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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 4, 1994
Amax Gold Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9620 06-1199974
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
9100 East Mineral Circle
Englewood, Colorado 80112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 643-5500
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Item 7(c) - Exhibits.
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The following exhibits are filed in connection with the Registration Statement
on Form S-3 (Registration No. 33-53963), filed by Amax Gold Inc. (the
"Registrant") with the Securities and Exchange Commission (the "Commission") on
June 3, 1994, as amended by Amendment No. 1 to Form S-3 Registration Statement,
filed with the Commission on July 19, 1994:
1.3 Underwriting Agreement, dated August 4, 1994, between the Registrant and
Salomon Brothers Inc and Goldman, Sachs & Co., as Representatives of the
several Underwriters
4.3 Certificate of Designations for the $3.75 Series B Convertible Preferred
Stock
10.5 Refugio Project Agreement, dated November 17, 1992, between Bema Gold
Corporation and Amax Gold Inc.
10.6 Shareholders Agreement, dated November 18, 1992, between Amax Gold Refugio,
Inc. and Bema Gold (Bermuda) Ltd.
12.1 Statement re Computation of Ratios
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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 hereunto duly authorized.
Date: August 9, 1994 AMAX GOLD INC.
(Registrant)
By: /s/ PAUL J. HEMSCHOOT, JR.
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Paul J. Hemschoot, Jr.
Vice President, Secretary and General
Counsel
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EXHIBIT 1.3
Amax Gold Inc.
Underwriting Agreement
New York, New York
August 4, 1994
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
As Representatives of the several Underwriters
Ladies and Gentlemen:
Amax Gold Inc., a Delaware corporation (the "Company"), proposes to sell to
the underwriters named in Schedule I hereto (the "Underwriters"), for whom you
are acting as representatives (the "Representatives"), 1,600,000 shares of its
$3.75 Series B Convertible Preferred Stock, $1.00 par value per share (the
"Underwritten Securities"). The Company also proposes to grant to the
Underwriters an option, exercisable by the Representatives, to purchase up to
240,000 additional shares of such Series B Convertible Preferred Stock (the
"Option Securities"; the Option Securities that may be sold to the Underwriters,
together with the Underwritten Securities, being hereinafter called the
"Securities").
1. Representations and Warranties.
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The Company represents and warrants to, and agrees with, each Underwriter
that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act") and has filed with the Securities and
Exchange Commission (the "Commission") a registration statement (file number
33-53963) on such Form, including a related basic prospectus, in accordance
with Rule 415 (a)(1)(x) and Rule 424(b) for the registration under the Act of
the offering and sale of $200,000,000 principal amount of securities. The
Company may have filed one or more
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amendments thereto, each of which has previously been furnished to you. Such
registration statement and amendments thereto have become effective prior to
the date of this Agreement. Such registration statement, as amended at the
date of this Agreement, meets the requirements set forth in Rule 415(a)(1)(x)
and complies in all material respects with such Rule. The Company has filed
with the Commission pursuant to the applicable paragraphs of Rule 415 and Rule
424(b) a preliminary supplement to the form of prospectus included in such
registration statement relating to the Securities and plan of distribution
thereof (the "Preliminary Prospectus Supplement"). The Company has filed or
will file with the Commission pursuant to the applicable paragraphs of Rule
415 and Rule 424(b) a final supplement to the form of prospectus included in
such registration statement relating to the Securities and plan of
distribution thereof (the "Prospectus Supplement"). As filed, the Prospectus
Supplement shall be in all substantive respects in the form furnished to you
prior to the Execution Time (as such term is defined in the immediately
following paragraph) or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other changes as
the Company has advised you, prior to the Execution Time, will be included or
made therein and to which you shall not have objected.
The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "the Effective Date" shall mean each date that
the Registration Statement and any post-effective amendment or amendments
thereto became or become effective. "Execution Time" shall mean the date and
time that this Agreement is executed and delivered by the parties hereto.
"Material Subsidiaries" shall mean, collectively, the following: AGI Chile
Credit Corp., Inc., a Delaware corporation, Amax Gold B.C. Ltd, a British
Columbia corporation, Amax Gold Exploration, Inc., a Delaware corporation,
Amax Gold Refugio, Inc., a Delaware corporation, Amax Precious Metals, Inc., a
Delaware corporation, Compania Minera Amax Guanaco (90% owned by the Company),
a Chile corporation, Compania Minera Maricunga (50% owned by the Company), a
Chile corporation, Fairbanks Gold Ltd., a British Columbia corporation,
Fairbanks Gold Mining, Inc., a Delaware corporation, Haile Mining Company,
Inc., a Delaware corporation, Guanaco Mining Company, Inc., a Delaware
corporation, Lancaster Mining Company, Inc., a Delaware corporation, Lassen
Gold Mining, Inc., a Delaware corporation, Melba Creek Mining, Inc., an Alaska
corporation, Nevada Gold Mining, Inc., a Delaware corporation and Wind
Mountain Mining, Inc., a Delaware corporation. "Basic Prospectus" shall mean
the form of basic prospectus contained in the Registration Statement at the
Effective Date. "Prospectus" shall mean the Basic Prospectus as supplemented
by the Prospectus Supplement. "Preliminary Prospectus" shall mean any
preliminary prospectus
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with respect to the offering of the Securities referred to in the preceding
paragraph, including, without limitation, the Preliminary Prospectus
Supplement. "Registration Statement" shall mean the registration statement
referred to in the preceding paragraph, including documents incorporated by
reference, exhibits and financial statements, as amended at the Execution Time
and, in the event, if any, that any post-effective amendment thereto becomes
effective prior to the Closing Date (as hereinafter defined) or any settlement
date pursuant to Section 3 hereof, shall also mean such registration statement
as so amended on such date. Such term shall include Rule 430A Information
deemed to be included therein at the Effective Date as provided by Rule 430A.
"Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K" refer to such rules
under the Act. "Rule 430A Information" means information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A. Any
reference herein to the Registration Statement, any Preliminary Prospectus,
the Basic Prospectus, the Prospectus Supplement or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange
Act of 1934 (the "Exchange Act") on or before the Effective Date or the date
of such Preliminary Prospectus, the Basic Prospectus, the Prospectus
Supplement or the Prospectus, as the case may be; and any reference herein to
the terms "amend", "amendment" or "supplement" with respect to the
Registration Statement, any Preliminary Prospectus, the Basic Prospectus, the
Prospectus Supplement or the Prospectus shall be deemed to refer to and
include the filing of any document under the Exchange Act after the Effective
Date or the date of any Preliminary Prospectus, the Basic Prospectus, the
Prospectus Supplement or the Prospectus, as the case may be, deemed to be
incorporated therein by reference.
(b) No order preventing or suspending the use of any Preliminary
Prospectus, the Basic Prospectus, the Prospectus Supplement or the Prospectus
has been received by the Company. Each of the Preliminary Prospectuses, at the
time of filing thereof, conformed in all material respects to the requirements
of the Act and the rules and regulations thereunder and with respect to
documents incorporated therein by reference the Exchange Act and the rules and
regulations thereunder, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
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that the Company makes no representations or warranties as to the information
contained in or omitted from any Preliminary Prospectus in reliance upon and
in conformity with information forwarded in writing to the
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Company by or on behalf of any Underwriter through the Representatives
specifically for use therein.
(c) On the Effective Date, at the Execution Time, when the Prospectus
Supplement is first filed with the Commission in accordance with Rule 424(b),
on the Closing Date and on any settlement date pursuant to Section 3 hereof,
(i) the Registration Statement, as amended as of each such time, and the
Prospectus, as supplemented as of each such time, did and will comply in all
material respects with the applicable requirements of the Act and the rules
and regulations thereunder and, with respect to the documents incorporated
therein by reference, the Exchange Act and the rules and regulations
thereunder; (ii) the Registration Statement, as amended as of each such time,
did not or will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading; and, (iii) the Prospectus, as
supplemented as of each such time, did not or will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading; provided, however, that
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the Company makes no representations or warranties as to the information
contained in or omitted from the Registration Statement or Prospectus, as
supplemented as of each such time, in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of any
Underwriter through the Representatives specifically for use therein.
(d) The documents incorporated by reference in the Registration
Statement and Prospectus pursuant to Item 12 of Form S-3, at the times they
were filed with the Commission, complied in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder and,
when read together with the other information in the Prospectus, on the
Effective Date, when the Preliminary Prospectus Supplement was first filed
with the Commission in accordance with Rule 424(b), at the Execution Time,
when the Prospectus Supplement is first filed with the Commission in
accordance with Rule 424(b), on Closing Date, and on any settlement date
pursuant to Section 3 hereof, did not and will not contain an untrue statement
of a material fact or omit to state a material fact.
(e) The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or violation of
any of the terms and provisions of, or constitute a default under: (i) any
statute, any indenture, mortgage, deed of trust, credit agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which any of them is bound or to which any of the property of the
Company or any of its
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subsidiaries is subject, which in any such case is material to the Company and
its subsidiaries considered as a whole; (ii) the Company's or any of its
subsidiaries' certificate or articles of incorporation or by-laws; or (iii)
any order, rule or regulation of any Federal, state, local or foreign court or
governmental agency or body having jurisdiction over the Company, any of its
subsidiaries or any of their respective properties, which in any such case is
material to the Company and its subsidiaries considered as a whole. No
consent, approval, authorization or order of, or filing with, any Federal,
state, local or foreign court or governmental agency or body is required for
the consummation of the transactions contemplated by this Agreement in
connection with the issuance or sale of the Securities except such as may be
required by The National Association of Securities Dealers, Inc. or under the
Act or state securities or blue sky laws.
(f) Neither the Company nor any of its subsidiaries is in violation of
any term of its certificate or articles of incorporation or by-laws. Neither
the Company nor any of its subsidiaries is in violation of any term of any
license, contract, instrument or other agreement, or, to the Company's
knowledge, after due inquiry, any judgment, decree, order, statute, rule or
governmental regulation applicable to it which violation or violations,
individually or in the aggregate, has resulted in, or could be reasonably
anticipated to result in, a material adverse effect on the Company and its
subsidiaries considered as a whole.
(g) All contracts, agreements, instruments, leases, licenses, claims,
concessions and governmental permits required to be described in the
Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement have been so described or filed.
(h) The financial statements, together with the related notes and
schedules, included or incorporated by reference in the Prospectus and
elsewhere in the Registration Statement, fairly present, on the basis stated
therein, the financial position and results of operations and cash flows of
the entities covered thereby at the respective dates and for the respective
periods therein specified. Such financial statements and related notes and
schedules have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the respective periods
involved, except as noted therein, fairly present on the basis set forth
therein the information set forth therein, and are in accordance with the
books and records of the entities covered thereby. Any quarterly or other
unaudited interim financial statements, and the related notes and schedules
thereto, included or incorporated by reference in the Prospectus and elsewhere
in the Registration Statement
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have been prepared in compliance with the applicable requirements of the Act
and the rules and regulations thereunder and of the Exchange Act and the rules
and regulations thereunder and have been prepared on a basis substantially
consistent with that of the applicable audited consolidated financial
statements included or incorporated by reference in the Registration Statement
and Prospectus, except as described therein. The selected financial data set
forth in the Prospectus under the captions "Ratio of Earnings to Fixed
Charges", "Summary Consolidated Financial Information," "Gold Production and
Production Costs" and "Capitalization" fairly presents, on the basis stated in
the Prospectus, the information set forth therein. No other financial
statements are required by Form S-3 or otherwise to be included or
incorporated by reference in the Registration Statement or Prospectus. The
reserve data set forth in the Registration Statement, Prospectus and
Prospectus Supplement under the caption "Proven/Probable Gold Ore Reserves"
presents a fair summary of the information described therein.
(i) Coopers & Lybrand, who have certified the financial statements of the
Company and its consolidated subsidiaries, are, and during the periods covered
by their respective reports included or incorporated by reference in the
Registration Statement were, independent public accountants as required by the
Act and the applicable rules and regulations thereunder. Price Waterhouse, the
Company's accountants since March 1, 1994, are independent public accountants
as required by the Act and the applicable rules and regulations thereunder.
(j) Each of the Company and its Material Subsidiaries has been duly
organized and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation. Each of the Company and its
Material Subsidiaries is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
properties (owned, leased or licensed) or the nature or conduct of its
business makes such qualification necessary, except for those failures to be
so qualified or in good standing that could not individually or in the
aggregate have a material adverse effect on the Company and its Material
Subsidiaries considered as a whole. Each of the Company and its Material
Subsidiaries has all requisite corporate power and authority to own, lease,
license, mine and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and Prospectus.
(k) As of the date of this Agreement, the issued shares of Common Stock
and Preferred Stock of the Company conform to the description thereof in the
Prospectus and have been duly
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authorized and validly issued and are fully paid and nonassessable and were
not issued in violation of or subject to any preemptive or other rights; the
stockholders of the Company have no preemptive rights with respect to any
shares of capital stock of the Company; and all outstanding shares of capital
stock of each Material Subsidiary have been duly authorized and are or will be
validly issued, fully paid and nonassessable and were not issued or will not
be issued, as the case may be, in violation of or subject to any preemptive or
other rights and are owned directly by the Company or by another subsidiary of
the Company free and clear of any liens, encumbrances, equities or claims
except as described in the Notes to the Consolidated Financial Statements of
the Company contained in its Annual Report on Form 10-K for the year ended
December 31, 1993. There is no commitment, plan or arrangement to issue, and
no outstanding option, warrant or other right or security calling for the
issuance of, any share of capital stock of the Company or any of its Material
Subsidiaries, or any security or other instrument which by its terms is
convertible into or exchangeable or exercisable for any capital stock of the
Company or any of its Material Subsidiaries, except as described in the
Prospectus. The Securities to be issued and sold by the Company to the
Underwriters hereunder when issued, delivered and sold in accordance with this
Agreement will be duly and validly issued and outstanding, fully paid and
nonassessable, and will not have been issued in violation of or subject to any
preemptive or other rights. The shares of the Company's common stock, $.01 par
value per share ("Common Stock"), issuable upon conversion of the Securities
have been duly authorized and validly reserved for issuance and when issued at
the option of the holders thereof upon conversion of the Securities shall be
validly issued, fully paid and nonassessable and shall not have been issued in
violation of or subject to any preemptive or other rights.
(l) The Company has full corporate power and authority to enter into this
Agreement and to issue, sell and deliver the Securities to be issued, sold and
delivered by it hereunder and this Agreement has been duly and validly
authorized, executed and delivered by the Company.
(m) No person or entity has the right to require registration of shares of
Common Stock, Preferred Stock or other securities of the Company because of
the filing or effectiveness of the Registration Statement or offering or sale
of the Securities.
(n) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as described therein, (i)
there has been no material adverse change in the condition, financial or
otherwise, of
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the Company or any of its Material Subsidiaries or in the earnings, business,
properties or prospects of the Company or any of its Material Subsidiaries,
whether or not arising in the ordinary course of business, (ii) there have
been no transactions material to the Company or any of its Material
Subsidiaries entered into by the Company or any of its Material Subsidiaries,
other than those entered into in the ordinary course of business consistent
with past custom and practice and (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock.
(o) Except as described in the Registration Statement and Prospectus, the
Company and each of its Material Subsidiaries possess all consents, approvals,
certificates, authorizations, registrations, qualifications, licenses,
concessions and permits issued by the appropriate Federal, state, local and
foreign public, regulatory or governmental agencies or bodies necessary to
own, lease, mine and operate its properties, as the Company and its Material
Subsidiaries currently own, lease, mine and operate its properties and to
conduct the business now operated by it as described in the Registration
Statement and Prospectus, the absence of which could reasonably be expected to
have a material adverse effect on the Company and its Material Subsidiaries
considered as a whole, and neither the Company nor any of its Material
Subsidiaries has received any notice of proceedings relating to the revocation
or modification of any such consent, approval, certificate, authorization,
registration, qualification, license, concession or permit which, individually
or in the aggregate, could reasonably be expected to have a material adverse
affect on the Company and its Material Subsidiaries considered as a whole.
(p) Each of the Company and its Material Subsidiaries has sufficient
title to all of its properties and assets to conduct its business as presently
conducted and as contemplated to be conducted as described in the Registration
Statement and Prospectus. Except as described or incorporated by reference in
the Registration Statement and Prospectus, such properties and assets are
owned by the Company or such Material Subsidiary, as the case may be, free and
clear of all material liens, charges, encumbrances or restrictions.
(q) All subsidiaries of the Company other than Material Subsidiaries,
considered in the aggregate, would not constitute a "significant subsidiary"
under Commission Regulation S-X.
(r) Except as disclosed in the Registration Statement and Prospectus and
except as would not individually or in the aggregate have a material adverse
effect on the Company and
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its Material Subsidiaries considered as a whole, (i) the Company and its
Material Subsidiaries are each in compliance with all applicable Environmental
Laws, (ii) the Company and its Material Subsidiaries have all permits,
authorizations and approvals required under any applicable Environmental Laws
and are each in compliance with their requirements, and (iii) there are no
pending or, to the best knowledge of the Company, threatened Environmental
Claims against the Company or any of its Material Subsidiaries.
For purposes of this Agreement, the following terms shall have the
following meanings: "Environmental Law" means any Federal, state, local or
foreign statute, law, rule, regulation, ordinance or code or any judicial or
administrative order, consent decree or judgment binding on the Company or one
of the Material Subsidiaries, relating to the environment, health or safety or
any hazardous material or substance, exposure to which is prohibited or
regulated by any governmental authority. "Environmental Claims" means any and
all administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law.
(s) The Securities and the shares of Common Stock issuable upon
conversion of the Securities have been authorized for trading on the New York
Stock Exchange subject to notice of issuance or sale, as the case may be.
(t) Neither the Company nor any of its officers, directors or affiliates
(as defined in the Act and the rules and regulations thereunder) has taken or
will take, directly or indirectly, any action designed to or which has
constituted or which could be anticipated to cause or result, under the Act,
the Exchange Act or otherwise, in stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the
Securities.
(u) The Company and each of its subsidiaries is in compliance with
Florida blue sky law relating to disclosure of issuers doing business with
Cuba. The Company is not presently doing business with the government of Cuba
or with any person or affiliate located in Cuba and will notify the Florida
Department of Banking and Finance, Division of Securities and Investor
Protection, if the Company or any of its subsidiaries commences doing business
with the government of Cuba or any person or affiliate located in Cuba.
2. Purchase and Sale. (a) Subject to the terms and conditions and in
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reliance upon the representations and warranties herein set forth, the Company
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase
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from the Company at a purchase price of $48.38 per share, the amount of the
Underwritten Securities set forth opposite such Underwriter's name in Schedule I
hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
225,000 shares of the Option Securities at the same purchase price per share as
the Underwriters shall pay for the Underwritten Securities. Said option may be
exercised only to cover over-allotments in the sale of the Underwritten
Securities by the Underwriters. Said option may be exercised in whole or in
part at any time (but not more than once) on or before the 30th day after the
date of the Prospectus upon written or telegraphic notice by the Representatives
to the Company setting forth the number of Option Securities as to which the
several Underwriters are exercising the option and the settlement date.
Delivery of certificates for the Option Securities by the Company, and payment
therefor to the Company, shall be made as provided in Section 3 hereof. The
number of Option Securities to be purchased by each Underwriter shall be the
same percentage of the total number of Option Securities to be purchased by the
several Underwriters as such Underwriter is purchasing of the Underwritten
Securities, subject to such adjustments as the Representatives in their absolute
discretion shall make to eliminate any fractional shares.
3. Delivery and Payment. Delivery of and payment for the Underwritten
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Securities and the Option Securities that are purchased by the Underwriters (if
the option provided for in Section 2(b) hereof shall have been exercised on or
before the third business day prior to the Closing Date) shall be made at the
offices of Davis, Graham & Stubbs, 370 17th Street, Denver, Colorado, at 9:00
AM, Denver time, on August 11, 1994, or such later date (not later than August
18, 1994) as the Representatives shall designate, which place may be moved by
agreement of the Representatives and Company to such other location as may be
agreed upon and which date and time may be postponed by agreement between the
Representatives and Company or as provided in Section 9 hereof (such date and
time of delivery and payment for the Securities being herein called the "Closing
Date"). Delivery of the Securities shall be made to the Representatives for the
respective accounts of the several Underwriters against payment by the several
Underwriters through the Representatives of the aggregate purchase price of the
Securities being sold by the Company to or upon the order of the Company by
certified or official bank check or checks drawn on or by a New York Clearing
House bank and payable in next day funds. Certificates for the Securities shall
be registered in such names and denominations as the Representatives may request
not less than three business days in advance of the Closing Date.
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The Company agrees to have the Securities available for inspection,
checking and packaging by the Representatives in New York, New York not later
than 1:00 PM, two business days prior to the Closing Date.
If the option provided for in Section 2(b) hereof is exercised after the
third business day prior to the Closing Date, the Company will deliver (at the
expense of the Company) to the Representatives, at Salomon Brothers Inc, Seven
World Trade Center, New York, New York 10048 or at such other place as the
Representatives may direct, on the date specified by the Representatives (which
shall be within three business days after exercise of said option), certificates
for the Option Securities to be purchased by the Underwriters in such names and
denominations as the Representatives shall have requested against payment of the
purchase price thereof to or upon the order of the Company by certified or
official bank check or checks drawn on or by a New York Clearing House bank and
payable in next day funds. If settlement for the Option Securities occurs after
the Closing Date, the Company will deliver to the Representatives on the
settlement date for the Option Securities, and the obligation of the
Underwriters to purchase such Option Securities to be purchased by them shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.
4. Offering by Underwriters. It is understood that the several
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Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters that:
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(a) The Company will use all reasonable efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the Execution Time,
to become effective. The Company will cause the Prospectus Supplement,
properly completed and in form and substance reasonably acceptable to the
Representatives, to be filed with the Commission pursuant to Rule 424(b)
within the time period prescribed and will provide evidence satisfactory to
the Representatives of such timely filing. The Company will promptly advise
the Representatives (i) when the Prospectus, and any supplement thereof, shall
have been filed with the Commission pursuant to Rule 424(b) or otherwise, (ii)
when any amendment of the Registration Statement shall have been filed or
become effective, (iii) of any request by the Commission for any amendment or
supplement of the Registration Statement or Prospectus or for any additional
information, (iv) of the receipt by the Company of any stop order suspending
the effectiveness of the Registration Statement or the institution
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or threatening of any proceeding for that purpose and (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose. The Company will not file
any amendment of the Registration Statement or supplement to the Prospectus
unless the Company has furnished to you a copy for your review prior to filing
and will not file any such proposed amendment or supplement to which you
reasonably object. The Company will use all reasonable efforts to prevent the
issuance of any such stop order and, if issued, will use all reasonable
efforts to obtain as soon as practicable the withdrawal thereof.
(b) If, at any time when a Prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Registration Statement, as then amended, or the Prospectus, as then
supplemented, would include any untrue statement of a material fact or omit to
state any material fact, any facts or events arise which, individually or in
the aggregate, would represent a material change in the information set forth
in the Registration Statement, as then amended, or the Prospectus, as then
supplemented, or if it shall be necessary to amend the Registration Statement
or supplement the Prospectus to comply with the Act or the rules or
regulations thereunder or, with respect to any information incorporated by
reference in the Registration Statement or Prospectus, the Exchange Act or the
rules or regulations thereunder, the Company will promptly (i) prepare and
file with the Commission, subject to paragraph (a) of this Section 5, an
amendment or supplement which will correct such statement or omission, reflect
such change or effect such compliance and (ii) supply such amended
Registration Statement or supplemented Prospectus to the Representatives in
such quantities as they may reasonably request.
(c) As soon as practicable, the Company will make generally available to
its security holders and to the Representatives an earnings statement or
statements of the Company and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Representatives and counsel for the
Underwriters, without charge, signed copies of the Registration Statement and
all amendments thereto (including all exhibits thereto) and to each other
Underwriter a copy of the Registration Statement and all amendments thereto
(without exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of the
Prospectus and any Preliminary
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Prospectus and any supplements thereto as the Representatives may request.
(e) The Company will arrange for the qualification of the Securities for
sale under the laws of such jurisdictions as the Representatives may designate
and will maintain such qualifications in effect for so long as required for
the distribution of the Securities; provided, that no such qualification shall
-------- ----
be required in any jurisdiction where, solely as a result thereof, the Company
would be subject to taxation or qualification as a foreign corporation doing
business in such jurisdiction where it is not now so qualified or required to
take any action that would subject it to service of process in suits, other
than those arising out of the offering or sale of the Securities, in any
jurisdiction where it is not now so subject. In addition, the Company will
arrange for the determination of the legality of the Securities for purchase
by institutional investors and will pay the fee of the National Association of
Securities Dealers, Inc. in connection with its review of the offering.
(f) The Company will reserve and keep available at all times, free of
preemptive and other rights, sufficient shares of Common Stock to satisfy any
obligations to issue shares of Common Stock upon conversion of the Securities.
(g) Neither the Company nor any of its directors or officers will, for a
period of 90 days following the Execution Time, without the prior written
consent of the Representatives, offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce the offering of, (i) any
shares of Common Stock or any securities convertible into, or exchangeable
for, shares of Common Stock or (ii) shares of any class of capital stock of
the Company which is preferred as to the payment of dividends, or as to the
distribution of assets upon any liquidation or dissolution of the Company,
over shares of any other class of capital stock of the Company; provided,
--------
however, that the Company may offer, issue and sell Common Stock pursuant to
-------
the Directors' Deferred Compensation Plan, the Nonemployee Directors' Stock
Grant Plan, or any employee stock option plan, thrift plan, excess benefit
plan or dividend reinvestment plan of the Company in effect at the Execution
Time, the DOCLOC Agreement and the Stock Purchase Agreement and the Company
may issue Common Stock issuable upon the conversion of securities or the
exercise of warrants outstanding on the date of this Agreement.
(h) The Company will use all reasonable efforts to maintain the listing
of the Securities and the shares of Common Stock issuable upon conversion of
the Securities on The New York Stock Exchange.
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<PAGE>
(i) The Company will promptly deliver to the Representatives copies of all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Securities under the Act or The New
York Stock Exchange in connection with the listing of the Securities and of
the shares of Common Stock issuable upon conversion of such Securities.
(j) Prior to the Closing Date, the Company will issue no press release
or other communication directly or indirectly and hold no press conference
with respect to the Company or any of its subsidiaries, or with respect to the
financial condition, results of operations, business, properties, assets,
liabilities or prospects of any of them, or the offering of the Securities,
without your prior consent which will not be unreasonably withheld.
(k) The Company confirms as of the date hereof that it is in compliance
with all provisions of Section 1 of Laws of Florida, Chapter 92-198,
An Act Relating to Disclosure of Doing Business with Cuba, and the Company
---------------------------------------------------------
further agrees that if it commences engaging in business with the government
of Cuba or with any person or affiliate located in Cuba after the date the
Registration Statement becomes or has become effective with the Securities and
Exchange Commission or with the Florida Department of Banking and Finance (the
"Florida Department"), whichever date is later, or if the information reported
in the Prospectus, if any, concerning the Company's business with Cuba or with
any person or affiliate located in Cuba changes in any material way, the
Company will provide the Florida Department notice of such business or change,
as appropriate, in a form acceptable to the Florida Department for so long as
the Florida Department requires such notice.
6. Conditions to the Obligations of the Underwriters. The obligations
-------------------------------------------------
of the Underwriters to purchase the Underwritten Securities and the Option
Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company contained herein as of
the Execution Time, the Closing Date and any settlement date pursuant to Section
3 hereof, to the accuracy and completeness of the statements of the Company made
in any certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) If filing of the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b), the Prospectus, and any such supplement, shall have
been filed in the manner and within the time period required by Rule 424(b).
No stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been
instituted or threatened.
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<PAGE>
(b) The Company shall have furnished to the Representatives, on behalf
of the Underwriters, the opinion of Paul J. Hemschoot, Jr., Vice President,
Secretary and General Counsel of the Company, dated the Closing Date, to the
effect that:
(i) all the outstanding shares of capital stock of each Material
Subsidiary have been duly and validly authorized and issued and are fully
paid and nonassess able, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of each of the Material
Subsidiaries are owned by the Company either directly or through wholly-
owned Material Subsidiaries free and clear of any perfected security
interest and, to the knowledge of such counsel, any other security
interests, claims, liens or encumbrances, except as described in the Notes
to the Consolidated Financial Statements set forth in the Company's Annual
Report on Form 10-K for the year ended December 31, 1993;
(ii) to such counsel's knowledge, neither the Company nor any of its
Material Subsidiaries is in breach of, or in default under (nor has any
event occurred which with notice, lapse of time, or both, would constitute
a breach of or default under), any indenture, mortgage, deed of trust,
credit agreement, contract, license or other agreement or instrument to
which the Company or any of its Material Subsidiaries is a party or by
which any of them or their respective properties may be bound or affected
where such breach or default could reasonably be expected to have a
material adverse effect on the Company and its Material Subsidiaries
considered as a whole;
(iii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iv) neither the issue and sale of the Securities, nor the issuance
of the shares of Common Stock issuable upon conversion of the Securities,
nor the consummation of the transactions contemplated hereby will conflict
with, result in a breach of, or constitute a default under (or constitute
any event which with notice, lapse of time, or both, would constitute a
breach of or default under) the terms of any material indenture, mortgage,
deed of trust, credit agreement, contract, license or other material
agreement or instrument to which the Company or any of its Material
Subsidiaries is a party or bound;
(v) to the knowledge of such counsel, there is no pending or
threatened action, suit, investigation or proceeding before any court or
governmental agency,
-15-
<PAGE>
authority or body or any arbitrator involving the Company or any of its
Material Subsidiaries of a character required to be disclosed or
incorporated by reference in the Registration Statement or Prospectus which
is not adequately disclosed or incorporated by reference in the
Registration Statement and Prospectus; and
(vi) to such counsel's knowledge, no person has the right,
contractual or otherwise, to cause the Company to issue, or register
pursuant to the Act, any shares of capital stock of the Company upon the
issue and sale of the Securities to be sold by the Company to the
Underwriters pursuant to this Agreement or upon the issuance of shares of
Common Stock issuable upon conversion of the Securities, nor does any
person have preemptive rights, rights of first refusal or other rights to
purchase any capital stock of the Company.
In addition, such counsel shall state that no facts have come to such
counsel's attention that lead him to believe that, as of the Effective Date,
when the Preliminary Prospectus Supplement was filed with the Commission in
accordance with Rule 424(b), at the Execution Time, when the Prospectus
Supplement was filed with the Commission in accordance with Rule 424(b) or on
the Closing Date, the Registration Statement, or any amendment thereto filed
with the Commission by the Company prior to the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that, as of its date, the Basic Prospectus, Preliminary Prospectus
Supplement, Prospectus and Prospectus Supplement, and any amendment or
supplement thereto filed with the Commission by the Company prior to the Closing
Date contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein in the light of the
circumstances in which they were made, not misleading or that, as of the Closing
Date, the Prospectus, as then supplemented, contains an untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading (it being understood that such counsel has not been requested to and
does not express any view with respect to the financial statements, financial
schedules, geological and engineering reports and other financial, statistical,
geological and engineering information contained or incorporated by reference in
the Registration Statement or the Prospectus, Preliminary Prospectus Supplement
and Prospectus Supplement, as so amended or supplemented).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
New York, to the extent he deems proper and specified in such opinion, upon the
opinion of other counsel of
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<PAGE>
good standing whom he believes to be reliable and who are reasonably
satisfactory to counsel for the Underwriters and (B) as to matters of fact, to
the extent he deems proper, on certificates of responsible officers of the
Company and public officials. References to the Prospectus in this paragraph
(b) include any supplements thereto.
(c) The Company shall have furnished to the Representatives, on behalf
of the Underwriters, the opinion of Davis, Graham & Stubbs, counsel for the
Company, dated the Closing Date, to the effect that:
(i) the Company and each of its Material Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or organized,
with full corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus, and is
duly qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which the character of properties owned,
leased, licensed or otherwise held by the Company or one of its Material
Subsidiaries or the transaction of business by the Company or one of its
Material Subsidiaries as now conducted requires such qualification and
where the failure to be so qualified would have a material adverse effect
on the Company and its Material Subsidiaries considered as a whole;
(ii) the Company's authorized equity capitalization is as set forth
in the Prospectus; the capital stock of the Company conforms to the
description thereof contained in the Prospectus; the issued and outstanding
shares of Common Stock and Preferred Stock have been duly and validly
authorized and issued and are fully paid and nonassessable; the Securities
have been duly and validly authorized and, when issued and delivered to and
paid for by the Underwriters pursuant to this Agreement, will be fully paid
and nonassessable and will be free of any pledge, lien, security interest,
encumbrance, claim or preemptive or other rights; the Securities are
convertible at the option of the holders thereof into shares of Common
Stock as described in the Prospectus, the shares of Common Stock issuable
upon conversion of the Securities have been duly and validly reserved for
issuance and when issued at the option of the holders of the Securities
will be validly issued, fully paid and nonassessable and will be free of
any pledge, lien, security interest, encumbrance, claim or preemptive or
other rights; the Securities and the shares of Common Stock issuable upon
conversion of the Securities are duly
-17-
<PAGE>
authorized for listing, subject to official notice of issuance or sale, as
the case may be, on The New York Stock Exchange; the certificates for the
Securities are in valid and sufficient form; and the holders of outstanding
shares of capital stock of the Company are not entitled to preemptive or,
to the knowledge of such counsel, other rights to subscribe for the
Securities or shares of Common Stock issuable upon conversion of the
Securities;
(iii) to the knowledge of such counsel, there is no mortgage,
indenture, contract or other agreement of a character required to be
described in the Registration Statement or Prospectus, to be incorporated
by reference therein, or to be filed as an exhibit thereto, which is not
described, incorporated by reference, or filed as required; the statements
included or incorporated by reference in the Prospectus describing material
agreements fairly summarize such agreements; the description contained in
the Prospectus under the heading "U.S. Federal Income Tax Consequences"
constitutes a fair summary of the statutes and regulations discussed
therein as applicable to the offering and ownership of the Securities;
(iv) the Registration Statement has become effective under the Act;
any required filing of the Prospectus, or any supplement thereto, pursuant
to Rule 424(b) has been made in the manner and within the time period
required by Rule 424(b); no stop order suspending the effectiveness of the
Registration Statement has been received by the Company and, to the
knowledge of such counsel, no proceedings for that purpose have been
instituted or threatened; the Registration Statement (and any amendments
thereto) and the Prospectus (and any supplements thereto) (other than the
financial statements, related schedules, geological and engineering reports
and other financial, geological, engineering and statistical information
contained therein as to which such counsel need express no opinion) comply
as to form in all material respects with the applicable requirements of the
Act and, as applicable, the rules and regulations thereunder and the
Exchange Act and, as applicable, the rules and regulations thereunder;
(v) The documents incorporated by reference in the Registration
Statement and any amendments thereto and the Prospectus and any supplements
thereto (other than the financial statements, related schedules, geological
and engineering reports and other financial, geological, engineering and
statistical information contained therein as to which such counsel need
express no opinion), when
-18-
<PAGE>
they were filed with the Commission, complied as to form in all material
respects with the applicable requirements of the Exchange Act and the rules
and regulations thereunder;
(vi) this Agreement has been duly authorized, executed and delivered
by the Company;
(vii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement, except such as have been
obtained under the Act and such as may be required under the state
securities or blue sky laws of any jurisdiction in connection with the
purchase and distribution of the Securities by the Underwriters and such
other approvals (which shall be specified in such opinion) as have been
obtained;
(viii) neither the issue and sale of the Securities, nor the
issuance of the shares of Common Stock issuable upon conversion of the
Securities, nor the consummation of the transactions contemplated hereby
will conflict with, result in a breach of, or constitute a default under
(or constitute any event which with notice, lapse of time, or both, would
constitute a breach of or default under) the certificate or articles of
incorporation or by-laws of the Company or any of its Material Subsidiaries
or the terms of any indenture, mortgage, deed of trust, credit agreement,
contract, license or other agreement or instrument to which the Company or
any of its Material Subsidiaries is a party or bound that is filed as an
exhibit to the Registration Statement, or, to such counsel's knowledge, any
order or regulation applicable to the Company or any of its Material
Subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company or any
of its Material Subsidiaries; and
(ix) to such counsel's knowledge, no person has the right,
contractual or otherwise, to cause the Company to issue, or register
pursuant to the Act, any shares of capital stock of the Company upon the
issue and sale of the Securities to be sold by the Company to the
Underwriters pursuant to this Agreement or upon the issuance of shares of
Common Stock issuable upon conversion of the Securities, nor, to such
counsel's knowledge, does any person have preemptive rights, rights of
first refusal or other rights to purchase any capital stock of the Company.
-19-
<PAGE>
In addition, such counsel shall state that no facts have come to such
counsel's attention that lead them to believe that, as of the Effective Date,
when the Preliminary Prospectus Supplement was filed with the Commission in
accordance with Rule 424(b), at the Execution Time, when the Prospectus
Supplement was filed with the Commission in accordance with Rule 424(b) or on
the Closing Date, the Registration Statement, or any amendment thereto filed
with the Commission by the Company prior to the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that, as of its date, the Basic Prospectus, Preliminary Prospectus
Supplement, Prospectus and Prospectus Supplement, and any amendment or
supplement thereto filed with the Commission by the Company prior to the Closing
Date, contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein in the light of the
circumstances in which they were made, not misleading or that, as of the Closing
Date, the Prospectus, as then supplemented, contains an untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances in which they were made, not
misleading (it being understood that such counsel have not been requested to and
do not express any view with respect to the financial statements, financial
schedules, geological and engineering reports and other financial, statistical,
geological and engineering information contained or incorporated by reference in
the Registration Statement or the Prospectus, Preliminary Prospectus Supplement
and Prospectus Supplement, as so amended or supplemented).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
Colorado, to the extent they deem proper and specified in such opinion, upon the
opinion of other counsel of good standing whom they believe to be reliable and
who are reasonably satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus in
this paragraph (c) include any supplements thereto.
(d) The Representatives shall have received from Winston & Strawn,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Securities, the shares of
Common Stock issuable upon conversion of the Securities, the Registration
Statement, the Prospectus and other related matters as the Representatives may
reasonably require, and the Company shall have furnished to such counsel all
such information, instruments, certificates and documents as they may
reasonably request for the purpose of enabling them to pass upon such matters.
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<PAGE>
(e) The Company shall have furnished to the Representatives a
certificate of the Company, signed by the Chairman, President and Chief
Executive Officer and the Vice President and Chief Financial Officer of the
Company, dated the Closing Date, to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
Prospectus, any supplements to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date and the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been received by the Company and no proceedings for that
purpose have been instituted or, to the Company's knowledge, threatened;
and
(iii) subsequent to the date of the most recent financial statements
included in the Registration Statement and Prospectus, and except as set
forth in the Prospectus, (A) neither the Company nor any of its Material
Subsidiaries has incurred any material liabilities or obligations, direct
or contingent, or entered into any material transactions not in the
ordinary course of business consistent with past custom and practice, and
(B) there has not been any material adverse change in the condition
(financial or otherwise), business, prospects, net worth or results of
operations of the Company or any of its Material Subsidiaries or any change
in the capital stock or increase in the long-term debt of the Company or
any of its Material Subsidiaries.
(f) At the Execution Time and on the Closing Date, Price Waterhouse, with
respect to clause (ii) below and, to the extent applicable, clauses (iii) and
(iv) below, and Coopers & Lybrand with respect to clause (i) below and, to the
extent applicable, clauses (iii) and (iv) below, shall each have furnished to
the Representatives a letter or letters, dated respectively as of the date of
this Agreement and as of the Closing Date, in form and substance satisfactory
to the Representatives, confirming that they are independent accountants
within the meaning of the Act and Exchange Act and the applicable rules and
regulations thereunder and stating to the extent applicable that:
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<PAGE>
(i) in their opinion the audited financial statements and financial
statement schedules included or incorporated by reference in the
Registration Statement and Prospectus and reported on by them comply in
form in all material respects with the applicable accounting requirements
of the Act and Exchange Act and the related rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its subsidiaries; carrying out
certain specified procedures (but not an audit in accordance with generally
accepted auditing standards) which would not necessarily reveal matters of
significance with respect to the comments set forth in such letter; a
reading of the minutes of the meetings of the stockholders, directors and
executive, audit and other board committees of the Company and its
subsidiaries; and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company and its
subsidiaries as to transactions and events subsequent to the date of the
most recent audited financial statements and financial statement schedules
included or incorporated by reference in the Registration Statement and
Prospectus; nothing came to their attention which caused them to believe
that:
(1) the unaudited financial statements included or
incorporated by reference in the Registration Statement and Prospectus
do not comply in form in all material respects with the applicable
accounting requirements of the Act and Exchange Act and with the rules
and regulations of the Commission with respect to financial statements
included or incorporated by reference in Quarterly Reports on Form 10-
Q under the Exchange Act; or said unaudited financial statements are
not in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements included or incorporated by reference in the
Registration Statement and Prospectus;
(2) with respect to the period subsequent to the date of the
most recent financial statements and financial statement schedules
(other than any capsule information), audited or unaudited, included
or incorporated by reference in the Registration Statement and
Prospectus, there were any changes, at a specified date not more than
five business days prior to the date of the letter, in the long-term
debt of the Company and its
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<PAGE>
subsidiaries or capital stock of the Company and its subsidiaries, or
decreases in the stockholders' equity of the Company and its
subsidiaries or increases in the short-term debt of the Company and
its subsidiaries as compared with the amounts shown on the most recent
consolidated balance sheet included or incorporated by reference in
the Registration Statement and Prospectus, or for the period from the
date of the most recent financial statements and financial statement
schedules (other than any capsule information) included or
incorporated by reference in the Registration Statement and Prospectus
to such specified date there were any decreases, as compared with the
corresponding period in the preceding year, in net sales or income
before income taxes or in total or per share amounts of net income of
the Company and its subsidiaries, except in all instances for changes
(increases or decreases) set forth in such letter, in which case the
letter shall be accompanied by an explanation by the Company as to the
significance thereof unless said explanation is not deemed necessary
by the Representatives;
(iii) the amounts included in any unaudited "capsule" information
included or incorporated by reference in the Registration Statement and
Prospectus do not agree with the amounts set forth in the unaudited
financial statements for the same periods or were not determined on a basis
substantially consistent with that of the corresponding amounts in the
audited financial statements and financial statement schedules included or
incorporated by reference in the Registration Statement and Prospectus; and
(iv) they have performed certain other specified procedures, in
form and substance acceptable to the Representatives, as a result of which
they determined that certain information of an accounting, financial or
statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Registration Statement and
Prospectus agrees with the accounting records of the Company and its
subsidiaries, excluding any questions of legal interpretation.
References to the Prospectus in this paragraph (f) include any supplements
thereto at the date of the letters.
(g) Subsequent to the Execution Time or, if earlier, the respective
dates as of which information is given in the
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<PAGE>
Registration Statement and Prospectus, there shall not have been (i) any
change or increase or decrease specified in the letters referred to in
paragraph (f) of this Section 6 or (ii) any change, or any development
involving a prospective change, in or affecting the business, assets,
operations, financial condition, properties or prospects of the Company or any
of its subsidiaries, the effect of which, in any case referred to in clause
(i) or (ii) above, is, in the reasonable judgment of the Representatives,
material and adverse enough to make it impractical or inadvisable to proceed
with the public offering or delivery of the Securities as contemplated by the
Registration Statement and Prospectus.
