Special Warrantholder shall pay to the Trustee
or to its agent all exigible transfer taxes or governmental or other charges
required to be paid in respect of the transfer of the Special Warrants or
Shares or Warrants and the Company will not be required to issue or deliver any
certificate evidencing any Shares or Warrants unless or until that amount has
been so paid or the Special Warrantholder has established to the satisfaction
of the Company that the taxes and charges have been paid or that no taxes or
charges are owing.
(3) If, at the time of exercise of the Special Warrants, there remain
restrictions on resale under applicable securities legislation on the Shares
and Warrants acquired, the Company may, on the advice of counsel, endorse the
certificates representing the Shares and Warrants with respect to those
restrictions.
4.7 Effect of Exercise of Special Warrants
(1) Upon the exercise or deemed exercise of any Special Warrants and
compliance by the holder with section 4.6 and subject to sections 4.9 and 5.4,
the holder of the Special Warrants shall be entitled without further payment
therefor to receive from the Company:
(a) one-half Warrant for each Special Warrant exercised; and
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(b) the number of Shares that is equal to the number of Special Warrants
exercised multiplied by the Exchange Number in effect at the Exercise
Date,
and the Company shall cause the holder thereof to be entered forthwith on its
register of shareholders as the holder of the Shares and on the register of
Warrantholders as the holder of the Warrants and the Shares and Warrants so
acquired shall be deemed to have been issued, and the person or persons to whom
those Shares and Warrants are to be issued shall be deemed to have become the
shareholder or shareholders of record of the Shares and the Warrantholder or
registered Warrantholder of the Warrants on the Exercise Date unless the
register of the Company or the register of Warrantholders shall be closed on
that date, in which case the Shares and Warrants so acquired shall be deemed to
be issued and the person or persons shall be deemed to become the holder or
holders of record thereof on the date or dates on which the registers are
reopened and the Shares and Warrants shall be issued on the later date or
dates.
(2) Upon the exercise or deemed exercise of the Special Warrants as
aforesaid, the Company shall, without charge therefor except as provided in
subsection 4.6(2), forthwith cause to be delivered to the Trustee as agent for,
upon exercise pursuant to section 4.6 the person or persons in whose name or
names the Shares and Warrants so acquired are to be issued as specified in the
exercise form attached to the Special Warrant Certificate, or upon deemed
exercise pursuant to section 4.10 the holder of the Special Warrants deemed
exercised certificates for the appropriate number of Shares and Warrants that
the Special Warrantholder is entitled to and has elected to acquire pursuant to
the Special Warrants exercised. Upon receipt by the Trustee of such
certificates the Trustee shall cause such certificates to be delivered
forthwith in accordance with the written delivery instructions of the holder,
or in the absence of such instructions, by registered mail without charge
therefor, to the person or persons in whose name or names the Shares and
Warrants have been issued at the addresses specified in, upon exercise pursuant
to section 4.6 the exercise form, or upon deemed exercise pursuant to section
4.10 the register for the Special Warrants deemed exercised, and if the
Qualification Date has occurred, a copy of the Final Prospectus, unless a copy
thereof has previously been given by the Company to such person or persons.
4.8 Partial Exercise of Special Warrants
Except as provided for in section 4.10 and paragraph 4.4(1)(b), a Special
Warrantholder may exercise any number of Special Warrants up to the aggregate
number of Special Warrants represented by the Special Warrant Certificate
surrendered. In the event of any exercise of a number of Special Warrants less
than the number which the holder is entitled to exercise, the holder of the
Special Warrants upon such exercise shall be entitled to receive, without
charge therefor, a new Special Warrant Certificate in respect of the balance of
the
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Special Warrants represented by the surrendered Special Warrant Certificate and
which were not then exercised and the Trustee shall issue a new Special Warrant
Certificate upon surrender of such Special Warrant Certificate, if satisfied
that the new Special Warrant Certificate is properly issuable.
4.9 No Fractional Shares or Warrants
Notwithstanding anything herein contained including any adjustment
provided for in Article Five, the Company shall not be obliged to issue any
fractional Shares or Warrants or to distribute certificates which evidence
fractional Shares or Warrants upon the exercise of one or more Special
Warrants. To the extent that the holder of one or more Special Warrants would
otherwise have been entitled to receive on the exercise or partial exercise
thereof a fraction of a Share or Warrant that holder may exercise that right in
respect of the fraction only in combination with other Special Warrants that in
the aggregate entitle the holder to purchase a whole number of Shares and
Warrants. If not so exercised, the Company shall not pay any amounts to the
holder in satisfaction of the right to otherwise have received a fraction of a
Share or Warrant.
4.10 Deemed Exercise of Special Warrants
Immediately prior to the expiry of the Exercise Period, all Special
Warrants not exercised by the holders thereof in accordance with section 4.6
and not retracted in accordance with section 4.4 shall be deemed to have been
then exercised and surrendered by the holder without any further action on the
part of the holder.
4.11 Accounting and Recording
The Trustee shall record the particulars of the Special Warrants
exercised, including the name or names and addresses of the persons who become
holders of Shares and Warrants on exercise and the Exercise Date. Within three
business days of each Exercise Date, the Trustee shall provide those
particulars in writing to the Company.
4.12 Cancellation of Surrendered Special Warrants
All Special Warrant Certificates surrendered to the Trustee shall be
cancelled by the Trustee and, upon request therefor by the Company, the Trustee
shall furnish the Company with a certificate identifying the Special Warrant
Certificates so cancelled and the number of Shares and Warrants which have been
issued pursuant to each.
4.13 Exercise Restrictions
Notwithstanding the foregoing, Special Warrant Certificates bearing the
U.S. Legend may only be exercised pursuant
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to this Article Four provided that the certificates representing the Shares and
Warrants delivered upon such exercise shall bear the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT
OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, OR (C)
INSIDE THE UNITED STATES IN ACCORDANCE WITH (1) CERTAIN PROCEDURES
SATISFACTORY TO THE COMPANY OR (2) RULE 144 UNDER THE SECURITIES ACT, IF
AVAILABLE. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY"
IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE "GOOD
DELIVERY" MAY BE OBTAINED FROM MONTREAL TRUST COMPANY OF CANADA UPON
DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM
SATISFACTORY TO MONTREAL TRUST COMPANY OF CANADA AND THE COMPANY, TO THE
EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN
COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT.
ARTICLE FIVE
Adjustment of Exercise Number
5.1 Definitions
In this Article the terms "record date" and "effective date" where used
herein shall mean 4:30 p.m. (Vancouver time) on the relevant date.
5.2 Adjustment of Exercise Number
The Exercise Number (or the number and kind of Shares or securities to be
received upon exercise in the case of subsections 5.2(4) and 5.2(5) below)
shall be subject to adjustment from time to time in the events and in the
manner provided in section 5.3 and as follows:
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(1) If during the Exercise Period the Company:
(a) issues to all or substantially all the holders of the Shares by way
of a stock dividend or otherwise Shares or Convertible Securities,
other than (i) the issue from time to time of Shares or Convertible
Securities by way of stock dividend to shareholders who elect to
receive Shares or Convertible Securities in lieu of cash dividends in
the ordinary course or pursuant to a dividend reinvestment plan or
(ii) as dividends paid in the ordinary course; or
(b) subdivides or redivides its outstanding Shares into a greater number
of Shares; or
(c) combines, consolidates or reduces its outstanding Shares into a
smaller number of Shares
(any of those events being herein called a "Share Reorganization"),
the Exercise Number shall be adjusted effective immediately after the record
date at which the holders of Shares are determined for the purposes of the
Share Reorganization or the effective date if no record date is fixed to a
number that is the product of (1) the Exercise Number in effect on the record
date and (2) a fraction:
(i) the numerator of which shall be the number of Shares outstanding
after giving effect to the Share Reorganization; and
(ii) the denominator of which shall be the number of Shares
outstanding on the record date before giving effect to the Share
Reorganization.
For the purposes of determining the number of Shares outstanding at any
particular time for the purpose of this subsection 5.2(1) there shall be
included that number of Shares which would have resulted from the conversion at
that time of all outstanding Convertible Securities (which, for greater
certainty, includes Warrants issued prior to the end of the Exercise Period,
pursuant to the exercise of Special Warrants).
(2) If during the Exercise Period the Company shall issue rights, options
or warrants (other than the Warrants) to all or substantially all the holders
of the Shares pursuant to which those holders are entitled to subscribe for,
purchase or otherwise acquire Shares or Convertible Securities within a period
of 45 days from the date of issue thereof at a price per share, or at a
conversion price per share, of less than 95% of the Current Market Price at the
record date for such distribution (any such issuance being herein called a
"Rights Offering" and Shares that may be acquired in exercise of the Rights
Offering, or upon conversion of
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the Convertible Securities offered by the Rights Offering, being herein called
the "Offered Shares"), the Exercise Number shall be adjusted effective
immediately after the record date at which holders of Shares are determined for
the purposes of the Rights Offering to an Exercise Number that is the product
of (1) the Exercise Number in effect on the record date and (2) a fraction:
(i) the numerator of which shall be the sum of (a) the number of
Shares outstanding on the record date plus (b) the number of
Offered Shares offered pursuant to the Rights Offering or the
maximum number of Offered Shares into which the Convertible
Securities so offered pursuant to the Rights Offering may be
converted, as the case may be; and
(ii) the denominator of which shall be the sum of:
(A) the number of Shares outstanding on the record date; and
(B) the number arrived at when (I) either the product of (a)
the number of Offered Shares so offered and (b) the price
at which those shares are offered, or the product of (c)
the conversion price thereof and (d) the maximum number of
Offered Shares for or into which the Convertible Securities
so offered pursuant to the Rights Offering may be
converted, as the case may be, is divided by (II) the
Current Market Price of the Shares on the record date.
Any Offered Shares owned by or held for the account of the Company or a
subsidiary of the Company shall be deemed not to be outstanding for the purpose
of any such computation; if all the rights, options or warrants are not so
issued or if all rights, options or warrants are not exercised prior to the
expiration thereof, the Exercise Number shall be readjusted to the Exercise
Number in effect immediately prior to the record date, and the Exercise Number
shall be further adjusted based upon the number of Offered Shares (or
Convertible Securities that are convertible into Offered Shares) actually
delivered upon the exercise of the rights, options or warrants, as the case may
be, but subject to any other adjustment required hereunder by reason of any
event arising after that record date.
(3) If during the Exercise Period the Company shall issue or distribute to
all or substantially all the holders of Shares, (i) shares of any class other
than Shares, or (ii) rights, options or warrants other than Warrants and other
than rights, options or warrants exercisable within 45 days from the date of
issue thereof at a price, or at a conversion price, of at least 95% of the
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<PAGE> 29
Current Market Price at the record date for such distribution, or (iii)
evidences of indebtedness, or (iv) any other cash, securities or other property
or assets (excluding cash dividends that Special Warrantholders receive under
section 6.5) and that issuance or distribution does not constitute a Share
Reorganization or a Rights Offering (any of those events being herein called a
"Special Distribution"), the Exercise Number shall be adjusted effective
immediately after the record date at which the holders of Shares are determined
for purposes of the Special Distribution to an Exercise Number that is the
product of (1) the Exercise Number in effect on the record date and (2) a
fraction:
(i) the numerator of which shall be the product of (I) the sum of
the number of Shares outstanding on the record date plus the
number of Shares which the Special Warrantholders would be
entitled to receive upon exercise of all their outstanding
Special Warrants if they were exercised on the record date and
(II) the Current Market Price thereof on that date; and
(ii) the denominator of which shall be:
(A) the product of (I) the sum of the number of Shares
outstanding on the record date plus the number of Shares
which the Special Warrantholders would be entitled to
receive upon exercise of all their outstanding Special
Warrants if they were exercised on the record date and (II)
the Current Market Price thereof on the earlier of such
record date and the date on which the Company announces its
intention to make such distribution;
less
(B) the aggregate fair market value, as determined by the board
at the time such distribution is authorized, whose
determination shall be conclusive, of the shares, rights,
options, warrants, evidences of indebtedness or other
assets issued or distributed in the Special Distribution.
Any Shares owned by or held for the account of the Company shall be deemed not
to be outstanding for the purpose of any such computation; to the extent that
the distribution of shares, rights, options, warrants, evidences of
indebtedness or assets is not so made or to the extent that any rights, options
or warrants so distributed are not exercised, the Exercise Number shall be
readjusted to the Exercise Number that would then be in effect based upon
shares, rights, options, warrants, evidences of
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indebtedness or assets actually distributed or based upon the number of Shares
or Convertible Securities actually delivered upon the exercise of the rights,
options or warrants, as the case may be, but subject to any other adjustment
required hereunder by reason of any event arising after the record date.
(4) If during the Exercise Period there is a reorganization of the Company
not otherwise provided for in subsection 5.2(1) or a consolidation or merger or
amalgamation of the Company with or into another body corporate including a
transaction whereby all or substantially all of the Company's undertaking and
assets become the property of any other corporation through sale, lease,
exchange or otherwise (any such event being herein called a "Capital
Reorganization") any holder of a Special Warrant who has not exercised his
right to exchange his Special Warrant for Shares and Warrants prior to the
effective date of the Capital Reorganization shall be entitled to receive and
shall accept, upon the exercise of his right at any time after the effective
date of the Capital Reorganization, in lieu of the number of Shares and
Warrants (and any other securities or properties to which holders are entitled
upon exercise of the Special Warrants) to which he was theretofore entitled
upon exercise of the Special Warrant, the aggregate number of shares or other
securities or property of the Company, or the continuing, successor or
purchasing corporation, as the case may be, under the Capital Reorganization
that the holder would have been entitled to receive as a result of the Capital
Reorganization if, on the effective date thereof, he had been the holder of the
number of Shares and Warrants (and any other securities to which holders are
entitled upon exercise of the Special Warrants) to which immediately before the
transaction he was entitled upon exercise of the Special Warrants; no Capital
Reorganization shall be carried into effect unless all necessary steps shall
have been taken so that the holders of Special Warrants shall thereafter be
entitled to receive the number of shares or other securities or property of the
Company, or of the continuing, successor or purchasing corporation, as the case
may be, under the Capital Reorganization, subject to adjustment thereafter in
accordance with provisions the same, as nearly as may be possible, as those
contained in this section 5.2 and in section 5.3.
(5) If the Company shall reclassify or otherwise change the outstanding
Shares, the exercise right shall be adjusted effective immediately upon the
reclassification becoming effective so that holders of Special Warrants who
exercise their rights thereafter shall be entitled to receive such shares as
they would have received had the Special Warrants been exercised immediately
prior to the effective date, subject to adjustment thereafter in accordance
with provisions the same, as nearly as may be possible, as those contained in
this section 5.2 and in section 5.3.
5.3 Subscription Rights Adjustment Rules
The following rules and procedures shall be applicable to adjustments made
pursuant to section 5.2:
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<PAGE> 31
(1) The adjustments and readjustments provided for in this Article Five
are cumulative and, subject to subsection 5.3(2), shall apply (without
duplication) to successive issues, subdivisions, combinations, consolidations,
distributions and any other events that require adjustment of the Exercise
Number or the number or kind of shares or securities purchasable hereunder.
(2) No adjustment in the Exercise Number shall be required unless the
adjustment would result in a change of at least 1% in the Exercise Number then
in effect provided, however, that any adjustments that, except for the
provisions of this subsection 5.3(2) would otherwise have been required to be
made, shall be carried forward and taken into account in any subsequent
adjustment.
(3) No adjustment in the Exercise Number shall be made in respect of any
event described in paragraph 5.2(l)(a) or subsections 5.2(2) or 5.2(3) if the
holders of the Special Warrants are entitled to participate in the event on the
same terms, mutatis mutandis, as if they had exercised their Special Warrants
immediately prior to the effective date or record date of the event.
(4) No adjustment in the Exercise Number shall be made pursuant to section
5.2 in respect of the issue of Shares, rights, options or warrants pursuant
(a) to this Indenture;
(b) the issuance of Shares pursuant to the exercise of directors,
officers and employees options or options granted for services in
accordance with the rules of The Toronto Stock Exchange;
(c) the issuance of Shares pursuant to the exercise of Warrants (except
that the number of Convertible Securities will increase if Warrants
are issued prior to the end of the Exercise Period); or
(d) the issuance of any special warrants to L.B. Mining Co. or any
affiliate thereof in part consideration for the acquisition of the
Guariche property in Venezuela, the issuance of any Shares pursuant
to the exercise of such special warrants, the issuance of any common
share purchase warrants pursuant to the exercise of such special
warrants, and the issuance of any Shares pursuant to the exercise of
such common share purchase warrants (except that the number of
Convertible Securities will increase if such common share purchase
warrants are issued prior to the expiry of their exercise period);
and any such issue shall be deemed not to be a Share Reorganization, a Rights
Offering or a Special Distribution.
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(5) If a dispute shall at any time arise with respect to adjustments of
the Exercise Number, the dispute shall be conclusively determined (as between
the Company, the Special Warrantholders, the Trustee and all transfer agents
and shareholders of the Company) by the auditors of the Company or if they are
unable or unwilling to act, by such firm of independent chartered accountants
as may be selected by the directors and any such determination shall be binding
upon the Company, the Special Warrantholders, the Trustee and all transfer
agents and shareholders of the Company.
(6) If the Company shall set a record date to determine the holders of
Shares for the purpose of entitling them to receive any dividend or
distribution or any subscription or purchase rights and shall, thereafter
legally abandon its plans to pay or deliver the dividend, distribution or
subscription or purchase rights, then no adjustment in the Exercise Number
shall be required by reason of the setting of the record date.
5.4 Postponement of Subscription
In any case where the application of section 5.2 results in an increase of
the Exercise Number taking effect immediately after the record date for or
occurrence of a specific event, if any Special Warrants are exercised after
that record date or occurrence and prior to completion of the event or of the
period for which a calculation is required to be made, the Company may postpone
the issuance to the holder of the Special Warrants of the Shares to which the
holder is entitled by reason of the increase of the Exercise Number but the
Shares shall be so issued and delivered to that holder upon completion of that
event or period, with the number of those Shares calculated on the basis of the
Exercise Number on the Exercise Date adjusted for completion of that event or
period, and the Company shall forthwith after the Exercise Date deliver to the
person or persons in whose name or names the Shares are to be issued an
appropriate instrument evidencing the person's or persons' right to receive the
Shares.
5.5 Notice of Certain Events
(1) Upon the occurrence of any event referred to in sections 5.2 or 5.3
that requires an adjustment in the Exercise Number, the Company shall promptly
thereafter:
(a) file with the Trustee a certificate of the Company specifying the
particulars of the event and, if determinable, the adjustment and a
computation of the adjustment; and
(b) give notice to the Special Warrantholders of the particulars of the
event and, if determinable, the adjustment.
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(2) If notice has been given under subsection 5.5(1) and the adjustment is
not then determinable, the Company shall promptly after the adjustment is
determinable:
(a) file with the Trustee a certificate of the Company evidencing the
computation of the adjustment; and
(b) give notice to the Special Warrantholders of the adjustment.
5.6 Protection of Trustee
Subject to sections 10.2 and 10.3, the Trustee shall not at any time be
under any duty or responsibility to any Special Warrantholder to determine
whether any facts exist which may require any adjustment contemplated by
section 5.2, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed in making the same.
5.7 Proceedings Prior to Any Action Requiring Adjustment
As a condition precedent to the taking of any action which would require
an adjustment in any of the acquisition rights pursuant to any of the Special
Warrants, including the number of Shares which are to be received upon the
exercise of the Special Warrants, the Company shall take any corporate action
which may, in the opinion of counsel, be necessary in order that the Company
has unissued and reserved in its authorized capital and may validly and legally
issue as fully paid and non-assessable all the Shares which the holders of such
Special Warrants are entitled to receive on the full exercise thereof in
accordance with the provisions hereof.
ARTICLE SIX
Rights and Covenants
6.1 Purchase of Special Warrants
(1) The Company may from time to time purchase any of the Special Warrants
in such manner, from such persons and on such terms as the Company may
determine.
6.2 General Covenants of the Company
The Company covenants with the Trustee that so long as any Special
Warrants remain outstanding and may be exercised for Shares and Warrants:
(1) The Company will at all times maintain its existence; carry on and
conduct its business in a prudent manner in accordance with industry standards
and good business practice; keep or cause to be kept proper books of account in
accordance with applicable law; and, if and whenever required in writing by the
Trustee, file
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with the Trustee copies of all annual financial statements of the Company
furnished to its shareholders during the term of this Indenture.
(2) The Company shall maintain the listing of the Shares on The Toronto
Stock Exchange, and will take all steps necessary to ensure that the Shares
issuable upon exercise of the Special Warrants and Warrants will be listed and
posted for trading on The Toronto Stock Exchange upon their issue.
(3) The Company will reserve and keep available a sufficient number of
Shares for issuance upon the exercise or deemed exercise of Special Warrants
issued by the Company hereunder and for issuance upon the exercise of Warrants.
(4) The Company will cause the Shares and Warrants from time to time
subscribed for pursuant to the exercise or deemed exercise of the Special
Warrants issued by the Company hereunder, in the manner herein provided, to be
duly issued in accordance with the Special Warrants and the terms hereof.
(5) The Company will cause the certificates representing the Shares and
Warrants from time to time to be acquired pursuant to the Special Warrants in
the manner herein provided, to be duly issued and delivered in accordance with
the Special Warrants and the terms hereof.
(6) All Shares that shall be issued by the Company upon exercise or deemed
exercise of the Special Warrants as provided for herein shall be issued as
fully paid and non-assessable.
(7) The Company will use its best efforts to maintain its status as a
"reporting issuer" not in default of the requirements of the Securities Laws
for a period of at least one year from the date hereof.
(8) As expeditiously as reasonably practicable, the Company shall prepare
and file under the Securities Laws a preliminary prospectus and other documents
required to be filed therewith relating to the proposed distribution of Shares
and Warrants to holders of Special Warrants upon the exercise thereof.
(9) The Company will use its reasonable best efforts to resolve any
comments on the preliminary prospectus by the Securities Commissions and to
prepare and file under the Securities Laws the Final Prospectus and other
related documents required to be filed therewith and to take all other steps
and proceedings that may be necessary in order to qualify the Shares and
Warrants to be issued upon exercise of the Special Warrants for distribution in
each of the Provinces through registrants who comply with the relevant
provisions of applicable Securities Laws.
(10) The Company shall use its reasonable best efforts to ensure that the
Qualification Date occurs on or before the
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Qualification Deadline. However, if the Qualification Date does not occur on
or before the Qualification Deadline, the Company shall continue to use its
reasonable best efforts to ensure that the Qualification Date occurs prior to
the end of the Exercise Period.
(11) Generally, the Company will well and truly perform and carry out all
the acts or things to be done by it as provided in this Indenture.
6.3 Trustee's Remuneration and Expenses
(1) The Company covenants that it will pay to the Trustee from time to
time such reasonable remuneration for its services hereunder as may be agreed
upon between the Company and the Trustee and will pay or reimburse the Trustee
upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in the administration or execution of the
trusts hereby created (including the reasonable compensation and the
disbursements of counsel and all other advisers and assistants not regularly in
its employ), both before any default hereunder and thereafter until all duties
of the Trustee under the trusts hereof shall be finally and fully performed,
except any expense, disbursement or advance as may arise from the negligence,
wilful misconduct or bad faith of the Trustee or of persons for whom the
Trustee is responsible.
(2) The Trustee shall not have a lien against any of the funds deposited
with it and held in escrow pursuant to section 6.4 in respect of its
remuneration or expenses, disbursements and advances.
