<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant []
Check the appropriate box:
[] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[] Definitive Additional Materials
[] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
[] Confidential, for Use of the Commission Only
(as Permitted by Rule 14a-6(a)(2))
AMAX GOLD INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1)Title of each class of securities to which transaction applies:
2)Aggregate number of securities to which transaction applies:
3)Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4)Proposed maximum aggregate value of transaction:
5)Total fee paid:
[ X ] Fee paid previously with preliminary materials.
[] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1)Amount previously paid:
2)Form, Schedule or Registration Statement No.:
3)Filing Party:
4)Date Filed:
Notes:
<PAGE>
LOGO OF AMAX GOLD INC. APPEARS HERE
APRIL 27, 1995
Dear Stockholder:
On behalf of the Board of Directors and Management of Amax Gold Inc. (the
"Company"), we urge you to consider carefully and to approve your Company's
proposals described in the attached proxy materials. Approval of these
proposals will benefit your Company by facilitating transactions between your
Company and Cyprus Amax Minerals Company ("Cyprus") that are designed to
strengthen significantly the financial condition of your Company.
During 1994, the Company made great progress on many fronts. Since the merger
of AMAX Inc. with Cyprus Minerals Company late in 1993, the Company's new major
stockholder has been assisting the Company to realize its potential. Since that
time, key management changes have been made, cost reductions have been effected
at operating and administrative levels, and the Company and its new 42%
stockholder have put in place certain significant agreements to support the
growth of the Company, including the $100 million Double Convertible Line of
Credit ("DOCLOC I") and the stock purchase agreement under which Cyprus
acquired three million shares of the Company's Common Stock in exchange for
cancellation of $20.7 million of indebtedness owed to Cyprus, both of which
were approved by the Company's stockholders last year. Significant progress in
your Company's operations also has been accomplished during 1994. We and our
partner in the Refugio gold project in Chile recently completed the $85 million
financing for the Refugio gold project which has commenced construction. The
water shortage problem that has delayed full-scale production at the Guanaco
gold mine in Chile has been resolved and the performance of the Hayden Hill
mine has improved.
In order to continue this progress and growth, your Company needs additional
financing and the continued support of Cyprus. For example, development of the
Fort Knox gold project in Alaska (which has reserves of over four million
ounces of gold) will require a capital investment of over $250 million during
1995 and 1996. While the Company had positive cash flow from operations in
1994, we do not anticipate generating sufficient cash flow from operations to
assure payment of all scheduled debt amortization obligations or to meet the
Company's working capital and development requirements without the benefit of a
new $80 million Double Convertible Line of Credit with Cyprus ("DOCLOC II") or
other equity financing that would bear significant transaction costs. In
addition, the continuing financial support from Cyprus evidenced by DOCLOC I
and DOCLOC II has been viewed as a vote of confidence in the Company that we
believe will be important to obtaining additional bank financing on favorable
terms for the Company's future growth. Without the extension of DOCLOC I and
the addition of DOCLOC II, the Company believes that additional third party
debt financing for development of the Company's Fort Knox project would be
unavailable in adequate amounts on favorable terms. Therefore, we are seeking
your approval of both an extension of DOCLOC I to December 31, 2001 and DOCLOC
II.
Under DOCLOC II, Cyprus will provide the Company with an additional $80
million line of credit, which may be repaid by the Company's issuance of up to
1,600,000 shares of a new class of $2.25 Series C Convertible Preferred Stock
which, if issued, may be redeemed by the Company for 14,919,806 shares of
Common Stock at a price equal to the greater of $4.196 per share or the average
closing price per share over a period prior to redemption. The Preferred Stock
also may be converted by Cyprus into 14,919,806 shares of the Company's Common
Stock at a conversion price of $5.362 per common share. Alternatively, Cyprus
has the right to buy up to 14,919,806 shares of the Company's Common Stock for
$80 million during the term of DOCLOC II.
Because the proposed transactions involve Cyprus, which currently owns
approximately 42% of the Company's outstanding Common Stock, your approval is
necessary. The affirmative vote of stockholders holding 66 2/3% of the
outstanding shares of Common Stock not owned by Cyprus is required for approval
of these proposals under Section 203 of the Delaware General Corporation Law,
and rules of the New York
<PAGE>
Stock Exchange require the affirmative vote of a majority of all shares of
Common Stock voting on the proposals. This means that stockholders who do not
vote have the same effect as if they voted against such a proposal regardless
of its merits. Given the number of stockholders who are often unavailable or
who do not vote for one reason or another, the 66 2/3% of the non-Cyprus
stockholders is an extremely difficult vote to achieve even when stockholders
are overwhelmingly in favor of a transaction. For example, last year over 90%
of all of the Company's outstanding shares that voted, did so in favor of
DOCLOC I. Despite the overwhelming support, there were barely sufficient votes
to surpass the 66 2/3% threshold required by Section 203.
An additional proposal being presented this year will eliminate this 66 2/3%
threshold by reincorporating the Company as a Delaware corporation that
specifically elects not to have Section 203 apply. Even without a
reincorporation, the supermajority vote requirement under Section 203 will
expire automatically with respect to transactions with Cyprus in May 1996.
Because of the onerous burdens of complying with Section 203, the proposal
seeks your approval for the early termination of these requirements. The
proposal would eliminate the burdensome threshold and associated uncertainty,
management time and expense associated with Section 203 this June; the proposal
will not eliminate the need to seek approval of stockholders other than Cyprus
or eliminate the Company's Board of Director's duties to assure that
transactions between the Company and Cyprus are fair to the Company. We believe
this Section 203 threshold, which is primarily an anti-takeover measure, is
neither necessary nor desirable in the Company's circumstances and that it is
in the best interests of all of the Company's stockholders to elect not to have
Section 203 apply. We believe that adoption of this proposal will facilitate
Cyprus' support of your Company, thereby enhancing your Company's growth and
financial strength.
We believe approval of these proposals is key to the financial well being of
the Company and will enhance the value of your Company. They are described in
greater detail in the accompanying Proxy Statement. We apologize for the length
of the document, but the detailed information included here is required by law
for the benefit of all stockholders.
We urge you to consider carefully your Company's proposals and related
information in the accompanying proxy materials. In order to ensure that your
vote is represented, please indicate your decision on the enclosed proxy card,
date and sign it, and return it in the enclosed envelope. A prompt response
would be appreciated. If you decide to attend the Annual Meeting of
Stockholders, you may revoke your proxy and vote in person if you choose to do
so.
Sincerely,
Signature of Milton H. Ward appears here
Milton H. Ward
Chairman of the Board and Chief
Executive Officer
Signature of Roger A. Kauffman appears here
Roger A. Kauffman
President and Chief Operating
Officer
Signature of Mark A. Lettes appears here
Mark A. Lettes
Vice President and Chief Financial
Officer
<PAGE>
LOGO OF AMAX GOLD INC. APPEARS HERE
9100 EAST MINERAL CIRCLE, ENGLEWOOD, COLORADO 80112
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 1995
To the Holders of Common Stock:
The Annual Meeting of Stockholders of Amax Gold Inc. (the "Company") will be
held at the Inverness Hotel & Golf Club, Inverness Business Park, 200 Inverness
Drive West, Englewood, Colorado on Friday, June 2, 1995, at 10:00 a.m.
(Mountain Daylight Savings Time) for the following purposes:
1. To elect six directors, each to hold office until the 1996 Annual
Meeting of Stockholders;
2. To ratify the selection of Price Waterhouse LLP as independent
accountants for the current fiscal year;
3. To approve an amendment (the "DOCLOC I Amendment") to the $100 million
double convertible revolving credit agreement, dated as of April 15,
1994 and approved by stockholders at the Special Meeting of Stockholders
held on July 26, 1994 ("DOCLOC I"), between the Company and Cyprus Amax
Minerals Company, a Delaware corporation ("Cyprus"), to extend DOCLOC I
from April 30, 1997 to December 31, 2001 (the "DOCLOC I Amendment
Proposal");
4. To approve the transactions contemplated by an $80 million double
convertible revolving credit agreement, dated as of March 10, 1995
("DOCLOC II"), between the Company and Cyprus, pursuant to which Cyprus
will provide a line of credit of $80 million, under which any
indebtedness may be repaid by the Company's issuance of up to 1,600,000
shares of the Company's newly created $2.25 Series C Convertible
Preferred Stock, par value $1.00 per share (the "Series C Preferred
Stock"), and such shares of Series C Preferred Stock may be redeemed by
the Company for 14,919,806 shares of the Company's common stock, par
value $.01 per share ("Common Stock"), at a price equal to the greater
of $4.196 per share or the average closing price per share over a period
prior to redemption, or converted by Cyprus at any time into up to
14,919,806 shares of Common Stock at a conversion price of $5.362 per
share; such approval shall include but not be limited to the
authorization and issuance to Cyprus of up to 1,600,000 shares of the
Series C Preferred Stock and up to 14,919,806 shares of Common Stock
(the "DOCLOC II Proposal");
5. To approve the Company's reincorporation by means of a merger with New
AGI Corporation, a Delaware corporation ("NEW AGI"), for purposes of
electing not to be governed by Section 203 of the General Corporation
Law of Delaware ("Delaware Law"), thereby permitting the Company to
engage in business transactions with Cyprus without requiring the
approval of 66 2/3% of all stockholders excluding Cyprus and its
affiliates and associates (the "Reincorporation Proposal");
6. To vote on a stockholder proposal to permit cumulative voting for the
election of directors (the "Stockholder Proposal"); and
7. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Cyprus currently owns 34,313,709 shares or 42.2% of the outstanding shares of
Common Stock. If Cyprus were to exercise its right under DOCLOC I to acquire
additional shares of Common Stock, Cyprus would be the indirect owner of
46,412,922 shares or 49.7% of the outstanding shares of Common Stock. If
stockholders approve DOCLOC II and if Cyprus were to exercise its right to
acquire 14,919,806 additional shares of Common Stock under DOCLOC II, Cyprus'
ownership of outstanding shares of Common Stock would increase to 61,332,728
shares or 56.6% of the outstanding shares of Common Stock. Each share of the
Company's $3.75 Series B Convertible Preferred Stock, par value $1.00 per share
(the "Series B Preferred Stock"), is convertible into 6.061 shares of Common
Stock and, if converted, would reduce Cyprus' record ownership to 51.3% of the
outstanding shares of Common Stock.
<PAGE>
The Board of Directors has fixed the close of business on April 10, 1995 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting or any adjournments of postponements thereof (the
"Record Date"). To be effective, proxies must be signed, dated and delivered to
Chemical Bank at or prior to the Annual Meeting.
The directors standing for election (Proposal 1) must be elected by a
plurality of the votes cast. The ratification of the selection of the
independent accountants (Proposal 2) and the Stockholder Proposal (Proposal 6)
must be approved by the holders of a majority of the shares of Common Stock
present in person or by proxy and entitled to vote.
Approval of each of the DOCLOC I Amendment Proposal, the DOCLOC II Proposal
and the Reincorporation Proposal (Proposals 3 through 5) requires (i) under
Delaware Law, the affirmative vote of 66 2/3% of the outstanding shares of
Common Stock on the Record Date which are not owned by Cyprus or its affiliates
and associates and (ii) under the rules of the New York Stock Exchange, the
affirmative vote of a majority of all shares of Common Stock voting on such
proposals, provided that the total vote cast on each of these proposals
represents over 50% in interest of all outstanding shares of Common Stock.
If a proxy is signed and returned to Chemical Bank without indicating any
voting instructions, shares of Common Stock represented by the proxy will be
voted FOR Proposals 1 through 5 and AGAINST Proposal 6. The Company's proxy
holders may in their discretion vote shares voted for each of Proposals 3
through 5 to adjourn the Annual Meeting to solicit additional proxies in favor
of the proposals. Proxies voting against any one of Proposals 3 through 5 will
not be voted for adjournment of the Annual Meeting. Any proxy given pursuant to
this solicitation may be revoked by the filing of an instrument revoking it or
of a duly executed proxy bearing a later date with Chemical Bank prior to or at
the Annual Meeting, or by voting in person at the Annual Meeting.
A list of stockholders of record will be available for examination by any
stockholder for any purpose germane to the meeting beginning on May 23, 1995 at
the Company's offices in Englewood, Colorado.
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY FORM PROMPTLY IN THE
ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
THE BOARD OF DIRECTORS OF AMAX GOLD INC. RECOMMENDS THAT STOCKHOLDERS VOTE FOR
PROPOSALS 1 THROUGH 5 AND AGAINST PROPOSAL 6.
By Order of the Board of Directors
SIGNATURE OF DEBORAH J. FRIEDMAN
APPEARS HERE
Deborah J. Friedman
Vice President, General Counsel and
Secretary
Englewood, Colorado
April 27, 1995
<PAGE>
LOGO OF AMAX GOLD APPEARS HERE
PROXY STATEMENT
This Proxy Statement is being furnished to the stockholders of Amax Gold
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors (the "Board") from
holders of outstanding shares of the Company's common stock, par value $.01 per
share ("Common Stock"), on April 10, 1995 (the "Record Date"), for use at the
Annual Meeting of Stockholders of the Company to be held on June 2, 1995 and at
any adjournments or postponements thereof (the "Annual Meeting").
This Proxy Statement and form of Proxy enclosed herewith are first being
mailed to the stockholders on or about April 27, 1995.
Holders of Common Stock of the Company on the Record Date (the
"Stockholders") are being asked to attend the Annual Meeting for the following
purposes:
1. To elect six directors, each to hold office until the 1996 Annual
Meeting of Stockholders;
2. To ratify the selection of Price Waterhouse LLP as independent
accountants for the current fiscal year;
3. To approve an amendment (the "DOCLOC I Amendment") to the $100 million
double convertible revolving credit agreement, dated as of April 15,
1994 and approved by stockholders at the Special Meeting of Stockholders
held on July 26, 1994 ("DOCLOC I"), between the Company and Cyprus Amax
Minerals Company, a Delaware corporation ("Cyprus"), to extend the term
of DOCLOC I from April 30, 1997 to December 31, 2001 (the "DOCLOC I
Amendment Proposal");
4. To approve the transactions contemplated by an $80 million double
convertible revolving credit agreement, dated as of March 10, 1995
("DOCLOC II"), between the Company and Cyprus, pursuant to which Cyprus
will provide a line of credit of $80 million, under which any
indebtedness may be repaid by the Company's issuance of up to 1,600,000
shares of the Company's newly created $2.25 Series C Convertible
Preferred Stock, par value $1.00 per share (the "Series C Preferred
Stock"), and such shares of Series C Preferred Stock may be redeemed by
the Company for 14,919,806 shares of the Company's common stock, par
value $.01 per share ("Common Stock"), at a price equal to the greater
of $4.196 per share or the average closing price per share over a period
prior to redemption, or converted by Cyprus at any time into up to
14,919,806 shares of Common Stock at a conversion price of $5.362 per
share; such approval shall include but not be limited to the
authorization and issuance to Cyprus of up to 1,600,000 shares of the
Series C Preferred Stock and up to 14,919,806 shares of Common Stock
(the "DOCLOC II Proposal");
5. To approve the Company's reincorporation by means of a merger with New
AGI Corporation, a Delaware corporation ("NEW AGI"), for purposes of
electing not to be governed by Section 203 of the General Corporation
Law of Delaware ("Delaware Law"), thereby permitting the Company to
engage in business transactions with Cyprus without requiring the
approval of 66 2/3% of all stockholders excluding Cyprus (the
"Reincorporation Proposal");
6. To vote on a stockholder proposal to permit cumulative voting for the
election of directors (the "Stockholder Proposal"); and
7. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The Company is engaged in the mining and processing of gold and silver ore
and in the exploration for and acquisition and development of gold-bearing
properties principally in North and South America. The Company was incorporated
in Delaware in April 1987. The Company's principal offices are located at 9100
East Mineral Circle, Englewood, Colorado 80112, and its telephone number is
(303) 643-5500.
<PAGE>
For additional information regarding the business of the Company, see
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
See "ANNUAL MEETING--Votes Required" for a description of the votes required
for approval of each of the proposals.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
ON BEHALF OF THE COMPANY, CONCERNING THE PROPOSALS IF NOT CONTAINED IN OR
APPENDED TO THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO PURCHASE, THE SECURITIES REFERRED TO IN THIS PROXY STATEMENT, OR THE
SOLICITATION OF A PROXY, BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER, OR SOLICITATION OF AN OFFER, OR PROXY
SOLICITATION. DELIVERY OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS PROXY STATEMENT.
THE DATE OF THIS PROXY STATEMENT IS APRIL 27, 1995.
2
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... 4
SUMMARY................................................................... 5
Solicitation............................................................ 5
Certain Transactions--Relationship with Cyprus.......................... 5
Proposal 1. Election of Directors....................................... 7
Proposal 2. Ratification of Auditors.................................... 7
Proposals 3 and 4. The DOCLOC I Amendment Proposal and the DOCLOC II
Proposal............................................................... 7
Proposal 5. The Reincorporation Proposal................................ 10
Proposal 6. The Stockholder Proposal.................................... 11
Effects of the Proposals on the Rights of the Company's Stockholders.... 11
Votes................................................................... 12
Intention of Directors, Executive Officers and Cyprus................... 13
Recommendation of the Board............................................. 13
Opinions of Financial Advisor Regarding the DOCLOC I Amendment Proposal
and the DOCLOC II Proposal............................................. 13
ANNUAL MEETING............................................................ 14
Recommendation of the Board............................................. 14
Record Date............................................................. 14
Votes Required.......................................................... 14
Votes................................................................... 15
Solicitation of Proxies................................................. 15
Accountants............................................................. 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS........................... 16
CERTAIN TRANSACTIONS--RELATIONSHIP WITH CYPRUS............................ 16
PROPOSAL 1. ELECTION OF DIRECTORS......................................... 18
Information Concerning Directors and Nominees........................... 18
Compliance with Exchange Act Section 16(a).............................. 19
Meetings and Committees of the Board of Directors....................... 19
Compensation of Directors............................................... 20
Compensation of Executive Officers...................................... 21
Compensation Committee Interlocks and Insider Participation............. 24
Compensation Committee Report on Executive Compensation................. 24
Security Ownership of Directors and Officers............................ 27
Performance Graph....................................................... 28
PROPOSAL 2. RATIFICATION OF SELECTION OF AUDITORS......................... 29
PROPOSALS 3 AND 4. THE DOCLOC I AMENDMENT PROPOSAL AND THE DOCLOC II
PROPOSAL................................................................. 29
Background for the DOCLOC I Amendment Proposal and the DOCLOC II
Proposal............................................................... 30
Reasons for the DOCLOC I Amendment Proposal and the DOCLOC II Proposal;
Recommendation of the Board............................................ 32
Opinion of Financial Advisor Regarding the DOCLOC I Amendment Proposal
and the DOCLOC II Proposal............................................. 34
Effects of the DOCLOC I Amendment Proposal and the DOCLOC II Proposal on
the Rights of the Company's Stockholders............................... 38
Material Terms of the DOCLOC I Amendment................................ 38
Material Terms of DOCLOC II............................................. 39
Temporary Borrowing Under DOCLOC II..................................... 42
</TABLE>
3
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PROPOSAL 5. THE REINCORPORATION PROPOSAL................................... 43
Background of the Merger; Section 203.................................... 43
Reasons for the Reincorporation Proposal; Recommendation of the Board.... 45
Reincorporation.......................................................... 46
Effect of the Reincorporation Proposal on the Rights of the Company's
Stockholders............................................................ 46
PROPOSAL 6. THE STOCKHOLDER PROPOSAL....................................... 46
Resolution to Adopt Cumulative Voting.................................... 46
Supporting Statement..................................................... 46
Recommendation of the Board.............................................. 47
PRO FORMA FINANCIAL INFORMATION............................................ 48
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY................................ 49
Common Stock............................................................. 49
Preferred Stock.......................................................... 49
Warrants................................................................. 54
OTHER MATTERS.............................................................. 55
PROPOSALS FOR 1996 ANNUAL MEETING.......................................... 55
</TABLE>
APPENDICES
APPENDIX A--DOCLOC I
APPENDIX B--Amendment to DOCLOC I
APPENDIX C--DOCLOC II
APPENDIX D--Certificate of Designations--$2.25 Series C Convertible Preferred
Stock
APPENDIX E--Merger Agreement
APPENDIX F--Certificate of Incorporation for NEW AGI
APPENDIX G--Opinions of Salomon Brothers Inc
----------------
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS NOT PRESENTED HEREIN
OR DELIVERED HEREWITH. DOCUMENTS INCORPORATED BY REFERENCE HEREIN, EXCLUDING
EXHIBITS UNLESS SPECIFICALLY INCORPORATED HEREIN, ARE AVAILABLE WITHOUT CHARGE
UPON REQUEST TO SECRETARY, AMAX GOLD INC., 9100 EAST MINERAL CIRCLE, ENGLEWOOD,
COLORADO 80112. TELEPHONE REQUESTS MAY BE DIRECTED TO INVESTOR RELATIONS AT
(303) 643-5522. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY MAY 23, 1995.