(h) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of the Company's debt or equity securities by
any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act) or any notice given of any intended or
potential decrease in any such rating or of any review of or any possible
change in any such rating that does not indicate the direction of the possible
change.
(i) At the Execution Time, the Company shall have furnished to the
Representatives a letter from Cyprus and each officer and director of the
Company, addressed to the Representatives, in which each such person agrees
not to offer, sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce an offering of, any shares of Common or Preferred
Stock beneficially owned by such person or any securities convertible into, or
exchangeable for, any shares of Common or Preferred Stock for a period of 90
days following the Execution Time without the prior written consent of the
Representatives, other than shares of Common Stock disposed of by officers and
directors as bona fide gifts.
(j) Prior to the Closing Date, the Company shall have furnished to the
Representatives and rating agencies such further information, certificates and
documents as the Representatives or any rating agency may reasonably request.
If any of the conditions specified in this Section 6 shall not, in the
reasonable judgment of the Representatives, have been fulfilled in all material
respects when and as provided in this Agreement, or if any of the opinions,
certificates or letters mentioned above or elsewhere in this Agreement shall not
be in all material respects satisfactory in form and substance to the
Representatives and their counsel, this Agreement and all obligations of the
Underwriters hereunder may be cancelled at, or at any time prior to, the Closing
Date by the Representatives. Notice of such cancellation shall be given to the
Company in writing or by telephone or telegraph confirmed in writing.
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<PAGE>
7. Expenses; Reimbursement of Underwriters' Expenses.
-------------------------------------------------
(a) The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Securities under the Act and the sale of
the Securities and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectuses
and the Prospectus and any amendments and supplements thereto and the mailing
and delivering of copies thereof to the Underwriters and dealers; (ii) the cost
of printing, producing or distributing this Agreement, the Blue Sky Memorandum
and any other agreements or documents in connection with the offering, purchase,
sale, distribution and delivery of the Securities; (iii) all expenses in
connection with the qualification of the Securities for offering and sale as
provided in Section 5(e) hereof, including the fees and disbursements of counsel
for the Underwriters in connection with such qualification; (iv) all expenses in
connection with authorizing the Securities and the shares of Common Stock
issuable upon conversion of the Securities for trading on The New York Stock
Exchange; (v) the filing fees incident to securing any required review by The
National Association of Securities Dealers, Inc. of the terms of the sale of the
Securities, including the fees and disbursements of counsel for the Underwriters
in connection therewith; (vi) the cost of preparing stock certificates; (vii)
the cost and charges of any transfer agent or registrar; and (viii) all other
costs and expenses incident to the performance of its obligations hereunder
which are not otherwise specifically provided for in this Section. The Company
shall not be liable to any of the Underwriters for loss of anticipated profits
from the transaction covered by this Agreement.
(b) If the sale of the Securities provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 6 hereof is not satisfied, because of any termination pursuant to
Section 10 hereof or because of any refusal, inability or failure on the part of
the Company to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally upon demand for all out-of-pocket expenses
(including fees and disbursements of counsel) that shall have been reasonably
incurred by them in connection with the proposed purchase and sale of the
Securities. If the sale of the Securities provided for herein is not
consummated for any other reason, the Company shall not be obligated to
reimburse the Underwriters for their out-of-pocket expenses.
8. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and
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<PAGE>
each person who controls any Underwriter within the meaning of the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or any other Federal, state or foreign statutory law or regulation,
at common law, in equity or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement for the registration of the Securities as originally
filed or in any amendment thereof, or in any Preliminary Prospectus, the Basic
Prospectus, the Prospectus Supplement or the Prospectus, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that (i) the
-------- -------
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Underwriter through the Representatives
specifically for use in connection with the preparation thereof, and (ii) such
indemnity with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or any person controlling such Underwriter) from
whom the person asserting any such loss, claim, damage or liability purchased
the Securities which are the subject thereof if such person did not receive a
copy of the Prospectus (or the Prospectus as amended or supplemented) excluding
documents incorporated therein by reference at or prior to the confirmation of
the sale of such Securities to such person in any case where such delivery is
required by the Act and the untrue statement or omission of a material fact
contained in such Preliminary Prospectus was corrected in the Prospectus (or
the Prospectus as amended or supplemented) and, if a copy of such Prospectus
(or the Prospectus as amended or supplemented) had been so sent or given, such
delivery would have cured the defect giving rise to the claim asserted by such
person and it is finally judicially determined that such delivery was required
to be made under the Act and was not so made. This indemnity agreement will be
in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company and each of its directors, each of its officers who signs the
Registration Statement and each person who controls the Company within the
meaning of either the Act or Exchange Act, to the same extent as the foregoing
indemnity from the Company to each Underwriter, but only with reference to
written
-26-
<PAGE>
information relating to such Underwriter furnished to the Company by or on
behalf of such Underwriter through the Representatives specifically for use in
the preparation of the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any Underwriter
may otherwise have. The Company acknowledges and agrees that the statements set
forth under the heading "Underwriting" in the Preliminary Prospectus Supplement
and Prospectus Supplement constitute the only information furnished in writing
by or on behalf of the several Underwriters for inclusion in the Registration
Statement, the Prospectus, the Basic Prospectus, the Prospectus Supplement or
any Preliminary Prospectus, and the several Underwriters hereby confirm that
such statements are correct in all material respects.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof,
but the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified
party, unless the failure to so notify the indemnifying party shall have
materially impaired the defense of such claim. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to appoint
counsel reasonably satisfactory to such indemnified party to represent the
indemnified party in such action; provided, however, that if the defendants in
-------- -------
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to defend such action, at the
indemnifying party's expense, on behalf of such indemnified party or parties.
Upon receipt of notice from the indemnifying party to the indemnified party of
its election so to appoint counsel to defend such action and approval by the
indemnified party of such counsel, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the immediate preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one separate counsel (plus any local counsel), approved by
the Representatives in the case of paragraph (a) of this Section 8, representing
the indemnified parties under such paragraph (a) who are parties to such
action), (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the
-27-
<PAGE>
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim, action, suit or proceeding) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
No indemnifying party shall be liable for any settlement of any such claim,
action, suit or proceeding effected without its prior written consent.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraphs (a) and
(b) of this Section 8 is due in accordance with its terms but is for any reason
unavailable or insufficient (including, without limitation, because of any
holding by a court that such indemnification is unenforceable or otherwise
unavailable on grounds of public policy or otherwise), the Company and the
Underwriters shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses incurred in connection with
investigating or defending same) (collectively, "Losses") to which the Company
and one or more of the Underwriters may be subject in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Underwriters from the offering of the Securities; provided, however, that in no
-------- -------
case shall any Underwriter (except as may be provided in the agreement among
underwriters relating to the offering of the Securities) be responsible for any
amount in excess of the underwriting discount applicable to the Securities
purchased by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
the Underwriters shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and of the Underwriters in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the offering of the Securities (before deducting
expenses) and benefits received by the several Underwriters shall be deemed to
be equal to the total underwriting discounts and commissions, in each case as
set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Underwriters and the
parties' relevant intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other
-28-
<PAGE>
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this paragraph
(d), each person who controls an Underwriter within the meaning of the Act or
Exchange Act and each director, officer, employee and agent of an Underwriter
shall have the same rights to contribution as such Underwriter, and each person
who controls the Company within the meaning of the Act or Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company. Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or preceding against such party in
respect of which a claim for contribution may be made against another party or
parties under this paragraph (d), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have hereunder.
9. Default by an Underwriter. If any one or more Underwriters shall
-------------------------
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
-------- -------
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representatives shall determine in order that required
changes in the Registration Statement and Prospectus or in any other documents
or arrangements may be effected. Nothing contained in this Agreement shall
relieve a defaulting Underwriter of its liability, if any, to the Company and
nondefaulting Underwriters for damages occasioned by its default hereunder.
-29-
<PAGE>
10. Termination. This Agreement shall be subject to termination in the
-----------
absolute discretion of the Representatives, by notice given to the Company prior
to delivery of and payment for the Securities, if prior to such time (i) trading
in the Company's Common Stock or other securities shall have been suspended by
the Commission, The New York Stock Exchange, The American Stock Exchange or The
Toronto Stock Exchange or trading in securities generally on The New York Stock
Exchange or any other national securities exchange or market shall have been
suspended or limited or minimum prices shall have been established on The New
York Stock Exchange or any such other exchange or market, (ii) a banking
moratorium shall have been declared by Federal, Colorado or New York authorities
or (iii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on the financial markets is such as to
make it, in the judgment of the Representatives, impracticable or inadvisable to
proceed with the offering or delivery of the Securities as contemplated by the
Prospectus.
11. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company or its officers or directors and of the Underwriters set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation made by or on behalf of the Representatives, any
Underwriter or the Company or any of the officers, directors, employees, agents
or controlling persons referred to in Section 8 hereof, and will survive
delivery of and payment for the Securities. The provisions of Sections 7 and 8
hereof shall survive any termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telegraphed and confirmed to it at Salomon Brothers Inc, Seven
World Trade Center, New York, New York, 10048, with a copy to Winston & Strawn,
35 West Wacker Drive, Chicago, Illinois 60601, Attention: F. Ellen Duff, Esq.,
or if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at 9100 East Mineral Circle, Englewood, Colorado 80112,
Attention: Paul J. Hemschoot, Jr., Esq., Vice President, Secretary and General
Counsel, with a copy to: Davis, Graham & Stubbs, 370 17th Street, Suite 4700,
Denver, Colorado 80201, Attention: Paul Hilton.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
-30-
<PAGE>
14. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
--------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
-31-
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and the several Underwriters.
Very truly yours,
AMAX Gold Inc.
By: /s/ Mark A. Lettes
-------------------------------
Its: Vice President CFO
------------------------------
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
By: /s/ R. Stribling Koster
------------------------------
Its: Vice President
-----------------------------
Goldman, Sachs & Co.
By: /s/ Goldman, Sachs & Co.
------------------------------
Its:
-----------------------------
For themselves and the other several
Underwriters named in Schedule I to
the foregoing Agreement.
-32-
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Shares of
Underwritten Securities
Underwriters To Be Purchased
- ------------ -----------------------
<S> <C>
Salomon Brothers Inc ........... 800,000
Goldman, Sachs & Co. ........... 800,000
---------------
Total.................................. 1,600,000
===============
</TABLE>
-33-
<PAGE>
Exhibit 4.3
CERTIFICATE OF DESIGNATIONS
$3.75 SERIES B CONVERTIBLE PREFERRED STOCK
OF
AMAX GOLD INC.
PAR VALUE $1.00 PER SHARE
LIQUIDATION VALUE $50 PER SHARE
PURSUANT TO SECTION 151 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
The undersigned duly authorized officer of Amax Gold Inc., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 of the General
Corporation Law of the State of Delaware (the "DGCL"), and pursuant to Section
151 thereof, hereby certifies as follows:
FIRST: The Restated Certificate of Incorporation, as amended, of the
Corporation authorizes the issuance of up to 210,000,000 shares of capital
stock, of which 200,000,000 shares shall be shares of common stock, par value
$.01 per share ("Common Stock"); and 10,000,000 shares shall be shares of
preferred stock, par value $1.00 per share ("Preferred Stock").
SECOND: The Restated Certificate of Incorporation, as amended, of the
Corporation, authorizes the Board of Directors of the Corporation to provide for
the issuance of Preferred Stock in one or more series, with such designation,
powers, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions providing for the issue of
such series adopted by the Board of Directors of the Corporation, subject to the
limitations prescribed by law and except as otherwise provided in the Restated
Certificate of Incorporation or any amendment thereto.
THIRD: Pursuant to authority conferred upon the Board of Directors of the
Corporation by the Restated Certificate of Incorporation, as amended, of the
Corporation under the provisions of Section 151 of the DGCL, the Board of
Directors of the Corporation, at a meeting duly held on July 26, 1994, and the
Pricing Committee of the Board of Directors of the Company, by written consent
dated August 4, 1994, adopted the following resolutions providing for an issue
of a series of the Corporation's Preferred Stock, which resolutions are still in
full force and effect and are not in conflict with any provision of the Restated
Certificate of Incorporation, as amended, or the By-Laws of the Corporation:
<PAGE>
"RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation by Section 151 of the DGCL and the provisions of its Restated
Certificate of Incorporation, as amended, an issue of a series of the Preferred
Stock, par value $1.00 per share, of the Corporation is hereby created,
consisting of 1,840,000 shares, with the designations, powers, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of such series as follows:
(1) Designation, Number of Shares and Rank. The designation of such
--------------------------------------
series shall be "$3.75 Series B Convertible Preferred Stock" (hereinafter
referred to as the "Series B Convertible Preferred Stock"). Each share of Series
B Convertible Preferred Stock shall be identical in all respects with the other
shares of Series B Convertible Preferred Stock.
All shares of Series B Convertible Preferred Stock shall rank prior, both
as to payment of dividends and as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
to all of the Corporation's now or hereafter issued Common Stock.
(2) Dividends. The holders of shares of Series B Convertible Preferred
---------
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors of the Corporation, but only out of funds legally available therefor,
dividends at the annual rate of $3.75 per share, and no more, which shall be
fully cumulative, shall accrue without interest from the date of first issuance
and shall be payable in cash in equal quarterly installments on the 1st day of
August 15, November 15, February 15 and May 15 of each year, commencing on
November 15, 1994 (except that if any such date is not a business day, then such
dividend shall be payable on the next succeeding business day) (each, a
"Dividend Payment Date"), to stockholders of record as they appear on the stock
transfer books of the Corporation on such record dates, not more than 60 nor
less than 10 days preceding such Dividend Payment Date, as are fixed by the
Board of Directors of the Corporation. For the purposes hereof, the term
"business day" shall mean each Monday, Tuesday, Wednesday, Thursday or Friday
which is not a day on which banking institutions are authorized or obligated by
law or executive order to close in New York, New York. Subject to the next
paragraph of this Section 2, dividends on account of arrears for any past
dividend periods may be declared and paid at any time, without reference to any
Dividend Payment Date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board of Directors of
the Corporation. The amount of dividends payable per share of Series B
Convertible Preferred Stock for each quarterly dividend period shall be computed
by dividing the annual amount by four. The amount of dividends payable on the
Series B Convertible Preferred Stock for the initial dividend period and for any
period less than a full quarterly dividend period shall be
-2-
<PAGE>
computed on the basis of a 360-day year consisting of twelve 30-day months.
Holders of shares of Series B Convertible Preferred Stock shall not be entitled
to any dividend whether payable in cash, property or stock, in excess of the
full cumulative dividends on such shares of Series B Convertible Preferred
Stock.
On each Dividend Payment Date all dividends which shall have accrued on
each share of Series B Convertible Preferred Stock outstanding on such Dividend
Payment Date shall accumulate and be deemed to become "due" whether or not
declared and whether or not there shall be funds legally available for the
payment thereof. Any dividend which shall not be paid on the Dividend Payment
Date on which it shall become due shall be deemed to be "past due" until such
dividend shall be paid or until the share of Series B Convertible Preferred
Stock with respect to which such dividend became due shall no longer be
outstanding, whichever is the earlier to occur. No interest or sum of money or
other property or securities in lieu of interest shall be payable in respect of
any dividend payment or payments which are past due. Dividends paid on shares of
Series B Convertible Preferred Stock in an amount less than the total amount of
such dividends at the time accumulated and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding.
No dividends or other distributions, other than dividends payable solely in
shares of Common Stock, shall be paid, or declared and set apart for payment in
respect of, and no purchase, redemption or other acquisition for any
consideration shall be made by the Corporation of and no sinking fund or other
analogous fund payments shall be made in respect of any shares of Common Stock
or other capital stock of the Corporation ranking junior as to dividends or as
to liquidation rights to the Series B Convertible Preferred Stock (the "Junior
Dividend Stock") unless and until all accrued and unpaid dividends on the Series
B Convertible Preferred Stock, including the full dividend for the then current
dividend period, shall have been paid or declared and set apart for payment and
the Corporation is not in default in respect of the optional redemption of any
shares of Series B Convertible Preferred Stock.
No dividends or other distributions shall be paid or declared and set apart
for payment and no purchase, redemption or other acquisition for any
consideration shall be made by the Corporation of, and no sinking fund or other
analogous fund payments shall be made in respect of, any class or series of the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series B Convertible Preferred Stock (the "Parity Dividend Stock"), including
any then outstanding $2.25 Series A Convertible Preferred Stock, par value $1.00
per share (the "Series A Preferred Stock"), for any period unless full
cumulative dividends have been, or contemporaneously are, paid or declared and
set apart for such payment on the Series B Convertible Preferred Stock for all
dividend payment periods
-3-
<PAGE>
terminating on or prior to the date of payment of such full cumulative
dividends. No dividends shall be paid or declared and set apart for payment on
the Series B Convertible Preferred Stock for any period unless full cumulative
dividends have been, or contemporaneously are, paid or declared and set apart
for payment on the Parity Dividend Stock for all dividend periods terminating on
or prior to the date of payment of such full cumulative dividends. When
dividends are not paid in full upon the Series B Convertible Preferred Stock and
the Parity Dividend Stock, all dividends paid or declared and set apart for
payment upon shares of Series B Convertible Preferred Stock and the Parity
Dividend Stock shall be paid or declared and set apart for payment pro rata so
that the amount of dividends paid or declared and set apart for payment per
share on the Series B Convertible Preferred Stock and the Parity Dividend Stock
shall in all cases bear to each other the same ratio that accrued and unpaid
dividends per share on the shares of Series B Convertible Preferred Stock and
the Parity Dividend Stock bear to each other.
The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of capital stock of
the Corporation or any Parity Dividend Stock unless the Corporation could, under
this Section 2, purchase or otherwise acquire such shares at such time and in
such manner. Any reference to "distribution" contained in this Section 2 shall
not be deemed to include any distribution made in connection with any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
(3) Liquidation Preference. In the event of any liquidation, dissolution
----------------------
or winding up of the Corporation, whether voluntary or involuntary, the holders
of shares of Series B Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets are stated capital or
surplus of any nature, an amount equal to the dividends accrued and unpaid
thereon to the date of final distribution to such holders, whether or not
declared, without interest, and a sum equal to $50.00 per share, and no more,
before any payment shall be made or any assets distributed to the holders of
Common Stock or any other class or series of the Corporation's capital stock
ranking junior as to liquidation rights to the Series B Convertible Preferred
Stock (the "Junior Liquidation Stock"). In the event the assets of the
Corporation available for distribution to stockholders upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full the amounts payable with respect to the
Series B Convertible Preferred Stock and any other class or series of the
Corporation's capital stock which has been or may hereafter be created ranking
on a parity as to liquidation rights with the Series B Convertible Preferred
Stock (the "Parity Liquidation Stock"), including any then outstanding Series A
Preferred Stock, the holders of the Series B Convertible Preferred Stock and the
holders of the Parity Liquidation Stock shall share ratably in any distribution
of
-4-
<PAGE>
assets of the Corporation in proportion to the full respective preferential
amounts to which they are entitled (but only to the extent of such preferential
amounts). After payment in full of the liquidation preferences of the shares of
Series B Convertible Preferred Stock, the holders of such shares shall not be
entitled to any further participation in any distribution of assets by the
Corporation. Neither a consolidation, merger or other business combination of
the Corporation with or into another corporation or other entity nor a sale or
transfer of all or part of the Corporation's assets for cash, securities or
other property shall be considered a liquidation, dissolution or winding up of
the Corporation for purposes of this Section 3 (unless in connection therewith
the liquidation of the Corporation is specifically approved).
The holder of any shares of Series B Convertible Preferred Stock shall not
be entitled to receive any payment owed for such shares under this Section 3
until such holder shall cause to be delivered to the Corporation (i) the
certificate(s) representing such shares of Series B Convertible Preferred Stock
and (ii) transfer instrument(s) satisfactory to the Corporation and sufficient
to transfer such shares of Series B Convertible Preferred Stock to the
Corporation free of any liens or encumbrances thereon or rights of third parties
thereto. As in the case of the Redemption Price referred to below, no interest
shall accrue on any payment upon liquidation after the due date thereof.
(4) Redemption at the Option of the Corporation.
-------------------------------------------
(a) Right of Redemption. Subject to and upon compliance with the
-------------------
provisions of this Section 4, the Corporation, at its option, may at any time
redeem the Series B Convertible Preferred Stock, in whole or from time to time
in part, on any date on or after August 15, 1997 set by the Board of Directors
of the Corporation, at the following redemption prices per share, if redeemed
during the 12-month period commencing on August 15, of the year indicated:
<TABLE>
<CAPTION>
Price
Years per Share
----- ---------
<S> <C>
1997............................................. $52.625
1998............................................. 52.250
1999............................................. 51.875
2000............................................. 51.500
2001............................................. 51.125
2002............................................. 50.750
2003............................................. 50.375
2004 and thereafter.............................. 50.000
</TABLE>
plus in each case accrued and unpaid dividends to, but excluding, the date of
redemption.
-5-
<PAGE>
In case of the redemption of less than all of the then outstanding Series B
Convertible Preferred Stock, the shares of Series B Convertible Preferred Stock
to be redeemed shall be redeemed pro rata or by lot or in such other equitable
manner as the Board of Directors of the Corporation reasonably may determine.
Notwithstanding the foregoing, the Corporation shall not redeem less than all of
the Series B Convertible Preferred Stock at any time outstanding until all
dividends accrued and in arrears upon all Series B Convertible Preferred Stock
and Parity Dividend Stock then outstanding shall have been paid for all past
dividend periods.
(b) Manner of Exercise of Redemption Option. In order to exercise
---------------------------------------
its redemption option, the Corporation must give written notice in person or by
first class mail, postage prepaid, of such redemption to each holder of record
of the shares of Series B Convertible Preferred Stock to be redeemed, at such
holder's address as it shall appear upon the stock transfer books of the
Corporation not more than 60 days nor less than 30 days prior to the redemption
date. Each such notice of redemption shall state, as appropriate: (1) the date
fixed for redemption; (2) the number of shares of Series B Convertible Preferred
Stock to be redeemed and, if fewer than all of the shares held by such holder
are to be redeemed, the number of such shares to be redeemed from such holder;
(3) the Redemption Price per share of Series B Convertible Preferred Stock; (4)
the place or places of payment that payment of the Redemption Price will be made
upon presentation and surrender of the certificate or certificates evidencing
the shares of Series B Convertible Preferred Stock to be redeemed; (5) that on
and after the redemption date, dividends will cease to accrue on such shares;
and (6) the then effective Conversion Price pursuant to Section 5 and that the
right of holders to convert shall terminate at the close of business on the
redemption date (unless the Corporation defaults in the payment of the
Redemption Price).
Any notice that is delivered or mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
Series B Convertible Preferred Stock receives such notice; and failure to give
such notice, or any defect in such notice, to the holders of any shares
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of Series B Convertible Preferred Stock. On
or after the date fixed for redemption as stated in such notice, each holder of
the shares of Series B Convertible Preferred Stock called for redemption shall
surrender the certificate or certificates evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Redemption Price as herein provided. If less
than all the shares represented by any such surrendered certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
If, on the date fixed for redemption, cash necessary for the redemption shall be
available for such purpose and
-6-
<PAGE>
irrecoverably shall have been deposited or set apart, then, notwithstanding that
the certificates evidencing any shares so called for redemption shall not have
been surrendered, the dividends with respect to the shares so called shall cease
to accrue after the date fixed for redemption, the shares no longer shall be
deemed outstanding, the holders thereof shall cease to be holders of Series B
Convertible Preferred Stock, and all rights whatsoever with respect to the
shares so called for redemption (except the right of the holders to receive
payment of the Redemption Price as herein provided, without interest, upon
surrender of their certificates therefor) shall terminate. Any cash necessary
for the redemption of shares of Series B Convertible Preferred Stock shall be
deemed to be available therefor for purposes of the preceding sentence and for
purposes of Section 7, if, on or before the date fixed for redemption, the
Company shall deposit with a bank or trust company that has an office in the
Borough of Manhattan, City of New York, and that has, or is an affiliate of a
bank that has, a capital surplus of at least $50,000,000, the cash necessary for
such redemption, in trust, with irrevocable instructions that such cash be
applied to the redemption of the shares of the Series B Convertible Preferred
Stock and any Parity Dividend Stock so called for redemption. No interest shall
accrue for the benefit of the holders of shares of Series B Convertible
Preferred Stock to be redeemed on any cash so set apart by the Corporation.
Subject to applicable escheat laws, any such cash unclaimed at the end of six
years from the redemption date shall revert to the general funds of the
Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for the
payment of such cash.
The holder of any shares of Series B Convertible Preferred Stock
redeemed upon any exercise of the Corporation's redemption right shall not be
entitled to receive payment of the Redemption Price for such shares until such
holder shall cause to be delivered to the place specified in the notice given
with respect to such redemption (i) the certificate or certificates representing
such shares of Series B Convertible Preferred Stock redeemed and (ii) transfer
instruments satisfactory to the Corporation and sufficient to transfer such
shares of Series B Convertible Preferred Stock to the Corporation free of any
adverse interest. No interest shall accrue on the Redemption Price of any share
of Series B Convertible Preferred Stock after its redemption date.
In the event that any shares of Series B Convertible Preferred Stock
shall be converted into Common Stock pursuant to Section 5, then (i) the
Corporation shall not have the right to redeem such shares and (ii) any funds
which shall have been deposited for the payment of the Redemption Price for such
shares of Series B Convertible Preferred Stock shall be returned to the
Corporation immediately after such conversion (subject to declared dividends
payable to holders of shares of Series B Convertible Preferred Stock on the
record date for such
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<PAGE>
dividends, to the extent set forth in Section 5 hereof, regardless of whether
such shares are converted subsequent to such record date and prior to the
related Dividend Payment Date).
(c) Cash Payments in Lieu of Fractional Shares. No fractional shares
------------------------------------------
of Series B Convertible Preferred Stock shall be issued upon any redemption of
Series B Convertible Preferred Stock, but, in lieu thereof, the Corporation
shall pay to the holder of such shares an appropriate amount in cash (computed
to the nearest cent) based on the value of the shares of Series B Convertible
Preferred Stock as determined in good faith by the Corporation's Board of
Directors.
(5) Conversion.
----------
(a) Right of Conversion. Subject to and upon compliance with the
-------------------
provisions of this Section 5, each share of Series B Convertible Preferred Stock
shall, at the option of the holder thereof, be convertible at any time (unless
such share is called for redemption, then to and including but not after 5:00
p.m. (New York City time) on the date fixed for such redemption, unless the
Corporation shall default in payment due upon redemption thereof), into that
number of fully paid and non-assessable shares of Common Stock (calculated as to
each conversion to the nearest 1/100th of a share) obtained by dividing $50.00
by the Conversion Price (as defined in Section 5(d)) in effect at such time and
by surrender of such share so to be converted in the manner provided in Section
5(b).
(b) Manner of Exercise of Conversion Privilege. In order to exercise
------------------------------------------
the conversion privilege, the holder of one or more shares of Series B
Convertible Preferred Stock to be converted shall surrender such shares at any
of the offices or agencies to be maintained for such purpose by the Corporation
accompanied by the funds, if any, required by the last paragraph of this Section
5(b) and shall give written notice of conversion in the form provided on such
shares of Series B Convertible Preferred Stock (or such other notice as is
reasonably acceptable to the Corporation) to the Corporation at such office or
agency that the holder elects to convert the shares of Series B Convertible
Preferred Stock specified in said notice. Such notice shall also state the name
or names, together with address or addresses, in which the certificate or
certificates for shares of Common Stock which shall be issuable on such
conversion shall be issued. Each share of Series B Convertible Preferred Stock
surrendered for conversion, unless the shares issuable on conversion are to be
issued in the same name as the name in which such share of Series B Convertible
Preferred Stock is registered, shall be accompanied by instruments of transfer,
in form satisfactory to the Corporation, duly executed by the holder or such
holder's duly authorized attorney. As promptly as practicable after the
surrender of such shares of Series B Convertible Preferred Stock and the receipt
of such notice, instruments of transfer and funds, if any, as aforesaid, the
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<PAGE>
Corporation shall issue and shall deliver at such office or agency to such
holder, or on his written order, a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such shares of
Series B Convertible Preferred Stock in accordance with the provisions of this
Section 5 and a check or cash in respect of any fractional interest in a share
of Common Stock arising upon such conversion, as provided in Section 5(c).
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the business day following the date on which
such shares of Series B Convertible Preferred Stock shall have been surrendered
and such notice (and any applicable instruments of transfer and any required
taxes) received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares represented thereby at such time on such
date, and such conversion shall be at the Conversion Price in effect at such
time on such date, unless the stock transfer books of the Corporation shall be
closed on that date, in which event such person or persons shall be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, and such
conversion shall be at the Conversion Price in effect on the close of business
on such next succeeding business day upon which such shares of Series B
Convertible Preferred Stock shall have been surrendered and such notice received
by the Corporation.
Any shares of Series B Convertible Preferred Stock surrendered for
conversion during the period from the close of business on the record date for
any dividend payment to the opening of business on the related Dividend Payment
Date (unless such shares of Series B Convertible Preferred Stock shall have been
called for redemption on a date in such period) shall be accompanied by payment,
in funds acceptable to the Corporation, of an amount equal to the dividend
otherwise payable on such Dividend Payment Date. Except as provided for above
in this Section, no adjustment shall be made for dividends accrued on any shares
of Series B Convertible Preferred Stock converted or for dividends on any shares
issued upon the conversion of such shares as provided in this Section.
(c) Cash Payments in Lieu of Fractional Shares. No fractional shares or
------------------------------------------
scrip representing fractions of shares of Common Stock shall be issued upon
conversion of Series B Convertible Preferred Stock. If more than one share of
Series B Convertible Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate of $50.00 for
each such share so surrendered. In lieu of any fractional interest in a share of
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<PAGE>
Common Stock which would otherwise be deliverable upon the conversion of any
share of Series B Convertible Preferred Stock, the Corporation shall pay to the
holder of such shares an amount in cash (computed to the nearest cent) equal to
the average Closing Price per share of Common Stock as calculated for the ten
day trading period ending on the fifth trading day prior to the day of
conversion multiplied by the fractional interest in a share of Common Stock that
otherwise would have been deliverable upon conversion of such share.
(d) Adjustment of Conversion Price. The "Conversion Price" shall mean and
------------------------------
be $8.25, subject to adjustment from time to time by the Corporation as follows:
(i) In case the Corporation shall (A) pay a dividend or make a
distribution on its Common Stock in shares of Common Stock (other than
pursuant to a dividend reinvestment or similar plan), (B) subdivide its
outstanding shares of Common Stock into a greater number of shares, (C)
combine its outstanding shares of Common Stock into a smaller number of
shares, or (D) issue by reclassification of its Common Stock any shares of
capital stock of the Corporation, then in each such case the Conversion Price
in effect immediately prior to such action shall be adjusted so that the
holder of any share of Series B Convertible Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares
of Common Stock or other capital stock of the Corporation which he would have
owned or been entitled to receive immediately following such action had such
share been converted immediately prior to the occurrence of such event. An
adjustment made pursuant to this subsection (i) shall become effective
immediately after the record date, in the case of a dividend or distribution,
or immediately after the effective date, in the case of a subdivision,
combination or reclassification.
(ii) In case the Corporation shall issue rights, options or warrants
to all holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less
than the current market price per share (as determined pursuant to subsection
(iv) of this Section 5(d)) of the Common Stock (other than pursuant to any
stock option, restricted stock or other incentive or benefit plan or stock
ownership or purchase plan for the benefit of employees, directors or
officers or any dividend reinvestment plan of the Corporation in effect at
the time hereof or any other similar plan adopted or implemented hereafter),
then with respect to any conversion prior to the expiration of such rights,
options or warrants, the Conversion Price in effect immediately prior thereto
shall be adjusted so that it shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the date of issuance of
such rights, options or warrants by a fraction of which the
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<PAGE>
numerator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights, options or warrants (immediately prior to
such issuance) plus the number of shares which the aggregate offering price
of the total number of shares so offered would purchase at such current
market price, and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights, options or
warrants (immediately prior to such issuance) plus the number of additional
shares of Common Stock offered for subscription or purchase. Such adjustment
shall be made successively whenever any rights, options or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants; provided, however, in the event that all the shares of Common Stock
offered for subscription or purchase are not delivered upon the exercise of
such rights, options or warrants, upon the expiration of such rights, options
or warrants the Conversion Price shall be readjusted to the Conversion Price
which would have been in effect had the numerator and the denominator of the
foregoing fraction and the resulting adjustment been made based upon the
number of shares of Common Stock actually delivered upon the exercise of such
rights, options or warrants rather than upon the number of shares of Common
Stock offered for subscription or purchase. In determining whether any
rights, options or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such current market price, and in
determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received by the
Corporation for such rights, options or warrants, the value of such
consideration, if other than cash, to be determined by the Audit Committee of
the Board of Directors of the Corporation (whose reasonable determination
shall be conclusive, except for arithmetic errors, and shall be described in
a statement filed by the Corporation with the stock transfer agent).
(iii) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its outstanding Common Stock, evidences of its
indebtedness or assets (including securities and cash, but excluding any cash
dividend of the Corporation paid out of retained earnings and dividends or
distributions payable in stock pursuant to a dividend reinvestment or similar
plan or for which adjustment is made pursuant to subsection (i) of this
Section 5(d)) or rights, options or warrants to subscribe for or purchase
securities of the Corporation (excluding those referred to in subsection (ii)
of this Section 5(d)), then in each such case the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the record date of such
distribution by a fraction of which the numerator shall be the current market
price per
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<PAGE>
share of the Common Stock as determined pursuant to subsection (iv) of this
Section 5(d) less the fair market value on such record date (as determined by
the Audit Committee of the Board of Directors of the Corporation, whose
reasonable determination shall be conclusive, except for arithmetic errors,
and shall be described in a statement filed by the Corporation with the stock
transfer agent) of the portion of the capital stock or assets or the
evidences of indebtedness or assets so distributed to the holder of one share
of Common Stock or of such subscription rights, options or warrants
applicable to one share of Common Stock, and of which the denominator shall
be such current market price per share of Common Stock. Such adjustment shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such distribution.
(iv) For the purpose of any computation under subsections (ii) and
(iii) of this Section 5(d), the current market price per share of Common
Stock on any date shall be deemed to be the average of the Closing Price for
the shorter of (A) 30 consecutive trading days ending on the last full
trading day prior to the Time of Determination or (B) the period commencing
on the date next succeeding the first public announcement of the issuance of
such rights, options or warrants or such distribution through such last full
trading day prior to the Time of Determination. For purposes of the
foregoing, the term "Time of Determination" shall mean the time and date of
the earlier of (I) the record date for determining stockholders entitled to
receive the rights, options, warrants or distributions referred to in Section
5(d) (ii) and (iii) or (II) the commencement of "ex-dividend" trading on the
New York Stock Exchange or such other United States exchange or market on
which the Common Stock of the Corporation is then listed or admitted for
trading.
(v) In any case in which this Section 5(d) shall require that an
adjustment be made immediately following a record date or an effective date,
the Corporation may elect to defer (but only until the filing by the
Corporation with the stock transfer agent of the certificate required by
subsection (vii) of this Section 5(d)) issuing to the holder of any share of
Series B Convertible Preferred Stock converted after such record date or
effective date the shares of Common Stock issuable upon such conversion over
and above the shares of Common Stock issuable upon such conversion on the
basis of the Conversion Price prior to adjustment, and paying to such holder
any amount of cash in lieu of a fractional share.
(vi) No adjustment in the Conversion Price shall be required to be
made unless such adjustment would require an increase or decrease of at least
1% of such price;
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<PAGE>
provided, however, that any adjustments which by reason of this subsection
(vi) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section
5(d) shall be made to the nearest cent or to the nearest 1/100th of a share,
as the case may be. Anything in this Section 5(d) to the contrary
notwithstanding, the Corporation shall be entitled to make such reduction in
the Conversion Price, in addition to those required by this Section 5(d), as
it in its discretion shall determine to be advisable in order that any stock
dividend, subdivision of shares, distribution of rights to purchase stock or
securities, or distribution of securities convertible into or exchangeable
for stock hereafter made by the Corporation to its stockholders shall not be
taxable to the recipients. Except as set forth in subsections (i), (ii) and
(iii) above, the Conversion Price shall not be adjusted for any such event
including, without limitation, the issuance of Common Stock, or any
securities convertible into or exchangeable for Common Stock or carrying the
right to purchase any of the foregoing, in exchange for cash, property or
services.
(vii) Whenever the Conversion Price is adjusted as herein provided,
(A) the Corporation promptly shall file with the stock transfer agent a
certificate setting forth the Conversion Price after such adjustment and a
brief statement of the facts requiring such adjustment and the manner of
computing the same, which certificate shall be conclusive evidence of the
correctness of such adjustment, except for arithmetic errors, and (B) the
Corporation also shall deliver or mail, or cause to be delivered or mailed by
first class mail, postage prepaid, as soon as practicable to each holder of
record of shares of Series B Convertible Preferred Stock a notice stating
that the Conversion Price has been adjusted and setting forth the adjusted
Conversion Price. The stock transfer agent shall not be under any duty or
responsibility with respect to the certificate required by this subsection
(vii) except to exhibit the same to any holder of shares of Series B
Convertible Preferred Stock who requests to inspect it.
(viii) In the event that at any time, as a result of an adjustment
made pursuant to subsection (i) of this Section 5(d), the holder of any share
of Series B Convertible Preferred Stock thereafter surrendered for conversion
shall become entitled to receive any shares of the Corporation other than
shares of Common Stock, thereafter the Conversion Price of such other shares
so receivable upon conversion of any share of Series B Convertible Preferred
Stock shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
Common Stock contained in this Section.
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<PAGE>
(ix) The Corporation from time to time may decrease the Conversion
Price by any amount for any period of time if the period is at least 20 days
and if the decrease is irrevocable during the period. Whenever the Conversion
Price is so decreased, the Corporation shall deliver or mail to holders of
record of shares of Series B Convertible Preferred Stock a notice of the
decrease at least 15 days before the date the decreased Conversion Price
takes effect, and such notice shall state the decreased Conversion Price and
the period it will be in effect.
(e) Notice to Holders Prior to Certain Corporate Actions. In case:
----------------------------------------------------
(i) the Corporation shall take any action which would require an
adjustment in the Conversion Price pursuant to Section 5(d)(iii); or
(ii) the Corporation shall authorize the granting to the holders of
its Common Stock generally of rights, options or warrants to subscribe for or
purchase any shares of stock of any class or of any other rights; or
(iii) there shall be any reorganization or reclassification of the
Common Stock (other than a subdivision or combination of the outstanding
Common Stock and other than a change in the par value of the Common Stock),
or any consolidation or merger to which the Corporation is a party or any
statutory exchange of securities with another corporation and for which
approval of any stockholders of the Corporation is required, or any sale,
lease or transfer of all or substantially all of the assets of the
Corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
then in each such case the Corporation shall cause to be delivered or mailed by
first class mail, postage prepaid, to the holders of shares of Series B
Convertible Preferred Stock and the stock transfer agent, as promptly as
possible, but in any event at least 20 days prior to the applicable date
hereinafter specified, a written notice stating (i) the date on which a record
is to be taken for the purpose of such action or granting of rights, options or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such distribution, rights, options
or warrants are to be determined, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, statutory exchange, sale, lease,
transfer, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property
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<PAGE>
deliverable upon such reorganization, reclassification, consolidation, merger,
statutory exchange, sale, lease, transfer, dissolution, liquidation or winding-
up. Failure to give such notice or any defect therein shall not affect the
legality or validity or the proceedings described in subsection (i), (ii), (iii)
or (iv) of this Section 5(e).
(f) Reservation of Shares of Common Stock. The Corporation covenants
-------------------------------------
that it will, at all times, reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued shares of Common
Stock for the purpose of effecting conversions of shares of Series B Convertible
Preferred Stock, the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series B Convertible Preferred Stock not
theretofore converted and on or before (and as a condition of) taking any action
that would cause an adjustment of the Conversion Price resulting in an increase
in the number of shares of Common Stock deliverable upon conversion above the
number thereof previously reserved and available therefor, the Corporation shall
take all such action so required. For purposes of this Section 5(f), the number
of shares of Common Stock which shall be deliverable upon the conversion of all
outstanding shares of Series B Convertible Preferred Stock shall be computed as
if at the time of computation all outstanding shares of Series B Convertible
Preferred Stock were held by a single holder.
Before taking any action that would cause an adjustment reducing the
Conversion Price below the then par value (if any) of the shares of Common Stock
deliverable upon conversion of the shares of Series B Convertible Preferred
Stock, the Corporation shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and non-assessable shares of Common Stock at such
adjusted Conversion Price.
(g) Transfer Taxes, Etc. The Corporation shall pay any and all
--------------------
documentary stamp, issue or transfer taxes, and any other similar taxes payable
in respect of the issue or delivery of shares of Common Stock upon conversion of
shares of Series B Convertible Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issue or delivery of shares
of Common Stock in a name other than that of the holder of the shares of Series
B Convertible Preferred Stock to be converted and no such issue or delivery
shall be made unless and until the person requesting such issue or delivery has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(h) Consolidation or Merger or Sale of Assets. Notwithstanding any
-----------------------------------------
other provision herein to the contrary, in
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<PAGE>
case of any consolidation or merger to which the Corporation is a party (other
than a merger or consolidation in which the Corporation is the continuing
corporation and in which the Common Stock outstanding immediately prior to the
merger or consolidation is not exchanged for cash, or the securities or other
property of another corporation), or in case of any sale, lease or transfer to
another corporation of the property of the Corporation as an entirety or
substantially as an entirety, then lawful provision shall be made by the
corporation formed by such consolidation or the corporation whose securities,
cash or other property immediately after the merger or consolidation will be
owned, by virtue of the merger or consolidation, by the holders of Common Stock
immediately prior to the merger or consolidation, or the corporation which shall
have acquired such assets or securities of the Corporation (collectively the
"Formed, Surviving or Acquiring Corporation"), as the case may be, providing
that the holder of each share of Series B Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such share into the kind
and amount of securities, cash or other property receivable upon such
consolidation, merger, sale, lease or transfer by a holder of the number of
shares of Common Stock into which such share of Series B Convertible Preferred
Stock might have been converted immediately prior to such consolidation, merger,
sale, lease or transfer assuming such holder of Common Stock did not exercise
his rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon such consolidation, merger, sale, lease or
transfer (provided that, if the kind or amount of securities, cash or other
property receivable upon such consolidation, merger, sale, lease or transfer is
not the same for each share of Common Stock in respect of which such rights of
election shall not have been exercised ("non-electing share"), then for the
purposes of this Section 5(h) the kind and amount of securities, cash or other
property receivable upon such consolidation, merger, sale, lease or transfer for
each non-electing share shall be deemed to be the kind and amount so receivable
per share by a plurality of the non-electing shares). The Formed, Surviving or
Acquiring Corporation, as the case may be, shall make provision in its
certificate or articles of incorporation or other constituent documents to the
end that the provisions set forth in this Section 5(h) shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock or other securities or property thereafter deliverable on
the conversion of the Series B Convertible Preferred Stock.