6.4 Escrow of Funds
The Company agrees to deposit with the Trustee prior to the issue of each
Special Warrant all proceeds received by the Company from the issue and sale of
such Special Warrant, and the Trustee shall hold the proceeds received from the
Company in trust upon and subject to the following irrevocable authorizations
and instructions, and the Company hereby irrevocably authorizes and instructs
the Trustee:
(1) to retain the balance of the proceeds in trust for the benefit of the
Company and the Special Warrantholders, as their respective interests may
appear from time to time, to be distributed by the Trustee as hereinafter
provided;
(2) if, prior to the Trustee having received from the Company a Notice of
Compliance or a Notice of Non- Compliance, any Special Warrantholder exercises
any of his Special Warrants in accordance with Article 4:
(a) pay to such Special Warrantholder, within five business days of the
surrender of the Special Warrant Certificate
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or Special Warrant Certificates representing such Special Warrants
exercised, an amount for each Share issuable on the exercise of such
Special Warrants that is equal to the aggregate amount of cash
dividends paid on each Share from the date hereof until the Exercise
Date and, without duplication, the amount for each Share, if any, of
cash dividends declared payable but not paid to holders of Shares of
record from the date hereof and until the Exercise Date together with
a proportionate share of all interest earned thereon after the
dividend payment date; and
(b) pay to the Company either contemporaneously with any payment made
pursuant to paragraph 6.4(2)(a) above or, if no such payment is made,
within five business days of the surrender of the Special Warrant
Certificate or Special Warrant Certificates representing the Special
Warrants exercised in an amount equal to the Special Warrant Purchase
Price received by the Trustee in respect of such Special Warrants
together with the proportionate share of all interest earned thereon
in the hands of the Trustee from the date hereof to and including the
date immediately preceding the date of such payment, less the
aggregate amount paid in lieu of dividends pursuant to paragraph
6.4(2)(a) in respect of such Special Warrants;
(3) if the Trustee has received from the Company a Notice of Compliance in
accordance with section 4.2 and the certificate referred to in section 6.8:
(a) pay on or before the fifth business day following the end of the
Exercise Period to each Special Warrantholder who has surrendered or
is deemed to have surrendered his Special Warrants (other than any
previously exercised Special Warrants to which subsection 6.4(2)
applies) an amount for each Share issuable on the exercise or deemed
exercise of such Special Warrants (other than any previously
exercised Special Warrants to which subsection 6.4(2) applies) that
is equal to the aggregate amount of cash dividends paid on each Share
from the date hereof until the Exercise Date and, without
duplication, the amount for each Share, if any, of cash dividends
declared and payable but not paid to holders of Shares of record from
the date hereof until the Exercise Date, together with a
proportionate share of all interest earned thereon after the dividend
payment date; and
(b) pay to the Company on the fifth business day following the end of the
Exercise Period an amount equal to the aggregate Special Warrant
Purchase Price received by the Trustee in respect of Special Warrants
issued by the Company hereunder together with a proportionate share
of all interest earned thereon in the hands of the Trustee
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from the date hereof to and including the date immediately preceding
the date of such payment less:
(i) the aggregate amount paid to the Company pursuant to subsection
6.4(2);
(ii) the aggregate amount paid in lieu of dividends pursuant to
paragraphs 6.4(2)(a) and 6.4(3)(a) in respect of Special
Warrants issued by the Company hereunder; and
(iii) the Company's share of any amounts paid to the Trustee pursuant
to section 6.3;
(4) if the Trustee has received from the Company a Notice of
Non-Compliance in accordance with section 4.2:
(a) pay on or before the fifth business day following the end of the
Retraction Period to or at the written direction of each Special
Warrantholder who has elected to retract all of his Special Warrants
in accordance with the provisions of section 4.4, the aggregate
Special Warrant Purchase Price for his Special Warrants together with
all interest earned thereon in the hands of the Trustee from the date
hereof to and including the date immediately preceding the date of
such payment (less any tax required to be withheld therefrom); and
(b) pay on or before the fifth business day following the end of the
Retraction Period to the Special Warrantholders who have exercised or
are deemed to have exercised their Special Warrants pursuant to
sections 4.6 or 4.10 and pay on the fifth business day following the
end of the Retraction Period to the Company in respect of the Special
Warrants of Special Warrantholders who have not retracted their
Special Warrants and who have exercised or are deemed to have
exercised their Special Warrants pursuant to section 4.6 or 4.10 the
monies specified in subsection 6.4(3).
For purposes of the determination of proportionate shares of interest
earned in the hands of the Trustee to be paid under this section 6.4, the
determinations shall be based on the number of Special Warrants held by the
recipient at the time of the payment and the length of time the amount has been
on deposit for the benefit of the recipient, which in respect of any payment
payable in lieu of dividends shall be deemed to be from the date on which the
dividend was paid.
6.5 Right to Dividends or Distributions
If during the period commencing on the date hereof and ending on the
Exercise Date, the Company shall pay any dividend or make any distribution to
all or substantially all of the holders of
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Shares or if the Company declares any dividend, or provides for any
distribution, payable to all or substantially all the holders of Shares of
record during that period, Special Warrantholders who exercise or are deemed to
have exercised their Special Warrants shall be entitled to participate in the
dividend or distribution on the same terms, mutatis mutandis, as if they
exercised their Special Warrants immediately prior to the effective date or
record date of the dividend or distribution. For cash dividends this
entitlement shall be satisfied, to the extent of any payment received under
section 6.4, without duplication, by the payment received under section 6.4.
For stock dividends or distributions in respect of which an adjustment can be
made in the Exercise Number pursuant to paragraph 5.2(1)(a) or subsections
5.2(2) or 5.2(3), this entitlement shall be satisfied by such an adjustment.
6.6 Investment of Funds
Funds deposited hereunder with the Trustee shall, pending any payment out
thereof as required in accordance with section 6.4, be invested by the Trustee
in accordance with section 10.4 hereof.
6.7 Performance of Covenants by Trustee
If the Company shall fail to perform any of its covenants and obligations
contained in this Indenture, the Trustee may notify the Special Warrantholders
of the failure on the part of the Company or may itself perform any of the said
covenants capable of being performed by it, but shall be under no obligation to
do so or to notify the Special Warrantholders. All sums expended or advanced by
the Trustee in so doing shall be repayable as provided in section 6.3. No
performance, expenditure or advance by the Trustee shall be deemed to relieve
the Company of any default or of its continuing obligations hereunder.
6.8 Certificate of the Company
The Company shall deliver to the Trustee, on each exercise date and the
same date that it delivers either the Notice of Compliance or the Notice of
Non-Compliance to the Trustee, a certificate indicating the Exercise Number as
at that date and whether or not any dividends or distributions referred to in
section 6.5 have been made.
6.9 Rescission Right
The Company covenants with the Trustee to provide a right of rescission to
each Special Warrantholder as hereinafter set forth, which right shall be
exercisable either by the Trustee on behalf of a Special Warrantholder or by a
Special Warrantholder directly:
In the event that any holder of Special Warrants who acquires Shares and
Warrants upon the exercise or deemed exercise of his Special
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Warrants is or becomes entitled under applicable securities legislation to
the remedy of rescission by reason of the Final Prospectus or any
amendment thereto containing a misrepresentation, such holder shall be
entitled to rescission not only of such holder's exercise of such Special
Warrants but also of the purchase of such Special Warrants hereunder, and
shall be entitled in connection with such rescission to a full refund of
all consideration paid to the Company on the acquisition of such Special
Warrants. In the event such holder is a permitted assignee of the interest
of the original purchaser of such Special Warrants, such permitted
assignee shall be entitled to exercise the rights of rescission and refund
granted hereunder as if such permitted assignee were such original
purchaser. The foregoing is in addition to any other right or remedy
available to a holder of the Special Warrants under section 114 of the
Securities Act (British Columbia), section 130 of the Securities Act
(Ontario) or a corresponding provision of other securities legislation or
otherwise at law.
ARTICLE SEVEN
Enforcement
7.1 Suits by Special Warrantholders
(1) All or any of the rights conferred upon any Special Warrantholder by
any of the terms of the Special Warrants or of this Indenture, or both of them,
may be enforced by the Special Warrantholder by appropriate legal proceedings,
but without prejudice to the right which is hereby conferred upon the Trustee
to proceed in its own name to enforce each and all of the provisions herein
contained for the benefit of all Special Warrantholders, subject, in each case,
to the provisions of section 8.11.
7.2 Immunity of Shareholders
The Trustee, and by their acceptance of the Special Warrant Certificates
and as part of the consideration for the issue of the Special Warrants, the
Special Warrantholders, hereby waive and release any right, cause of action or
remedy now or hereafter existing in any jurisdiction against any past, present
or future shareholder, director or officer of the Company or of any of the
subsidiaries of the Company, or any subsidiary of the Company, in their
capacity as such, for the issue of Shares and Warrants
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pursuant to any Special Warrants or on any covenant, agreement, representation
or warranty by the Company contained herein or in the Special Warrant
Certificates.
7.3 Limitation of Liability
The obligations hereunder are not personally binding upon, nor shall
resort hereunder be had to, the private property of any of the past, present or
future directors, shareholders, officers, employees or agents of the Company or
any of the subsidiaries of the Company, or any subsidiary of the Company, but
only the property of the Company (or any successor corporation) shall be bound
in respect hereof.
ARTICLE EIGHT
Meetings of Special Warrantholders
8.1 Right to Convene Meetings
The Trustee may at any time and from time to time and shall on receipt of
a written request of the Company or of a Special Warrantholders' Request, and
upon being indemnified to its reasonable satisfaction by the Company or by one
or more of the Special Warrantholders signing the Special Warrantholders'
Request against the costs that may be incurred in connection with the calling
and holding of the meeting, convene a meeting of the Special Warrantholders. In
the event of the Trustee failing, within 15 days after receipt of the written
request of the Company or Special Warrantholders' Request and indemnity given
as aforesaid, to give notice convening a meeting, the Company or the Special
Warrantholders, as the case may be, may convene the meeting. Every meeting
shall be held in the City of Vancouver or at such other place as may be
approved or determined by the Trustee.
8.2 Notice
At least 14 days' notice of any meeting shall be given to the Special
Warrantholders in the manner provided in section 11.2 and a copy of the notice
shall be sent by mail to the Trustee unless the meeting has been called by it,
and to the Company unless the meeting has been called by it. Each notice shall
state the time when and the place where the meeting is to be held and shall
state briefly the general nature of the business to be transacted thereat and
it shall not be necessary for the notice to set out the terms of any resolution
to be proposed or any of the provisions of this Article Eight. Any accidental
omission in the notice of a meeting shall not invalidate any resolution passed
at the meeting.
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8.3 Chairman
A person (who need not be a Special Warrantholder) designated in writing
by the Trustee shall be chairman of the meeting, and if no person is so
designated, or if the person so designated is not present within 15 minutes
from the time fixed for the holding of the meeting, the Special Warrantholders
present in person or by proxy shall choose a person present to be chairman.
8.4 Quorum
Subject to the provisions of section 8.12, at any meeting of the Special
Warrantholders a quorum shall consist of one or more Special Warrantholders
present in person or by proxy and holding in aggregate, at least 20% of the
aggregate number of Shares and Warrants that could be acquired pursuant to all
the then outstanding Special Warrants. If a quorum of the Special
Warrantholders shall not be present within half an hour from the time fixed for
holding a meeting, the meeting, if summoned by the Special Warrantholders
pursuant to a Special Warrantholders' Request, shall be dissolved; but, subject
to section 8.12, in any other case the meeting shall be adjourned to the same
day in the next week (unless that day is not a business day, in which event the
meeting shall be reconvened on the next day that is a business day) at the same
time and place and no notice of the adjournment need be given. At the adjourned
meeting the Special Warrantholders present in person or by proxy shall form a
quorum and may transact the business for which the meeting was originally
convened, notwithstanding that they may not be entitled to acquire at least 20%
of the aggregate number of Shares and Warrants that can be acquired pursuant to
all the then outstanding Special Warrants.
8.5 Power to Adjourn
The chairman of any meeting at which a quorum of the Special
Warrantholders is present may, with the consent of the meeting, adjourn the
meeting and no notice of the adjournment need be given except such notice, if
any, as the meeting may prescribe.
8.6 Show of Hands
Every question submitted to a meeting shall be decided in the first place
by a majority of the votes given on a show of hands except that votes on an
Extraordinary Resolution shall be given in the manner hereinafter provided. At
any meeting, unless a poll is duly demanded or required as herein provided, a
declaration by the chairman that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority shall be conclusive evidence of the fact.
8.7 Poll
On every Extraordinary Resolution, and on any other question submitted to
a meeting upon which a poll is directed by
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the chairman or requested by one or more of the Special Warrantholders acting
in person or by proxy and holding in the aggregate not less than 5% of the
aggregate number of Shares and Warrants that could be acquired pursuant to all
the Special Warrants then outstanding, a poll shall be taken in such manner as
the chairman shall direct. Questions other than an Extraordinary Resolution
shall be decided by a majority of the votes cast on a poll. The results of a
poll shall be deemed to be the decision of the meeting at which the poll was
demanded and shall be binding on all Special Warrantholders.
8.8 Voting
On a show of hands, every person who is present and entitled to vote,
whether as a Special Warrantholder or as proxy for one or more absent Special
Warrantholders or both, shall have one vote. On a poll each Special
Warrantholder present in person or represented by a proxy duly appointed by
instrument in writing shall be entitled to one vote in respect of each Special
Warrant then held by him. A proxy need not be a Special Warrantholder.
8.9 Regulations
The Trustee, or the Company with the approval of the Trustee, may from
time to time make or vary such regulations as they shall think fit:
(a) for the issue of voting certificates by any bank, trust company or
other depository satisfactory to the Trustee stating that the Special
Warrants specified therein have been deposited with the depository by
a named person and will remain on deposit until a specified date,
which voting certificates shall entitle the persons named therein to
be present and vote at the meeting of the Special Warrantholders and
at any adjournment thereof held before that date or to appoint a
proxy or proxies to represent them and vote for them at any such
meeting and at any adjournment thereof held before that date in the
same manner and with the same effect as though the persons so named
in the voting certificates were the actual holders of the Special
Warrants specified therein;
(b) for the deposit of voting certificates and/or instruments appointing
proxies at such place and time as the Trustee, the Company or the
Special Warrantholders convening the meeting, as the case may be, may
in the notice convening the meeting direct;
(c) for the deposit of voting certificates and/or instruments appointing
proxies at some approved place or places other than the place at
which the meeting is to be held and enabling particulars of the
voting certificates and/or instruments appointing proxies to be sent
by mail, cable, telex or other means of prepaid, transmitted,
recorded
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communication before the meeting to the Company or to the Trustee at
the place where the same is to be held and for the voting of proxies
so deposited as though the instruments themselves were produced at
the meeting;
(d) for the form of instrument appointing a proxy (which shall be in
writing), the manner in which the same shall be executed and the
verification of any authority under which a person executes a proxy
on behalf of a Special Warrantholder; and
(e) generally for the calling of meetings of Special Warrantholders and
the conduct of business thereat.
Any regulations so made shall be binding and effective and the votes given in
accordance therewith shall be valid and shall be counted. Save as the
regulations may provide, the only persons who shall be recognized at any
meeting as the holders of any Special Warrants, or as entitled to vote or,
subject to section 8.10, be present at the meeting in respect thereof, shall be
persons who are the registered holders of Special Warrants or their duly
appointed proxyholders.
8.10 Company and Trustee may be Represented
The Company and the Trustee, by their respective officers or directors,
and the counsel to the Company and the Trustee may attend any meeting of the
Special Warrantholders, but shall have no vote as such.
8.11 Powers Exercisable by Extraordinary Resolution
In addition to all other powers conferred upon them by any other
provisions of this Indenture or by law, the Special Warrantholders at a meeting
shall have the following powers exercisable from time to time by Extraordinary
Resolution:
(a) power to agree to or sanction any modification, abrogation,
alteration, compromise or arrangement of the rights of Special
Warrantholders and/or the Trustee in its capacity as trustee
hereunder or on behalf of the Special Warrantholders against the
Company, whether those rights arise under this Indenture or otherwise
which shall be agreed to by the Company, and to authorize the Trustee
to concur in and execute any indenture supplement, except that in
respect of a change in the Exercise Period or the Special Warrant
Consideration the amendment shall not be binding upon a Special
Warrantholder who does not consent thereto;
(b) power to direct or authorize the Trustee to enforce any of the
obligations on the part of the Company contained in this Indenture or
the Special Warrants or to enforce any of the rights of the Special
Warrantholders in any
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manner specified in the Extraordinary Resolution or to refrain from
enforcing any such covenant or right;
(c) power to waive and direct the Trustee to waive any default on the
part of the Company in complying with any provisions of this
Indenture or the Special Warrants, either unconditionally or upon any
conditions specified in the Extraordinary Resolution;
(d) power to restrain any Special Warrantholder from taking or
instituting any suit, action or proceeding against the Company for
the enforcement of any of the obligations on the part of the Company
contained in this Indenture or to enforce any of the rights of the
Special Warrantholders except for a suit or action against the
Company to compel payment to a Special Warrantholder in respect of
monies owing to him in accordance with the provisions of section 6.5;
(e) power to direct any Special Warrantholder who, as such, has brought
any suit, action or proceeding to stay or discontinue or otherwise
deal with the same upon payment of the costs, charges and expenses
reasonably and properly incurred by the Special Warrantholder in
connection therewith;
(f) power from time to time and at any time, with the consent of the
Company, not to be unreasonably withheld, to remove the Trustee and
appoint a successor trustee;
(g) power to assent to any compromise or arrangement with any creditor or
any class of creditors, whether secured or otherwise, and with
holders of any Shares or other securities of the Company; and
(h) power to amend, alter or repeal any Extraordinary Resolution
previously passed or consented to by Special Warrantholders.
8.12 Meaning of "Extraordinary Resolution"
(1) The expression "Extraordinary Resolution" when used in this Indenture
means, subject as hereinafter in this section and in sections 8.15 and 8.16
provided, a resolution proposed at a meeting of the Special Warrantholders duly
convened for that purpose and held in accordance with the provisions of this
Article Eight at which there are present in person or by proxy one or more
Special Warrantholders entitled to acquire at least 51% of the aggregate number
of Shares and Warrants that can be acquired pursuant to all the then
outstanding Special Warrants and passed by the affirmative votes of Special
Warrantholders entitled to acquire not less than two-thirds of the aggregate
number of Shares and Warrants that can be acquired pursuant to all the Special
Warrants represented at the meeting and voted on the poll upon the resolution.
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(2) If, at any meeting called for the purpose of passing an Extraordinary
Resolution, Special Warrantholders entitled to acquire 51% of the aggregate
number of Shares and Warrants that can be acquired pursuant to all the then
outstanding Special Warrants are not present in person or by proxy within half
an hour after the time appointed for the meeting, then the meeting, if convened
by Special Warrantholders pursuant to a Special Warrantholders' Request, shall
be dissolved; but in any other case it shall stand adjourned to such day, being
not less than 15 or more than 60 days later, and to such place and time as may
be appointed by the chairman. Not less than ten days' notice shall be given to
the Special Warrantholders of the time and place of the adjourned meeting in
the manner provided in section 11.2. The notice shall state that at the
adjourned meeting the Special Warrantholders present in person or by proxy
shall form a quorum but it shall not be necessary to set forth the purposes for
which the meeting was originally called or any other particulars. At the
adjourned meeting the Special Warrantholders present in person or by proxy
shall form a quorum and may transact the business for which the meeting was
originally convened and a resolution proposed at the adjourned meeting and
passed by the requisite vote as provided in subsection 8.12(1) shall be an
Extraordinary Resolution within the meaning of this Indenture notwithstanding
that the Special Warrantholders entitled to acquire 51% of the aggregate number
of Shares and Warrants that can be acquired pursuant to all the then
outstanding Special Warrants are not present in person or by proxy at the
adjourned meeting.
(3) Votes on an Extraordinary Resolution shall always be given on a poll
and no demand for a poll on an Extraordinary Resolution shall be necessary.
8.13 Powers Cumulative
It is hereby declared and agreed that any one or more of the powers or any
combination of the powers in this Indenture stated to be exercisable by the
Special Warrantholders by Extraordinary Resolution or otherwise may be
exercised from time to time and the exercise of any one or more of the powers
or any combination of the powers from time to time shall not prevent the
Special Warrantholders from exercising that power or those powers or
combination of powers then or any other power or powers or combination of
powers thereafter from time to time.
8.14 Minutes
Minutes of all resolutions and proceedings at every meeting of Special
Warrantholders as aforesaid shall be made and duly entered in books from time
to time to be provided for that purpose by the Trustee at the expense of the
Company, and any minutes as aforesaid, if signed by the chairman of the meeting
at which such resolutions were passed or proceedings were taken, shall be prima
facie evidence of the matters therein stated and, until the contrary is proved,
every meeting, in respect of the
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<PAGE> 46
proceedings of which minutes shall have been made, shall be deemed to have been
duly convened and held, and all resolutions passed thereat or proceedings
taken, to have been duly passed and taken.
8.15 Instruments in Writing
All actions that may be taken and all powers that may be exercised by the
Special Warrantholders at a meeting held as in this Article Eight provided may
also be taken and exercised by Special Warrantholders entitled to acquire
two-thirds of the aggregate number of Shares and Warrants that can be acquired
pursuant to all the then outstanding Special Warrants by an instrument in
writing signed in one or more counterparts by each Special Warrantholder in
person or by attorney duly appointed in writing and the expression
"Extraordinary Resolution" when used in this Indenture shall include a
resolution embodied in an instrument so signed.
8.16 Binding Effect of Resolutions
Every resolution and every Extraordinary Resolution passed in accordance
with the provisions of this Article Eight at a meeting of Special
Warrantholders shall be binding upon all the Special Warrantholders, except as
provided in subsection 8.11(a), whether present at or absent from the meeting,
and whether voting for or against the resolution or abstaining and every
instrument in writing signed by Special Warrantholders in accordance with
section 8.15 shall be binding upon all the Special Warrantholders, except as
provided in subsection 8.11(a), whether signatories thereto or not, and each
and every Special Warrantholder and the Trustee (subject to the provisions for
its indemnity herein contained) shall be bound to give effect accordingly to
every resolution and instrument in writing passed or executed in accordance
with these provisions.
8.17 Holdings by Company Disregarded
In determining whether the requisite number of Special Warrantholders are
present for the purpose of obtaining a quorum or have voted or consented to any
resolution, Extraordinary Resolution, consent, waiver, Special Warrantholders'
Request or other action under this Indenture, Special Warrants owned by the
Company or any subsidiary of the Company shall be deemed to be not outstanding.
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ARTICLE NINE
Supplemental Indentures and Successor Companies
9.1 Provision for Supplemental Indentures for Certain Purposes
From time to time the Company and the Trustee may, subject to the
provisions hereof, and they shall, when so directed hereby, execute and deliver
by their proper officers or directors, as the case may be, indentures or
instruments supplemental hereto, which thereafter shall form part hereof, for
any one or more or all of the following purposes:
(a) setting forth any adjustments resulting from the application of the
provisions of Article Five;
(b) adding to the provisions hereof such additional covenants and
enforcement provisions as, in the opinion of counsel, are necessary
or advisable, provided that the same are not in the opinion of the
Trustee prejudicial to the interests of the Special Warrantholders as
a group;
(c) giving effect to any Extraordinary Resolution passed as provided in
Article Eight;
(d) adding to, deleting or altering the provisions hereof in respect of
the transfer of Special Warrants, the exchange of Special Warrants
and the making of any modification in the form of a Special Warrant
Certificate which additions, deletions or alterations, in the opinion
of the Trustee, do not affect the substance thereof;
(e) making any additions to, deletions from or alterations of the
provisions of this Indenture which, in the opinion of the Trustee, do
not materially and adversely affect the interests of the Special
Warrantholders and are necessary or advisable in order to
incorporate, reflect or comply with any Applicable Legislation;
(f) making provisions not inconsistent with this Indenture as may be
necessary or desirable with respect to matters or questions arising
hereunder or for the purpose of obtaining a listing or quotation of
the Shares issuable under the Special Warrants on a stock exchange,
bourse or over-the-counter market, provided that the provisions are
not, in the opinion of the Trustee, prejudicial to the interests of
the Special Warrantholders as a group;
(g) modifying any of the provisions of this Indenture or relieving the
Company from any of the obligations, conditions or restrictions
herein contained, provided that no such modification or relief shall
be or become operative or effective if in the opinion of the Trustee
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<PAGE> 48
the modification or relief impairs any of the rights of the Special
Warrantholders provided hereunder, or of the Trustee, and provided
that the Trustee may in its uncontrolled discretion decline to enter
into any supplemental indenture which in its opinion may not afford
adequate protection to the Trustee when the same shall become
operative;
(h) evidencing any succession, or successive successions, of other bodies
corporate to the Company and the assumption by any successor of the
obligations of the Company herein and in the Special Warrant
Certificates as provided hereafter in this Article Nine; and
(i) for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any
ambiguities, defective provisions, errors or omissions herein,
provided that, in the opinion of the Trustee, the rights of the
Trustee and the Special Warrantholders provided hereunder, are in no
way prejudiced thereby.
9.2 Successor Companies
In the case of the consolidation, amalgamation, arrangement, merger or
transfer of the undertaking or assets of the Company as an entirety or
substantially as an entirety to another corporation ("successor corporation"),
the successor corporation resulting from the consolidation, amalgamation,
arrangement, merger or transfer (if not the Company) shall be bound by the
provisions hereof and all obligations for the due and punctual performance and
observance of each and every covenant and obligation contained in this
Indenture to be performed by the Company and, if requested by the Trustee, the
successor corporation shall by supplemental indenture satisfactory in form to
the Trustee and executed and delivered to the Trustee, expressly assume those
obligations.
ARTICLE TEN
Concerning the Trustee
10.1 Trust Indenture Legislation
(1) If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with a mandatory requirement of Applicable Legislation,
the mandatory requirement shall prevail.
(2) The Company and the Trustee agree that each will at all times in
relation to this Indenture and any action to be taken hereunder observe and
comply with and be entitled to the benefits of Applicable Legislation.
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<PAGE> 49
10.2 Rights and Duties of Trustee
(1) In the exercise of the rights, duties and obligations prescribed or
conferred by the terms of this Indenture, the Trustee shall act honestly and in
good faith with a view to the best interests of the Special Warrantholders and
shall exercise that degree of care, diligence and skill that a reasonably
prudent trustee would exercise in comparable circumstances.