The following portions of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 filed with the Securities and Exchange
Commission (the "SEC") (File No. 1-9620) are incorporated herein by reference:
(i) "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 20-23 and (ii) "Financial Statements and Supplementary
Data" on pages 24-48.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the
date hereof and prior to the Annual Meeting shall be deemed to be incorporated
herein by reference and to be a part hereof from the date of such filing. Any
statement contained herein or in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein or in any
other subsequently filed document which also is, or is deemed to be,
incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part hereof, except as so modified or superseded.
4
<PAGE>
SUMMARY
The following summary is not intended to be complete and is qualified in all
respects by the more detailed information included in this Proxy Statement, the
Appendices hereto and the documents incorporated herein by reference.
Stockholders are urged to read carefully this Proxy Statement, including the
Appendices hereto and the documents incorporated herein by reference, in their
entirety.
SOLICITATION
This Proxy Statement is being furnished to the Stockholders of the Company in
connection with the solicitation of proxies by the Company's Board from holders
of outstanding shares of Common Stock for use at the Annual Meeting. April 10,
1995 is the Record Date for determining the Stockholders of record who are
entitled to receive this Proxy Statement and to vote on each of the proposals.
This Proxy Statement and form of Proxy enclosed herewith are first being
mailed to the Stockholders on or about April 27, 1995.
The Stockholders are being asked to consider and vote on a number of
proposals:
1. To elect six directors, each to hold office until the 1996 Annual
Meeting of Stockholders;
2. To ratify the selection of Price Waterhouse LLP as independent
accountants for the current fiscal year;
3. To approve the DOCLOC I Amendment Proposal, pursuant to which DOCLOC I
will be extended to December 31, 2001;
4. To approve the DOCLOC II Proposal, pursuant to which Cyprus will provide
a new double convertible revolving line of credit of $80 million and the
Company may issue up to 1,600,000 shares of Series C Preferred Stock and
up to 14,919,806 shares of Common Stock, among other matters;
5. To approve the Reincorporation Proposal, pursuant to which the Company
will elect not to be governed by Section 203 of the Delaware Law, among
other matters;
6. To vote on a stockholder proposal to permit cumulative voting; and
7. To transact such other business as may properly come before the meeting
or any adjournments thereof.
CERTAIN TRANSACTIONS--RELATIONSHIP WITH CYPRUS
Cyprus
Cyprus is a diversified mining company engaged in the exploration for and the
extraction, processing and marketing of mineral resources. Cyprus operates in
three principal industry segments: copper/molybdenum, coal and other minerals
(including lithium and gold).
Cyprus currently owns 34,313,709 shares or 42.2% of the outstanding shares of
Common Stock of the Company. If Cyprus acquires all shares of Common Stock
available under DOCLOC I and DOCLOC II, it would hold an aggregate of
61,332,728 shares or 56.6% of the outstanding shares of Common Stock (assuming
no shares of Series B Preferred Stock have been converted). See "--Effect of
the Proposals on the Rights of the Company's Stockholders."
Directors and officers of Cyprus comprise four of the six members of the
Company's Board. Milton H. Ward, Chairman of the Board and Chief Executive
Officer of the Company, is Co-Chairman of the Board, President and Chief
Executive Officer of Cyprus; Gerald J. Malys, a director of the Company, is
Senior Vice President and Chief Financial Officer of Cyprus; Allen Born, a
director of the Company, is Co-Chairman of Cyprus; and Rockwell A. Schnabel, a
director of the Company, is a director of Cyprus.
5
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In addition to DOCLOC I and the proposed DOCLOC II, which are discussed
elsewhere in this Proxy Statement, Cyprus is party to a number of contracts
with the Company, which are summarized below.
Exploration Joint Venture Agreement. The Company entered into an Exploration
Joint Venture Agreement with Cyprus (the "Exploration JV") effective January 1,
1994. Under the Exploration JV, the Company and Cyprus have agreed to pool
their efforts for the principal purpose of discovering and developing future
gold prospects, with Cyprus providing 75% and the Company providing 25% of the
initial exploration funding for such prospects. Properties held by the parties
prior to January 1, 1994 are excluded from the joint venture. A subsidiary of
Cyprus has been appointed as Manager to manage, direct and control exploration
activities. The agreement will terminate January 1, 1996 unless the Company and
Cyprus mutually agree to extend the agreement. Either party may withdraw upon
giving 60 days' notice to the other party. Pursuant to the Exploration JV, the
Company has the first right to acquire any gold property covered by the
Exploration JV, and Cyprus has the first right to acquire property containing
deposits of minerals or precious metals other than gold.
Cerro Quema Option Agreement. The Company and Cyprus have entered into an
agreement which gives the Company the option to purchase Cyprus' interest in
the Cerro Quema advanced stage gold exploration prospect in Panama. The
purchase price is to be based on reserves to be established in a feasibility
study funded by the Company that has yet to be completed.
The Company is evaluating its option to purchase the Cerro Quema prospect. In
the event the purchase price of the Cerro Quema property (or any property
acquired pursuant to the Exploration JV) involves the issuance of 1% or more of
the Company's voting securities, pursuant to the rules of the New York Stock
Exchange (the "NYSE"), the Company would need to obtain the affirmative vote of
50% of all stockholders to complete the transaction. At this time, the Company
has made no decision regarding whether the exercise of the option will be
submitted to a vote of unaffiliated stockholders. If Cyprus exercises its
rights to acquire additional shares of Common Stock, its ownership may be
greater than 50%, which would enable Cyprus to approve such transactions
without the approval of unaffiliated stockholders. See "--Effects of the
Proposals on the Rights of the Company's Stockholders."
Management Services Agreement. Pursuant to the terms of a management services
agreement (the "Management Services Agreement"), the Company and Cyprus have
agreed to provide a variety of managerial and other services to each other on a
full cost-reimbursement basis. The agreement is terminable by the Company or by
Cyprus as of the end of any month on 180 days' prior written notice.
Put and Call Agreement. The Company and Cyprus are parties to a put and call
agreement (the "Put and Call Agreement") under which Cyprus may sell shares of
Common Stock of the Company to the Company upon exercise of certain common
stock purchase warrants (the "Warrants") issued in connection with the
acquisition of the Fort Knox Project in 1992.
Employee Transfer Agreement. Pursuant to the Employee Transfer Agreement, the
Company and Cyprus have agreed to amend their respective benefit plans to allow
employees to transfer from the Company to Cyprus or from Cyprus to the Company
with minimal effect on an employee's benefits.
Net Operating Loss Agreement. Pursuant to the Agreement for the Carryback of
1993 Net Operating Losses, the Company agreed to allow Cyprus to use a net
operating loss generated in 1993 which would result in a refund of taxes paid
by Cyprus in a prior year, and Cyprus agreed to reimburse the Company at such
time that the Company would have received the benefit for the 1993 net
operating loss had the Company elected to carry forward such loss.
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PROPOSAL 1. ELECTION OF DIRECTORS
The following nominees have been recommended for election by the Board to
hold office until the 1996 Annual Meeting of Stockholders or until their
successors are duly elected and qualified:
Allen Born
Gerald J. Malys
Rockwell A. Schnabel
Vernon F. Taylor, Jr.
Milton H. Ward
Russell L. Wood
PROPOSAL 2. RATIFICATION OF AUDITORS
The Audit Committee recommended and the Board approved the selection of Price
Waterhouse LLP as independent accountants for the Company for its 1995 fiscal
year.
PROPOSALS 3 AND 4. THE DOCLOC I AMENDMENT PROPOSAL AND THE DOCLOC II PROPOSAL
The holders of Common Stock are being asked to approve an amendment to the
$100 million double convertible revolving credit agreement with Cyprus,
approved by Stockholders at the Special Meeting of Stockholders held in July
1994. Such amendment would extend DOCLOC I from April 30, 1997 to December 31,
2001. Additionally, Stockholders are being asked to approve DOCLOC II pursuant
to which Cyprus will provide the Company with an additional line of credit of
$80 million, under which any indebtedness may be repaid by the Company's
issuance of up to 1,600,000 shares of the Company's Series C Preferred Stock,
and such shares of Series C Preferred Stock may be redeemed by the Company for
14,919,806 shares of Common Stock at a price equal to the greater of $4.196 per
share or the average closing price per share over a period prior to redemption,
or converted by Cyprus at any time into up to 14,919,806 shares of Common Stock
at a conversion price of $5.362 per share; such approval shall include but not
be limited to the authorization and issuance to Cyprus of up to 1,600,000
shares of Series C Preferred Stock and up to 14,919,806 shares of Common Stock
under DOCLOC II. Like under DOCLOC I as amended, Cyprus has agreed to make
loans to the Company through December 31, 2001 under DOCLOC II.
Although the financing activities undertaken in 1994 allowed the Company to
meet its debt obligations in 1994 and to satisfy its principal repayment
obligations for 1995 aggregating approximately $24 million, the Company has
determined that additional financing is needed to finance development of its
Fort Knox project during 1995. Currently, no amounts are outstanding under
DOCLOC I, approximately $86 million has been designated to support certain
credit arrangements, and $14 million is available and has not been designated.
Cash flow from operations for 1995 is estimated to be sufficient to cover
operating and administrative expenses, exploration expenditures and interest
payments on the Company's debt obligations. In February 1995, the Company
negotiated with Cyprus for an extension from April 30, 1997 to December 31,
2001 on its financing under DOCLOC I and an additional $80 million double
convertible line of credit similar to DOCLOC I. At a series of meetings of the
Audit Committee (composed of the two directors who are not associates, officers
or employees of the Company or Cyprus) and the Board (with those members other
than the members of the Audit Committee abstaining) during February and March
1995, the Audit Committee and the Board, after consideration of a fairness
opinion from Salomon Brothers Inc ("Salomon Brothers") and other financing
alternatives, approved the execution and delivery of the DOCLOC I Amendment and
DOCLOC II. On March 10, 1995, the Company arranged for the right to borrow up
to $40 million under DOCLOC II, subject to obtaining stockholder approval of
DOCLOC II by June 16, 1995 and the suspension of the equity features of DOCLOC
II. This temporary borrowing arrangement is secured by a 20% interest in the
Company's Fort Knox project.
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Summary of Material Terms of the DOCLOC I Amendment
Extension of Revolving Loan. The DOCLOC I Amendment provides that Cyprus will
make loans (evidenced by a note of the Company) to the Company from time to
time until the earlier of December 31, 2001 or the date on which the Commitment
(defined below) is terminated under DOCLOC I (the earlier of such dates being
the "DOCLOC I Revolver Expiration Date") in an aggregate principal amount not
to exceed at any time outstanding $100 million (the "DOCLOC I Commitment").
On the Revolver Expiration Date, all accrued interest must be paid and the
aggregate principal balance of all loans outstanding will become due and
payable in 20 equal quarterly installments on June 30, September 30, December
31 and March 31 of each of the following five years, with the first installment
due on March 31, 2002. The last installment, due December 31, 2006, will be in
an amount necessary to repay in full the unpaid principal amount of the loans.
The outstanding principal balance of the note will bear interest as set forth
above.
Material Terms of DOCLOC I. The terms of DOCLOC I are identical to those of
DOCLOC II with the exception of price terms. Under DOCLOC I, Cyprus agreed to
make loans to the Company (evidenced by a note from the Company) from time to
time until the DOCLOC I Revolver Expiration Date in an aggregate principal
amount not to exceed at any time outstanding the DOCLOC I Commitment. The
Company may elect to repay the outstanding indebtedness under DOCLOC I either
in cash or in shares of Series A Preferred Stock. Payment by the Company in
shares of Series A Preferred Stock automatically reduces the DOCLOC I
Commitment amount by $50 per share of Series A Preferred Stock so issued.
The Company, at its option, may at any time redeem the Series A Preferred
Stock, in whole or from time to time in part, by issuing shares of Common Stock
at a price per share equal to the greater of $5.854 or the average closing
price per share (up to $8.265) over a pre-determined period prior to
redemption.
The maximum number of shares of Common Stock that the Company may issue upon
redemption or conversion of the Series A Preferred Stock, together with any
shares of Common Stock issued as dividends on the Series A Preferred Stock, is
12,099,213 shares, subject to adjustment due to any adjustment in the
conversion price upon the occurrence of certain dilutive events.
The amendment will also extend the time during which Cyprus can exercise its
option to acquire up to 12,099,213 shares of Common Stock under DOCLOC I.
The full text of DOCLOC I and the DOCLOC I Amendment are attached as Appendix
A and Appendix B, respectively, to this Proxy Statement and are incorporated
herein by reference.
Summary of Material Terms of DOCLOC II
Revolving Loan. Under DOCLOC II Cyprus agrees to make loans to the Company
(evidenced by a note from the Company) from time to time until the earlier of
December 31, 2001 or the date on which the DOCLOC II Commitment (defined below)
is terminated under DOCLOC II (the earlier of such dates being the "DOCLOC II
Revolver Expiration Date") in an aggregate principal amount not to exceed at
any time outstanding $80 million (the "DOCLOC II Commitment"). The Company may
elect to repay the outstanding indebtedness under this line of credit either by
payment in cash or payment in shares of Series C Preferred Stock. Payment by
the Company in shares of Series C Preferred Stock automatically reduces the
DOCLOC II Commitment amount by $50 per share of Series C Preferred Stock so
issued.
Use of Proceeds. The proceeds of DOCLOC II will be used to finance
development of the Company's Fort Knox project, for growth and for general
corporate purposes. Although no specific allocations of the proceeds have been
determined, the Company anticipates that at least 50% of the proceeds will be
used for its Fort Knox project.
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Interest Rate. Each loan made by Cyprus to the Company bears interest at an
annual rate equal to the London Interbank Offered Rate ("LIBOR") for a period
of either one, three or six months, as selected by the Company, plus .30%.
Amortization of Principal and Payment. On the Revolver Expiration Date, all
accrued interest must be paid and the aggregate principal balance of all loans
outstanding will become due and payable in 20 equal quarterly installments on
June 30, September 30, December 31 and March 31 of each of the following five
years, with the first installment due on March 31, 2002. The last installment,
due December 31, 2006, will be in an amount necessary to repay in full the
unpaid principal amount of the loans. The outstanding principal balance of the
note will bear interest as set forth above.
Prepayments in Cash. The Company may make cash prepayments of principal in
amounts equal to an integral multiple of $1,000,000 without premium or penalty.
Payment with Series C Preferred Stock. The Company may elect to repay or
prepay the entire principal balance due under the note, any required
amortization payment due, any required interest payment due under the note
and/or increments of at least $5,000,000 of principal of loans outstanding
under the note by issuing shares of Series C Preferred Stock to Cyprus. The
number of shares of Series C Preferred Stock to be issued can be determined by
dividing the amount of indebtedness under DOCLOC II to be repaid with shares of
Series C Preferred Stock by $50.00. Cash will be issued in lieu of any
fractional shares.
Payment of Dividends on Series C Preferred Stock. Each share of Series C
Preferred Stock shall be entitled to receive dividends at an annual rate of
$2.25 per share, payable semi-annually on January 1 and July 1 of each year.
The Company may pay Series C Preferred Stock dividends in shares of Common
Stock in lieu of cash unless the holder of such shares of Series C Preferred
Stock elects to receive cash.
Restrictions on Transfer of Series C Preferred Stock. If Cyprus desires to
transfer any shares of Series C Preferred Stock held by it, such proposed sale
must be for cash only, and the Company has a right of first refusal with
respect to all such offered shares.
Conversion and Redemption of Series C Preferred Stock. The holder of any
shares of Series C Preferred Stock will have the right, at the holder's option,
to convert any or all shares of Series C Preferred Stock held by such holder
into Common Stock at any time. Each share of Series C Preferred Stock is
convertible into that number of shares of Common Stock obtained by dividing $50
by the Conversion Price in effect at the time. The conversion price is $5.362
and is subject to adjustment upon the occurrence of certain dilutive events.
The Company, at its option, may at any time redeem the Series C Preferred
Stock, in whole or from time to time in part, by issuing shares of Common Stock
at a price per share equal to the greater of $4.196 or the average closing
price per share (up to $5.362) over a pre-determined period prior to
redemption.
The maximum number of shares of Common Stock that the Company may issue upon
redemption or conversion of the Series C Preferred Stock, together with any
shares of Common Stock issued as dividends on the Series C Preferred Stock, is
14,919,806 shares, subject to adjustment due to any adjustment in the
conversion price upon the occurrence of certain dilutive events.
Covenants. As in DOCLOC I, DOCLOC II requires the prior consent of Cyprus
before the Company may enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution).
Events of Default. Events of default are limited to non-payment of principal
or interest, material misrepresentations, bankruptcy and failure to comply with
the covenants set forth in DOCLOC II after a 30-day grace period.
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Stock Purchase Option. Cyprus will have the right to replace DOCLOC II and
any outstanding indebtedness and/or shares of Series C Preferred Stock with the
purchase of up to 14,919,806 shares of Common Stock at a purchase price of
$5.362 per share. The purchase price for the shares of Common Stock will be
paid and applied (i) to cancel any interest and principal outstanding, (ii) to
convert any shares of Series C Preferred Stock previously issued to Cyprus and
(iii) to terminate the DOCLOC II Commitment.
Demand Registration Rights. Cyprus may demand registration under the
Securities Act of 1933, as amended, of all or part (but not less than 1,000,000
shares per demand) of the shares of Common Stock issued to Cyprus pursuant to
DOCLOC II. The Company is obligated to pay all expenses in connection with the
first such demand registration. All expenses incurred in connection with each
additional registration, if any, shall be paid by Cyprus.
Representations and Warranties. The Company made certain representations and
warranties to Cyprus concerning corporate existence, corporate power and
authority, government approvals, enforceability, financial statements provided,
litigation matters and the validity of the shares of Series C Preferred Stock
and Common Stock issuable under DOCLOC II.
The full text of DOCLOC II is attached as Appendix C to this Proxy Statement
and is incorporated herein by reference.
PROPOSAL 5. THE REINCORPORATION PROPOSAL
The Reincorporation will be effected by means of a merger by the Company with
and into NEW AGI, a wholly owned subsidiary of the Company. The Certificate of
Incorporation of NEW AGI is identical to the Restated Certificate of
Incorporation of the Company, except that the Certificate of Incorporation of
NEW AGI contains a provision electing not to be governed by Section 203 of the
Delaware Law. The merger agreement provides that, upon the filing of the
certificate of merger, the name of NEW AGI will be changed to "Amax Gold Inc."
The full text of the Merger Agreement is attached as Appendix E to this Proxy
Statement and is incorporated herein by reference.
While Section 203 is intended to provide anti-takeover protection for
Delaware corporations by imposing supermajority disinterested stockholder
voting requirements for certain self-dealing transactions with large
stockholders, the Board believes that potential transactions between Cyprus and
the Company could be beneficial to both the Company and Stockholders (without
regard to Cyprus) and that the need to meet the supermajority disinterested
stockholder approval requirements under Section 203 for each such transaction
makes it more difficult to pursue potentially attractive opportunities and more
time consuming and expensive to effect them. In that connection, the Board
notes that Delaware Law will continue to require that the directors satisfy
their fiduciary duties to all stockholders of the Company in considering
transactions with interested stockholders, including Cyprus.