The above provisions of this Section 5(h) shall similarly apply to
successive consolidations, mergers, sales, leases or transfers.
(i) Covenant as to Common Stock. The Corporation covenants that all
---------------------------
shares of Common Stock which may be delivered upon conversions of shares of
Series B Convertible Preferred Stock will upon delivery be duly and validly
issued and fully
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<PAGE>
paid and nonassessable, free of all liens and charges and not subject to any
preemptive rights.
The Corporation will list and keep listed, so long as the Common Stock
shall be listed on The New York Stock Exchange, all Common Stock issuable upon
conversion of the shares of Series B Convertible Preferred Stock.
(6) Voting Rights.
-------------
(a) General. The holders of Series B Convertible Preferred Stock
-------
shall not have any voting rights except as set forth below or as otherwise from
time to time required by law. In connection with any right to vote, each holder
of Series B Convertible Preferred Stock will have one vote for each share held.
Any shares of Series B Convertible Preferred Stock held by the Corporation or
any entity controlled by the Corporation shall not have voting rights hereunder
and shall not be counted in determining the presence of a quorum.
(b) Default Voting Rights. Whenever dividends on the Series B
---------------------
Convertible Preferred Stock shall be in arrears in an amount equal to at least
six quarterly dividend payments (whether or not consecutive), (i) the number of
members of the Board of Directors of the Corporation shall be increased by two,
effective as of the time of election of such directors as hereinafter provided,
and (ii) the holders of the Series B Convertible Preferred Stock (voting as a
class together with all other affected classes or series of the Parity Dividend
Stock upon which like voting rights have been conferred and are exercisable
(other than the Series A Preferred Stock)) will have the exclusive right to vote
for and elect such two additional directors of the Corporation at any meeting of
stockholders of the Corporation at which directors are to be elected held during
the period such dividends remain in arrears. The right of the holders of the
Series B Convertible Preferred Stock to vote for such two additional directors
shall terminate when all accrued and unpaid dividends on the Series B
Convertible Preferred Stock have been declared and paid or set apart for
payment. The term of office of all directors so elected shall terminate
immediately upon the termination of the right of the holders of the Series B
Convertible Preferred Stock and such Parity Dividend Stock to vote for such two
additional directors.
The foregoing right of the holders of the Series B Convertible
Preferred Stock with respect to the election of two directors may be exercised
at any annual meeting of stockholders or at any special meeting of stockholders
held for such purpose. If the right to elect directors shall have accrued to the
holders of the Series B Convertible Preferred Stock more than 90 days preceding
the date established for the next annual meeting of stockholders, the President
of the Corporation shall, within 20 days after the delivery to the Corporation
at its principal office of a written request for a special meeting signed by the
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<PAGE>
holders of at least ten percent (10%) of the Series B Convertible Preferred
Stock then outstanding, call a special meeting of the holders of the Series B
Convertible Preferred Stock to be held within 60 days after the delivery of such
request for the purpose of electing such additional directors.
The holders of the Series B Convertible Preferred Stock and any such
Parity Dividend Stock referred to above (excluding the holders of Series A
Preferred Stock) voting together shall have the right to remove without cause at
any time and replace any directors such holders have elected pursuant to this
Section 6.
(c) Class Voting Rights. So long as the Series B Convertible
-------------------
Preferred Stock is outstanding, the Corporation shall not, without the
affirmative vote or consent of the holders of at least 66 2/3 percent of all
outstanding shares of Series B Convertible Preferred Stock (unless the vote or
consent of a greater percentage is required by applicable law or the Restated
Certificate of Incorporation, as amended, of the Corporation), voting separately
as a class, (i) amend, alter or repeal (by merger, consolidation or otherwise)
any provision of the Restated Certificate of Incorporation, as amended, or the
Bylaws of the Corporation, as amended, so as to affect adversely the relative
rights, preferences, qualifications, limitations or restrictions of the Series B
Convertible Preferred Stock, (ii) authorize or issue, or increase the authorized
amount of, any additional class or series of stock, or any security convertible
into stock of such class or series, ranking prior to the Series B Convertible
Preferred Stock in respect of the payment of dividends or upon liquidation,
dissolution or winding up of the Corporation or (iii) effect any
reclassification of the Series B Convertible Preferred Stock. A class vote on
the part of the Series B Convertible Preferred Stock, without limitation,
specifically shall not be deemed to be required (except as otherwise required by
law or resolution of the Board of Directors of the Corporation) in connection
with: (a) the authorization, issuance or increase in the authorized amount of
any shares of any other class or series of stock that ranks junior to, or on a
parity with, the Series B Convertible Preferred Stock in respect of the payment
of dividends and upon liquidation, dissolution or winding up of the Corporation;
or (b) the authorization, issuance or increase in the amount of any notes,
bonds, mortgages, debentures or other obligations of the Corporation not
convertible into or exchangeable, directly or indirectly, for stock ranking
prior to the Series B Convertible Preferred Stock in respect of the payment of
dividends or upon liquidation, dissolution or winding up of the Corporation.
(7) Outstanding Shares. For purposes of this Certificate of Designations,
------------------
all shares of Series B Convertible Preferred Stock shall be deemed outstanding
except (i) from the date fixed for redemption pursuant to Section 4, all shares
of Series B Convertible Preferred Stock that have been so called for
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<PAGE>
redemption under Section 4 if the cash necessary for payment of the Redemption
Price irrevocably has been set aside; (ii) from the date of surrender of
certificates representing shares of Series B Convertible Preferred Stock, all
shares of Series B Convertible Preferred Stock converted into Common Stock; and
(iii) from the date of registration of transfer, all shares of Series B
Convertible Preferred Stock held of record by the Corporation or any subsidiary
of the Corporation.
(8) No Other Rights and Powers. The shares of Series B Convertible
--------------------------
Preferred Stock shall not have any relative, participating, optional or other
special rights and powers other than as set forth herein.
(9) Preemptive Rights. The Series B Convertible Preferred Stock is not
-----------------
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.
(10) Severability of Provisions. Whenever possible, each provision hereof
--------------------------
shall be interpreted in a manner as to be effective and valid under applicable
law, but if any provision hereof is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise adversely affecting
the remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period of
time were extended or shortened or a particular percentage were increased or
decreased, then such court may make such change as shall be necessary to render
the provision in question effective and valid under applicable law.
"FURTHER RESOLVED, that each officer of the Corporation hereby is
authorized, in the name and on behalf of the Corporation, to prepare, execute,
seal and file, or cause to be prepared, executed, sealed and filed, the
Certificate of Designations relating to the Series B Convertible Preferred Stock
in accordance with the Delaware General Corporation Law and to take any and all
such action with respect thereto that such officer of the Corporation shall deem
necessary or advisable; and
"FURTHER RESOLVED, that each officer of the Corporation hereby is
authorized, in the name and on behalf of the Corporation, to execute and
deliver, or cause to be made, executed and delivered, all such officers'
certificates and such other agreements, undertakings, documents or instruments
and to perform such other acts as such officer may deem necessary or appropriate
in order to effectuate the purpose and intent of these resolutions;
-19-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed in its name by Richard B. Esser, its Vice President, and attested by
its Secretary, this 4th day of August, 1994.
AMAX GOLD INC.
By: /s/ Richard B. Esser
--------------------------------
Richard B. Esser
Vice President
Attest:
By: /s/ Paul J. Hemschoot, Jr.
------------------------------
Paul J. Hemschoot, Jr.
Secretary
-20-
<PAGE>
Exhibit 10.5
REFUGIO PROJECT AGREEMENT
-------------------------
This Agreement is dated as of November 17, 1992, and is made BETWEEN:
BEMA GOLD CORPORATION, a body corporate subsisting under the laws of
---------------------
British Columbia and having an office at 1400 - 510 Burrard Street,
Vancouver, British Columbia, V6C 3A8
("Bema")
OF THE FIRST PART
AND:
AMAX GOLD INC., a body corporate subsisting under the laws of the
--------------
state of Delaware and having an office at 350 Indiana Street, Golden,
Colorado, 80228
("AGI")
OF THE SECOND PART
W H E R E A S:
A. Sociedad Contractual Compania Minera Refugio ("CMR") is the registered
and beneficial owner of the Refugio Property;
B. Certain of the Bema Companies and CMR entered into the 1990 Option
Agreement pursuant to which CMM acquired the option to purchase the Refugio
Property from CMR on the terms and conditions set out therein;
C. AGI has entered into letters of intent each dated March 23, 1992, as
amended, with Bema and with CMR pursuant to which the existing transactions
between the Bema Companies and CMR will be modified and whereby AGI will acquire
from certain of the Bema Companies 50% of the shares of CMM and whereby CMM will
acquire from CMR the Refugio Property;
D. AGI and Bema wish to provide for the financing, exploration and
development of the Refugio Property through the ownership of shares in CMM as
equal shareholders;
E. The parties are entering into this Agreement to set out their
agreement to negotiate in good faith the documents required to carry out the
aforementioned acquisition by AGI and the financing, exploration and
development of the Refugio Property;
<PAGE>
- 2 -
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
premises and the covenants and agreements contained herein, the parties hereto
agree as follows:
ARTICLE 1
INTERPRETATION
--------------
1.1 Definitions. In addition to certain defined words and terms used in
-----------
particular sections of this Agreement, in this Agreement (including the
recitals) the following words and terms have the meaning set forth below:
(a) "Affiliate" means (i) when used with respect to AGI, any Person that
is Controlled by AGI, (ii) when used with respect to AGRI, AGI and any
Person Controlled by AGI or AGRI, and (iii) when used in any other
case, a Person that is Controlled by or is under common Control with
the entity in question;
(b) "Agreement for Acquisition of Shares" means the agreement dated
November 18, 1992 among AGI, Amax Gold de Chile Limitada (a limited
liability company), Bema, CMM, CMR and the CMR Shareholders;
(c) "Amax Companies" means AGI and AGRI;
(d) "AGRI" means Amax Gold Refugio, Inc., a corporation organized under
the laws of the State of Delaware;
(e) "Approvals" means any and all material approvals, orders, consents,
filings, licences and permits required by any applicable law, rule,
regulation, order, decree, statute or otherwise, including all court,
securities, regulatory and stock exchange approvals;
(f) "August 1992 Feasibility Study" means the feasibility study for the
Project dated August, 1992 as approved by Bema and AGI pursuant to
section 5.1;
(g) "Bema Bermuda" means Bema Gold (Bermuda) Ltd., a corporation organized
under the laws of Bermuda;
(h) "Bema Chile" means Minera Bema Gold (Chile) Limitada, a Chilean
limited liability entity;
(i) "Bema Companies" means Bema, Bema Chile, Bema U.S. and Bema Bermuda;
(j) "Bema U.S." means Bema Gold (U.S.) Inc., a corporation organized under
the laws of the State of Nevada;
(k) "Board" means the board of directors of a company;
<PAGE>
- 3 -
(l) "Buffer Zone Property" means those mining claims, exploration
concessions and exploitation concessions listed in Schedule "B"
together with the surface rights overlying a portion of such claims
and concessions as described in Schedule "C";
(m) "Business Day" means a day other than Saturday, Sunday or any other
day which is a legal holiday in either of Vancouver or Denver;
(n) "CMM" means Compania Minera Maricunga, a Chilean contractual mining
corporation;
(o) "CMR" means Sociedad Contractual Compania Minera Refugio, a Chilean
contractual mining company having an office at Balmaceda 3620, La
Serena, Chile;
(p) "CMR Shareholders" means Mario Ivan Hernandez Alvarez, Gerardo Findel
Steppes, David Robert Stanley Thompson, Compania Minera Ventarron and
Exploraciones Mineras NCE Ltda.;
(q) "Completion of Construction" has the meaning set out in the
Shareholders' Agreement;
(r) "Confidential Information" means information, analyses, reports,
studies, costs, strategies, financial reports and financial
information, customer lists, pricing information and data, know-how,
technical data, patterns, results, processes, formulas, patterns,
devices, trade secrets and other information whatsoever but does not
include the following:
(i) any information that at the time of disclosure is in the
public domain;
(ii) any information that after disclosure is published or
otherwise becomes part of the public domain through no fault
of the recipient (but only after, and only to the extent
that, it is published or otherwise becomes part of the public
domain);
(iii) any information that the recipient can show already was in
its possession at the time of the disclosure and that without
breach of any obligation of confidentiality, it is free to
disclose to others;
(iv) any information that the recipient can show was received by
it after the time of disclosure, from a third Person who did
not acquire it directly or indirectly from the disclosing
party or its Affiliates under an obligation of confidence,
and
<PAGE>
- 4 -
that without breach of any obligation of confidence the
recipient is free to disclose to others; and
(v) any information that is required to be disclosed by law
(including any order, regulation or governmental action) or
stock exchange rule;
(s) "Constating Documents" means the constating memorandum, the articles,
the articles of incorporation, the articles of arrangement, the
articles of continuance or the articles of amalgamation pursuant to
which a corporation is incorporated, arranged, continued or
amalgamated, as the case may be, together with any amendments thereto,
the by-laws of such corporation, any special rights and restrictions
associated with any class of shares and any shareholders' agreement
which has been executed by such corporation and which governs in whole
or in part such corporation's affairs;
(t) "Control" means, at any time:
(i) the right to exercise the majority of the votes which may be
cast at a general meeting of a corporation;
(ii) the right or ability to elect or appoint, directly or
indirectly, the majority of the directors of a corporation or
other Persons who have the right to manage or supervise the
management of the affairs and business of the corporation; or
(iii) the direct or indirect power to direct or cause the direction
of the management or policies of a legal entity, whether
through ownership of voting securities, by contract, or
otherwise;
(u) "Environmental Law" means any applicable law, rule, policy, order,
permit, demand or regulation whatsoever, of any national, federal,
state or local government or any subdivision thereof, relating to the
protection, preservation, reclamation or rehabilitation of the
environment, whether now existing or hereafter arising, relating to
the Project;
(v) "Existing Exploration and Evaluation Data" means all information,
data, material and results of the exploration, evaluation and other
activities undertaken by or for Bema Chile, Bema U.S. or Bema or its
Affiliates with respect to the Refugio Property or any portion thereof
prior to the date of this Agreement, including without limitation, all
core, pulps and other samples relating to the Refugio Property in the
possession or
<PAGE>
- 5 -
control of Bema Chile, Bema U.S. or Bema or its Affiliates and all
reports, analyses, assays, studies, maps, data bases, plans, drawings,
and documents derived from, based on, or which incorporate information
from such exploration, evaluation or other activities;
(w) "Final Closing" means final completion of the Transactions;
(x) "Final Closing Conditions" has the meaning set out in section 8.4;
(y) "Final Closing Date" means January 14, 1993 or such other date as
shall be agreed upon by the parties and CMR;
(z) "Financing Period" means the period of time extending from the Final
Closing Date to that day which is the last day of the eighteenth month
thereafter;
(aa) "Financing Plan" has the meaning set out in the Shareholders'
Agreement;
(ab) "First Closing" means the completion of the Transactions subject only
to the Final Closing Conditions;
(ac) "First Closing Date" means November 18, 1992 or such other date as
shall be agreed upon by the parties and CMR;
(ad) "Fixed Portion of the Purchase Price" means the fixed portion of the
purchase price as set out in Clause Fourth Section 1) of the
Purchase/Sale Promise of Mining Claims;
(ae) "Governmental Authority" means any federal, provincial, state,
municipal, county or regional government or governmental authority,
domestic or foreign, and includes any department, commission, bureau,
board, administrative agency or regulatory body of any of the
foregoing;
(af) "License Agreement" means the License and Use of Information Agreement
dated as of [the Final Closing Date] between Bema Chile and CMM
pursuant to which Bema Chile will grant to CMM the right to use the
Existing Exploration and Evaluation Data owned by Bema Chile;
(ag) "Mineco" means Compania Minera San Damian, the contractual mining
company to be established by Bema Chile and CMR for mining
exploration, development and exploitation with respect to the Outside
Property;
(ah) "New Bylaws" means new bylaws of CMM to replace, effective as of the
Final Closing, the existing bylaws of CMM;
<PAGE>
- 6 -
(ai) "1990 Option Agreement" means the Promise of Sale of Mining Properties
dated August 29, 1990 among Bema Chile, CMM and CMR and granted before
the Santiago Notary Public Mr. Andres Rubio Flores, as amended by
agreement dated October 2, 1992;
(aj) "Outside Property" means those mining claims, exploration concessions
and exploitation concessions owned directly or indirectly by any one
or more of Mineco, Bema Chile, CMR or any Affiliate of them, lying in
whole or in part within a 12 kilometer radius extending from the UTM
coordinates 6953600 North and UTM 469900 east (excluding those mining
claims, exploration concessions and exploitation concessions included
in the Refugio Property and the Buffer Zone Property) together with
any surface rights overlying those claims and concessions owned
directly or indirectly by any one or more of Mineco, Bema Chile, CMR
or any Affiliate of them;
(ak) "Person" means an individual, corporation, body corporate, firm,
partnership, syndicate, joint venture, association, trust,
unincorporated organization or governmental authority or any trustee,
executor, administrator or other legal representative;
(al) "Project" means the financing, construction, development and operation
of the Refugio Property in accordance with the Project Feasibility
Study, the Project Schedule and the Financing Plan;
(am) "Project Feasibility Study" has the meaning set out in the
Shareholders' Agreement;
(an) "Project Schedule" means the schedule for carrying out the
construction, development and operation of the Refugio Property
included in the Project Feasibility Study;
(ao) "Project Financing" has the meaning set out in the Shareholders'
Agreement;
(ap) "Promise to Assign Easement" means the agreement between Bema Chile
and CMM dated November 18, 1992 pursuant to which Bema Chile promises
to assign to CMM all of Bema Chile's rights in the Easement granted by
the Chilean Army to Bema Chile on June 27, 1991 and registered under
No. 3.273 to the extent of the coordinates set out in Schedule "C",
Area B3, upon receipt of the consent of the Chilean Army;
(aq) "Promise to Assign Water Rights" means the agreement between Bema
Chile and CMM dated November 18, 1992 pursuant to which Bema Chile
promises to assign to CMM all of Bema Chile's rights in the Right to
Explore and
<PAGE>
- 7 -
Exploit Water granted by the Chilean Army to Bema Chile on June 27,
1991 and registered under No. 3.272 upon receipt of the consent of the
Chilean Army and promises to assign to CMM any exploitation
concessions that are granted to Bema Chile pursuant to the exploration
concessions listed in Schedule "D";
(ar) "Purchase/Sale Promise of Laguna and Hielo Claims" means the agreement
between CMM and Bema Chile dated as of November 18, 1992 pursuant to
which CMM agrees to purchase and Bema Chile agrees to sell the Laguna
1 - 11 and Hielo 1 - 9 mining claims;
(as) "Purchase/Sale Promise of Mining Claims" means the Purchase/Sale
Promise of Mining Claims and Constitution of Easements agreement
between CMM and CMR dated November 18, 1992 pursuant to which CMM
agrees to purchase and CMR agrees to sell the mining claims included
in the Refugio Property and the mining claims, exploration concesions
and exploitation concessions included in the Buffer Zone Property
except the Laguna 1 - 11 and Hielo 1 - 9 mining claims and includes
the agreements appurtenant thereto including the Determination of Net
Operating Margin Agreement and the Determination of Net Smelter Return
Agreement (as therein defined);
(at) "Purchase/Sale Promise of Surface Rights" means the agreement dated
November 18, 1992 between CMR and CMM pursuant to which CMM agrees to
purchase and CMR agrees to sell the surface rights included in the
Refugio Property and the Buffer Zone Property except those surface
rights which are the subject of the Promise to Assign Easement and
those surface rights which are the subject of the Purchase/Sale
Promise of Laguna and Hielo Claims;
(au) "Purchase/Sale Promise of Water Rights" means the agreement dated
November 18, 1992 between Bema Chile and CMM pursuant to which CMM
agrees to purchase and Bema Chile agrees to sell the Water Rights
other than those Water Rights that are the subject of the Promise to
Assign Water Rights;
(av) "Refugio Property" means the mining claims listed on Schedule "A"
together with any surface rights overlying those mining claims, the
description of the surface rights being set out in Schedule "C";
(aw) "Securities Agreement" means an agreement dated as of the First
Closing Date between AGI and the CMR Shareholders governing the
acquisition by the CMR Shareholders of 3,150,000 shares of AGI common
stock and the registration
<PAGE>
- 8 -
rights and transfer restrictions with respect to those shares;
(ax) "Shareholders' Agreement" means an agreement dated as of the First
Closing Date among Bema Bermuda, AGRI, Bema and AGI to govern the
relationship of Bema Bermuda and AGRI as shareholders of CMM;
(ay) "this Agreement" means this agreement including the recitals hereof
and the schedules hereto, as amended and supplemented;
(az) "Transactions" means:
(i) the entering into of the Purchase/Sale Promise of Mining
Claims by CMM and CMR and the transfer from CMR to CMM of the
properties described in Clauses One, Two and Thirty thereof;
(ii) the entering into of the Purchase/Sale Promise of Water
Rights by Bema Chile and CMM and the transfer from Bema Chile
to CMM of the water rights described therein;
(iii) the entering into of the Purchase/Sale Promise of Surface
Rights by CMR and CMM and the transfer from CMR to CMM of the
surface rights described therein;
(iv) the entering into of the Purchase/Sale Promise of Laguna and
Hielo Claims by Bema Chile and CMM;
(v) the entering into of the Promise to Assign Water Rights by
Bema Chile and CMM;
(vi) the entering into of the Promise to Assign Easement by Bema
Chile and CMM;
(vii) the adoption by Bema Bermuda and AGRI of the New Bylaws;
(viii) the execution and delivery of the Shareholders' Agreement
by Bema Bermuda, AGRI, Bema and AGI;
(ix) the execution and delivery of the License Agreement by Bema
Chile and CMM;
(x) the execution and delivery of the Securities Agreement by AGI
and the CMR Shareholders and the sale of shares of AGI stock
to the CMR Shareholders pursuant thereto; and
(xi) the execution and delivery of the Agreement for Acquisition
of Shares by AGI, Amax Gold de Chile
<PAGE>
- 9 -
Limitada, Bema, CMM, CMR and the CMR Shareholders; and
(ba) "Water Rights" means those water concessions listed in Schedule "D".
1.2 Governing Law and Forum. This Agreement and all matters arising
-----------------------
hereunder will be governed by and construed in accordance with the laws of the
State of Colorado excluding conflict of laws principles.
1.3 Business Day. In the event that any date on which any action is
------------
required to be taken or by which notice is to received hereunder is not a
Business Day, such action shall be required to be taken on and such notice shall
be required to be received by the next succeeding day which is a Business Day.
1.4 Severability. If any one or more of the provisions contained in this
------------
Agreement should be invalid, illegal or unenforceable in any respect in any
jurisdiction, the validity, legality and enforceability of such provision or
provisions shall not in any way be affected or impaired thereby in any other
jurisdiction and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby, unless in either case as a result of such determination this Agreement
would fail in its essential purpose.
1.5 Included Words. The singular of any term includes the plural, and
--------------
vice versa, the use of any term is generally applicable to either gender and,
where applicable, to a corporation, the word "or" is not exclusive and the word
"including" is not limiting whether or not non-limiting language (such as
"without limitation" or "but not limited to" or words of similar import) is used
with reference thereto.
1.6 Headings. The headings to the sections and subsections of this
--------
Agreement are inserted for convenience only and do not form a part of this
Agreement and are not intended to interpret, define or limit the scope, extent
or intent of this Agreement or any provision hereof.
1.7 Cross-References. Unless otherwise stated, all references in this
----------------
Agreement to a designated "section", "subsection" or other subdivision or to a
schedule is to the designated section, subsection or other subdivision of, or
schedule to, this Agreement.
1.8 References to Whole Agreement. Unless otherwise stated, the words
-----------------------------
"herein", "hereof" and "hereunder" and other words of similar import refer to
this Agreement as a whole and not to any particular section, subsection or other
subdivision or schedule.
<PAGE>
- 10 -
1.9 Statutes. Unless otherwise stated, any reference to a statute
--------
includes and is a reference to such statute and to the regulations made pursuant
thereto, with all amendments made thereto and in force from time to time, and to
any statute or regulations that may be passed which supplement or supersede such
statute or regulations.
1.10 References to Successors Included. Any reference to a corporate
---------------------------------
entity includes and is also a reference to any corporate entity that is a
successor to such entity.
1.11 Requirement in Writing. A reference to "waiver", "approval",
----------------------
"authorization", "consent", "designation" or "notice" means written approval,
authorization, consent, designation or notice unless specifically indicated
otherwise.
1.12 Cognates. A cognate of a defined term the initial letter of which is
--------
capitalized shall have a meaning corresponding to that of the defined term.
1.13 Currency. All dollar amounts referenced in this Agreement refer to
--------
United States dollars, unless otherwise specified.
1.14 Schedules. The following are the Schedules attached to and
---------
incorporated in this Agreement by this reference and deemed to form a part
hereof:
Schedule "A" Mining Claims included in the Refugio
Property
Schedule "B" Mining Claims, Exploration Concessions and
Exploitation Concessions included in the
Buffer Zone Property
Schedule "C" Description of the Surface Rights included
in the Refugio Property and the Buffer
Zone Property
Schedule "D" Water Rights
Schedule "E" Unaudited Financial
Statements of CMM
Schedule "F" Material Agreements of CMM
Schedule "G" Material Agreements of Bema
Companies Relating to
Refugio Property
<PAGE>
- 11 -
Schedule "H" Approvals required by Bema
Companies
Schedule "I" Approvals required by Amax
Companies
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 Representations and Warranties of Bema. Bema represents and warrants
--------------------------------------
to AGI, as representations and warranties that are true at the date hereof, and
acknowledges that AGI is relying on each of the following representations and
warranties in entering into this Agreement and in concluding the Transactions,
that:
(a) Status - each of the Bema Companies and CMM is a corporation duly
------
organized, validly existing and in good standing in the jurisdiction
of its incorporation;
(b) Capacity - Bema has all requisite corporate power and capacity to
--------
execute and deliver this Agreement, to carry out the Transactions to
which it is a party and to duly observe and perform all its covenants
set out herein;
(c) Authority - the execution and delivery of this Agreement have been
---------
duly and validly authorized by all necessary action on the part of
Bema and this Agreement constitutes a legal, valid and binding
obligation of Bema enforceable against Bema in accordance with its
terms subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other similar laws of general applicability
relating to or affecting creditors' rights and to the availability of
equitable remedies;
(d) No Default/Approvals - neither the execution and delivery of this
--------------------
Agreement nor the due observance and performance by Bema of its
obligations contemplated herein shall:
(i) conflict with or result in a breach of or violate any of the
terms, conditions or provisions of the Constating Documents
of Bema;
(ii) provided that all Approvals required by Bema in order to
consummate the Transactions to which Bema is a party have
been obtained, result in a breach or violation by Bema of any
of the terms, conditions or provisions of any law, judgment,
order, injunction, decree or ruling to which Bema is subject;
or
(iii) give any other Person any right of termination,
cancellation, acceleration in respect of, or constitute a
material breach of or material
<PAGE>
- 12 -
default under, any material agreement, instrument or commitment
to which Bema is a party or by which its properties are bound
or affected, including any agreement or obligation relating to
the Refugio Property;
(e) Required Approvals - Schedule "H" lists all Approvals required by the
------------------
Bema Companies to consummate the Transactions to which they are a
party;
(f) Delivery of Material Information - the Bema Companies and CMM have
--------------------------------
delivered or identified and made available to AGI all material
information relating to the Refugio Property and Buffer Zone Property
and the title thereto that is within their possession or control;
(g) Possession of Refugio Property - Bema Chile is in possession of the
------------------------------
Refugio Property and Buffer Zone Property subject to the rights of CMR
and the paramount authority of the Republic of Chile;
(h) Title to Refugio Property and Buffer Zone Property -After due
---------------------------------------------------
inquiry, Bema knows of no other Person claiming any paramount or
conflicting interest in the Refugio Property and Buffer Zone Property
other than the interests of CMR and the interests therein of the
Republic of Chile, and that except for the rights under this
Agreement, the rights of CMR and the rights of the Republic of Chile,
the Refugio Property and the Buffer Zone Property is free from all
liens and encumbrances, except liens, if any, for property taxes not
yet due and payable;
(i) Ownership of Refugio 105 - Refugio 105 is owned by CMM and CMM has
------------------------
granted no rights in favour of third parties with respect to Refugio
105 with the exception of those rights in favour of CMR arising from
the 1990 Option Agreement;
(j) Proper Recording of Rights - to Bema's knowledge, after due inquiry:
--------------------------
(i) the mining claims, exploration and exploitation concessions
and surface rights included in the Refugio Property and
Buffer Zone Property and the Water Rights have been
registered with the proper mining or other registrar and have
been properly surveyed as the case may be;
(ii) all assessment work has been performed and claim fees paid
(or other steps taken in accordance with the Chilean Mining
Code and other applicable law) as required for the retention
and perfection of the Water Rights and the mining claims,
<PAGE>
- 13 -
exploration concessions, exploitation concessions and surface
rights included within the Refugio Property and Buffer Zone
Property;
(iii) all mining claims, exploration concessions, exploitation
concessions and surface rights included in the Refugio
Property and Buffer Zone Property and the Water Rights have
been properly and lawfully obtained; and
(iv) all other legal requirements for the staking, retention and
maintenance of the mining claims, exploration concessions,
exploitation concessions and surface rights included in the
Refugio Property and Buffer Zone Property and the Water
Rights have been properly and timely met in all material
respects;
(k) No Sales into United States - No sales into the United States can be
---------------------------
attributed to the Refugio Property or the Buffer Zone Property in the
fiscal year ended December 31, 1991;
(l) Organization of CMM - with respect to CMM:
-------------------
(i) CMM is a contractual mining company organized under the laws
of the Republic of Chile;
(ii) CMM has authorized and issued 10,000 shares consisting of
5,000 Series A shares and 5,000 Series B shares;
(iii) all of the Series A shares are owned by Bema Bermuda;
(iv) the unaudited financial statements of CMM as at and for the
period ending August 31, 1992 and attached hereto as Schedule
"E" present fairly the financial condition and position of
CMM as at August 31, 1992 and since that date there have been
no material liabilities incurred or material assets acquired;
and
(v) CMM does not hold assets located in the United States having
an aggregate book value of $15,000,000 or more and CMM has
not made aggregate sales in or into the United States of
$25,000,000 or more in its most recent fiscal year;
(m) Ownership of Bema Companies - Bema Bermuda is owned by Bema, as to
---------------------------
99%, and Bema U.S., as to 1%, Bema U.S. is a wholly-owned subsidiary
of Bema and Bema Chile is owned by Bema, as to 99%, and Bema U.S., as
to 1%;
<PAGE>
- 14 -
(n) Material Agreements of CMM - Schedule "F" contains a complete list of all
--------------------------
material agreements to which CMM is a party, CMM has received no notice of
default under any such agreements and no events or conditions exist
thereunder that would give rise to any default, whether through the
passage of time, the giving of notice or both;
(o) Material Agreements of Bema Companies - Schedule "G" contains a
-------------------------------------
complete list of all material agreements relating to the Refugio Property
to which any of the Bema Companies is a party;
(p) No Default by CMR - None of the Bema Companies have given to CMR or
-----------------
its Affiliates notice of default under any agreement relating to the
Refugio Property and, to the best of Bema's knowledge after due inquiry,
no events or conditions exist that would entitle any of the Bema Companies
to give notice of default under such agreements;
(q) No Litigation - To Bema's knowledge, after due inquiry, except as
-------------
shown in the Annual Report to Shareholders for the year ended December 31,
1991, the Quarterly Reports to Shareholders for the first and second
quarters of 1992, the Annual Report on Form 20-F for the year ended
December 31, 1991 filed with the U.S. Securities and Exchange Commission,
a copy of each of which has been provided to AGI, there is no public or
private litigation, arbitration, proceeding or governmental investigation
pending or threatened involving any of the Bema Companies or the Refugio
Property which may, if adversely determined, materially and adversely
affect the Project, the Bema Companies, the ability of Bema Bermuda to
finance its share of the Project or the ability of CMM to obtain Project
Financing or which seeks to prevent, restrain or prohibit any of the
Transactions;
(r) Compliance with Laws - All work performed by, or under the direction
--------------------
of, the Bema Companies relating to the Refugio Property has been performed
in material compliance with all applicable laws, rules, regulations and
ordinances, including health and safety, labour and Environmental Laws;
(s) No Insurance Claims - There are no insurance claims that have been
-------------------
made or are pending against the Bema Companies with respect to liability
for loss of property or bodily injury or death relating to the Refugio
Property; and
(t) Insurance Policies - A copy of the insurance policies governing the
------------------
operations of the Refugio Property has been made available to AGI.
<PAGE>
- 15 -
2.2 Representations and Warranties of AGI. AGI represents and warrants to
-------------------------------------
Bema, as representations and warranties that are true at the date hereof, and
acknowledges that Bema is relying on each of the following representations and
warranties in entering this Agreement and in concluding the Transactions, that:
(a) Status - each of the Amax Companies is a corporation duly organized,
------
validly existing and in good standing in the jurisdiction of its
incorporation;
(b) Power - AGI has all requisite corporate power and authority to execute
-----
and deliver this Agreement, to carry out the Transactions to which it
is a party and to duly observe and perform all its covenants set out
herein;
(c) Authority - the execution and delivery of this Agreement have been
---------
duly and validly authorized by all necessary action on the part of AGI
and this Agreement constitutes a legal, valid and binding obligation
of AGI enforceable against AGI in accordance with its terms subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting
creditors' rights and to the availability of equitable remedies;
(d) No Default/Approvals - neither the execution and delivery of this
--------------------
Agreement nor the due observance and performance by AGI of its
obligations contemplated herein shall:
(i) conflict with or result in a breach of or violate any of the
terms, conditions or provisions of the Constating Documents
of AGI;
(ii) provided that all Approvals required by AGI in order to
consummate the Transactions to which AGI is a party have been
obtained, result in a breach or violation by AGI of any of
the terms, conditions or provisions of any law, judgment,
order, injunction, decree, ruling or award to which AGI is
subject; or
(iii) give any other Person any right of termination,
cancellation, acceleration in respect of, or constitute a
material breach of or material default under, any material
agreement, instrument or commitment to which AGI is a party
or by which its properties are bound or affected;
(e) Ownership of AGRI - AGRI is a wholly-owned subsidiary of AGI;
-----------------
(f) Ownership of Series B Shares - AGRI has not transferred the 5,000
----------------------------
Series B shares in the capital of CMM;
<PAGE>
- 16 -
(g) No Litigation - To AGI's knowledge after due inquiry, except as shown
-------------
in the Annual Report to Stakeholders for the year ended December 31,
1991, the Annual Report on Form 10K for the year ended December 31,
1991, the Quarterly Reports to Stakeholders for the first, second and
third quarters 1992 and the quarterly report on Form 10Q for the
first, second and third quarters 1992, a copy of each of which has
been provided to Bema, there is no public or private litigation,
arbitration, proceeding or governmental investigation pending or
threatened involving any of the Amax Companies which may, if adversely
determined, materially and adversely affect the Project, the ability
of AGRI to finance its share of the Project or the ability of CMM to
obtain Project Financing or which seeks to prevent, restrain or
prohibit any of the Transactions;
(h) Ownership of Bema Shares - to AGI's knowledge after due inquiry, AGI
------------------------
and its Affiliates do not own any shares in the capital of Bema;
(i) Material Agreements of AGI - the only material agreements relating to
--------------------------
the Refugio Property to which AGI is a party are the letters of intent
dated March 23, 1992 with each of Bema and CMR; and
(j) Required Approvals - Schedule "I" lists all Approvals required by the
------------------
Amax Companies to consummate the Transactions to which they are a
party.
ARTICLE 3
COVENANTS
---------
3.1 Covenants of Bema. Bema covenants and agrees with AGI as follows:
-----------------
(a) Bema will make reasonable efforts in good faith to obtain all third
party, governmental and stock exchange Approvals required for the Bema
Companies and CMM to complete the Transactions and to carry out the
obligations of the Bema Companies thereunder;
(b) Bema will cause CMM to carry on its business in the ordinary and
normal course and will ensure that CMM does not, without the prior
consent of AGI, incur any material liabilities or acquire any material
assets prior to First Closing;
(c) Bema will negotiate in good faith and make reasonable efforts to
complete by the First Closing Date the provisions of the New Bylaws,
the Shareholders' Agreement, the License Agreement, the Purchase/Sale
Promise of Mining Claims and any other agreement or
<PAGE>
- 17 -
document to which any of the Bema Companies is a party and which is
required to carry out the Transactions;
(d) provided the conditions set forth in sections 7.4 and 7.5 have been
satisfied or waived by the First Closing Date, Bema will cause the
Bema Companies and, in conjunction with AGI, CMM to execute and
deliver pursuant to section 7.3 those agreements required to carry out
the Transactions to which the Bema Companies are a party and which
have been successfully finalized by the First Closing Date;
(e) as soon as reasonably possible after Bema has determined that a state
of facts exists which results in or will result in the non-fulfilment
of any of the material conditions precedent set forth in sections 7.4,
7.6 or 8.2, Bema will notify AGI of such state of facts; and
(f) Bema will continue to make available to AGI and its representatives
and contractors all material information relating to the Refugio
Property, the Buffer Zone Property, the Outside Property and the Water
Rights and the title thereto that is within the possession and control
of the Bema Companies or CMM and to provide access to such Persons to
the properties relating to the Project.
3.2 Covenants of AGI. AGI covenants and agrees with Bema as follows:
----------------
(a) AGI will make reasonable efforts in good faith to obtain all third
party, governmental and stock exchange Approvals required for the Amax
Companies and CMM to complete the Transactions and to carry out the
obligations of the Amax Companies thereunder;
(b) AGI will negotiate in good faith and make reasonable efforts to
complete by the First Closing Date the provisions of the New Bylaws,
the Shareholders Agreement, the Purchase/Sale Promise of Mining
Claims, the Securities Agreement and any other agreement or document
to which any of the Amax Companies is a party and which is required to
carry out the Transactions;
(c) provided the conditions set forth in sections 7.4 and 7.5 have been
satisfied or waived by the First Closing Date, AGI will cause the Amax
Companies and, in conjunction with Bema, CMM to execute and deliver
pursuant to section 8.3 those agreements required to carry out the
Transactions to which the Amax Companies are a party and which have
been successfully finalized by the First Closing Date; and
<PAGE>
- 18 -
(d) as soon as reasonably possible after AGI has determined that a state
of facts exists which results in or will result in the non-fulfilment
of any of the material conditions precedent set forth in sections 7.5,
7.6 or 8.2, AGI will notify Bema of such state of facts.
3.3 Additional Undertakings by the Parties -
--------------------------------------
(a) Bema agrees that AGI will have the right to approve the provisions of
the License Agreement, which approval shall not be unreasonably
withheld;
(b) each of Bema and AGI will have the right to approve the provisions of
the Purchase/Sale Promise of Mining Claims and each will use
reasonable efforts to have the same finalised prior to the First
Closing Date; and
(c) each of Bema and AGI will use reasonable good faith efforts to ensure
that Bema Bermuda and AGRI make a joint application for a Foreign
Investment Contract for the Project under 11 bis of Decree Law 600
prior to the First Closing Date.
ARTICLE 4
ALLOCATION OF LIABILITIES AND INDEMNIFICATIONS
----------------------------------------------
4.1 AGI Protected. None of the Amax Companies nor any of their officers,
-------------
directors, employees, agents or shareholders (collectively, "AGI Persons") will
be responsible in any manner for any fines, costs, expenses, violations of law,
penalties, failure to comply with permits, defaults or failures under any
agreement between the Bema Companies and any other Person or any and all other
obligations and liabilities whatsoever, whether known or unknown, absolute,
contingent or otherwise, arising under, or in connection with, any law,
regulation, or other matter whatsoever, affecting or relating to the Refugio
Property, the Buffer Zone Property, the Outside Property or the Water Rights
including those arising under any Environmental Law, which at any time arises
with respect to matters occurring or existing on, or prior to, the First Closing
Date, including arising out of any change in law made after such date. All such
liabilities shall be retained by Bema and/or its predecessors in title. For any
action or proceeding relating to any period prior to the First Closing Date, in
which any of the AGI Persons is named a defendant, Bema will use reasonable
efforts to effect the joinder of CMR and the predecessors in title to the Bema
Companies, in order to allow determination of the allocation of liability prior
to the First Closing Date. Bema agrees, and agrees to cause each of the Bema
Companies, to defend, indemnify and hold harmless each of the AGI Persons from
any and all costs, claims, actions, demands, awards, judgments, fines, penalties
and other liabilities and expenses whatsoever, including attorneys' fees,
arising from or in any manner related to matters occurring
<PAGE>
- 19 -
with respect to the Project prior to the First Closing Date, except to the
extent that the gross negligence or wilful misconduct of one or more of the AGI
Persons was a contributing cause to the event giving rise to such liability.
4.2 Bema Protected. AGI hereby agrees to defend, indemnify and hold
--------------
harmless Bema, its Affiliates and each of their officers, directors, employees,
agents and shareholders from any and all costs, claims, actions, demands,
awards, judgments, fines, penalties and other liabilities and expenses
whatsoever, including attorneys' fees, arising from or in any manner related to
the acts, omissions and operations of AGI on the Refugio Property, the Buffer
Zone Property, the Outside Property or the Water Rights prior to the First
Closing Date except to the extent that the gross negligence or wilful misconduct
of Bema or its Affiliates was a contributing cause to the event giving rise to
such liability.
ARTICLE 5
APPROVAL OF FEASIBILITY STUDY
-----------------------------
5.1 August 1992 Feasibility Study. AGI and Bema hereby confirm and
-----------------------------
approve the August 1992 Feasibility Study.
ARTICLE 6
INTERIM FUNDING OF PROJECT EXPENSES
-----------------------------------
6.1 AGI's Obligation. AGI agrees to fund 50% of all directly related
----------------
Project holding expenses from March 23, 1992 until First Closing or until
termination of this Agreement, whichever is earlier. All expenditures are
subject to a mutually agreed plan and budget. The disbursements made by Bema
will be reimbursed only to the extent such expenditures are directly related to
CMM and the reimbursement of any other expenditures will be made only if the
expenditure has been specifically approved by both AGI and Bema. Each of Bema
and AGI will fund all of their respective corporate and internal costs and
expenses. All expenditures made by AGI and Bema with respect to an approved
plan and budget shall be treated as costs relating to the Project for purposes
of determining the investment of AGI and Bema in the Project after First
Closing.
ARTICLE 7
FIRST CLOSING
-------------
7.1 Time and Place of First Closing. The First Closing shall take place
-------------------------------
at 4:00 p.m. (Santiago time) on the First Closing Date at the offices of Urenda,
Rencoret, Orrego Y Dorr, Ahumada 179 10 degrees, Piso Office, Santiago, Chile.