(2) No provision of this Indenture will be construed to relieve the
Trustee from liability for its own negligent act, negligent failure to act,
wilful misconduct or bad faith.
(3) The obligation of the Trustee to commence or continue any act, action
or proceeding for the purpose of enforcing any rights of the Trustee or the
Special Warrantholders or obligations of the Company hereunder shall be
conditional upon either the Special Warrantholders or the Company furnishing,
when required by notice in writing by the Trustee, sufficient funds to commence
or continue the act, action or proceeding and an indemnity reasonably
satisfactory to the Trustee to protect and hold harmless the Trustee against
the costs, charges and expenses and liabilities to be incurred thereby and any
loss and damage it may suffer by reason thereof. None of the provisions
contained in this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers unless indemnified as
aforesaid.
(4) The Trustee may, before commencing any such act, action or proceeding,
or at any time during the continuance thereof require the Special
Warrantholders at whose instance it is acting to deposit with the Trustee the
Special Warrant Certificates held by them, for which Special Warrant
Certificates the Trustee shall issue receipts.
(5) Every provision of this Indenture that by its terms relieves the
Trustee of liability or entitles it to rely upon any evidence submitted to it
is subject to the provisions of Applicable Legislation, and of this section
10.2 and section 10.3.
10.3 Evidence, Experts and Advisers
(1) In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Company shall furnish to the Trustee such
additional evidence of compliance with any provision hereof, and in such form,
as may be prescribed by Applicable Legislation or as the Trustee may reasonably
require by written notice to the Company.
(2) In the exercise of its rights and duties hereunder the Trustee may, if
it is acting in good faith, rely as to the truth of the statements and the
accuracy of the opinions expressed therein, upon statutory declarations,
opinions, reports, certificates or
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<PAGE> 50
other evidence furnished to the Trustee pursuant to any provision hereof or of
Applicable Legislation or pursuant to a request of the Trustee, provided that
the evidence complies with Applicable Legislation and that the Trustee examines
such evidence and determines that the evidence complies with the applicable
requirements of this Indenture.
(3) Whenever Applicable Legislation requires that evidence referred to in
subsection 10.3(1) be in the form of a statutory declaration, the Trustee may
accept the statutory declaration in lieu of a certificate of the Company
required by any provision hereof. Any such statutory declaration may be made by
one or more of the officers of the Company.
(4) Proof of the execution of an instrument in writing, including a
Special Warrantholders' Request, by any Special Warrantholder may be made by
the certificate of a notary public, or other person with similar powers, that
the person signing the instrument acknowledged to him the execution thereof, or
by an affidavit of a witness to the execution or in any other manner that the
Trustee may consider adequate.
(5) The Trustee may employ or retain such counsel, accountants, engineers,
appraisers, or other experts or advisers as it may reasonably require for the
purpose of discharging its duties hereunder and may pay reasonable remuneration
for all services so performed by any of them, without taxation of costs of any
counsel, and shall not be responsible for any misconduct on the part of any of
them.
(6) The Trustee may as a condition precedent to any action to be taken by
it under this Indenture require such opinions, statutory declarations, reports,
certificates or other evidence as it, acting reasonably, considers necessary or
advisable in the circumstances.
10.4 Securities, Documents and Monies Held by Trustee
Any securities, documents of title or other instruments that may at any
time be held by the Trustee subject to the trusts hereof may be placed in the
deposit vaults of the Trustee or of any of the Canadian Imperial Bank of
Commerce, Bank of Montreal, Bank of Nova Scotia, The Toronto-Dominion Bank, the
Royal Bank of Canada and the Hongkong Bank of Canada or deposited for
safekeeping with any of those Canadian chartered banks. Unless herein otherwise
expressly provided, any money so held pending the application or withdrawal
thereof under any provision of this Indenture shall be deposited in the name of
the Trustee in any of the foregoing Canadian chartered banks at the rate of
interest, if any, then current on similar deposits or, with the consent of the
Company, be:
(a) deposited in the deposit department of the Trustee or of any other
loan or trust company authorized to accept
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<PAGE> 51
deposits under the laws of Canada or a province thereof whose short
term debt obligations or deposits have a rating of at least R1 as
rated by Dominion Bond Rating Service; or
(b) invested in securities issued or guaranteed by the Government of
Canada or a province thereof or in obligations, maturing not more
than one year from the date of investment, of or guaranteed by any of
the foregoing Canadian chartered bank or loan or trust company.
Subject to the provisions of section 6.4, unless the Company is in default
hereunder, all interest or other income received by the Trustee in respect of
deposits and investments will belong to the Company.
10.5 Action by Trustee to Protect Interests
The Trustee shall have power to institute and to maintain such actions and
proceedings as it may consider necessary or expedient to preserve, protect or
enforce its interests and the interests of the Special Warrantholders.
10.6 Trustee not Required to Give Security
The Trustee shall not be required to give any bond or security in respect
of the execution of the trusts and powers of this Indenture or otherwise in
respect of the premises contained herein.
10.7 Protection of Trustee
By way of supplement to the provisions of any law from time to time
applicable to trustees, it is expressly declared and agreed as follows:
(1) The Trustee shall not be liable for or by reason of any
representations, statements of fact or recitals in this Indenture or in the
Special Warrant Certificates (except the representation contained in section
10.9 or by virtue of the certification by the Trustee of the Special Warrant
Certificates) or required to verify the same, but all those statements or
recitals are and shall be deemed to be made by the Company.
(2) Nothing herein contained shall impose any obligation on the Trustee to
see to or to require evidence of the registration (or filing or renewal
thereof) of this Indenture or any instrument ancillary or supplemental hereto.
(3) The Trustee shall not be bound to give notice to any person or persons
of the execution hereof.
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<PAGE> 52
(4) The Trustee shall not incur any liability or responsibility whatever
or be in any way responsible for the consequence of any breach on the part of
the Company of any of the covenants or warranties herein contained or of any
acts of any director, officer, employee or agent of the Company.
(5) The Trustee shall not be bound to give any notice or to do or take any
act, action or proceeding by virtue of the powers conferred on it hereby unless
and until it shall have been required so to do under the terms hereof nor shall
the Trustee be required to take notice of any default of the Company hereunder
unless and until notified in writing of the default (which notice must specify
the nature of the default) and, in the absence of that notice, the Trustee may
for all purposes hereunder conclusively assume that no default by the Company
hereunder has occurred. The giving of any notice shall in no way limit the
discretion of the Trustee hereunder as to whether any action is required to be
taken in respect of any default hereunder.
(6) The Trustee shall not be accountable with respect to the validity or
value (or the kind or amount) of any Shares or Warrants or other securities or
property which may at any time be issued or delivered upon the exercise of the
rights attaching to any Special Warrant.
(7) The Trustee is not responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver Shares or Warrants or
certificates for the same upon the surrender or deemed surrender of any Special
Warrant Certificates for the purpose of the exercise of the Special Warrants
represented by such Special Warrant Certificates or to comply with any of the
covenants contained in Article Five.
10.8 Replacement of Trustee
(1) The Trustee may resign its trust and be discharged from all further
duties and liabilities hereunder, except as provided in this Article Ten, by
giving to the Company and the Special Warrantholders not less than 90 days'
notice in writing or, if a new Trustee has been appointed such shorter notice
as the Company may accept as sufficient. The Special Warrantholders by
Extraordinary Resolution shall have power at any time, with the consent of the
Company, not to be unreasonably withheld, to remove the Trustee and to appoint
a new Trustee. In the event of the Trustee resigning or being removed as
aforesaid or being dissolved, becoming bankrupt, going into liquidation or
otherwise becoming incapable of acting hereunder, the Company shall forthwith
appoint a new Trustee unless a new Trustee has already been appointed by the
Special Warrantholders; failing that appointment by the Company, the retiring
Trustee or any Special Warrantholder may apply to the Supreme Court of British
Columbia, on such notice as the Court may direct, for the appointment of a new
Trustee; but any new Trustee so appointed by the Company or by the Court shall
be subject to removal as aforesaid by the Special Warrantholders and
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<PAGE> 53
the Company. Any new Trustee appointed under any provision of this section
10.8 shall be a corporation authorized to carry on the business of a trust
company in the Provinces of British Columbia and Ontario and, if required by
the Applicable Legislation of any other Province, in that other Province. On
any appointment, the new Trustee shall be vested with the same powers, rights,
duties and responsibilities as if it had been originally named herein as
Trustee without any further assurance, conveyance, act or deed; but there shall
be immediately executed, at the expense of the Company, all such conveyances or
other instruments as may, in the opinion of counsel, be necessary or advisable
for the purpose of assuring such powers, rights, duties and responsibilities of
the new Trustee.
(2) Upon the appointment of a new Trustee, the Company shall promptly give
notice thereof to the Special Warrantholders.
(3) Any corporation into or with which the Trustee may be merged or
consolidated or amalgamated, or any corporation succeeding to the trust
business of the Trustee, shall be the successor to the Trustee hereunder
without any further act on its part or any of the parties hereto provided that
the corporation would be eligible for appointment as a new Trustee under
subsection 10.8(1).
(4) Any Special Warrant Certificates certified but not delivered by a
predecessor Trustee may be certified by the new or successor Trustee in the
name of the predecessor or new or successor Trustee.
10.9 Conflict of Interest
(1) The Trustee represents to the Company that at the time of the
execution and delivery hereof no material conflict of interest exists between
the Trustee's role as a fiduciary hereunder and its role in any other capacity
and agrees that in the event of a material conflict of interest arising
hereafter it will, within 90 days after ascertaining that it has a material
conflict of interest, either eliminate the same or assign its trust hereunder
to a successor Trustee approved by the Company and meeting the requirements set
forth in subsection 10.8(1). Notwithstanding the foregoing provisions of this
subsection 10.9(1), if any such material conflict of interest exists or
hereafter shall exist, the validity and enforceability of this Indenture and
the Special Warrant Certificate shall not be affected in any manner whatsoever
by reason thereof.
(2) Subject to subsection 10.9(1), the Trustee, in its personal or any
other capacity, may buy, lend upon and deal in securities of the Company may
act as registrar and transfer agent for the Shares and trustee for the Warrants
under the Warrant Indenture and generally may contract and enter into financial
transactions with the Company or any subsidiary of the Company, all without
being liable to account for any profit made thereby.
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<PAGE> 54
10.10 Acceptance of Trust
The Trustee hereby accepts the trusts in this Indenture declared and
provided for, agrees to perform the same upon the terms and conditions herein
set forth and agrees to hold all rights, interests and benefits contained
herein for and on behalf of those persons who become holders of Special
Warrants from time to time issued pursuant to this Indenture.
10.11 Trustee not to be Appointed Receiver
The Trustee and any person related to the Trustee shall not be appointed a
receiver, a receiver and manager or liquidator of all or any part of the assets
or undertaking of the Company.
10.12 Indemnity
Without limiting any protection or indemnity of the Trustee under any
other provision hereof, or otherwise at law, the Company hereby agrees to
indemnify and hold harmless the Trustee from and against any and all
liabilities, losses, damages, penalties, claims, actions, suits, costs,
expenses and disbursements, including reasonable legal or advisor fees and
disbursements, of whatever kind and nature which may at any time be imposed on,
incurred by or asserted against the Trustee in connection with the performance
of its duties and obligations hereunder, other than such liabilities, losses,
damages, penalties, claims, actions, suits, costs, expenses and disbursements
arising by reason of the negligence, wilful misconduct or bad faith of the
Trustee or persons for whom the Trustee is responsible. This provision shall
survive the resignation or removal of the Trustee, or the termination of the
Indenture.
ARTICLE ELEVEN
General
11.1 Notice to Company and Trustee
(1) Unless herein otherwise expressly provided, any notice to be given
hereunder to the Company or the Trustee shall be given in writing and shall be
deemed to be validly given if delivered or if sent by registered letter,
postage prepaid or if transmitted by facsimile:
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<PAGE> 55
(a) If to the Company:
Granges Inc.
Suite 3000
370 Seventeenth Street
Denver, Colorado
U.S.A. 80202
Attention: Mr. Michael B. Richings
President and Chief Executive Officer
Facsimile No.: (303) 629-2499
and to:
Ladner Downs
Barristers & Solicitors
1200 Waterfront Centre
200 Burrard Street
P.O. Box 48600
Vancouver, British Columbia
Canada V7X 1T2
Attention: Mr. William F. Sirett
Facsimile No.: (604) 687-1415
(b) If to the Trustee:
Montreal Trust Company of Canada
Montreal Trust Centre
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Attention: Manager, Corporate Trust Department
Facsimile No.: (604) 685-4079
and any notice given in accordance with the foregoing shall be deemed to have
been received on the date of delivery or, if mailed, on the fifth business day
following the day of the mailing of the notice or, if transmitted by facsimile,
on the day following the transmission.
(2) The Company or the Trustee, as the case may be, may from time to time
notify the other in the manner provided in subsection 11.1(1) of a change of
address which, from the effective date of the notice and until changed by like
notice, shall be the address of the Company or the Trustee, as the case may be,
for all purposes of this Indenture.
(3) If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the Trustee
or to the Company hereunder could reasonably be considered unlikely to reach or
to be delayed in reaching its destination, the notice shall be valid and
effective
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<PAGE> 56
only if it is delivered to an officer of the party to which it is addressed or
if it is delivered to that party at the appropriate address provided in
subsection 11.1(1) by cable, telegram, telex, facsimile or other means of
prepaid, transmitted, or written communication and any notice delivered in
accordance with the foregoing shall be deemed to have been received on the date
of delivery to the officer or if delivered by cable, telegram, telex, facsimile
or other means of prepaid, transmitted, recorded communication, on the first
business day following the date of the sending of the notice by the person
giving the notice.
11.2 Notice to Special Warrantholders
(1) Unless herein otherwise expressly provided, any notice to be given
hereunder to Special Warrantholders shall be written and shall be deemed to be
validly given if the notice is sent by prepaid mail, addressed to the holder or
delivered by hand or transmitted by facsimile (or so mailed to certain holders
and so delivered to other holders and so transmitted by facsimile to other
holders) at their respective addresses and facsimile numbers appearing on the
register maintained by the Trustee; and if in the case of joint holders of any
Special Warrants more than one address or facsimile number appears on the
register in respect of that joint holding, the notice shall be addressed or
delivered, as the case may be, only to the first address or facsimile number,
as the case may be, so appearing. The Trustee shall give, in the same manner as
for Special Warrantholders set out above, a copy of each such notice to
ScotiaMcLeod Inc. (Attention: John A. Macdonald) on behalf of the Underwriters,
at 1100 - 609 Granville Street, Vancouver, British Columbia, V7T 2T2 (Facsimile
No.: (604) 661-7496). Any notice so given shall be deemed to have been received
on the day of delivery by hand or facsimile or, if mailed, on the next business
day following the day of mailing of the notice. Accidental error or omission in
giving notice or accidental failure to mail notice to any Warrantholder shall
not invalidate any action or proceeding founded thereon.
(2) If, by reason of strike, lock-out or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the Special
Warrantholders hereunder could reasonably be considered unlikely to reach or be
delayed in reaching its destination, the notice shall be valid and effective if
published or distributed once in the Report on Business section of the national
edition of The Globe and Mail newspaper, or, in the event of a disruption in
the circulation of that newspaper, once in a daily newspaper in the English
language approved by the Trustee of general circulation in the Cities of
Toronto and Vancouver; provided that in the case of a notice convening a
meeting of the holders of Special Warrants, the Trustee may require such
additional publications of that notice, in the same or in other cities or both,
as it may deem necessary for the reasonable protection of the holders of
Special Warrants or to comply with any applicable requirement of law or any
stock exchange. Any notice so given shall be deemed to have been given on the
day on which it has been published in all of the cities in which publication
was
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<PAGE> 57
required (or first published in a city if more than one publication in that
city is required). In determining under any provision hereof, the date when
notice of any meeting or other event must be given, the date of giving notice
shall be included and the date of the meeting or other event shall be excluded.
11.3 Satisfaction and Discharge of Indenture
Upon the date by which certificates representing Shares and Warrants shall
have been delivered to Special Warrantholders to the full extent of the rights
attached to all Special Warrants theretofore certified hereunder and the monies
to be paid hereunder, if any, have been paid, this Indenture shall cease to be
of further effect and the Trustee, on demand of and at the cost and expense of
the Company and upon delivery to the Trustee of a certificate of the Company
stating that all conditions precedent to the satisfaction and discharge of this
Indenture have been complied with and upon payment to the Trustee of the fees
and other remuneration payable to the Trustee, shall execute proper instruments
acknowledging satisfaction of and discharging this Indenture.
11.4 Sole Benefit of Parties and Special Warrantholders
Nothing in this Indenture or in the Special Warrant Certificates,
expressed or implied, shall give or be construed to give to any person other
than the parties hereto and the Special Warrantholders any legal or equitable
right, remedy or claim under this Indenture, or under any covenant or provision
therein contained, all such covenants and provisions being for the sole benefit
of the parties hereto and the Special Warrantholders.
11.5 Discretion of Directors
Any matter provided herein to be determined by the directors will be
determined acting reasonably in their sole discretion, and a determination so
made will be conclusive.
11.6 Counterparts and Formal Date
This Indenture may be executed in several counterparts, each of which when
so executed shall be deemed to be an original and the counterparts together
shall constitute one and the same
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<PAGE> 58
instrument and notwithstanding their date of execution shall be deemed to bear
the date as of April 25, 1996.
IN WITNESS WHEREOF the parties hereto have executed these presents under
the hands of their proper officers in that behalf.
GRANGES INC.
(C/S) By:
---------------------------------
By:
---------------------------------
MONTREAL TRUST COMPANY OF CANADA
(C/S) By:
---------------------------------
By:
---------------------------------
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<PAGE> 59
SCHEDULE A
SPECIAL WARRANT TO ACQUIRE
SHARES AND WARRANTS OF
GRANGES INC.
(Incorporated under the laws of British Columbia)
Special Warrant Certificate Certificate for ___________
NO. SW Special Warrants, each entitling the
holder to acquire one Share and one-half
Warrant of Granges Inc.
THIS IS TO CERTIFY THAT, for value received,
________________________________________________________________________________
(herein called the "holder") is the registered holder of the number of Special
Warrants of Granges Inc. (the "Company") set forth above, and is entitled to
receive on exercise of these Special Warrants in the manner herein provided and
without further payment therefor, subject as hereinafter provided and as more
specifically set forth in the Special Warrant Indenture (defined below):
(a) one fully paid and non-assessable common share (a "Share") without
par value in the capital of the Company; and
(b) one-half of a common share purchase warrant (a "Warrant"), each whole
Warrant entitling the holder thereof to acquire one Share for the
price of $3.00 per Share at any time until 4:30 p.m. (local time) at
the office of the Trustee (defined below) in Toronto or Vancouver on
October 31, 1997
for each of the Special Warrants evidenced by this certificate.
Each Warrant will be issued under the warrant indenture (the "Warrant
Indenture") dated as of April 25, 1996 between the Company and the Montreal
Trust Company of Canada (the "Trustee").
The Special Warrants represented by this Special Warrant Certificate are
issued under and pursuant to a special warrant indenture (herein called the
"Special Warrant Indenture") made as of April 25, 1996 between the Company and
the Trustee to which Special Warrant Indenture and any instruments supplemental
thereto reference is hereby made for a full description of the rights of the
holders of the Special Warrants and the terms and conditions upon which Special
Warrants are, or are to be, issued, held, exchanged and surrendered, all to the
same effect as if the provisions of the Special Warrant Indenture and all
instruments supplemental thereto were herein set forth, and to all of which
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<PAGE> 60
provisions the holder of this Special Warrant Certificate by acceptance hereof
assents. Capitalized terms used in this Special Warrant Certificate and not
otherwise defined shall have the meanings ascribed to them in the Special
Warrant Indenture.
The Company will furnish to the holder, on request and without charge, a
copy of the Special Warrant Indenture.
The Exercise Period is the period commencing on April 25, 1996, and ending
at 4:30 p.m. (local time) on the fifth business day after the earlier of:
(a) the date on which a receipt is issued for the Final Prospectus
relating to the distribution of the Shares and Warrants to be
acquired upon the exercise of the Special Warrants by the last of the
securities regulatory authorities to do so in each of the Provinces
of British Columbia and Ontario (the "Qualification Date"); and
(b) July 24, 1996 or such later date as the underwriters of the offering
of the Special Warrants may determine in a written notice delivered
to the Company and the Trustee, provided that such underwriters have
obtained the written consent thereto of each initial purchaser of the
Special Warrants who have not resold their Special Warrants (the
"Qualification Deadline").
If the Qualification Date occurs on or before the Qualification Deadline,
the Trustee will give notice to each holder of Special Warrants specifying that
the Qualification Date has occurred on or before the Qualification Deadline and
specifying the duration and expiry of the Exercise Period.
The Special Warrants represented by this Special Warrant Certificate may
be exercised by the holder during the Exercise Period by:
(a) duly completing and executing the attached exercise form; and
(b) surrendering this Special Warrant Certificate to the Trustee at the
principal transfer office of the Trustee in either of the Cities of
Toronto or Vancouver.
The Special Warrants represented by this Special Warrant Certificate shall
be effectively surrendered (unless deemed to be surrendered) only upon personal
delivery hereof or, if sent by mail or other means of transmission, upon actual
receipt thereof by the Trustee at either of the offices referred to above.
Upon surrender of the Special Warrants, the person or persons in whose
name or names the Shares and Warrants issuable upon exercise of the Special
Warrants are issued shall be deemed for all purposes (except as provided in the
Special Warrant Indenture) to be the holder or holders of record of such Shares
and Warrants. The Company has covenanted that it will deliver (subject
A-2
<PAGE> 61
to the provisions of the Special Warrant Indenture) to the Trustee as agent for
such person or persons, certificates representing such Shares and Warrants and
the Trustee has covenanted that it will cause such certificates to be mailed by
registered mail to such person or persons at the address or addresses specified
to the Exercise Form forthwith.
The holders of these Special Warrants may exercise these Special Warrants
with respect to a lesser number of Special Warrants than the number represented
by this Special Warrant Certificate. In such event, the Holder shall be
entitled to receive a new Special Warrant Certificate for the balance of the
Special Warrants which remain unexercised. No fractional Shares or Warrants
will be issued.
The Special Warrant Indenture provides for: (i) adjustments to certain
rights of the holder, including the number of Shares issuable upon exercise or
deemed exercise, upon the happening of certain stated events, including the
subdivision or consolidation of the outstanding Shares, certain distributions
of Shares or securities convertible or exchangeable into Shares or of other
securities or assets of the Company, certain offerings of rights, warrants or
options, and certain capital reorganizations; and (ii) payment of an amount to
compensate for dividends paid on Shares prior to the exercise of the Special
Warrants.
If, immediately prior to the expiry of the Exercise Period, the Special
Warrants represented by this Special Warrant Certificate have not been
exercised, the Special Warrants represented hereby shall be deemed to have been
exercised and surrendered by the holder immediately after that time without any
further action on the part of the holder.
If the Special Warrants represented by this Special Warrant Certificate
are exercised or are deemed to be exercised by the holder notwithstanding that
the Qualification Date has not occurred, any such exercise or deemed exercise
shall be subject to the holder providing such assurances and executing such
documents as the Company or the Trustee, acting reasonably, may require to
ensure compliance with applicable securities legislation.
One hundred percent (100%) of the original consideration received by the
Company for the Special Warrants is held in escrow by the Trustee and may be
deposited with certain Canadian chartered banks or loan or trust companies or
invested in short-term debt obligations issued or guaranteed by the Government
of Canada or a province thereof. If the Qualification Date has not occurred on
or before the Qualification Deadline, the holder of the Special Warrants
represented by this Special Warrant Certificate may elect to retract such
Special Warrants by duly completing an election form and delivering such form
and to the Trustee at its principal office in either of the cities of Vancouver
or Toronto on or before 4:30 p.m. (local time) on the fifth business day after
the Qualification Deadline and the Trustee shall deliver to the holder the
purchase price for the Special Warrants so retracted, together with all
interest earned thereon. The purchase price held in
A-3
<PAGE> 62
escrow of each Special Warrant that has not been retracted will be released,
together with all interest earned thereon, to the Company on the exercise or
deemed exercise of each such Special Warrant. If the Qualification Date has
occurred on or before the Qualification Deadline, 100% of the gross proceeds
held in escrow from the issue of the Special Warrants will be released,
together with all interest earned thereon, to the Company on the fifth business
day after the Qualification Date.
The holder of this Special Warrant Certificate may, upon surrender hereof
to the Trustee at its principal transfer office in either of the Cities of
Toronto or Vancouver, subject to the provisions of the Special Warrant
Indenture and in compliance with the reasonable requirements of the Trustee,
exchange one or more Special Warrant Certificates for one or more Special
Warrant Certificates of different denomination evidencing Special Warrants
entitling the holder to receive in the aggregate the same number of Shares and
Warrants as may be acquired pursuant to the Special Warrant Certificate being
exchanged.