The Certificate of Incorporation of NEW AGI will be identical to the Restated
Certificate of Incorporation of the Company, except that the Certificate of
Incorporation contains a provision electing not to be governed by Section 203.
As a result, stockholders of the Company will not have the right to a vote in
connection with transactions between Cyprus and NEW AGI unless the requirement
of stockholder approval is imposed by another provision of Delaware Law or the
rules of the NYSE or the Toronto Stock Exchange (the "TSE"). In addition, if
any other person or entity acquires 15% or more of the outstanding shares of
common stock of NEW AGI, whether through an acquisition from Cyprus or
otherwise, such person or entity will not be subject to Section 203.
The Reincorporation Proposal, if approved, would allow the Company to enter
into "business combinations" (including financing arrangements involving the
issuance of Common Stock) without requiring the approval of 66 2/3% of the
holders of Common Stock excluding Cyprus. Rules of the NYSE will continue
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to require the affirmative vote of 50% of all stockholders to complete such
transactions and the TSE may also require stockholder approval. If Cyprus has
exercised its right to acquire additional shares of Common Stock under DOCLOC I
and DOCLOC II (if approved), Cyprus' ownership of Common Stock may be greater
than 50%. Therefore, under Delaware Law and NYSE rules, Cyprus alone could
approve all corporate action and elect all members of the Board.
PROPOSAL 6. THE STOCKHOLDER PROPOSAL
A stockholder holding 76,272 shares of Common Stock has stated its intention
to present a proposal for consideration at the Annual Meeting. The proposal is
a recommendation that the Board take the necessary steps to adopt and implement
a policy of cumulative voting for all elections of directors.
THE BOARD RECOMMENDS A VOTE AGAINST THE STOCKHOLDER PROPOSAL.
EFFECTS OF THE PROPOSALS ON THE RIGHTS OF THE COMPANY'S STOCKHOLDERS
Assuming the issuance of the shares of Common Stock to Cyprus under DOCLOC II
as proposed in this Proxy Statement, the percentage of the Company's voting
securities owned of record and beneficially by existing holders of shares of
Common Stock (other than Cyprus) will be reduced significantly on a fully
diluted basis. If all 12,099,213 shares of Common Stock that are potentially
issuable under DOCLOC I were issued to Cyprus, the interest of existing holders
of shares of Common Stock other than Cyprus would bereduced to 50.3% of the
outstanding shares of Common Stock and Cyprus' ownership of shares of Common
Stock would increase to 49.7% of the outstanding shares of Common Stock.
Additionally, if Stockholders approve DOCLOC II, the interest of existing
holders of shares of Common Stock other than Cyprus would be reduced further to
43.4% and Cyprus' ownership of shares of Common Stock would increase further to
56.6% of the outstanding shares of Common Stock, in each case assuming that all
14,919,806 shares of Common Stock that are potentially issuable under DOCLOC II
are in fact issued to Cyprus. Each share of the Company's $3.75 Series B
Convertible Preferred Stock, par value $1.00 per share (the "Series B Preferred
Stock"), is convertible into 6.061 shares of Common Stock and, if converted,
would reduce Cyprus' record ownership to 51.3% of the outstanding shares of
Common Stock. Thus, if all shares of Common Stock are issued to Cyprus as
described above, Cyprus could control the election of directors and any other
action taken by the holders of the Common Stock and the ability of existing
stockholders to influence the election of directors or any other action taken
by the holders of Common Stock would be reduced. The Company has been informed
that Cyprus presently does not intend to take the Company private nor does it
intend the transactions covered by the proposals to be the first in or part of
a series of transactions which would result in any class of the Company's
equity securities which is currently listed on a national securities exchange
not to be so listed or would result in any class of the Company's equity
securities being held of record by less than 300 holders.
Additionally, both DOCLOC I and DOCLOC II require the prior consent of Cyprus
before the Company may enter into any merger, consolidation or amalgamation
transaction or liquidate, wind up or dissolve itself (or suffer any liquidation
or dissolution).
Further, the payment of cash dividends on shares of preferred stock issuable
under DOCLOC I and DOCLOC II may limit the Company's ability to pay cash
dividends on shares of Common Stock. The terms of the Series A Preferred Stock
and the Series C Preferred Stock (and the terms of the Series B Preferred Stock
issued by the Company in connection with a public offering in August 1994)
state that no dividends may be paid on shares of Common Stock unless and until
all dividends payable on the preferred stock have been paid.
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Approval of the DOCLOC II Proposal will reinstate the equity features of
DOCLOC II with respect to the temporary borrowing and will release Cyprus'
security interest in 20% of the Company's Fort Knox project. In the event
stockholder approval is not obtained by June 16, 1995, all amounts borrowed
become due and payable on October 15, 1995 and the interest rate increases to
compensate for the loss of equity features. Although no assurance can be given,
the Company believes that it would be able to secure alternative more costly
financing to repay all amounts borrowed prior to October 15, 1995 to avoid the
potential loss of any interest in the Fort Knox project.
The Reincorporation Proposal, if approved, would allow the Company to enter
into "business combinations" with Cyprus or any future interested stockholder
(including financing arrangements involving the issuance of the Common Stock)
without requiring the approval of 66 2/3% of the holders of Common Stock held
by persons other than Cyprus or such interested stockholder. NYSE rules will
continue to require the affirmative vote of over 50% of all stockholders voting
to complete certain such transactions and that the total vote cast exceed 50%
of the outstanding shares of Common Stock. However, if Cyprus has exercised its
right to acquire additional shares of Common Stock under DOCLOC I and DOCLOC
II, Cyprus' ownership of Common Stock would be greater than 50%. Therefore,
under Delaware Law and NYSE rules Cyprus alone could approve corporate action
and elect all members of the Board.
If Stockholders approve the Stockholder Proposal to permit cumulative voting
for the election of directors, each stockholder would have the number of votes
equal to the number of shares owned by such stockholder multiplied by the
number of directors to be elected, and each stockholder would be able to cast
all of such stockholder's votes for a single director nominee or apportion the
votes among the nominees. As a result, a stockholder or group of stockholders
holding a minority interest could elect a director. Cumulative voting could
encourage factionalism and partisanship and introduce an element of discord on
the Board, thus impairing the ability of directors to effectively work together
for the best interests of the Company and its stockholders.
VOTES
On the Record Date there were 81,296,373 shares of Common Stock outstanding,
of which Cyprus indirectly owned 34,313,709 shares. The directors standing for
election (Proposal 1) must be elected by a plurality of the votes cast. The
ratification of the selection of independent accountants (Proposal 2) and the
Stockholder Proposal (Proposal 6) must be approved by the holders of a majority
of the shares of Common Stock entitled to vote.
Approval of each of the DOCLOC I Amendment Proposal, the DOCLOC II Proposal
and the Reincorporation Proposal requires (i) under Delaware Law, the
affirmative vote of 66 2/3% of the outstanding shares of Common Stock on the
Record Date which are not owned by Cyprus or its affiliates and associates and
(ii) under the rules of the NYSE, the affirmative vote of a majority of all
shares of Common Stock voting on such proposals, provided that the total vote
cast on each of these proposals represents over 50% in interest of all
outstanding shares of Common Stock. See "ANNUAL MEETING--Votes Required."
Shares of Common Stock represented by a proxy properly signed and received at
or prior to the Annual Meeting, unless subsequently revoked, will be voted in
accordance with the instructions thereon. If a proxy is signed and returned to
Chemical Bank without indicating any voting instructions, shares of Common
Stock represented by the proxy will be voted FOR Proposals 1 through 5 and
AGAINST Proposal 6. The Company's proxy holders may in their discretion vote
shares voted for each of Proposals 3 through 5 to adjourn the Annual Meeting to
solicit additional proxies in favor of the proposals. Proxies voting against
any one of Proposals 3 through 5 will not be voted for adjournment of the
Annual Meeting. Any proxy given pursuant to this solicitation may be revoked by
the filing of an instrument revoking it or of a duly executed proxy bearing a
later date with Chemical Bank prior to or at the Annual Meeting, or by voting
in person at
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the Annual Meeting. All written revocations and other communications with
respect to revocation of proxies should be addressed as follows: Chemical Bank,
Proxy Tally Department, Church Street Station, P.O. Box 24555, New York, New
York 10242-0018. Attendance at the Annual Meeting will not in and of itself
constitute a revocation.
INTENTION OF DIRECTORS, EXECUTIVE OFFICERS AND CYPRUS
The directors and executive officers of the Company (with four of the six
directors and one of the eight executive officers being directors and/or
executive officers of Cyprus) holding in the aggregate less than 1% of the
shares of Common Stock as of April 10, 1995, have advised the Company that they
intend to vote for each of the proposals except the Stockholder Proposal.
Cyprus has advised the Company that it intends to vote for each of the
proposals except the Stockholder Proposal. Although the vote of Cyprus and its
affiliates and associates will be counted for purposes of obtaining the
approval of stockholders for the election of directors, the ratification of the
independent accountants and the Stockholder Proposal, and for purposes of
obtaining the approval of stockholders required by the NYSE rules for the
DOCLOC I Amendment Proposal, the DOCLOC II Proposal and the Reincorporation
Proposal, the vote of Cyprus and its affiliates and associates will not be
counted for purposes of obtaining the requisite stockholder approval under
Section 203 of Delaware Law for the DOCLOC I Amendment Proposal, the DOCLOC II
Proposal and the Reincorporation Proposal. See "ANNUAL MEETING--Votes
Required."
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS A VOTE FOR EACH OF PROPOSALS 1 THROUGH 5 AND A VOTE
AGAINST PROPOSAL 6.
Following the unanimous approval of the Audit Committee of the Board (the
"Audit Committee"), which is comprised of the two directors who are not
associates, officers or employees of the Company or Cyprus, the Board, with
directors other than members of the Audit Committee abstaining, approved the
DOCLOC I Amendment Proposal, the DOCLOC II Proposal and the Reincorporation
Proposal, and the issuance of the shares of preferred stock and Common Stock
contemplated thereby. The conclusion of the Company's Audit Committee and the
Board is based upon a number of factors that are discussed in connection with
each proposal. The Board believes that each of the DOCLOC I Amendment Proposal,
the DOCLOC II Proposal and the Reincorporation Proposal is fair to and in the
best interests of all stockholders, excluding Cyprus and its affiliates. The
Board believes that the Stockholder Proposal is NOT in the best interests of
stockholders.
OPINIONS OF FINANCIAL ADVISOR REGARDING THE DOCLOC I AMENDMENT PROPOSAL AND THE
DOCLOC II PROPOSAL
Salomon Brothers rendered its oral opinion on March 2, 1995 (with respect to
DOCLOC II) and on March 14, 1995 (with respect to the DOCLOC I Amendment) to
the Audit Committee to the effect that the transactions contemplated by DOCLOC
II and the DOCLOC I Amendment, respectively, are fair, from a financial point
of view, to the stockholders of the Company (solely in their capacity as such),
exclusive of Cyprus and its affiliates. Salomon Brothers has confirmed its
opinions by delivery of written opinions, dated March 2, 1995 (with respect to
DOCLOC II), March 14, 1995 (with respect to the DOCLOC I Amendment) and April
27, 1995 (with respect to DOCLOC II and the DOCLOC I Amendment).
The opinions of Salomon Brothers are described in connection with each of
these proposals and theApril 27, 1995 opinions are attached as Appendix G to
this Proxy Statement and are incorporated by reference herein.
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ANNUAL MEETING
RECOMMENDATION OF THE BOARD
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR EACH OF PROPOSALS 1
THROUGH 5 AND AGAINST PROPOSAL 6.
RECORD DATE
The close of business on April 10, 1995 shall be the Record Date for the
determination of the holders of Common Stock entitled to receive this Proxy
Statement and to vote for the proposals.
VOTES REQUIRED
Under Delaware Law and the Company's By-Laws, the holders of a majority of
the shares of Common Stock eligible to vote, present in person or represented
by proxy, will constitute a quorum at the Annual Meeting. For this purpose,
shares which are present or represented by a proxy at the 1995 Annual Meeting
will be counted for quorum purposes, regardless of whether the holder of the
shares or proxy fails to vote on, or whether a broker with discretionary
authority fails to exercise its discretionary voting authority with respect to,
any particular matter. None of the proposals are contingent upon approval of
any other proposal. The directors standing for election (Proposal 1) must be
elected by a plurality of the votes cast. The ratification of the selection of
independent accountants (Proposal 2) and the Stockholder Proposal (Proposal 6)
must be approved by the holders of a majority of the shares of Common Stock
entitled to vote.
Approval of each of the DOCLOC I Amendment Proposal, the DOCLOC II Proposal
and the Reincorporation Proposal requires (i) under Delaware Law, the
affirmative vote of 66 2/3% of the outstanding shares of Common Stock on the
Record Date which are not owned by Cyprus or its affiliates and associates and
(ii) under the rules of the NYSE the affirmative vote of a majority of all
shares of Common Stock voting on such proposals, provided that the total vote
cast on each of these proposals represents over 50% in interest of all
outstanding shares of Common Stock. Section 203 of Delaware Law states that the
Company may not engage in any business combination (defined to include most
transactions which result in the issuance by the Company of any stock to
Cyprus) with Cyprus (an "interested stockholder" because it owns more than 15%
of the outstanding shares of Common Stock) for a period of three years
following the date that Cyprus became an interested stockholder, unless on or
subsequent to such date the business combination is approved by the Company's
Board and authorized at an annual or special meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by Cyprus or its affiliates or associates. In addition, pursuant to a
rule of the NYSE (Paragraph 312.03(b) of the Listed Company Manual), the
approval of a majority of the holders of over 50% of all shares of Common Stock
entitled to vote (provided that the total vote cast exceeds 50% of the
outstanding shares of Common Stock) is required as a prerequisite to the
listing of the Common Stock to be issued to Cyprus in the transactions
described in the DOCLOC I Amendment Proposal and the DOCLOC II Proposal, on the
basis that these proposals contemplate that "tangible or intangible assets" (in
the case of DOCLOC I and DOCLOC II, cash) are to be acquired directly or
indirectly from a substantial security holder of the Company (a holder of 5% or
more of the Company's outstanding shares of Common Stock) and the number of
shares of Common Stock to be issued in such transactions will exceed 1% of the
number of shares of Common Stock outstanding before such issuance. The
Company's Common Stock is also listed on the TSE, and rules of the TSE also
require stockholder approval in certain circumstances.
As of April 10, 1995, there were 81,296,373 shares of Common Stock
outstanding (exclusive of 1,991 shares held by the Company in treasury) of
which Cyprus indirectly owned 34,313,709 shares. Common Stock is the only
outstanding class of voting securities of the Company. Each share of Common
Stock outstanding on the Record Date is entitled to one vote on each of the
proposals.
14
<PAGE>
As of April 10, 1995, directors and executive officers of the Company (with
four of the six directors and one of the eight executive officers of the
Company being directors and/or executive officers of Cyprus) owned beneficially
less than 1% of the shares of Common Stock outstanding on such date. Such
directors and executive officers of the Company have advised the Company that
they intend to vote for each of the proposals except the Stockholder Proposal
(Proposal 6). Cyprus has advised the Company that it intends to vote for each
of the proposals except the Stockholder Proposal (Proposal 6). Although the
vote of Cyprus and its affiliates and associates will be counted for purposes
of obtaining the approval of stockholders required by the NYSE rules, the vote
of Cyprus and its affiliates and associates will not be counted for purposes of
obtaining the requisite stockholder approval under Section 203 of Delaware Law
for Proposals 3 through 5.
VOTES
Shares of Common Stock represented by proxy properly signed and received at
or prior to the Annual Meeting, unless subsequently revoked, will be voted in
accordance with the instructions thereon. If a proxy is signed and returned to
Chemical Bank without indicating any voting instructions, shares of Common
Stock represented by the proxy will be voted FOR Proposals 1 through 5 and
AGAINST Proposal 6. The Company's proxy holders may in their discretion vote
shares voted for each of Proposals 3 through 5 to adjourn the Annual Meeting to
solicit additional proxies in favor of the proposals. Proxies voting against
any one of Proposals 3 through 5 will not be voted for adjournment of the
Annual Meeting. Any proxy given pursuant to this solicitation may be revoked by
the filing of an instrument revoking it or of a duly executed proxy bearing a
later date with Chemical Bank prior to or at the Annual Meeting, or by voting
in person at the Annual Meeting. All written revocations and other
communications with respect to revocation of proxies should be addressed as
follows: Chemical Bank, Proxy Tally Department, Church Street Station, P.O. Box
24555, New York, New York 10242-0018. Attendance at the Annual Meeting will not
in and of itself constitute a revocation.
Votes at the Annual Meeting will be tabulated by two employees of Chemical
Bank, the Company's Transfer Agent, to be named by Chemical Bank to serve as
inspectors of election.
SOLICITATION OF PROXIES
The Company will bear the cost of solicitation of proxies. In addition to the
use of mails, proxies may be solicited by officers and regular employees of the
Company, personally or by telephone or telegraph, and the Company may reimburse
persons holding shares in their names or those of their nominees for their
expenses in sending soliciting material to their principals.
In addition, the Company has retained Georgeson & Company Inc. ("Georgeson")
to assist in the solicitation of proxies from Stockholders. Georgeson will
solicit proxies from those Stockholders of the Company that are banks, brokers
and other institutional investors and from non-objecting beneficial owners and
individual holders of record, for a fee of $20,000, plus expenses. Georgeson
will directly solicit non-objecting beneficial owners and unvoted registered
Stockholders by telephone for an additional fee of $6.00 per call.
ACCOUNTANTS
Representatives of Price Waterhouse LLP will be present at the Annual Meeting
with the opportunity to make a statement if they desire to do so and to respond
to appropriate Stockholder questions.
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 31, 1995, the following are, to the knowledge of the Company, the
only persons (including any "group" as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934) who are the beneficial owners of more than
5% of the Common Stock:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
------------------- ----------------------- -------
<S> <C> <C>
Cyprus......................................... 34,313,709 shares 42.2%
9100 East Mineral Circle
Englewood, Colorado 80112
Franklin Resources, Inc.*...................... 4,839,102 shares 6.0%
777 Mariners Island Blvd.
San Mateo, California 94404
</TABLE>
- --------
*This information is based solely on a Schedule 13G Report filed with the
Securities and Exchange Commission by Franklin Resources, Inc. in February
1995.
CERTAIN TRANSACTIONS--RELATIONSHIP WITH CYPRUS
Cyprus is a diversified mining company engaged in the exploration for and the
extraction, processing and marketing of mineral resources. Cyprus operates in
three principal industry segments: copper/molybdenum, coal and other minerals
(including lithium and gold). Cyprus was incorporated in Delaware in 1969 and
operates primarily in the United States. Cyprus' principal executive offices
are located at 9100 East Mineral Circle, Englewood, Colorado 80112, and its
telephone number is (303) 643-5000.
Cyprus currently owns 34,313,709 shares or 42.2% of the outstanding shares of
Common Stock of the Company. Cyprus holds theses shares of Common Stock as a
result of (i) the merger on November 15, 1993 of AMAX Inc., a Delaware
corporation ("Amax"), which owned approximately 68% of the outstanding shares
of Common Stock, with and into Cyprus Minerals Company (renamed Cyprus Amax
Minerals Company) (the "Cyprus Amax Merger"), (ii) the distribution by Amax of
21.8 million shares or approximately 28% of the shares of Common Stock to the
stockholders of Amax immediately prior to the Cyprus Amax Merger, and (ii) the
acquisition in July 1994 by Cyprus of 3,000,000 shares of Common Stock under a
stock purchase agreement. If Cyprus were to exercise its right under DOCLOC I
to acquire additional shares of Common Stock, Cyprus would be the indirect
owner of 46,412,922 shares or 49.7% of the outstanding shares of Common Stock.
If Stockholders approve DOCLOC II and if Cyprus were to exercise its right to
acquire 14,919,806 additional shares of Common Stock under DOCLOC II, Cyprus'
ownership of outstanding shares of Common Stock would increase further to
61,332,728 shares or 56.6% of the outstanding shares of Common Stock. Each
share of the Company's Series B Preferred Stock is convertible into 6.061
shares of Common Stock and, if converted, would reduce Cyprus' record ownership
to 51.3% of the outstanding shares of Common Stock.