<PAGE>
- 20 -
7.2 Documents to be Tabled. The documents and instruments set out in
----------------------
section 7.3 will be executed, if applicable, and tabled on the First Closing
Date and held undelivered by Urenda, Rencoret, Orrego Y Dorr until all
documents and instruments set out in section 7.3 are tabled. If all of the
documents and instruments called for by section 7.3 are not tabled as required,
each document and instrument tabled will be returned to the party that tabled it
unless the parties agree otherwise. The First Closing will be completed upon
all documents and instruments called for by section 7.3 being tabled as required
and the conditions set out in sections 7.4, 7.5 and 7.6 being satisfied or
waived by the parties.
7.3 Closing Documents. On the First Closing Date the parties will table
-----------------
the following documents and instruments and take the following steps:
(a) Bema will table for delivery to AGI a duly executed certificate of an
officer of Bema certifying that:
(i) the representations and warranties of Bema set out in section
2.1 are true and correct in all material respects as if the
same were originally made on and as of the First Closing
Date;
(ii) Bema has complied with its covenants set out in section 3.1;
and
(iii) all Approvals required by Bema to consummate the Transactions
to which it is a party have been obtained;
(iv) neither the execution and delivery of the Shareholders'
Agreement nor the due observance and performance by Bema of
its obligations therein shall:
A. conflict with or result in a breach of or violate any of
the terms, conditions or provisions of the Constating
Documents of Bema;
B. result in a breach or violation by Bema of any of the
terms, conditions or provisions of any law, judgment,
order, injunction, decree or ruling to which Bema is
subject; or
C. give any other Person any right of termination,
cancellation, acceleration in respect of or constitute a
material breach of or material default under, any
material agreement, instrument or commitment to which
Bema is a party or by which its properties are bound or
affected, including any
<PAGE>
- 21 -
agreement or obligation relating to the Refugio
Property;
(b) Bema will table for delivery to AGI a duly executed certificate of an
officer of each of the Bema Companies other than Bema certifying that:
(i) the company has all requisite corporate power and capacity to
carry out the Transactions to which it is a party, to execute
and deliver the documents set out in section 7.3 to which it
is a party and to duly observe and perform its obligations
set out therein;
(ii) the execution and delivery of all documents set out in
section 7.3 to which it is a party have been duly and validly
authorized by all necessary action on the part of the company
and those documents constitute a legal, valid and binding
obligation of the company enforceable against the company in
accordance with their terms subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other similar laws
of general application relating to or affecting creditors'
rights and to the availability of equitable remedies;
(iii) all Approvals required by the company in order to consummate
the Transactions to which it is a party have been obtained
except as set out in Schedule "H";
(iv) neither the execution and delivery of the documents set out
in section 7.3 to which it is a party nor the due observance
and performance by the company of its obligations
contemplated therein shall:
A. conflict with or result in a breach of or violate any of
the terms, conditions or provisions of the Constating
Documents of the company;
B. result in a breach or violation by the company of any of
the terms, conditions or provisions of any law,
judgment, order, injunction, decree or ruling to which
the company is subject; or
C. except as set out in Schedule "H", give any other Person
any right of termination, cancellation, acceleration in
respect of, or constitute a material breach of or
material default under, any material agreement,
<PAGE>
- 22 -
instrument or commitment to which the company is a party
or by which its properties are bound or affected,
including any agreement or obligation relating to the
Refugio Property;
(c) AGI will table for delivery to Bema a duly executed certificate of an
officer of AGI certifying that:
(i) the representations and warranties of AGI set out in section
2.2 are true and correct in all material respects as if the
same were originally made on and as of the First Closing
Date;
(ii) AGI has complied with its covenants set out in section 3.2;
and
(iii) AGI has received all Approvals required in order to
consummate the Transactions to which it is a party and to
perform its obligations under the Securities Agreement;
(iv) neither the execution and delivery of the Shareholders'
Agreement and the Securities Agreement nor the due observance
and performance by AGI of its obligations therein shall:
A. conflict with or result in a breach of or violate any of
the terms, conditions or provisions of the Constating
Documents of AGI;
B. result in a breach or violation by AGI of any of the
terms, conditions or provisions of any law, judgment,
order, injunction, decree or ruling to which AGI is
subject; or
C. give any other Person any right of termination,
cancellation, acceleration in respect of or constitute a
material breach of or material default under, any
material agreement, instrument or commitment to which
AGI is a party or by which its properties are bound or
affected, including any agreement or obligation relating
to the Refugio Property;
(d) AGI will table for delivery to Bema a duly executed certificate of an
officer of AGRI certifying that:
(i) the company has all requisite corporate power and capacity to
carry out the Transactions to which it is a party, to execute
and deliver the documents set out in section 7.3 to which it
is a
<PAGE>
- 23 -
party and to duly observe and perform its obligations set out
therein;
(ii) the execution and delivery of all documents set out in
section 7.3 to which it is a party have been duly and validly
authorized by all necessary action on the part of the company
and those documents constitute a legal, valid and binding
obligation of the company enforceable against the company in
accordance with their terms subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other similar laws
of general application relating to or affecting creditors'
rights and to the availability of equitable remedies;
(iii) all Approvals required by the company to consummate the
Transactions to which it is a party have been obtained;
(iv) neither the execution and delivery of the documents set out
in section 7.3 to which it is a party nor the due observance
and performance by the company of its obligations
contemplated therein shall:
A. conflict with or result in a breach of or violate any of
the terms, conditions or provisions of the Constating
Documents of the company;
B. result in a breach or violation by the company of any of
the terms, conditions or provisions of any law,
judgment, order, injunction, decree or ruling to which
the company is subject; or
C. give any other Person any right of termination,
cancellation, acceleration in respect of, or constitute
a material breach of or material default under, any
material agreement, instrument or commitment to which
the company is a party or by which its properties are
bound or affected, including any agreement or obligation
relating to the Refugio Property;
(e) Deleted.
(f) Bema will table for delivery to AGI a Certificate of Good Standing
from the Office of the British Columbia Registrar of Companies;
<PAGE>
- 24 -
(g) Bema will table for delivery to AGI a written opinion dated the First
Closing Date of counsel to Bema in a form reasonably satisfactory to
AGI to the effect that:
(i) Bema is a corporation duly organized and validly existing
under the laws of the Province of British Columbia and is in
good standing with respect to the filing of annual returns
with the British Columbia Registrar of Companies;
(ii) Bema has the full corporate power and capacity to enter into
and perform its obligations under the Transactions to which
it is a party;
(iii) the execution, delivery and performance by Bema of the
agreements to effect the Transactions to which it is a party
has been duly authorized by all necessary corporate action on
the part of Bema and each of those agreements has been duly
executed and delivered by Bema;
(iv) to counsel's knowledge, after due inquiry, except as shown in
the Annual Report to Shareholders for the year ended December
31, 1991, the Quarterly Reports to Shareholders for the
first and second quarters of 1992, the Annual Report on Form
20-F for the year ended December 31, 1991 filed with the U.S.
Securities and Exchange Commission, there is no public or
private litigation, arbitration, proceeding or governmental
investigation pending or threatened involving Bema which may,
if adversely determined, materially and adversely affect the
Project or the ability of Bema to carry out its obligations
pursuant to the Shareholders' Agreement;
(h) Bema will table for delivery to AGI a written opinion dated the First
Closing Date of counsel to each of Bema Bermuda and Bema Chile in a
form reasonably satisfactory to AGI to the effect that:
(i) the company is a corporation duly organized, validly
existing and in good standing in the jurisdiction of its
incorporation;
(ii) the company has all requisite corporate power and capacity
to execute and deliver this Agreement, to carry out the
Transactions to which it is a party and to duly observe and
perform all its covenants set out herein;
(iii) the execution, delivery and performance by the company of
the agreements to effect the Transactions to which it is a
party has been duly
<PAGE>
- 25 -
authorized by all necessary corporate action on the part of
the company and each of those agreements has been duly
executed and delivered by the company;
(i) AGI will table for delivery to Bema a written opinion dated the First
Closing Date of Paul J. Hemschoot Jr., Vice President, General Counsel
and Secretary of AGI, in a form reasonably satisfactory to Bema to the
effect that:
(i) AGI is a corporation duly organized and validly existing and
in good standing under the laws of Delaware;
(ii) AGI has the corporate power and authority to enter into and
perform its obligations under the Transactions to which it is a
party;
(iii) the execution, delivery and performance by AGI of the
agreements to effect the Transactions to which it is a party
has been duly authorized by all necessary corporate action on
the part of AGI and each of those agreements has been duly
executed and delivered by AGI;
(iv) to the knowledge of the General Counsel and Secretary of AGI,
after due inquiry, except as shown in the Annual Report to
Stakeholders for the year ended December 31, 1991, the Annual
Report on Form 10K for the year ended December 31, 1991, the
Quarterly Reports to Stakeholders for the first, second and
third quarters 1992 and the quarterly report on Form 10Q for
the first, second and third quarters 1992, there is no public
or private litigation, arbitration, proceeding or governmental
investigation pending or threatened involving AGI which may, if
adversely determined, materially and adversely affect the
Project or the ability of AGI to carry out its obligations
pursuant to the Shareholders' Agreement;
(j) AGI will table for delivery to Bema a written opinion dated the First
Closing Date of Paul J. Hemschoot Jr., General Counsel to AGRI in a
form reasonably satisfactory to Bema to the effect that:
(i) AGRI is a corporation duly organized, validly existing and in
good standing in the jurisdiction of its incorporation;
(ii) AGRI has all requisite corporate power and authority to execute
and deliver this Agreement,
<PAGE>
- 26 -
to carry out the Transactions to which it is a party and to
duly observe and perform all its covenants set out herein;
(iii) the execution, delivery and performance by AGRI of the
agreements to effect the Transactions to which it is a party
has been duly authorized by all necessary corporate action on
the part of AGRI and each of those agreements has been duly
executed and delivered by AGRI;
(k) Deleted.
(l) each of Bema and AGI will table for delivery to CMM the documents, all
duly executed, required to adopt the New Bylaws;
(m) Bema will table for delivery to AGI the Shareholders' Agreement, duly
executed by Bema Bermuda and Bema;
(n) AGI will table for delivery to Bema the Shareholders' Agreement, duly
executed by AGRI and AGI;
(o) Bema will, and will cause Bema Chile to, and both Bema and AGI will
cause CMM to, execute and table for delivery to each of the others the
License Agreement;
(p) both Bema and AGI will cause CMM to execute and table for delivery to
CMR or Bema Chile, as the case may be, the Purchase/Sale Promise of
Mining Claims, the Purchase/Sale Promise of Surface Rights, the
Purchase/Sale Promise of Water Rights, the Promise to Assign Easement
and the Promise to Assign Water Rights;
(q) Bema will cause Bema Chile to execute and table for delivery to CMM
the Purchase/Sale Promise of Water Rights, the Promise to Assign
Easement and the Promise to Assign Water Rights;
(r) AGI will execute and table for delivery to the CMR Shareholders the
Securities Agreement;
(s) each of AGI and Bema will execute and table for delivery, and will
cause their respective Affiliates to execute and table for delivery,
to CMR and the CMR Shareholders the Agreement for Acquisition of
Shares;
(t) each of AGI and Bema will execute and table for delivery, or cause to
be executed and tabled for delivery, to the appropriate parties all
such other documents and instruments reasonably required by the
parties to effectively consummate the Transactions except nothing
shall be construed as requiring AGI to table any
<PAGE>
- 27 -
securities or payments or other instruments pursuant to the Securities
Agreement until Final Closing.
7.4 Joint Conditions Precedent to First Closing. The respective
-------------------------------------------
obligations of each of the parties hereto to complete the First Closing shall be
subject to satisfaction, on or before the First Closing Date, of the following
conditions:
(a) the Transactions to which each of Bema and AGI, or their respective
Affiliates, will be a party will have been approved by their
respective Boards in their sole discretion;
(b) the terms of the Shareholders' Agreement and New Bylaws shall have
been agreed to by AGI and Bema;
(c) there shall not be in force or threatened any order or decree of a
court of competent jurisdiction, or any federal, provincial, state,
municipal or other governmental department, commission, board, agency
or regulatory body restraining, interfering with in any material
manner or enjoining the consummation of the Transactions;
(d) no Governmental Authority shall have enacted any statute, regulation
or bylaws or announced any policy that will materially and adversely
affect the Project;
(e) all Approvals required by CMM for the completion of the Transactions
shall have been obtained or received by CMM from the Persons,
authorities or bodies having jurisdiction in the circumstances other
than the Approvals necessary for approval of the foreign investment
contract application to be made by AGRI and Bema Bermuda;
(f) CMR shall have executed and tabled for delivery the Purchase/Sale
Promise of Mining Claims, the Purchase/Sale Promise of Surface Rights
and the Agreement for Acquisition of Shares;
(g) the CMR Shareholders shall have executed and tabled for delivery the
Agreement for Acquisition of Shares and the Securities Agreement.
If any of the conditions contained in this Section 7.4 shall not be
fulfilled or performed on or before the First Closing Date, at the election
of either Bema or AGI the parties will be relieved of further performance
of their obligations under this Agreement other than as set out in Section
11.14.
7.5 Conditions to Obligations of Bema. The obligation of Bema to complete
---------------------------------
the First Closing is subject to the satisfaction,
<PAGE>
- 28 -
on or before the First Closing Date, of the following conditions, any of which
may be waived by it without prejudice to its right to rely on any other or
others of them:
(a) each of the covenants, agreements, acts and undertakings of AGI to be
performed on or before the First Closing Date pursuant to the terms of
this Agreement shall have been duly performed by it, including the
execution and delivery of the documents specified in section 7.3;
(b) the warranties and representations of AGI contained in Article 2 shall
be true in all material respects immediately prior to the First
Closing with the same effect as though made at and as of such time;
(c) all Approvals required by the Amax Companies for the completion of the
Transactions to which they are a party shall have been obtained or
received from the Persons, authorities or bodies having jurisdiction
in the circumstances;
(d) there shall be no litigation, arbitration, proceeding or governmental
investigation involving any of the Amax Companies which is reasonably
believed by counsel to Bema to be in prospect (such belief to be
evidenced in writing and addressed to AGI) and which would, if
adversely determined, materially and adversely affect the Project, the
ability of AGRI or AGI to meet their financial obligations with
respect to the Project or the ability of CMM to obtain Project
Financing;
(e) no Governmental Authority shall have enacted any statute, regulation
or bylaws or announced any policy that will materially and adversely
affect the value of the Project or CMM;
(f) AGRI shall have granted to Mr. Eulogio Perez-Cotapos an irrevocable
power of attorney to transfer back the Series B shares to Bema Chile
in certain circumstances, which power of attorney will expire upon
completion of the Final Closing;
(g) CMR shall have entered into an agreement with Bema Chile to the effect
that if the Final Closing does not occur within two days after the
Final Closing Date, the Purchase/Sale Promise of Mining Claims shall
be terminated and the 1990 Option Agreement shall be deemed to be in
full force and effect.
7.6 Conditions to Obligations of AGI. The obligation of AGI to complete
--------------------------------
the First Closing is subject to the satisfaction, on or before the First Closing
Date, of the following conditions, any of which may be waived by it without
prejudice to its right to rely on any other or others of them:
<PAGE>
- 29 -
(a) each of the covenants, agreements, acts and undertakings of Bema to be
performed on or before the First Closing Date pursuant to the terms of
this Agreement shall have been duly performed by it, including the
execution and delivery of the documents specified in section 7.3;
(b) the warranties and representations of Bema contained in Article 2
shall be true in all material respects immediately prior to the First
Closing with the same effect as though made at and as of such time;
(c) all Approvals required by the Bema Companies for the completion of the
Transactions to which they are a party shall have been obtained or
received from the Persons, authorities or bodies having jurisdiction
in the circumstances other than those Approvals specifically noted in
Schedule "H" as not being required at First Closing;
(d) there shall be no litigation, arbitration, proceeding or governmental
investigation involving any of the Bema Companies which is reasonably
believed by counsel to AGI to be in prospect (such belief to be
evidenced in writing and addressed to Bema) and which would, if
adversely determined, materially and adversely affect the Project, the
ability of Bema or Bema Bermuda to meet their financial obligations
with respect to the Project or the ability of CMM to obtain Project
Financing; and
(e) no Governmental Authority shall have enacted any statute, regulation
or bylaws or announced any policy that will materially and adversely
affect the the value of the Project or CMM.
ARTICLE 8
FINAL CLOSING
-------------
8.1 Time and Place of Final Closing. Provided the First Closing has been
-------------------------------
completed, the Final Closing shall take place at 1:00 p.m. (Santiago time) on
the Final Closing Date at the offices of Urenda, Rencoret, Orrego Y Dorr,
Ahumada 179 10 degrees, Piso Office, Santiago, Chile and the offices of Morrison
& Foerster, 1290 Avenue of the Americas, New York, New York, 10104-0012.
8.2 Documents Undelivered Until All Documents Tabled. On the Final
------------------------------------------------
Closing Date the documents, instruments and payments set out in section 8.3 will
be tabled at the offices of Urenda, Rencoret, Orrego Y Dorr or Morrison &
Foerster, as the case may be, and will be held undelivered by Urenda, Rencoret,
Orrego Y Dorr or Morrison & Foerster, as the case may be, until all documents,
instruments, payments and actions called for by section 8.3 are tabled or
carried out, as the case may be.
<PAGE>
- 30 -
8.3 Final Closing Deliveries. Subject only to the Final Closing
------------------------
Conditions, on the Final Closing Date the parties will cause to be tabled the
following documents, instruments and payments and take the following steps:
(a) AGI will cause AGRI and another Affiliate of AGI to pay to an account
of CMM to be established solely for the purpose of the Transactions
herein, an aggregate amount equal to the Fixed Portion of the Purchase
Price;
(b) AGI and Bema will cause, through AGRI and Bema Bermuda, CMM to table
for delivery to CMR, one or more bank cheques in an aggregate amount
equal to the Fixed Portion of the Purchase Price; and
(c) AGI will table at Morrison & Foerster, or at an agent in New York, for
delivery to the CMR Shareholders share certificates representing, in
the aggregate, 3,150,000 shares in the capital of AGI required to be
delivered to the CMR Shareholders pursuant to the Securities
Agreement.
8.4 Final Closing Conditions. After completion of the First Closing, the
------------------------
Final Closing shall be subject only to the following conditions:
(a) CMR or its agent shall have endorsed the cheque or cheques referred to
in section 8.3(b) in favour of the CMR Shareholders;
(b) the CMR Shareholders or their agent shall have, in turn, endorsed the
cheque or cheques referred to in section 8.3(b) in favour of AGI in
payment for the shares of AGI stock to be delivered under the
Securities Agreement;
(c) those deeds required to complete the Purchase/Sale Promise of Mining
Claims, the Purchase/Sale Promise of Laguna and Hielo Claims, the
Purchase/Sale Promise of Surface Rights and the Purchase/Sale Promise
of Water Rights shall have been signed before a Notary of Santiago in
registrable form;
(d) there shall be no litigation or proceedings by any third party pending
against CMR, the CMR Shareholders, Bema Chile or CMM which:
(i) could materially and adversely affect the Project or the
right of CMM to own and enjoy the use of the Refugio
Property; or
(ii) seeks to attach to or enjoin the payments to be made by CMM
to CMR, CMR to the CMR Shareholders or by the CMR
Shareholders to AGI;
<PAGE>
- 31 -
(e) no Governmental Authority shall have enacted any statute, regulation
or bylaws or announced any policy that would materially and adversely
affect the Project and there shall not be in force or threatened any
order or decree of a court of competent jurisdiction or of any
Governmental Authority restraining, interfering with in any material
and adverse manner or enjoining the consummation of the Transactions;
(collectively, the "Final Closing Conditions").
If any of the Final Closing Conditions shall not be fulfilled or performed on or
before the Final Closing Date, at the election of either Bema or AGI the parties
will be relieved of further performance of their obligations under this
Agreement other than as set out in Section 11.14.
8.5 Completion of Final Closing. Upon satisfaction or waiver, as the case
---------------------------
may be, of the Final Closing Conditions and upon all documents, instruments and
payments being tabled and all actions being carried out as required by section
8.3, the Final Closing will be deemed to be completed and all documents,
instruments and payments set out in section 8.3 shall be released from escrow
(to the extent not previously released for the purpose of effecting
registrations) and be deemed to be delivered to the parties to whom delivery is
required.
ARTICLE 9
SPECIFIC PERFORMANCE AND INDEMNITY
----------------------------------
9.1 Right to Specific Performance of Obligations. AGI hereby acknowledges
--------------------------------------------
that default in making the payments or tabling the instruments set out in
sections 8.3(a) and (c) would constitute an injury and damage to Bema difficult
to measure monetarily and, in the event of any such failure, provided the Final
Closing Conditions in Sections 8.4(c), (d), (e) and (f) have been met or waived
by the applicable parties, Bema shall, in addition and without prejudice to any
other rights and remedies at law or in equity which it may have, be entitled to
pursue the remedy of specific performance without any undertaking as to damages
and AGI hereby waives any right to require that security be posted in connection
therewith.
9.2 Remedy of Specific Performance Assignable. Due to the structure of
-----------------------------------------
the Transactions, AGI further acknowledges that, provided the Final Closing
Conditions set out in Sections 8.4(c), (d), (e) and (f) have been met, default
by AGI to table the payments or instruments set out in sections 8.3(a) and (c)
would constitute an injury and damage to CMR for which CMR would have no
direct remedy enforceable against AGI. AGI hereby agrees that Bema may assign
to CMR Bema's right to cause AGI to specifically perform its obligations under
sections 8.3(a) and (c).
<PAGE>
- 32 -
9.3 Indemnity. AGI hereby agrees that it shall indemnify and hold
---------
harmless Bema and its Affiliates from any and all claims, losses, liabilities,
damages, costs or expenses (including all fees and disbursements of legal
counsel) incurred or suffered by Bema or its Affiliates in connection with or
arising out of default by AGI to table the payments or instruments set out in
sections 8.3(a) and (c), including any claims, losses, liabilities, damages,
costs or expenses incurred or suffered by Bema or its Affiliates as a result of
litigation or arbitration proceedings brought by CMR against CMM pursuant to the
.
If any action, suit or proceeding is commenced against Bema or its Affiliates,
or any written claim or demand against Bema or its Affiliates is received by
them in respect of which Bema and its Affiliates proposes to demand
indemnification by AGI pursuant to the provisions of this Article 9, AGI shall
be notified to that effect with reasonable promptness and no later than 10 days,
and, provided that AGI acknowledges and accepts liability vis-a-vis Bema or its
Affiliates in respect of such claims, AGI shall have the right, by notifying
Bema with reasonable promptness and no later than 10 days after AGI has received
notice from Bema, to assume the entire control of the defense, compromise or
settlement of the matter provided any compromise or settlement does not contain
any admission of liability or fault on the part of Bema or its Affiliates
(subject to the right of Bema to participate, at their expense and with counsel
of its choice), including employment of counsel of AGI's choice and at its own
expense, and, in connection therewith, provided that AGI pays all reasonable
costs and expenses incurred by Bema and its Affiliates in doing so, Bema and its
Affiliates shall cooperate in every reasonable manner and make available to AGI
all pertinent information under their control.
If, in its discretion, Bema at any time deems it necessary or desirable to
compromise or settle any action, suit, proceeding, claim or demand with respect
to which AGI has notified Bema that AGI will assume control of the defense,
compromise or settlement of the matter, Bema may so proceed without consent of
AGI, and in that event, AGI shall have no obligation to indemnify Bema relating
to any matter so compromised or settled.
9.4 Termination. This provisions of this Article 9 shall expire upon
-----------
completion of the Final Closing.
ARTICLE 10
CONFIDENTIALITY AND STANDSTILL
------------------------------
10.1 No Disclosure By AGI Without Consent. Prior to the Final Closing Date
------------------------------------
and for a period of one year thereafter if the Final Closing does not occur, AGI
agrees to maintain, and to cause its employees, representatives, consultants,
servants and agents to maintain, and to hold in confidence and to not disclose
to any Person without the prior consent of Bema, any and all Confidential
Information relating to Bema, the Refugio Property, CMM or the
<PAGE>
- 33 -
Transactions which is disclosed to, otherwise made available to, or obtained by,
AGI, its employees, representatives, consultants, servants or agents, directly
or indirectly, in connection with this Agreement and the Transactions.
Prior to the Final Closing and for a period of one year after the Final Closing
Date if the Final Closing does not occur, AGI agrees that it and its respective
employees and agents will use Confidential Information relating to Bema, the
Refugio Property, CMM and the Transactions only for the purpose of assessing and
furthering its own knowledge of the Refugio Property and the business and
affairs of CMM and for no other purpose. Notwithstanding the foregoing, AGI
shall be entitled to disclose any information that is required to be disclosed
under existing agreements or any information that is reasonably necessary to be
disclosed to advisors, representatives, consultants or banking or financial
entities with respect to the parties or the Refugio Property to enable such
entities to assist in the evaluation and recommendations relating to the Project
(provided that such disclosures are made under similar obligations of
confidentiality) or to operate the business of CMM.
10.2 No Disclosure by Bema Without Consent. Prior to the Final Closing
-------------------------------------
Date and for a period of one year thereafter if the Final Closing does not
occur, Bema agrees to maintain, and to cause its employees, representatives,
consultants, servants and agents to maintain, and to hold in confidence and to
not disclose to any Person without the prior consent of AGI, any and all
Confidential Information relating to AGI which is disclosed to, otherwise made
available to, or obtained by, Bema, its employees, representatives, consultants,
servants or agents, directly or indirectly, in connection with this Agreement
and the Transactions. Bema agrees that it and its respective employees and
agents will use Confidential Information relating to AGI only for the purpose of
assessing, and furthering it knowledge with respect to, the Transactions.
10.3 Standstill. Each of AGI and Bema agree that neither it nor any of its
----------
respective Affiliates (the "Acquiring Company") will, without the prior approval
of a majority of the directors of Bema or AGI, as the case may be, (the "Target
Company") who are independent of the Acquiring Company and its Affiliates:
(a) acquire, directly or indirectly, by purchase or otherwise, one or more
voting securities or securities convertible into or exchangeable for
voting securities of the Target Company such that, as a result of such
acquisition, the Acquiring Company and its Affiliates will hold, in
the aggregate, 5% or more of the outstanding voting securities or
securities convertible into or exchangeable for 5% or more, in the
aggregate, of the outstanding voting securities of the Target Company
or direct or indirect rights or options to acquire 5% or
<PAGE>
- 34 -
more, in the aggregate, of the outstanding voting securities of the
Target Company;
(b) make or in any way participate, directly or indirectly, in any
"solicitation" of votes or proxies in respect of voting securities of
the Target Company and in any manner influence any other Person with
respect to such a "solicitation" as a consequence of which it would
hold, in the aggregate, 5% or more of the outstanding voting
securities of the Target Company except with respect to a proxy
solicitation by management for a general meeting of shareholders;
(c) agree to act together as a group with one or more Persons for the
purposes of acquiring, holding, voting or disposing of voting
securities of the Target Company as a consequence of which the group
would hold, in the aggregate, 5% or more of the outstanding voting
securities of the Target Company; or
(d) make any communication (other than appointing a person or entity as a
proxy to vote securities) stating how the Acquiring Company intends to
vote and/or the reasons therefor or make any solicitation (as defined
in Rule 14a-1 under the Securities Exchange Act of 1934 as in effect
on the date hereof) directly or indirectly for votes or proxies in
respect of voting securities of the Target Company for any election
contest concerning the board of directors of the Target Company,
for the period of time extending from the date of this Agreement to:
(e) if an acceptable commitment for Project Financing is obtained within
the Financing Period, that date which is one year after Completion of
Construction or five years from the date hereof, whichever is earlier;
or
(f) if an acceptable commitment for Project Financing is not obtained
within the Financing Period, that date which is one year after expiry
of the Financing Period; or
(g) that date upon which (i) a receiver is appointed over the assets of
the Target Company; (ii) the Target Company voluntarily files a
petition in bankruptcy; (iii) an involuntary petition in bankruptcy
is filed against the Target Company which has not been dismissed
within thirty days; (iv) an assignment is made on behalf of the
creditors of the Target Company; or (v) the directors of the Target
Company take any corporate action to approve such filing or
assignment.
<PAGE>
- 35 -
ARTICLE 11
GENERAL PROVISIONS
------------------
11.1 Press Releases. It is agreed that until Final Closing, or until
--------------
termination of this Agreement, whichever is earlier, all public announcements
regarding this Agreement and the subject matter hereof to be made by AGI or Bema
shall first be delivered to the other party for review and comment at least four
hours prior to the scheduled release of the announcement.
11.2 Notice. Any notice, consent, waiver, approval, report, authorization
------
or other communication which any party is required or may desire to give to or
make upon any other party pursuant to this Agreement will be effective and valid
only if in writing and actually delivered (including by telecopy) to such
second-mentioned party at the following address of such second-mentioned party:
(a) To Bema:
Bema Gold Corporation
1400 - 510 Burrard Street
Vancouver, British Columbia
V6C 3A8
Attention: Mr. Clive Johnson
---------
(b) To AGI:
Amax Gold Inc.
350 Indiana Street
Golden, Colorado
80401-5081
Attention: Mr. Harry Carson
---------
copy to General Counsel
or at such other address as such second-mentioned party may from time to time
designate to such first-mentioned party by notice delivered in accordance with
this subsection. Notice will be deemed given when received or if delivery is
refused on the date delivery is so refused.
11.3 Time. Subject to section 11.10, time shall be of the essence of this
----
Agreement.
11.4 Enurement. This Agreement shall enure to the benefit of and be
---------
binding upon the parties hereto and their respective successors and assigns.
11.5 Non-Assignment. No party shall assign, convey or otherwise transfer
--------------
this Agreement or any of its rights or duties herein, without the prior written
consent of the other parties, which consent shall not be unreasonably withheld.
Provided, however, that any such consent shall not be necessary for any
<PAGE>
- 36 -
assignment to an Affiliate of a party, which assignments are specifically
contemplated to effect the transactions contemplated herein.
11.6 No Brokerage Commission. Each Party represents that it has not
-----------------------
entered into any agreement or understanding whereby any broker or finder is
entitled to any brokerage commission or finder's fee in connection with the
Transactions herein or in connection with any Project Financing, and hereby
agrees that it will indemnify and hold the other parties harmless from any and
all claim arising out of, or relating to, any breach by it of the foregoing
representation; except that Bema states that Endeavour Capital Corporation may
be entitled to a brokerage fee upon an acceptable commitment for Project
Financing being obtained, which fee shall be the sole responsibility of Bema.
11.7 Survival of Representations and Warranties. The representations,
------------------------------------------
warranties and covenants made by any party to this Agreement herein or pursuant
hereto including any statements contained in any certificate or other instrument
delivered by or on behalf of any party pursuant to this Agreement shall not
merge and shall survive the completion of the Transactions regardless of any
independent investigations that any other party may have made at any time,
provided that no action, suit or proceeding of any type may be brought by any
party with respect to this Agreement or any of the transactions contemplated
hereby (including any instruments or certificates delivered in connection
therewith) unless such action, suit or proceeding has been commenced and notice
thereof has been given to such other party or parties as the case may be within
18 months after the Final Closing Date. Except as specifically provided herein,
no party shall have any liability for special, incidental or consequential
damages whatsoever or howsoever characterized.
11.8 Waiver, Delays and Omissions. No failure, delay or omission to
----------------------------
exercise any right, power or remedy accruing to any Party hereto, upon any
breach or default of any other Party hereto, shall impair any such right,
power, or remedy nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, for any similar breach or default
thereafter occurring. Unless otherwise expressly provided in this Agreement, to
be effective, any waiver, permit, consent or approval of any kind on the part of
any Party hereto of any breach of default under this Agreement, or any waiver of
any provisions or conditions of this Agreement, must be in writing. Such
waiver, permit, consent or approval shall be effective only to the extent
specifically set forth in writing.
11.9 Jurisdiction and Venue. Any dispute with respect to this Agreement
----------------------
other than monetary claims in excess of $2 million, will be finally resolved by
mandatory arbitration in the City of Denver, Colorado, under the rules then
pertaining of the American Arbitration Association, with a panel of one
arbitrator. For monetary claims in excess of $2 million, the Parties agree that
any
<PAGE>
- 37 -
litigation shall be instituted only in a court of competent jurisdiction,
whether state or federal, located within the City of Denver, Colorado. If any
such litigation is commenced, each of the parties irrevocably consents and
submits to personal jurisdiction of any such court and to the service of process
upon them in accordance with the rules or statutes governing service of process,
provided that nothing in this section shall be deemed to prevent either party
from seeking to remove any action to federal court in Denver, Colorado. Each of
Bema and AGI waive to the full extent permitted by law (i) the right to trial by
jury, (ii) any objection that it may now or hereafter have to venue in any such
litigation in a court of competent jurisdiction, whether state or federal, in
Denver, Colorado, and (iii) any claim that any such litigation has been brought
in an inconvenient forum.
11.10 Force Majeure. No Party shall be responsible for any delay (whether
-------------
material or not) in or failure of any performance or obligation under this
Agreement, due to any cause beyond the control of such Party (except those
caused by its own lack of funds), including, but not limited to, any act of God;
any failure of transportation facilities; strikes or labour controversies of any
nature (but in no event shall a Party be required to settle any such strike or
controversy); explosions; fires; floods; accidents to personnel or equipment;
wars (domestic or foreign); riots; revolutions; rebellions; blockades;
embargoes; applicable foreign or domestic governmental acts, restrictions,
requisition, regulations, or orders (whether or not later proved to be invalid);
unusually inclement and sustained weather conditions; and any other causes or
occurrences of any nature beyond a Party's control, whether similar or
dissimilar to the foregoing.
11.11 Further Assurances. Each party will, on demand by the party, execute
------------------
and deliver or cause to be executed and delivered all such further documents and
instruments and do all such further acts and things as the other party may
either before or after the Final Closing reasonably require to evidence, carry
out and give full effect to the terms, conditions, intent and meaning of this
Agreement and to assure the completion of the Transactions contemplated hereby.
11.12 Modifications, Approvals and Consents. No amendment, modification,
-------------------------------------
supplement, termination or waiver of any provision of this Agreement will be
effective unless in writing signed by the appropriate party and then only in the
specific instance and for the specific purpose given.
11.13 Legal and Other Fees. Unless otherwise specifically provided herein,
--------------------
each party will be separately responsible for paying its respective legal,
accounting and other professional fees and expenses, including goods and
services taxes on such fees and expenses, incurred by each in connection with
the negotiation and settlement of this Agreement, the completion of the
transactions contemplated hereby and the other matters pertaining hereto.
<PAGE>
- 38 -
11.14 Survival. [Article 9,] Article 10, Section 11.1, Section 11.6 and
--------
Section 11.13 will survive any termination of this Agreement.
11.15 Entire Agreement. This Agreement expressly supersedes the Letters of
----------------
Intent dated March 23, 1992, as amended, between the parties and, together with
the other instruments and agreements described in section 1.1(ba), constitutes
the complete agreement between the parties relating to the Transactions
contemplated herein.
11.16 Counterparts. This Agreement may be executed in any number of
------------
counterparts or by facsimile, each of which shall together, for all purpose,
constitute one and the same instrument, binding on the parties, and each of
which shall together be deemed to be an original, notwithstanding that all of
the parties are not signatory to the same counterpart or facsimile.
In witness whereof, the parties hereto have executed this Agreement as
of the date first above written.
BEMA GOLD CORPORATION
Per: /s/ (Signature Unreadable)
--------------------------------
Title: CHAIRMAN & C.E.O.
--------------------------------
AMAX GOLD INC.
Per: /s/ (Signature Unreadable)
--------------------------------
Title: Vice President
--------------------------------
<PAGE>
SCHEDULE "A"
REFUGIO PROPERTY CLAIMS
-----------------------
Refugio 1-112
Maricunga 17-20
Maricunga 27-30
Maricunga 97-100
Maricunga 121-124
Maricunga 261-262
Demasias on Refugio 1-112 western boundary.
<PAGE>
SCHEDULE "B"
BUFFER ZONE CLAIMS
-------------------
TO BE TRANSFERRED BY CMR:
Maricunga 1-16
Maricunga 21-26
Maricunga 31-40
Maricunga 93-96
Maricunga 113-120
Maricunga 125-167
Maricunga 171-177
Maricunga 181-187
Maricunga 191-197
Maricunga 201
Maricunga 221-223
Maricunga 241-260
Maricunga 263-280
Anillo Seis 3-15
Anillo Seis 18-30
Anillo Siete 1-5
Anillo Siete 11-14
Anillo Ocho 1-2
Anillo Ocho 6-7
Anillo Ocho 11-12
Anillo Ocho 16
Anillo Trece 8-10
Anillo Trece 20
Anillo Catorce 1-17
Anillo Quince 1-2
Anillo Dieciseis 10-11
Amparo Uno 45-60
Amparo Dos 25-26
Amparo Seis 31-32
Amparo Once 5-30
Amparo Once 35-60
Amparo Doce 1-36
TO BE TRANSFERRED BY BEMA CHILE:
Laguna 1-11
Hielo 1-9
<PAGE>
SCHEDULE "C"
DESCRIPTION OF SURFACE RIGHTS BY UTM COORDINATES
REFUGIO PROPERTY
Area C - Refugio Property Zone - (owned in name of CMR)
<TABLE>
<S> <C> <C>
8 6,955,400.00 468,500.00
7 6,955,400.00 469,500.00
6 6,955,000.00 469,500.00
19 6,955,000.00 470,920.08
20 6,953,400.00 470,920.08
21 6,953,400.00 471,400.00
22 6,952,600.00 471,400.00
23 6,952,600.00 470,920.08
24 6,952,200.00 470,920.08
25 6,952,200.00 468,900.00
12 6,954,800.00 468,900.00
11 6,954,800.00 468,400.00
10 6,955,000.00 468,400.00
9 6,955,000.00 468,500.00
</TABLE>
BUFFER ZONE PROPERTY
Area A - Western Buffer Zone (owned in the name of CMR)
<TABLE>
<S> <C> <C>
1 6,955,800.00 467,400.00
2 6,955,800.00 467,900.00
3 6,956,000.00 467,900.00
4 6,956,000.00 470,000.00
5 6,955,000.00 470,000.00
6 6,955,000.00 469,500.00
7 6,955,400.00 469,500.00
8 6,955,400.00 468,500.00
9 6,955,000.00 468,500.00
10 6,955,000.00 468,400.00
11 6,954,800.00 468,400.00
12 6,954,800.00 468,900.00
13 6,952,700.00 468,900.00
14 6,952,700.00 468,400.00
15 6,952,900.00 468,400.00
16 6,952,900.00 467,900.00
17 6,954,000.00 467,900.00
18 6,954,000.00 467,400.00
</TABLE>
Area B1 - Eastern Buffer Zone (owned in name of CMR)
<TABLE>
<S> <C> <C>
26 6,953,800.00 470,920.08
27 6,953,800.00 472,000.00
28 6,950,000.00 472,000.00
29 6,950,000.00 471,000.00
</TABLE>
<PAGE>
30 6,949,800.00 471,000.00
31 6,949,800.00 470,900.00
32 6,951,500.00 470,900.00
33 6,951,500.00 468,900.00
25 6,952,200.00 468,900.00
24 6,952,200.00 470,920.08
23 6,952,600.00 470,920.08
22 6,592,600.00 471,400.00
21 6,593,400.00 471,400.00
20 6,593,400.00 470,920.08
Area B2 - Eastern Buffer Zone - (Application to Purchase has been made by CMR
on behalf of CMM to Ministry of National Assets for the purchase of 974.4 ha.)
27 6,953,800.00 472,000.00
34 6,953,800.00 473,407.20
35 6,950,800.00 474,100.40
36 6,950,800.00 473,900.00
37 6,950,400.00 473,900.00
38 6,950,400.00 473,400.00
39 6,950,200.00 473,400.00
40 6,950,200.00 472,900.00
41 6,950,000.00 472,900.00
28 6,950,000.00 472,000.00
Area B3 - Eastern Buffer Zone (surface leased from Army pursuant to Easement
granted by the Chilean Army to Bema Chile dated June 27, 1991 for approximately
2,425 ha., registration No. 3.273)
34 6,953,800.00 473,407.20
44 6,953,800.00 473,400.00
45 6,953,400.00 474,400.00
46 6,953,400.00 474,900.00
47 6,953,200.00 474,900.00
48 6,953,200.00 475,400.00
49 6,952,800.00 475,400.00
50 6,952,800.00 474,900.00
51 6,951,800.00 474,900.00
52 6,951,800.00 474,400.00
53 6,951,100.00 474,400.00
55 6,951,100.00 474,031.00
<PAGE>
[Map of Surface Rights by UTM Coordinates appears here.]
<PAGE>
SCHEDULE "D"
WATER RIGHTS
DESCRIPTION OF WATER EXPLORATION CONCESSIONS
--------------------------------------------
* VALLE ANCHO CHILEAN WATER DEPARTMENT FILE NR. 149 D.G.A. 29. GRANTS
AUTHORIZATION TO JULIA ASPILLAGA FOR UNDERGROUND WATER
EXPLORATION AREA OF VALLE ANCHO - MUNICIPALITY AND
PROVINCE OF COPIAPO - III REGION ATACAMA, CHILE.
CONCESSION EXPIRES JUNE 10, 1994.
* PANTANILLO CHILEAN WATER DEPARTMENT FILE NR. 112 D.G.A. 36. GRANTS
AUTHORIZATION TO JULIA ASPILLAGA FOR UNDERGROUND WATER
EXPLORATION AREA OF PANTANILLO - MUNICIPALITY AND
PROVINCE OF COPIAPO - III REGION ATACAMA, CHILE.
CONCESSION EXPIRES JULY 14, 1994.
* QUEBRADA DE CHILEAN WATER DEPARTMENT FILE NR. 148 D.G.A. 31. GRANTS
LA SAL AUTHORIZATION TO JULIA ASPILLAGA FOR UNDERGROUND WATER
EXPLORATION AREA OF QUEBRADA DE LA SAL - MUNICIPALITY
AND PROVINCE OF COPIAPO - III REGION ATACAMA, CHILE.
CONCESSION EXPIRES JUNE 10, 1994.
* CERRO PAREDONES CHILEAN WATER DEPARTMENT FILE NR. 150 D.G.A. 50. GRANTS
AUTHORIZATION TO JULIA ASPILLAGA FOR UNDERGROUND WATER
EXPLORATION AREA OF CERRO PAREDONES - MUNICIPALITY AND
PROVINCE OF COPIAPO - III REGION ATACAMA, CHILE.
CONCESSION EXPIRES SEPT. 1, 1994.
* CERRO DEL MEDIO CHILEAN WATER DEPARTMENT FILE NR. 147 D.G.A. 52. GRANTS
AUTHORIZATION TO BEMA GOLD CHILE LTDA. FOR UNDERGROUND
WATER EXPLORATION AREA OF CERRO DEL MEDIO - MUNICIPALITY
AND PROVINCE OF COPIAPO - III REGION ATACAMA, CHILE.
CONCESSION EXPIRES SEPT. 16, 1992.
DESCRIPTION OF WATER EXPLOITATION CONCESSIONS
---------------------------------------------
Right to explore and exploit water granted by the Chilean Army to Bema Chile
dated June 27, 1991 for approximately 4,372. ha., Registration No. 3.272.