The holding of the Special Warrants evidenced by this Special Warrant
Certificate shall not constitute the holder hereof a shareholder of the Company
or entitle the holder to any right or interest in respect thereof except as
herein and in the Special Warrant Indenture expressly provided.
The parties hereto have declared that they have required that these
presents and all other documents related hereto be in the English language. Les
parties aux presentes declarent qu'elles ont exige que la presente convention,
de meme que tous les documents s'y rapportant, soient rediges en anglais.
The Special Warrants represented by this Special Warrant Certificate, the
Shares and Warrants to be issued upon exercise thereof, and the Shares to be
issued upon exercise of the Warrants, have not been registered under the United
States Securities Act of 1933, as amended (the "U.S. Securities Act") or any
applicable State securities laws of the United States. Subject to certain
exceptions Special Warrants, and the Warrants to be issued upon exercise of the
Special Warrants, may not be exercised by U.S. Persons or persons within the
United States unless such securities and Shares issuable upon exercise thereof
are registered under the U.S. Securities Act and the securities laws of all
applicable States of the United States or an exemption from such registration
requirements is available. Terms used in this paragraph have the meanings given
to them in Regulation S under the U.S. Securities Act.
This Special Warrant Certificate shall not be valid for any purpose
whatsoever unless and until it has been certified by or on behalf of the
Trustee under the Special Warrant Indenture.
A-4
<PAGE> 63
Time shall be of the essence hereof.
IN WITNESS WHEREOF Granges Inc. has caused this Special Warrant
Certificate to be duly executed as of the 25th day of April, 1996.
GRANGES INC.
By:
---------------------------------
Authorized Signatory
By:
---------------------------------
Authorized Signatory
Countersigned and Registered by:
MONTREAL TRUST COMPANY OF CANADA,
Toronto
Vancouver
By:
---------------------------------
Authorized Signatory
LEGEND
THE SECURITY REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO A HOLD PERIOD
AND MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL THE EXPIRY OF THE HOLD PERIOD
EXCEPT AS PERMITTED BY THE SECURITIES ACT (BRITISH COLUMBIA) AND THE RULES MADE
THEREUNDER. THE HOLD PERIOD EXPIRES ON APRIL 27, 1997.
A-5
<PAGE> 64
SCHEDULE B
EXERCISE FORM
TO: c/o Montreal Trust Company of Canada
151 Front Street, 8th Floor
Toronto, Ontario
M5J 2N1
Attention: Stock Transfer
Department
or c/o Montreal Trust Company of Canada
Montreal Trust Centre
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Attention: Stock Transfer
Department
The undersigned holder of the within Special Warrants hereby exercises
_____________ of the Special Warrants represented hereby and the right provided
for in such exercised Special Warrants to receive the common shares and common
share purchase warrants of Granges Inc. issuable pursuant to such Special
Warrants.
The undersigned hereby irrevocably directs that the said common shares and
common share purchase warrants be issued and delivered as follows:
Number(s) of
common shares and
common share
Name(s) in Full Address(es) purchase warrants
- ----------------------- ----------------------------- ----------------------
- ----------------------- ----------------------------- ----------------------
- ----------------------- ----------------------------- ----------------------
(Please print in full the name in which certificates are to be issued. If any
of the securities are to be issued to a person or persons other than the
Special Warrantholder, the Transfer of Special Warrants form must be completed
and the Special
B-1
<PAGE> 65
Warrantholder must pay to the Trustee all exigible transfer taxes or other
government charges.)
DATED this ______ day of ________________, 199___.
- ----------------------------- ------------------------------------
Witness Signature of Registered Holder
------------------------------------
Name of Registered Holder
------------------------------------
------------------------------------
Address of Registered Holder
[ ] Please check box if these certificates are to be delivered to the office
where this Special Warrant Certificate is surrendered, failing which the
certificates will be mailed to the address shown on the register.
B-2
<PAGE> 66
SCHEDULE C
TRANSFER OF SPECIAL WARRANTS
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
(name) (the "transferee")
________________________________________________________________________________
(address)
_______________ of the Special Warrants of Granges Inc. registered in the name
of the undersigned represented by the within certificate.
DATED the _____ day of ______________, 199___.
Signature of Special Warrantholder _____________________________________________
Guaranteed by: (Signature of Special Warrantholder)
__________________________________ [* ]
* Authorized Signature Number
NOTE: The signature to this transfer must correspond with the name as recorded
on the Special Warrants in every particular without alteration or enlargement
or any change whatever. The signature of the person executing this transfer
must be guaranteed by a Bank or Trust Company or by a member of the Toronto,
Vancouver or Montreal stock exchanges.
C-1
<PAGE> 67
SCHEDULE D
FORM OF DECLARATION FOR REMOVAL OF LEGEND
To: Montreal Trust Company of Canada
Stock and Bond Transfer Department
The undersigned (A) acknowledges that the sale of the securities,
represented by certificate numbers __________________, to which this
declaration relates is being made in reliance on Rule 904 of Regulation S under
the United States Securities Act of 1933, as amended (the "Securities Act") and
(B) certifies that (1) it is not an "affiliate" of Granges Inc. (as defined in
Rule 405 under the Securities Act), (2) the offer of such securities was not
made to a person in the United States and either (a) at the time the buy order
was originated, the buyer was outside the United States, or the seller and any
person acting on its behalf reasonably believed that the buyer was outside the
United States or (b) the transaction was executed on or through the facilities
of The Toronto Stock Exchange and neither the seller nor any person acting on
its behalf knows that the transaction has been prearranged with a buyer in the
United States and (3) neither the seller nor any person acting on its behalf
engaged in any directed selling efforts in connection with the offer and sale
of such securities. Terms used herein have the meanings given to them by
Regulation S.
Dated:
By:
-----------------------------------
Name:
Title:
D-1
<PAGE> 68
SCHEDULE F
ELECTION FORM
[TO BE COMPLETED BY A SPECIAL WARRANTHOLDER UPON RECEIVING NOTICE FROM THE
TRUSTEE THAT THE QUALIFICATION DATE HAS NOT OCCURRED ON OR BEFORE THE
QUALIFICATION DEADLINE]
TO: c/o Montreal Trust Company of Canada
Montreal Trust Centre
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Attention: Stock Transfer Department
or c/o Montreal Trust Company of Canada
151 Front Street, 8th Floor
Toronto, Ontario
M5J 2N1
Attention: Stock Transfer Department
The undersigned holder of Special Warrants of Granges Inc. hereby gives
irrevocable notice of its election to: (check one)
[ ] exercise all of such holder's Special Warrants represented by the
Special Warrant Certificate(s) surrendered herewith and receive the common
shares in the capital of Granges Inc. and the common share purchase
warrants which such holder is entitled to acquire upon such exercise,
subject to any applicable hold periods, resale restrictions and other
requirements of applicable securities legislation; or
[ ] retract 100% of such holder's Special Warrants represented by the
Special Warrant Certificate(s) surrendered herewith and receive payment
from Montreal Trust Company of Canada (the "Trustee") of the purchase
price of the Special Warrants so retracted and all interest earned thereon
in the hands of the Trustee from April 25, 1996 to the date immediately
preceding the date of such payment (less any tax required to be withheld
therefrom) to either such holder or to such person as is specified below:
Name in Full Address
------------------------------ ---------------------------------------
DATED this ______ day of ________________, 199___.
F-1
<PAGE> 69
- ----------------------------- ------------------------------------
Witness Signature of Registered Holder
------------------------------------
Name of Registered Holder
------------------------------------
------------------------------------
Address of Registered Holder
[ ] Please check box if payment of the purchase price of any Special
Warrants that are retracted are to be delivered to the office where this
Special Warrant Certificate is delivered, failing which payment will be
made to the address shown on the register or above.
F-2
<PAGE> 1
GRANGES INC.
- AND -
MONTREAL TRUST COMPANY OF CANADA
---------------------------------
WARRANT INDENTURE
Providing for the issue of up to
4,849,900 Common Share Purchase Warrants
---------------------------------
April 25, 1996
LADNER DOWNS
McCARTHY TETRAULT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE ONE
Interpretation 2
1.1 Definitions 2
1.2 Words Importing the Singular 5
1.3 Interpretation not Affected by Headings 6
1.4 Day Not a Business Day 6
1.5 Time of the Essence 6
1.6 Currency 6
1.7 Applicable Law 6
1.8 English Language 6
1.9 Meaning of "outstanding" for Certain Purposes 6
ARTICLE TWO
Issue of Warrants 7
2.1 Creation and Issue of Warrants 7
2.2 Terms of Warrants 7
2.3 Warrant Certificates 8
2.4 Issue in Substitution for Lost Certificates 9
2.5 Warrantholder not a Shareholder 9
2.6 Warrants to Rank Pari Passu 10
2.7 Signing of Warrant Certificates 10
2.8 Certification by the Trustee or Co-transfer Agent 10
ARTICLE THREE
Exchange and Ownership of Warrants 11
3.1 Exchange of Warrants 11
3.2 Charges for Exchange or Transfer 11
3.3 Ownership of Warrants 11
3.4 Registration and Transfer of Warrants 12
ARTICLE FOUR
Exercise of Warrants 13
4.1 Method of Exercise of Warrants 13
4.2 Effect of the Exercise of Warrants 15
4.3 Partial Exercise of Warrants 16
4.4 No Fractional Shares 16
4.5 Expiration of Warrants 16
4.6 Cancellation of Warrants 16
ARTICLE FIVE
Adjustment to Subscription Rights 17
5.1 Adjustment of the Subscription
Price and Subscription Rights 17
5.2 Subscription Rights Adjustment Rules 22
5.3 Postponement of Issue of Shares, etc. 23
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
5.4 Notice of Certain Events 24
5.5 Reclassifications, Reorganizations, etc. 24
5.6 Protection of Trustee 25
5.7 Proceedings Prior to Any Action Requiring Adjustment 25
ARTICLE SIX
Rights and Covenants 26
6.1 Purchase of Warrants 26
6.2 General Covenants 26
6.3 Trustee's Remuneration and Expenses 27
6.4 Performance of Covenants by Trustee 28
6.5 Notice to Warrantholders of Certain Events 28
6.6 Closure of Share Transfer Books 29
ARTICLE SEVEN
Enforcement 29
7.1 Enforcement of Rights of Warrantholders 29
7.2 Immunity of Shareholders 30
7.3 Limitation of Liability 30
ARTICLE EIGHT
Meetings of Warrantholders 30
8.1 Right to Convene Meetings 30
8.2 Notice 31
8.3 Chairman 31
8.4 Quorum 31
8.5 Power to Adjourn 31
8.6 Show of Hands 31
8.7 Poll 32
8.8 Voting 32
8.9 Regulations 32
8.10 Company and Trustee may be Represented 33
8.11 Powers Exercisable by Extraordinary Resolution 33
8.12 Meaning of "Extraordinary Resolution" 34
8.13 Powers Cumulative 35
8.14 Minutes 35
8.15 Instruments in Writing 36
8.16 Binding Effect of Resolutions 36
8.17 Holdings by Company Disregarded 36
ARTICLE NINE
Supplemental Indentures and Successor Companies 37
9.1 Provision for Supplemental
Indentures for Certain Purposes 37
9.2 Successor Companies 38
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE TEN
Concerning the Trustee 38
10.1 Trust Indenture Legislation 38
10.2 Rights and Duties of Trustee 39
10.3 Evidence, Experts and Advisors 39
10.4 Documents, Monies, etc. Held by Trustee 40
10.5 Action by Trustee to Protect Interests 41
10.6 Trustee not Required to Give Security 41
10.7 Protection of Trustee 41
10.8 Replacement of Trustee 42
10.9 Conflict of Interest 43
10.10 Acceptance of Trust 43
10.11 Trustee Not to be Appointed Receiver 44
10.12 Indemnity 44
ARTICLE ELEVEN
General 44
11.1 Notice to the Company or the Trustee 44
11.2 Notice to Warrantholders 45
11.3 Satisfaction and Discharge of Indenture 46
11.4 Sole Benefit of Parties and Warrantholders 47
11.5 Discretion of Directors 47
11.6 Counterparts and Formal Date 47
SCHEDULE "A" - COMMON SHARE PURCHASE WARRANT A-1
SCHEDULE "B" - FORM OF DECLARATION FOR REMOVAL OF LEGEND B-1
SCHEDULE "C" - EXERCISE FORM C-1
SCHEDULE "D" - INSTRUCTIONS FOR THE TRANSFER OF COMMON
SHARES BEARING A U.S. SECURITIES ACT LEGEND D-1
SCHEDULE "E" - TRANSFER OF WARRANTS E-1
</TABLE>
iii
<PAGE> 5
THIS WARRANT INDENTURE is dated as of April 25, 1996
BETWEEN:
GRANGES INC., a company incorporated under the laws of the Province of
British Columbia, having its head office at Suite 3000, 370 Seventeenth
Street, Denver, Colorado, U.S.A. 80202
(the "Company")
AND:
MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated under the
laws of Canada, having an office at 510 Burrard Street, Vancouver, British
Columbia, V6C 3B9
(the "Trustee").
WHEREAS:
A. The Company has agreed to create and issue 9,699,800 Special Warrants
pursuant to the Special Warrant Indenture, each Special Warrant exercisable to
acquire one Share in the capital of the Company and one-half of a Warrant,
subject to adjustment as provided for in the Special Warrant Indenture;
B. The Company is duly authorized to create and issue the Warrants to be
issued as herein provided;
C. Subject to adjustment in the circumstances herein provided, one whole
Warrant will entitle the holder thereof to purchase one Share upon the payment
of the Subscription Price;
D. Subject to adjustment in the circumstances herein provided, up to 4,849,900
Warrants will be issued entitling the holders thereof to purchase in the
aggregate up to 4,849,900 Shares;
E. All things necessary have been done and performed to make the Warrants,
when certified by the Trustee and issued and delivered as herein provided,
legal, valid and binding upon the Company with the benefits of and subject to
the terms of this Indenture;
F. The Trustee has agreed to enter into this Indenture and to hold all rights,
interests and benefits contained herein for and on behalf of those persons who
become holders of Warrants from time to time issued pursuant to this Indenture;
- 1 -
<PAGE> 6
NOW THEREFORE THIS INDENTURE WITNESSES that in consideration of the
premises and the covenants of the parties, the Company hereby appoints the
Trustee as trustee for the Warrantholders, to hold all rights, interests and
benefits contained herein for and on behalf of those persons who become holders
of Warrants from time to time issued pursuant to this Indenture and it is
hereby agreed and declared as follows:
ARTICLE ONE
Interpretation
1.1 Definitions
In this Indenture and in the recitals and schedules hereto, unless the
subject matter or context is inconsistent therewith, the following phrases and
words shall have the following meanings:
(a) "Applicable Legislation" means the provisions of any statute of
Canada or a province thereof, and the regulations under any such
statute relating to trust indentures or the rights, duties or
obligations of corporations and trustees under trust indentures as
are from time to time in force and applicable to this Indenture;
(b) "board" means the board of directors of the Company;
(c) "business day" means a day that is not a Saturday, Sunday or civic or
statutory holiday in the cities of Toronto, Ontario and Vancouver,
British Columbia;
(d) "Company" means Granges Inc., a company incorporated under the laws
of the Province of British Columbia, and its lawful successors from
time to time as provided for in section 9.2;
(e) "Company's auditors" means the firm of chartered accountants duly
appointed as auditors of the Company from time to time;
(f) "Convertible Security" means a security of the Company (other than
the Special Warrants or Warrants) convertible into or otherwise
carrying the right to acquire authorized but unissued Shares;
(g) "Co-transfer Agent" has the meaning given in section 2.1;
(h) "Current Market Price", at any date, means the weighted average price
per Share at which the Shares have traded:
(i) on The Toronto Stock Exchange;
- 2 -
<PAGE> 7
(ii) if the Shares are not listed on The Toronto Stock Exchange, on
any stock exchange upon which the Shares are listed as may be
selected for this purpose by the directors and approved by the
Trustee; or
(iii) if the Shares are not listed, on any over-the-counter market as
may be selected for this purpose by the directors and approved
by the Trustee;
during the 20 consecutive trading days (on each of which at least 500
Shares are traded in board lots) ending the 15th trading day before
such date, and the weighted average price shall be determined by
dividing the aggregate sale price of all Shares sold in board lots on
the exchange or market, as the case may be, during the 20 consecutive
trading days by the aggregate number of Shares sold;
(i) "director" means a director of the Company from time to time, and
reference without more to action by the directors shall mean action
by the directors as a board or by any authorized committee thereof,
in each case by resolution duly passed;
(j) "dividends" means dividends or distributions (payable in cash or in
securities, property or assets of equivalent value) declared payable
on Shares;
(k) "dividends paid in the ordinary course" means such dividends or
distributions declared payable on Shares in any fiscal year of the
Company to the extent that such dividends or distributions in the
aggregate do not exceed on a per Share basis 5% of the Subscription
Price, and for such purposes the amount of any dividends or
distributions paid in other than cash or shares shall be the fair
market value of such dividends as determined by the directors;
(l) "Exercise Date", with respect to any Warrant, means the date on which
the Warrant Certificate evidencing such Warrant is duly surrendered
in accordance with the provisions of section 4.1;
(m) "Extraordinary Resolution" means an extraordinary resolution of
Warrantholders as defined in section 8.12 and includes a written
instrument signed by Warrantholders pursuant to the provisions of
section 8.15;
(n) "Original Exercise Price" means $3.00 per Share;
- 3 -
<PAGE> 8
(o) "person" means an individual, a corporation, a partnership, a trust,
or any unincorporated organization, and words importing persons have
a similar meaning;
(p) "Price Adjustment Factor", at any time, means that number, as may be
adjusted by Article Five hereof, which when multiplied by the
Original Exercise Price gives the Subscription Price, and that
number, as at the date hereof, is equal to one;
(q) "Registrar" means a registrar, from time to time, of the Warrants
appointed pursuant to subsection 3.4(1);
(r) "Regulation S" means Regulation S under the U.S. Securities Act;
(s) "Shares" means the fully paid and non-assessable common shares
without par value in the capital of the Company; provided that in the
event of any adjustment pursuant to Article Five, "Shares" shall
thereafter mean the shares or other securities or property that a
Warrantholder is entitled to on an exchange after the adjustment;
(t) "Special Warrants" means the special warrants issued under the
Special Warrant Indenture entitling registered holders thereof to
acquire, at no additional cost to the holder, Shares and Warrants,
upon the exercise of the Special Warrant;
(u) "Special Warrant Indenture" means the special warrant indenture dated
as of April 25, 1996 between the Company and the Trustee, pursuant to
which the Company authorized the creation and issuance of 9,688,900
Special Warrants;
(v) "Subscription Price", at any time, means the subscription price
payable for one Share upon the exercise at that time of any whole
Warrant and calculated as the price that is the product of the
Original Exercise Price at that time and the Price Adjustment Factor
as at that time;
(w) "subsidiary of the Company" means a corporation, more than 50% of the
outstanding voting shares of which are owned, directly or indirectly
other than by way of security only, by the Company or by one or more
of the subsidiaries of the Company. As used in this definition,
"voting shares" means shares of a class or classes ordinarily
entitled to vote for the election of a majority of the directors of a
corporation irrespective of whether or not shares of any other class
or classes have or might have the right to vote for directors by
reason of the happening of any contingency;
(x) "this Indenture", "hereto", "herein", "hereby", "hereunder", "hereof"
and similar expressions refer to
- 4 -
<PAGE> 9
this instrument and not to any particular Article, section,
subsection, paragraph, clause, or other portion hereof, and include
any and every instrument supplemental or ancillary hereto or in
implementation hereof;
(y) "Trustee" means Montreal Trust Company of Canada or any lawful
successor thereto in the trusts hereby created, including through the
operation of section 10.8;
(z) "U.S. Person" means a U.S. person as that term is defined in
Regulation S;
(aa) "U.S. Securities Act" means the Securities Act of 1933, as amended,
of the United States;
(ab) "Underwriters" means, collectively, ScotiaMcLeod Inc., First Marathon
Securities Limited, Yorkton Securities Inc. and Goepel Shields &
Partners Inc.;
(ac) "United States" means the United States as that term is defined in
Regulation S;
(ad) "Warrant" means a common share purchase warrant of the Company
authorized to be created by the Company under section 2.1 and issued
and certified under this Indenture and for the time being
outstanding;
(ae) "Warrant Certificate" means a certificate in the form attached as
Schedule "A" hereto, or such other form as may be approved under
subsection 2.3(1) evidencing one or more Warrants;
(af) "Warrant Expiry Date" means October 31, 1997;
(ag) "Warrant Expiry Time" means 4:30 p.m. (local time) on the Warrant
Expiry Date;
(ah) "Warrantholder", "holder" or "holder of Warrants" means with respect
to the Warrants, a person entered on a register to be maintained
under section 3.3 as the registered holder of a Warrant for the time
being; and
(ai) "Warrantholder's Request" means an instrument signed in one or more
counterparts by Warrantholders holding Warrants sufficient to
purchase not less than 25% of the aggregate number of Shares that
could be purchased under all Warrants then outstanding requesting the
Trustee to take some action or proceeding specified therein.
1.2 Words Importing the Singular
Words importing the singular include the plural and vice versa, and words
importing a particular gender include all genders.
- 5 -
<PAGE> 10
1.3 Interpretation not Affected by Headings
The division of this Indenture into Articles, sections, subsections and
paragraphs, the provision of a table of contents and the insertion of headings
are for convenience of reference only and shall not affect the construction or
interpretation of this Indenture.
1.4 Day Not a Business Day
In the event the Warrant Expiry Date or any day on or before which any
action is required to be taken hereunder is not a business day, then the
Warrant Expiry Date shall be or the action shall be required to be taken on or
before the requisite time on the next succeeding day that is a business day.
1.5 Time of the Essence
Time shall be of the essence in all respects in this Indenture, the
Warrants and the Warrant Certificates.
1.6 Currency
Except as otherwise stated, all dollar amounts herein are expressed in
Canadian dollars.
1.7 Applicable Law
This Indenture and the Warrant Certificates shall be governed by,
construed and enforced in accordance with the laws of the Province of British
Columbia and shall be treated in all respects as British Columbia contracts.
1.8 English Language
The parties hereby confirm that they accept this Indenture, as well as
notices and certificates relating directly or indirectly to the subject matter
hereof, as drawn in the English language.
Les parties confirment par les presentes qu'elles acceptent la presente
convention ainsi que les avis et certificats se rapportant directement ou
indirectement a l'objet des presentes tels que rediges en lanque anglaise.
1.9 Meaning of "outstanding" for Certain Purposes
Every Warrant Certificate certified and delivered by the Trustee hereunder
is deemed to be outstanding until the Warrant Expiry Time, or until it is
surrendered to the Trustee pursuant to this Indenture, provided that:
(a) a Warrant which has been partially exercised shall be deemed to be
outstanding only to the extent of the unexercised part of the
Warrant;
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(b) where a Warrant Certificate has been issued in substitution for a
Warrant Certificate which has been lost, stolen or destroyed, only
the latest Warrant Certificate issued shall be counted for the
purpose of determining the Warrants outstanding; and
(c) for the purpose of any provision of this Indenture entitling holders
of outstanding Warrants to vote, sign consents, requests or other
instruments or take any other action under this Indenture, Warrants
owned legally or equitably by the Company or any subsidiary of the
Company shall be disregarded, except that:
(i) for the purpose of determining whether the Trustee shall be
protected in relying on any such vote, consent, request or other
instrument or other action, only the Warrants of which the
Trustee has notice that they are so owned shall be so
disregarded; and
(ii) Warrants so owned which have been pledged in good faith other
than to the Company or any subsidiary of the Company shall not
be so disregarded if the pledgee shall establish to the
satisfaction of the Trustee the pledgee's right to vote the
Warrants in his discretion free from the control of the Company
or any subsidiary of the Company pursuant to the terms of the
pledge.
ARTICLE TWO
Issue of Warrants
2.1 Creation and Issue of Warrants
A total of up to 4,849,900 Warrants, each entitling the holder thereof to
acquire from the Company on the exercise thereof one Share, as adjusted from
time to time pursuant to this Indenture, are hereby authorized to be created
and issued upon the due and valid exercise of Special Warrants in accordance
with the terms of the Special Warrant Indenture. The Warrants so exercised
shall be executed by the Company and certified by or on behalf of the Trustee,
or by such other person as the Company may from time to time appoint with the
approval of the Trustee (hereinafter referred to as a "Co-transfer Agent") and
delivered by the Company in accordance with subsection 2.3(3).
2.2 Terms of Warrants
(1) Subject to the provisions of Articles Four and Five, each whole
Warrant issued under section 2.1 shall entitle the holder thereof to purchase
one Share at any time from and after the date
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of issue of the Warrant up to and including the Warrant Expiry Time at the
Subscription Price.