Directors and officers of Cyprus comprise four of the six members of the
Company's Board. Milton H. Ward, Chairman of the Board and Chief Executive
Officer of the Company, is Co-Chairman of the Board, President and Chief
Executive Officer of Cyprus; Gerald J. Malys, a director of the Company, is
Senior Vice President and Chief Financial Officer of Cyprus; Allen Born, a
director of the Company, is Co-Chairman of Cyprus; and Rockwell A. Schnabel, a
director of the Company, is a director of Cyprus.
In addition to DOCLOC I and the proposed DOCLOC II, which are discussed
elsewhere in this Proxy Statement, Cyprus is party to a number of contracts
with the Company, which are described below.
Guarantees. As of March 31, 1995, Cyprus has provided a guarantee for
approximately $35 million of the Company's outstanding indebtedness and letters
of credit. An equivalent amount of DOCLOC I has been allocated to replace this
guarantee.
16
<PAGE>
Exploration Joint Venture Agreement. The Company entered into an Exploration
JV with Cyprus effective January 1, 1994. Under the Exploration JV, the Company
and Cyprus have agreed to pool their efforts for the principal purpose of
discovering and developing future gold prospects, with Cyprus providing 75% and
the Company providing 25% of the initial exploration funding for such
prospects. Properties held by the parties prior to January 1, 1994 are excluded
from the joint venture. A subsidiary of Cyprus has been appointed as Manager to
manage, direct and control exploration activities. The agreement will terminate
on January 1, 1996 unless the Company and Cyprus mutually agree to extend the
agreement. Either party may withdraw upon giving 60 days' notice to the other
party. Pursuant to the Exploration JV, the Company has the first right to
acquire any gold property covered by the Exploration JV, and Cyprus has the
first right to acquire property containing deposits of minerals or precious
metals other than gold.
Cerro Quema Option Agreement. The Company and Cyprus have entered into an
agreement which gives the Company the option to purchase Cyprus' interest in
the Cerro Quema advanced stage gold exploration prospect in Panama. The
purchase price is to be based on reserves to be established in a feasibility
study funded by the Company that has yet to be completed.
The Company is evaluating its option to purchase the Cerro Quema prospect. In
the event the purchase price of the Cerro Quema property (or any property
acquired pursuant to the Exploration JV) involves the issuance of 1% or more of
the Company's voting securities, pursuant to the rules of the NYSE, the Company
would need to obtain the affirmative vote of 50% of all stockholders to
complete the transaction. At this time, the Company has made no decision
regarding whether the exercise of the option will be submitted to a vote of
unaffiliated stockholders. If Cyprus exercises its rights to acquire additional
shares of Common Stock, its ownership may be greater than 50%, which would
enable Cyprus to approve such transactions without the approval of unaffiliated
stockholders. See "Summary--Effects of the Proposals on the Rights of the
Company's Stockholders."
Management Services Agreement. Pursuant to the terms of the Management
Services Agreement, the Company and Cyprus have agreed to provide a variety of
managerial and other services to each other on a full cost-reimbursement basis.
The agreement is terminable by the Company or by Cyprus as of the end of any
month on 180 days' prior written notice. For fiscal year 1994, amounts charged
to the Company by Cyprus pursuant to the Management Services Agreement were
approximately $4.8 million, including the costs of insurance coverage for the
Company, and amounts charged to Cyprus by the Company pursuant to the
Management Services Agreement were approximately $.9 million.
Put and Call Agreement. The Company and Cyprus are parties to the Put and
Call Agreement under which Cyprus may sell shares of Common Stock of the
Company to the Company upon exercise of the Warrants issued in connection with
the acquisition of the Fort Knox project in 1992. Under the Put and Call
Agreement, Cyprus has a put option whereby, upon exercise of any Warrants,
Cyprus may require the Company to purchase a number of shares of Common Stock
of the Company from Cyprus at the warrant exercise price, as determined
pursuant to the provisions of the Warrant Agreement dated January 6, 1992,
entered into between the Company and Manufacturers Hanover Trust Company as
Warrant Agent, such number to be equal to the number of shares of Common Stock
of the Company which the Company is required to issue upon exercise of such
Warrants. Pursuant to the Warrant Agreement, the initial warrant exercise price
is $21.00 per share and is subject to customary anti-dilution adjustments upon
the occurrence of, among other things, stock dividends, stock splits,
reclassifications, mergers and similar events.
In the event Cyprus fails to exercise the put option, the Company will have a
call option whereby it may require Cyprus to sell shares of Common Stock (to
the extent then owned by Cyprus) to the Company equal to the number of shares
of Common Stock of the Company which the Company is required to issue upon
exercise of such Warrants at a price equal to the warrant exercise price plus
two-thirds of the excess of (x) the market price per share of Common Stock of
the Company over (y) the warrant exercise price.
Employee Transfer Agreement. Pursuant to the Employee Transfer Agreement, the
Company and Cyprus have agreed to amend their respective benefit plans to allow
employees to transfer from the Company to Cyprus or from Cyprus to the Company
with minimal effect on an employee's benefits.
17
<PAGE>
Net Operating Loss Agreement. Pursuant to the Net Operating Loss Agreement,
the Company agreed to allow Cyprus to use the 1993 NOL which would result in a
refund of taxes paid by Cyprus in a prior year, and Cyprus agreed to reimburse
the Company at such time that the Company would have received the benefit for
the 1993 NOL had the Company elected to carry forward the 1993 NOL.
PROPOSAL 1. ELECTION OF DIRECTORS
The Company currently has six directors, each of whom is elected to serve
until the next annual meeting of stockholders or until his successor is duly
elected and qualified. The Board has nominated Messrs. Allen Born, Gerald J.
Malys, Rockwell A. Schnabel, Vernon F. Taylor, Jr., Milton H. Ward and Russell
L. Wood for the election of directors at the Annual Meeting and to serve until
the 1996 Annual Meeting of Stockholders or until their successors are duly
elected and qualified. It is not anticipated that any of these nominees will
become unavailable for any reason, but if that should occur before the Annual
Meeting, the persons named in the enclosed proxy reserve the right to
substitute another person of their choice as nominee in his place or to vote
for such lesser number of directors as may be prescribed by the Board in
accordance with the Company's Restated Certificate of Incorporation and By-
Laws.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE NOMINEES.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
ALLEN BORN, age 61, has been a director of the Company since May 1987. Mr.
Born has served as Chairman and Chief Executive Officer of Alumax Inc. since
November 1993. He served as Chairman of AMAX Inc. from June 1988 to November
1993, as Chief Executive Officer of AMAX Inc. from January 1986 to November
1993 and as President and Chief Operating Officer of AMAX Inc. from June 1985
through July 1991. Mr. Born is a director and Co-Chairman of the Board of
Cyprus, a director of AK Steel, the International Primary Aluminium Institute
and the Aluminum Association.
GERALD J. MALYS, age 50, has been a director of the Company since November
1993. Mr. Malys has been Senior Vice President and Chief Financial Officer of
Cyprus since August 1989. He served as Senior Vice President, Financial and
Information Services of Cyprus from August 1988 to July 1989 and Vice President
and Corporate Controller from 1985 to August 1988.
ROCKWELL A. SCHNABEL, age 58, has been a director of the Company since March
1994. Ambassador Schnabel is Co-Chairman of Trident Capital, L.P. and former
Deputy Secretary of the United States Department of Commerce. Ambassador
Schnabel served as Deputy Commerce Secretary in 1991 and 1992; Acting Secretary
of Commerce from December 1991 to March 1992; and Under Secretary of Commerce
in 1989 and 1990. Ambassador Schnabel served as the United States Ambassador to
the Republic of Finland from 1986 to 1989. Ambassador Schnabel was in the
investment banking field from 1960 to 1986, and served as President of Bateman
Eichler Hill Richards Inc. (investment bankers-member NYSE) from 1980 to 1982.
He has been a director of Cyprus since February 1993. Ambassador Schnabel is
also a director of International Game Technology and is President of the Los
Angeles Fire and Police Pension Board.
VERNON F. TAYLOR, JR., age 79, has been a director of the Company since May
1987. Mr. Taylor has served as President and Director of Westhoma Oil Company
and Peerless, Inc. since 1966. He served as a director of Cyprus from July 1985
to May 1993.
MILTON H. WARD, age 62, has been Chairman of the Board and Chief Executive
Officer of the Company since November 1993. Mr. Ward has been Chairman,
President and Chief Executive Officer of Cyprus since May 1992 and Co-Chairman
of Cyprus since November 1993. Mr. Ward served as Director, President and Chief
Operating Officer of Freeport-McMoRan Inc. from 1983 until 1992 and Chairman
and Chief Executive Officer of Freeport McMoRan Copper & Gold Inc. from 1984
until 1992. Mr. Ward is a director of the National Mining Association.
18
<PAGE>
RUSSELL L. WOOD, age 67, has been a director of the Company since May 1987.
Mr. Wood has been a mining consultant and independent businessman since May
1989. He served as President and Chief Executive Officer of Asamera Minerals
Inc. from May 1990 to February 1992. Mr. Wood was President of Copper Range
Company from 1985 to 1989. He is a member of the Board of Trustees of the
Colorado School of Mines.
COMPLIANCE WITH EXCHANGE ACT SECTION 16(A)
The Company's officers and directors and persons who are beneficial owners of
more than 10% of the Common Stock ("10% beneficial owners") are required to
file reports of their holdings and transactions in the Common Stock with the
SEC and to furnish the Company with copies of such reports. Based primarily
upon its review of the copies it has received and upon written representations
it has obtained from some of these persons, the Company believes that during
the fiscal year ended December 31, 1994, the Company's officers, directors and
10% beneficial owners have complied with all such filing requirements except as
set forth in this paragraph. Mr. Schnabel, a director of the Company, made one
late Form 4 filing in 1994 with respect to one transaction in the Company's
Series B Preferred Stock.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings in 1994. No director attended fewer
than 75 percent of the aggregate of (i) the number of meetings of the Board of
Directors and (ii) the number of meetings of committees of the Board of
Directors on which he served.
AUDIT COMMITTEE. The Audit Committee, which met four times in 1994, is
composed of Vernon F. Taylor, Jr. and Russell L. Wood. The Committee recommends
to the Board of Directors the independent accounting firm responsible for
conducting the annual audit of the Company's accounts and reviews the nature
and scope of audit examinations, the financial organization and accounting
practices of the Company and the qualifications and performance of its internal
auditors. In addition, the Committee recommends to the Board policies
concerning avoidance of employee conflicts of interest and avoidance of
conflicts of interest between the Company and Cyprus and reviews the
administration of such policies.
COMPENSATION COMMITTEE. The Compensation Committee, which met one time in
1994, has as its members Allen Born, Gerald J. Malys and Rockwell A. Schnabel
and is responsible for establishing, implementing and monitoring the Company's
policies and plans for executive development, succession planning and
compensation of officers and key employees of the Company.
NOMINATING COMMITTEE. The Nominating Committee, which did not meet in 1994,
has as its members Vernon F. Taylor, Rockwell A. Schnabel, Russell L. Wood and
Milton H. Ward. The Committee reviews and makes recommendations concerning the
qualifications of prospective Board members. The Nominating Committee does not
consider individuals nominated by stockholders for election to the Board.
However, under the By-Laws, nominations for the election of directors may be
made by any stockholder entitled to vote in the election of directors
generally, but only if written notice of such stockholder's intent to make such
nominations has been received by the Secretary of the Company at 9100 East
Mineral Circle, Englewood, Colorado 80112 not later than (i) with respect to an
election to be held at an annual meeting of stockholders, 90 days prior to the
anniversary date of the immediately preceding annual meeting, and (ii) with
respect to an election to be held at a special meeting of stockholders for the
election of directors, the close of business on the tenth day following the
date on which notice of such meeting is first given to stockholders. Each such
notice shall set forth: (a) the name and address of the stockholder who intends
to make the nomination and of the person or persons to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(c) the number of shares of the Company owned of record and beneficially by the
stockholder; (d) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons (naming such
person or persons)
19
<PAGE>
pursuant to which the nomination or nominations are to be made by the
stockholder; (e) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the SEC; and (f) the consent of each nominee to
serve as a director of the Company. The presiding officer of the meeting may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure.
COMPENSATION OF DIRECTORS
For their services, all directors (except Mr. Ward) receive an annual
retainer of $10,000, and a $1,000 fee for attendance at meetings of the Board.
Members of committees of the Board (except Mr. Ward) are compensated at the
rate of $600 per committee meeting attended, while committee chairmen receive
$1,000 per meeting attended. Mr. Ward is eligible to participate in the Amax
Gold Inc. 1992 Stock Option Plan and the Amax Gold Inc. Performance Share Plan
(the "Performance Share Plan").
Under the Stock Grant Plan for Nonemployee Directors, on the day following
the annual stockholders meeting in each year, each director who is not then an
officer or employee of the Company or any of its subsidiaries will be granted
1,500 shares of Common Stock, until a maximum of 100,000 shares in the
aggregate have been granted. As of March 31, 1995, a total of 7,500 shares had
been granted to five directors.
The Company has a Deferred Compensation Plan for Directors (the "Deferred
Compensation Plan"), under which any director who is not an employee of the
Company may elect to defer all or a portion of his director's fees. Amounts
deferred under the Deferred Compensation Plan are credited to a participant's
account in the form of a right to receive shares of the Common Stock at the
closing market price on the Composite Tape of the NYSE on the date such
participant would have received such compensation had a deferral election not
then been in effect. A distribution will be made to a participant upon or
following termination of his directorship. Messrs. Born, Malys, Schnabel and
Wood have elected to participate in the Deferred Compensation Plan.
20
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following compensation table sets forth information for the years
indicated concerning the compensation of the Chairman of the Board and Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------- ------------------- ---------
LONG-TERM
RESTRICTED INCENTIVE
STOCK OPTIONS/ PLAN ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS AWARDS SARS PAYOUTS COMPENSA-
POSITION YEAR $ $ $(A) #(B) $ TION $(C)
- ------------------ ------ ------- ------ ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Milton H. Ward(D)....... 1994 211,611 -- -- 40,000 -- --
Chairman and 1993 -- -- -- -- -- --
Chief Executive Officer
Roger A. Kauffman(E).... 1994 197,087 40,000 54,000 95,000 -- 7,050
President and Chief
Operating Officer
Mark A. Lettes.......... 1994 130,000 24,500 45,000 55,000 -- 10,694
Vice President and Chief 1993 112,350 29,458 -- -- -- 14,266
Financial Officer 1992 112,350 33,500 -- 18,000 -- 5,063
Neil K. Muncaster....... 1994 129,000 19,350 25,200 39,500 -- 5,805
Vice President 1993 129,000 33,824 -- -- 108,445(F) 63,148
1992 129,000 30,000 -- 15,000 -- 5,814
Richard B. Esser........ 1994 115,500 17,000 18,000 19,700 -- 14,125
Vice President 1993 115,500 30,284 -- -- -- 34,574
1992 115,500 25,000 -- 6,000 -- 5,205
</TABLE>
- --------
(A) Awards of restricted stock were made under the Performance Share Plan in
November 1994. The restricted stock holdings of the named executives
totalled 23,700 shares with a fair market value of $142,200 based on the
closing price of Common Stock of $6.00 per share on December 30, 1994. Such
holdings include $54,000 (9,000 shares) for Mr. Kauffman; $45,000 (7,500
shares) for Mr. Lettes; $25,200 (4,200 shares) for Mr. Muncaster; and
$18,000 (3,000 shares) for Mr. Esser. The actual value an executive may
realize will depend upon the amount of the stock in respect of which
restrictions lapse and the value realized, which may be greater or less
than this amount. Dividends, to the extent declared by the Board, will be
paid on the restricted stock.
(B) These amounts represent options to purchase shares of Common Stock awarded
under the Company's 1992 Stock Option Plan.
(C) The 1994 amounts shown include employer contributions to the Thrift Plan
for Employees of Amax Gold Inc. and its Subsidiaries (the "Thrift Plan") in
the following amounts: $6,750 for Mr. Kauffman; $5,850 for Mr. Lettes;
$5,805 for Mr. Muncaster; and $5,198 for Mr. Esser. The 1994 amount shown
for Mr. Kauffman also includes $300 allocated to Mr. Kauffman through the
Employee Deferred Compensation Plan on October 31, 1994. The 1994 amounts
for Messrs. Lettes and Esser include payments of $4,844 and $8,927,
respectively, made by Cyprus in connection with the exercise or
cancellation of outstanding Amax stock options (which, if not cancelled,
were converted to Cyprus options).
(D) Mr. Ward was elected an executive officer of the Company in November 1993.
Amounts shown for 1994 represent payments made by the Company to Cyprus in
respect of a portion of Mr. Ward's base salary and benefits attributable to
his service as an officer of the Company. No such payment was made for 1993
for the period following his election.
(E) Mr. Kauffman was elected an executive officer of the Company in February
1994. The 1994 amount represents compensation since that date.
(F) This amount represents payment made in cash by Cyprus under change of
control provisions of the Amax Performance Share Plan that were triggered
by the Cyprus Amax Merger.
21
<PAGE>
Option/SAR Grants in the Last Fiscal Year
The following table sets forth certain information concerning stock options
granted during 1994 by the Company under the Stock Option Plan to the Chairman
of the Board and Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company. THE POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR THE TERM OF THE OPTIONS
SHOWN BELOW ARE PRESENTED PURSUANT TO SEC RULES. THE COMPANY IS NOT AWARE OF
ANY MODEL OR FORMULA WHICH WILL DETERMINE WITH REASONABLE ACCURACY A PRESENT
VALUE FOR STOCK OPTIONS BASED ON FUTURE UNKNOWN FACTORS. THE ACTUAL AMOUNT, IF
ANY, REALIZED UPON THE EXERCISE OF STOCK OPTIONS WILL DEPEND UPON THE MARKET
PRICE OF THE COMMON STOCK RELATIVE TO THE EXERCISE PRICE PER SHARE OF COMMON
STOCK OF THE STOCK OPTION AT THE TIME THE STOCK OPTION IS EXERCISED. THERE IS
NO ASSURANCE THAT THE POTENTIAL REALIZABLE VALUES OF STOCK OPTIONS REFLECTED IN
THIS TABLE ACTUALLY WILL BE REALIZED.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------------------- ---------------
% OF TOTAL
OPTIONS/SARS
GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES IN OR BASE
GRANTED FISCAL PRICE EXPIRATION
NAME (#)(A) YEAR(B) ($/SHARE) DATE(C) 5%($) 10%($)
- ---- ------------ ------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Milton H. Ward.......... 40,000 6.41 6.19 11/30/04 155,651 394,451
Roger A. Kauffman....... 20,000 3.20 6.94 02/01/04 87,259 221,132
40,000 6.41 7.50 03/21/04 188,668 478,123
35,000 5.61 6.19 11/30/04 136,195 345,145
Mark A. Lettes.......... 25,000 4.00 7.50 03/21/04 117,918 298,827
30,000 4.80 6.19 11/30/04 116,739 295,838
Neil K. Muncaster....... 20,000 3.20 7.50 03/21/04 94,334 239,061
19,500 3.12 6.19 11/30/04 75,880 192,295
Richard B. Esser........ 8,000 1.28 7.50 03/21/04 37,734 95,625
11,700 1.87 6.19 11/30/04 45,528 115,377
</TABLE>
- --------
(A) All options are granted with an alternative settlement method under which,
in the Company's discretion, the option holder may exercise the option as
if it were a stock appreciation right.
(B) The percentage calculation is based on a total of 624,350 options granted
in 1994.
(C) The exercise price for each grant is equal to 100% of the fair market value
of Common Stock on the grant date. All options vest two years after the
date of grant and have a term of ten years, subject to earlier termination
in certain events related to termination of employment.