Resolution D.G.A. (Water Department) NR. 282 July 24, 1992 - 45 lts/sec.
Resolution D.G.A. (Water Department) NR. 283 July 24, 1992 - 105 lts/sec.
Resolution D.G.A. (Water Department) NR. 284 July 24, 1992 - 108 lts/sec.
<PAGE>
SCHEDULE "E"
UNAUDITED FINANCIAL STATEMENTS OF CMM
-------------------------------------
<PAGE>
SCHEDULE "F"
MATERIAL AGREEMENTS OF CMM
1990 Option Agreement.
Amendment to Option Agreement dated October 2, 1992.
Promise to Lease Contract (Refugio 78) dated August 29, 1990 between CMR and CMM
and granted before the Santiago Notary Public Mr. Andres Rubio Flores. Subject
to the condition that CMM acquire the Refugio Claims.
Promise to Assign dated August 30, 1990 between:
(i) Miriam Codoceo Gonzalez and CMM regarding the exploration concessions known
as Amparo 1 - 12 for 1.5 million pesos payable in cash on issuance of the
assignment deed;
(ii) Mario Hernandez Alvarez and CMM regarding the exploitation concession and
the exploration concessions known as the claims Maricunga 1 - 280 for
350,000 pesos, claims Tranque 1 - 4 for 300,000 pesos, and Anillo 1 - 25
for 2,500,000 pesos payable in cash on issuance of the assignment deed.
Request dated June 1, 1992 by CMR on behalf of CMM to Ministry of National
Assets for the purchase of 974.4 ha with the coordinates for the area marked B2
in Schedule "C".
<PAGE>
SCHEDULE "G"
MATERIAL AGREEMENTS OF BEMA COMPANIES RELATING TO REFUGIO PROPERTY
1990 Option Agreement.
Amendment to Option Agreement dated October 2, 1992.
Easement granted by the Chilean Army to Bema Chile dated June 27, 1991 for
approximately 2,425 ha., Registration No. 3.273.
Right to explore and exploit water granted by the Chilean Army to Bema
Chile dated June 27, 1991 for approximately 4,372. ha., Registration No.
3.272.
<PAGE>
SCHEDULE "H"
APPROVALS REQUIRED BY BEMA COMPANIES
Approval of The Toronto Stock Exchange to enter into the Transactions.
Approval of The Vancouver Stock Exchange to enter into the Transactions.
* Approval of the Chilean Army to the transfer by Bema Chile to CMM of that
portion of the easement granted by the Chilean Army to Bema Chile dated June 27,
1991, registration No. 3.273 over the area described as Area B3 in Schedule "C".
* Approval of the Chilean Army to the transfer by Bema Chile to CMM of the
right to explore and exploit water granted by the Chilean Army to Bema Chile
dated June 27, 1991 for approximately 4,372. ha., Registration No. 3.272.
* Approval of the Chilean government to the transfer of the water exploration
concessions.
* Approval of the Chilean government to the transfer of the Application to
Purchase made by CMR on behalf to CMM to Ministry of National Assets for the
purchase of 974.4 ha.
Note: those approvals marked with an "*" will not be received by First Closing
or Final Closing.
<PAGE>
SCHEDULE "I"
APPROVALS REQUIRED BY AMAX COMPANIES
Approval of The New York Stock Exchange to issue an additional 3,150,000 shares
of the common stock of AGI to the CMR Shareholders.
Approval of The Toronto Stock Exchange to issue an additional 3,150,000 shares
of common stock of AGI to the CMR Shareholders.
<PAGE>
EXHIBIT 10.6
SHAREHOLDERS AGREEMENT
BETWEEN
AMAX GOLD REFUGIO, INC.
AND
BEMA GOLD (BERMUDA) LTD.
CONCERNING
COMPANIA MINERA MARICUNGA
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS OF TERMS ............................................. 2
Section 1.1 Definitions ............................................... 2
ARTICLE 2 PURPOSES OF AGREEMENT ............................................ 9
Section 2.1 General Statement of Intent ............................... 9
Section 2.2 Controlling Terms ......................................... 9
Section 2.3 Action by Directors and Technical Management Committee
Members Consistent with Agreement ......................... 9
Section 2.4 Financing ................................................. 10
Section 2.5 Unilateral Right to Proceed With Project Construction and
Subsequent Operations ..................................... 11
Section 2.6 Investment Contract ....................................... 14
ARTICLE 3 RELATIONSHIP OF THE SHAREHOLDERS ................................. 14
Section 3.1 Purposes of the Company .................................. 14
Section 3.2 No Agency ................................................ 15
Section 3.3 Other Business Opportunities ............................. 15
Section 3.4 Transactions With Affiliates ............................. 16
Section 3.5 Implied Covenants ........................................ 16
Section 3.6 Liability Several ........................................ 16
Section 3.7 No Fiduciary Duties ...................................... 16
Section 3.8 Standard of Care for the Chairman of the Technical
Management Committee ..................................... 16
ARTICLE 4 OWNERSHIP INTERESTS .............................................. 17
Section 4.1 Ownership Interests of Shareholders ....................... 17
Section 4.2 Ownership of Shares to Correspond to Ownership Interests .. 17
Section 4.3 Changes in Ownership Interests ............................ 17
Section 4.4 Changes in Ownership of Shares ............................ 18
Section 4.5 Voluntary Reduction in Ownership .......................... 18
Section 4.6 Elimination of Minority Interest .......................... 19
Section 4.7 Transfers of Ownership Interests and Powers of Attorney ... 19
Section 4.8 Limited Continuing Liabilities Upon Adjustment of Ownership
Interests ................................................. 20
Section 4.9 Subordination of Ownership Interests ...................... 20
ARTICLE 5 BOARD OF DIRECTORS ............................................... 21
Section 5.1 Organization and Composition .............................. 21
Section 5.2 Votes on Board ............................................ 21
Section 5.3 Board and Technical Management Committee Voting Power to
Correspond to Ownership Interests ......................... 21
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Page
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ARTICLE 6 APPROVAL BY BOARD ................................................ 22
Section 6.1 Vote Necessary For Approval ............................... 22
Section 6.2 Appointment of Chairman of the Board ...................... 22
Section 6.3 Actions Requiring Affirmative Majority Approval of the
Board ..................................................... 22
Section 6.4 Material Change to the Preliminary Construction
Budget .................................................... 24
Section 6.5 Matters Requiring Unanimous Approval of the Board ......... 24
Section 6.6 Failure to Obtain Unanimous Consent or Affirmative
Majority Approval ......................................... 25
ARTICLE 7 TECHNICAL MANAGEMENT COMMITTEE ................................... 25
Section 7.1 Appointment of Committee and Chairman ..................... 25
Section 7.2 Committee Decisions ....................................... 26
Section 7.3 Meetings of Technical Management Committee ................ 26
Section 7.4 Resignation of Members .................................... 27
Section 7.5 Removal of Members ........................................ 27
Section 7.6 Submission of Additional Information to Chairman .......... 27
Section 7.7 Approval of Construction Change Orders .................... 27
ARTICLE 8 GENERAL MANAGER .................................................. 28
Section 8.1 Appointment of the General Manager ........................ 28
Section 8.2 Delegation of Authority to the General Manager ............ 29
Section 8.3 Removal of the General Manager ............................ 29
Section 8.4 Reports by General Manager ................................ 29
ARTICLE 9 PROGRAMS AND BUDGETS ............................................. 29
Section 9.1 Operations To Be Conducted Pursuant to Programs and
Budgets ................................................... 29
Section 9.2 Initial Program and Budget ................................ 29
Section 9.3 Project Feasibility Study ................................. 29
Section 9.4 Engineering Phase Program and Budget ...................... 30
Section 9.5 Construction Phase Program and Budget ..................... 31
Section 9.6 Preparation of Programs and Budgets After
Completion of Construction ................................ 31
Section 9.7 Adoption of Programs and Budgets After
Completion of Construction ................................ 32
Section 9.8 Failure of Board to Adopt Programs and Budgets
after Completion of Construction .......................... 32
Section 9.9 Election to Participate in Programs and Budgets ........... 32
Section 9.10 Budget Overruns and Program Changes ....................... 33
Section 9.11 Emergency and Unexpected Expenditures ..................... 33
Section 9.12 Amendment of Programs and Budgets ......................... 33
ARTICLE 10 INITIAL AND SUBSEQUENT CONTRIBUTIONS ............................ 33
Section 10.1 Initial Contributions of the Shareholders ................. 33
ii
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Page
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Section 10.2 Use of Initial Contributions .............................. 35
Section 10.3 Default in Making Contributions ........................... 35
Section 10.4 Default in Contribution to Construction Phase Program
and Budget ................................................ 37
Section 10.5 Reimbursement of IVA Distribution ......................... 37
Section 10.6 Remedies Cumulative ....................................... 37
ARTICLE 11 LOANS ........................................................... 37
Section 11.1 Initial Program Loan ...................................... 37
Section 11.2 Construction Credit Facility Loan ......................... 38
Section 11.3 Construction Overrun Loan ................................. 38
Section 11.4 Project Construction Loan ................................. 39
Section 11.5 Terms of Loans ............................................ 40
Section 11.6 Special Provisions Concerning Control of Board ............ 41
Section 11.7 Use of Qualified Financial Institution .................... 41
ARTICLE 12 ACCOUNTS, SETTLEMENTS AND DIVIDENDS ............................. 41
Section 12.1 Monthly Statements ........................................ 41
Section 12.2 Requests for Additional Operating Equity .................. 42
Section 12.3 Failure to Contribute Additional Operating
Equity .................................................... 42
Section 12.4 Cash Available for Distributions .......................... 42
Section 12.5 Payments and Distributions ................................ 43
Section 12.6 Audits .................................................... 44
ARTICLE 13 SALE OF PRODUCTS ................................................ 45
Section 13.1 Sales of Refined Precious Metals .......................... 45
Section 13.2 Trading Activities ........................................ 45
Section 13.3 Purchase of Dore .......................................... 46
ARTICLE 14 INSOLVENCY OF A SHAREHOLDER ..................................... 46
Section 14.1 Deemed Offer to Sell Interests ............................ 46
Section 14.2 Non-Compete Covenants ..................................... 47
ARTICLE 15 LAND USE ........................................................ 47
Section 15.1 Buffer Zone Property ...................................... 47
Section 15.2 Outside Property .......................................... 48
Section 15.3 Water Rights .............................................. 49
Section 15.4 Conflicts in Use of Lands ................................. 49
Section 15.5 Preemptive Right With Respect to Sales of
Property .................................................. 50
Section 15.6 Surrender or Abandonment of Property ...................... 50
ARTICLE 16 TRANSFER OF INTEREST ............................................ 51
Section 16.1 General ................................................... 51
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Page
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Section 16.2 Limitations on Free Transferability ........................ 51
Section 16.3 Preemptive Right ........................................... 52
Section 16.4 Exceptions to Preemptive Right ............................. 53
Section 16.5 Meanings of Qualified Transferee and Control ............... 54
ARTICLE 17 DISPUTES ........................................................ 54
Section 17.1 Resolution of Disputes ..................................... 54
Section 17.2 Matters Subject to Arbitration in the United
States ..................................................... 55
Section 17.3 Matters Subject to Arbitration in Chile .................... 56
Section 17.4 Matters Not Subject to Arbitration ......................... 56
Section 17.5 Special Procedures for Arbitration in the United
States ..................................................... 57
Section 17.6 Special Provisions For Arbitration in Chile ................ 59
Section 17.7 Disputes Subject to Litigation ............................. 60
ARTICLE 18 CONFIDENTIALITY ................................................. 61
Section 18.1 General .................................................... 61
Section 18.2 Exceptions ................................................. 61
Section 18.3 Duration of Confidentiality ................................ 62
ARTICLE 19 GENERAL PROVISIONS .............................................. 62
Section 19.1 Notices .................................................... 62
Section 19.2 No Waiver .................................................. 63
Section 19.3 Modification ............................................... 63
Section 19.4 No Force Majeure ........................................... 63
Section 19.5 Governing Law .............................................. 64
Section 19.6 Further Assurances ......................................... 64
Section 19.7 Term of Agreement .......................................... 64
Section 19.8 Captions and Gender of Terms ............................... 64
Section 19.9 Severability ............................................... 64
Section 19.10 Binding Effect ............................................ 64
Section 19.11 Execution in Counterparts ................................. 64
Section 19.12 English Language Version Controlling ...................... 65
LIMITED UNDERTAKINGS BY AGI AND BEMA ........................................ 66
iv
<PAGE>
Exhibits
A - Buffer Zone Property
B - Amended and Restated Bylaws of CMM
C - Data License
D - Initial Program and Budget
E - Contract for Purchase of Data
F - Net Profits
G - Outside Property
H - Refugio Project Properties
I - Water Rights
J - Form of Power of Attorney
K - Form of Power of Attorney to General Manager
L - Form of Junior Subordinated Promissory Notes
M - Form of Initial Program Loan Note
N - Form of Project Construction Loan Note
O - Form of Credit Facility Loan or Construction Overrun Loan Note
v
<PAGE>
SHAREHOLDERS AGREEMENT
This Shareholders Agreement, dated November 18, 1992 is made
between AMAX GOLD REFUGIO, INC., a Delaware corporation, and BEMA GOLD
(BERMUDA) LTD., a Bermuda corporation.
Recitals
--------
Amax Gold Refugio, Inc. ("AGRI") is a wholly-owned subsidiary of
Amax Gold Inc. ("AGI"), a Delaware corporation. Bema Gold (Bermuda) Ltd.
("Bema Bermuda") is owned by Bema Gold Corporation ("Bema"), a company
organized under the laws of British Columbia, Canada, as to 99%, and by Bema
Gold (U.S.) Inc. ("Bema U.S."), a Nevada corporation, as to 1%. AGI and Bema
have entered the Refugio Project Agreement, dated as of November 17, 1992,
("Refugio Project Agreement") for the joint exploration, development, financing,
and operation of certain properties, located in the Copiapo Mining District,
Municipality of Tierra Amarilla, Province of Copiapo, Region III, Chile.
Pursuant to the Promise of Sale of Mining Properties, dated
August 29, 1990 among Bema, Minera Bema Gold (Chile), Limitada ("Bema Chile"),
a Chilean limited liability entity, Compania Minera Maricunga ("CMM"), a Chilean
contractual mining company, and Compania Minera Refugio ("CMR"), a Chilean
contractual mining company, as amended by an agreement dated October 2,
1992 (collectively the "1990 Purchase Agreement"), CMM acquired the right to
purchase the Refugio Project Properties (hereinafter defined), except for the
Refugio Claim 105, upon the performance of certain conditions. CMM owns the
Refugio Claim 105.
Pursuant to that certain Purchase/Sale Promise of Mining Claims
and Constitution of Easements dated November 18, 1992 among CMM, Bema,
Bema Chile and CMR (the "1992 Purchase Agreement"), the provisions of the
1990 Purchase Agreement are suspended and, upon the closing of the
transactions contemplated in the 1992 Purchase Agreement, will be absolutely
terminated.
<PAGE>
Pursuant to that certain Claim Purchase Promise Agreement, dated
as of November 18, 1992, CMM has agreed to purchase and Bema Chile has
agreed to sell the Laguna 1-11 exploration mining concessions and Hielo 1-9
mining claims and pursuant to that certain Water Rights Agreement, dated as
of November 18, 1992, CMM has agreed to purchase and Bema Chile has agreed
to sell the Water Rights (as hereafter defined).
Bema Chile owns the Existing Exploration and Evaluation Data
(hereinafter defined), which includes the results of certain exploration and
evaluation activities conducted on the Refugio Project Properties by or for
Bema Chile pursuant to the 1990 Purchase Agreement, including a feasibility
study dated April 1991. Pursuant to that certain License Agreement and Use
of Information dated November 18, 1992, Bema Chile has licensed the use of the
Existing Exploration and Evaluation Data to CMM.
CMM has 10,000 shares of stock, divided into two series, which as
of the date of this Agreement are owned as follows: Bema Bermuda owns 5,000
shares of Series A stock and AGRI owns 5,000 shares of Series B stock.
Simultaneously with the execution of this Agreement, Bema and
AGRI have amended and restated the Bylaws of CMM. Bema Bermuda and AGRI
wish to enter into certain additional arrangements concerning CMM, the
allocation of certain funding obligations and tax and dividend benefits, the
ownership and transfer of stock in CMM, the financing of the development of
the Refugio Project Properties, the consequences of a failure to satisfy a
request for an additional contribution of capital, the voting rights of the
directors of CMM and its shareholders, the resolution of disputes and other
matters.
Bema Bermuda and AGRI, having considered various arrangements
by which their legal relationship with respect to each other and CMM might be
established and enforced and the laws of various jurisdictions, have
determined to establish this Agreement to provide a contractual relationship
between the Shareholders and for the enforcement of their rights and the
resolution of disputes pursuant to arbitration or litigation in the United
States, as herein provided.
NOW THEREFORE, in consideration of the covenants herein
contained and other valuable consideration, AGRI and Bema agree as follows:
Agreement
---------
ARTICLE 1
---------
DEFINITIONS OF TERMS
--------------------
Section 1.1 Definitions. As used in this Agreement, the
-----------
following terms shall have the meanings assigned to them in this Section 1.1.
<PAGE>
A. "Adopted Program and Budget" means the Initial Program
and Budget and any Program and Budget that is adopted or deemed adopted
by the Board pursuant to Sections 2.5C, 2.5D, 9.4, 9.5 or 9.7 of this Agreement
or determined by arbitration pursuant to Article 17 of this Agreement.
B. "Affiliate" means (i) with respect to AGRI, AGI and any
controlled subsidiary of AGI or AGRI, and (ii) with respect to Bema Bermuda
any person, partnership, joint venture, corporation or other form of
enterprise which directly or indirectly controls, is controlled by, or is under
common control with, Bema Bermuda. For purposes of the preceding sentence,
"control" means possession, directly or indirectly, of the power to direct or
cause direction of management and policies through ownership of voting
securities, contract, or otherwise. As used in Sections 3.4, 16.2 and 16.4
only, "Affiliate" shall also mean, with respect to AGRI, AMAX Inc., a Delaware
corporation, and its controlled subsidiaries, other than AGI and its
subsidiaries.
C. "Affirmative Majority Approval" means approval by a
majority of the Directors' Votes, and is used in this Agreement to identify
matters with respect to which the Chairman of the Board or his alternate may
not break a deadlock by casting the deciding vote.
D. "Agreement" means this Shareholders Agreement, together
with all Exhibits hereto, which are incorporated by this reference, and all
amendments hereto and modifications hereof.
E. "Army Use Contracts" means the Right to Explore and
Exploit Water granted by the Chilean Army to Bema Chile on June 27, 1991, for
approximately 4,372 hectares, Registration No. 3.272, and Easement granted by
the Chilean Army to Bema Chile on June 27, 1991, for approximately 2,425
hectares, Registration No. 3.273.
F. "Assets" means the Refugio Project Properties, Water Rights,
Products and all other real and personal property, tangible and intangible,
now or hereafter owned by the Company.
G. "August 1992 Feasibility Study" means the report prepared
by Mineral Resources Development, Inc., dated August, 1992.
H. "Board" means the board of directors of the Company.
I. "Budget" means a detailed estimate and schedule of all costs
to be incurred by the Company with respect to a Program and a schedule of
contributions of additional equity to be made by the Shareholders.
J. "Budget Period" means the six-month periods commencing on
January 1 and July 1 each year, on the first such date after the Completion
of Construction, unless the Board by Affirmative Majority Approval establishes
a different period.
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<PAGE>
K. "Buffer Zone Property" means the mining claims, exploration
concessions and exploitation concessions listed in Exhibit A together with the
surface rights overlying a portion of those claims and concessions, the legal
descriptions of which are set out in Exhibit A.
L. "Bylaws" means the Amended and Restated Bylaws of the
Company, dated November 18, 1992, an English language copy of which is
attached as Exhibit B to this Agreement, together with all amendments thereto.
M. "Cash Available for Distribution" is defined in Section 12.4
of this Agreement.
N. "Change Order" means a written order to a contractor
performing a portion of the Project Construction, signed by the Chairman of
the Technical Management Committee or his designee, issued after execution of
the contract with the contractor, authorizing a change in the work to be
performed by the contractor, the consideration to be received by the
contractor or the time for performance of the work.
O. "Company" or "CMM" means Compania Minera Maricunga, a
contractual mining company organized under Article 200 of the Mining Code of
Chile.
P. "Completion of Construction" means the acceptance by the
Company as mechanically complete of all plant and facilities packages with a
value in excess of $U.S. 1 million to be provided pursuant to the contracts
awarded by the Company for Project Construction.
Q. "Construction Budget" means the Budget for Project
Construction, including appropriate escalations and contingencies, which, as
provided in Section 9.5 of this Agreement, shall either be adopted by the
Board or determined by arbitration. The costs of Project Construction shall
not include (i) capital or operating costs incurred after the Completion of
Construction, (ii) any costs incurred for expansion of the mine, processing
plant or other facilities beyond the capacities contemplated in the Construction
Budget or (iii) any cash component of working capital.
R. "Construction Credit Facility Loan" means a loan made by or
on behalf of the Series B Shareholder for the benefit of the Series A
Shareholder in accordance with Section 11.2 of this Agreement.
S. "Construction Overrun Costs" means any amount by which
the total expenses for Project Construction, for those items included in the
Construction Budget or in a Change Order, exceed the total amount of the
Construction Budget, including all the escalations and contingencies contained
therein and for which the Company, by its agreement or through final and
binding arbitration or litigation, is determined to be liable.
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<PAGE>
T. "Construction Overrun Loan" means a loan made by or on
behalf of the Series B Shareholder for the benefit of the Series A Shareholder
in accordance with Section 11.3 of this Agreement.
U. "Construction Phase Program and Budget" means the
Construction Budget and the Program necessary to achieve Project
Construction in accordance therewith, adopted by the Board or determined by
arbitration, as provided in Section 9.5 of this Agreement.
V. "Data License" means that License Agreement and Use of
Information, between the Company and Bema Chile pursuant to which the
Company has the right to use the Existing Exploration and Evaluation Data, a
copy of which is attached hereto as Exhibit C.
W. "Default Loan" means a loan made by one Shareholder to
another Shareholder pursuant to Section 10.3A of this Agreement.
X. "Detailed Engineering" means the preparation of drawings
and specifications for equipment and facilities, site plans and definitive
elevations, equipment lists, process flow charts, and other specifications and
bid documents necessary to permit the purchase of all required equipment and
the construction of all plant and facilities under lump sum or other processes
involving invitations to bid approved by the Technical Management Committee.
Detailed Engineering shall also involve the preparation of a final mine plan
and a Revised Construction Budget for Project Construction.
Y. "Development" means all preparation for the removal and
recovery of Products from the Refugio Project Properties, including the
construction or installation of a mill (if any), processing plant, crushers,
leach pads, pipelines, roads, power and water lines, stations and facilities,
mancamps, waste dumps, tunnels, access ways, adits, shafts, haulage ways, and
other facilities and improvements, both surface and underground, to be used
for the mining, handling, crushing, milling, processing, treating, haulage,
leaching, or other beneficiation of Products or needed for the construction or
operation of the Refugio Project Properties, regardless of the methods of
mining and processing employed, and includes Project Construction and the
development and exploitation of the Water Rights.
Z. "Directors' Votes" is defined in Section 5.2 of this
Agreement.
AA. "DL600" means Decree Law 600 of the Republic of Chile.
AB. "Effective Interest Rate" means a rate per annum,
determined from time to time, equal to the LIBOR per annum rate in effect on
the first business day of each calendar month, plus two percent. The
Effective Interest Rate shall be determined for each full or partial calendar
month in which interest accrues under any obligation to which it applies
pursuant to this Agreement or any note or other instrument executed
pursuant hereto, and shall apply to all interest obligations accruing in such
month. As used in this definition,
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<PAGE>
"business day" means a day on which the London and New York banks are open for
business and on which a quotation of the LIBOR may be obtained.
AC. "Engineering Phase Program and Budget" means the Program
and Budget covering Detailed Engineering, described in Section 9.4 of this
Agreement.
AD. "Existing Exploration and Evaluation Data" means all information,
data, material and results of the exploration, evaluation and other activities
undertaken by or for Bema Chile, Bema U.S., or any Affiliate of Bema Bermuda
with respect to the Refugio Project Properties or any portion thereof prior to
the date of this Agreement, including without limitation, all core, pulps and
other samples relating to the Refugio Project Properties in the possession or
control of Bema Chile, Bema U.S. or any Affiliate of Bema Bermuda and all
existing reports, analyses, assays, studies, maps, data bases, plans, drawings,
and documents derived from, based on, or which incorporate information from such
exploration, evaluation or other activities, including without limitation the
August 1992 Feasibility Study.
AE. "Exploration" means all activities directed principally toward
ascertaining the existence, location, quantity, quality, or commercial value of
deposits of Products, that are not contemplated by the Project Feasibility
Study, but shall not include condemnation or ore control drilling associated
with Project Construction or Mining or which is conducted on the Outside
Property.
AF. "Financing Plan" is defined in Section 2.4 of this Agreement.
AG. "Initial Contribution" means that contribution each
Shareholder agrees to make to the Company pursuant to Section 10.1 of this
Agreement.
AH. "Initial Program and Budget" means the Program and Budget
attached hereto as Exhibit D.
AI. "Initial Program Loan" is defined in Section 11.1 of this
Agreement.
AJ. "Investment Contract" means the agreement formed pursuant to 11 bis
of DL600, between Bema Bermuda, AGRI and Estado de Chile, and all amendments
thereto, resulting from the applications filed on or about November 27, 1992.
AK. "LIBOR" means the rate of interest (i) as quoted to AGRI by
The Chase Manhattan Bank, N.A., New York office or other major New York or
London commercial bank designated by AGRI from time to time, as such bank
is offered U.S. dollar deposits in the London Interbank Eurodollar Market in
an amount equal to the principal amount to which such rate shall be applied,
for one week borrowings or such other periods as are mutually agreed by the
Shareholders, or (ii) as obtained by AGRI from the display that appears as
page "LIBOR" on the Reuters Monitor Money Rates Service (or such other page
as may replace the LIBOR page on that service for the purpose of displaying
London Interbank Offered Rates of major banks) as of 11:00 am, London,
England time.
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<PAGE>
AL. "Mining" means the mining, extracting, producing, handling,
treating, heap leaching, milling, or other processing of Products, regardless of
the method, and includes the production of dore or refinable concentrates.
AM. "Net Profits" means certain amounts calculated as provided
in Exhibit F, which may be payable to the owner of Series C Shares as
provided by Sections 2.5A(3), 4.6 or 10.3B of this Agreement.
AN. "Operations" means all activities carried out by the
Company, including Exploration, Development and Mining.
AO. "Outside Property" means those mining claims, exploration
concessions and exploitation concessions (together with the surface rights
overlying a portion of such claims and concessions) owned directly or
indirectly by any one or more of San Damian, Bema Chile, CMR or any affiliate
of any of them, lying in whole or in part within a 12 kilometer radius
extending from the coordinates within the Refugio Property specified in
Exhibit G, excluding those mining claims, exploration concessions and
exploitation concessions included in the Refugio Property and the Buffer Zone
Property.
AP. "Ownership Interest" means the percentage interest
representing the equitable and beneficial ownership interest of a Shareholder
in the Company, as such interest may from time to time be adjusted hereunder
and reflected on the books and records of the Company. The Shares of the
Company will be owned by each Shareholder in accordance with and in
proportion to its Ownership Interest, as provided in Section 4.2 of this
Agreement. Ownership Interests shall be calculated to three decimal places
and rounded to two decimal places. A Shareholder owning only Series C
Shares shall not have an Ownership Interest.
AQ. "Preliminary Construction Budget" is defined in Section 9.3
of this Agreement.
AR. "Products" means all ores, minerals, concentrates, dore and
mineral resources produced from the Refugio Property or the Buffer Zone
Property by the Company, and all refined gold and other refined metals
produced therefrom.
AS. "Program" means a description in reasonable detail of
Operations to be conducted and objectives to be accomplished during a Budget
Period. Each Program for a Budget Period commencing after the Completion of
Construction shall include a mine plan and estimate of costs for the 12 months
following the commencement of the Budget Period, together with life-of-mine
reserve, production and cost estimates.
AT. "Project Construction" means the building, installing and
erecting of all plant, facilities, structures, pits, shafts, tunnels, adits,
mancamps, waste dumps, pads, equipment, roads, pipelines, and water and
power transmission lines, necessary to achieve Completion of Construction
either in accordance with the Construction Phase Program and
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<PAGE>
Budget modified by Change Orders or substantially in accordance with a project
proposed by a Notifying Shareholder pursuant to Section 2.5.
AU. "Project Construction Loan" means a loan made by one
Shareholder to the other Shareholder pursuant to Section 11.4 of this
Agreement.
AV. "Project Feasibility Study" means the study approved or
deemed approved as provided in Section 9.3 of this Agreement.
AW. "Project Financing" is defined in Section 2.4A of this
Agreement.
AX. "Project Financing Documents" means the loan, security and
financing agreements executed to obtain or secure Project Financing and all
notes, mortgages and security and other agreements entered into in
connection therewith.
AY. "Refugio Project Agreement" means that agreement dated as
of September 1, 1992 between Bema and AGI.
AZ. "Refugio Project Properties" means the Refugio Property,
the Buffer Zone Property, and the Outside Property.
BA. "Refugio Property" means the mining claims listed on Exhibit
H together with the surface rights overlying those mining claims, the legal
description of the surface rights being set out in Exhibit H.
BB. "Revised Construction Budget" is defined in Section 9.4C of
this Agreement.
BC. "San Damian" means Compania Minera San Damian, a
contractual mining company established by Bema Chile and CMR for the
exploration, development and mining exploitation of the Outside Property.
BD. "Series A Shareholder" means Bema Bermuda as owner of the
Series A Shares, and its permitted successors and assigns, whether one or
more.
BE. "Series B Shareholder" means AGRI as owner of the Series B
Shares, and its permitted successors and assigns, whether one or more.
BF. "Series C Shares" means the Series of Shares to be created
by amendment of the Bylaws pursuant to Exhibit F and Sections 2.5A(3), 4.6 or
10.3B of this Agreement.
BG. "Shareholder" and "Shareholders" means the
persons or entities that from time to time own the Shares of the Company.
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<PAGE>
BH. "Shares" means the Series A and Series B Shares of stock
of the Company, together with any additional Shares as may be issued from
time to time.
BI. "Technical Management Committee" means a committee of the
Board established under Article 7 of this Agreement.
BJ. "Trading Activities" is defined in Section 13.2 of this
Agreement.
BK. "Transfer" means, when used as a verb, to sell, grant,
assign, encumber, pledge, dispose of or to commit to do any of the preceding;
and when used as a noun, a sale, grant, assignment, encumbrance, pledge,
disposal or a commitment to do any of the preceding.
BL. "Water Rights" means those water concessions granted to
Bema Chile or CMR and listed in Exhibit I.
ARTICLE 2
---------
PURPOSES OF AGREEMENT
---------------------
Section 2.1 General Statement of Intent. The Shareholders
---------------------------
unanimously agree that, among other things, this Agreement sets forth the
unanimous agreement of the Shareholders referred to in Articles 6, 32, 33 and
35 of the Bylaws. The Shareholders further unanimously agree that this
Agreement shall constitute the irrevocable unanimous agreement of the
Shareholders with respect to such matters and all other matters which are the
subject of this Agreement, unless and until the Shareholders unanimously
agree otherwise, and that no further action by the Shareholders shall be
necessary or appropriate to achieve or effect the unanimous agreement
referred to in such articles of the Bylaws.
Section 2.2 Controlling Terms. In the event of any inconsistency
-----------------
between the terms and conditions of the Bylaws and the terms and conditions
of this Agreement, the terms and conditions of this Agreement shall control.
Section 2.3 Action by Directors and Technical Management
--------------------------------------------
Committee Members Consistent with Agreement. AGRI and Bema Bermuda shall
- -------------------------------------------
each cause the directors of the Company that it elects to cast all votes and
take all other actions in their capacities as directors and members of the
Technical Management Committee, respectively, in a manner consistent with this
Agreement and so as to implement its terms and intent. AGRI and Bema
Bermuda will each immediately remove or cause the removal of any director
who acts in any manner that is inconsistent with the terms and conditions of
this Agreement. Any action or failure to act by a director, whether as a
member of the Board or the Technical Management Committee, that would be a
breach of this Agreement if taken by a Shareholder, shall be deemed a breach
of this Agreement by the Shareholder that elected the director.
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<PAGE>
Section 2.4 Financing of Project Construction.
---------------------------------
A. The Shareholders have approved the following general plan
for funding the Operations necessary to achieve Completion of Construction
(the "Financing Plan"):
Source of Funds Approximate Amount
--------------- ------------------
Gold/Dollar Loan US$75-80 million
Equipment Financing US$25-30 million
Equity/Junior Subordinated Debt US$15-25 million
The Shareholders shall jointly seek, on the terms and subject to the
conditions of this Section 2.4, Project Financing (hereinafter defined) for the
Company. Subject to the terms and conditions of this Section 2.4, the
Shareholders each shall use, for a period of 18 months from and after the
date of this Agreement, commercially reasonable, good faith efforts to secure:
(i) firm written commitments to provide on commercially reasonable terms the
Gold/Dollar Loan and Equipment Financing components (the Gold/Dollar Loan
and Equipment Financing components shall be referred to collectively as
"Project Financing") of the Financing Plan for the Company, provided,
however that each Shareholder shall be responsible only for its share of the
costs necessary to achieve Completion of Construction, and only for a
corresponding share of Project Financing, and (ii) the funds necessary for its
share of the Equity/Junior Subordinated Debt component of the Financing
Plan. Each of the Shareholders acknowledges that the amount of the
Equity/Junior Subordinated Debt component of the Financing Plan which it
may contribute to the Company in the form of subordinated debt is limited by
the Investment Contract and, subject to the provisions of this Section 2.4,
agrees to cause the conversion of any contribution it has made to the
Company in the form of subordinated debt to equity if such action is required
to obtain Project Financing and to comply with DL600. It shall be a condition
of Project Financing that a default by either Shareholder or any guarantor of
the obligations of such Shareholder with respect to Project Financing shall not
constitute a default by the other Shareholder or any guarantor of the
obligations such other Shareholder with respect to Project Financing.
B. Subject to the terms and conditions of this Section 2.4, AGI
and Bema shall, for the 18 month period described in Section 2.4A of this
Agreement, use commercially reasonable good faith efforts to assist its
subsidiary identified in Section 2.4A with respect to the undertakings
contained in that Section. If requested by a lender offering to provide
Project Financing, AGI and Bema shall each agree to provide a corporate
guarantee, as a parent company, solely for its subsidiary's share of Project
Financing, with such guarantee to be effective only until the relevant
operational and economic completion tests incorporated in the Project
Financing Documents are satisfied. If hedging is required in conjunction with
Project Financing, AGI will undertake its share for its own account, and Bema
will provide a put program back-up as required. At Bema's request, AGI will
assist Bema in the put program and counterparty facilities to reduce Bema's
costs, but AGI will not be required to act as a counterparty or to assume any
liabilities or costs in connection therewith.
-10-
<PAGE>
C. Nothing in this Agreement, in the Bylaws or in the Project
Agreement shall require either AGI, any affiliate of AGI, Bema or any of its
Affiliates (i) to seek to obtain Project Financing on terms which if accepted
would, or to accept Project Financing which would, impair or preclude its
ability to finance or to operate other projects or properties it now owns or
hereafter acquires, or (ii) to seek to obtain or to use existing cash, lines of
credit, credit facilities or any other source or potential source of funds to
provide the Equity/Junior Debt component of the Financing Plan, if such
action would impair or preclude its ability to finance or to operate other
projects or properties it now owns or hereafter acquires. Neither Shareholder
shall have a fiduciary duty with respect to the other Shareholder or such
Shareholder's parent corporation with respect to any obligation arising under
Section 2.4 of this Agreement. Neither AGI nor Bema shall have a fiduciary
duty with respect to the other or the other's subsidiary corporation with
respect to any obligation arising under Section 2.4 of this Agreement.
D. The Shareholders, AGI and Bema shall cooperate in seeking to
obtain Project Financing in discharge of their obligations under Sections 2.4A
and 2.4B of this Agreement. Each of the Shareholders, AGI and Bema shall
bear all costs, expenses and fees it incurs in attempting to secure Project
Financing and in attempting to secure the Equity/Junior Subordinated Debt
component of the Financing Plan, and shall indemnify and hold harmless the
Company, the other Shareholder, and its Affiliates from any claim for any such
cost, expense or fee; provided, however, that all fees, charges and costs
(including attorneys and technical consultants fees) paid to the banks,
insurance companies, equipment suppliers or other entities which provide
Project Financing which is accepted by both Shareholders shall be borne
jointly by the Shareholders in proportion to their Ownership Interests
through the Company.
E. Except as provided in Section 2.5 of this Agreement, or the
Shareholders otherwise agree, Development of the Refugio Project Properties,
other than to the extent provided in the Initial Program and Budget, will not
commence until written commitments acceptable to both Shareholders for
Project Financing have been obtained and each Shareholder is able to
contribute to the Company the Equity/Junior Subordinated Debt component of
the Financing Plan.
Section 2.5 Unilateral Right to Proceed With Project Construction
-----------------------------------------------------
and Subsequent Operations.
- --------------------------
A. If upon the expiration of the 18 month period described in
Section 2.4A of this Agreement, either of the Shareholders has not obtained
and accepted a written commitment for Project Financing and/or is unable to
contribute the Equity/Junior Subordinated Debt component of the Financing
Plan, then notwithstanding Section 2.4E or any other provision of this
Agreement, either Shareholder (the "Notifying Shareholder") may elect to
proceed with Development and Mining of the Refugio Project Properties in
accordance with the provisions of this Agreement, upon providing written
notice of its election to do so to the other Shareholder (the "Notified
Shareholder") (with the first such notice given to control). The notice shall
identify the project to be undertaken in reasonable detail, and shall identify
any material differences between the project proposed by the
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<PAGE>
Notifying Shareholder and the project contemplated by the Project Feasibility
Study. Any project proposed pursuant to this Section 2.5A shall contemplate the
production of at least 100,000 ounces of gold per year. The notice shall be
accompanied by a budget for the Project Construction of the proposed project.
A Notified Shareholder shall, within 30 days after receipt of the notice, elect
one of the options specified below in this Section 2.5A and advise the
Notifying Shareholder which such option it has elected; provided, however that
if the proposed project differs materially from the project contemplated by the
Project Feasibility Study, the Notified Party shall have 90 days in which to
respond to any notice given pursuant to this Section 2.5A; and provided
further that such notice may be given during the last 90 days of the 18
month period described in Section 2.4A. The Notified Shareholder shall, within
30 days after receipt of a notice given pursuant to this section 2.5A:
(1) Commit to fund its proportionate share of all costs of
Project Construction of the proposed project from its own sources (including
its own borrowings); or
(2) Request from the Notifying Shareholder a credit
facility from which one or more loans (a "Project Construction Loan") shall be
made for all or a specified portion of the Notified Shareholder's proportionate
share of all costs for Project Construction of the proposed project; or
(3) Convert all of its Shares to Series C Shares which shall
entitle it to receive only 10% of the Net Profits thereafter generated by the
Company as provided in Exhibit F, upon which conversion the Notified
Shareholder shall have no Ownership Interest in, or any rights with respect
to, the Company or the Refugio Project Properties except as provided in
Exhibit F and in Section 2.5E.
If the Notified Shareholder does not timely elect one of the options specified
in Sections 2.5A(1), 2.5A(2) or 2.5A(3), it will be deemed irrevocably to have
elected the option specified in Section 2.5A(3).
B. The credit facility described in Section 11.2 shall not be
available to the Notified Shareholder. However, the provisions of Section 11.3
shall apply to a Notified Shareholder that has elected the option specified in
Sections 2.5A(1) or 2.5A(2).
C. If the Notified Shareholder elects the option specified in
Section 2.5A(1), the Board shall be deemed to have adopted the proposed
project and accompanying budget for Project Construction as an Approved
Program and Budget and the Notified Shareholder shall be deemed to have
elected to participate therein to the full extent of its Ownership Interest.
D. If the Notified Shareholder elects the option specified in
Section 2.5A(2):
(1) It shall be responsible for providing any funds for
Project Construction not included within the requested credit facility, subject
to the provisions of Section 11.3.
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<PAGE>
(2) The Board shall be deemed to have adopted the
proposed project and accompanying budget for Project Construction as an
Approved Program and Budget and the Notified Shareholder shall be deemed to
have elected to participate therein to the full extent of its Ownership
Interest.
(3) The Notifying Shareholder shall have with respect to
the requested credit facility the rights specified in Section 11.4 of this
Agreement; and if a credit facility is extended to the Notified Shareholder, any
Project Construction Loan made pursuant thereto shall be made in accordance
with and subject to Sections 11.4 and 11.5 of this Agreement.
E. If the Notified Shareholder elects the option specified in
Section 2.5A(3), it shall have the right to repurchase an Ownership Interest
equal to the Ownership Interest it held immediately prior to the time of such
election. To exercise such repurchase right, the Notified Shareholder shall
give written notice of its election to the Notifying Shareholder within 90 days
after Completion of Construction of the proposed project, which notice must be
accompanied by a payment to the Notifying Shareholder, in immediately
available funds, in an amount equal to:
(1) 150% of the product obtained by multiplying:
(a) all costs of every kind and character incurred or
accrued by the Notifying Shareholder, from and after the date of the Notified
Shareholder's election under Section 2.5A(3), for or in connection with the
ownership or Development of the Refugio Project Properties, including without
limitation all costs for Project Construction, by
(b) the Ownership Interest transferred to the
Notifying Shareholder by the Notified Shareholder on the date of its election
under Section 2.5A(3) divided by one hundred; plus
(2) an amount equivalent to interest on all costs described
in Section 2.5E(1)(a) at the Effective Interest Rate from the time the Notifying
Shareholder incurred or accrued such costs until payment is made to the
Notifying Shareholder pursuant to this Section 2.5E.
To exercise the repurchase option provided in this Section 2.5E, the Notified
Shareholder shall also expressly assume in writing, by execution of one or
more documents in form and substance satisfactory to the Notifying
Shareholder, a share equal to its reacquired Ownership Interest of all
liabilities and obligations of the Company and all liabilities and obligations
incurred by the Notifying Shareholder with respect to the Company or the
Refugio Project Properties from and after the date of the Notified
Shareholder's election pursuant to Section 2.5A(3). Upon full compliance with
this Section 2.5E by the Notified Shareholder, including payment of the
amounts specified herein, the Notifying Shareholder shall cause the Company
to convert the Series C Shares held by the Notified Shareholder to the same
number and Series of Shares held by the Notified Shareholder immediately
prior to its election of the option provided in Section 2.5A(3). For purposes
of the formula in Section 4.5 of this Agreement, the Notified Shareholder will
thereafter be deemed to have contributed to the
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<PAGE>
Company an amount equal to 100% of the costs described in Section 2.5E(1)(a)
multiplied by the Ownership Interest equivalent to the Shares it reacquired
pursuant to this Section 2.5E, divided by 100.