(2) Fractional Warrants shall not be issued or provided for.
2.3 Warrant Certificates
(1) Warrants shall be issued in registered form only and shall be
evidenced only by Warrant Certificates, which shall be substantially in the
form attached as Schedule "A" hereto, with such additions, variations or
omissions as may be permitted by the provisions of this Indenture or may from
time to time be agreed upon between the Company and the Trustee, shall be dated
as of date hereof (regardless of their actual dates of issue), shall bear such
legends and distinguishing letters and numbers as the Company shall, with the
approval of the Trustee, prescribe, shall be issuable in any denomination
excluding fractions, and each Warrant Certificate issued upon the exercise of a
Special Warrant the certificate of which contains the legend set forth in
subsection 2.3(2) of the Special Warrant Indenture, and all certificates issued
in exchange therefor or in substitution thereof, will bear a legend to the
following effect (the "U.S. Legend"):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT OR (C) INSIDE THE UNITED
STATES IN ACCORDANCE WITH (1) CERTAIN PROCEDURES SATISFACTORY TO THE
COMPANY OR (2) RULE 144 UNDER THE SECURITIES ACT, IF AVAILABLE.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN
SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW
CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE
"GOOD DELIVERY" MAY BE OBTAINED FROM MONTREAL TRUST COMPANY OF CANADA
UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN
A FORM SATISFACTORY TO MONTREAL TRUST COMPANY OF CANADA AND THE
COMPANY, TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED
HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT;
provided, that if any such Warrant is being sold or transferred in
compliance with Rule 904 of Regulation S, the U.S. Legend may be removed
by providing a declaration to the Trustee substantially in the form set
forth in Schedule B
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attached hereto, and provided, further, that if any such Warrant is being
sold in compliance with Rule 144 under the U.S. Securities Act, the U.S.
Legend may be removed by delivery to the Trustee of an opinion of counsel,
of recognized standing reasonably satisfactory to the Company, to the
effect that such legend is no longer required under the applicable
requirements of the U.S. Securities Act or state securities laws.
(2) The Trustee shall maintain and make available to the Company lists of
all persons who are entitled to Warrant Certificates, and the Trustee shall
mail or deliver Warrant Certificates evidencing whole Warrants to those persons
or as directed by the Company.
2.4 Issue in Substitution for Lost Certificates
(1) If a Warrant Certificate becomes mutilated or is lost, destroyed or
stolen, the Company, subject to applicable law and to subsection 2.4(2), shall
issue, and thereupon the Trustee shall countersign or certify and deliver, a
new Warrant Certificate of like date and tenor as the one mutilated, lost,
destroyed or stolen upon surrender of and in place of and upon cancellation of
the mutilated Warrant Certificate or in lieu of and in substitution for the
lost, destroyed or stolen Warrant Certificate. The substituted Warrant
Certificate shall be in a form approved by the Trustee, be entitled to the
benefit hereof, rank equally in accordance with its terms with all other
Warrant Certificates issued or to be issued hereunder and bear the same legends
as the Warrant Certificate being replaced.
(2) The applicant for the issue of a new Warrant Certificate pursuant to
this section 2.4 shall bear the cost of the issue thereof and in case of loss,
destruction or theft will, as a condition precedent to the issue thereof,
furnish to the Company and to the Trustee such evidence of ownership and of the
loss, destruction or theft of the Warrant Certificate so lost, destroyed or
stolen as shall be satisfactory to the Company and to the Trustee in their
discretion, and if required, furnish an indemnity in amount and form
satisfactory to the Company and to the Trustee in their discretion and pay the
reasonable charges of the Company and the Trustee in connection therewith.
2.5 Warrantholder not a Shareholder
Nothing in this Indenture or in the holding of a Warrant evidenced by a
Warrant Certificate, or otherwise, will be construed as conferring on a
Warrantholder any right or interest whatsoever as a shareholder of the Company,
including but not limited to any right to vote at, to receive notice of, or to
attend, meetings of shareholders or any other proceedings of the Company or any
right to receive any dividend or other distribution.
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2.6 Warrants to Rank Pari Passu
Except as otherwise provided herein, a Warrant shall rank pari passu with
all other Warrants issued under this Indenture, whatever may be the actual
dates of issue of the Warrant Certificates that evidence them.
2.7 Signing of Warrant Certificates
The Warrant Certificates shall be signed by any two or more of the
directors or officers of the Company and need not be under the Seal of the
Company. The signature of any of these directors or officers may be
mechanically reproduced in facsimile and Warrant Certificates bearing those
facsimile signatures shall be binding upon the Company as if they had been
manually signed by the director or officer. Notwithstanding that any of the
persons whose manual or facsimile signature appears on any Warrant Certificates
as an officer or director may no longer hold office at the date of the Warrant
Certificate or at the date of certification or delivery thereof, any Warrant
Certificate signed as aforesaid shall, subject to section 2.8, be valid and
binding upon the Company.
2.8 Certification by the Trustee or Co-transfer Agent
(1) The Trustee shall certify Warrant Certificates upon the written
direction of the Company. No Warrant Certificate shall be issued, or if issued,
shall be valid or entitle the holder to the benefit hereof until it has been
certified by manual signature by or on behalf of the Trustee or by manual
signature by the Co-transfer Agent, substantially in the form approved by the
Company and the Trustee and the certification by the Trustee or by the
Co-transfer Agent upon any Warrant Certificate shall be conclusive evidence as
against the Company that the Warrant Certificate so certified has been duly
issued hereunder and is a valid obligation of the Company, and that the holder
is entitled to the attributes and characteristics of the Warrants provided for
in this Indenture.
(2) The certificate of the Trustee or of the Co-transfer Agent on any
Warrant Certificate issued hereunder shall not be construed as a representation
or warranty by the Trustee or by the Co-transfer Agent as to the validity of
this Indenture or of the Warrant Certificates (except the due certification
thereof) and the Trustee or the Co-transfer Agent shall in no respect be liable
or answerable for the use made of the Warrants, Certificate or of the
consideration therefor, except as otherwise specified herein.
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ARTICLE THREE
Exchange and Ownership of Warrants
3.1 Exchange of Warrants
(1) One or more Warrant Certificates may, upon compliance with the
reasonable requirements of the Trustee, be exchanged for one or more Warrant
Certificates of different denominations evidencing, in the aggregate, the same
number of Warrants as the Warrant Certificate or Warrant Certificates being
exchanged.
(2) Warrants may be exchanged only at the principal transfer offices of
the Trustee in either of the cities of Toronto or Vancouver or at the principal
transfer office of the Co-transfer Agent designated by the Company or at any
other place that is designated by the Company with the approval of the Trustee.
Any Warrant Certificates tendered for exchange shall be surrendered to the
Trustee or to its agent or the Co-transfer Agent and, upon issuance of new
Warrant Certificates in exchange therefore, cancelled. The Company shall sign
all Warrant Certificates necessary to carry out exchanges as aforesaid and
those Warrant Certificates shall be certified by or on behalf of the Trustee
and will bear the same legends as the Warrant Certificates being exchanged.
3.2 Charges for Exchange or Transfer
For each Warrant transferred or Warrant Certificate exchanged, the
Trustee, or the Co-transfer Agent except as otherwise herein provided, shall
charge, if required by the Company, a reasonable sum in respect of each Warrant
transferred or Warrant Certificate exchanged. The party requesting the transfer
or exchange, as a condition precedent thereto, shall pay such charges and shall
pay or reimburse the Trustee, the Co-transfer Agent or the Company for all
exigible transfer taxes or governmental or similar transfer charges required to
be paid in connection therewith.
3.3 Ownership of Warrants
The Company and the Trustee and their respective agents may deem and treat
the holder of any Warrant as the absolute owner of that Warrant for all
purposes, and the Company and the Trustee and their respective agents shall not
be affected by any notice or knowledge to the contrary except as required by
statute or by order of a court of competent jurisdiction. The holder of any
Warrant shall be entitled to the rights evidenced by that Warrant free from all
equities or rights of set-off or counterclaim between the Company and the
original or any intermediate holder thereof and all persons may act accordingly
and the receipt from any holder for the Shares or monies obtainable pursuant
thereto shall be a good discharge to the Company and the Trustee for the same
and neither the Company nor the Trustee shall be bound to inquire into the
title of any such registered holder.
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3.4 Registration and Transfer of Warrants
(1) The Company hereby appoints the Trustee as Registrar of the Warrants.
The Company may hereafter, with the consent of the Trustee, appoint one or more
other additional Registrars of the Warrants, including the Co-transfer Agent.
(2) The Company shall cause a register to be kept by the Trustee, and the
Trustee agrees to maintain such a register at its principal transfer offices in
the City of Vancouver, in which shall be entered alphabetically, the names and
addresses of the holders of Warrants and other particulars of the Warrants held
by them respectively and a register of all transfers of Warrants and the date
and other particulars of each transfer. Such registration shall be noted on the
Warrant Certificates by the Trustee or other Registrar duly appointed pursuant
to subsection 3.4(1). The Company shall also cause transfer agencies (each a
"Transfer Agency") to be maintained by the Trustee, and the Trustee shall
maintain such Transfer Agencies at its principal transfer office in the cities
of Toronto and Vancouver and in such other place or places and by such other
agent as the Company, with the approval of the Trustee, may designate.
(3) No transfer of a Warrant shall be valid unless made on any one of the
registers upon surrender of the Warrant Certificate to the Trustee or other
Registrar duly appointed pursuant to subsection 3.4(1) accompanied by a written
instrument of transfer in form satisfactory to the Trustee or other Registrar
duly appointed pursuant to subsection 3.4(1) executed by the registered holder
or his executors, administrator or other legal representatives or his attorney
duly appointed by an instrument in writing in form and execution satisfactory
to the Trustee or other Registrar duly appointed pursuant to subsection 3.4(1)
and upon compliance with such reasonable requirements as the Trustee or other
Registrar duly appointed pursuant to subsection 3.4(1) may prescribe, nor shall
a transfer of a Warrant be valid, except in the case where a new Warrant
Certificate is issued upon a transfer, unless the transfer shall have been
noted on the Warrant Certificate by the Trustee or other Registrar duly
appointed pursuant to subsection 3.4(1).
(4) The registers referred to in this section 3.4 shall at all reasonable
times be open for inspection by the Company, by the Trustee and by any
Warrantholder.
(5) The registered holder of a Warrant may at any time and from time to
time have the registration of the Warrant transferred from the register in
which the registration thereof appears to another authorized register upon
compliance with such reasonable requirements as the Trustee or other registrar
duly appointed pursuant to subsection 3.4(1) may prescribe.
(6) Subject to subsections 3.4(7), (8) and (9), the holder of a Warrant
may at any time and from time to time have the Warrant transferred at any
Transfer Agency in accordance with the
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<PAGE> 17
conditions herein, such reasonable requirements as the registrar may prescribe
and all applicable securities legislation and requirements of regulatory
authorities, provided however that the transfer of Warrants shall be
accompanied by a Transfer Form.
(7) If a Warrant Certificate tendered for transfer bears the U.S. Legend,
the Trustee or other Registrar shall authenticate, register and deliver in the
name of the transferee a new Warrant Certificate, representing the number of
Warrants so transferred, bearing the U.S. Legend; provided, that if the
Warrants are being sold in accordance with Rule 904 of Regulation S and the
transferor has delivered to the Trustee or other Registrar a declaration
substantially in the form set forth in Schedule B hereto, the Trustee or other
Registrar shall authenticate, register and deliver in the name of the
transferee a new Warrant Certificate, representing the number of Warrants so
transferred, without the U.S. Legend and, provided, further, that if the
Warrants are being sold pursuant to Rule 144 under the U.S. Securities Act and
the transferor has delivered to the Trustee or other Registrar an opinion of
counsel, of recognized standing reasonably satisfactory to the Company, to the
effect that the U.S. Legend is no longer required under applicable requirements
of the U.S. Securities Act or state securities laws, then the Trustee or other
Registrar shall authenticate, register and deliver in the name of the
transferee a new Warrant Certificate, representing the number of Warrants so
transferred, without the U.S. Legend.
(8) Except as required by law, neither the Company nor the Trustee nor any
Registrar duly appointed pursuant to subsection 3.4(1) shall be bound to take
notice of or see to the execution of any trust, whether express, implied or
constructive, in respect of any Warrant, and may, transfer any Warrant on the
written direction of the person registered as the holder thereof, whether named
as Trustee or otherwise, as though that person were the beneficial owner
thereof.
(9) The Trustee and every Registrar duly appointed pursuant to subsection
3.4(1) shall from time to time, when requested so to do by the Company, by the
Trustee or by any Warrantholder, furnish the Company, the Trustee or, upon
payment by the Warrantholder of a reasonable fee, the Warrantholder, as the
case may be, with a list of names and addresses of holders of Warrants entered
on the registers kept by such Trustee or Registrar and showing the number of
Warrants held by each such holder.
ARTICLE FOUR
Exercise of Warrants
4.1 Method of Exercise of Warrants
(1) Subject to and upon compliance with the provisions of this Article
Four and Article Five, the holder of any Warrant Certificate or Warrant
Certificates may exercise the right of
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purchase therein provided for by surrendering the Warrant Certificate or
Warrant Certificates to the Trustee at its principal transfer offices in either
of the cities of Toronto or Vancouver or at any other place or places that may
be designated by the Company with the approval of the Trustee, or to the
Co-transfer Agent at its principal transfer office designated by the Company,
during normal business hours on a business day at that place, prior to the
Warrant Expiry Time, together with a duly completed and executed exercise form
attached to the Warrant Certificate in the form set out in Schedule "C"
attached hereto for the number of Shares which the holder desires to purchase
and the Subscription Price applicable at the time of the surrender calculated
in accordance with the provisions of this Indenture. Any such exercise shall
be subject to the holder providing such assurances and executing such documents
as may, in the reasonable opinion of the Company, the Trustee or the
Co-transfer Agent, be required to ensure compliance with all applicable
securities legislation.
(2) The Subscription Price for Shares subscribed for under Warrants shall
be paid in cash, by certified cheque, bank draft or money order payable to or
to the order of the Company or to the Trustee at par at the city where the
Warrant Certificate is surrendered.
(3) Surrender of a Warrant Certificate and the exercise form and payment
of the Subscription Price will be deemed to have been effected only on personal
delivery thereof to or, if sent by mail or other means of transmission on
actual receipt thereof, by the Trustee or the Co-transfer Agent at one of the
offices specified in subsection 4.1(1).
(4) Any exercise form referred to in subsection 4.1(1) shall be signed by
the Warrantholder or the Warrantholder's executors or administrators or other
legal representatives or an attorney of the Warrantholder duly appointed by an
instrument in writing satisfactory to the Trustee or the Co-transfer Agent, as
the case may be. The exercise form attached to the Warrant Certificate shall
specify the number of Shares that the subscriber wishes to purchase (being not
more than he is entitled to purchase under the Warrant Certificate), the person
or persons in whose name or names the Shares which the subscriber desires to
purchase are to be issued and his or their address or addresses and the number
of Shares to be issued to each such person. If any Shares subscribed for are to
be issued to a person or persons other than the Warrantholder, the
Warrantholder shall pay to the Trustee or to its agent all exigible transfer
taxes or governmental or other charges required to be paid in respect of the
transfer of the Warrants or Shares and the Company will not be required to
issue or deliver any certificate evidencing any Shares unless or until that
amount has been so paid or the Warrantholder has established to the
satisfaction of the Company that the taxes and charges have been paid or that
no taxes or charges are owing.
(5) Unless box B has been checked on the exercise form referred to in
subsection 4.1(1), (i) Warrants may not be exercised
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within the United States or by or on behalf of any U.S. Person, (ii) no Shares
shall be issued to any person who has an address in the United States on the
exercise form and (iii) no Shares issued upon exercise of Warrants will be
delivered to any address in the United States.
(6) In the event that any Warrant Certificate or Warrant Certificates have
been delivered to the Trustee pursuant to subsection 4.1(1) and box B has been
checked on the accompanying exercise form, then the Trustee shall cause the
certificates representing the Shares issued upon exercise of any such Warrants
to be affixed with the U.S. Legend.
(7) If, at the time of exercise of the Warrants, there remain restrictions
on resale under applicable securities legislation in respect of the Shares
issuable upon exercise of the Warrants, the Company may, on the advice of
counsel, endorse the certificate representing the Shares with respect to those
restrictions.
4.2 Effect of the Exercise of Warrants
(1) Upon exercise of a Warrant in accordance with section 4.1 and subject
to sections 4.4, 4.5 and 5.3, the Company shall cause the holder thereof to be
entered forthwith on its register of shareholders as the holder of the Shares
so subscribed for, and the number of Shares to be issued to such person or
persons shall be issued to the person or persons in whose name or names the
Shares so subscribed for are to be issued as specified in the exercise form.
Such person or persons shall become the shareholder or shareholders of record
of those Shares with effect from the date on which the Warrant is exercised
unless the register of the Company shall be closed on that date, in which case
the Shares so subscribed for shall be deemed to be issued and the person or
persons shall be deemed to become the shareholder or shareholders of record of
the Shares on the date on which the register is reopened and the Shares shall
be issued on the later date.
(2) Upon the due exercise of the Warrants as aforesaid the Company shall,
without charge therefor except as provided in subsection 4.1(4), forthwith
cause to be delivered to the Trustee, as agent for the person or persons in
whose name or names the Shares so subscribed for are to be issued as specified
in the exercise forms attached to the Warrant Certificates, certificates for
the appropriate number of Shares that the Warrantholders are entitled to and
have elected to acquire pursuant to the Warrants surrendered. Upon receipt by
the Trustee of such certificates, the Trustee shall cause such certificates to
be delivered forthwith in accordance with the written delivery instructions of
the holder, or in the absence of such instructions, by registered mail without
charge therefor, to the person in whose names the Shares have been issued at
the addresses specified in the exercise forms.
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4.3 Partial Exercise of Warrants
A Warrantholder may subscribe for and purchase any number of Shares up to
the aggregate number of Warrants represented by the Warrant Certificates
surrendered. In the event of any exercise of a number of Warrants less than the
number which the holder is entitled to exercise, the holder of the Warrants
upon such exercise shall, in addition, be entitled to receive, without charge
therefor, a new Warrant Certificate in respect of the balance of the Warrants
represented by the surrendered Warrant Certificate and which were not then
exercised. The Trustee shall issue a new Warrant Certificate upon surrender of
the Warrant Certificate, if satisfied that the new Warrant Certificate is
properly issuable.
4.4 No Fractional Shares
The Company will not, pursuant to section 5.1 or under any other
circumstances, be obligated to issue any fraction of a Share on the exercise of
a Warrant or Warrants. If any fractional interest in a Share would, except for
the provisions of this section, be deliverable upon the exercise of any
Warrant, the Company shall in lieu of delivering a fractional Share therefor,
satisfy the right to receive the fractional Share by payment to the holder of
the Warrant of an amount in cash (computed, in the case of a fraction of a
cent, to the next lower cent) equal to the same fraction of the Current Market
Price per Share on the date of exercise of the Warrant.
4.5 Expiration of Warrants
(1) After the Warrant Expiry Time, all rights under this Indenture and
under any Warrant that has not been exercised shall wholly cease and terminate
and the Warrant Certificate therefor shall be wholly void and of no effect.
(2) The Company shall give notice to the Warrantholders of the Warrant
Expiry Time not more than 60 and not less than 30 days prior to the Warrant
Expiry Time.
4.6 Cancellation of Warrants
All Warrants exercised as provided in section 4.1, partially exercised as
provided in section 4.3 or exchanged for other Warrants as provided in section
3.1 shall be cancelled and destroyed by the Trustee and, if required by the
Company, the Trustee shall furnish the Company with a certificate identifying
the Warrant Certificates so cancelled and the number of Shares which have been
issued pursuant to each.
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ARTICLE FIVE
Adjustment to Subscription Rights
5.1 Adjustment of the Subscription Price and Subscription Rights
(1) In this section the terms "record date" and "effective date" where
used herein shall mean 4:30 p.m. (Vancouver time) on the relevant date.
(2) The number of Shares to be acquired by a Warrantholder on exercise of
a Warrant will be adjusted from time to time in the events and in the manner
provided and in accordance with the provisions of and rules set out in this
Article Five.
(3) If and whenever at any time from the date hereof to the Warrant Expiry
Time, the Company:
(a) issues to all or substantially all of the holders of Shares by way of
stock dividend or otherwise Shares or Convertible Securities, other
than (i) the issue from time to time of Shares or Convertible
Securities by way of stock dividend to shareholders who elect to
receive Shares or Convertible Securities in lieu of cash dividends in
the ordinary course or pursuant to a dividend reinvestment plan or
(ii) as dividends paid in the ordinary course,
(b) subdivides or redivides the outstanding Shares into a greater number
of shares, or
(c) combines, consolidates or reduces the outstanding Shares into a
lesser number of shares
(any of those events being herein called a "Share Reorganization"),
the Price Adjustment Factor will be adjusted, effective immediately after the
record date at which the holders of Shares are determined for the purposes of
the Share Reorganization or the effective date if no record date is fixed, to
the number that is the product of (1) the Price Adjustment Factor in effect on
that effective date or record date, and (2) the fraction:
(i) the numerator of which shall be the total number of Shares
outstanding on that effective date or record date before giving
effect to the Share Reorganization; and
(ii) the denominator of which shall be the total number of Shares
that are or would be outstanding immediately after that
effective date or record date after giving effect to the Share
Reorganization and assuming all
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<PAGE> 22
Convertible Securities issued as part of the Share
Reorganization had then been converted into or exchanged for
Shares or all rights to acquire Shares had then been exercised.
For the purposes of determining the number of Shares outstanding at any
particular time, there shall be included therein that number of Shares which
would have resulted from the conversion or exchange at that time of all
Convertible Securities of the Company (other than any Convertible Securities
issued to holders of Shares by way of a stock dividend and otherwise included
in computing the denominator in clause (ii) hereof). Shares (and Shares
issuable upon conversion or exchange of Convertible Securities) issued or to be
issued under a Share Reorganization shall be deemed to be outstanding on the
record date or effective date for such Share Reorganization for the purpose of
calculating the number of outstanding Shares under subsections (4) and (6). To
the extent that any Convertible Securities issued to holders of Shares by way
of a stock dividend are not so converted or exchanged into or for Shares prior
to the expiration of the right to do so, the conversion price shall then be
readjusted to the conversion price which would then be in effect based upon the
number of Shares actually issued upon the conversion or exchange of the
Convertible Securities.
(4) If and whenever at any time from the date hereof to the Warrant Expiry
Time, the Company shall issue rights, options or warrants to all or
substantially all of the holders of the Shares pursuant to which those holders
are entitled to subscribe for, purchase or otherwise acquire Shares or
Convertible Securities, to subscribe for or purchase Shares or Convertible
Securities within a period of 45 days from the record date, at a price per
share or at a conversion price per share of less than 95% of the Current Market
Price on the earlier of the record date and the date on which the Company
announces its intention to make such issuance (any such issuance being herein
called a "Rights Offering" and Shares that may be acquired and exercised the
Rights Offering or upon conversion of the Convertible Securities offered by the
Rights Offering, being herein called "Offered Shares"), the Price Adjustment
Factor shall be adjusted effective immediately after the record date so that it
shall equal the number which is the product of (1) the Price Adjustment Factor
in effect immediately prior to the record date, and (2) the fraction:
(i) the numerator of which shall be the total number of Shares
outstanding immediately prior to the record date plus a number
of Shares equal to the number arrived at by multiplying the
total number of additional Shares offered for subscription or
purchase or into or for which the total number of Convertible
Securities so offered are convertible or exchangeable by the
quotient obtained by dividing the purchase or subscription price
for each Share offered for subscription or
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<PAGE> 23
purchase or the conversion price for each Convertible Security
so offered by such Current Market Price for the Shares; and
(ii) the denominator of which shall be the total number of Shares
outstanding immediately prior to such record date plus the total
number of additional Shares offered for subscription or purchase
or into or for which the total number of Convertible Securities
so offered are convertible or exchangeable.
The adjustment shall be made successively whenever a record date is fixed,
provided that if two or more such record dates or dates of announcement, as
applicable, or record dates or dates of announcement, as applicable, referred
to in subsection (6) are fixed within a period of 35 trading days, the
adjustment shall be made successively as if each of such record dates occurred
on the earliest of such record dates. To the extent that any rights, options
or warrants are not so issued or any of the rights, options or warrants so
issued are not exercised prior to the expiration thereof, or any Convertible
Securities are not so converted into or exchanged for Shares prior to the
expiration of the right to do so, the Price Adjustment Factor will be
readjusted to the Price Adjustment Factor in effect immediately prior to the
record date, and the Price Adjustment Factor will be further adjusted based
upon the number of additional Shares actually delivered upon the exercise of
the rights, options or warrants, or issued upon the conversion or exchange of
the Convertible Securities, as the case may be.