22
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table sets forth information concerning the exercise during
1994 of stock options granted to the Chairman of the Board and Chief Executive
Officer of the Company and each of the four most highly compensated executive
officers and options remaining unexercised at December 31, 1994. THERE WERE NO
UNEXERCISED IN-THE-MONEY STOCK OPTIONS AT DECEMBER 31, 1994. THE ACTUAL AMOUNT,
IF ANY, REALIZED UPON EXERCISE OF A STOCK OPTION WILL DEPEND UPON THE MARKET
PRICE OF THE COMMON STOCK RELATIVE TO THE EXERCISE PRICE OF THE STOCK OPTION AT
THE TIME THE STOCK OPTION IS EXERCISED. THERE IS NO ASSURANCE THAT THE VALUES
OF UNEXERCISED IN-THE-MONEY STOCK OPTIONS REFLECTED IN THIS TABLE WILL BE
REALIZED.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
NUMBER OF UNEXERCISED
SECURITIES OPTIONS AT
WITH RESPECT FY-END
TO WHICH (#)
OPTIONS -------------
WERE EXERCISED VALUE REALIZED EXERCISABLE/
NAME (1) ($) UNEXERCISABLE
- ---- -------------- -------------- -------------
<S> <C> <C> <C>
Milton H. Ward...................... -- -- --/40,000
Roger A. Kauffman................... -- -- --/95,000
Mark A. Lettes...................... 2,761 4,844 18,000/55,000
Neil K. Muncaster................... -- -- 15,000/39,500
Richard B. Esser.................... 3,111 8,927 6,000/19,700
</TABLE>
- --------
(1) Amounts represent options to purchase Cyprus common stock obtained on
conversion of previously outstanding Amax stock options.
Pension and Benefits
Retirement Plan for Employees. The Retirement Plan for Salaried Employees of
the Company (the "Retirement Plan") covers executive officers and most other
salaried employees. The amount of annuity a retiring employee will receive on a
single-life basis is determined under the formula set forth below. Upon
retirement, a married employee receives a reduced annuity payment that
continues after death to cover the surviving spouse, unless the employee and
the spouse elect one of the alternate options of equivalent actuarial value.
The benefit formula for service on or after July 1, 1994, is: 1.7% of annual
earnings (base salary plus bonus) received by the employee for service during
each year after 1994, plus 1.7% of the employee's average annual earnings from
1990 through 1994 multiplied by the employee's service from July 1, 1994
through December 31, 1994, less 1.1% of the Social Security offset multiplied
by the total years of service credited before January 1, 1995, and after June
30, 1994, not to exceed 35 years. The benefit formula for service prior to July
1, 1994 provided benefits that were slightly higher than those provided under
the new plan formula and will remain in effect with respect to years of service
prior to July 1, 1994. In those cases where the amounts payable under the
Retirement Plan exceed the annual pension limitations imposed by the Internal
Revenue Code of 1986, as amended (the "Code"), such excess will be paid from
the Company's Excess Benefit Plan (the "Excess Plan"). Benefits payable under
the Retirement Plan are also subject to reduction to the extent that
participants receive payments pursuant to other Company-sponsored pension or
retirement plans that have been suspended, discontinued or otherwise
terminated. The amounts shown in the table reflect the aggregate of payments
under both the Retirement Plan and the Excess Plan.
The estimated annual benefits payable upon retirement at normal retirement
age are $60,562 for Roger A. Kauffman; $89,786 for Mark A. Lettes; $48,433 for
Neil J. Muncaster; and $94,753 for Richard B. Esser. The foregoing estimates
are calculated by using salary and bonus amounts actually received for the
years from 1990 to 1994 and estimating base salary and bonus for future years
to be equal to 1994 base salary and bonus amounts.
23
<PAGE>
The five-year period 1990 through 1994 currently used in the benefit formula
described above may be rolled forward by the Board. The table below provides
information on retirement benefits (subject to reduction by a percentage of
Social Security benefits), assuming that the formula is applied to average
annual remuneration during the five years prior to retirement:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION FOR YEARS OF CREDITED SERVICE
FIVE YEAR -----------------------------------------------------------------
AVERAGE ANNUAL 5 10 15 20 25 30 35
EARNINGS YEARS YEARS YEARS YEARS YEARS YEARS YEARS
- -------------- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
150,000 12,750 25,500 38,250 51,000 63,750 76,500 89,250
200,000 17,000 34,000 51,000 68,000 85,000 102,000 119,000
250,000 21,250 42,500 63,750 85,000 106,250 127,500 148,750
300,000 25,500 51,000 76,500 102,000 127,500 153,000 178,500
350,000 29,750 59,500 89,250 119,000 148,750 178,500 208,250
</TABLE>
The amounts above are payable upon retirement between ages 62 and 65. For
retirement below age 62, the annual annuity amounts are reduced as provided in
the Retirement Plan. At December 31, 1994, the years of credited service under
the Retirement Plan for Messrs. Kauffman, Lettes, Muncaster and Esser were 1
year, 15 years, 13 years and 25 years, respectively. For purposes of
determining benefits under the Retirement Plan, covered compensation for these
individuals includes the amounts shown in the "Salary" and "Bonus" columns of
the Summary Compensation Table with certain minor adjustments. Mr. Ward does
not participate in the Company's Retirement Plan, but is covered by the Cyprus
Retirement Plan for Salaried Employees.
Employment Policies
In connection with the change of control of the Company resulting from the
Cyprus Amax Merger, Mr. Muncaster relinquished his rights under an Amax
corporate separation policy applicable to certain Amax and subsidiary company
executives and agreed to continue employment for a minimum of two years from
the date of the merger. In consideration of such relinquishment and agreement,
the Company agreed to provide Mr. Muncaster with a severance payment of
$200,000 upon termination of his employment at any time after such two-year
period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Born, Malys and Schnabel, with
Mr. Born serving as Chairman. Mr. Born is Co-Chairman of the Board of Cyprus.
Mr. Malys is Senior Vice President and Chief Financial Officer of Cyprus. Mr.
Schnabel serves as a director of Cyprus. Mr. Ward is Co-Chairman of the Board,
President and Chief Executive Officer of Cyprus. Mr. Ward is compensated by
Cyprus and the Company reimburses Cyprus for a portion of his base salary and
benefits attributable to his services as an officer of the Company. None of the
present or former members of the Company's Compensation Committee served on the
Cyprus Compensation Committee, and no executive officers of the Company served
on the Cyprus Compensation Committee. (For a discussion of transactions with
Cyprus, see "CERTAIN TRANSACTIONS--RELATIONSHIP WITH CYPRUS.")
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policies Applicable to Executive Officers
The Company's Compensation Committee is responsible for establishing,
implementing and monitoring the Company's policies and plans for executive
development, succession planning and compensation. The Company's policy is to
(i) attract, select and retain high caliber managerial and technical talent to
meet the Company's executive needs, (ii) assess and develop its personnel to
succeed to key positions throughout the Company and its operating subsidiaries,
(iii) provide compensation opportunities that are competitive with those
provided by other gold companies, and (iv) motivate and reward its executives
individually based on the contribution of each toward meeting Company
objectives, which include annual and long-term business performance objectives
and the creation of stockholder value.
The Compensation Committee determines the compensation levels for base pay,
annual incentive awards and long-term incentive compensation based on a review
of the performance of executive officers and the
24
<PAGE>
Company and a review of the compensation offered by the Company's competitors.
Some of the companies used for comparison by the Compensation Committee are
different from the companies selected by the Company as peer companies for
preparing the performance graph. The Company did not conduct its own survey
regarding compensation practices, but relied on a survey by the Hay Group (see
below), which the Company believed included companies representative of the
industry as a whole. The Company selected a smaller number of mining companies
that are somewhat larger than the Company for purposes of the performance
graph. See "--Performance Graph." At or following year end, an executive
officer's performance is assessed by the Compensation Committee against certain
objectives and by taking into consideration prevailing economic and business
conditions.
The Compensation Committee is assisted in its review and evaluation by
Strategic Compensation Associates, executive compensation consultants. The
consultants provide advice to the Compensation Committee generally, with
particular emphasis on the competitiveness of compensation paid to the officers
of the Company. In so doing, the consultants review survey data regarding
compensation practices and payments to executives of other major North American
gold mining companies and the relationship of executive officer pay to Company
performance and stockholder value. For 1994, the major survey data was
collected and compiled by the Hay Group in its Executive Compensation Report
for Gold Mining Companies. Companies included in the survey were: Barrick Gold
Corp., ASARCO Incorporated, Battle Mountain Gold Company, Coeur D'Alene Mines
Corporation, Echo Bay Mines Ltd., FirstMiss Gold Inc., Hecla Mining Company,
Homestake Mining Company, LAC Minerals Ltd., Newmont Mining Corporation,
Pegasus Gold Inc., Placer Dome Inc., Santa Fe Pacific Gold Corporation and TVX
Gold Inc. The Company competes with these companies for executive talent.
Compensation of the four highest paid executive officers of the Company other
than the Company's Chief Executive Officer was determined pursuant to the
Company's policies and plans. Those policies and plans include three major
elements of compensation.
The base salary for each executive officer was established by the
Compensation Committee to be near the median base salary in the competitive
marketplace (based on the Hay Group survey), adjusted based on the Committee's
assessment of the individual performance of each executive officer, the length
of time in a certain position and the overall financial condition of the
Company. Base salaries are generally reviewed each year for adjustment by the
Company's Compensation Committee.
Annual incentive awards are contingent on the Compensation Committee's year
end assessment of the performance of the Company and the individual executive
officer. Achievement of the Company's performance goals is not applied as part
of a formula to arithmetically determine the level of incentive awards, but is
used by the Compensation Committee as guidance in making awards. Generally, the
Company met its objectives for 1994. Although the Company reported a net loss
and negative cash flow from operations, 1994 earnings and cash flow were better
than the Company had targeted. In addition, the Company successfully adjusted
to reorganization and downsizing, completed various financing activities,
reduced administrative and operating costs and made progress on its gold
projects. However, due to the financial condition of the Company, annual
incentive bonuses were awarded at approximately 50% of target amounts, with
adjustments based on the Compensation Committee's subjective view of individual
performance after consultation with management.
Equity participation in the form of stock options and long-term performance
based restricted stock awards help strengthen the commonality of interest of
executive officers and the Company's stockholders in the Company's growth in
real value over the long term. While the Company made no stock option grants in
1993, stock option grants were made at two times during 1994. The amount of
such awards is shown in the table under Option/SAR Grants in Last Fiscal Year
above. Awards under the Performance Share Plan and effective January 1, 1995
are shown in the Summary Compensation Table above.
The Company's philosophy is to increase the percentage of the Company's stock
in the hands of directors, officers, and employees and thus to increase the
commonality of interest with the stockholders. In lieu of the reduction in
annual incentive awards for 1994 (notwithstanding objectives being met), the
25
<PAGE>
Compensation Committee gave added significance to equity participation. In
1994, long term incentive awards, including stock options and restricted stock
awards, were granted, on average, at somewhat above the median levels for such
awards among competitive companies in the gold industry to compensate for the
reduction in annual incentive bonus awards (which, as stated above, were
awarded at approximately 50% of target amounts). Options were issued at option
prices equal to 100% of fair market value at the date of grant, are exercisable
for 10 years and have a two-year vesting period. In the future, additional
stock options may be granted to Company officers and employees by the
Compensation Committee on a discretionary basis within a guideline range that
are intended to be near the median levels for such awards among competitive
companies in the gold industry. Such grants reflect the Compensation
Committee's view of the relative importance of the individual's position as
well as his or her current performance, continuing contribution and the
prospective impact of the individual on the Company's future success and
creation of stockholder value.
Long-term performance based restricted stock awards were granted effective
January 1, 1995, to officers of the Company under the Performance Share Plan.
Restrictions on shares of Common Stock will lapse upon completion of successive
three-year performance periods to the extent that there is favorable comparison
in terms of total stockholder return (based on stock price plus dividends) with
competitive companies in the gold industry as measured by a peer group similar
to the group in the Hay Group survey. Such awards could be deferred,
accelerated or otherwise adjusted at the sole discretion of the Compensation
Committee based on strategic and comparative performance assessment or other
factors deemed relevant by the Compensation Committee. Such shares could be
delivered on an accelerated basis or forfeited as determined by the
Compensation Committee in certain circumstances.
Bases for the Compensation of the Chief Executive Officer
Mr. Ward, Chairman of the Board and Chief Executive Officer of the Company,
is compensated by Cyprus, and the Company reimburses Cyprus for a portion of
his base salary and benefits attributable to his service as an officer of the
Company. In determining the compensation to be awarded to Mr. Ward for his
services to the Company as Chairman of the Board and Chief Executive Officer,
the Committee took into account the salaries paid to chief executive officers
at competitive companies and the base salary payable to Mr. Ward under an
employment agreement between Cyprus and Mr. Ward, which establishes a base
salary and bonus targeted at 100% of base salary. The base salary amount under
the Cyprus employment agreement for 1994 was $825,000. The agreement does not
address reimbursement of Mr. Ward's salary and benefits by Amax Gold Inc.The
Committee also recognized the significant progress made during 1994, the first
full year Mr. Ward served as Chairman of the Board and Chief Executive Officer
of the Company, including the fact that the Company's earnings and cash flow,
although negative, were better than the Company had targeted and that the
Company had successfully adjusted to reorganization and downsizing, completed
various financing activities, reduced administrative and operating costs and
made progress on its gold projects. Based on these factors, the estimated
amount of Mr. Ward's time spent on matters relating to the Company and the
subjective determination of the Committee, approximately 15% of Mr. Ward's base
salary and benefits paid by Cyprus was reimbursed by the Company in 1994.
Mr. Ward is eligible to participate in the Company's Stock Option Plan and
Performance Share Plan. The Committee also awarded Mr. Ward 40,000 stock
options, based on the median of the stock options granted to chief executive
officers at competitive companies, the amount of Mr. Ward's time allocated to
the Company and the subjective determination of the Committee.
As the Company moves forward in its efforts to create stockholder value, the
Compensation Committee will continue to review, monitor and evaluate the
Company's program for executive compensation to assure that it is effective in
support of the Company's strategy, is competitive in the marketplace to
attract, retain and motivate the talent needed to succeed, takes into account
changes in accounting rules and taxes and appropriately pays for performance on
behalf of all Company stockholders.
Allen Born
Gerald J. Malys
Rockwell A. Schnabel
26
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
As of March 31, 1995, the following table sets forth the amount of all equity
securities of the Company and Cyprus that are beneficially owned by each
director of the Company, each of the executive officers named in the Summary
Compensation Table above, and all directors and executive officers of the
Company as a group. The table segregates shares held from those beneficially
owned through ownership of options to purchase shares of Common Stock. A person
is considered to "beneficially own" any shares (i) over which such person
exercises sole or shared voting or investment power or (ii) of which such
person has the right to acquire beneficial ownership at any time within 60 days
(e.g., through the exercise of stock options). Unless otherwise indicated, each
person has sole voting and investment power with respect to the shares set
opposite his name.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SHARES NUMBER OF
SHARES OF THE OF THE SHARES OF
COMPANY COMMON COMPANY SERIES B CYPRUS
NAME OF BENEFICIAL OWNER STOCK(1)* PREFERRED STOCK* COMMON STOCK*
- ------------------------ -------------- ---------------- -------------
<S> <C> <C> <C>
Allen Born....................... 13,302 -- 21,148
Gerald J. Malys.................. 5,079 -- 90,609(2)
Rockwell A. Schnabel............. 11,926 2,500 6,677(3)
Vernon F. Taylor, Jr............. 4,977(4) 3,000(4) 24,094(5)
Milton H. Ward................... 10,000 -- 234,720
Russell L. Wood.................. 8,080 -- --
Roger A. Kauffman................ 13,272 200 --
Mark A. Lettes................... 27,221(6) 300 --
Neil K. Muncaster................ 26,944(6) 500 1,003
Richard B. Esser................. 17,365(6) 500 5,000
All directors and executive
officers as a group
(13 persons).................... 179,274(7) 7,400 388,419
</TABLE>
- --------
*All amounts shown are less than 1% of the class.
(1) Each share of Series B Preferred Stock is convertible into 6.061 shares of
Common Stock. Shares of Common Stock do not include shares obtainable upon
conversion of the Series B Preferred Stock.
(2) The amount includes 8,000 shares held by Mrs. Malys.
(3) The amount includes shares held in the Cyprus Non-Employee Director
Deferred Compensation Plan.
(4) The amounts include 1,227 shares of Common Stock and 3,000 shares of Series
B Preferred Stock owned by trusts of which Mr. Taylor, as trustee, has
investment or voting power.
(5) The amount includes 12,344 shares of Cyprus common stock obtainable upon
conversion of 6,000 shares of $4.00 Series A Convertible Preferred Stock of
Cyprus.
(6) The amounts include shares subject to options exercisable within 60 days:
18,000 shares for Mr. Lettes; 15,000 shares for Mr. Muncaster; 6,000 shares
for Mr. Esser.
(7) The amount includes 64,000 shares subject to options exercisable within 60
days.
Also included in the table above are shares of Common Stock held pursuant to
the Deferred Compensation Plan, the Thrift Plan and the Performance Share Plan.
27
<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on Common Stock over the prior five years
(assuming reinvestment of dividends at date of payment into Common Stock) with
the cumulative total return on the published Standard & Poor's 500 Stock Index,
the published Standard & Poor's index for the gold industry, and the stocks for
peer companies (weighting the returns of these peer companies based on stock
market capitalization as of the beginning of the period). The peer companies
selected by the Company for this Proxy Statement were Battle Mountain Gold
Company, Echo Bay Mines Ltd., Hemlo Gold Mines Inc., Pegasus Gold Inc. and TVX
Gold Inc. The Company changed from using the Standard & Poor's Gold Mining
Index in 1993 to a self-constructed peer group for 1994, because the Company
believes that companies included in the Standard & Poor's index for the gold
industry are all much larger than the Company. The Company selected a range of
companies more comparable to the Company for its peer group. Cumulative total
stockholder return (on an assumed initial investment of $100 at December 31,
1989), as determined at the end of each year, reflects the change in stock
price, assuming reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
GRAPH APPEARS HERE
INDEXED RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDING
------------------------------------------------------------------------
DEC. 89 DEC. 90 DEC. 91 DEC. 92 DEC. 93 DEC. 94
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX........... 100 96.90 126.42 136.05 149.76 151.74
- -------------------------------------------------------------------------------------------------
AMAX GOLD INC........... 100 85.45 67.21 50.28 40.49 35.34
- -------------------------------------------------------------------------------------------------
PEER GROUP (1994 INDEX). 100 52.70 49.22 36.63 78.83 69.69
- -------------------------------------------------------------------------------------------------
GOLD MINING INDEX (1993
INDEX)................. 100 88.31 71.73 66.98 122.70 99.13
- -------------------------------------------------------------------------------------------------
</TABLE>
ANNUAL RETURN PERCENTAGE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDING
---------------------------------------------------
COMPANY/INDEX DEC. 90 DEC. 91 DEC. 92 DEC. 93 DEC. 94
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S&P 500 INDEX........... -3.11 30.47 7.62 10.08 1.32
- -------------------------------------------------------------------------------------
AMAX GOLD INC........... -14.55 -21.35 -25.18 -19.48 -12.73
- -------------------------------------------------------------------------------------
PEER GROUP (1994 INDEX). -47.30 -6.61 -25.58 115.19 -11.59
- -------------------------------------------------------------------------------------
GOLD MINING INDEX (1993
INDEX)................. -11.69 -18.77 -6.63 83.19 -19.20
- -------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
PROPOSAL 2. RATIFICATION OF SELECTION OF AUDITORS
In March 1994, Price Waterhouse LLP replaced Coopers & Lybrand who had been
the Company's independent accountants since the Company's inception in 1987.
Price Waterhouse LLP are the independent accountants for Cyprus and have served
as such since 1985. The change was made to realize certain synergies between
the Company and Cyprus.