F. If the Notified Shareholder has elected the option specified in
Section 2.5A(2) or 2.5A(3), and the Notifying Shareholder does not obtain
commitments for financing of Project Construction for the project described in
the notice given pursuant to Section 2.5A or a substantially similar project
within 6 months after the date of the Notified Shareholder's election and does
not award one or more contracts for Project Construction totalling at least
U.S. $1 million within 18 months after the date of the Notified Shareholder's
election and does not commence Project Construction of such a project within
such 18 month period, then upon the expiration of the relevant period:
(1) the election made by the Notified Shareholder shall be
deemed rescinded;
(2) the Notified Shareholder shall pay to the Notifying
Shareholder an amount equal to the sum of all costs (including capital
costs) which the Notifying Shareholder incurred from and after the date
of the Notified Shareholder's election for the maintenance of the Refugio
Project Properties, multiplied by its Ownership Interest immediately
prior to its election, divided by 100; and
(3) either Shareholder shall thereafter have the right to
elect to act as a Notifying Shareholder under this Section 2.5.
For purposes of this Section 2.5F, Project Construction shall be deemed to
commence upon mobilization of equipment and commencement of excavation of
the heap leach pad facility contemplated by the proposed project.
Section 2.6 Investment Contract. Each Shareholder shall, at all
-------------------
times, comply with its obligations under and take all actions necessary to
maintain in good standing the Investment Contract. Each Sharheolder shall at all
time maintain as equity at least 15% of the funds it or its Affiliates invest in
the Company under the Investment Contract. Neither Shareholder shall, without
the express consent of the other, make or seek to make any change in the
Investment Contract that would adversely affect the other Shareholder, the
Development of the Refugio Project Properties or the ability of the other
Shareholder to maintain its investment in the Company under 11 bis of DL600 or
to retain the proceeds of sale of Products in an offshore account.
ARTICLE 3
---------
RELATIONSHIP OF THE SHAREHOLDERS
--------------------------------
Section 3.1 Purposes of the Company. The Company shall serve
-----------------------
as the exclusive means by which AGRI, Bema Bermuda, and the Affiliates of
either shall
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<PAGE>
accomplish any of the purposes of the Company as set forth in
the Bylaws. Notwithstanding the foregoing provisions of this Section 3.1:
A. Bema Bermuda, CMR and their Affiliates shall have the right
to engage in mineral exploitation activities within the Outside Property,
subject to the provisions of Section 15.2 of this Agreement and subject to the
easements and rights of the Company under the 1992 Purchase Agreement and
the related contract of sale; provided that such activities do not otherwise
materially interfere or hinder Operations, whether ongoing or planned,
conducted or to be conducted by the Company.
B. Neither AGRI nor Bema Bermuda will interfere with, hinder
or take any action inconsistent with the exercise of access rights by the
Company outside the Refugio Project Properties.
C. Nothing in this Section 3.1 or elsewhere in this Agreement
or in the Bylaws shall affect, in any way, the ability of any Shareholder to
conduct its own Trading Activities with respect to production from the Refugio
Project Properties or elsewhere, the risks, losses and proceeds of which shall
belong solely to such Shareholder, as further provided in Section 13.2 of this
Agreement. No Trading Activities undertaken by a Shareholder shall impose
any liability on the Company or the Assets.
Section 3.2 No Agency. Nothing contained in this Agreement or
---------
in the Bylaws shall be deemed to constitute any Shareholder the partner or
joint venturer of the other, to create any fiduciary relationship between them,
nor, except as otherwise herein expressly provided, to constitute any
Shareholder the agent or legal representative of any other. It is not the
intention of the Shareholders to create, nor shall this Agreement be construed
to create, any mining, commercial, or other partnership or joint venture. No
Shareholder shall have any authority to act for or to assume any obligation or
responsibility on behalf of any other Shareholder in its individual capacity,
except as otherwise expressly provided herein. Each Shareholder shall
indemnify, defend and hold harmless the other Shareholder and its Affiliates,
their directors, officers, employees, agents, attorneys, and the directors of
the Company elected by the indemnified Shareholder from and against any and all
losses, claims, damages and liabilities arising out of any act or assumption of
liability by the indemnifying Shareholder, or any of its directors, officers,
employees, agents or attorneys or the directors of the Company elected by it
done or undertaken, or apparently done or undertaken, on behalf of the other
Shareholder, except pursuant to authority expressly granted in the Bylaws or
in this Agreement or conferred in writing by the Board. Nothing in this
Section 3.2 shall be deemed to lessen any power or authority, express or
implied, of the General Manager or of any director, officer or committee of the
Company.
Section 3.3 Other Business Opportunities. Other than with
----------------------------
respect to the Refugio Project Properties or as expressly provided in the
Bylaws or this Agreement, each Shareholder and its Affiliates shall have the
right independently to engage in and receive full benefits from business
activities, whether or not competitive with Operations, without consulting the
other. The doctrines of "corporate opportunity" or "business opportunity"
shall not be applied to any other activity, venture, or operation of either
Shareholder.
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<PAGE>
Neither Shareholder shall have any obligation to the other
Shareholder with respect to any opportunity to acquire any property or water
rights outside the Refugio Project Properties at any time, or, except as
provided in Section 14.3, within Refugio Project Properties after the
termination or liquidation of the Company. Unless otherwise agreed in writing,
no Shareholder shall have any obligation to mill, beneficiate or otherwise treat
any Products or the other Shareholder's share of Products in any facility
owned or controlled by such Shareholder.
Section 3.4 Transactions With Affiliates. The Technical
----------------------------
Management Committee may contract with an Affiliate of a Shareholder to
provide services, pursuant to a technical services agreement of fixed duration,
for a term not to exceed 12 months; provided, however, that any such contract
for an amount in excess of $200,000 in any six month period must be
unanimously approved by the Board. Notwithstanding the foregoing, the
Series B Shareholder shall have the right, but not the obligation, to provide
insurance coverage as needed from time to time by the Operations; provided,
however, that the cost for such coverage charged to the Company shall not
exceed the premiums that would be charged to the Company acting on its own
behalf for similar coverage and amounts, as determined by the quotations of
two independent insurance brokers.
Section 3.5 Implied Covenants. There are no implied covenants
-----------------
contained in this Agreement or in the Bylaws, or in any promissory note or
other document executed pursuant to this Agreement.
Section 3.6 Liability Several. The rights, duties, obligations, and
-----------------
liabilities of the Series A Shareholder and the Series B Shareholder under the
Bylaws and this Agreement shall be several and not joint or collective. Each
Shareholder shall be responsible only for its obligations as set out in the
Bylaws and in this Agreement and shall be liable only for its share of costs
and expenses as provided herein.
No Shareholder or director of the Company shall be liable for any
act or omission resulting in loss or damages to the Company or to the other
Shareholder, except as provided in Sections 3.2 or 3.8 of this Agreement.
Section 3.7 No Fiduciary Duties. The directors of the Company
-------------------
are responsible to, and bound to represent the interests of, the Shareholder
of the Series of Shares that caused their election. It shall not be a breach of
fiduciary duty or of any term or condition of the Bylaws or of this Agreement
for a director of the Company in discharging his or her responsibilities under
the Bylaws or this Agreement, whether as a member of the Board or the
Technical Management Committee, to place the interests of the Shareholder that
elected him or her above the interests of the other Shareholder.
Section 3.8 Standard of Care for the Chairman of the Technical
--------------------------------------------------
Management Committee. When the Chairman of the Technical Management
- --------------------
Committee or his alternate exercises his or her power to cast the deciding
vote on a matter to be decided by the Technical Management Committee, he or
she shall act in a manner consistent with the conduct of Operations in a good,
workmanlike and efficient manner in accordance with sound
-16-
<PAGE>
mining and other applicable industry standards and practices and in accordance
with the terms and provisions of leases, licenses, permits, contracts and other
agreements pertaining to the Assets. But, neither the Chairman of the Technical
Management Committee or his or her alternate, nor the Shareholder which elected
them, shall be liable to the other Shareholder or its Affiliates for any act or
omission by the Chairman of the Technical Management Committee or his or her
alternate, including the casting of a deciding vote, resulting in damage, claims
or loss, except to the extent caused by the willful misconduct or gross
negligence of the Chairman of the Technical Management Committee or his or her
alternate.
ARTICLE 4
---------
OWNERSHIP INTERESTS
-------------------
Section 4.1 Ownership Interests of Shareholders. The Ownership
-----------------------------------
Interest of each Shareholder is the equitable and beneficial ownership right
and interest of the Shareholder in the Company. The Ownership Interests of
the Shareholders shall be adjusted as provided in this Agreement. On the
date of this Agreement AGRI has a 50% Ownership Interest and Bema Bermuda
has a 50% Ownership Interest.
Section 4.2 Ownership of Shares to Correspond to Ownership Interests.
--------------------------------------------------------
Each of the existing Shares of the Company represents a one-hundredth of one
percent (0.01%) Ownership Interest. The Shares of the Company shall be held by
each of the Shareholders in proportion to its Ownership Interest. On the date of
this Agreement, Bema Bermuda holds 5,000 Series A Shares, corresponding to its
50% Ownership Interest, and AGRI owns 5,000 Series B Shares, corresponding to
its 50% Ownership Interest.
Section 4.3 Changes in Ownership Interests. A Shareholder's
------------------------------
Ownership Interest shall be changed as follows:
A. Upon an election by a Shareholder pursuant to Section 4.5
of this Agreement to contribute less to an Adopted Program and Budget than
the amount corresponding to its Ownership Interest.
B. As provided in Sections 2.5 or 4.6 of this Agreement.
C. If a Shareholder defaults in making its agreed upon
contribution to an Adopted Program and Budget or with respect to a Default
Loan made pursuant to Section 10.3A, followed by an election by the other
Shareholder to invoke the provisions of Section 10.3B of this Agreement.
D. If the Series A Shareholder defaults with respect to an
Initial Program Loan.
E. Subject to the provisions of Section 10.4, in the event of an
uncured condition of default by a Shareholder or its guarantor under any of
the Project Financing Documents followed by an election by the other
Shareholder to invoke the provisions of Section 10.3B of this Agreement. As
used in the immediately preceding sentence, "uncured
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<PAGE>
condition of default" shall mean any default under the Project Financing
Documents or any condition which with the passing of time, the giving of notice,
or both, would constitute a default under the Project Financing Documents, which
is not cured prior to one business day before the expiration of the applicable
period for cure under the Project Financing Documents.
F. By transfer by a Shareholder of less than all of its Shares
in accordance with Article 16 of this Agreement.
G. By acquisition of the Shares of the other Shareholder,
however arising.
Section 4.4 Changes in Ownership of Shares. If the Ownership
------------------------------
Interests of the Shareholders are changed, the ownership of the Shares of the
Company shall also be changed to correspond to the changed Ownership
Interests. For example, assume that all of the Series B Shares are held by
one Shareholder (the "Reducing Shareholder"), and that all of the Series A
Shares are held by another Shareholder (the "Increasing Shareholder").
Assume further that, pursuant to Section 4.5 of this Agreement, the Ownership
Interest of the Reducing Shareholder was reduced from 50% to 40% (and that
the Ownership Interest of the Increasing Shareholder was thus increased to
60%). Pursuant to Section 4.7 of this Agreement, 1000 Series B Shares would
be transferred from the Reducing Shareholder to the Increasing Shareholder,
with the result that the Reducing Shareholder would own 4,000 Series B
Shares and the Increasing Shareholder would own a total of 6,000 Shares
(5,000 Shares of Series A and 1,000 Shares of Series B).
If a Shareholder whose Ownership Interest was previously
increased (with a corresponding acquisition of Shares from the other
Shareholder), subsequently has its Ownership Interest decreased, the Shares
to be transferred to the other Shareholder shall be, as necessary: (i) first,
from the same Series of Shares previously acquired from the other
Shareholder, and (ii) only thereafter, from the Series of Shares initially owned
by the Shareholder whose Ownership Interest is being decreased.
Section 4.5 Voluntary Reduction in Ownership. Except with
--------------------------------
respect to a Shareholder's obligation to make the contributions required by
Transitory Article 1 of the Bylaws and by Section 10.1 of this Agreement, and
as required by the Initial Program and Budget, as to which no further
election is permitted, a Shareholder may elect, only in accordance with the
procedures specified in Section 9.9 of this Agreement, not to contribute to an
Adopted Program and Budget or to contribute in some lesser amount than its
respective Ownership Interest. If a Shareholder elects to contribute to an
Adopted Program and Budget in some lesser amount than its respective
Ownership Interest, or not at all, and as provided in Section 10.3C with
respect to the Ownership Interest of the Series A Shareholder, the Ownership
Interest of that Shareholder shall be recalculated at the time of election in
accordance with the following formula:
Shareholder's Reduced Ownership Interest = a + b + c
---------
A + B + C
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<PAGE>
where "a" is U.S. $22.5 million which as is specified in Section 10.1 is the
agreed value of the reducing Shareholder's Initial Contribution; "b" is the
total of all of the reducing Shareholder's other contributions to the Company
pursuant to Section 12.2 of this Agreement (including equity and subordinated
debt, but not interest, under DL600) and its proportionate share of any
payments of principal made pursuant to the Project Financing Documents; and
"c" is the amount, if any, the reducing Shareholder elects to contribute to the
Adopted Program and Budget; "A" is U.S. $45 million which, as specified in
Section 10.1, is the agreed value of both Shareholders' Initial Contributions;
"B" is the total of all other contributions by or on behalf of both
Shareholders pursuant to Section 12.2 of this Agreement (including equity and
subordinated debt, but not interest, under DL600) and all payments of
principal made pursuant to the Project Financing Documents; and "C" is the
amount both Shareholders have elected to contribute to the Adopted Program
and Budget. The Ownership Interest of the other Shareholder shall thereupon
become the difference between 100% and the recalculated Ownership Interest of
the reducing Shareholder.
Section 4.6 Elimination of Minority Interest.
--------------------------------
A. Upon the reduction of its Ownership Interest to less than
20%, other than as a result of a Transfer of some but not all of its Shares as
permitted in Article 16, the Shares owned by the reducing Shareholder shall
be automatically converted into Series C Shares, which shall be entitled to
receive only 10% of Net Profits thereafter generated by the Company, as
provided in Exhibit F to this Agreement, upon which conversion the owner of
the Series C Shares shall have no Ownership Interest in, or any rights with
respect to, the Company or the Refugio Project Properties except as provided
in Exhibit F.
B. If a Shareholder has transferred some but not all of its
Shares, the provisions of this Section 4.6 shall be applied to the aggregate
Ownership Interests held by the transferring Shareholder and its transferees,
so that if the aggregate Ownership Interests held by such parties, their
successors and assigns, is reduced to less than 20%, the Shares owned by the
reducing Shareholders shall be automatically converted into Series C Shares,
which shall be entitled to receive only 10% of Net Profits thereafter generated
by the Company, as provided in Exhibit F to this Agreement, upon which
conversion the owners of the Series C Shares shall have no Ownership
Interest in, or any rights with respect to, the Company or the Refugio Project
Properties except as provided in Exhibit F.
C. In no circumstances will the Net Profits payable pursuant to
this Agreement to one or more Series C Shareholders, their successors or
assigns, exceed, in the aggregate, ten percent (10%).
Section 4.7 Transfers of Ownership Interests and Powers of Attorney.
-------------------------------------------------------
A. A Shareholder shall, within three (3) days after the event
or election causing a reduction in its Ownership Interest as provided in
Section 4.5 of this Agreement, transfer to the other Shareholder the number of
Shares necessary to reflect the change in the respective Ownership Interests
of the Shareholders. Such transfer will be effected by a deed or an
instrument of assignment in a form and having such content as is reasonably
acceptable
-19-
<PAGE>
to the receiving Shareholder and by such other documents and
instruments as reasonably required by the receiving Shareholder.
B. Each Shareholder hereby irrevocably grants to Alberto
Orrego Gamboa, Fernando Hurtado Morales, Sergio Orrego Flory, and Eugenio
Besa Jocelyn-Holt, a power of attorney with full power of substitution to make
all transfers of Shares, to execute all deeds and conveyances, to record the
same by public deed and take all other actions necessary to implement the
provisions of this Section 4.7 and to implement Sections 2.5A(3), 4.5, 4.6, and
10.3B of this Agreement. If a Shareholder whose Ownership Interest is
reduced pursuant to Section 4.5 fails to take all action necessary to effect a
transfer of its Shares as required by this Agreement, Alberto Orrego Gamboa,
Fernando Hurtado Morales, Sergio Orrego Flory, or Eugenio Besa Jocelyn-Holt
shall promptly transfer from the Shareholder whose Ownership Interest is
reduced to the other Shareholder or its designee the requisite number of
Shares so that the Shares of the Company are held by each of the
Shareholders in proportion to its Ownership Interest, and otherwise execute
and record such other documents and instruments as reasonably required to
fully evidence such transfer or conversion, as the case may be. If a
Shareholder whose Ownership Interest is converted to ownership of Series C
Shares pursuant to Sections 2.5A(3), 4.6 or 10.3B fails to take all actions
necessary to effect a conversion of its Ownership Interest, including the
making of all necessary and appropriate changes to the Bylaws, Alberto Orrego
Gamboa, Fernando Hurtado Morales, Sergio Orrego Flory, or Eugenio Besa
Jocelyn-Holt shall promptly take all actions necessary to effect such a
conversion.
C. Promptly following the date of this Agreement, the
Shareholders shall take all actions reasonably necessary to implement the
provisions of this Section 4.7, including the execution of a formal power of
attorney in the form of Exhibit J before a Notary Public to authorize the full
implementation of all provisions hereof.
D. The Shareholders acknowledge and agree that the
conversion of Ownership Interest provided for in Sections 4.6 and 10.3B of
this Agreement to ownership of Series C Shares is a reasonable means of
liquidating the damages which will be incurred by the nonconverting
Shareholder if the circumstances giving rise to the conversion occur.
Section 4.8 Limited Continuing Liabilities Upon Adjustment of
-------------------------------------------------
Ownership Interests. The increased Ownership Interest accruing to a
- -------------------
Shareholder as a result of the transfer of the other Shareholder's Ownership
Interest pursuant to Sections 2.5A(3), 4.5, 4.6 or 10.3B shall be free of
royalties, liens, claims or encumbrances, arising by, through, or under such
other Shareholder, other than (i) in the case of both Series of Shares, the Net
Smelter Return royalties payable to CMR pursuant to Clause Fourth of the 1992
Purchase Agreement, (ii) those which the Board has approved and to which
the recipient Shareholder has given its written consent, and (iii) those arising
from Project Financing which the increasing Shareholder has agreed to accept.
Section 4.9 Subordination of Ownership Interests. Each
------------------------------------
Shareholder shall, from time to time, pledge and subordinate its Shares, its
Ownership Interest, any debt owed to it by the Company and any other right
or interest it holds with respect to the Refugio
-20-
<PAGE>
Project Properties or in the Company to any secured borrowings of the Company
approved by the Board, including any Project Financing, and any modifications or
renewals thereof, and shall execute any documents reasonably required by the
lenders in connection with Project Financing.
ARTICLE 5
---------
BOARD OF DIRECTORS
------------------
Section 5.1 Organization and Composition. The Company shall be
----------------------------
managed by a board consisting of four directors (the "Board"). Two directors
shall be elected by the Series A Shareholder and two directors shall be
elected by the Series B Shareholder. The Board shall, subject to the terms
and conditions of this Agreement, determine overall policies, objectives,
procedures, methods, and actions for the Company. The Series A Shareholder
and the Series B Shareholder may each also elect two or more alternate
directors to the Board to act in the absence of one or more of its elected
regular directors. Any alternate so acting shall be deemed a member of the
Board. The owners each Series of Shares shall give notice to the owners of
the other Series of Shares of the election of its directors and alternates.
Each director and alternate shall serve for a term of 1 year, and
until a successor is elected and shall qualify, or until his or her earlier
death, resignation or removal.
Section 5.2 Votes on Board. The directors in the aggregate shall
--------------
have a total of 100 votes ("Directors' Votes") on all matters to be decided by
the Board, divided between them as herein provided. The directors elected by
the Series A Shareholder shall have in the aggregate the number of Directors'
Votes on the Board equal to its Ownership Interest and the directors elected
by the Series B Shareholder shall have in the aggregate the number of
Directors' Votes on the Board equal to its Ownership Interest; provided,
however, that if a Shareholder owns Shares of both Series A and Series B, the
directors which it elects shall have the aggregate number of Directors' Votes
equal to such Shareholder's total Ownership Interest, and the directors elected
by the other Shareholder shall have the aggregate number of Directors' Votes
equal to the Ownership Interest of the other Shareholder. There shall be
fractional portions of a Directors' Vote, if necessary to correspond to the
Ownership Interests of the Shareholders. If only one of the directors or
alternates elected by the owners of one of the Series of Shares attends a
meeting of the Board, that director or alternate shall be entitled to cast at
that meeting all of the Directors' Votes held by the directors elected by the
owners of the Series of Shares that elected the attending director or
alternate.
Section 5.3 Board and Technical Management Committee Voting Power to
--------------------------------------------------------
Correspond to Ownership Interests. It is the intent of the Shareholders that if
- ---------------------------------
a Shareholder acquires a majority of the Ownership Interest, such Shareholder
shall have the controlling vote on the Board through the directors it elects,
and Article 10 of the Bylaws and Section 5.2 of this Agreement so provide. The
following example illustrates the manner in which the provisions of Article 10
of the Bylaws and Section 5.2 of this Agreement will operate:
-21-
<PAGE>
If a Shareholder acquires a majority of the Ownership Interest
(becomes a "Majority Owner"), the directors elected by the Majority Owner
(regardless of the Series of Shares initially owned by that Shareholder) will
be entitled to cast a majority of the Directors' Votes on the Board. For
example, if the Majority Owner holds an Ownership Interest of 51.03%, the
directors it elects would be entitled to cast 51.03 Directors' Votes on all
matters that come before the Board and the directors elected by the other
Shareholder would be entitled to cast 48.97 Directors' Votes on all such
matters. In this example, the directors elected by the Majority Owner would
be able to decide all matters that come before the Board, except those matters
which, as provided in Section 6.5 of this Agreement, require the unanimous
approval of the Board.
The number of votes each member of the Technical Management
Committee shall be entitled to cast shall be determined in the same manner, as
is provided in Section 7.2 of this Agreement.
ARTICLE 6
---------
APPROVAL BY BOARD
-----------------
Section 6.1 Vote Necessary For Approval. A majority of the Directors'
---------------------------
Votes shall be required to constitute the action of the Board at any meeting at
which a quorum is present, provided, however, that if the Board is deadlocked by
an inability to obtain a majority of the Directors' Votes with respect to any
matter within the scope of its authority, except those matters specifically
identified in Sections 6.3 and 6.5 of this Agreement, the Chairman of the Board,
or in his absence, his alternate, is hereby authorized and empowered to cast the
deciding vote with respect to such matter, and thereby to determine the action
of the Board with respect thereto. The directors shall take all actions
necessary, including without limitation the signing of minutes of Board action,
to give effect to any decision of the Board made as a result of the casting of
the deciding vote by the Chairman of the Board or his alternate as provided in
this Section 6.1.
Section 6.2 Appointment of Chairman of the Board. So long as
------------------------------------
AGRI and/or its Affiliates are the owners of all the Series B Shares, a director
elected by the Series B Shareholder shall serve as Chairman of the Board. If
AGRI and/or its Affiliates do not own all of the Series B Shares, a director
chosen by a majority vote of the directors shall act as Chairman of the Board.
The Chairman of the Board, or in his absence, his alternate, shall conduct all
Board meetings. The procedures for Board meetings shall be as determined by
the Board.
Section 6.3 Actions Requiring Affirmative Majority Approval of the
------------------------------------------------------
Board. The following actions shall require an Affirmative Majority Approval
- -----
of the Board and shall not be subject to the authority provided to the
Chairman in Section 6.1 of this Agreement to break deadlocks:
-22-
<PAGE>
A. The adoption of any Program or Budget, other than the
Initial Program and Budget, including the Engineering Phase Program and
Budget and the Construction Phase Program and Budget;
B. The making of a Material Change to the Preliminary
Construction Budget (as defined in Section 6.4), as a result of Detailed
Engineering;
C. A capital outlay for an expansion of facilities, subsequent to
Completion of Construction, of more than U.S. $2 million per year, except that
such restriction shall not apply to expenditures for the repair, rehabilitation
or replacement of plant, facilities or equipment;
D. The abandonment, sale or other disposition in any one year
of any of Assets having a value of more than U.S. $2 million, except that
Affirmative Majority Approval shall not be required (i) for sales or
dispositions of Products, surplus or obsolete plant or equipment or other
materials in the ordinary course of business or (ii) for the abandonment, sale
or other disposition of any mining claims, surface rights or water rights
having a value of less than U.S. $2 million;
E. The settlement of any suit, claim, arbitration or demand
involving the Company or the Assets (other than any suit, claim, arbitration
or demand between the Shareholders) in an amount in excess of U.S.
$1 million;
F. Any decision that would constitute an intentional and
material default under the 1992 Purchase Agreement and related contract of
sale by which title to any material portion of the Refugio Project Properties is
held;
G. Exploration or Development on the Refugio Project Properties
not contemplated by the Project Feasibility Study in an amount greater than
U.S. $1 million per year;
H. Following the completion of the financings contemplated by
the Financing Plan, the undertaking of any future third party borrowings by
the Company other than future borrowings for working capital purposes
pursuant to one or more lines of credit not to exceed, at any one time, the
principal amount of U.S. $5 million;
I. A change in the general scope of the powers and duties of
the General Manager or the approval of the delegation of powers to the
General Manager by the Technical Management Committee not provided in
Section 8.2 of this Agreement;
J. Approval of overruns to an Adopted Program and Budget,
other than the Construction Phase Program and Budget, exceeding 10%;
K. Any business or activity proposed to be conducted by the
Company which is beyond the authorized purposes of the Company;
-23-
<PAGE>
L. Transactions with Affiliates of the Shareholders, except as
provided in Sections 3.4 and 13.2; and
M. Any other matter that:
(1) previously received either an Affirmative Majority
Approval or the unanimous approval of the Board or of the Shareholders
where so required by this Agreement, or
(2) was previously settled by arbitration pursuant to Article
17 of this Agreement or Article 35 of the Bylaws,
but nothing in this Section 6.3M shall prevent the Chairman of the Technical
Management Committee from proposing an amendment to an Adopted Program
and Budget as provided in Section 9.12 of this Agreement.
Section 6.4 Material Change to the Preliminary Construction
-----------------------------------------------
Budget. As used in this Agreement, "Material Change to the Preliminary
- ------
Construction Budget" means any of the following changes made as a result of
Detailed Engineering which are to be implemented prior to the Completion of
Construction:
A. changes in the design or type of equipment or facilities
incorporated in the Construction Budget, which changes, as compared to the
Preliminary Construction Budget, would cause a net increase or decrease
greater than 5% in the total estimated costs for Project Construction;
B. changes in the mine plan incorporated in the Construction
Budget, which changes, as compared to the mine plan on which the Preliminary
Construction Budget was based, would cause a net increase or decrease in
estimated production greater than 15,000 ounces of gold bullion in any of the
first five years after the Completion of Construction; or
C. changes in the methods used to process ores contemplated
by the Construction Budget, which changes, as compared to the projections on
which the Preliminary Construction Budget was based, would cause a net
life-of-mine increase or decrease in estimated total gold production greater
than 3%.
Section 6.5 Matters Requiring Unanimous Approval of the Board.
-------------------------------------------------
Notwithstanding any other provision of this Agreement or of the Bylaws, so
long as AGRI (or an Affiliate of AGRI) and Bema Bermuda (or an Affiliate of
Bema Bermuda) each have an Ownership Interest, the following matters shall
require unanimous approval of the Board, even though one such Shareholder
owns a majority of the Ownership Interest:
A. A decision to suspend (after Completion of Construction)
Mining of the Verde deposit (as identified in the Project Feasibility Study) for
a period of six months or longer, not caused by governmental action or
inaction, inability to obtain equipment or
-24-
<PAGE>
supplies in the ordinary course, strikes or labor difficulties, or any other
force majeure; but provided that neither this restriction nor any other
provision of this Agreement shall be deemed to require that Mining be conducted
at an operating loss after Completion of Construction;
B. The abandonment, sale or disposition of all or substantially
all of the Assets, except that such restriction shall not apply to sales or
dispositions of Products, surplus or obsolete plant or equipment or other
materials in the ordinary course of business; or
C. A capital outlay for an expansion of facilities subsequent to
Completion of Construction greater than U.S. $8 million in any one year.
Section 6.6 Failure to Obtain Unanimous Consent or Affirmative
--------------------------------------------------
Majority Approval. If a matter requiring the unanimous approval of the Board
- -----------------
pursuant to Sections 3.4, 6.5, 8.3 or 9.3 of this Agreement or Affirmative
Majority Approval of the Board pursuant to Sections 6.3, 7.7, 9.1, 9.2, 9.4,
9.5, 9.7, 9.10, 11.2, or 11.4 of this Agreement does not receive such unanimous
or majority approval, as the case may be, either Shareholder may submit the
matter to arbitration in accordance with the provisions of Article 17 of this
Agreement. If the matter submitted to arbitration involves a proposal by the
Series B Shareholder to make Material Change to the Construction Phase Program
and Budget (as defined in Section 7.7), the Series B Shareholder shall have the
right, but not the obligation, to cause the Technical Management Committee to
proceed with the proposed change prior to the arbitrator's ruling, subject to
the provisions of Section 17.5M of this Agreement. If neither Shareholder
submits to arbitration a matter which requires Affirmative Majority Approval
pursuant to Sections 7.7, 9.4, 9.5 and 9.10 but which failed to receive such
approval within 30 days after the Board meeting at which the matter was
considered, the matter shall be deemed decided in accordance with the vote of
the Chairman of the Board.
ARTICLE 7
---------
TECHNICAL MANAGEMENT COMMITTEE
------------------------------
Section 7.1 Appointment of Committee and Chairman. The Board
-------------------------------------
shall appoint from its members a Technical Management Committee, which shall
have overall responsibility for implementing Operations. The Technical
Management Committee shall consist of one regular and one or more alternate
members appointed by the owners of the Series A Shares and one regular
member and one or more alternate members appointed by the owners of the
Series B Shares. The Technical Management Committee shall be administered
by one member acting as Chairman. So long as the Ownership Interests of the
Shareholders remain equal and AGRI and/or an Affiliate of AGRI continues to
own the Series B Shares, the Chairman of the Technical Management Committee
shall be the member appointed by the Series B Shareholder. Notwithstanding
the preceding provisions of this Section 7.1, if the Ownership Interests of the
Shareholders become unequal, the party owning a majority of the Ownership
Interest shall be entitled to appoint the Chairman of the Technical Management
Committee, until such time, if ever, as the Ownership Interests of the
-25-
<PAGE>
Shareholders again become equal, at which time the Chairman of the Technical
Management Committee would again be a director elected by the Series B
Shareholder.
Section 7.2 Committee Decisions. The members of the Technical
-------------------
Management Committee collectively shall have a total of 100 votes, divided
between them as herein provided. The member of the Technical Management
Committee appointed by the Series A Shareholder shall have a number of votes
on the Technical Management Committee equal to the Ownership Interest of the
Series A Shareholder and the member of the Technical Management Committee
appointed by the Series B Shareholder shall have a number of votes on the
Technical Management Committee equal to the Ownership Interest of the Series
B Shareholder; provided, however, that if a Shareholder owns Shares of both
Series A and Series B, the member of the Technical Management Committee
which it appoints shall have the aggregate number of votes equal to such
Shareholder's total Ownership Interest, and the member of the Technical
Management Committee appointed by the other Shareholder shall have the
aggregate number of votes equal to the Ownership Interest of the other
Shareholder. There shall be fractional portions of a vote, if necessary to
correspond to the Ownership Interests of the Shareholders.
A majority of the votes of the Technical Management Committee
shall be required to constitute action of the Technical Management Committee.
If the Technical Management Committee is deadlocked by an inability to obtain
a majority of votes with respect to any matter within the scope of its
authority, the Chairman of the Technical Management Committee or his
alternate is hereby authorized and empowered to cast the deciding vote with
respect to such matter and thereby to determine the action of the Committee.
Section 7.3 Meetings of Technical Management Committee. As soon
------------------------------------------
as practicable after the date of this Agreement, the Technical Management
Committee shall meet for the purposes of organization and the transaction of
other business. Regular meetings of the Technical Management Committee shall
be held quarterly on a date to be determined by the Technical Management
Committee and specified in the notice of such meeting; provided that, during
the implementation of the Initial Program and Budget, the Engineering Phase
Program and Budget, the Construction Phase Program and Budget and for the
six months following Completion of Construction, meetings shall be held at least
monthly, and further that during the Engineering Phase Program and Budget,
the Construction Phase Program and Budget and for the six months following
Completion of Construction at least half of all such meetings shall be held in
Chile. Special meetings of the Technical Management Committee may be called
by either member on 7 days prior notice. Subject to the provisions of this
Section 7.3, meetings of the Technical Management Committee may be held at
such place or places either within or without Chile as shall from time to time
be determined by the Technical Management Committee and designated in the
notice of meeting. The Chairman, or his or her alternate, shall act as
chairman and secretary of the meeting of the Technical Management Committee.
The Shareholder calling a special meeting, and the Chairman of the Technical
Management Committee with respect to regularly scheduled meetings, shall
prepare a reasonably detailed agenda, which shall specifically identify any
proposed significant changes to the Construction Phase Program and
-26-
<PAGE>
Budget or in operating procedures. The agenda shall accompany the notice of the
Technical Management Committee special meetings and be sent to the directors at
least 10 days prior to a regularly scheduled monthly meeting and at least 20
days prior to a regularly scheduled quarterly meeting.
Section 7.4 Resignation of Members. Either member or any
----------------------
alternate member of the Technical Management Committee may resign upon
5 days' prior notice to the other member of the Technical Management
Committee, in which case the directors who appointed the resigning member
shall appoint another member of the Technical Management Committee to
replace the resigning member.
Section 7.5 Removal of Members. The directors who appointed a
------------------
member or alternate of the Technical Management Committee may remove such
member or alternate, either with or without cause, at any time. The vacancy
on the Technical Management Committee caused by any such removal shall be
filled by the directors causing such removal.
Section 7.6 Submission of Additional Information to Chairman.
------------------------------------------------
Section 7.2 of this Agreement provides that the Chairman of the Technical
Management Committee is authorized to cast the deciding vote in the event of
a deadlock. Each Shareholder shall have had the opportunity, during the
seven day period following the meeting at which a deadlock of the Technical
Management Committee occurred, to make a further submission to the Chairman
on the matter in question. As soon as the deadlock occurs, each Shareholder
shall advise the Chairman whether it wishes to make such a submission. If
neither Shareholder so advises the Chairman, the Technical Management
Committee may then act with respect to the matter in accordance with the
Chairman's vote. If either or both Shareholders make a submission, the
Chairman shall in good faith consider the submission or submissions and the
Technical Management Committee shall take no action on the matter for a
period of seven days after the meeting at which the deadlock occurred, unless
urgent operational considerations require that the matter be acted on in a
shorter period, in which case the Chairman shall so notify the Shareholders
and any additional submission shall be made within such shortened period. If
after reviewing the additional submissions, the Chairman decides to change his
or her vote on the matter, the Chairman shall notify the other member of the
Technical Management Committee, and shall promptly convene a meeting of the
Technical Management Committee to reconsider the matter. If after reviewing
the additional submissions, the Chairman does not wish to change his or her
vote, the matter will be deemed finally decided in accordance with the
Chairman's vote.
Section 7.7 Approval of Construction Change Orders.
--------------------------------------
A. The Chairman of the Technical Management Committee or his
designee shall have authority to approve all changes and modifications to the
Construction Phase Program and Budget and all contracts awarded for Project
Construction that are in his or her judgment reasonable and prudent to
achieve the Completion of Construction; provided, however, that Affirmative
Majority Approval shall be required for any change or modification which
Constitutes a Material Change to the Construction Phase Program and Budget.
Before authorizing a change or modification to the Construction Program and
-27-
<PAGE>
Budget which involves a net increase or decrease of more than U.S. $500,000
to a line item of the Construction Budget the matter shall be considered at a
regularly scheduled or special meeting of the Technical Management Committee.
The notice of any such meeting shall be accompanied by an agenda identifying
the proposed change or modification. The Chairman of the Technical
Management Committee shall promptly inform the Technical Management
Committee of each such change or modification he or she has made or
approved which does not require Affirmative Majority Approval or prior review
with the Technical Management Committee.
B. As used in this Agreement, "Material Change to the
Construction Phase Program and Budget" means any of the following, if
implemented prior to the Completion of Construction:
(1) changes in the design or type of equipment or
facilities, which changes, as compared to the Construction Budget, would cause
a net increase or decrease greater than 5% in the total estimated costs for
Project Construction;
(2) changes in the mine plan, which changes, as compared
to the Construction Phase Program and Budget mine plan, would cause a net
increase or decrease in estimated production greater than 15,000 ounces of
gold bullion in any of the first five years after the Completion of
Construction; or
(3) changes in the methods used to process ores, which
changes, as compared to the Construction Phase Program and Budget
projections, would cause a net life-of-mine increase or decrease in estimated
total gold extraction greater than 3%.
C. Any overrun of the Construction Budget which does not
result directly from one of the circumstances specified in Section 7.7B shall
not be considered a Material Change to the Construction Phase Program and
Budget and shall not require Affirmative Majority Approval. Subject only to
the requirements of Section 7.7A, the Chairman of the Technical Management
Committee, after consultation with the Technical Management Committee, is
authorized to overrun the Construction Budget without limitation.
ARTICLE 8
---------
GENERAL MANAGER
---------------
Section 8.1 Appointment of the General Manager. The Board shall
----------------------------------
use reasonable good faith efforts to select a qualified General Manager
acceptable to both the Series A Shareholder and to the Series B Shareholder
as soon as practical after the date of this Agreement; provided, however, that
if the Board does not unanimously approve the appointment of a General
Manager within 90 after the date of this Agreement, the Chairman of the Board
shall have the right to appoint the General Manager. The Series B
Shareholder is authorized and empowered to appoint an acting General
Manager, who shall be authorized to carry out the responsibilities and who
shall have all power and authority of the General Manager as provided in this
Agreement, until the appointment of a General Manager as provided in this
Section 8.1.
-28-
<PAGE>
Section 8.2 Delegation of Authority to the General Manager. At
----------------------------------------------
its first meeting the Board shall formally delegate powers to the General
Manager by authorizing the execution of a power of attorney to the General
Manager substantially in the form of Exhibit K. The Board and the Technical
Management Committee may delegate additional powers to the General Manager,
but the Technical Management Committee may not delegate any power or duty
expressly reserved to it by this Agreement. The General Manager shall report
and be responsible to the Technical Management Committee with respect to the
performance of his or her duties. Nothing in the power of attorney granted
to the General Manager shall authorize the General Manager or any director to
take any action not otherwise authorized by this Agreement or the Board.
Section 8.3 Removal of the General Manager. At any time any
------------------------------
director may request that the General Manager be replaced. If the Board does
not reach unanimous agreement with respect to the request to replace the
General Manager, the Chairman of the Board shall have the right to determine
whether to replace the General Manager. If the Chairman of the Board
determines not to remove the General Manager, the owners of the Series of
Shares which did not elect the Chairman may initiate arbitration with respect
to such proposed removal.
Section 8.4 Reports by General Manager. The General Manager
--------------------------
shall prepare monthly reports, which shall be furnished to the Technical
Management Committee and to the Board, summarizing Operations conducted
during the preceding month and comparing such Operations and the costs
thereof to the applicable Program and Budget.
ARTICLE 9
---------
PROGRAMS AND BUDGETS
--------------------
Section 9.1 Operations To Be Conducted Pursuant to Programs
-----------------------------------------------
and Budgets. Except as otherwise provided in Sections 7.7, 9.10 and 9.11 of
- -----------
this Agreement, Operations shall be conducted, expenses shall be incurred, and
Assets shall be acquired substantially in accordance with Programs and
Budgets adopted by Affirmative Majority Approval of the Board or determined
by arbitration, in accordance with the provisions of this Article 9.
Section 9.2 Initial Program and Budget. The
--------------------------
Shareholders have approved the Initial Program and Budget and shall cause
the Board to approve and adopt the Initial Program and Budget at its first
meeting. Each of the Shareholders has elected to participate in the Initial
Program and Budget to the full extent of its Ownership Interest. The Initial
Program and Budget shall remain in effect from the date of this Agreement
until the start of the Engineering Phase Program and Budget or the Board
otherwise determines by Affirmative Majority Approval.
Section 9.3 Project Feasibility Study. The results of the
-------------------------
additional metallurgical testing and analysis which are being conducted as of
the date of this Agreement shall be incorporated in the August 1992 Feasibility
Study to produce a "Revised Feasibility Study." The Board shall meet to
consider the Revised Feasibility Study within 20 days after
-29-
<PAGE>
its receipt by the Shareholders. If at such meeting the Board, unanimously
approves the Revised Feasibility Study or such study as modified, the study thus
approved shall be deemed the Project Feasibility Study. If at such meeting the
Board fails to unanimously approve a feasibility study, the August 1992
Feasibility Study shall be deemed the Project Feasibility Study. The Project
Feasibility Study will include a preliminary budget for Project Construction
(the "Preliminary Construction Budget").
Section 9.4 Engineering Phase Program and Budget.
------------------------------------
A. Either Shareholder may propose, at any time, that the
Engineering Phase Program be commenced. However, unless the Board
otherwise determines by Affirmative Majority Approval (subject to the
provisions of Section 17.2F), the Engineering Phase Program and Budget shall
not commence until after (i) both Shareholders have approved Project
Financing and are able to fund the Equity/Junior Subordinated Debt
component of the Financing Plan in accordance with Section 2.4 of this
Agreement or, in the absence of such conditions, (ii) one Shareholder has
elected to proceed in accordance with Section 2.5 of this Agreement. Promptly
upon the occurrence of either the circumstances of Section 9.4A(i) or 9.4A(ii),
the Chairman of the Technical Management Committee after consulting with the
committee will prepare and submit to the Board an Engineering Phase Program
and Budget.
B. Within 20 days after the submission of a proposed
Engineering Phase Program and Budget, the Board shall hold a meeting at
which the directors shall:
(1) Approve the proposed Engineering Phase Program and
Budget; or
(2) Propose modifications to the proposed Engineering
Phase Program and Budget; or
(3) Reject the proposed Engineering Phase Program and
Budget.
If at such meeting the directors by an Affirmative Majority Approval adopt the
proposed Engineering Phase Program and Budget or some modification thereof,
the Program and Budget thus adopted shall be the Engineering Phase Program
and Budget. If at such meeting the directors fail to adopt an Engineering
Phase Program and Budget, the directors elected by either Series of Shares
shall be authorized to refer the matter to arbitration pursuant to Article 17 of
this Agreement. The Engineering Phase Program and Budget determined by
such arbitration shall be deemed to have been adopted by the Board on the
date of the arbitration award.
C. The Engineering Phase Program shall be devoted principally
to Detailed Engineering of the Project Feasibility Study. In conjunction with
Detailed Engineering, the Preliminary Construction Budget shall be reviewed
and a revised budget for Project Construction (the "Revised Construction
Budget") shall be prepared.