(5) If and whenever at any time from the date hereof to the Warrant Expiry
Time, the Company shall fix a record date for the issue of rights, options or
warrants to all or substantially all the holders of the outstanding Shares
entitling them, for a period expiring not more than 45 days after such record
date, to subscribe for or purchase Shares or Convertible Securities at a price
per share (or having a conversion price per share) not less than 95% of the
Current Market Price on the earlier of the record date and the date on which
the Company announces its intention to make such issuance, the Price Adjustment
Factor will not be adjusted.
(6) If and whenever at any time from the date hereof to the Warrant Expiry
Time the Company shall fix a record date for the making of an issue or
distribution to all or substantially all the holders of its outstanding Common
Shares resident in Canada of (a) shares of any class, excluding Shares or
Convertible Securities referred to in paragraph 3(a), whether of the Company or
any other corporation, or (b) rights, options or warrants, excluding those
referred to in subsections (4) or (5), or (c) evidences of its indebtedness, or
(d) property, cash or other assets, excluding dividends in the ordinary course
or property distributed in lieu thereof at the option of the shareholders (any
of such events being herein called a "Special Distribution") then, in each such
case, the Price Adjustment Factor shall be adjusted on the record date so
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that it shall equal the number that is the product of the Price Adjustment
Factor in effect immediately prior to the record date, and the fraction:
(i) the numerator of which shall be the total number of Shares
outstanding immediately prior to the record date multiplied by
the Current Market Price on the earlier of the day immediately
prior to such record date and the date on which the Company
announces its intention to make such issuance, less the
aggregate fair market value (as determined by the directors with
the approval of the Trustee, which determination shall be
conclusive) of the shares or rights, options or warrants or
evidences of indebtedness or property, cash or assets so
distributed; and
(ii) the denominator of which shall be the total number of Shares
outstanding immediately prior to the record date multiplied by
such Current Market Price.
The adjustment shall be made successively whenever a record date is fixed,
provided that if two or more such record dates or dates of announcement, as
applicable, or record dates or dates of announcement, as applicable, referred
to in subsection (4) are fixed within a period of 35 trading days, the
adjustment shall be made successively as if each of such record dates occurred
on the earliest of such record dates. To the extent that any distribution is
not so made, the Price Adjustment Factor shall then be readjusted to the Price
Adjustment Factor which would then be in effect if the record date had not been
fixed or to the Price Adjustment Factor which would then be in effect based
upon the shares or rights, options or warrants or evidences of indebtedness or
property, cash or assets actually distributed, as the case may be.
(7) On any adjustment of the Price Adjustment Factor pursuant to
subsections (3), (4) or (6), including any readjustment, the number of Shares
purchasable on exercise of a Warrant will be adjusted, effective at the same
time as the adjustment of the Price Adjustment Factor, by multiplying the
number of Shares so purchasable immediately before the adjustment by a fraction
which is the reciprocal of the fraction used in the adjustment of the Price
Adjustment Factor.
(8) If and whenever at any time from the date hereof to the Warrant Expiry
Time there is:
(a) a reclassification of the Shares outstanding, a change of Shares into
other shares or securities, or any other capital reorganization of
the Company except as described in subsections (3), (4), (5) and (6),
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(b) a consolidation, merger or amalgamation of the Company with or into
another body corporate resulting in a reclassification of outstanding
Shares or a change of Shares into other shares or securities, or
(c) a transaction whereby all or substantially all the Company's
undertaking and assets become the property of another corporation,
through sale, lease, exchange or otherwise,
(any of those events being herein called a "Corporate Reorganization"), a
holder who thereafter exercises Warrants will, subject to the prior written
consent of The Toronto Stock Exchange, be entitled to receive and will accept,
for the Subscription Price then in effect, in lieu of the Shares (and any other
securities to which Warrantholders are then entitled on the exercise of
Warrants) to which he would otherwise have been entitled on exercise
immediately prior to the Corporate Reorganization, the kind and amount of
shares or other securities or property (including cash) that he would have been
entitled to receive as a result of the Corporate Reorganization if, on the
effective date thereof, he had been the holder of the number of Shares (and any
other securities to which Warrantholders are then entitled on the exercise of
Warrants) to which he would have been entitled on the exercise of the Warrant
or Warrants immediately prior to the Corporate Reorganization.
(9) As a condition precedent to taking any action that would require an
adjustment pursuant to subsection (8), the Company will take all action that,
in the opinion of counsel, is necessary in order that the Company, any
successor or any successor to its assets and undertaking, shall be obligated to
and may validly and legally issue as fully paid and non-assessable all the
Shares or other shares or securities or property to which Warrantholders will
be entitled on the exercise of Warrants thereafter.
(10) If necessary as a result of any Corporate Reorganization, appropriate
adjustments will be made in the application of the provisions set forth in this
Article Five with respect to the rights and interests of Warrantholders to the
end that the provisions set forth in this Article Five will thereafter
correspondingly be made applicable as nearly as may reasonably be possible to
any shares or other securities or property thereafter deliverable on the
exercise of a Warrant. Any such adjustment will be subject to the prior written
consent of The Toronto Stock Exchange, will be made by and set forth in an
amendment hereto approved by the Directors and by the Trustee and will for all
purposes be conclusively deemed to be an appropriate adjustment.
(11) If the purchase price provided for in any right, warrant or option
issued in connection with a Rights Offering is decreased, or the conversion
price for Convertible Securities issued in connection with a Share
Reorganization is increased, the Price Adjustment Factor shall forthwith be
changed to whatever Price Adjustment Factor would have been obtained had the
adjustment made
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in connection with the issuance of all such rights, warrants, options or
Convertible Securities been made upon the basis of the purchase price as so
decreased or the conversion price as so increased, provided that the provisions
of this subsection shall not apply to any increase or decrease resulting from
provisions in any rights, warrants, options or securities designed to prevent
dilution if the increase or decrease shall not have been proportionately
greater than the change, if any, in the Price Adjustment Factor to be made at
the same time pursuant to the provisions of this section 5.1.
5.2 Subscription Rights Adjustment Rules
The following rules and procedures will be applicable to adjustments made
pursuant to section 5.1:
(a) the adjustments and readjustments provided for in section 5.1 shall
be cumulative and, subject to paragraph (b), will apply (without
duplication) to successive issues, subdivisions, combinations,
consolidations, distributions and other events that require an
adjustment;
(b) no adjustment in the Price Adjustment Factor, or resulting adjustment
in the number of Shares issuable on exercise of Warrants, will be
made unless the adjustment would result in a change of at least 1% in
the prevailing Price Adjustment Factor or the number of Shares
purchasable upon the exercise of the Warrants would change by at
least one one-hundredth of a share, provided that any adjustment that
would have been required to be made except for the provisions of this
paragraph, will be carried forward and taken into account in the next
adjustment;
(c) no adjustment will be made in respect of an event described in
paragraph (3)(a) or subsection (4) or (6) of section 5.1 if the
Warrantholders are entitled to participate in the event on the same
terms, mutatis mutandis, as if they had exercised their Warrants
immediately before the effective date of or record date for the event
and Warrantholders shall not be entitled to so participate without
the prior written consent of The Toronto Stock Exchange;
(d) no adjustment in the Price Adjustments Factor shall be made pursuant
to section 5.1 in respect of the issue of shares, rights, options or
warrants pursuant:
(i) to this Indenture,
(ii) the issuance of Shares pursuant to the exercise of directors,
officers and employees options or options granted for services
in
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accordance with the requirements of The Toronto Stock Exchange,
or
(iii) the issuance of any special warrants to L.B. Mining Co. or any
affiliate thereof in part consideration for the acquisition of
the Guariche property in Venezuela, the issuance of any Shares
pursuant to the exercise of such special warrants, the issuance
of any common share purchase warrants pursuant to the exercise
of such special warrants and the issuance of any Shares pursuant
to the exercise of such common share purchase warrants (except
that the number of Convertible Securities will increase if such
common share purchase warrants are issued prior to the expiry of
their exercise period),
and any such issues shall be deemed not to be a Share
Reorganization, a Rights Offering or a Special Distribution;
(e) for the purposes of subsections (3), (4), (5) and (6) of section 5.1,
there will be deemed not to be outstanding:
(i) any Share owned by or held for the account of the Company; or
(ii) any Share owned by or held for the account of any Subsidiary of
the Company;
(f) any dispute that arises at any time with respect to any adjustment
pursuant to this Indenture will be conclusively determined (as
between the Company, the Warrantholders, the Trustee and all transfer
agents and shareholders of the Company) by the auditors of the
Company or, if they are unable or unwilling to act, by such firm of
independent chartered accountants as is selected by the directors and
is acceptable to the Trustee, and any determination by them will be
binding on the Company, the Warrantholders, the Trustee and all
transfer agents and shareholders of the Company; and
(g) in the absence of a resolution of the directors fixing the record
date for an event referred to in section 5.1, the Company will be
deemed to have fixed as the record date therefor the date on which
the event is effected or such date as may be required by law.
5.3 Postponement of Issue of Shares, etc.
In any case in which section 5.1 requires an adjustment to take effect
immediately after the effective date of or record date for an event, and a
Warrant is exercised after that date and before the consummation of the event
(which in the case of rights,
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options and warrants will be the date the rights, options and warrants are
issued), the Company may postpone, until such consummation, issuing to the
Warrantholder such of the shares, securities or property to which he is
entitled pursuant to the exercise as exceeds those to which he would have been
entitled if the Warrant had been exercised immediately before that date,
provided however, that the Company will deliver to the Warrantholder an
appropriate instrument evidencing such holder's right to receive such
additional shares, securities or property upon the occurrence and consummation
of such event and the right to receive any dividend or other distribution in
respect of such additional shares, securities or property declared in favour of
the holders of record of Shares or of such securities or property on or after
that date or such later date as such holder would, but for the provisions of
this section, have become the holder of record of such additional shares or of
such securities or property pursuant to section 4.2.
5.4 Notice of Certain Events
(1) At least 21 days before the effective date of or record date for any
event referred to in section 5.1, other than a subdivision or consolidation of
the Shares, that requires or might require an adjustment in the subscription
rights pursuant to a Warrant, including the Price Adjustment Factor and the
number of Shares purchasable on exercise of a Warrant, the Company will:
(a) file with the Trustee a certificate of the Company specifying the
particulars of the event and, if determinable, the adjustment and a
computation of the adjustment; and
(b) give notice to the Warrantholders of the particulars of the event
and, if determinable, the adjustment.
The notice need only set forth particulars as have been determined at the date
that notice is given.
(2) If notice has been given under subsection (1) and the adjustment is
not then determinable, the Company shall promptly after the adjustment is
determinable:
(a) file with the Trustee a certificate of the Company showing the
computation of the adjustment; and
(b) give notice to the Warrantholders of the adjustment.
5.5 Reclassifications, Reorganizations, etc.
(1) In case of:
(a) any reclassifications or change of the Shares (other than a change in
par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or consolidation),
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(b) any amalgamation, consolidation or merger of the Company with, or
amalgamation, consolidation or merger of the Company into, any other
corporation (other than an amalgamation, consolidation or merger in
which the Company is the continuing corporation and which does not
result in any reclassification or change, other than as aforesaid, of
the Shares),
(c) any reorganization of the Company, or
(d) any sale, transfer or other disposition of all or substantially all
of the assets of the Company,
the Company, the corporation formed by the amalgamation, the corporation into
which the Company shall have been merged, the reorganized Company, or the
corporation which shall have acquired such assets, as the case may be, shall
execute and deliver to the Trustee a supplemental indenture providing that the
holder of each Warrant then outstanding shall have the right thereafter (until
the Warrant Expiry Time) to exercise Warrants only into the kind and amount of
shares and other securities and property (including cash) receivable upon such
reclassification, change, amalgamation, merger, reorganization, sale, transfer
or other disposition by a holder of the number of Shares which were purchasable
upon the exercise of the Warrants had the Warrants been exercised immediately
prior to the reclassification, change, amalgamation, merger, reorganization,
sale, transfer or other disposition.
(2) The supplemental indenture shall provide for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Article Five.
(3) The provisions of this section 5.5 shall apply to successive
reclassifications, changes, amalgamation, mergers, reorganizations, sales,
transfers or other dispositions.
5.6 Protection of Trustee
Subject to sections 10.2 and 10.3, the Trustee shall not at any time be
under any duty or responsibility to any Warrantholder to determine whether any
facts exist which may require any adjustment contemplated by section 5.1, or
with respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making the same.
5.7 Proceedings Prior to Any Action Requiring Adjustment
As a condition precedent to the taking of any action which would require
an adjustment in any of these subscription rights pursuant to any of the
Warrants, including the number of Shares which are to be issued by the exercise
of the Warrants, the Company shall take any corporate action which may, in the
opinion of counsel, be necessary in order that the Company has unissued and
preserved in its authorized capital and may validly and legally issue as fully
paid and non-accessible, all the Shares which the
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holders of such Warrants are entitled to receive on the full exercise thereof
in accordance with the provisions hereof.
ARTICLE SIX
Rights and Covenants
6.1 Purchase of Warrants
(1) The Company, when not in default under this Indenture, may purchase in
the market, by private contract, by tender or otherwise all or any portion of
the Warrants in such manner, from such persons and on such terms as the Company
and such persons may determine. All Warrants so purchased shall forthwith be
delivered to the Trustee and cancelled by it and no Warrants shall be issued in
substitution therefor.
(2) If, upon an invitation for tenders, more Warrants are tendered at the
same lowest price than the Company is prepared to accept at that price, the
Warrants to be purchased by the Company shall be selected by the Trustee by
lot, or in any other manner as the Trustee may deem equitable, from the
Warrants tendered by each tendering Warrantholder who tendered at such lowest
price. For this purpose the Trustee may make, and from time to time amend,
regulations with respect to the manner in which Warrants may be so selected and
regulations so made shall be valid and binding upon all Warrantholders
notwithstanding the fact that, as a result thereof, the Warrants held by a
holder or represented by a Warrant Certificate become subject to purchase in
part only.
6.2 General Covenants
The Company covenants with the Trustee that so long as any Warrants remain
outstanding and may be exercised:
(a) the Company will at all times maintain its existence, carry on and
conduct its business in a prudent manner and in accordance with
industry standards and good business practice, keep or cause to be
kept proper books of account in accordance with applicable law and,
if and whenever required in writing by the Trustee, file with the
Trustee copies of all annual financial statements of the Company
furnished to its shareholders during the term of this Indenture;
(b) the Company shall maintain the listing of the Shares on The Toronto
Stock Exchange, and will take all steps necessary to ensure that the
Shares issuable upon exercise of the Warrants will be listed and
posted for trading on The Toronto Stock Exchange upon their issue;
(c) the Company will reserve and keep available a sufficient number of
Shares for issuance upon the exercise of Warrants issued by the
Company hereunder;
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(d) the Company will cause the Shares from time to time subscribed for
and purchased pursuant to the exercise of the Warrants, issued by the
Company hereunder, in the manner herein provided, to be duly issued
in accordance with the Warrants and the terms hereof;
(e) the Company will cause the certificates representing the Shares
issuable upon exercise of the Warrants from time to time in the
manner herein provided, to be duly issued and delivered in accordance
with the Warrants and the terms hereof;
(f) upon the exercise by the holder of any Warrant of the right of
purchase provided for therein and herein and, upon payment of the
Subscription Price applicable thereto for each Share in respect of
which the right of purchase is so exercised, all Shares issuable upon
the exercise of Warrants shall be issued by the Company as fully paid
and non-assessable;
(g) the Company will use its best efforts to maintain its status as a
"reporting issuer" (or the equivalent thereof) not in default of the
requirements of the Securities Act (British Columbia) and the
Securities Act (Ontario);
(h) the Company is duly authorized to create and issue the Warrants to be
issued hereunder, and the Warrant Certificates when issued and
certified as herein provided will be legal, valid and binding
obligations of the Company;
(i) if, in the opinion of counsel, any prospectus or registration
statement is required to be filed with, or any permission is required
to be obtained from, any governmental authority or any other step is
required under any applicable securities laws before any Shares which
a Warrantholder is entitled to purchase pursuant to his Warrant may
properly and legally be issued upon the due exercise thereof, the
Company will take such action so required; and
(j) generally, the Company will well and truly perform and carry out all
the acts or things to be done by it as provided in this Indenture.
6.3 Trustee's Remuneration and Expenses
The Company covenants that it will pay to the Trustee from time to time
such reasonable remuneration for its services hereunder as may be agreed upon
between the Company and the Trustee and will pay or reimburse the Trustee upon
its request for all reasonable expenses, disbursements and advances properly
incurred or made by the Trustee in the administration or execution of the
trusts hereby created (including the reasonable compensation and
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the disbursements of counsel and all other advisors and assistants not
regularly in its employ), both before any default hereunder and thereafter
until all duties of the Trustee under the trusts hereof shall be finally and
fully performed, except any expense, disbursement or advance as may arise from
the negligence, wilful misconduct or bad faith of the Trustee or of persons for
whom the Trustee is responsible.
6.4 Performance of Covenants by Trustee
If the Company shall fail to perform any of its covenants and obligations
contained in this Indenture, the Trustee may notify the Warrantholders of the
failure on the part of the Company or may itself perform any of the said
covenants capable of being performed by it, but shall be under no obligation to
do so or to notify the Warrantholders. All sums expended or advanced by the
Trustee in so doing shall be repayable as provided in Section 6.3. No
performance, expenditure or advance by the Trustee shall be deemed to relieve
the Company of any default or of its continuing obligations hereunder.
6.5 Notice to Warrantholders of Certain Events
The Company covenants with the Trustee for the benefit of the Trustee and
the Warrantholders that, so long as any of the Warrants are outstanding, it
will not:
(a) pay any dividend payable in shares of any class to the holders of its
Shares or make any other distribution (other than a cash distribution
made as a dividend out of retained earnings or contributed surplus
legally available for the payment of dividends) to the holders of its
Shares,
(b) offer to the holders of its Shares rights to subscribe for or to
purchase any Shares or shares of any class or any other securities,
rights, warrants or options,
(c) make any repayment of capital on, or distribution of evidences of
indebtedness or any of its assets (excluding cash dividends) to the
holders of, its Shares,
(d) amalgamate, consolidate or merge with any other person or sell or
lease the whole or substantially the whole of its assets or
undertaking,
(e) effect any subdivision, consolidation or reclassification of its
Shares, or
(f) liquidate, dissolve or wind-up,
unless, in each such case, the Company shall have given notice, in the manner
specified in section 11.2, to each Warrantholder, of the action proposed to be
taken and the date on which (a) the books of the Company shall close or a
record shall be taken for such
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dividend, repayment, distribution, subscription rights or other rights,
warrants or securities, or (b) such subdivision, consolidation,
reclassification, amalgamation, merger, sale or lease, dissolution, liquidation
or winding-up shall take place, as the case may be, provided that the Company
shall only be required to specify in the notice those particulars of the action
as shall have been fixed and determined at the date on which the notice is
given. The notice shall also specify the date as of which the holders of
Shares of record shall participate in the dividend, repayment, distribution,
subscription of rights or other rights, warrants or securities, or shall be
entitled to exchange their Shares for securities or other property deliverable
upon such reclassification, amalgamation, merger, sale or lease, other
disposition, dissolution, liquidation or winding-up, as the case may be. The
notice shall be given, with respect to the actions described in subsections
(a), (b), (c), (d), (e) and (f) not less than 21 days prior to the record date
or the date on which the Company's transfer books are to be closed with respect
thereto.
6.6 Closure of Share Transfer Books
The Company further covenants and agrees that it will not during the
period of any notice given under section 6.5 close its share transfer books or
take any other corporate action which might deprive the Warrantholders of the
opportunity of exercising their Warrants, provided that nothing contained in
this section 6.6 shall be deemed to affect the right of the Company to do or
take part in any of the things referred to in section 6.5 or to pay cash
dividends on the shares of any class or classes in its capital from time to
time outstanding.
ARTICLE SEVEN
Enforcement
7.1 Enforcement of Rights of Warrantholders
(1) No Warrantholder shall have the right to institute any action or
proceeding or to exercise any other remedy authorized by this Indenture for the
purpose of enforcing any rights on behalf of all Warrantholders for the
execution of any trust or power hereunder unless a requisition, in writing
signed by holders of Warrants sufficient to purchase not less than 25% of the
aggregate number of Shares which could be purchased under the Warrants then
outstanding, requesting the Trustee to so act, and the indemnity referred to in
subsection 10.2(3), have been tendered to the Trustee and the Trustee shall
have failed to act within a reasonable time thereafter. In such case, but not
otherwise, any Warrantholder acting on behalf of himself and all other
Warrantholders shall be entitled to take proceedings in any court of competent
jurisdiction such as the Trustee might have taken.
(2) No one or more Warrantholders shall have any right in any manner
whatsoever to affect, disturb or prejudice the rights hereby
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created by his or their action, or to enforce any right hereunder or under any
Warrant Certificate, except subject to the conditions and in the manner herein
provided and all powers and trusts hereunder shall be exercised and all
proceedings at law shall be instituted, had and maintained by the Trustee,
except only as herein provided, and in any event for the equal benefit of all
Warrantholders.
7.2 Immunity of Shareholders
The Trustee, and by their acceptance of the Warrant Certificates and as
part of the consideration for the issue of the Warrants, the Warrantholders,
hereby waive and release any right, cause of action or remedy now or hereafter
existing in any jurisdiction against any past, present or future shareholder,
director or officer of the Company or of any of the subsidiaries of the
Company, or any subsidiary of the Company, in their capacity as such, for the
issue of Shares pursuant to any Warrants or on any covenant, agreement,
representation or warranty by the Company contained herein or in the Warrant
Certificates.
7.3 Limitation of Liability
The obligations hereunder are not personally binding upon, nor shall
resort hereunder be had to the private property of, any of the past, present or
future directors, shareholders, officers, employees or agents of the Company or
any of the subsidiaries of the Company, or any subsidiary of the Company, but
only the property of the Company (or any successor corporation) shall be bound
in respect hereof.
ARTICLE EIGHT
Meetings of Warrantholders
8.1 Right to Convene Meetings
The Trustee may at any time and from time to time and shall on receipt of
a written request of the Company or of a Warrantholders' Request and upon being
indemnified to its reasonable satisfaction by the Company or by one or more
Warrantholders signing the Warrantholders' Request against the costs that may
be incurred in connection with the calling and holding of the meeting, convene
a meeting of the Warrantholders. In the event of the Trustee failing, within 15
days after receipt of the written request of the Company or Warrantholders'
Request and indemnity given as aforesaid, to give notice convening a meeting,
the Company or the Warrantholders, as the case may be, may convene the meeting.
Every meeting shall be held in the City of Vancouver or at such other place as
may be approved or determined by the Trustee.
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8.2 Notice
At least 21 days notice of any meeting shall be given to the
Warrantholders in the manner provided in section 11.2 and a copy of the notice
shall be sent by mail to the Trustee unless the meeting has been called by it,
and to the Company unless the meeting has been called by it. Each notice shall
state the time when and the place where the meeting is to be held and shall
state briefly the general nature of the business to be transacted thereat and
it shall not be necessary for the notice to set out the terms of any resolution
to be proposed or any of the provisions of this Article Eight. Any accidental
omission in the notice of a meeting shall not invalidate any resolution passed
at the meeting.
8.3 Chairman
A person (who need not be a Warrantholder) designated in writing by the
Trustee shall be chairman of the meeting and if no person is so designated, or
if the person so designated is not present within 15 minutes from the time
fixed for the holding of the meeting, the Warrantholders present in person or
by proxy shall choose a person present to be chairman.
8.4 Quorum
Subject to the provisions of section 8.12, at any meeting of the Special
Warrantholders a quorum shall consist of one or more Warrantholders present in
person or by proxy holding Warrants sufficient to purchase not less than 20% of
the aggregate number of Shares that could be purchased under all the Warrants
then outstanding. If a quorum of the Warrantholders shall not be present within
half an hour from the time fixed for holding any meeting, the meeting, if
summoned by the Warrantholders pursuant to a Warrantholders' Request, shall be
dissolved but, subject to section 8.12, in any other case the meeting shall be
adjourned to the same day in the next week (unless that day is not a business
day, in which event the meeting shall be reconvened on the next day that is a
business day) at the same time and place and no notice need be given. At the
adjourned meeting the Warrantholders present in person or by proxy shall form a
quorum and may transact the business for which the meeting was originally
convened, notwithstanding the outstanding Warrants that such Warrantholders
hold.
8.5 Power to Adjourn
The chairman of any meeting at which a quorum of the Warrantholders is
present may, with the consent of the meeting, adjourn the meeting and no notice
of the adjournment need be given except such notice, if any, as the meeting may
prescribe.
8.6 Show of Hands
Every question submitted to a meeting shall be decided in the first place
by a majority of the votes given on a show of hands
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except that votes on an Extraordinary Resolution shall be given in the manner
hereinafter provided. At any meeting, unless a poll is duly demanded or
required as herein provided, a declaration by the chairman that a resolution
has been carried or carried unanimously or by a particular majority or lost or
not carried by a particular majority shall be conclusive evidence of the fact.