The report of Coopers & Lybrand on the financial statements for the 1993
fiscal year and the report of Price Waterhouse LLP for the 1994 fiscal year
contained no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principles. Also, in
connection with its audit for the 1993 fiscal year, there were no disagreements
with Coopers & Lybrand on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Coopers & Lybrand would
have caused them to make reference thereto in their report on the financial
statements for such year. In connection with Price Waterhouse LLP's audit for
the 1994 fiscal year, there have been no disagreements with Price Waterhouse
LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
During the two most recent fiscal years, there have been no reportable events
(as defined in Regulation S-K Item 304(a)(1)(v)). Moreover, during the two most
recent fiscal years, the Company has not consulted with Price Waterhouse LLP on
items which (1) were or should have been subject to Statement of Auditing
Standards No. 50 or (2) concerned the subject matter of a disagreement or
reportable event with the former auditor, (as described in Regulation S-K Item
304(a)(2)).
Neither the firm of Price Waterhouse LLP nor any of its partners has a
direct, or material indirect, financial interest in the Company or any of its
subsidiaries. Representatives of Price Waterhouse LLP will be present at the
Annual Meeting with the opportunity to make a statement if they desire to do so
and to respond to appropriate stockholder questions.
The Audit Committee recommended and the Board approved the selection of Price
Waterhouse LLP as independent accountants for the Company for its 1995 fiscal
year.
The favorable vote of the holders of a majority of the shares of Common Stock
entitled to vote is needed to approve this Proposal.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR THIS PROPOSAL.
PROPOSALS 3 AND 4. THE DOCLOC I AMENDMENT PROPOSAL
AND THE DOCLOC II PROPOSAL
The holders of Common Stock are being asked to approve an amendment to the
$100 million double convertible revolving credit agreement with Cyprus,
approved by stockholders at the special meeting of stockholders held in July
1994. Such amendment would extend DOCLOC I from April 30, 1997 to December 31,
2001. Additionally, the stockholders are being asked to approve DOCLOC II,
pursuant to which Cyprus will provide the Company with an additional line of
credit of $80 million, under which any indebtedness may be repaid by the
Company's issuance of up to 1,600,000 shares of the Company's Series C
Preferred Stock, and such shares of Series C Preferred Stock may be converted
by Cyprus at any time into up to 14,919,806 shares of Common Stock at a
conversion price of $5.362 per share; such approval shall include but not be
limited to the authorization and issuance to Cyprus of up to 1,600,000 shares
of Series C Preferred Stock and up to 14,919,806 shares of Common Stock under
DOCLOC II. Like under DOCLOC I as amended, Cyprus has agreed to make loans to
the Company through December 31, 2001 under DOCLOC II.
Outstanding indebtedness under the $80 million DOCLOC II may be repaid in
whole or in part in cash or by the Company issuing up to 1,600,000 shares of
the Company's Series C Preferred Stock. Shares of Series C Preferred Stock can
be converted at any time by Cyprus into shares of Common Stock at a conversion
price of $5.362 per share, which represents a 15% premium over the average
closing price on the ten days preceding February 16, 1995, the date of the
signing of the DOCLOC II Commitment Letter. The Company will have the right to
redeem shares of Series C Preferred Stock at any time in whole or in part by
issuing
29
<PAGE>
shares of Common Stock at a price per share equal to the greater of $4.196 or
the average closing price per share (up to $5.362) over a predetermined period
prior to redemption. The terms of the shares of the Series C Preferred Stock
limit the number of shares of Common Stock issuable upon redemption, conversion
and the payment of dividends to 14,919,806. The holder of shares of Series C
Preferred Stock will receive cash in lieu of any shares in excess of 14,919,806
shares of Common Stock that would have otherwise been issuable. Such cash
payment would be payable in 12 consecutive substantially equal quarterly
payments. Cyprus will have the right to replace from time to time all or a
portion of DOCLOC II and any outstanding indebtedness and/or Series C Preferred
Stock with the purchase of up to 14,919,806 shares of Common Stock at a
purchase price of $5.362 per share (or $80 million if all 14,919,806 shares of
Common Stock are purchased). For a discussion of the terms of DOCLOC II, see
"--Material Terms of DOCLOC II."
The DOCLOC I Amendment Proposal and the DOCLOC II Proposal are being
submitted to Stockholders for their approval to satisfy Section 203 of Delaware
Law and a requirement of the NYSE. See "ANNUAL MEETING--Votes Required."
BACKGROUND FOR THE DOCLOC I AMENDMENT PROPOSAL AND THE DOCLOC II PROPOSAL
Prior to the Cyprus Amax Merger, Amax had provided the Company with an
informal assurance of financial support. The Company had approximately $125
million of debt owed to commercial banks and $24.7 million of debt owed to
Cyprus. Following the Cyprus Amax Merger, the Company's commercial lenders had
requested financial guarantees from Cyprus, a loan paydown with the proceeds of
an equity or a debt offering or a fundamental change in the operational
performance of the Company. Although the Company forecasted positive cash flows
from its mining operations for 1994 based on certain assumptions regarding
operations, the Company recognized that it would be unable to service its
existing debt obligations and continue development work on its new projects
without raising external capital funds. With substantial capital needs in 1994
and 1995 for the development of its Fort Knox and Refugio Projects, the Company
considered the public and private capital markets and the commercial lending
market as the most likely sources for such capital. The Company needed to
quickly improve its creditworthiness in order to access the commercial debt
market and the public debt and equity market on acceptable terms in the
foreseeable future.
During 1994, various financing activities were undertaken to provide the
Company with more financial strength and flexibility to meet its outstanding
debt obligations. DOCLOC I was signed by Cyprus and the Company in April 1994
and subsequently approved by stockholders in July 1994. Most of the credit line
has been designated as support for indebtedness relating to the Hayden Hill,
Guanaco and Refugio projects. The Company issued 3,000,000 shares of Common
Stock to Cyprus as payment for approximately $20.7 million of outstanding
indebtedness pursuant to the Stock Purchase Agreement, which was also approved
by stockholders in July 1994.
During 1994, Cyprus provided guarantees of $19.2 million which subsequently
were released following the approval of DOCLOC I. In March 1994, a subsidiary
of the Company entered into a $36 million three-year term loan agreement which
is guaranteed by the Company and Cyprus.
In July 1994, a shelf registration statement was declared effective allowing
the Company to offer an aggregate of up to $200 million of equity and/or
subordinated debt securities. In August 1994, the Company utilized the shelf
registration to sell publicly 1,840,000 shares of the Series B Preferred Stock
for net proceeds of $88.3 million. The Company subsequently used the proceeds
from this sale to finance development of its Refugio and Fort Knox projects, to
repay debt and for general corporate purposes.
In February 1995, Compania Minera Maricunga ("CMM"), a Chilean corporation
50% owned by the Company, borrowed $85 million under a financing arrangement
for the Refugio project in Chile from a group of five banks. The loan is a five
year amortizing term loan that can be drawn in U.S. dollars and/or gold. The
Company and the other 50% owner are guarantors on a several basis until after
completion tests are passed, at which time the loan will become non-recourse to
the Company. Interest is calculated at LIBOR for a U.S. dollar loan or at the
bank's gold base rate for a gold loan, plus 1.75% during the construction phase
or plus 2.5% after production begins.
30
<PAGE>
The Company has determined that additional financing is needed to finance
development of its Fort Knox project during 1995 and to fund a portion of
approximately $24 million of principal repayment obligations. Cash flow from
operations for 1995 is estimated to be sufficient to cover only operating and
administrative expenses, exploration expenditures and interest payments on the
Company's debt obligations. The Company is currently negotiating with a group
of banks for a corporate line of credit of approximately $200 million and
anticipates receiving commitments during the second quarter of 1995. Currently,
no amounts are outstanding under DOCLOC I, approximately $86 million has been
designated to support certain credit arrangements and $14 million is available
and has not been designated.
In February 1995, the Company negotiated with Cyprus for an extension from
April 30, 1997 to December 31, 2001 on its financing under DOCLOC I and a new
double convertible line of credit in the amount of $80 million--DOCLOC II. The
proposed terms for the DOCLOC I Amendment and DOCLOC II were first presented by
the Company's management to the Board at the February 15, 1995 meeting of the
Board. The Board approved the DOCLOC I Amendment and DOCLOC II subject to its
review of a fairness opinion and subject to stockholder approval at the Annual
Meeting. At the February 15, 1995 meeting, Salomon Brothers was engaged to
advise the Audit Committee with respect to the fairness from a financial point
of view of both the DOCLOC I Amendment and DOCLOC II. The Board directed the
Company's management to proceed with negotiations concerning the terms of the
convertible line of credit with Cyprus. The principal financial terms of DOCLOC
II were proposed by the Company. Interest was set at LIBOR plus 0.3%, the same
rate as under DOCLOC I. The conversion rate was set at a 15% premium above, and
the redemption rate was set at a 10% discount to, the average closing price of
the Common Stock on the ten days preceding the signing of the DOCLOC II
Commitment Letter on February 16, 1995. DOCLOC I, as amended, and DOCLOC II
provide the Company with a lower cost of capital and greater financial
flexibility than other alternatives.
The Audit Committee (composed of the two directors who are not associates,
officers or employees of the Company or Cyprus) met on March 2, 1995 to
determine the fairness of DOCLOC II. Salomon Brothers reported its views to the
Audit Committee of the Board at the March 2, 1995 meeting. Subsequently, the
Audit Committee determined that the $80 million double convertible line of
credit under DOCLOC II was fair to the Company's stockholders and recommended
that the Board approve DOCLOC II. At a meeting of the entire Board held on
March 3, 1995, after consideration of the fairness opinion received from
Salomon Brothers, the Board (with those members other than members of the Audit
Committee abstaining) approved the execution and delivery of DOCLOC II.
The Audit Committee met again on March 14, 1995 to determine the fairness of
the DOCLOC I Amendment. Salomon Brothers reported its views to the Audit
Committee at that meeting, and the Audit Committee determined that the
extension of DOCLOC I was fair to the Company's stockholders and recommended
that the Board approve the DOCLOC I Amendment. At a meeting of the Board on
March 14, 1995, after consideration of the fairness opinion from Salomon
Brothers, the Board (with those members other than the members of the Audit
Committee abstaining) approved the execution and delivery of the DOCLOC I
Amendment.
Prior to proposing to Cyprus that it extend DOCLOC I and provide the Company
an additional double convertible line of credit in the amount of $80 million,
the Company considered a number of factors and evaluated a number of options
for raising capital. The Company determined that seeking additional convertible
financing from Cyprus was its best alternative because financing from Cyprus
would provide a lower cost of capital, greater flexibility (since the Company
would only pay for the funds that it borrowed) and substantial cost savings
because there would be no underwriting fees. See "--Reasons for the DOCLOC I
Amendment Proposal and the DOCLOC II Proposal; Recommendation of the Board."
During February 1995 it became necessary for the Company to seek funding from
Cyprus to continue development of its Fort Knox project. On March 10, 1995, the
Company arranged for the right to borrow up to $40 million under DOCLOC II,
subject to obtaining stockholder approval of DOCLOC II by June 16,
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1995 and the suspension of the equity features of DOCLOC II. In addition, this
temporary borrowing arrangement is secured by a 20% interest in the Company's
Fort Knox project. In the event stockholder approval is not obtained prior to
June 16, 1995, any amounts borrowed become due October 15, 1995. Although no
assurance can be given, the Company believes that it would be able to secure
alternative but more costly financing to repay the amounts borrowed prior to
October 15, 1995 to avoid the potential loss of any interest in the Fort Knox
project. See "--Temporary Borrowing Under DOCLOC II."
The support of Cyprus through DOCLOC I and DOCLOC II and debt guarantees has
enabled the Company to sustain its current operations, its operating mine
capital requirements, its current debt service requirements and its development
work at Fort Knox. In the event that the DOCLOC I Amendment Proposal and the
DOCLOC II Proposal are not approved, there can be no assurance that Cyprus
would be willing to continue to provide financial support to the Company. In
any event, financing in addition to DOCLOC I and DOCLOC II will be required to
fund the total capital required to bring the Company's Fort Knox and other
development projects into production.
REASONS FOR THE DOCLOC I AMENDMENT PROPOSAL AND THE DOCLOC II PROPOSAL;
RECOMMENDATION OF THE BOARD
Given the Company's need for financing to continue development work on its
new projects, the Audit Committee, comprised of the two directors who are
neither associates of Cyprus nor officers or directors of the Company, and the
entire Board (with those members other than members of the Audit Committee
abstaining) determined the transactions with Cyprus as contemplated in the
DOCLOC I Amendment and DOCLOC II to be desirable and in the best interest of
the Company and its stockholders.
The Company faces an immediate need for cash. After negative operating cash
flow of $23.5 million in 1993 and $9.7 million in 1994 and with modest
projected operating cash flows for 1995, the commitment of an aggregate of $180
million in financing from Cyprus provides the Company with the financial
support it needs to meet its working capital requirements, debt repayment
obligations and development objectives for its Fort Knox project through the
summer of 1995. Without the DOCLOC I Amendment and DOCLOC II, the Company
believes that additional third party debt financing for development of the
Company's Fort Knox project would be unavailable in adequate amounts on
favorable terms.
Reasons for the DOCLOC I Amendment
The Board determined that an extension of DOCLOC I would benefit
relationships with existing lenders and enhance the Company's ability to secure
additional third party debt financing for the Company's Fort Knox project.
Existing lenders requested that DOCLOC I be available beyond the due date of
the first payment on the Company's existing credit arrangements. The Board
anticipates that potential sources for additional financing for the Company's
Fort Knox project will look beyond the Fort Knox project as security for any
loan and will consider the financial strength of the Company. The Board
believes that the availability of a $100 million revolving credit facility
through December 31, 2001 will be viewed favorably by potential lenders.
Reasons for DOCLOC II
The conclusion of the Audit Committee and the Board with respect to the
transactions contemplated by DOCLOC II was based on the following factors:
(i) Equity financing is thought to be expensive in light of the current
price of the Common Stock, aggravated by the redemption pressure on gold
funds. Additionally, equity financing is potentially more dilutive due to
the Company's recent financial losses and current level of debt. The Board
also noted that such financing appears to be available only with
substantial transaction costs.
(ii) Convertible preferred or convertible subordinated debt financing is
or was thought to be available in adequate amounts, but the Board concluded
such financing would likely bear higher dividend or interest rates, be less
flexible in terms of redemption and conversion rights in favor of the
Company
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and be accompanied by substantial transaction costs. Additionally, the
Board was concerned that due to the low price of the Common Stock,
investors might sell the Common Stock to purchase the convertible preferred
being offered, causing a further reduction in the price of the Common
Stock.
(iii) DOCLOC II, like DOCLOC I, provides the Company with a flexible type
of financing, with useful aspects of both debt and equity: (a) DOCLOC II
provides the Company with the ability to borrow what it needs from time to
time under a low interest loan, with interest charged only on amounts
borrowed, and does not impose requirements for security, restrictive
covenants, substantial fees or other costs; (b) the amounts borrowed can be
repaid with cash or shares of Series C Preferred Stock; (c) the Series C
Preferred Stock is non-voting and calls for only a 4.5% cumulative dividend
and includes a Common Stock conversion feature at a 15% premium to the
market price of the Common Stock (based on stock prices at the time the
DOCLOC II Commitment Letter was signed); (d) the transfer of the Series C
Preferred Stock is restricted; (e) in addition to a conversion right for
Cyprus, the Series C Preferred Stock includes a right for the Company to
redeem it with Common Stock for $4.196 per share, a 10% discount to market
at the time of the DOCLOC II Commitment Letter; and (f) in consideration
for this flexibility, DOCLOC II provides an option for Cyprus to convert
the entire arrangement into a right to purchase $80 million of Common Stock
for $5.362 per share, a 15% premium to market at the time of the DOCLOC II
Commitment Letter.
(iv) The Company's right to repay outstanding borrowings under DOCLOC II
with Series C Preferred Stock and its right to redeem the Series C
Preferred Stock with Common Stock at any time are advantageous to the
Company and its stockholders in that such rights will permit the Company to
conserve its cash resources.
(v) The less-than-market interest and dividend rates under DOCLOC II are
very favorable to the Company. Whereas at the time of the DOCLOC II
Commitment Letter straight convertible preferred stock would have cost the
Company approximately a 8.5% dividend yield, DOCLOC II provides for an
interest rate of LIBOR plus 0.3%, a rate of approximately 4% at the time of
the DOCLOC II Commitment Letter. The repayment of the outstanding
indebtedness under DOCLOC II with Series C Preferred Stock would result in
the Company paying only a 4.5% dividend yield on the Series C Preferred
Stock. Additionally, with conventional convertible preferred stock, the
Company would be paying dividends on the entire amount of the preferred
stock before all of this amount was needed by the Company. Under DOCLOC II,
the Company only pays for the cash that it borrows, and there is no
commitment fee on undrawn balances. Further, DOCLOC II provides a
substantial cost savings as there are no underwriting or placement fees
associated with DOCLOC II.
(vi) The Audit Committee of the Board received the opinion of Salomon
Brothers that DOCLOC II, which provides Cyprus with the option to convert
the outstanding indebtedness into shares of Common Stock at a price that
represents a 15% premium over market at the time of the DOCLOC II
Commitment Letter, is fair from a financial point of view to the
stockholders of the Company (in their capacity as such) without
consideration of Cyprus and its affiliates.
(vii) DOCLOC II, like DOCLOC I, does not have restrictive covenants that
reduce the Company's operational flexibility. In addition, because no
commitment fee is assessed on undrawn balances, DOCLOC II provides greater
flexibility than the other financing arrangements considered.
(viii) Although DOCLOC II may result in dilution to existing holders of
Common Stock and provide Cyprus with valuable rights to acquire Common
Stock, in the absence of the financing arrangement provided by DOCLOC II,
the Company could be forced into less attractive financing alternatives
and, in such event, the holders of Common Stock could experience greater
dilution.
(ix) It is believed that Cyprus' willingness to provide financial support
to the Company in exchange for a larger stake in the Company will be viewed
favorably by the public equity market and commercial lenders as a vote of
confidence in the future performance of the Company by its largest
stockholder.
THE BOARD (WITH THOSE MEMBERS OTHER THAN MEMBERS OF THE AUDIT COMMITTEE
ABSTAINING) HAS APPROVED AND RECOMMENDS THAT STOCKHOLDERS APPROVE THE DOCLOC I
AMENDMENT PROPOSAL AND THE DOCLOC II PROPOSAL.
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OPINION OF FINANCIAL ADVISOR REGARDING THE DOCLOC I AMENDMENT PROPOSAL AND THE
DOCLOC II PROPOSAL
The Board retained Salomon Brothers to render an opinion to its Audit
Committee in connection with the DOCLOC I Amendment and DOCLOC II (together,
the "DOCLOC Agreements"). At a meeting of the Audit Committee held on March 2,
1995, Salomon Brothers delivered its oral opinion to the Audit Committee that,
as of such date, the availability of the $80 million double convertible line of
credit to the Company pursuant to the terms of DOCLOC II is fair, from a
financial point of view, to the stockholders of the Company generally (solely
in their capacity as such), exclusive of Cyprus and its affiliates. At a
meeting of the Audit Committee held on March 14, 1995, Salomon Brothers
delivered its oral opinion to the Audit Committee that, as of such date, the
DOCLOC I Amendment is fair, from a financial point of view, to the stockholders
of the Company generally (solely in their capacity as such), exclusive of
Cyprus and its affiliates. Salomon Brothers has confirmed its opinions by
delivery of written opinions, dated March 2, 1995 (with respect to DOCLOC II),
March 14, 1995 (with respect to the DOCLOC I Amendment) and April 27, 1995
(with respect to DOCLOC II and the DOCLOC I Amendment), to the Audit Committee
of the Board that the "Transactions" (defined to be the availability of the
$100 million double convertible line of credit to the Company pursuant to the
terms of DOCLOC I, as amended, and the availability of the $80 million double
convertible line of credit to the Company pursuant to the terms of DOCLOC II)
are fair, from a financial point of view, to the stockholders generally (solely
in their capacity as such), exclusive of Cyprus and its affiliates. Copies of
each of Salomon Brothers' opinions dated April 27, 1995 are attached as
Appendix G to this Proxy Statement and each sets forth the assumptions made,
matters considered and limits on the review undertaken. STOCKHOLDERS ARE URGED
TO READ THE OPINIONS IN THEIR ENTIRETY. Salomon Brothers' opinions are directed
only to the fairness, from a financial point of view, of the Transactions to
the stockholders generally (solely in their capacity as such), exclusive of
Cyprus and its affiliates, and do not constitute a recommendation as to whether
or not any stockholder of the Company should vote to approve the DOCLOC
Agreements or the Transactions or as to any other matter. The Company, its
Board, the Audit Committee, and the stockholders of the Company have the
responsibility to decide whether it is appropriate and reasonable to approve
the Transactions.