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Section 9.5 Construction Phase Program and Budget.
-------------------------------------
A. If the Revised Construction Budget does not include a
Material Change to the Preliminary Construction Budget (as defined in Section
6.4 of this Agreement), the Revised Construction Budget shall be deemed
adopted by the Board and shall automatically become the Construction Budget.
If the Revised Construction Budget does include a Material Change to the
Preliminary Construction Budget, the Board shall, within 30 days after receipt
thereof, meet to consider the Revised Construction Budget. If at such meeting
the Board by Affirmative Majority Approval adopts the Revised Construction
Budget or another budget, such budget shall be the Construction Budget. If
at such meeting the Board fails by Affirmative Majority Approval to adopt the
Revised Construction Budget or by Affirmative Majority Approval to adopt
another budget as the Construction Budget, the directors elected by either
Series of Shares shall be authorized to refer the matter to arbitration as
provided in Article 17 of this Agreement. The budget determined by such
arbitration shall be the Construction Budget and shall be deemed to have been
adopted by the Board on the date of the arbitration award. The Construction
Budget, however adopted or determined, shall include appropriate escalations
and contingencies.
B. Upon adoption by the Board or determination by arbitration,
as provided in this Section 9.5, the Construction Budget, and the Program
necessary to achieve Project Construction in accordance therewith, shall be
deemed the Construction Phase Program and Budget. The Construction Phase
Program and Budget will cover the period from its effective date until the
start of the first Budget Period occurring after the Completion of
Construction, unless the duration of the Construction Phase Program and
Budget is modified by the Board.
Section 9.6 Preparation of Programs and Budgets After Completion of
-------------------------------------------------------
Construction.
- ------------
A. On or before May 1 and November 1 each year, starting on the
first such date after the Completion of Construction, the Technical Management
Committee shall prepare and submit to the Board a proposed Program and
Budget for the ensuing Budget Period. Each such proposed Program and
Budget shall be in a form and degree of detail approved by the Board, which
once established shall thereafter be utilized, unless the Board otherwise
determines.
B. In preparing each proposed Program and Budget for a
Budget Period after the Completion of Construction, the Chairman of the
Technical Management Committee shall determine the extent to which and the
sources from which funds will be required to implement the proposed Program
and Budget. In making such determinations, the Chairman of the Technical
Management Committee shall as a first priority look to the Company's available
cash flow.
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Section 9.7 Adoption of Programs and Budgets After Completion
-------------------------------------------------
of Construction.
- ---------------
A. Within 20 days after submission of any proposed Program and
Budget, (other than the Initial Program and Budget, which the Shareholders
have approved, the Engineering Phase Program and Budget, which shall be
adopted or determined as provided in Section 9.4 of this Agreement, and the
Construction Phase Program and Budget, which shall be adopted or determined
as provided in Section 9.5 of this Agreement) the Board shall hold a meeting
at which the directors shall:
(1) Approve the proposed Program and Budget; or
(2) Propose modifications to the proposed Program and Budget; or
(3) Reject the proposed Program and Budget.
If at such meeting the directors by an Affirmative Majority Approval adopt the
proposed Program and Budget or some modification thereof, the Program and
Budget thus adopted shall be the Program and Budget for the ensuing Budget
Period. If at such meeting the directors fail to adopt a Program and Budget,
the Board, subject to the provisions of Section 9.8 of this Agreement shall
immediately endeavor in good faith to develop a Program and Budget for the
ensuing Budget Period which may be adopted by Affirmative Majority Approval
of the Board.
Section 9.8 Failure of Board to Adopt Programs and Budgets
----------------------------------------------
after Completion of Construction. After the Completion of Construction, if the
- --------------------------------
Board fails, for any reason, to approve a Program and Budget by June 15 or
December 15, as the case may be, the directors elected by either Series of
Shares shall be authorized to refer the matter to arbitration pursuant to
Article 17 of this Agreement. If the Board fails to adopt a Program and
Budget for any such Budget Period, the Technical Management Committee shall
be authorized to continue Operations at levels of production and expenditure
comparable with the last Adopted Program and Budget, unless the Board
otherwise directs by Affirmative Majority Approval, and the last Adopted
Program and Budget shall be deemed extended at such levels.
For purposes of this Section 9.8, Operations shall be considered to
at "levels of production and expenditure comparable with the last Adopted
Program and Budget" if both the costs of, and the quantity of gold bullion
produced by, such Operations are not more than 10% larger or smaller than,
respectively, the inflation-adjusted costs and gold bullion production in the
last Adopted Program and Budget. For purposes of this Section 9.8,
"inflation-adjusted costs" shall be determined by multiplying the budgeted
costs by one plus the rate of increase or one minus the rate of decrease in
the Unidad de Fomentos since the start of the Budget Period covered by the
last Adopted Program and Budget.
Section 9.9 Election to Participate in Programs and Budgets. By
-----------------------------------------------
notice to the Board within twenty (20) days after the adoption or
determination by arbitration of an
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Adopted Program and Budget, (including the Engineering Phase Program and Budget
and the Construction Phase Program and Budget; but excluding the Initial Program
and Budget) a Shareholder may elect to contribute to such Adopted Program and
Budget in some lesser amount than its respective Ownership Interest, or not at
all, in which cases its Ownership Interest shall be recalculated as provided in
Section 4.5 of this Agreement. If a Shareholder fails to so notify the Board of
its election with respect to such an Adopted Program and Budget within such 20
day period, the Shareholder shall be deemed to have elected to contribute to
such Adopted Program and Budget in proportion to its respective Ownership
Interest as of the beginning of the period covered by the Adopted Program and
Budget.
Section 9.10 Budget Overruns and Program Changes. The
-----------------------------------
Chairman of the Technical Management Committee shall promptly notify the
Board of any actual or anticipated material departure from an Adopted
Program and Budget. The Technical Management Committee shall not exceed an
adopted Budget (other than the Construction Budget, for which overruns not
resulting directly from a Material Change to the Construction Phase Program
and Budget, shall not be limited except as expressly provided in Section 7.7)
by more than 10% unless expressly authorized by the Affirmative Majority
Approval of the Board. The Chairman of the Technical Management Committee
shall have the authority to overrun the Construction Budget, subject only to
those matters specified in Section 7.7 of this Agreement. Budget overruns
shall be borne by the Shareholders in proportion to their respective
Ownership Interests as of the time the overrun occurs, subject to the
provisions of Section 11.2 of this Agreement.
Section 9.11 Emergency and Unexpected Expenditures.
-------------------------------------
Notwithstanding any other provision of this Agreement or of the Bylaws, in
case of emergency, the Technical Management Committee may take any
reasonable action it deems necessary to protect life or property, to protect
the Assets or to comply with law or government regulation. The Chairman of
the Technical Management Committee shall promptly notify the Board of any
emergency expenditure. The costs of actions resulting from emergencies shall
be borne by the Shareholders in portion to their respective Ownership
Interests as of the time the emergency occurs.
Section 9.12 Amendment of Programs and Budgets. At any time,
---------------------------------
the Chairman of the Technical Management Committee, after consultation with
the Technical Management Committee, may propose the amendment of an
Adopted Program and Budget, in which event the procedures of Sections 9.4B,
9.5 or 9.7 as the case may be shall apply. If as a result of such proposed
amendment, the Adopted Program and Budget is revised, each Shareholder
shall make one of the elections specified in Section 9.9 with respect to such
revised Adopted Program and Budget, within the time therein specified.
ARTICLE 10
----------
INITIAL AND SUBSEQUENT CONTRIBUTIONS
------------------------------------
Section 10.1 Initial Contributions of the Shareholders. In
-----------------------------------------
addition to the contribution of cash to the Company required by Transitory
Article 1 of the Bylaws, AGRI
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and Bema Bermuda shall contribute the following to the Company (the Initial
Contributions"):
A. The Series B Shareholder shall:
(1) Pursuant to the 1992 Purchase Agreement, contribute
the "Fixed Portion" of the purchase price specified in Clause Fourth thereof,
as defined therein. Such contributions shall be made by cash funded through
equity contributions and/or through junior subordinated loans evidenced by
one or more Junior Subordinated Promissory Notes in the form of Exhibit L
attached hereto, and in such ratios consistent with the Investment Contract as
the Series B Shareholder determines. The Series B Shareholder shall
contribute all expenses incurred in connection with such contributions,
including any stamp tax and withholding costs.
(2) Contribute to the Company all costs and expenses and
invoices (including taxes thereon) relating to services performed and data
acquired by AGI or its Affiliates, including the 1992 Feasibility Study, on or
prior to the date of this Agreement in connection with the Refugio Project
Properties (which services and data may be invoiced by AGI or its Affiliates at
any time prior to commencement of production).
B. The Series A Shareholder shall:
(1) Contribute to the Company all payments and costs that
the Company is required to make or bear in connection with or under the Data
License, including any stamp tax, withholding tax, or reserve requirements.
(2) Contribute to the Company all costs necessary to obtain
the approval of the transfer of the Army Use Contracts to the Company on
terms and conditions acceptable to the Series B Shareholder.
(3) Contribute to the Company all payments and costs that
the Company is required to make or bear in connection with or under the
Water Rights Agreement dated as of November 18, 1992.
(4) Contribute to the Company all payments and costs that
the Company is required to make or bear in connection with or under the
Claim Purchase Agreement, dated as of November 18, 1992, relating to the
Laguna 1-11 and Hielo 1-9 mining claims.
(5) Contribute to the Company all costs, expenses and
invoices (including any taxes thereon) relating to services performed on or
prior to the date of this Agreement by Bema in connection with the Refugio
Project Properties which services may be invoiced by Bema at any time prior
to commencement of production).
C. The Series A Shareholder shall also be entitled, as part of
its Initial Contribution, to cause the Company to purchase the Exploration and
Evaluation Data
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<PAGE>
pursuant to a contract substantially in the form of Exhibit E
to this Agreement and subject to the terms and conditions specified in this
Section 10.1C. The Series A Shareholder shall contribute to the Company all
costs of purchasing the Exploration and Evaluation Data and all expenses
incurred in connection with any such purchase, including any stamp tax,
withholding costs and IVA.
D. All contributions made by the Series A Shareholder pursuant
to the Sections 10.1B and 10.1C shall be made by cash funded through equity
contributions and/or through junior subordinated loans evidenced by one or
more Junior Subordinated Promissory Notes in the form of Exhibit L attached
hereto, and in such ratios consistent with the Investment Contract as the
Series A Shareholder determines.
E. Notwithstanding any other provision of this Agreement, for
purposes of the formula provided in Section 4.5 of this Agreement the "Initial
Contribution" of the Series A Shareholder is U.S. $22.5 million and "Initial
Contribution" of the Series B Shareholder is U.S. $22.5 million.
F. Each Shareholder covenants and agrees, and it will be a
condition of the making of any Subordinated Loan in the form of Exhibit L
under DL600, that the holder of such loan will agree with the Company (i) that
payment of principal or interest on such Note shall be made only out of Cash
Available for Distribution payable in respect of the Series of Shares on whose
behalf the loan was advanced; (ii) any payment of principal may be deferred
to a date acceptable to the Company but in any event not later than three
years after the last payment date and a new rate, or an extension of the due
date of the existing note, shall be made accordingly; (iii) the Shareholder on
whose behalf the loan is advanced shall bear all costs of stamp tax and
encaje; and (iv) the note will be declared in default only under those
circumstances set forth in paragraphs 2(e)(i)-(iv) of Exhibit L.
Section 10.2 Use of Initial Contributions. The contributions to the
----------------------------
Company made by the Shareholders pursuant to Section 10.1 of this
Agreement, shall be used as follows:
A. The contributions made by the Series B Shareholder shall be
used to pay the Fixed Portion (as therein defined) of the purchase price
pursuant to Clause Fourth of the 1992 Purchase Agreement, but not the
Variable Portion (as therein defined); and
B. The contributions made by the Series A Shareholder shall be
used to make payments due pursuant to the Data License and to the Promise
to Sell Water Rights and to discharge the other obligations of the Series A
Shareholder under Section 10.1B of this Agreement.
Section 10.3 Default in Making Contributions. Subject to the
-------------------------------
provisions of Section 10.4, the Shareholders acknowledge that if a Shareholder
defaults in making a contribution to an Adopted Program and Budget in which,
pursuant to Section 9.9 of this Agreement, it has elected to participate or is
deemed to have elected to participate, it will be difficult to measure the
damages resulting therefrom. The non-defaulting Shareholder may,
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<PAGE>
with respect to any such default not cured within 10 days after delivery of
notice of such default to the defaulting Shareholder, elect one of the following
remedies by giving notice to the defaulting Shareholder:
A. The non-defaulting Shareholder shall have the right but not
the obligation to advance or cause to be advanced to the Company, as
subordinated debt under DL600 or otherwise, the defaulted contribution on
behalf of the defaulting Shareholder and treat the same, together with any
accrued interest, as a demand loan to the defaulting Shareholder (a "Default
Loan") bearing interest from the date of the advance until paid at the
Effective Interest Rate plus an additional two percent, but in no event at a
rate higher than the maximum rate permitted by law. A Default Loan and any
security interest relating thereto shall be subordinate to the Project Financing
or any other secured debt, unless otherwise agreed by the creditor of any
such Project Financing or other secured debt. The non-defaulting
Shareholder agrees to evidence such subordination by such instruments as
such creditor may reasonably request. The failure to repay a Default Loan
upon demand shall be a default, with respect to which the non-defaulting
Shareholder shall have the right but not the obligation to make a Default
Loan. Failure timely to repay any Default Loan shall entitle to other
Shareholder to enforce the security for the loan and to exercise the rights
provided in Section 10.3B.
Each Shareholder hereby grants to the other a lien upon its
interest in the Shares, the Assets and a pledge of and security interest in its
Shares and in its Ownership Interest, including its interest in Products and
the proceeds therefrom, to secure any Default Loan made hereunder, including
interest thereon, reasonable attorneys fees and all other reasonable costs and
expenses incurred in recovering the loan with interest and in enforcing such
lien, pledge, or security interest, or both, but in all cases subordinated to
any Project Financing or other secured debt now or hereafter incurred by the
Company, as provided above.
B. The non-defaulting Shareholder may elect, by notice to the
defaulting Shareholder at any time within fifteen (15) days after expiration of
the cure period provided in this Section 10.3, or on failure to repay a Default
Loan on demand to have all of the Shares owned by the defaulting
Shareholder converted into Series C Shares, which shall be entitled to receive
only 10% of Net Profits thereafter generated by the Company, determined as
provided in Exhibit F to this Agreement, upon which conversion the defaulting
Shareholder shall have no Ownership Interest in, or any rights with respect
to, the Company or the Refugio Project Properties except as provided in
Exhibit F.
C. Notwithstanding any other provision of this Agreement, if the
Series A Shareholder (1) defaults with respect to the repayment of principal
or interest on any Initial Program Loan, or (2) fails to make timely any
contribution for the Initial Program and Budget which it is required to make
prior to the earlier of December 31, 1993 or the acceptance by the Series A
Shareholder of a written commitment for Project Financing, the Ownership
Interest of the Series A Shareholder shall be reduced and the Ownership
Interest of the Series B Shareholder shall be increased in accordance with the
formula set forth in Section 4.5 of this Agreement, using the amount of such
defaulted loan payment or the
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<PAGE>
amount not contributed to the Initial Program and Budget, as the case may be, as
the basis for such adjustment of Ownership Interests.
Section 10.4 Default in Contribution to Construction Phase
---------------------------------------------
Program and Budget. The provisions of Section 10.3 shall apply during the
- ------------------
Construction Phase Program, unless the default of a Shareholder in timely
contributing additional equity required by the Construction Phase Budget is
the direct result of the failure or refusal by the lender providing Project
Financing to provide funds it has committed to provide, other than such a
failure or refusal resulting from an act or omission of the defaulting
Shareholder.
Section 10.5 Reimbursement of IVA Distribution. If the Company
---------------------------------
receives reimbursement of, and distributes to the Series A Shareholder, any
IVA paid in connection with the purchase of the Existing Exploration and
Evaluation Data, as provided in Section 10.1C, which must thereafter be
reimbursed by the Company to the government, Bema Bermuda shall bear all
costs making all such payments of such IVA. Bema Bermuda shall indemnify
and hold AGRI and its Affiliates harmless from and against all costs of
repayment of such IVA and all costs relating thereto. If such IVA and all
costs relating thereto are not paid to the Company by Bema Bermuda no fewer
than thirty days prior to the date on which such IVA must be paid to the
government, such failure shall be deemed to constitute a default in making
contributions to an Adopted Program and Budget under Section 10.3 hereof,
provided that the cure period with respect to such default shall be reduced
to five days after notice of default.
Section 10.6 Remedies Cumulative. A non-defaulting Shareholder
-------------------
may elect one or more of the remedies available to it under this Agreement,
or, to the extent a Shareholder has a cause of action for damages, or a lien,
pledge or security interest under applicable law, it shall be entitled to its
rights and remedies at law and in equity, subject to the conditions and
limitations of Article 17 of this Agreement. All such remedies shall be
cumulative. The election of one or more remedies shall not waive the election
of any other remedies.
ARTICLE 11
----------
LOANS
-----
Section 11.1 Initial Program Loan. If the Series A Shareholder so
--------------------
requests, at least five days in advance of the date on which such contributions
are due, the Series B Shareholder shall fund any contributions which the Series
A Shareholder is required to make prior to April 1, 1993 pursuant to the Initial
Program and Budget, up to an aggregate total of U.S. $600,000. All funds
advanced by or on behalf of the Series B Shareholder to the Company for the
benefit of the Series A Shareholder pursuant to this Section 11.3 shall be
treated as a loan from the Series B Shareholder to the Series A Shareholder (an
"Initial Program Loan"). An Initial Program Loan shall be evidenced by a note
substantially in the form of Exhibit M to this Agreement, and shall be subject
to Section 11.5 of this Agreement. Any default by the Series A Shareholder in
the payment of principal or interest due with respect to an Initial Program Loan
shall, result in a reduction of the Ownership Interest of the Series A
Shareholder and a corresponding increase in the Ownership Interest of the Series
B Shareholder, as provided in Section 10.3C of this Agreement. The Series A
Shareholder shall execute any and all documents, promissory notes and other
instruments as may be reasonably requested by the Series B Shareholder to
evidence the obligations of the Series A Shareholder pursuant to all Initial
Program Loans.
Section 11.2 Construction Credit Facility Loan. Upon approval by
---------------------------------
the Board of the Construction Phase Program and Budget, unless the Series B
Shareholder has elected to proceed pursuant to Section 2.5, the Series A
Shareholder may request from the Series B Shareholder a credit facility, not
to exceed U.S. $10 million, to be used exclusively for purposes of funding the
contribution obligations of the Series A Shareholder for the costs of Project
Construction under the Construction Phase Program and Budget, as such
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contributions become due. The Series B Shareholder shall have the right to
determine in its sole and absolute discretion whether to extend the requested
credit facility, and shall respond to a request for a credit facility within 10
days after its receipt. Each advance made under this credit facility (a
"Construction Credit Facility Loan") shall be evidenced by a note substantially
in the form of Exhibit O to this Agreement and shall be subject to the
provisions of Section 11.5 this Agreement.
A. If the Series B Shareholder extends a credit facility
pursuant to this Section 11.1, the credit facility shall be deemed accepted by
the Series A Shareholder and the proceeds of all Construction Credit Facility
Loans shall be paid by or on behalf of the Series B Shareholder to the
Company on behalf of the Series A Shareholder and used solely to fund, (only
to the extent of such Construction Credit Facility Loan) the contribution
obligations of the Series A Shareholder for the costs of Project Construction
under the Construction Phase Program and Budget, as such contributions
become due. The Series A Shareholder shall execute any and all documents,
promissory notes and other instruments as may be reasonably requested by
the Series B Shareholder to evidence the obligations of the Series A
Shareholder pursuant to the credit facility and Construction Credit Facility
Loan.
B. If the Series B Shareholder determines not to extend the
credit facility, Project Construction shall not be commenced and in lieu of the
Construction Phase Program and Budget, the Technical Management Committee
shall undertake only those activities necessary to maintain title to the Refugio
Project Properties and for the maintenance of the Assets ("Asset Maintenance
Costs"), unless and until the Board determines otherwise by Affirmative
Majority Approval; provided, however, that in such event either Shareholder
may proceed under Section 2.5 of this Agreement. Each Shareholder hereby
commits to contribute timely its proportionate share of all Asset Maintenance
Costs in accordance with its Ownership Interest, and agrees that the failure to
do so will constitute a default in making a required contribution to an
Adopted Program and Budget. If a Shareholder defaults in making a
contribution required by this Section 11.2 for Asset Maintenance Costs, the
nondefaulting Shareholder shall have all the rights and remedies specified in
Section 10.3 with respect to any such default.
Section 11.3 Construction Overrun Loan. If both the Series A
-------------------------
Shareholder and the Series B Shareholder have elected pursuant to Section 9.9
to participate in the Construction Phase Program and Budget, or if the Series
A Shareholder pursuant to Sections 2.5A(1) or 2.5A(2) has elected to
participate in a project proposed by the Series B Shareholder (provided that
if the election was pursuant to Section 2.5A(2) the Series B Shareholder has
elected to extend a credit facility as provided in Section 11.4), then upon the
request of the Series A Shareholder, the Series B Shareholder shall fund any
contributions needed for Project Construction (but only for Project
Construction) required from the Series A Shareholder in excess of its
proportionate share of the Construction Budget, including any additional
contributions required to fund Change Orders. All funds advanced by or on
behalf or the Series B Shareholder pursuant to this Section 11.3 shall be paid
to the Company on behalf of the Series A Shareholder and shall be treated as
a loan from the Series B Shareholder to the Series A Shareholder (a
"Construction Overrun Loan"). A Construction
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Construction Phase Program and Budget, or if the Series A Shareholder pursuant
to Sections 2.5A(1) or 2.5A(2) has elected to participate in a project proposed
by the Series B Shareholder (provided that if the election was pursuant to
Section 2.5A(2) the Series B Shareholder has elected to extend a credit facility
as provided in Section 11.4), then upon the request of the Series A Shareholder,
the Series B Shareholder shall fund any contributions needed for Project
Construction (but only for Project Construction) required from the Series A
Shareholder in excess of its proportionate share of the Construction Budget,
including any additional contributions required to fund Change Orders. All funds
advanced by or on behalf or the Series B Shareholder pursuant to this Section
11.3 shall be paid to the Company on behalf of the Series A Shareholder and
shall be treated as a loan from the Series B Shareholder to the Series A
Shareholder (a "Construction Overrun Loan"). A Construction Overrun Loan shall
be evidenced by a note substantially in the form of Exhibit O to this Agreement
and subject to Section 11.5 of this Agreement.
Notwithstanding any other provision of this Agreement, the obligations of
the Series B Shareholder under this Section 11.3 shall remain in force and
effect only so long as (i) Bema Bermuda or an Affiliate of Bema Bermuda owns all
of the Series A Shares (other than any such Shares held by AGRI or its
Affiliates), and (ii) there is no change in control of Bema Bermuda. As used in
this Section 11.3, "control" means possession, directly or indirectly, of the
power to direct or cause direction of management and policies through ownership
of voting securities, contract, voting trust or otherwise.
Section 11.4 Project Construction Loan. Pursuant to Section 2.5A (2) the
-------------------------
Notified Shareholder may request from the Notifying Shareholder a credit
facility, to be used exclusively for purposes of funding the contribution
obligations of the Notified Shareholder for the costs of Project Construction of
the proposed project, as such contributions become due. The Notifying
Shareholder shall have the right to determine in its sole and absolute
discretion whether to extend the requested credit facility, and shall respond to
a request for a credit facility within 10 days after its receipt. Each advance
made under this credit facility (a "Project Construction Loan") shall evidenced
by a note substantially in the form of Exhibit N to this Agreement and subject
to the provisions of Section 11.5 this Agreement.
A. If the Notifying Shareholder extends a credit facility
pursuant to Section 11.4, the credit facility shall be deemed accepted by the
Notified Shareholder and the proceeds of all Project Construction Loans shall
be paid to the Company on behalf of the Notified Shareholder and used solely
to fund, (only to the extent of such Project Construction Loan) the
contribution obligations of the Notified Shareholder for the costs of Project
Construction for the proposed project, as such contributions become due. The
Notified Shareholder shall execute any and all documents, promissory notes
and other instruments as may be reasonably requested by the Notifying
Shareholder to evidence the obligations of the Notified Shareholder pursuant
to the credit facility and Project Construction Loan.
B. If the Notifying Shareholder determines not to extend the
credit facility, the proposed project shall not be commenced and in lieu
thereof the Technical Management Committee shall undertake only those
activities necessary to maintain title to the Refugio Project Properties and for
the maintenance of the Assets unless and until the Board
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<PAGE>
determines otherwise by Affirmative Majority Approval; provided, however, that
in such event either Shareholder may proceed under Section 2.5 of this
Agreement. Each Shareholder hereby commits to contribute timely its
proportionate share of all Asset Maintenance Costs in accordance with its
Ownership Interest, and agrees that the failure to do so will constitute a
default in making a required contribution to an Adopted Program and Budget. If a
Shareholder defaults in making a contribution required by this Section 11.4 for
Asset Maintenance Costs, the nondefaulting Shareholder shall have all the rights
and remedies specified in Section 10.3 with respect to any such default.
Section 11.5 Terms of Loans. If the Series B Shareholder or an
--------------
Affiliate of the Series A Shareholder makes an Initial Program Loan, a
Construction Credit Facility Loan and/or a Construction Overrun Loan on
behalf of the Series A Shareholder, or the Notifying Shareholder or an
Affiliate of the Notifying Shareholder makes a Project Construction Loan on
behalf of the Notified Shareholder, the loan shall be:
A. Subordinate to the Project Financing and consistent with
Project Financing Documents.
B. At the Effective Interest Rate or at the cost of funds to the
Company for project financing for the Refugio Project from third parties in an
amount of U.S. $10 million or more, whichever is greater, but in not event
higher than the rate permitted by applicable law, except that the interest rate
for an Initial Program Loan shall be LIBOR plus two percent, and in each case,
net of any withholding taxes, reserve requirements, and other costs and
expenses of making or holding such loans, all of which shall be the
responsibility of the Shareholder on whose behalf the loan was made, it being
the intent of the Shareholders that the interest rate payable to the
Shareholder extending such a loan shall be a net rate;
C. Repaid firstly, to the Shareholder entitled to repayment or
its order, outside Chile and net of any Chilean taxes, as to interest which has
accrued from the date of advance and then as to principal, to the extent
permitted by Project Financing, from 80% of Cash Available for Distribution
from the Company that would otherwise be made to the Shareholder obligated
to repay the loan, except that a Project Construction Loan shall be so repaid
from 85% of such Cash Available for Distribution and an Initial Program Loan
shall be payable in full on the due date; and
D. Subject to the right of the Shareholder, at any time and
from time to time, to repay any such loan, provided that if a Shareholder
repays a loan other than as provided in Section 11.4C, it shall bear all costs
and expenses incurred by the other Shareholder with respect to early
payment, including any breakage costs.
E. A Shareholder receiving a loan pursuant to this Agreement
shall pay and bear all costs and all taxes imposed by any governmental or
taxing authority in Chile, including all costs associated with any reserve
required by the central bank, and any stamp and withholding taxes.
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Section 11.6 Special Provisions Concerning Control of Board.
----------------------------------------------
Notwithstanding any other provision of this Agreement or of the Bylaws, if the
Series B Shareholder makes a Construction Overrun Loan to the Series A
Shareholder in excess of U.S. $10 million, the directors elected by the Series B
Shareholder will then have the right and authority to exercise all powers of
the Board until such time as the Series A Shareholder have repaid the
outstanding principal balance of the Construction Overrun Loan to U.S. $5
million or less. During any such period, the directors elected by the Series B
Shareholder may not use the control of the Board granted in the immediately
preceding sentence to approve:
A. A capital outlay in any one year for an expansion of
facilities, subsequent to Completion of Construction of more than U.S. $2
million;
B. The abandonment, sale or the disposition of any of Assets in
any one year having a value of more than U.S. $2 million, except that such
restriction shall not apply to sales or dispositions of Products, surplus or
obsolete plant or equipment or other materials in the ordinary course of
business;
C. The settlement of any suit, claim, arbitration or demand
involving the Company or the Assets in excess of U.S. $1 million; or
D. Any decision that would constitute an intentional and
material default of the 1992 Purchase Agreement and related contract of sale
by which title to any material portion of the Refugio Project Properties is
held.
None of the restrictions relating to control of the Board set forth in this
Section 11.7 shall apply if the directors elected by the Series B Shareholder
hold a majority of the Directors Votes.
Section 11.7 Use of Qualified Financial Institution. The Series B
--------------------------------------
Shareholder shall have the right to make any Construction Credit Facility
Loan, Construction Overrun Loan, Initial Program Loan, Project Construction
Loan, Default Loan or demand loan through a Qualified Financial Institution,
including one wholly owned by the Series B Shareholder or its Affiliates, and
the Series A Shareholder shall bear all charges, fees and costs thereof. All or
any portion of any such loans may be made as a subordinated loan under
DL600, in which event the Series A Shareholder shall convert to equity a
sufficient amount of its then-outstanding subordinated debt as may be
necessary to comply with DL600 and the Investment Contract.
ARTICLE 12
----------
ACCOUNTS, SETTLEMENTS AND DIVIDENDS
-----------------------------------
Section 12.1 Monthly Statements. The Technical Management
------------------
Committee shall by the twentieth (20th) of each month submit to each
Shareholder a statement of account reflecting in reasonable detail the charges
and credits to the Company during the preceding month.
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Section 12.2 Requests for Additional Operating Equity. The
----------------------------------------
Technical Management Committee shall submit to each Shareholder prior to the
last day of each month, a request for the contribution of additional equity to
the Company in an amount corresponding to the estimated cash requirements
for the next month. Subject to any applicable requirements of the Project
Financing Documents and the terms of any outstanding Initial Program Loan,
Project Construction Loan, Construction Credit Facility Loan, Construction
Overrun Loan, Default Loan or demand loan, the Technical Management
Committee shall apply as a credit against the contribution request any funds
held by the Company for the benefit of the Shareholder to which the
contribution request is directed. Within 10 days after receipt of a
contribution request, each Shareholder shall pay to the Company its
proportionate share of the amount by which its requested contribution exceeds
its available share of such credits. Time is of the essence with respect to
such payments. The Technical Management Committee shall at all times
maintain a cash balance approximately equal to the rate of disbursement for
up to 90 days. All funds in excess of immediate cash requirements shall be
invested for the benefit of the Company in interest-bearing accounts in such
bank or banks as is determined by the Technical Management Committee or the
General Manager.
Contributions by Shareholders shall be made in cash by means of
capital contributions or loans evidenced by junior subordinated debt
obligations of the Company to such Shareholder or its designee, evidenced by
a promissory note in the form of Exhibit L to this Agreement, to the extent
permitted by the Project Financing Documents. For purposes of determining
the amount of contributions made by the Shareholders under Section 4.5 of
this Agreement, the amount of principal outstanding that has been contributed
in the form of loans evidenced by junior subordinated debt obligations and
accrued by unpaid interest thereon, shall be treated as a contribution to the
Company. It is agreed that amounts contributed in the form of junior
subordinated debt obligations shall be at a variable interest rates not to
exceed the then current LIBOR, plus three percent, and that no interest,
principal or other payments shall be made with respect to such debt
obligations except to the extent that the Board declares there is Cash
Available for Distribution. Interest shall accrue until the same is paid. The
Shareholder for whose benefit the loan was extended shall pay all stamp tax
and Chilean withholding tax, and shall be responsible for all costs of the
reserve requirements of the Banco Central de Chile.
Section 12.3 Failure to Contribute Additional Operating Equity. A
-------------------------------------------------
Shareholder that fails to contribute additional equity in the amount and at the
times specified in Section 12.2 shall be in default, and the amounts of the
defaulted contribution request shall bear interest from the date due at the
Effective Interest Rate, plus an additional two percent, but in no event, shall
the rate of interest exceed the maximum permitted by law. The non-defaulting
Shareholder shall have those rights, remedies and elections specified in
Section 10.3 of this Agreement.
Section 12.4 Cash Available for Distributions. "Cash Available for
--------------------------------
Distributions" means, so long as the financial books of the Company are
maintained in United States dollars, on any date of calculation and subject to
any requirements of Project Financing, including any cash reserves, the
positive difference resulting from;
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A. The amount of cash, and cash equivalent, in all accounts of
CMM plus any spot gold sale receivables;
B. Less, without duplication, the sum of the following items:
(1) Current liabilities for the next three months but
including all current liabilities for Chilean taxes payable and excluding long
term debt and debt required for working capital purposes contemplated by
Section 6.3H,
(2) Debt service requirements for all third party Company
debt due within three months; and
(3) Budgeted operating and capital expenditures forecast
for the next two months and reasonable and normal reserve accounts for
reclamation and other governmental obligations.
Cash Available for Distribution shall exclude the effects of any
monetary revaluations required by Chilean law for tax or other purposes but
shall include any cash effects of currency translation adjustments of
converting between United States dollars and Chilean pesos.
If the sum of 12.4B(1), (2) and (3) exceeds U.S. $10,000,000, the
Board may consider the distribution of a portion of such excess amount, if in
its judgment the excess can be distributed without adversely impacting the
Company's financial position.
Section 12.5 Payments and Distributions.
--------------------------
A. The Cash Available for Distributions, whether as payment for
principal or interest on any subordinated debt to the Shareholders or their
Affiliates, or as dividends for payment to any Series of Shares, shall be
adjusted as follows:
(1) To the Series A Shareholder:
(a) Cash Available for Distribution to the Series A
Shareholder shall be (i) reduced by all royalties and payments made by CMM
to CMR under Article Fourth Section 2)A) of the 1992 Purchase Agreement, the
burden of which payments shall be borne exclusively by the Series A
Shareholder; and (ii) shall be increased by an amount equal to the benefit of
any first category tax deduction obtained by CMM due to such payments to
CMR;
(b) Cash Available for Distribution attributable to the
Series A Shareholder shall be increased by an amount equal to (i) the benefit
of any first category tax deduction that has been obtained by CMM from data,
services invoiced and other purchases or acquisitions made by CMM with the
Initial Contributions attributed to the Series A Shareholder or its Affiliates,
provided that such Series A Shareholder shall bear the burden of any
disallowance of any such deduction, plus (ii) interest on such amount equal to
the
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<PAGE>
amount of interest paid by Banco de Chile for time deposits in dollars,
from the time such deduction is taken by the Company until the time it is
paid.
(2) To Series B Shareholder:
(a) Cash Available for Distribution attributed to the Series
B Shareholder shall be (i) reduced by all royalties and payments made by CMM
to CMR under Article Fourth Sections 2)B) and 2)C), of the 1992 Purchase
Agreement, the burden of which payments shall be borne exclusively by the
Series B Shareholder; and (ii) increased by an amount equal to the benefit of
any first category tax deduction obtained by CMM due to such payments to
CMR;
(b) Cash Available for Distribution to the Series B
Shareholder shall be increased by an amount equal to the (i) benefit of any
first category tax deduction that has been obtained from CMM from the
purchases of the Refugio Project Properties and other acquisitions by the
Company arising from the Initial Contributions attributed to the Series B
Shareholder or its Affiliates, provided that such Series B Shareholder shall
bear the burden of any disallowance of such deduction, plus (ii) interest on
such amount equal to the amount of interest paid by Banco de Chile for time
deposits in dollars, from the time such deduction is taken by the Company
until the time it is paid.
(3) The Cash Available for Distribution to a Series of Shares
shall be increased by the amount of the benefit of the first category tax
deduction obtained by CMM resulting from any interest expense deduction
taken by CMM with respect to any interest payments made to the holder of
such Series of Shares or an Affiliate thereof, and decreased by the amount of
any stamp tax paid by the Company in connection therewith. Each Series of
Shares shall be responsible for any withholding tax payable by the Company
in connection with any payment made to such Series of Shares or to a
qualified financial institution on behalf of such Series of Shares.
(4) Nothing contained herein shall be deemed to relieve either
Series of Shares from any withholding or other taxes on any funds distributed
to or on behalf of such Shares, all of which will be borne by that Series of
Shares and adjusted in the Cash Available for Distribution otherwise payable
to such Shares. Any payments of Cash Available for Distribution to the
Shareholders shall be expressly subject and subordinate to any Project
Financing Documents.
Section 12.6 Audits. Upon request made by any Shareholder
------
within 12 months following the end of any calendar year (or, if the Board has
adopted an accounting period other than the calendar year, within 12 months
after the end of such period), an audit of the accounting and financial
records of the Company for such calendar year (or other accounting period)
shall be performed by the Santiago office of Langton Clarke or Price
Waterhouse. All written exceptions to the audit and claims upon the Company
for discrepancies disclosed by such audit shall be made not more than 3
months after receipt of the audit report. Failure to make any such exception
or claim within the 3 month period
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<PAGE>
shall mean the audit is correct and the accounting and financial matters subject
to such audit are binding upon the Shareholders.
ARTICLE 13
----------
SALE OF PRODUCTS
----------------
Section 13.1 Sales of Refined Precious Metals. Subject to the
--------------------------------
provisions of the Project Financing Documents, the Company shall arrange for
refining by one or more refineries located outside Chile of all dore and
precious metals concentrates produced from the Refugio Project Properties.
Each such refinery shall be required to produce a refined gold bullion of at
least 0.995 purity in the case of gold and at least 0.999 purity in the case of
silver, in both cases meeting the specifications of the requirements for good
delivery in the London Bullion Market Association or its successor or
otherwise as provided by the Board. All refined gold and silver bullion shall
be sold for the account of the Company, unless distribution of refined gold
and silver to the Shareholders is authorized by the Board.
If the Company produces any valuable mineral product other than
refined precious metals or a dore or concentrate containing precious metals, it
shall sell such other Products on a commercially reasonable basis.
Section 13.2 Trading Activities. Each Shareholder acknowledges
------------------
the other Shareholder and its Affiliates may from time to time enter forward
sale and/or purchase contracts, spot-deferred contracts, option and/or other
price hedging and price protection arrangements and mechanisms, and
speculative purchases and sales of forward, futures and option contracts, both
on and off commodity exchanges ("Trading Activities") in connection with
refined precious metals and other Products produced wholly or in part from
the Refugio Property or the Buffer Zone and attributable to the Ownership
Interest of the other Shareholder. Each Shareholder further acknowledges
and agrees that the Trading Activities of the other Shareholder and its
Affiliates, and the profits and losses generated thereby, shall not, in any
manner, be deemed or considered activities by or for the Company, nor taken
into account in any manner in determining the revenues or losses of the
Company. Each Shareholder acknowledges that as a result of the other's
Trading Activities, the other Shareholder and/or its Affiliates may receive
additional or reduced proceeds in connection with the sale of refined precious
metals and other Products produced from the Refugio Property or the Buffer
Zone. Each Shareholder expressly waives any right or claim to share in
profits or receive any benefit whatsoever resulting directly or indirectly from
the other's Trading Activities. Neither Shareholder shall have any liability
for any loss resulting from Trading Activities conducted by the other
Shareholder. It is expressly agreed that the foregoing provisions of this
Section 13.2 are not intended to confer any authority on either Shareholder to
conduct Trading Activities on behalf of the Company, or to grant either
Shareholder the right to have the other Shareholder conduct Trading Activities
on its behalf. Any Trading Activities conducted by or on behalf of the Company,
shall require the prior express authorization of the Board.
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<PAGE>
Section 13.3 Purchase of Dore. Each of the Shareholders shall
----------------
have the right to purchase a portion of the dore produced by the Company
corresponding to its Ownership Interest, subject in each case to (i) the
provisions of any Project Financing Documents; (ii) the provisions of any
royalty obligations of the Company being unaffected; (iii) existing refining
contracts; (iv) the condition that there are no adverse tax, legal, central
bank, Investment Contract or economic consequences to the other Shareholder or
to the Company; (v) the condition that the sales occur outside Chile; and (vi)
the entering into a satisfactory sales contract between such Shareholder and the
Company, including the normal commercial payment terms. Such right may be
exercised by an Affiliate of a Shareholder.
ARTICLE 14
----------
INSOLVENCY OF A SHAREHOLDER
---------------------------
Section 14.1 Deemed Offer to Sell Interests. If any of the
------------------------------
following shall occur, the Shareholder committing or subject to such act shall
promptly notify the other Shareholder in writing, and shall be deemed to have
offered to sell its Ownership Interest to the other Shareholder or its designee
on the terms and conditions hereinafter specified:
A. A receiver, liquidator, assignee, custodian, trustee,
sequester or similar official for a substantial part of a Shareholder's assets
is appointed and such appointment is neither made ineffective nor discharged
within 60 days after the making thereof, or such appointment is consented to,
requested by, or acquiesced in by the Shareholder; or
B. The Shareholder commences a voluntary case under any
applicable bankruptcy, insolvency, or similar law now or hereafter in effect; or
consents to the entry of an order for relief in an involuntary case under any
such law or to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator, or other similar
official of any substantial part of its assets; or makes a general assignment
for the benefit of creditors; or fails generally to pay its debts as such debts
become due; or takes corporate or other action in furtherance of any of the
foregoing; or
C. Entry is made against a Shareholder of a judgment, decree
or order for relief affecting a substantial part of its assets by a court of
competent jurisdiction in an involuntary case commenced under any applicable
bankruptcy, insolvency, or other similar law of any jurisdiction now or
hereafter in effect.
The price to be paid by the remaining Shareholder or its designee
shall be (i) an amount equal to the best bona fide offer received by the
withdrawing Shareholder within sixty (60) days after the occurrence of the
event giving rise to the deemed offer to sell, or (ii) if no such offer has been
received, then an amount equal to sixty-seven percent (67%) (which the
Shareholders agree adequately takes into account the risks of continuing
operations and commodity price fluctuations) of the other Shareholder's
Ownership Interest divided by 100 and then multiplied by the net present
value of the Assets (using a discount rate of 8%), using as the net present
value of the Assets the average of the fair market value stated in three
appraisals obtained by the remaining Shareholder from independent qualified
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<PAGE>
appraisers of recognized standing competent in the appraisal of mining
properties assuming a gold price equal to the average London PM fix during
the six months preceding the event giving rise to the deemed offer of sale.
If the remaining Shareholder desires to exercise the purchase
right granted to it pursuant to this Section 14.1, it shall so notify the other
Shareholder within thirty (30) days after the receipt of written notification
from the other Shareholder of the occurrence of the event which gave rise to
the deemed offer of sale.
Section 14.2 Non-Compete Covenants. A Shareholder that ceases
---------------------
to hold an Ownership Interest as a result of the operation of the provisions of
Articles 2, 4, 10, 11 or 14 of this Agreement, or an Affiliate thereof, shall
not directly or indirectly acquire any interest in property or water within the
area encompassed by the Refugio Project Properties for one (1) year after the
effective date of withdrawal. Nothing in this Section 14.2 shall be deemed to
prevent the Series A Shareholder from exercising any rights it holds pursuant to
the 1992 Purchase Agreement or acquires pursuant to this Agreement. If a former
Shareholder, or an Affiliate of a former Shareholder, breaches this Section
14.2, such former Shareholder or Affiliate shall be obligated to offer to convey
to the other Shareholder, without cost, any such property or water interest so
acquired. Such offer shall be made in writing and can be accepted by the other
Shareholder at any time within 60 days after it is received.