8.7 Poll
On every Extraordinary Resolution, and on any other question submitted to
a meeting upon which a poll is directed by the chairman or requested by one or
more of the Warrantholders acting in person or by proxy and holding Warrants
sufficient to purchase not less than 5% of the aggregate number of Shares that
could be purchased under Warrants then outstanding, a poll shall be taken in
such manner as the chairman shall direct. Questions other than an Extraordinary
Resolution shall be decided by a majority of the votes cast on a poll. The
results of a poll shall be deemed to be the decision of the meeting at which
the poll was demanded and shall be binding on all Warrantholders.
8.8 Voting
On a show of hands, every person who is present and entitled to vote,
whether as a Warrantholder or as proxy for one or more absent Warrantholders or
both, shall have one vote. On a poll each Warrantholder present in person or
represented by proxy duly appointed by instrument in writing shall be entitled
to one vote in respect of each Share purchasable under Warrants then held by
him. A proxy need not be a Warrantholder.
8.9 Regulations
The Trustee, or the Company with the approval of the Trustee, may from
time to time make or vary such regulations as they shall think fit:
(a) for the issue of voting certificates by any bank, trust company or
other depository satisfactory to the Trustee stating that the
Warrants specified therein have been deposited with the depository by
a named person and will remain on deposit until a specified date,
which voting certificates shall entitle the persons named therein to
be present and vote at the meeting of the Warrantholders and at any
adjournment thereof held before that date or to appoint a proxy or
proxies to represent them and vote for them at any such meeting and
at any adjournment thereof held before that date in the same manner
and with the same effect as though the persons so named in the voting
certificates were the actual holders of the Warrants specified
therein;
(b) for the deposit of voting certificates and/or instruments appointing
proxies at such place and time as the Trustee, the Company or the
Warrantholders convening the meeting,
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as the case may be, may in the notice convening the meeting direct;
(c) for the deposit of voting certificates and/or instruments appointing
proxies at some approved place or places other than the place at
which the meeting is to be held and enabling particulars of the
voting certificates and/or instruments appointing proxies to be sent
by mail, cable, telex or other means of prepaid, transmitted,
recorded communication before the meeting to the Company or to the
Trustee at the place where the same is to be held and for the voting
of proxies so deposited as though the instruments themselves were
produced at the meeting;
(d) for the form of instrument appointing a proxy (which shall be in
writing), the manner in which the same shall be executed and the
verification of any authority under which a person executes a proxy
on behalf of a Warrantholder; and
(e) generally, for the calling of meetings of Warrantholders and the
conduct of business thereat.
Any regulations so made shall be binding and effective and the votes given in
accordance therewith shall be valid and shall be counted. Except as the
regulations may provide, the only persons who shall be recognized at any
meeting as the holders of any Warrants, or as entitled to vote or, subject to
section 8.10, be present at the meeting in respect thereof, shall be persons
who are the registered holders of Warrants or their duly appointed
proxyholders.
8.10 Company and Trustee may be Represented
The Company and the Trustee, by their respective officers or directors,
and the counsel to the Company and the Trustee may attend any meeting of the
Warrantholders, but shall have no vote as such.
8.11 Powers Exercisable by Extraordinary Resolution
In addition to all other powers conferred upon them by any other
provisions of this Indenture or by law, the Warrant- holders at a meeting shall
have the following powers exercisable from time to time by Extraordinary
Resolution:
(a) power to agree to or sanction any amendment, modification,
abrogation, alteration, compromise or arrangement of the rights of
Warrantholders and/or the Trustee in its capacity as trustee
hereunder or on behalf of the Warrantholders against the Company,
whether those rights arise under this Indenture or the Warrants or
otherwise, which shall be agreed to by the Company, and to authorize
the Trustee to concur in and execute any indenture supplement, except
that in respect of a change
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in the Warrant Expiry Date or Warrant Expiry Time or the Subscription
Price, the amendment shall not be binding upon a Warrantholder who
does not consent thereto;
(b) power to direct or authorize the Trustee to enforce any of the
obligations on the part of the Company contained in this Indenture or
the Warrants or to enforce any of the rights of the Warrantholders in
any manner specified in the Extraordinary Resolution or to refrain
from enforcing any such covenant or right;
(c) power to waive and direct the Trustee to waive any default on the
part of the Company in complying with any provisions of this
Indenture or the Warrants, either unconditionally or upon any
conditions specified in the Extraordinary Resolution;
(d) power to restrain any Warrantholder from taking or instituting any
suit, action or proceeding against the Company for the enforcement of
any of the obligations on the part of the Company contained in this
Indenture or the Warrants or to enforce any of the rights of the
Warrantholders;
(e) power to direct any Warrantholder who, as such, has brought any suit,
action or proceeding to stay or discontinue or otherwise deal with
the same upon payment of the costs, charges and expenses reasonably
and properly incurred by the Warrantholder in connection therewith;
(f) power from time to time and at any time, with the consent of the
Company, not to be unreasonably withheld, to remove the Trustee and
appoint a successor trustee;
(g) power to assent to any compromise or arrangement with any creditor or
any class of creditors, whether secured or otherwise, and with
holders of any shares or other securities of the Company; and
(h) power to amend, alter or repeal any Extraordinary Resolution
previously passed or consented to by Warrantholders.
8.12 Meaning of "Extraordinary Resolution"
(1) The expression "Extraordinary Resolution" when used in this Indenture
means, subject as hereinafter in this section and in sections 8.15 and 8.16
provided, a resolution proposed at a meeting of the Warrantholders duly
convened for that purpose and held in accordance with the provisions of this
Article Eight at which there are present in person or by proxy Warrantholders
holding Warrants sufficient to purchase not less than 51% of the aggregate
number of Shares that could be purchased under all of the Warrants then
outstanding and passed by the affirmative votes of Warrantholders
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holding Warrants sufficient to purchase not less than 66.67% of the aggregate
number of Shares that could be purchased under all the Warrants then
outstanding and represented at the meeting and voted on the poll upon the
resolution.
(2) If, at any meeting called for the purpose of passing an Extraordinary
Resolution, Warrantholders holding Warrants sufficient to purchase not less
than 51% of the aggregate number of Shares that could be purchased under all of
the Warrants then outstanding are not present in person or by proxy within half
an hour after the time appointed for the meeting, then the meeting, if convened
by Warrantholders or on a Warrantholders' Request, shall be dissolved, but in
any other case it shall stand adjourned to such day, being not less than 15 or
more than 30 days later, and to such place and time as may be appointed by the
chairman. Not less than ten days' notice shall be given to the Warrantholders
of the time and place of the adjourned meeting in the manner provided in
section 11.2. The notice shall state that at the adjourned meeting the
Warrantholders present in person or by proxy shall form a quorum but it shall
not be necessary to set forth the purposes for which the meeting was originally
called or any other particulars. At the adjourned meeting the Warrantholders
present in person or by proxy shall form a quorum and may transact the business
for which the meeting was originally convened and a resolution proposed at the
adjourned meeting and passed by the requisite vote as provided in subsection
8.12(1) shall be an Extraordinary Resolution within the meaning of this
Indenture notwithstanding that Warrantholders holding Warrants sufficient to
purchase not less than 51% of the aggregate number of Shares that could be
purchased under all of the Warrants then outstanding are not present in person
or by proxy at the adjourned meeting.
(3) Votes on an Extraordinary Resolution shall always be given on a poll
and no demand for a poll on an Extraordinary Resolution shall be necessary.
8.13 Powers Cumulative
It is hereby declared and agreed that any one or more of the powers or any
combination of the powers in this Indenture stated to be exercisable by the
Warrantholders by Extraordinary Resolution or otherwise may be exercised from
time to time and the exercise of any one or more of the powers or any
combination of the powers from time to time shall not prevent the
Warrantholders from exercising that power or those powers or combination of
powers then or any other power or powers or combination of powers thereafter
from time to time.
8.14 Minutes
Minutes of all resolutions and proceedings at every meeting of
Warrantholders shall be made and duly entered in books from time to time to be
provided for that purpose by the Trustee at the expense of the Company, and any
minutes if purporting to be signed by the chairman of the meeting or by the
chairman of the
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<PAGE> 40
next succeeding meeting of Warrantholders, shall be prima facie evidence of the
matters therein stated and, until the contrary is proved, every meeting for
which minutes have been made, shall be deemed to have been duly convened and
held and all resolutions passed or proceedings taken thereat to have been duly
passed and taken.
8.15 Instruments in Writing
All actions that may be taken and all powers that may be exercised by the
Warrantholders at a meeting held as in this Article Eight provided may also be
taken and exercised by Warrantholders holding Warrants sufficient to purchase
not less than 66.67% of the aggregate number of Shares that could be purchased
under all of the Warrants then outstanding by an instrument in writing signed
in one or more counterparts by each Warrantholder in person or by attorney duly
appointed in writing and the expression "Extraordinary Resolution" when used in
this Indenture shall include a resolution embodied in an instrument so signed.
8.16 Binding Effect of Resolutions
Every resolution and every Extraordinary Resolution passed in accordance
with the provisions of this Article Eight at a meeting of Warrantholders shall
be binding upon all the Warrantholders, except as provided in subsection
8.11(a), whether present at or absent from the meeting, and whether voting for
or against the resolution or abstaining and every instrument in writing signed
by Warrantholders in accordance with section 8.15 shall be binding upon all the
Warrantholders, except as provided in subsection 8.11(a) whether signatories
thereto or not, and each and every Warrantholder and the Trustee (subject to
the provisions for its indemnity herein contained) shall be bound to give
effect accordingly to every resolution and instrument in writing passed or
executed in accordance with these provisions.
8.17 Holdings by Company Disregarded
In determining whether Warrantholders holding the requisite number of
Warrants are present for the purpose of obtaining a quorum or have voted or
consented to any resolution, Extraordinary Resolution, consent, waiver,
Warrantholders' Request or other action under this Indenture, Warrants owned by
the Company or any subsidiary of the Company shall be deemed to be not
outstanding.
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ARTICLE NINE
Supplemental Indentures and Successor Companies
9.1 Provision for Supplemental Indentures for Certain Purposes
From time to time the Company and the Trustee may, subject to the
provisions hereof, and they shall, when so directed hereby, execute and deliver
by their proper officers or directors, as the case may be, indentures or
instruments supplemental hereto, which thereafter shall form part hereof, for
any one or more or all of the following purposes:
(a) setting forth any adjustments resulting from the application of the
provisions of Article Five;
(b) adding to the provisions hereto such additional covenants and
enforcement provisions as, in the opinion of counsel, are necessary
or advisable, provided that the same are not in the opinion of the
Trustee prejudicial to the interests of the Warrantholders as a
group;
(c) giving effect to any Extraordinary Resolution passed as provided in
Article Eight;
(d) adding to, deleting or altering the provisions hereof in respect of
the transfer of Warrants, the exchange of Warrants and the making of
any modification in the form of a Warrant Certificate which, in the
opinion of the Trustee, does not affect the substance thereof;
(e) making any additions to, deletions from or alterations of the
provisions of this Indenture which, in the opinion of the Trustee, do
not materially and adversely affect the interests of the
Warrantholders and are necessary or advisable in order to
incorporate, reflect or comply with any Applicable Legislation;
(f) making provisions not inconsistent with this Indenture as may be
necessary or desirable with respect to matters or questions arising
hereunder or for the purpose of obtaining a listing or quotation of
the Shares issuable upon exercise of the Warrants on a stock
exchange, bourse or over-the-counter market, provided that the
provisions are not, in the opinion of the Trustee, prejudicial to the
interests of the Warrantholders as a group;
(g) modifying any of the provisions of this Indenture or relieving the
Company from any of the obligations, conditions or restrictions
herein contained, provided that no such modification or relief shall
be or become operative or effective if in the opinion of the Trustee
the modification or relief impairs any of the rights of the
Warrantholders provided hereunder, or of the Trustee,
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and provided that the Trustee may in its uncontrolled discretion
decline to enter into any supplemental indenture which in its opinion
may not afford adequate protection to the Trustee when the same shall
become operative;
(h) evidencing any succession, or successive successions, of other bodies
corporate to the Company and the assumption by any successor of the
obligations of the Company herein and in the Warrant Certificates as
provided hereafter in this Article Nine;
(i) adding to, deleting or altering the provisions hereof relating to any
adjustment in the provisions of Article Five relating to the
subscription for Shares upon exercise of the Warrants; and
(j) for any other purpose not inconsistent with the terms of this
Indenture, including the correction or rectification of any
ambiguities, defective provisions, errors or omissions herein,
provided that, in the opinion of the Trustee, the rights of the
Trustee or of the Warrantholders provided hereunder are in no way
prejudiced thereby.
9.2 Successor Companies
In the case of the consolidation, amalgamation, arrangement, merger or
transfer of the undertaking or assets of the Company as an entirety or
substantially as an entirety to another corporation ("successor corporation"),
the successor corporation resulting from the consolidation, amalgamation,
arrangement, merger or transfer (if not the Company) will be bound by the
provisions hereof and for the due and punctual performance and observance of
each and every covenant and obligation contained in this Indenture to be
performed by the Company and, if requested by the Trustee, the successor
corporation shall, by supplemental indenture satisfactory in form to the
Trustee and executed and delivered to the Trustee, expressly assume those
obligations.
ARTICLE TEN
Concerning the Trustee
10.1 Trust Indenture Legislation
(1) If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with a mandatory requirement of Applicable Legislation,
the mandatory requirement shall prevail.
(2) The Company and the Trustee each will, at all times in relation to
this Indenture and any action to be taken hereunder, observe and comply with
and be entitled to the benefits of Applicable Legislation.
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10.2 Rights and Duties of Trustee
(1) In the exercise of the rights, duties and obligations prescribed or
conferred by the terms of this Indenture, the Trustee shall act honestly and in
good faith with a view to the best interests of the Warrantholders and shall
exercise that degree of care, diligence and skill that a reasonably prudent
trustee would exercise in comparable circumstances.
(2) No provision of this Indenture will be construed to relieve the
Trustee from liability for its own negligent act, negligent failure to act,
wilful misconduct or bad faith.
(3) The obligation of the Trustee to commence or continue any act, action
or proceeding for the purpose of enforcing any rights of the Trustee or the
Warrantholders or obligations of the Company hereunder shall be conditional
upon either the Warrantholders or the Company furnishing, when required by
notice in writing by the Trustee, sufficient funds to commence or continue such
act, action or proceeding and an indemnity reasonably satisfactory to the
Trustee to protect and hold harmless the Trustee against the costs, charges and
expenses and liabilities to be incurred thereby and any loss and damage it may
suffer by reason thereof. None of the provisions contained in this Indenture
shall require the Trustee to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers unless indemnified as aforesaid.
(4) The Trustee may, before commencing or at any time during the
continuance of any such act, action or proceeding require the Warrantholders at
whose instance it is acting to deposit with the Trustee the Warrant
Certificates held by them, for which Warrant Certificates the Trustee shall
issue receipts.
(5) Every provision of this Indenture that by its terms relieves the
Trustee of liability or entitles it to rely upon any evidence submitted to it
is subject to the provisions of Applicable Legislation, and of this section
10.2 and section 10.3.
10.3 Evidence, Experts and Advisors
(1) In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Company will furnish to the Trustee such
additional evidence of compliance with any provision hereof, and in such form,
as is prescribed by Applicable Legislation or as the Trustee may reasonably
require by written notice to the Company.
(2) In the exercise of its right or duty hereunder, the Trustee may, if it
is acting in good faith, rely as to the truth of the statements or the accuracy
of the opinions expressed therein, upon statutory declarations, opinions,
reports, certificates or other evidence furnished to the Trustee pursuant to a
provision hereof or of Applicable Legislation or pursuant to a request of the
Trustee, provided the evidence complies with Applicable Legislation
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and that the Trustee examines such evidence and determines that it complies
with the applicable requirements of this Indenture.
(3) Whenever Applicable Legislation requires that evidence referred to in
subsection 10.3(1) be in the form of a statutory declaration, the Trustee may
accept the statutory declaration in lieu of a certificate of the Company
required by any provision hereof. Any statutory declaration may be made by one
or more of the officers of the Company.
(4) Proof of the execution of an instrument in writing, including a
Warrantholders' Request, by a Warrantholder may be made by the certificate of a
notary public, or other officer with similar powers, that the person signing
the instrument acknowledged to him the execution thereof, or by an affidavit of
a witness to the execution, or in any other manner that the Trustee may
consider adequate.
(5) The Trustee may employ or retain such counsel, accountants, engineers,
appraisers, or other experts or advisers as it may reasonably require for the
purpose of discharging its duties hereunder and may pay reasonable remuneration
for all services so performed by any of them, without taxation of costs of any
counsel, and will not be responsible for any misconduct or negligence on the
part of any of them who has been selected with due care by the Trustee.
(6) The Trustee may, as a condition precedent to any action to be taken by
it under this Indenture, require such opinions, statutory declarations,
reports, certificates or other evidence as it, acting reasonably, considers
necessary or advisable under the circumstances.
10.4 Documents, Monies, etc. Held by Trustee
(1) Any securities, documents of title or other instruments that may at
any time be held by the Trustee subject to the trusts hereof may be placed in
the deposit vaults of the Trustee or of any Canadian Imperial Bank of Commerce,
Bank of Montreal, Bank of Nova Scotia, The Toronto-Dominion Bank, the Royal
Bank of Canada and the Hongkong Bank of Canada or deposited for safekeeping
with any of those Canadian chartered banks. Unless herein otherwise expressly
provided, any money so held pending the application or withdrawal thereof under
any provision of this Indenture shall be deposited in the name of the Trustee
in any of the foregoing Canadian chartered banks at the rate of interest then
current on similar deposits or, with the consent of the Company, be:
(a) deposited in the deposit department of the Trustee or of any other
loan or trust company authorized to accept deposits under the laws of
Canada or a province thereof whose short term debt obligations or
deposits have a rating of at least R1 as rated by Dominion Bond
Rating Service, or
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<PAGE> 45
(b) invested in securities issued or guaranteed by the Government of
Canada or a province thereof or in obligations, maturing not more
than one year from the date of investment, of or guaranteed by any of
the foregoing Canadian chartered bank or loan or trust company.
Unless the Company is in default hereunder, all interest or other income
received by the Trustee in respect of deposits and investments will belong to
the Company.
10.5 Action by Trustee to Protect Interests
The Trustee shall have the power to institute and to maintain such actions
and proceedings as it may consider necessary or expedient to preserve or
protect its interests and the interests of the Warrantholders.
10.6 Trustee not Required to Give Security
The Trustee shall not be required to give any bond or security in respect
of the execution of the trusts and powers of this Indenture or otherwise in
respect of the premises contained herein.
10.7 Protection of Trustee
By way of supplement to the provisions of any law from time to time
applicable to trustees it is expressly declared and agreed as follows:
(a) the Trustee shall not be liable for or by reason of any statements of
fact or recitals in this Indenture or in the Warrant Certificates
(except the representation contained in section 10.9 and by virtue of
the certification by the Trustee of the Warrant Certificates) or
required to verify the same, but all such statements or recitals are
and shall be deemed to be made by the Company;
(b) nothing herein contained shall impose any obligation on the Trustee
to see or to require evidence of the registration (on filing or
renewal thereof) of this Indenture or any instrument ancillary or
supplemental hereto;
(c) the Trustee shall not be bound to give notice to any person or
persons of the execution hereof;
(d) the Trustee shall not incur any liability or responsibility whatever
or be in any way responsible for the consequence of any breach on the
part of the Company of any obligation herein contained or of any acts
of any director, officer, employee or agent of the Company;
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(e) the Trustee shall not be bound to give any notice or to do or take
any act, action or proceeding by virtue of the powers conferred on it
hereby unless and until it shall have been required to do so under
the terms hereof, nor shall the Trustee be required to take notice of
any default of the Company hereunder unless and until notified in
writing of the default (which notice must specify the nature of the
default) and, in the absence of that notice, the Trustee may for all
purposes hereunder conclusively assume that no default by the Company
hereunder has occurred. The giving of any notice shall in no way
limit the discretion of the Trustee hereunder as to whether any
action is required to be taken in respect of any default hereunder;
(f) the Trustee shall not be accountable with respect to the validity or
value (or the kind or amount) of any Shares or other securities or
property which may at any time be issued or delivered upon the
exercise of the rights attaching to any Warrant; and
(g) the Trustee is not responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver Shares or
certificates for the same upon the surrender of any Warrant
Certificates and payment of the Subscription Price applicable thereto
for the purpose of the exercise of the Warrants represented by such
Warrant Certificates or to comply with any of the covenants contained
in Article Six.
10.8 Replacement of Trustee
(1) The Trustee may resign its trust and be discharged from all further
duties and liabilities hereunder, except as provided in this Article Ten, by
giving to the Company and the Warrantholders not less than 90 days notice in
writing or, if a new Trustee has been appointed, such shorter notice as the
Company accepts as sufficient. The Warrantholders by Extraordinary Resolution
shall have power at any time, with the consent of the Company, not to be
unreasonably withheld, to remove the Trustee and to appoint a new Trustee. In
the event of the Trustee resigning or being removed as aforesaid or being
dissolved, becoming bankrupt, going into liquidation or otherwise becoming
incapable of acting hereunder, the Company shall forthwith appoint a new
Trustee unless a new Trustee has already been appointed by the Warrantholders.
If for any reason the Company is unable to appoint a new Trustee, the retiring
Trustee or any Warrantholder may apply to the Supreme Court of British
Columbia, on such notice as the Court may direct, for the appointment of a new
Trustee. Any new Trustee so appointed by the Company or by the Court shall be
subject to removal as aforesaid by the Warrantholders and the Company. Any new
Trustee appointed under any provision of this section 10.8 shall be a
corporation authorized to carry on the business of a trust company in the
Province of British Columbia and Ontario and, if required by the Applicable
Legislation of any other Province, in that other
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<PAGE> 47
Province. On any such appointment the new Trustee shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as Trustee without any further assurance, conveyance, act or deed, but
there shall be immediately executed, at the expense of the Company, all such
conveyances or other instruments as may, in the opinion of counsel, be
necessary or advisable for the purpose of assuring such powers, rights, duties
and responsibilities of the new Trustee.
(2) Upon the appointment of a new Trustee, the Company shall promptly give
notice thereof to the Warrantholders.
(3) Any corporation into or with which the Trustee may be merged or
consolidated or amalgamated, or any corporation succeeding to the trust
business of the Trustee, shall be the successor to the Trustee hereunder
without any further act on its part or any of the parties hereto provided that
the corporation would be eligible for appointment as a new Trustee under
subsection 10.8(1).
(4) A Warrant Certificate certified but not delivered by a predecessor
Trustee may be delivered by the new or successor Trustee in the name of the
predecessor Trustee or successor Trustee.
10.9 Conflict of Interest
(1) The Trustee represents to the Company that at the time of the
execution and delivery hereof no material conflict of interest exists between
the Trustee's role as a fiduciary hereunder and its role in any other capacity
and that if a material conflict of interest arises hereafter it will, within 90
days after ascertaining that it has a material conflict of interest, either
eliminate the conflict of interest or assign its trust hereunder to a successor
Trustee approved by the Company and meeting the requirements set forth in
subsection 10.8(1). Notwithstanding the foregoing provisions of this subsection
10.9(1), if any such material conflict of interest exists or hereafter shall
exist, the validity and enforceability of this Indenture and the Warrant
Certificate shall not be affected in any manner whatsoever by reason thereof.
(2) Subject to subsection 10.9(1), the Trustee, in its personal or any
other capacity, may buy, lend on and deal in securities of the Company, may act
as registrar and transfer agent for the Shares and trustee for the Special
Warrants under the Special Warrant Indenture and generally may contract and
enter into financial transactions with the Company or any subsidiary of the
Company without being liable to account for any profit made thereby.
10.10 Acceptance of Trust
The Trustee hereby accepts the trusts in this Indenture declared and
provided for and agrees to perform them on the terms
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and conditions herein set forth and agrees to hold all rights, interests and
benefits contained herein for and on behalf of those persons who become holders
of Warrants from time to time issued pursuant to this Indenture.
10.11 Trustee Not to be Appointed Receiver
The Trustee and any person related to the Trustee shall not be appointed a
receiver, a receiver manager or liquidator of all or any part of the assets or
undertaking of the Company.
10.12 Indemnity
Without limiting any protection or indemnity of the Trustee under any
other provision hereof, or otherwise at law, the Company hereby agrees to
indemnify and hold harmless the Trustee from and against any and all
liabilities, losses, damages, penalties, claims, actions, suits, costs,
expenses and disbursements, including reasonable legal or advisor fees and
disbursements, of whatever kind and nature which may at any time be imposed on,
incurred by or asserted against the Trustee in connection with the performance
of its duties and obligations hereunder, other than such liabilities, losses,
damages, penalties, claims, actions, suits, costs, expenses and disbursements
arising by reason of the negligence, bad faith or wilful misconduct of the
Trustee or of persons for whom the Trustee is responsible. This provision shall
survive the resignation or removal of the Trustee, or the termination of the
Indenture.