Salomon Brothers is a nationally recognized investment banking firm which
provides financial services in connection with a wide range of business
transactions. As part of its business, Salomon Brothers provides investment
banking and financial advisory services in various connections, including
valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuation for estate, corporate and other purposes. Salomon Brothers was
retained by the Board based on its expertise in the valuation of companies as
well as its familiarity with the Company's business.
Salomon Brothers is not affiliated with the Company or Cyprus. Salomon
Brothers has previously rendered certain financial advisory and investment
banking services to the Company, for which Salomon Brothers received customary
compensation. Salomon Brothers was the lead manager (for which Salomon Brothers
and the other managing underwriter received an underwriting discount of
$2,980,800) on a $92 million convertible preferred stock offering, unrelated to
the Transactions, which closed in August 1994 under the Company's Registration
Statement on Form S-3 for a $200 million universal shelf covering the offering
from time to time of subordinated debt, preferred stock, Common Stock and/or
warrants to acquire Common Stock which was declared effective by the SEC in
July 1994. Salomon Brothers has been named as a potential underwriter with
respect to possible future issuances under the universal shelf. The Company has
agreed to pay Salomon Brothers $250,000 for its investment banking services in
connection with its review of the Cerro Quema gold exploration prospect in
Panama.
The Company has agreed to pay Salomon Brothers $175,000 for its investment
banking services in connection with rendering the opinions. The Company has
agreed to reimburse Salomon Brothers for the reasonable fees and disbursements
of Salomon Brothers' counsel and Salomon Brothers' reasonable travel and other
out-of-pocket expenses incurred in connection with the Transactions or
otherwise arising out of Salomon Brothers' engagement. The Company also has
agreed to indemnify Salomon Brothers and its officers,
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employees and agents for any losses incurred in connection with its engagement.
The Company paid Salomon Brothers $150,000 in 1994 for its investment banking
services in connection with rendering an opinion in connection with DOCLOC I.
Except as disclosed herein, the Company has paid no other fees or commissions
to Salomon Brothers within the past two years.
The Company has agreed with Salomon Brothers that, if prior to the
Transactions or within two years following the consummation of either, the
Company or any of its affiliates determines to sell in a public offering or a
private placement, any debt securities (other than senior bank debt) or equity
securities, the Company or such affiliates would afford Salomon Brothers a
reasonable opportunity to compete to be retained as an underwriter (in the case
of a public offering) or as a placement agent (in the case of a private
placement where a placement agent is used) of such debt or equity securities.
Any such sale of securities would be pursuant to an underwriting agreement or
placement agent agreement, as the case may be, containing customary
representations, warranties, covenants, conditions and indemnities and
providing for customary underwriting discounts or placement fees, the exact
amounts to be mutually agreed upon. In addition, the Company from time to time
may engage Salomon Brothers to provide financial advisory and investment
banking services.
Salomon Brothers is a full service securities firm and, in the course of its
normal trading activities, Salomon Brothers may from time to time effect
transactions and hold positions in the securities of the Company and Cyprus for
its own account and accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
Salomon Brothers had no role in the determination of the terms of the DOCLOC
I Amendment or DOCLOC II or any of the related agreements or in the negotiation
thereof. The terms of the DOCLOC I Amendment and DOCLOC II and related
agreements were determined solely through negotiations between the Company and
Cyprus.
Salomon Brothers' opinions to the Audit Committee of the Board conclude,
based upon and subject to each of the items discussed therein, that the
Transactions are fair, from a financial point of view, to the stockholders
generally (solely in their capacity as such), exclusive of Cyprus and its
affiliates. In connection with its opinions, Salomon Brothers reviewed and
analyzed, among other things, (i) the DOCLOC Agreements; (ii) this Proxy
Statement; (iii) certain publicly available business and financial information
concerning the Company and Cyprus; (iv) certain internal information, primarily
financial in nature (including projections, forecasts, estimates and analyses
prepared by or on behalf of the Company's management), concerning the business,
assets, liabilities, operations and prospects of the Company and the
anticipated effects on the Company of the consummation or the non-consummation
of the Transactions, including alternatives to implementing the Transactions,
furnished to Salomon Brothers by or on behalf of the Company; (v) certain
publicly available and other information concerning the trading of, and the
trading market for, the publicly traded securities of the Company; (vi) certain
publicly available information with respect to other companies that Salomon
Brothers believed to be comparable in certain respects to the Company; (vii)
the resolution of certain existing financial and other relationships between
the Company and its banks with respect to certain project financings; (viii)
the flexibility provided by the DOCLOC Agreements to further the continued
development of certain existing mining projects, including the Fort Knox
project; (ix) the Company's public filings; and (x) such other information that
Salomon Brothers considered relevant to its inquiry. Salomon Brothers discussed
with certain members of the Company's management and its representatives the
Company's views as to the financial and other information described above and
other matters Salomon Brothers believed relevant to its inquiry.
In its review and analysis and in arriving at its opinions, Salomon Brothers
assumed and relied upon the accuracy and completeness of all financial and
other information provided to or reviewed for Salomon Brothers or publicly
available and did not attempt independently to verify (and did not assume any
independent responsibility to verify) any of such information, including,
without limitation, the Company's views discussed above. Salomon Brothers also
relied upon the reasonableness and accuracy of the financial projections,
forecasts, estimates and analyses, including, without limitation, forecasts,
estimates and analyses related to the cash flows and value of assets and
current and contingent liabilities of the Company without giving effect to the
Transactions and on a pro forma basis, assuming the Transactions are
consummated,
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provided to or reviewed for Salomon Brothers, and Salomon Brothers assumed that
they were all reasonably prepared in accordance with accepted industry practice
on bases reflecting the best currently available estimates and judgment of the
Company's management.
To the extent that evaluation of the Transactions required analysis of legal,
as opposed to financial, matters, including, without limitation, all matters
related to identifying and quantifying current and pro forma off balance sheet
liabilities, Salomon Brothers relied, with the Company's consent, on the views
of the Company and its counsel with respect to these matters.
Salomon Brothers did not make or obtain any independent evaluations or
appraisals of any of the Company's assets, properties, liabilities or
securities (nor did Salomon Brothers assume any responsibility to make or
obtain any such independent evaluations or appraisals), nor was Salomon
Brothers furnished with any such evaluations or appraisals other than certain
evaluations and market studies provided to it by the Company. Salomon Brothers
assumed that the terms of the DOCLOC Agreements are the most beneficial terms
from the Company's perspective that could, under the circumstances, be
negotiated among the parties to the Transactions. Salomon Brothers did not
participate in such negotiations and was not authorized to, and Salomon
Brothers did not, solicit or investigate alternative transactions which might
be available to the Company. Salomon Brothers was not requested to, and did
not, solicit third party indications of interest in entering into transactions
of the nature comprising the DOCLOC I Amendment and DOCLOC II.
In conducting its analysis and arriving at its opinions, Salomon Brothers
considered such financial and other information, including the financial and
non-financial judgments and views of the Company's management and
representatives, along with other factors, including, without limitation, the
information (including the financial projections, forecasts, estimates and
analyses) discussed above, as Salomon Brothers deemed appropriate under the
circumstances. In addition, Salomon Brothers took into account limited
discussions which Salomon Brothers had with certain of the Company's lenders.
Salomon Brothers also took into account its assessment of general economic,
market and financial conditions generally and the particular circumstances
applicable to the Company. Salomon Brothers' opinions necessarily are based
upon conditions and circumstances as they existed and could be evaluated as of
their respective dates and do not address the underlying business decision of
the Company to effect the Transactions or constitute a recommendation to any
holder of Common Stock as to how such stockholder should vote with respect to
the Transactions.
Salomon Brothers made various analyses in assessing the fairness, from a
financial point of view, of the Transactions to the stockholders (solely in
their capacity as such), exclusive of Cyprus and its affiliates. The material
analyses are summarized below. Among the analyses which Salomon Brothers
evaluated were: the Company's anticipated liquidity needs based upon its
current operating and financial performance and its projections for the future;
the Company's existing bank and other financing agreements and the need for
credit support in connection with such agreements; financing alternatives
available to the Company; and the current and pro forma shareholdings of Cyprus
in the Company.
In assessing financing alternatives available to the Company, Salomon
Brothers evaluated the possibility of obtaining financing from the public and
private markets, including bank debt, publicly offered and Rule 144A placed
convertible preferred stock, publicly offered common equity, publicly offered
high-yield debt and privately placed high-yield debt. Salomon Brothers'
assessment included an analysis of the availability of such financing and the
likely terms of any such financing. In addition, Salomon Brothers' assessment
included an analysis of the theoretical valuation, which is described below,
and relative benefit of the Transactions, as compared with financing
alternatives.
As a part of its evaluation and analysis, Salomon Brothers undertook a
theoretical valuation of the financial terms of each of the Transactions. In
doing so, Salomon Brothers analyzed the terms of the DOCLOC Agreements pursuant
to which Cyprus agrees to make loans to the Company, as previously described.
The Company may elect to repay outstanding indebtedness under both of the
DOCLOC Agreements either by payment in cash or in shares of preferred stock.
See "--Material Terms of the DOCLOC I Amendment" and "--Material Terms of
DOCLOC II."
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With respect to DOCLOC II, the Company's option to repay the convertible
revolving line of credit in cash or with shares of Series C Preferred Stock
indicates that the value to the Company of the Series C Preferred Stock should
provide a minimum value for the convertible revolving line of credit structure.
Salomon Brothers analyzed the Series C Preferred Stock using a modified
binomial option pricing model.
Salomon Brothers valued both the fixed income component of the Preferred
Stock as well as its option value (i.e., the holders' right to convert
Preferred Stock into Common Stock). In addition, Salomon Brothers used the
binomial model to value the Company's right to redeem the Preferred Stock. By
combining these values, Salomon Brothers estimated the value of the Preferred
Stock. Salomon Brothers made a number of assumptions in conducting this
analysis, including that the Company could successfully issue a straight
preferred security with a yield of between 12% and 13%.
On the basis of these assumptions and employing this methodology, Salomon
Brothers calculated a range of values for the Series C Preferred Stock. The
entire range of such values was under par as of March 2, 1995, the date when
Salomon Brothers made its presentation to the Audit Committee, and as of April
27, 1995, and therefore, implied positive value at each of such times from the
Company's perspective. As of April 27, 1995, such values ranged from 88% of par
to 99% of par for the Series C Preferred Stock and, therefore, implied a
positive value, ranging from 1% to 12%, from the Company's perspective. Because
the value of the Series C Preferred Stock to the Company should provide a
minimum value for this Transaction from the Company's perspective, this implies
that the minimum value of the DOCLOC II Transaction is positive from the
Company's perspective.
With respect to the DOCLOC I Amendment, the Company's option to repay the
convertible revolving line of credit in cash or with shares of Series A
Preferred Stock indicates that the value to the Company of the Series A
Preferred Stock should provide a minimum value for the convertible revolving
line of credit structure. Salomon Brothers analyzed the Series A Preferred
Stock using a modified binomial option pricing model.
Salomon Brothers valued both the fixed income component of the Series A
Preferred Stock as well as its option value (i.e., the holders' right to
convert Series A Preferred Stock into Common Stock). In addition, Salomon
Brothers used the binomial model to value the Company's right to redeem the
Series A Preferred Stock. By combining these values, Salomon Brothers estimated
the value of the Series A Preferred Stock. Salomon Brothers made a number of
assumptions in conducting this analysis, including that the Company could
successfully issue a straight preferred security with a yield of between 12%
and 13%.
On the basis of these assumptions and employing this methodology, Salomon
Brothers calculated a range of values for the Series A Preferred Stock. The
entire range of such values was under par as of March 14, 1995, the date when
Salomon Brothers made its presentation to the Audit Committee, and as of April
27, 1995, and therefore, implied positive value at each of such times from the
Company's perspective. As of April 27, 1995, such values ranged from 69% of par
to 78% of par for the Series A Preferred Stock and, therefore, implied a
positive value, ranging from 22% to 31%, from the Company's perspective.
Because the value of the Series A Preferred Stock to the Company should provide
a minimum value for this Transaction from the Company's perspective, this
implies that the minimum value of the DOCLOC I Amendment Transaction is
positive from the Company's perspective.
The preparation of a fairness opinion is not susceptible to partial analysis
or summary descriptions. Salomon Brothers believes that its evaluations and
analyses must be considered as a whole and that selecting portions of its
evaluations and analyses and the factors considered by it, without considering
all evaluations, analyses and factors, would create an incomplete view of the
processes underlying the preparation of its opinions. Salomon Brothers did not
indicate that any of the evaluations or analyses which it performed, or factors
which it considered, had a greater significance than any other.
In performing its evaluations and analyses, and in considering such factors,
Salomon Brothers made numerous assumptions with respect to industry
performance, available financing, the Company's existing and
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future prospects, the Company's working capital needs, general business and
economic conditions and other matters, many of which are beyond the control of
the Company. The evaluations were undertaken and the analyses were prepared
solely as a part of Salomon Brothers' analysis of the fairness, from a
financial point of view, of the Transactions to the stockholders generally
(solely in their capacity as such), exclusive of Cyprus and its affiliates.
As previously described, Salomon Brothers' opinions were one of many factors
taken into consideration by the Board of Directors of the Company and its Audit
Committee in making their determination to approve the Transactions. The
opinions of Salomon Brothers do not address the effect of any other transaction
in which the Company might engage.
EFFECTS OF THE DOCLOC I AMENDMENT PROPOSAL AND THE DOCLOC II PROPOSAL ON THE
RIGHTS OF THE COMPANY'S STOCKHOLDERS
Assuming the issuance of the shares of Common Stock to Cyprus under DOCLOC
II, as discussed in this Proxy Statement, the percentage of the Company's
voting securities owned of record and beneficially by existing holders of
shares of Common Stock (other than Cyprus) will be reduced significantly on a
fully diluted basis. If all 12,099,213 shares of Common Stock that are
potentially issuable under DOCLOC I have in fact been issued to Cyprus, the
interest of existing holders of shares of Common Stock other than Cyprus would
be reduced to 50.3% of the outstanding shares of Common Stock and Cyprus'
ownership of shares of Common Stock would increase to 49.7% of the outstanding
shares of Common Stock. Additionally, if stockholders approve DOCLOC II, the
interest of existing holders of shares of Common Stock other than Cyprus would
be reduced to 43.4% and Cyprus' ownership of shares of Common Stock would
increase to 56.6% of the outstanding shares of Common Stock, in each case
assuming that all 14,919,806 shares of Common Stock that are potentially
issuable under DOCLOC II are in fact issued to Cyprus. Thus, Cyprus could
control the election of directors and any other action taken by the holders of
the Common Stock, and the ability of existing stockholders to influence the
election of directors or any other action taken by the holders of Common Stock
would be reduced.
Additionally, both DOCLOC I and DOCLOC II require the prior consent of Cyprus
before the Company may enter into any merger, consolidation or amalgamation
transaction or liquidate, wind up or dissolve itself (or suffer any liquidation
of dissolution).
Further, the shares of preferred stock issuable under DOCLOC I and DOCLOC II
may limit the Company's ability to pay cash dividends on shares of Common
Stock. The terms of the Series A Preferred Stock and the Series C Preferred
Stock (and the terms of the Series B Preferred Stock issued by the Company in
connection with a public offering in August 1994) state that no dividends may
be paid on shares of Common Stock unless and until all dividends payable on the
preferred stock have been paid.
MATERIAL TERMS OF THE DOCLOC I AMENDMENT
The following is a description of material terms of the DOCLOC I Amendment,
which is attached as Appendix B to this Proxy Statement and incorporated herein
by reference. DOCLOC I is attached as Appendix A to this Proxy Statement and
incorporated herein by reference. All Stockholders are urged to read each of
DOCLOC I and the DOCLOC I Amendment in its entirety.
Extension of Revolving Loan. The DOCLOC I Amendment provides that Cyprus will
make loans to the Company (evidenced by a note from the Company) from time to
time until the earlier of December 31, 2001 or the date on which the commitment
is terminated under DOCLOC I (the earlier of such dates being the "DOCLOC I
Revolver Expiration Date") in an aggregate principal amount not to exceed at
any time outstanding $100 million. The Company may elect to repay the
outstanding indebtedness under this line of credit either by payment in cash or
payment in shares of Series A Preferred Stock. Payment by the Company in shares
of Series A Preferred Stock automatically reduces the Commitment amount by $50
per share of Series A Preferred Stock so issued. The amendment will also extend
the time during which Cyprus can exercise its option to acquire up to
12,099,213 shares of Common Stock under DOCLOC I.
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On the DOCLOC I Revolver Expiration Date, all accrued interest must be paid
and the aggregate principal balance of all loans outstanding will become due
and payable in 20 equal quarterly installments on June 30, September 30,
December 31 and March 31 of each of the following five years, with the first
installment due on March 31, 2002. The last installment, due December 31, 2006,
will be in an amount necessary to repay in full the unpaid principal amount of
the loans. The outstanding principal balance of the note will bear interest at
an annual rate equal to LIBOR for a period of one, three or six months, as
selected by the Company, plus .30%.
The Company, at its option, may at any time redeem the Series A Preferred
Stock, in whole or from time to time in part, by issuing shares of Common Stock
at a price per share equal to the greater of $5.854 or the average closing
price per share (up to $8.265) over a pre-determined period prior to
redemption.
The maximum number of shares of Common Stock that the Company may issue upon
redemption or conversion of the Series A Preferred Stock, together with any
shares of Common Stock issued as dividends on the Series A Preferred Stock, is
12,099,213 shares, subject to adjustment due to any adjustment in the
conversion price upon the occurrence of certain dilutive events.
MATERIAL TERMS OF DOCLOC II
The following is a description of material terms of DOCLOC II, which is
attached as Appendix C to this Proxy Statement and incorporated herein by
reference. All Stockholders are urged to read DOCLOC II in its entirety.
Revolving Loan
Under DOCLOC II, Cyprus will agree to make loans to the Company (evidenced by
a note) from time to time until the DOCLOC II Revolver Expiration Date in an
aggregate principal amount not to exceed $80 million at any time outstanding.
The Company may elect to repay the outstanding indebtedness under this line of
credit either by payment in cash or payment in shares of the Company's Series C
Preferred Stock. Should the Company pay or prepay any principal amount in
Series C Preferred Stock prior to the DOCLOC II Revolver Expiration Date, the
amount of the DOCLOC II Commitment will automatically be reduced by the amount
of any Series C Preferred Stock so issued, based on the value of such Series C
Preferred Stock at the time of issuance.
Interest Rate
Each loan made by Cyprus to the Company bears interest at an annual rate
equal to the LIBOR Rate for the interest period selected by the Company at its
option (a period of one, three or six months or such other period as Cyprus and
the Company agree to) plus .30%, unless the Company fails to make any payment
to Cyprus of the principal of or interest on any loan when due, in which case
such loan shall accrue interest at a rate that is 1.0% per annum higher than
the above rate.
Security
Loans made by Cyprus to the Company under DOCLOC II are unsecured and
subordinated to the present and future senior indebtedness of the Company and
are effectively subordinated to all indebtedness and other liabilities of
subsidiaries of the Company.
Amortization of Principal and Payment
On the DOCLOC II Revolver Expiration Date, all accrued interest must be paid
and the aggregate principal balance of all loans outstanding will become due
and payable in 20 equal quarterly installments on June 30, September 30,
December 31 and March 31 of each of the following five years, with the first
installment due on March 31, 2002. The last installment, due December 31, 2006,
will be in an amount necessary to repay in full the unpaid principal amount of
the loans. The outstanding principal balance of the note will bear interest as
set forth above.