ARTICLE 15
----------
LAND USE
--------
Section 15.1 Buffer Zone Property. The 1992 Purchase Agreement
--------------------
contains the following provisions:
A. Upon termination of the Refugio project, San Damian will
have the right to acquire, for a nominal price, the Buffer Zone Property
except that area which contains a geologically contiguous extension of
mineralization originating within the mining claims included in the Refugio
Property;
B. The Company shall have the right to exploit mineralization
within the Buffer Zone Property which is a geologically contiguous extension
of the mineralization originating within the mining claims included in the
Refugio Property; otherwise, may not exploit mineralization contained within
the Buffer Zone Property;
C. San Damian will have no right to exploit mineralization
within the Buffer Zone Property;
D. The Company will have the use of the surface land of the
Buffer Zone Property without restriction if the Company removes ore in its
use of the Buffer Zone Property, it must stockpile the ore so removed for the
benefit of San Damian.
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Section 15.2 Outside Property. San Damian will hold its interest
----------------
in the Outside Property subject only to the conditions that:
A. If the Company reasonably requests a mining easement or
surface and subsurface rights on a part of the Outside Property on which to
locate facilities to carry out Operations, San Damian shall transfer the same to
the Company provided that:
(1) With respect to facilities not shown in the Project
Feasibility Study, the Company first undertakes, where appropriate and at its
cost, condemnation drilling on the portion of the Outside Property to be
covered by such facilities. Such condemnation drilling shall be conducted to
determine if economic ore resources are contained within the area of the
planned facilities. The scope of the condemnation drilling shall be one hole
per two hectares (with a minimum of one hole per planned facility) to a depth
of at least 100 meters. If economic ore is discovered or if the planned facility
would adversely affect San Damian's ability to exploit previously discovered ore
in the immediate vicinity, the Company will use reasonable efforts to relocate
the planned facilities. Condemnation drilling will not be required or considered
appropriate for roads, pipelines, powerlines, temporary storage areas, tunnels,
temporary uses, ditches, conveyor ways, or for other like facilities, or for
facilities shown on the Project Feasibility Study.
(2) With respect to facilities contemplated by the Project
Feasibility Study, the Company shall be deemed thereby to have requested a
transfer of the properties relating to such facilities, which properties shall
be conveyed to the Company promptly after the Closing of the transactions
contemplated by the 1992 Purchase Agreement.
Subject to condemnation drilling and other on-site considerations,
the current best estimate of the location of the permanent mancamp for the
Verde mining operations is an area of 6 to 12 hectares, more or less, located
within a radius of 600 meters from the following coordinates:
N 6,953,300 m
E 478,350 m
The actual final location of the Verde mancamp will be determined by the
Company during detailed engineering.
San Damian will grant to the Company a mining easement or right
of way encompassing the surface and undersurface of the estimated area and
location of the mancamp, such easement or right of way to be amended, if
necessary, when the actual location and area of the mancamp has been
determined by the Company and condemnation drilling (not to exceed three
holes at a maximum total cost of U.S. $30,000) has been completed.
B. If San Damian wishes to exploit mineralization within the
Outside Property and that mineralization is lying under or within surface or
subsurface rights within which the Company has constructed or has plans to
construct roads, pipelines, powerlines or
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other facilities for the Refugio
Project, or if CMM has constructed or has plans to construct roads, pipelines,
powerlines or other facilities for the Refugio Project that adversely affect
Newco's ability to exploit ore in the immediate vicinity of such facilities, San
Damian may, when the same will reasonably be needed by San Damian, request
that the Company transfer to San Damian the required portion of the surface
and subsurface rights of the Outside Property and, provided San Damian
bears all costs to the Company of relocating the roads, pipelines, powerlines
or other facilities located on that portion of the Outside Property, which costs
are to include any additional operating costs or lost production costs to the
Company as a result of such relocation, the Company shall transfer to San
Damian the surface and undersurface rights so requested by San Damian,
unless by so doing the Company is unable to continue operations or
production at the anticipated levels then in existence or as contemplated by
the Project Feasibility Study and San Damian is unable to compensate therefor,
such transfer to be made within a reasonable time when San Damian will
actually need such areas.
Section 15.3 Water Rights. Bema Chile has agreed to grant to the
------------
Company in the Agreement an option to acquire all of Bema Chile's interest in
and to the Water Rights. At San Damian's request, the Company will make
available to San Damian such portion of the water supply from the Water
Rights which is in excess of the present and reasonably anticipated future
needs of the Company, at San Damian's cost and for such time as such
supplies are in excess of the Company's needs, for use by San Damian in
exploiting its property and interests in the Outside Property, subject to the
consents of third parties and to compliance with law.
San Damian will be obligated, on request by the Company and at
the Company's cost, to apply for any additional rights within the Outside
Property that may become necessary for Operations.
Section 15.4 Conflicts in Use of Lands. All parties will use
-------------------------
reasonable efforts to reduce potential conflicts in uses with respect to the
Refugio Property, Buffer Zone Property and the Outside Property.
It is agreed by the parties that in the event of any arbitration of
the matters herein, the arbitrator will be governed by the principle of the
best interests of the exploitation of the Refugio Property, as the paramount
interest in the event of incompatibility between exploitation by San Damian and
the Company or in the allocation of rights hereunder.
It is understood that none of AGI, AGRI, Bema, CMR, San Damian or
any of their Affiliates will, other than as set out herein, acquire, claim or
attempt to claim any interests in real or personal property within the Refugio
Property or contrary to the interests of the Company in the Buffer Zone
Property. Any interest so acquired shall, upon demand by the Company, be
immediately conveyed to the Company without charge.
Bema Chile agrees to cause San Damian to comply with its
obligations herein to the extent it is able to do so.
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<PAGE>
Section 15.5 Preemptive Right With Respect to Sales of Property.
--------------------------------------------------
If the Board desires to sell, in one or a series of related transactions, one or
more mining claims or water rights for price less than U.S. $2 million, the
Shareholders shall each have a preemptive right to purchase such mining
claims or water rights as provided in this Section 15.5.
A. The Board shall notify the Shareholders of its intention
make any such sale. The notice shall state the price and all other pertinent
terms and conditions of the intended transaction, and shall be accompanied by
a copy of the offer or contract. If any portion of the consideration to be
received is in the form of an undertaking to act or refrain from acting or in
some other nonmonetary form, the notice shall describe such consideration and
its monetary value, based on the fair market value of any such nonmonetary
consideration. The Series A Shareholder, provided it is not in default under
any material provision of the Bylaws, this Agreement or the Project Financing
Documents, shall have fifteen (15) days from the date such notice is delivered
to notify the Board whether it elects to acquire the offered interest at the
same price and on the same terms and conditions as set forth in the notice
(or their monetary equivalent). If it does so elect, the transaction shall be
consummated promptly after notice of such election is delivered to the Board.
B. If the Series A Shareholder fails to elect to exercise its
preemptive purchase right within the period provided for in Section 15.5A, the
Series B Shareholder, provided it is not in default under any material
provision of the Bylaws, this Agreement or the Project Financing Documents,
shall have fifteen (15) days from the last day of the fifteen (15) day period
described in Section 15.5A to notify the Board whether it elects to acquire the
offered interest at the same price and on the same terms and conditions as
set forth in the notice (or their monetary equivalent). If it does so elect, the
transaction shall be consummated promptly after notice of such election is
delivered to the Board.
C. If both the Series A Shareholder and the Series B
Shareholder fail to elect to exercise their preemptive purchase rights within
the periods provided for in Section 15.5, the Company shall have 180 days
following the expiration of the later of such periods to consummate the sale to
a third party at a price and on terms no less favorable than those in the
notice required by Section 15.5A.
D. If the Company fails to consummate the sale to a third party
within the period set forth in Section 15.5C, the preemptive right of the
Shareholders in such offered interest shall be deemed to be revived. Any
subsequent proposal to sell such interest shall be conducted in accordance
with the procedures set forth in this Section 15.5.
Section 15.6 Surrender or Abandonment of Property. The Board
------------------------------------
may authorize the surrender or abandonment of part or all of the Refugio
Project Properties. If the Board authorizes any such surrender or
abandonment it shall, on and subject to the terms herein provided, offer to
assign such property first to the Series A Shareholder, and if such offer is
not accepted, second to the Series B Shareholder, and if such offer is not
accepted, third to any other entity which has an express contractual right to
receive such offer pursuant to an agreement executed by or enter with the
consent of the Series A and the Series B
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Shareholders. A party which receives an offer of assignment of property pursuant
to this Section 15.6 may accept such offer only by notifying the Board of its
acceptance within 10 days after receipt of the offer of assignment. Failure to
notify the Board of acceptance of the offer of assignment within such 10 day
period shall conclusively be deemed to be an irrevocable rejection of such offer
and a waiver of any rights pursuant to this Section 15.6 with respect to the
property subject to the offer. If a party (an "Accepting Assignee") timely
accepts an offer of assignment made pursuant to this Section 15.6: (i) the
Company shall assign to the Accepting Assignee, by quitclaim deed or its
equivalent, all of the Company's interest in the property to be abandoned or
surrendered, (ii) the abandoned or surrendered property shall cease to be part
of the Refugio Project Properties, and (iii) neither the Company nor the other
Shareholder shall have any liability or responsibility thereafter relating to
such abandoned or surrendered property and the Accepting Assignee shall
indemnify the Company and the other Shareholder from and against any claim,
cost, liability or damage arising after the date of transfer to the Accepting
Assignee from or in connection with the abandoned or surrendered property
(including any such matter based on a condition of the property at the time of
transfer).
ARTICLE 16
----------
TRANSFER OF INTEREST
--------------------
Section 16.1 General. A Shareholder shall have the right to
-------
Transfer to a third party all of any part of its Shares or its Ownership
Interest or any interest therein, only as provided in this Article 16.
Section 16.2 Limitations on Free Transferability. A Shareholder
-----------------------------------
may Transfer its Ownership Interest, or any interest in the Company or in the
Assets only by a Transfer of Shares. Any Transfer of Shares shall be subject
to the following terms and conditions:
A. No Transfer shall be effective until after the earlier of
Completion of Construction or eighteen months after the date of this
Agreement; provided, however, that this Subsection 16.2A shall not prohibit a
Transfer (subject to the provisions of Sections 16.3 and 16.4 of this
Agreement) during such period:
(1) to an Affiliate of a Shareholder;
(2) arising from a public distribution of ownership interest
in a Shareholder or an Affiliate of a Shareholder;
(3) to a Qualified Transferee; or
(4) to create a mortgage, lien, encumbrance or security
interest in connection with Project Financing or securing funds for the
Equity/Junior Subordinated Debt component of the Financing Plan or in
connection with other general corporate borrowings, so long as the security
granted for such borrowings does not hinder or prevent the
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arrangement of the Project Financing or interfere with the implementation of the
Financing Plan.
B. If the Transfer is not to an Affiliate, the transferring
Shareholder must provide the transferee with a complete copy of this
Agreement and of the Bylaws before the Transfer becomes effective;
C. No transferee shall have the rights of a Shareholder unless
and until the transferring Shareholder has provided to the other Shareholder
notice of the Transfer, and the transferee, as of the effective date of the
Transfer, has committed in writing to be bound by the Bylaws and this
Agreement to the same extent as the transferring Shareholder;
D. The transferring Shareholder and the transferee shall bear
all tax consequences of the Transfer;
E. If the Transfer involves the grant of a security interest by
mortgage, deed of trust, pledge, lien or other encumbrance of any interest in
the Shares to secure a loan or other indebtedness of a Shareholder in a bona
fide transaction, such security interest shall be subordinate to the terms of
the Project Financing, any senior debt, any Project Construction Loan, any
Construction Credit Facility Loan, any Construction Overrun Loan, the Bylaws
and this Agreement, including the rights and interests of the other
Shareholder hereunder. Upon any foreclosure or other enforcement of rights
in the security interest the acquiring third party shall be deemed to have
assumed the position of the encumbering Shareholder with respect to the
Bylaws, this Agreement and the other Shareholder, and it shall comply with
and be bound by the terms and conditions of the Bylaws and this Agreement;
F. If Transfer is made of less than all of the Shares of a
Shareholder, the transferring Shareholder, and its transferee shall act and be
treated as one Shareholder; provided that the provisions of this Section 16.2F
shall not apply to a transfer of Shares made pursuant to Sections 2.5, 4.5 or
10.3 of this Agreement.
Section 16.3 Preemptive Right. Except as otherwise provided in
----------------
Section 16.4 of this Agreement, if a Shareholder desires to Transfer all or any
part of its Shares or any interest therein, the other Shareholder shall have a
preemptive right to acquire such Shares or the interest therein to be
transferred as provided in this Section 16.3.
A. A Shareholder intending to Transfer all or any part of its
Shares shall promptly notify the other Shareholder of its intentions. The
notice shall state the price and all other pertinent terms and conditions of the
intended transaction, and shall be accompanied by a copy of the offer or
contract. If any portion of the consideration to be received is in the form of
an undertaking to act or refrain from acting or in some other nonmonetary
form, the notice shall describe such consideration and its monetary value,
based on the fair market value of any such nonmonetary consideration. The
other Shareholder shall have sixty (60) days from the date such notice is
delivered to notify the transferring Shareholder whether it elects to acquire
the offered interest at the same price and on the same terms and conditions
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as set forth in the notice (or their monetary equivalent). If it does so elect,
the transaction shall be consummated promptly after notice of such election is
delivered to the transferring Shareholder.
B. If the other Shareholder fails to elect to exercise its
preemptive right within the period provided for in Section 16.3A, the
transferring Shareholder shall have 180 days following the expiration of such
period to consummate the Transfer to a third party at a price and on terms
no less favorable than those offered by the transferring Shareholder to the
other Shareholder in the notice required by Section 16.3A.
C. If the transferring Shareholder fails to consummate the
Transfer to a third party within the period set forth in Section 16.3B, the
preemptive right of the other Shareholder in such offered interest shall be
deemed to be revived. Any subsequent proposal to Transfer such interest
shall be conducted in accordance with the procedures set forth in this Section
16.3.
Section 16.4 Exceptions to Preemptive Right. Section 16.3 shall
------------------------------
not apply to the following, provided that the transferring Shareholder is not
in default under any material provision of the Bylaws, this Agreement or the
Project Financing Documents, and that neither such Shareholder nor its
transferee shall be in such default immediately after the Transfer:
A. A Transfer by a Shareholder of all or any part of its
interest in its Shares to an Affiliate, provided the transferring Shareholder is
not released from its obligations;
B. An incorporation, merger, consolidation, amalgamation,
corporate reorganization, or liquidation of a Shareholder, provided that the
surviving entity shall own, immediately after such Transfer, substantially all
of the assets and obligations of that Shareholder, provided further that any
such Transfer will not result in a change in control of the transferring
Shareholder;
C. The grant by a Shareholder of a security interest in its
Shares by mortgage, deed of trust, pledge, lien or other encumbrance;
D. A sale or other commitment or disposition of Products or
proceeds from sale of Products by a Shareholder upon distribution to it;
E. Transfer of any indirect interest in the Shares which is
effected by means of the Transfer of an ownership interest in the
Shareholder, including, without limitation, the issuance or Transfer of
securities of the Shareholder, provided that, either (1) such Transfer will not
result in a change of control of the Shareholder, or (2) if such Transfer
results in a change of control of the Shareholder, the Transfer arises from a
public distribution of ownership interest in the Shareholder or an Affiliate of
the Shareholder; or
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F. Transfer to Qualified Transferee, which is not an Affiliate of
the Shareholder, of any indirect interest in the Shares, which Transfer is
effected by means of the Transfer of any ownership interest in the
Shareholder or any other entity holding a direct or indirect interest in the
Shareholder, including without limitation, the issuance or Transfer of
securities of the Shareholder or such other entity, whether or not such
Transfer would result in a change of control of the Shareholder or of any
such other entity.
Section 16.5 Meanings of Qualified Transferee and Control. As
--------------------------------------------
used in Section 16.4 of this Agreement, "Qualified Transferee" shall mean any
entity which: (i) has financial capability and creditworthiness adequate to
satisfy its obligations and liabilities under this Agreement and the Bylaws;
(ii) has such technical ability with respect to the development, construction,
management and operation of a mineral property as will enable it to satisfy its
obligations under this Agreement and the Bylaws; (iii) has no legal impediments
to ownership of the Shares, the Assets, or the Ownership Interest or the
operation of the Company, is legally constituted, and is, or undertakes to
become, duly qualified and in good standing to transact business, in the
necessary jurisdictions; (iv) has not been in material litigation or arbitration
proceedings as an opposing party with the non-transferring Shareholder for a
period of at least seven (7) years prior to the proposed Transfer and; (v) which
if the Transfer were completed, would not cause such Transfer to constitute an
arrangement which is a violation of applicable law (such as an antitrust law).
As used in Section 16.4 of this Agreement, "control" means
possession, directly or indirectly, of the power to direct or cause direction of
management and policies through ownership of voting securities, contract,
voting trust or otherwise.
ARTICLE 17
----------
DISPUTES
--------
Section 17.1 Resolution of Disputes. The Shareholders shall
----------------------
resolve all disputes between them, including deadlocks of the Board or the
Technical Management Committee, arising out of or relating to this Agreement
or the Bylaws, or the breach of either or both, or the Operations of the
Company by one of the three methods specified in this Article 17. It is the
intent of the Shareholders that all such disputes shall be subject to resolution
by one, but only by one, of the following methods, and the sole applicable
method shall be determined as follows: (i) arbitration in the United States for
matters identified in Section 17.2, in accordance with the procedures specified
in Section 17.5, (ii) arbitration in Chile for matters identified in Section
17.3, in accordance with the procedures specified in Article 35 of the Bylaws
and Section 17.6, or (iii) litigation in the United States for matters not
subject to arbitration, in accordance with the provisions of Section 17.7.
AGRI, AGI, Bema and Bema Bermuda hereby expressly waive any
right to institute, and expressly covenant not to institute, any litigation,
arbitration, mediation, conciliation or other proceeding, other than arbitration
and litigation as provided in this Article 17, in any jurisdiction (including,
without limitation, in Chile or Canada) with respect to any claim, controversy,
dispute or cause of action arising out of or relating to this
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Agreement or the Bylaws, or the breach of either or both, or the Operations of
the Company. Nothing in this Agreement shall limit the rights of any Shareholder
to secure, in any court of competent jurisdiction, the recognition and
enforcement of any arbitral decision or award made in an arbitration proceeding
conducted pursuant Sections 17.2 or 17.3 of this Agreement.
The Shareholders acknowledge that the agreements to arbitrate
contained in this Section 17 and any award rendered pursuant thereto shall
be governed by the 1958 United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards.
Section 17.2 Matters Subject to Arbitration in the United States.
---------------------------------------------------
The Shareholders shall submit to final and binding arbitration in the United
States, in accordance with the provisions of Sections 17.5 of this Agreement,
all disputes, controversies or differences between or among them arising out
of or relating to the following, and further agree that judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction thereof:
A. As provided in Section 6.6 of this Agreement, any matter
which requires unanimous approval of the Board pursuant to Section 6.5 of
this Agreement, but which does not receive such unanimous approval when
presented to the Board.
B. As provided in Section 6.6 of this Agreement, any matter
which requires Affirmative Majority Approval of the Board pursuant to
Sections 6.3 or 7.7 of this Agreement, but which does not receive such
Affirmative Majority Approval when presented to the Board.
C. As provided in Section 9.8 of this Agreement, the adoption
of a Program and Budget if the Board fails to adopt a Program and Budget by
Affirmative Majority Approval, in accordance with the provisions of Section 9.7
of this Agreement.
D. As provided in Section 9.5 of this Agreement, the
determination of the Construction Budget if the Board fails unanimously to
adopt a Construction Budget, in accordance with the provisions of Section 9.5
of this Agreement.
E. As provided in Section 9.2 of this Agreement, a decision
concerning the duration of the Initial Program and Budget, if the Board fails
to agree concerning its duration; provided, however, that the decision whether
to proceed with Development beyond the activities contemplated to be
conducted during the Engineering Phase Program and Budget shall be made
by the Shareholders as provided in Sections 2.4 and 2.5 and shall not be
subject to arbitration.
F. As provided in Section 9.4 of this Agreement, a decision to
proceed with Detailed Engineering before each of the Shareholders has
accepted a commitment for Project Financing and is able to fund the
Equity/Junior Subordinated Debt component of the Financing Plan; provided,
however, that the decision whether to proceed with Development beyond the
activities contemplated to be conducted during the Engineering Phase Program
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and Budget shall be made by the Shareholders as provided in Sections 2.4 and
2.5 and shall not be subject to arbitration.
G. As provided in Section 8.3 of this Agreement, the failure of
the Board to unanimously agree concerning a request to remove and replace
the General Manager.
H. As provided in Section 11.2B of this Agreement, a decision
to conduct Operations in addition to those necessary to maintain title to the
Refugio Project Properties during the period therein described; provided,
however, that the decision whether to proceed with Development beyond the
activities contemplated to be conducted during the Engineering Phase Program
and Budget shall be made by the Shareholders as provided in Sections 2.4 and
2.5 and shall not be subject to arbitration.
I. Any alleged failure to follow the procedures specified in, or
to obtain the vote of the directors required by, this Agreement with respect
to any action by the Board or by the Technical Management Committee;
provided, however, that unless a Shareholder institutes arbitration with
respect to any such matter as herein provided within thirty (30) days after
the alleged failure, such Shareholder shall be deemed to have waived
irrevocably any right to object to or challenge such action by the Board or
the Technical Management Committee.
Section 17.3 Matters Subject to Arbitration in Chile. The
---------------------------------------
Shareholders shall submit to final and binding arbitration in Chile pursuant to
Article 35 of the Bylaws and the provisions of this Article 17, and further
agree that judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof any dispute or controversy
or claim between the Shareholders arising out of or relating to the 1992
Purchase Agreement.
Section 17.4 Matters Not Subject to Arbitration. Unless the
----------------------------------
Shareholders otherwise agree, no dispute between the Shareholders concerning
this Agreement or its interpretation, execution, validity, breach, application
or termination or relating to the Company shall be subject to arbitration,
except as provided in Sections 17.2 and 17.3 of this Agreement. Without limiting
the foregoing, the following matters shall not be subject to arbitration:
A. The decision of the Series B Shareholder concerning the
appointment of a General Manager, made pursuant to Section 8.1 of this
Agreement;
B. Any decision of the Board made pursuant to the authority of
the Chairman to break deadlocks of the Board as provided in Section 6.2 of
this Agreement;
C. Any alleged liability arising from the vote by the Chairman
of the Board made to break a deadlock, as provided in Section 6.2;
D. Any alleged liability arising from any decision of the
Chairman of the Technical Management Committee to break a deadlock, as
provided in Section 7.7; or
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Section 17.5 Special Procedures for Arbitration in the United
------------------------------------------------
States. In any arbitration of a matter submitted to arbitration pursuant to
- ------
Section 17.2 of this Agreement the following shall apply:
A. The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association ("AAA")
then in effect, as varied and supplemented by the provisions of this Article
17. The Supplementary Procedures for International Commercial Arbitration of
the AAA shall not be used. The Shareholders waive any right to require that
the arbitrator be a national of a country other than Canada or the United
States. If there is a conflict between the terms and conditions, either express
or fairly implied, of this Agreement and the Commercial Arbitration Rules, the
terms and conditions of this Agreement shall apply.
B. The arbitration shall be heard and determined by one impartial
arbitrator, chosen by the AAA from a list of potential arbitrators to the
Shareholders. The arbitrator shall be knowledgeable concerning the mining
industry and qualified by education, training and/or experience in the subject
matter of the issue to be arbitrated. The arbitrator shall take an oath of
impartiality prior to the commencement of the hearing.
C. The arbitration shall be in English, and all documents filed
with or submitted to the arbitrator, except any documents which were
originally prepared in Spanish and which are tendered as exhibits, shall be in
English. The arbitrator's award shall be in English.
D. The arbitration proceedings shall be conducted in Denver,
Colorado, in accordance with the Expedited Procedures of the Commercial
Arbitration Rules, except that:
(1) The list of potential arbitrators submitted to the
Shareholders need not be limited to individuals on the National Panel of
Commercial Arbitrators.
(2) The time for various procedures in the arbitration shall
be as follows:
(a) Appointment of arbitrator - lists of potential
arbitrators shall be returned to the AAA by the Shareholders within 10 days
after mailing of the lists.
(b) Objection to the appointment of an arbitrator -
within two days after receipt of notice of appointment.
(c) Hearing - within 30 days after the appointment of
the arbitrator, to be completed on consecutive days within 10 days after its
commencement.
(d) Award - within 10 days after the close of the
hearing.
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E. There shall be no discovery as part of or in connection with
any arbitration conducted in the United States and the Shareholders hereby
irrevocably waive all rights to conduct discovery.
F. Either Shareholder may demand arbitration by delivering a
demand for arbitration to the other Shareholder and to the AAA containing a
complete and concise statement of the issues to be arbitrated. The copy of
the demand filed with the AAA shall be accompanied by the appropriate filing
fee. A Shareholder receiving a demand for arbitration may, within 10 days
after its receipt, deliver to the other Shareholder and to the AAA a complete
and concise statement of any additional issues to be arbitrated.
(1) If the issue submitted to arbitration is the adoption of
a Program and Budget pursuant to Section 9.5 of this Agreement, the demand
shall specify the Program and Budget which the Shareholder wishes adopted
for the ensuing Budget Period and the other Shareholder shall, within 10 days
after receipt of such a demand, notify the Shareholder initiating the
arbitration and the AAA of the Program and Budget it wishes to have adopted
for the ensuing Budget Period.
(2) If the issue submitted to arbitration is the adoption of
the Construction Phase Budget pursuant to Section 9.8 of this Agreement or
involves a Material Change to the Project Feasibility Study as provided in
Sections 6.3 and 6.4 of this Agreement, the ruling sought by the Series A
Shareholder in such proceeding must be consistent with the Project Feasibility
Study.
(3) If the issue submitted to arbitration involves a Change Order to
the Construction Phase Program and Budget pursuant to Section 7.7, the ruling
sought by the Series A Shareholder in such proceeding must be consistent with
the Construction Phase Program and Budget.
G. Not later than five days before the hearing, each of the
Shareholders shall submit to the other and to the arbitrator a proposed
specific ruling on each of the issues to be arbitrated, which shall be
consistent with the provisions of Section 17.5F.
H. For each issue subject to arbitration, the arbitrator shall be
limited to selecting, as the only remedy or relief that may be awarded, the
ruling proposed in accordance with subsection 17.5G of this Agreement by one
or the other of the Shareholders. The arbitrator shall not effect a compromise
or award any relief or remedy, and shall have no authority to award any type
or form of damages. Notwithstanding the foregoing, the arbitrator shall be
authorized to impose sanctions for abuse or frustration of the arbitration
process.
I. The arbitrator shall award, as to each issue subject to
arbitration, to the Shareholder whose proposed ruling is selected by the
arbitrator all of its pre-award costs of arbitration with respect to such issue,
including the arbitrator's fee, administrative and other fees paid to the AAA,
witness fees, experts fees, travel expenses, and its attorneys' fees.
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J. In determining which of the Shareholders' proposed rulings
to adopt, the arbitrator shall determine which proposed ruling would better
contribute to the reasonable, prudent and efficient development and operation
of the project to be conducted with respect to the Refugio Project Properties.
The financial condition of the Shareholders shall not be deemed relevant or
considered in the arbitrator's determination. in addition, with respect to the
items identified below the arbitrator shall also apply the specified standard.
K. If, pursuant to Section 8.3 of this Agreement, the issue
submitted to arbitration is whether the General Manager should be removed
and replaced, the arbitrator shall determine the General Manager should be
removed and replaced only if the arbitrator determines that the General
Manager is not performing his or her duties substantially in accordance with
the standards reasonably expected of a general manager of a Chilean
contractual mining company of similar size and type of properties.
L. The Shareholders hereby agree that the document attached
to this Agreement as Exhibit B is an complete and accurate English language
translation of the Bylaws, and that such document shall be binding on the
Shareholders and on the arbitrator in any arbitration proceedings as the text
of the Bylaws.
M. If, as provided in Section 6.6, the Series B Shareholder
causes the Technical Management Committee to proceed with the proposed
change prior to the arbitrator's ruling, the following additional provisions
will apply to any arbitration instituted with respect to such action:
(1) If the arbitrator selects the ruling tendered by the
Series A Shareholder rather than the ruling tendered by the Series B
Shareholder, the Series B Shareholder shall pay 100% of all costs in excess of
the Construction Budget incurred as a result of such change; but
(2) If the arbitrator selects the ruling tendered by the
Series B Shareholder rather than the ruling tendered by the Series A
Shareholder, the Series A Shareholder shall pay its proportionate share of all
costs in excess of the Construction Budget incurred as a result of such
change, and, in addition an amount equal to 25% of such excess costs shall be
paid as a special dividend to the Series B Shareholder before any payment of
interest or principal on junior subordinated debt is made or other dividend is
paid to the Series A Shareholder.
Section 17.6 Special Provisions For Arbitration in Chile.
-------------------------------------------
A. The arbitrator's decision shall be consistent with any final
judgment of a foreign court of competent jurisdiction which is binding upon
the Shareholders, whether or not any such judgment has been recognized or
given effect by a court in Chile.
B. The Shareholders hereby agree that the document attached
to this Agreement as Exhibit B is an complete and accurate English language
translation of the
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Bylaws, and that such document shall be binding on the Shareholders and on the
arbitrator in any arbitration proceedings as the text of the Bylaws.
Section 17.7 Disputes Subject to Litigation. Each of the Shareholders
------------------------------
hereby agrees that if either it or any of its Affiliates commences any
litigation against the other Shareholder or its Affiliates arising under or
relating to the Company, or this Agreement or the Bylaws, or the breach of
either or both:
A. Under all circumstances, any litigation shall be instituted
only in a court of competent jurisdiction, whether state or federal, located
within the City of Denver, Colorado;
B. If any such litigation is commenced, each Shareholder and
its Affiliates irrevocably consents and submits to personal jurisdiction of any
such court and to the service of process upon them in accordance with the
rules or statutes governing service of process; provided that nothing in this
Section 17.7 shall be deemed to prevent either party from seeking to remove
any action to federal court in Denver, Colorado; and
C. Each Shareholder and its Affiliates waive to the full extent
permitted by law (i) the right to trial by jury, (ii) any objection that it may
now or hereafter have to venue in any such litigation in a court of competent
jurisdiction, whether state or federal, in Denver, Colorado, and (iii) any claim
that any such litigation has been brought in an inconvenient forum.
D. Each Shareholder and its Affiliates waive to the full extent
permitted by law any claim to consequential, exemplary or punitive damages in
any dispute between them, including deadlocks of the Board or the Technical
Management Committee, arising out of or relating to this Agreement or the
Bylaws, or the breach of either or both, or the Operations of the Company.
E. Each Shareholder, its Affiliates, AGI and Bema each waive to
the full extent permitted by law any claim to any type of damages or to any
other form of remedy or relief except specific performance in connection with
any claim, cause of action, controversy or dispute arising out of any alleged
breach of the provisions of Section 2.4 of this Agreement by any party bound
thereby.
F. Each Shareholder, AGI and Bema shall maintain a duly
appointed agent in Colorado for the service of process or other legal summons,
and if it fails to maintain such an agent, any such process or summons may
be served upon it by mailing a copy thereof by registered mail.
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ARTICLE 18
----------
CONFIDENTIALITY
---------------
Section 18.1 General. All information obtained in connection with the
-------
conduct of Operations which is designated as confidential by the Technical
Management Committee, the financial terms and conditions of this Agreement and
all material technical, geologic, financial, and corporate strategy or planning
information relating to the Refugio Project Properties, shall be exclusive
property of the Shareholders and, except as provided in Section 18.2 of this
Agreement, shall not be disclosed to any third party or the public without the
prior written consent of the other Shareholder, which consent shall not be
unreasonably withheld.
Section 18.2 Exceptions. The consent required by Section 18.1
----------
shall not apply to a disclosure:
A. If such information as is necessarily disclosed by Operations
or is necessary to disclose to implement an Adopted Program and Budget;
B. Of such information as is reasonably necessary to disclose
to an Affiliate, consultant, contractor, advisor, or representative, that has a
bona fide need to be informed;
C. To a third party to whom the disclosing Shareholder
contemplates a Transfer of all or any part of its Shares;
D. To CMR or another third party pursuant to an agreement
with the Company which has been approved by the Board or the Technical
Management Committee;
E. To a governmental agency or to the public which disclosure
the disclosing Shareholder believes in good faith is required by pertinent law
or regulation or the rules of any stock exchange on which its stock is traded;
F. Of any information which at the time of disclosure is in the
public domain, except as a result of a breach of this Agreement;
G. To a bank, insurance company or other financial institution
and to its advisors in connection with negotiations concerning Project
Financing or other financing arranged by a Shareholder for its own corporate
purposes, subject to reasonable requirements concerning use and
confidentiality; or
H. By a Shareholder of information which it owns or controls
independently of the Company, but which was furnished to the Company by
that Shareholder for use by the Company.
In any case to which this Section 18.2 is applicable, the disclosing
Shareholder shall give notice to the other Shareholder concurrently with the
making of such disclosure.
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As to any disclosure pursuant to Sections 18.2B, 18.2C or 18.2G, such third
party shall first agree in writing to protect the confidential information from
further disclosure to the same extent as the Shareholders are obligated under
this Article 14.
Section 18.3 Duration of Confidentiality. The provisions of this
---------------------------
Article 18 shall apply during the term of this Agreement, and shall continue to
apply to an Shareholder who has been deemed to have sold its Ownership
Interest in accordance with Sections 4.6 or 10.3B of this Agreement or who
Transfers all of its Shares, for one (1) year following the date of such
occurrence.
ARTICLE 19
----------
GENERAL PROVISIONS
------------------
Section 19.1 Notices. All notices, payments, and other required
-------
communications ("Notices") to the Shareholders shall be in writing, and shall
be addressed respectively as follows:
If to AGRI:
Amax Gold Refugio, Inc.
Attention: President
350 Indiana Street
Golden, CO 80401
U.S.A.
with a copy to:
Amax Gold Refugio, Inc.
Attention: President
350 Indiana Street
Golden, CO 80401
U.S.A.
If to Bema Bermuda:
Bema Gold (Bermuda) Ltd.
Attention: Chairman of the Board
Box 48, 1400 Burrard Street
Vancouver, BC V6C 3A8
CANADA
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with a copy to:
Bema Gold (Bermuda) Ltd.
Attention: Vice President, Administration
Box 48, 1400 Burrard Street
Vancouver, BC V6C 3A8
CANADA
with a copy to:
R. Stuart Angus
Smith, Lyons, Torrance, Stevenson & Mayer
World Trade Centre
550 - 999 Canada Place
Vancouver, BC V6C 3C8
CANADA
All Notices shall be given (i) by personal delivery to the party by leaving a
copy at the place specified for notice with a receptionist, or an apparently
responsible individual, or (ii) by electronic facsimile communication, with a
confirmation sent by registered or certified mail return receipt requested, or
(iii) by registered or certified mail return receipt requested. All Notices
shall be effective and shall be deemed delivered (i) if by personal delivery on
the date of delivery, if delivered during normal business hours, and, if not
delivered during normal business hours, on the next business day following
delivery, (ii) if by electronic communication on the next business day following
receipt of the electronic communication, and (iii) if solely by mail on the next
business day after actual receipt. A Notice shall be effective if delivered, as
above provided, to the first individual specified in this Section 19.1 as the
recipient of Notice for each of the Shareholders, provided that a Shareholder
shall use reasonable efforts to deliver all Notices to each copy recipient
specified in this Section 19.1. A party may change its address for Notice by
Notice to the other party.
Section 19.2 No Waiver. The failure of a Shareholder to insist on
---------
the strict performance of any provision of this Agreement or to exercise any
right, power, or remedy upon a breach hereof shall not constitute a waiver of
any provision of this Agreement or limit the Shareholder's right thereafter to
enforce any provision or exercise any right.
Section 19.3 Modification. No modification of this Agreement shall
------------
be valid unless made in writing and duly executed by the party against which
the modification is asserted.
Section 19.4 No Force Majeure. The obligations to make when due
----------------
contributions pursuant to Section 12.2 of this Agreement, payments due with
respect to a Default Loan, a Project Construction Loan, a Construction Credit
Facility Loan, a Construction Overrun Loan, an Initial Program Loan or
payments otherwise due hereunder, shall not be suspended by any force
majeure or by the financial distress or failure of a Shareholder.
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Section 19.5 Governing Law. Because of the multinational
-------------
character of the ownership of the Shares and of the Operations to be
conducted by the Company, AGRI and Bema Bermuda desire to establish with
certainty that this Agreement will be governed by and construed in
accordance with the law of a center for mining and international mining
activities which is acceptable to them. This Agreement shall be governed by
and interpreted in accordance with the laws of Colorado, the place at which
the majority of negotiations concerning this Agreement occurred, except for its
laws relating to choice of laws. AGRI and Bema Bermuda acknowledge that their
rights and obligations with respect to the Company, an entity formed under
the Mining code of Chile, can be established by contract, as set forth in this
Agreement, and intend that the law of Colorado concerning contracts, rather
than the law of Colorado applicable to a Colorado corporation, partnership or
joint venture, will be applicable to any dispute or controversy arising under
or in connection with this Agreement.
Section 19.6 Further Assurances. Each of the Shareholders
------------------
agrees to take, and to cause the directors of the Company elected by it and
the members of the Technical Management Committee appointed by those
directors to take, from time to time, such actions and execute such additional
instruments as may be reasonably necessary or convenient to implement and
carry out the intent and purpose of this Agreement.
Section 19.7 Term of Agreement. This Agreement shall have a
-----------------
term equal in duration to the term of the Company, and all extensions and
renewals thereof.
Section 19.8 Captions and Gender of Terms. The captions and
----------------------------
headings of this Agreement are for convenience only and do not affect, limit
or amplify the provisions hereof. Words of one gender shall include the other
gender.
Section 19.9 Severability. If any provision of this Agreement
------------
or of the Bylaws is held to be illegal, invalid or
unenforceable under present or future laws, such provision shall be fully
severable; this Agreement and the Bylaws shall be construed and enforced as
if such illegal, invalid or unenforceable provision formed no part of this
Agreement or the Bylaws; and the remainder of this Agreement or the Bylaws
shall remain in full force and effect and shall not be affected by such
provision or by its severance from this Agreement or the Bylaws, as the case
may be. In lieu of such illegal, invalid or unenforceable provision there shall
be added automatically as a part of this Agreement or the Bylaws from which
such provision was severed a provision as similar in terms and economic effect
to such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
Section 19.10 Binding Effect. This Agreement shall be binding
--------------
upon and inure to the benefit of the Shareholders hereto and their respective
successors and assigns.
Section 19.11 Execution in Counterparts. This Agreement may be
-------------------------
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same document.
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Section 19.12 English Language Version Controlling. Because
------------------------------------
English is the language of the fora selected by the Shareholders arbitration
and litigation in Sections 17.2 and 17.7 of this Agreement and the law of
Colorado is to govern such proceedings, the English language version of this
Agreement shall control the rights and obligations of the Shareholders
hereunder, and as such it shall be binding as the text of the Shareholders
Agreement on all such parties and on the arbitrator, the finder of fact and
the court, as the case may be, in any litigation conducted pursuant to Section
17.7 or any arbitration proceedings conducted pursuant to Section 17.2.
IN WITNESS WHEREOF, AGRI and Bema Bermuda have executed this
Shareholders Agreement as of its specified effective date.
AMAX GOLD REFUGIO, INC.
ATTEST: [SIGNATURE UNREADABLE]
-----------------------------------
Vice President
[SIGNATURE UNREADABLE]
___________________________
Asst Secretary
BEMA GOLD (BERMUDA) LTD.
ATTEST: [SIGNATURE UNREADABLE]
------------------------------------
President [TITLE UNREADABLE]
[SIGNATURE UNREADABLE]
___________________________
__________ Secretary
-65-
<PAGE>
LIMITED UNDERTAKINGS BY AGI AND BEMA
------------------------------------
AGI and Bema hereby agree to be bound by provisions of Section
2.4 and Article 17 of this Agreement, and have executed this Agreement as of
its effective date solely to evidence such undertakings. In addition, AGI will
cause AGRI to fund any Construction Overrun Loan AGRI is obligated to make
pursuant to Section 11.3 of the Shareholders Agreement.
AMAX GOLD INC.
[SIGNATURE UNREADABLE]
------------------------------
Vice President
ATTEST:
[SIGNATURE UNREADABLE]
___________________________
Asst Secretary
BEMA GOLD LTD.
[SIGNATURE UNREADABLE]
ATTEST: ------------------------------
_______ President Chairman CEO
[SIGNATURE UNREADABLE]
___________________________
__________ Secretary
-66-
<PAGE>
EXHIBIT 12.1
AMAX GOLD INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------
1994 1993 1993 1992 1991 1990 1989
------- -------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) before
income taxes and
cumulative effect of
accounting changes..... $(9,900) $(76,100) $(122,800) $18,000 $25,300 $16,900 $44,400
======= ======== ========= ======= ======= ======= =======
Adjustments:
Interest expense....... 4,600 4,000 8,500 2,300 400 700 1,200
Interest factor on
rentals(b)............ 300 400 600 200 100 100 100
Amortization of
capitalized interest.. 200 2,400 2,600 -- -- -- --
Minority interest in
the losses of
subsidiary (Compania
Minera Amax Guanaco).. (800) (500) (1,100) -- -- -- --
Loss from less than 50%
owned subsidiaries
(Cahawaz Resources
Inc.)................. -- -- -- -- -- 17,600 3,600
------- -------- --------- ------- ------- ------- -------
As adjusted income
(loss)................. $(5,600) $(69,800) $(112,200) $20,500 $25,800 $55,300 $49,300
======= ======== ========= ======= ======= ======= =======
FIXED CHARGES:
Interest expense........ $ 4,600 $ 4,000 $ 8,500 $ 2,300 $ 400 $ 700 $ 1,200
Interest factor on
rentals(b)............. 300 400 600 200 100 100 100
Interest capitalized.... -- 500 500 4,200 800 -- --
------- -------- --------- ------- ------- ------- -------
Total fixed charges..... $ 4,900 $ 4,900 $ 9,600 $ 6,700 $ 1,300 $ 800 $ 1,300
======= ======== ========= ======= ======= ======= =======
Ratio of earnings to
fixed charges.......... (a) (a) (a) 3.06 19.85 69.13 37.92
======= ======== ========= ======= ======= ======= =======
</TABLE>
- --------
(a) Earnings for the six months ended June 30, 1994 and 1993 and the year ended
December 31, 1993 were inadequate to cover fixed charges by $10,500,
$74,700 and $121,800, respectively.
(b) Represents one-third of rent and lease expense which management believes is
a reasonable approximation of an interest factor.