ARTICLE ELEVEN
General
11.1 Notice to the Company or the Trustee
(1) Unless herein otherwise expressly provided, any notice to be given
hereunder to the Company or the Trustee shall be given in writing and shall be
deemed to be validly given if delivered or if sent by registered letter,
postage prepaid or if transmitted by facsimile:
(a) if to the Company:
Granges Inc.
Suite 3000
370 Seventeenth Street
Denver, Colorado
U.S.A. 80202
Attention: Mr. Michael B. Richings
Facsimile No.: (303) 629-2499
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<PAGE> 49
and to:
Ladner Downs
Barristers & Solicitors
1200 - 200 Burrard Street
Vancouver, British Columbia
V7X 1T2
Attention: Mr. William F. Sirett
Facsimile No.: (604) 687-1415
(b) if to the Trustee:
Montreal Trust Company of Canada
Montreal Trust Centre
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
Attention: Manager, Corporate Trust Department
Facsimile No.: (604) 683-3694
and any notice delivered in accordance with the foregoing shall be deemed to
have been received on the date of delivery or, if mailed, on the fifth business
day following the day of the mailing of the notice, or if transmitted by
facsimile, on the day following the transmission.
(2) The Company or the Trustee, as the case may be, may from time to time
notify the other in the manner provided in subsection 11.1(1) of a change of
address which, from the effective date of the notice and until changed by like
notice, shall be the address of the Company or the Trustee, as the case may be,
for all purposes of this Indenture.
(3) If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, a notice to be given to the Trustee or
to the Company hereunder could reasonably be considered unlikely to reach or to
be delayed in reaching its destination, the notice shall be valid and effective
only if it is delivered to an officer of the party to which it is addressed or
if it is delivered to that party at the appropriate address provided in
subsection 11.1(1) by cable, facsimile, telegram, telex or other means of
prepaid, transmitted, written communication, and any notice delivered in
accordance with the foregoing shall be deemed to have been received on the date
of delivery to the officer or if delivered by cable, facsimile, telegram, telex
or other means of prepaid, transmitted, recorded communication, on the first
business day following the date of the sending of the notice by the persons
giving the notice.
11.2 Notice to Warrantholders
(1) Unless herein otherwise expressly provided, a notice to be given
hereunder to Warrantholders shall be written and shall be
- 45 -
<PAGE> 50
deemed to be validly given if the notice is sent by prepaid mail, addressed to
the holders or delivered by hand or facsimile (or so mailed to certain holders
and so delivered or facsimiled to the other holders) at their respective
addresses and facsimile numbers appearing on the register maintained by the
Trustee, and if, in the case of joint holders of any Warrant, more than one
address or facsimile number appears on the register in respect of the joint
holding, the notice shall be addressed or delivered, as the case may be, only
to the first address or facsimile number so appearing. The Trustee shall give,
in the same manner as for Warrantholders set out above, a copy of each such
notice to ScotiaMcLeod Inc. (Attention: John A. Macdonald) on behalf of the
Underwriters, at 1100 - 609 Granville Street, Vancouver, British Columbia, V7T
2T2 (Facsimile No.: (604) 661-7496). Any notice so given shall be deemed to
have been given on the day of delivery by hand or facsimile or, if mailed, on
the next business day following the day of mailing of the notice. Accidental
error or omission in giving notice or accidental failure to mail notice to any
Warrantholder shall not invalidate any action or proceeding founded thereon.
(2) If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the
Warrantholders hereunder could reasonably be considered unlikely to reach or to
be delayed in reaching its destination, the notice shall be valid and effective
if published or distributed once in the Report on Business section of the
national edition of The Globe and Mail newspaper, or, in the event of a
disruption of circulation of that newspaper, once in a daily newspaper in the
English language, approved by the Trustee, of general circulation in the cities
of Toronto and Vancouver; provided that in the case of a notice convening a
meeting of Warrantholders, the Trustee may require such addition publications
of that notice, in the same or in other cities or both, as it may deem
necessary for the reasonable protection of the holders of Warrants or to comply
with any applicable requirement of law or any stock exchange. A notice so given
will be deemed to have been given on the day on which it has been published in
all of the cities in which publication was required (or first published in a
city if more than one publication in that city is required). In determining
under any provision hereof the date when notice of any meeting or other event
must be given the date of giving notice shall be included and the date of the
meeting or other event shall be excluded.
11.3 Satisfaction and Discharge of Indenture
On the earlier of:
(a) the date by which there has been delivered to the Trustee for
exercise or destruction all Warrant Certificates theretofore
certified hereunder, or
(b) the 61st day following the Warrant Expiry Date,
- 46 -
<PAGE> 51
and if all Shares required to be issued in compliance with the provisions
hereof have been issued and delivered hereunder, this Indenture will cease to
be of further effect and the Trustee, on demand of and at the cost and expense
of the Company and on delivery to the Trustee by the Company of a certificate
of the Company stating that all conditions precedent to the satisfaction and
discharge of this Indenture have been complied with and on payment to the
Trustee of the fees and other remuneration payable to the Trustee, will execute
proper instruments acknowledging satisfaction of and discharging this
Indenture.
11.4 Sole Benefit of Parties and Warrantholders
Nothing in this Indenture or in the Warrant Certificates expressed or
implied, shall give or be construed to give to any person other than the
parties hereto and the Warrantholders, as the case may be, any legal or
equitable right, remedy or claim under this Indenture, or under any covenant or
provision herein contained, all covenants and provisions being for the sole
benefit of the parties hereto and the Warrantholders.
11.5 Discretion of Directors
Any matter provided herein to be determined by the directors will be
determined by the directors in their sole discretion, and a determination so
made will be conclusive.
11.6 Counterparts and Formal Date
This Indenture may be executed in several counterparts, each of which when
so executed will be deemed to be an original, and the counterparts together
will constitute one and the same instrument and notwithstanding the date of
their execution will be deemed to be dated as of April 25, 1996.
IN WITNESS WHEREOF the parties hereto have executed these presents under
their respective seals and the hands of their proper officers in that behalf.
GRANGES INC.
By:
-----------------------------------
(C/S)
By:
-----------------------------------
MONTREAL TRUST COMPANY OF CANADA
By:
-----------------------------------
(C/S)
By:
-----------------------------------
- 47 -
<PAGE> 52
SCHEDULE "A"
COMMON SHARE PURCHASE WARRANT
to acquire Common Shares of
GRANGES INC.
(incorporated under the laws of British Columbia)
THE RIGHT TO PURCHASE COMMON SHARES UNDER THIS WARRANT EXPIRES AT 4:30 P.M.
(LOCAL TIME) ON OCTOBER 31, 1997.
Warrant Certificate CERTIFICATE FOR _______________________
No. W- Warrants, each entitling the holder
thereof to acquire one Share of
Granges Inc.
THIS IS TO CERTIFY THAT,
- -------------------------------------------------------------------------------
(the "holder") is the registered holder of the number of common share purchase
warrants (the "Warrants") of Granges Inc. (the "Company") set forth above, and
is entitled, on exercise of these Warrants upon and subject to the terms and
conditions set forth herein and in the Warrant Indenture hereinafter referred
to, to purchase at any time, before 4:30 p.m. (local time) on October 31, 1997,
one fully-paid and non-assessable common share (a "Share") without par value in
the capital of the Company as constituted on the date hereof for each Warrant
by surrendering to Montreal Trust Company of Canada (the "Trustee") at its
principal transfer office in either of the cities of Toronto or Vancouver, an
exercise form in the form attached hereto duly completed and executed,
accompanied by this certificate, cash, a certified cheque, bank draft or money
order in lawful money of Canada payable to or to the order of the Company or to
the Trustee at par in the city where this Warrant Certificate is so surrendered
in an amount equal to the purchase price of the Shares so subscribed for.
Surrender of this Warrant Certificate, the duly completed exercise form
with payment as provided above will be deemed to have been effected only on
personal delivery thereof to, or if sent by mail or other means of transmission
on actual receipt thereof by, the Trustee at its principal transfer office in
either of the cities of Toronto or Vancouver.
The Warrants represented by this Warrant Certificate and the Shares to be
issued upon exercise thereof have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S. Securities Act") or
any applicable State securities laws of the United States. Accordingly, this
Warrant does not constitute an offer to any person within the
A-1
<PAGE> 53
United States or to any "U.S. Person" within the meaning of Regulation S under
the U.S. Securities Act and may not be exercised within the United States or by
or on behalf of any U.S. Person unless such person is an institutional
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) of the U.S.
Securities Act and has checked box B of the attached exercise form.
Subject to adjustment thereof in the events and in the manner set forth in
the Warrant Indenture hereinafter referred to, the price payable for each Share
upon the exercise of Warrants shall be $3.00 in lawful money of Canada.
Certificates for the Shares subscribed for will be mailed to the persons
specified in the exercise form at their respective addresses specified therein
or, if so specified in the exercise form, delivered to such persons at the
office where this Warrant Certificate is surrendered. If fewer Shares are
purchased than the number that can be purchased pursuant to this Warrant
Certificate, the holder hereof will be entitled to receive without charge a new
Warrant Certificate in respect of the balance of the Shares not so purchased.
No fractional Shares will be issued upon exercise of any Warrant. In lieu of
such fractional share, the holder will receive a cash payment therefor.
This Warrant Certificate evidences Warrants of the Company issued or
issuable under the provisions of a warrant indenture (which indenture together
with all other instruments supplemental or ancillary thereto is herein referred
to as the "Warrant Indenture") dated as of April 25, 1996 between the Company
and the Trustee, as trustee, to which Warrant Indenture reference is hereby
made for particulars of the rights of the Warrantholders, the Company and the
Trustee in respect thereof and the terms and conditions on which the Warrants
are issued and held, all to the same effect as if the provisions of the Warrant
Indenture were herein set forth, to all of which the holder by acceptance
hereof assents. The Company will furnish to the holder, on request and without
charge, a copy of the Warrant Indenture.
On presentation at the principal transfer office of the Trustee in either
of the cities of Toronto or Vancouver as specified below, subject to the
provisions of the Warrant Indenture and on compliance with the reasonable
requirements of the Trustee, one or more Warrant Certificates may be exchanged
for one or more Warrant Certificates entitling the holder thereof to purchase
in the aggregate an equal number of Shares as are purchasable under the Warrant
Certificate or Certificates so exchanged.
The Warrant Indenture contains provisions for the adjustment of the price
payable for each Share upon the exercise of Warrants and the number of Shares
issuable upon the exercise of Warrants in the events and in the manner set
forth therein.
The Warrant Indenture also contains provisions making binding on all
holders of Warrants outstanding thereunder resolutions passed at meetings of
Warrantholders held in accordance
A-2
<PAGE> 54
with the provisions of the Warrant Indenture and instruments in writing signed
by holders of Warrants entitled to purchase a specific majority of the Shares
that can be purchased pursuant to such Warrants.
Nothing contained in this Warrant Certificate, the Warrant Indenture or
elsewhere shall be construed as conferring upon the holder hereof any right or
interest whatsoever as a holder of Shares or any other right or interest except
as herein and in the Warrant Indenture expressly provided.
Warrants are issuable only as fully registered Warrants. Warrants may only
be transferred in compliance with the conditions of the Warrant Indenture on
one of the registers to be kept by and at the principal offices of the Trustee
in either of the cities of Toronto or Vancouver, and by the Trustee or such
other registrar as the Company, with the approval of the Trustee, may appoint
at such other place or places, if any, as may be designated, upon surrender of
this Warrant Certificate to the Trustee or other registrar accompanied by a
written instrument of transfer in form and execution satisfactory to the
Trustee or other registrar and upon compliance with the conditions prescribed
in the Warrant Indenture and with such reasonable requirements as the Trustee
or other registrar may prescribe and upon the transfer being duly noted thereon
by the Trustee or other registrar.
Time is of the essence hereof.
This Warrant Certificate will not be valid for any purpose until it has
been countersigned by or on behalf of the Trustee from time to time under the
Warrant Indenture.
The parties hereto have declared that they have required that these
presents and all other documents related hereto be in the English language. Les
parties aux presentes declarent qu'elles ont exige que la presente convention,
de meme que tous les documents s'y rapportant, soient rediges en anglais.
IN WITNESS WHEREOF Granges Inc. has caused this Warrant Certificate to be
duly signed on _______________________, 199__.
GRANGES INC.
By:
---------------------------------------
Authorized Signatory
By:
---------------------------------------
Authorized Signatory
A-3
<PAGE> 55
Countersigned and Registered by:
MONTREAL TRUST COMPANY OF CANADA,
Toronto
Vancouver
Per:
-----------------------------------
Authorized Signatory
A-4
<PAGE> 56
SCHEDULE "B"
FORM OF DECLARATION FOR REMOVAL OF LEGEND
To: Montreal Trust Company of Canada
Stock and Bond Transfer Department
The undersigned (A) acknowledges that the sale of the securities,
represented by certificate numbers ___________________, to which this
declaration relates is being made in reliance on Rule 904 of Regulation S under
the United States Securities Act of 1933, as amended (the "Securities Act") and
(B) certifies that (1) it is not an "affiliate" of Granges Inc. (as defined in
Rule 405 under the Securities Act), (2) the offer of such securities was not
made to a person in the United States and either (a) at the time the buy order
was originated, the buyer was outside the United States, or the seller and any
person acting on its behalf reasonably believed that the buyer was outside the
United States or (b) the transaction was executed on or through the facilities
of The Toronto Stock Exchange and neither the seller nor any person acting on
its behalf knows that the transaction has been prearranged with a buyer in the
United States and (3) neither the seller nor any person acting on its behalf
engaged in any directed selling efforts in connection with the offer and sale
of such securities. Terms used herein have the meanings given to them by
Regulation S.
Dated:
By:
--------------------------------------
Name:
Title:
B-1
<PAGE> 57
SCHEDULE "C"
EXERCISE FORM
To: Granges Inc.
c/o Montreal Trust Company of Canada
(1) The undersigned holder of the within Warrant Certificate hereby
subscribes for ________ common shares ("Shares") of Granges Inc. (or such
number of Shares or other securities or property to which such subscription
entitles him in lieu thereof or in addition thereto under the provisions of the
Warrant Indenture mentioned in the Warrant Certificate) at the price determined
under, and on the terms specified in, the Warrant Certificate and Warrant
Indenture and encloses herewith cash or a bank draft, certified cheque or money
order payable at par to or to the order of Granges Inc. or to Montreal Trust
Company of Canada in payment therefor.
(2) The undersigned certifies as follows (check one box):
A[ ] The undersigned (and any person named in Section 3 below) is not
a "U.S. Person" within the meaning of Regulation S under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and is not
exercising this Warrant on behalf of any U.S. Person.
B[ ] The undersigned is an institutional "accredited investor", as
defined in Rule 501(a)(1), (2), (3) or (7) of the Securities Act and
is exercising this Warrant for its own account or the account of an
institutional accredited investor over which it exercises sole
investment discretion.
By checking box B above, the undersigned represents that it (and any
person named in Section 3 below) has had access to such current public
information concerning Granges Inc. as it has considered necessary in
connection with its investment decision and understands that the Shares have
not been and will not be registered under the Securities Act and agrees that it
will only resell the Shares (i) to Granges Inc., (ii) outside the United States
in accordance with Rule 904 of Regulation S under the Securities Act, (iii)
inside the United States pursuant to the exemption from registration under the
Securities Act provided by Rule 144A or Rule 144 thereunder and in accordance
with applicable state securities laws or (iv) in a transaction that does not
require registration under the Securities Act or any applicable state
securities laws. If box B above is checked, the Shares issued pursuant to this
exercise form will bear a legend to the foregoing effect which may be removed
by providing a declaration to the registrar and transfer agent for the Shares
to the effect that such Shares have been sold in accordance with Rule 904 of
C-1
<PAGE> 58
Regulation S under the U.S. Securities Act or by providing the registrar and
transfer agent an opinion of counsel, of recognized standing reasonably
satisfactory to Granges Inc., to the effect that such legend is no longer
required under applicable requirements of the U.S. Securities Act or state
securities laws.
(3) The undersigned hereby irrevocably directs that the said Shares be
issued and delivered as follows:
Name(s) in Full Address(es) Number(s) of
(Include Postal Code) Common shares
- ----------------------- ----------------------------- ----------------------
- ----------------------- ----------------------------- ----------------------
- ----------------------- ----------------------------- ----------------------
(Please print full name in which share certificates are to be issued. If any
shares are to be issued to a person or persons other than the Warrantholder,
the Warrantholder must pay to the Trustee all exigible transfer taxes or other
government charges.)
DATED this day of , 19 .
----- ------------------------ --
- ---------------------------------- ------------------------------------
Signature Guaranteed By: Signature of Subscriber*
------------------------------------
Name of Subscriber
------------------------------------
------------------------------------
Address of Subscriber
(Include Postal Code)
* This signature must correspond exactly with the name appearing on the
registration panel.
Please check box if the share certificates are to be delivered at the office
where this Warrant Certificate is surrendered, failing which the certificates
will be mailed. [ ]
C-2
<PAGE> 59
THE RIGHT TO PURCHASE SHARES UNDER THIS WARRANT EXPIRES AT 4:30 P.M. (VANCOUVER
TIME) ON OCTOBER 31, 1997.
REGISTRATION PANEL
(No writing hereon except by the Trustee or other Registrar)
<TABLE>
<CAPTION>
In Whose Name Place of Trustee or other
Date of Registration Registered Registration Registrar
- -------------------- -------------- ------------ ----------------
<S> <C> <C> <C>
</TABLE>
C-3
<PAGE> 60
SCHEDULE "D"
INSTRUCTIONS FOR THE TRANSFER OF COMMON SHARES
BEARING A U.S. SECURITIES ACT LEGEND
--------------------------------------------
Granges Inc.
Common Shares
--------------------------------------------
Set forth below are the instructions to be followed by Montreal Trust
Company of Canada, as transfer agent and registrar of the common shares
("Shares") of Granges Inc. (the "Company"), in connection with (A) transfers of
Shares, bearing the U.S. Securities Act legend (the "U.S. Legend") set forth in
paragraph 2 below ("U.S. Legended Shares") to a person outside the United
States through a trade on The Toronto Stock Exchange or otherwise in compliance
with Rule 904 of Regulation S under the United States Securities Act of 1933
(the "U.S. Securities Act") or (B) transfers of U.S. Legended Shares other than
in the manner described in clause (A).
1. Transfers of U.S. Legended Shares through the facilities of The Toronto
Stock Exchange or otherwise in compliance with Rule 904 of Regulation S
Upon surrender for registration of transfer of any U.S. Legended Share
certificate at an authorized office of Montreal Trust Company of Canada by
a person who sold the Shares represented thereby on or through the
facilities of The Toronto Stock Exchange or otherwise in compliance with
Rule 904 of Regulation S under the U.S. Securities Act, Montreal Trust
Company of Canada shall certify, register and deliver in the name of such
transferee a new Share certificate without the U.S. Legend representing
the number of Shares so transferred, provided that such transferor has
delivered (by facsimile transmission or otherwise) to Montreal Trust
Company of Canada a duly executed declaration stating the following:
The undersigned (A) acknowledges that the sale of the securities,
represented by certificate numbers ______________, to which this
declaration relates is being made in reliance on Rule 904 of Regulation S
under the United States Securities Act of 1933, as amended (the
"Securities Act") and (B) certifies that (1) it is not an "affiliate" of
Granges Inc. (as defined in Rule 405 under the Securities Act), (2) the
offer of such securities was not made to a person in the United States and
either (a) at the time the buy order was originated, the buyer was outside
the United States, or the
D-1
<PAGE> 61
seller and any person acting on its behalf reasonably believed that the
buyer was outside the United States or (b) the transaction was executed on
or through the facilities of The Toronto Stock Exchange and neither the
seller nor any person acting on its behalf knows that the transaction has
been prearranged with a buyer in the United States and (3) neither the
seller nor any person acting on its behalf engaged in any directed selling
efforts in connection with the offer and sale of such securities. Terms
used herein have the meanings given to them by Regulation S.
2. Transfers of U.S. Legended Shares other than in the manner described in
Paragraph 1 above
Upon surrender for registration of transfer of any U.S. Legended Share
certificate at an authorized office of Montreal Trust Company of Canada,
Montreal Trust Company of Canada shall certify, register and deliver in
the name of the transferee a new Share certificate with the U.S. Legend in
the following form printed on the face or reverse thereof representing the
aggregate number of Shares so transferred.
THE U.S. LEGEND:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH
SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT OR (C). INSIDE THE
UNITED STATES IN ACCORDANCE WITH (1) CERTAIN PROCEDURES SATISFACTORY
TO THE COMPANY OR (2) RULE 144 UNDER THE SECURITIES ACT, IF
AVAILABLE. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD
DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.
A NEW CERTIFICATE, BEARING NO LEGEND, DELIVERY OF WHICH WILL
CONSTITUTE "GOOD DELIVERY" MAY BE OBTAINED FROM MONTREAL TRUST
COMPANY OF CANADA UPON DELIVERY OF THIS CERTIFICATE AND A DULY
EXECUTED DECLARATION, IN A FORM SATISFACTORY TO MONTREAL TRUST
COMPANY OF CANADA AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE
SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT.
provided, however, that Montreal Trust Company of Canada shall certify,
register and deliver in the name of such transferee a new Share
certificate without the U.S. Legend representing
D-2
<PAGE> 62
the number of Shares so transferred if such transferor has delivered to
Montreal Trust Company of Canada an opinion of counsel, of recognized
standing reasonably satisfactory to the Company, to the effect that the
U.S. Legend is no longer required under applicable requirements of the
U.S. Securities Act and state securities laws.
3. Exchanges of U.S. Legended Shares
If U.S. Legended Share certificates are presented to Montreal Trust
Company of Canada in exchange for new Share Certificates that are not
being transferred pursuant to paragraph 1 or 2 above (including any Shares
remaining untransferred after certificates are presented for transfer
pursuant to Paragraph 1 or 2 above), Montreal Trust Company of Canada
shall deliver to the holder thereof new Share certificates bearing the
U.S. Legend in the number requested, representing the appropriate
aggregate number of Shares.
D-3
<PAGE> 63
SCHEDULE "E"
TRANSFER OF WARRANTS
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- -------------------------------------------------------------------------------
(name) (the "transferee")
- -------------------------------------------------------------------------------
(address)
_______________ of the Warrants registered in the name of the undersigned
represented by the within certificate.
DATED the _____ day of ______________, 199___.
Signature of Special Warrantholder
----------------------------------------------
(Signature of Warrantholder)
Guaranteed by:
- ------------------------------------ [* ]
* Authorized Signature Number
NOTE: The signature to this transfer must correspond with the name as recorded
on the Warrants in every particular without alteration or enlargement or any
change whatever. The signature of the person executing this transfer must be
guaranteed by a Bank or Trust Company or by a member of the Toronto, Vancouver
or Montreal stock exchanges.
E-1
<PAGE> 1
EXHIBIT 11
EARNINGS PER SHARE COMPUTATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 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) (2,931,000) 160,000 (4,897,000) 1,210,000
Weighted average shares outstanding 46,181,661 41,946,876 46,145,088 38,085,045
---------------------------------------------------------
Basic Earnings Per Share (0.06) NIL (0.11) 0.03
=========================================================
1.0(b) FULLY DILUTED EARNINGS PER SHARE
Net earnings (loss) (2,931,000) 160,000 (4,897,000) 1,210,000
Interest income from cash from stock options 16,098 15,916 32,196 31,831
---------------------------------------------------------
Adjusted net earnings (loss) (2,914,902) 175,916 (4,864,804) 1,241,831
---------------------------------------------------------
Weighted average shares outstanding 46,181,661 41,946,876 46,145,088 38,085,045
Stock options deemed exercised 396,250 551,250 396,250 551,250
---------------------------------------------------------
Adjusted weighted average shares outstanding 46,577,911 42,498,126 46,541,338 38,636,295
---------------------------------------------------------
Fully diluted earnings per share (0.06) NIL (0.10) 0.03
=========================================================
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000783324
<NAME> GRANGES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 22,146
<SECURITIES> 4
<RECEIVABLES> 3,794
<ALLOWANCES> 0
<INVENTORY> 16,680
<CURRENT-ASSETS> 42,624
<PP&E> 78,366
<DEPRECIATION> (38,535)
<TOTAL-ASSETS> 86,018
<CURRENT-LIABILITIES> 14,111
<BONDS> 0
0
0
<COMMON> 54,398
<OTHER-SE> 13,810
<TOTAL-LIABILITY-AND-EQUITY> 86,018
<SALES> 16,408
<TOTAL-REVENUES> 16,408
<CGS> 18,199
<TOTAL-COSTS> 18,199
<OTHER-EXPENSES> 3,214
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (5,005)
<INCOME-TAX> (108)
<INCOME-CONTINUING> (4,897)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,897)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.10)
</TABLE>