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Prepayments in Cash
The Company may make cash prepayments of principal in amounts equal to an
integral multiple of $1,000,000 without premium or penalty.
Payment with Preferred Stock
The Company may elect to repay or prepay the entire principal balance due
under the note, plus any required amortization payment due and any required
interest due under the note and/or increments of at least $5,000,000 of
principal of loans outstanding under the note by issuing shares of Series C
Preferred Stock to Cyprus. The amount of such Series C Preferred Stock issued
to Cyprus will be as follows: (i) if payment is made to repay the entire
principal balance of the note, such amount will be equal in value to the
outstanding principal amount of all loans outstanding at the time of such
payment, plus accrued interest thereon to the date of such payment; (ii) if
payment is for the required amortization payment due under the note, such
amount will be equal in value to the amount of such required amortization
payment to be made plus accrued interest thereon to the date of such payment;
(iii) if payment is for the required interest payment, such amount will be
equal in value to the amount of such required interest payment; or (iv) if the
payment is prepayment of an increment of at least $5,000,000 of principal of
loans outstanding under the note, such amount will be equal in value to the
incremental amount of such loans that the Company elects to repay, plus accrued
interest thereon to the date of such payment except that cash will be paid in
lieu of fractional shares of Series C Preferred Stock. The number of shares of
Series C Preferred Stock to be issued can be determined by dividing the amount
of indebtedness under DOCLOC II to be repaid with shares of Series C Preferred
Stock by $50.00.
Payment of Dividends on Preferred Stock
Each share of Series C Preferred Stock shall be entitled to receive dividends
at a rate of $2.25 per year, payable semi-annually on January 1 and July 1 of
each year. The Company may pay Series C Preferred Stock dividends in shares of
Common Stock in lieu of cash with the consent of the holder of such shares of
Series C Preferred Stock.
Restrictions on Transfer of Preferred Stock
The transfer of shares of Series C Preferred Stock is subject to
restrictions. If Cyprus desires to sell, assign, transfer, pledge, encumber or
otherwise dispose of any shares of Series C Preferred Stock held by it, Cyprus
must deliver written notice to the Company setting forth the identity of the
prospective purchaser, the number of shares of Series C Preferred Stock
proposed to be sold (the "Offered Shares"), the price (the "Offer Price"), and
other material terms of disposition. Such proposed sale must be for cash only.
The Company, upon receipt of such notice, has the right to purchase all, but
not less than all, of the Offered Shares at the Offer Price. If the Company
does not exercise this first refusal option, Cyprus may sell to the prospective
purchaser the Offered Shares at the Offer Price and on the terms and provisions
set forth in the notice to the Company.
Covenants
DOCLOC II requires the prior consent of Cyprus, which consent cannot be
unreasonably withheld, before the Company may enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution). The consent of Cyprus is not
required for a merger or consolidation of a subsidiary of the Company into the
Company or a merger or consolidation of the Company with another entity if the
Company is the surviving entity, and, after giving effect to the merger or
consolidation, there is no event of default. In addition, DOCLOC II prohibits
the Company from conveying, selling, leasing, transferring or otherwise
disposing of all or substantially all of its business or assets.
Notwithstanding the foregoing, (i) any subsidiary of the Company may be merged
or consolidated with or into (A) the Company if the Company shall be the
continuing or surviving corporation or (B) any
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other subsidiary of the Company, (ii) any subsidiary of the Company may sell,
lease, transfer or otherwise dispose of any or all of its assets to the Company
or to a subsidiary of the Company, and (iii) the Company, or any of its
subsidiaries, may merge or consolidate with any other person if (A) in the case
of a merger or consolidation of the Company, the Company is the surviving
corporation and, in any other case, the surviving corporation is a subsidiary
of the Company, and (B) after giving effect thereto, no event of default would
exist under DOCLOC II, and there will be no material adverse impact on the
ability of the Company to perform any of its obligations under DOCLOC II or the
note.
Events of Default
Events of default occur under DOCLOC II in the event (i) of a default for
five days in the payment of principal or interest when due after discovery by a
senior officer of the Company, (ii) of a default for 30 days in the performance
or observance of any other term, covenant or condition in DOCLOC II after
discovery by a senior officer of the Company, (iii) any representation or
warranty made by the Company pursuant to DOCLOC II proves to have been
incorrect in any material respect when made and such incorrect representation
or warranty is not corrected within ten days after discovery by a senior
officer of the Company, or (iv) the Company admits in writing its inability to
pay its debt or makes a general assignment for the benefit of creditors, or any
proceeding is instituted by or against the Company or seeking to adjudicate the
Company a bankrupt or insolvent or seeking reorganization, adjustment, or
composition of it or its debts or seeking appointment of a receiver, trustee or
other similar official for it or for any substantial part of its property and,
with respect to any involuntary proceeding instituted against the Company, such
proceeding is not dismissed within 60 days. If an event of default occurs,
Cyprus may, at its option, terminate the DOCLOC II Commitment or declare the
principal and interest and any other sums due under DOCLOC II immediately due
and payable. Upon the occurrence of an event of default pursuant to
subparagraph (iv) above, the DOCLOC II Commitment will automatically be
terminated and the note, all principal and interest and any other sums due
under DOCLOC II will automatically become due and payable.
Stock Purchase Option
Prior to the latter of the DOCLOC II Revolver Expiration Date or the payment
in full of the note and all other amounts due to Cyprus under DOCLOC II, Cyprus
has the option from time to time to purchase an amount not to exceed 14,919,806
shares of Common Stock at a purchase price per share of $5.362 (the "Purchase
Price"), subject to adjustment as described below. In connection with the
consummation of such purchase, a portion of the DOCLOC II Commitment equal to
the product of the number of shares of Common Stock so purchased multiplied by
the Purchase Price will be terminated. The Purchase Price for the shares of
Common Stock to be purchased by Cyprus will be applied by Cyprus in the
following order:
(i) To all accrued interest and to such portion of the principal amount
of the outstanding balance under the note. Amounts of principal paid
pursuant to this provision may not be reborrowed by the Company.
(ii) If the aggregate amount of the Purchase Price exceeds the amount in
(i) above, Cyprus will deliver to the Company the number of shares of
Series C Preferred Stock previously issued to Cyprus pursuant to DOCLOC II,
to the extent such shares have not been converted into or redeemed for
shares of Common Stock. To the extent such shares have been converted into
or redeemed for shares of Common Stock and to the extent that any shares of
Common Stock have been issued in lieu of cash dividend payments on the
Series C Preferred Stock, the amount of Common Stock to be purchased by
Cyprus will be reduced.
(iii) The amount of any excess of the aggregate Purchase Price over the
amounts applied in (i) and (ii) above will next be applied by Cyprus paying
to the Company by wire transfer an amount up to the remainder of the DOCLOC
II Commitment less the amount of the outstanding principal balance of the
note.
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Upon payment of the Purchase Price in the manner described above, the Company
will deliver to Cyprus a certificate for the number of shares of Common Stock
purchased and such portion of the DOCLOC II Commitment as is equal to the
product of the number of shares of Common Stock so purchased multiplied by the
Purchase Price will be terminated.
Adjustment of Purchase Price and Number of Shares Purchasable
The Purchase Price and the number of shares of Common Stock purchasable upon
the exercise of Cyprus' purchase option will be subject to adjustment from time
to time for the payment of a dividend or distribution on Common Stock in shares
of Common Stock, the subdivision, combination or issuance by reclassification
of Common Stock or the issuance of rights, options or warrants to all holders
of 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.
Use of Proceeds
The proceeds of DOCLOC II will be used primarily to finance the Company's
development objectives at its Fort Knox project, for growth and for general
corporate purposes. Although no specific allocations of the proceeds have been
determined, the Company anticipates that at least 50% of the proceeds will be
used for its Fort Knox project.
Demand Registration Rights
Cyprus may make one or more written requests (a "Demand") for registration
under the Securities Act of 1933 of all or part (but not less than 1,000,000
shares per demand) of the shares of Common Stock issued to Cyprus pursuant to
DOCLOC II. If, at the time such Demand for registration is made, Cyprus
directly or indirectly owns less than 5% of the number of shares of Common
Stock outstanding, the Company may, if the Audit Committee of the Board
determines that it would be inadvisable to effect a demand registration, defer
such demand registration until the earliest practicable time at which such
demand registration can be reasonably effected. This period may not exceed
three months. All expenses of registration incurred in connection with the
first registration statement to be filed pursuant to Cyprus' demand
registration rights will be paid by the Company. All expenses of registration
associated with each additional registration statement to be filed, if any,
pursuant to Cyprus' demand registration rights will be paid by Cyprus.
Representations and Warranties
Under DOCLOC II, only the Company made representations and warranties. The
Company made representations and warranties to Cyprus concerning corporate
existence, corporate power and authority concerning DOCLOC II, government
approvals, enforceability, financial statements provided and litigation
matters. In addition, the Company warranted to Cyprus that the shares of Series
C Preferred Stock and Common Stock, when issued pursuant to DOCLOC II, will be
validly issued, fully paid and nonassessable.
The "$2.25 Series C Convertible Preferred Stock" will be designated as a new
series of preferred stock, consisting of 1,600,000 shares, which number may be
increased or decreased from time to time by the Board. For a description of the
material terms and provisions of the Series C Preferred Stock, see "DESCRIPTION
OF CAPITAL STOCK OF THE COMPANY--Series C Preferred Stock."
TEMPORARY BORROWING UNDER DOCLOC II
To permit the Company to borrow up to $40 million under DOCLOC II prior to
obtaining the approval of stockholders, the Company and Cyprus executed the
Pledge Agreement, dated March 10, 1995 (the "Pledge Agreement"). Subject to the
Company's commitment to use all reasonable efforts to obtain stockholder
approval by June 16, 1995, the Company and Cyprus agreed, among other things,
that until the requisite stockholder vote is obtained under the rules of the
NYSE and Section 203 of Delaware Law, the
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Company may borrow under DOCLOC II subject to the following conditions: (i) the
Company will not make any payment in Series C Preferred Stock; (ii) Cyprus will
not exercise its stock purchase option whereby it may convert shares of Series
C Preferred Stock or outstanding indebtedness under the line of credit into
shares of Common Stock; (iii) any and all other provisions of DOCLOC II
providing for or relating to the issuance of equity securities of the Company
will be suspended; and (iv) outstanding indebtedness under DOCLOC II is secured
by 20% of the shares of the Company's subsidiary that holds the Company's
interest in its Fort Knox project. As of April 24, 1995, the Company has
borrowed $10 million from Cyprus under DOCLOC II pursuant to the Pledge
Agreement.
Pursuant to the Pledge Agreement, in the event stockholder approval is not
obtained by June 16, 1995, the amounts borrowed plus interest become due and
payable on October 15, 1995, the interest rate increases to compensate for the
loss of equity features for the period from the date of borrowing until paid in
full, and in the event of a default, Cyprus may exercise certain remedies,
including without limitation all rights to vote, transfer and sell or assign
the pledged shares of the Company's subsidiary that holds the Company's
interest in the Fort Knox project. Although no assurance can be given, the
Company believes that it would be able to secure alternative but more costly
financing to repay the $35 million borrowed prior to October 15, 1995 to avoid
the potential loss of such interest in the Fort Knox project.
PROPOSAL 5. THE REINCORPORATION PROPOSAL
Stockholders of the Company are being asked to approve the Reincorporation
Proposal so that the Company will not be governed by Section 203 of Delaware
Law. Pursuant to the Reincorporation Merger, stockholders will exchange their
shares of Common Stock for an equal number of shares of common stock of NEW
AGI, a Delaware corporation. Pursuant to an Agreement and Plan of Merger, dated
as of April 26, 1995, between the Company and NEW AGI (the "Merger Agreement"),
the Company will be merged into NEW AGI and NEW AGI will change its name to
"Amax Gold Inc." (the "Merger").
NEW AGI is currently a non-operating, wholly owned subsidiary of the Company
formed for the purpose of completing the Merger. Upon the completion of the
Merger, NEW AGI will own all assets presently owned by the Company and will
conduct the business operations presently conducted by the Company. No material
change in the business, management, operations or financial statements of the
Company will result from the Merger. All of the Company's contracts and other
assets will vest in NEW AGI. The officers and directors of the Company
immediately prior to the transaction will continue to be the officers and
directors of NEW AGI.
The following discussion summarizes certain aspects of the reincorporation.
This summary is qualified in its entirety by the Merger Agreement attached as
Appendix E to this Proxy Statement.
BACKGROUND OF THE MERGER; SECTION 203
On May 24, 1993, Amax, which then owned 68% of the Company's Common Stock,
and Cyprus Minerals Company entered into the Cyprus Amax Merger. Following the
Cyprus Amax Merger, Cyprus owned approximately 40% of the outstanding shares of
Common Stock, and as of March 31, 1995, Cyprus owned 42.2% of the outstanding
shares of Common Stock.
Section 203 defines any person that owns, or has the right to acquire, 15% or
more of a corporation's voting stock as an "interested stockholder."
Accordingly, Cyprus became an interested stockholder when the Cyprus Merger
Agreement was approved. Subject to certain exceptions, Section 203 prohibits
business combinations between corporations and interested stockholders for a
three-year period following the date of the transaction in which such
stockholder becomes an "interested stockholder," unless the Board gives prior
approval to such transaction or unless the business combination is approved by
the holders of 66 2/3% of the outstanding voting stock of the corporation not
owned by the interested stockholder. The Cyprus Merger
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Agreement was not approved in advance by the Board. Accordingly, pursuant to
Section 203, Cyprus is prohibited, for a three-year period ending on May 24,
1996, from engaging in any "business combination" with the Company, unless such
business combination is approved by the affirmative vote of the holders of 66
2/3% of the outstanding shares of voting stock of the Company not owned by
Cyprus. Section 203 broadly defines business combinations to include certain
mergers of the Company (including the Merger); certain transfers of assets to
the interested stockholder by the Company; certain issuances or transfers by
the Company or any subsidiary of the Company to an interested stockholder of
shares of stock of the Company or of any subsidiary; certain other transactions
resulting in an increase in the proportionate share of stock of the Company
owned by the interested stockholder; and the receipt by an interested
stockholder of certain financial benefits provided by or through the Company or
a direct or indirect majority-owned subsidiary of the Company.
Certain types of transactions between the Company and Cyprus are subject to
Section 203 and therefore require the approval of the holders of at least 66
2/3% of the outstanding voting stock not held by Cyprus. The Reincorporation
Proposal is one of three such transactions submitted in this Proxy Statement
for such approval by the Company's stockholders. In addition, at a special
meeting of stockholders held in July 1994, stockholders approved two
transactions with Cyprus pursuant to Section 203, DOCLOC I and the Stock
Purchase Agreement, that involved the issuance of Common Stock to Cyprus. While
Section 203 is intended to provide anti-takeover protection for Delaware
corporations by imposing supermajority disinterested stockholder voting
requirements for certain self-dealing transactions with large stockholders, the
Board believes that potential transactions between Cyprus and the Company could
be beneficial to both the Company and its stockholders (without regard to
Cyprus) and that the need to meet the supermajority disinterested stockholder
approval requirements under Section 203 for each such transaction makes it more
difficult to pursue potentially attractive opportunities and more time
consuming and expensive to effect them. In that connection, the Board notes
that Delaware Law will continue to require that directors satisfy their
fiduciary duties to all of the stockholders of the Company when considering
transactions with interested stockholders. Moreover, the Board has a policy
that calls for approval of any transactions between the Company and Cyprus, not
only by the Board, but also by the Audit Committee, composed of the two
directors who are not associates, officers or employees of the Company or
Cyprus. Directors and officers of Cyprus comprise four of the six members of
the Company's Board. Milton H. Ward, Chairman of the Board and Chief Executive
Officer of the Company, is Co-Chairman of the Board, President and Chief
Executive Officer of Cyprus; Gerald J. Malys, a director of the Company, is
Senior Vice President and Chief Financial Officer of Cyprus; Allen Born, a
director of the Company, is Co-Chairman of Cyprus; and Rockwell A. Schnabel, a
director of the Company, is a director of Cyprus. In addition, as a result of
the affiliations with Cyprus of these four of the six directors on the Board,
such directors may be deemed to have a conflict of interest with respect to
transactions between the Company and Cyprus.
The Reincorporation Proposal provides for the merger of the Company into NEW
AGI. NEW AGI's certificate of incorporation contains a provision specifically
electing not to be governed by Section 203. Accordingly, if the Reincorporation
Proposal is approved, NEW AGI, as successor to the Company, will be able to
enter into transactions with Cyprus without obtaining the stockholder approval
required by Section 203. Except for eliminating the requirement that certain
transactions be subject to the supermajority stockholder vote requirement
imposed by Section 203, the Merger will have no effect on the rights of
stockholders to vote generally under other provisions of Delaware Law or the
requirement that the Company obtain approval of stockholders pursuant to the
rules of the NYSE and other exchanges on which the Company's stock is listed.
Although Cyprus currently owns approximately 42% of the outstanding shares of
Common Stock, if all shares of Common Stock that are potentially issuable to
Cyprus are issued to Cyprus, Cyprus' ownership of shares of Common Stock could
increase to as high as approximately 57% of the outstanding shares of Common
Stock. Thus, Cyprus could control the election of directors and any other
action taken by the holders of Common Stock, and the ability of existing
stockholders to influence the election of directors or any other action taken
by the holders of Common Stock would be reduced.
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REASONS FOR THE REINCORPORATION PROPOSAL; RECOMMENDATION OF THE BOARD
The Audit Committee, composed of the two directors who are not associates,
officers or employees of the Company or Cyprus, and the entire Board (with
those directors other than members of the Audit Committee abstaining)
determined the Reincorporation Proposal to be in the best interests of the
Company and its stockholders (without regard to Cyprus). This determination was
based on the following considerations:
(i) Given the Company's current development objectives and limited
financial capacity, the Board believes that any anti-takeover benefits that
might arise under Section 203 are outweighed by the Company's need for the
support of Cyprus.
(ii) The number and importance of transactions with Cyprus since the
Cyprus Amax Merger in November 1994 illustrate the need for avoiding
unnecessary impediments (i.e., the uncertainty, cost and delay associated
with obtaining the supermajority disinterested stockholder vote) to such
transactions. These recent transactions with Cyprus include DOCLOC I, the
Stock Purchase Agreement, the Exploration JV, the DOCLOC I Amendment and
DOCLOC II, among others.
(iii) The substantial delays experienced in effecting DOCLOC I, which was
originally negotiated in February 1994 but was not finally implemented
until July 1994 in part due to the need to satisfy the supermajority
disinterested voting requirements of Section 203.
(iv) Under the Exploration JV, whereby the Company and Cyprus have
combined their efforts for the principal purpose of discovering and
developing future gold prospects, the Company has the first right to
acquire any gold property covered by the Exploration JV by paying Cyprus
for its interest in such property. Thus, the acquisition of any gold
property pursuant to the Exploration JV may require obtaining the approval
of stockholders required by Section 203.
(v) The undesirability of repeatedly seeking stockholder approval under
Section 203, particularly where the Company is a party to continuing
agreements, such as the Exploration JV, and is likely to continue to need
the support of Cyprus to meet its debt amortization obligations and
simultaneously to pursue substantial development projects.
(vi) Even after Section 203 no longer applies to the Company,
transactions involving the issuance of more than 1% of the Company's Common
Stock to Cyprus will continue to require the approval of over 50% of the
outstanding shares of Common Stock pursuant to a rule of the NYSE. Also,
transactions involving the issuance of shares of Common Stock to Cyprus may
require approval of the holders of more than 50% of the Common Stock or a
majority of the Common Stock not owned by Cyprus under the rules of the
TSE. Additionally, a policy of the Board with respect to transactions
between the Company and Cyprus will require approval of a majority of the
disinterested members of the Board.
(vii) The supermajority disinterested voting requirement of Section 203
will expire automatically with respect to transactions with Cyprus in May
1996, and because of the onerous burdens of complying with Section 203, the
Board concluded that early termination of these requirements with respect
to Cyprus would be beneficial.
(viii) In evaluating whether to eliminate Section 203 with respect to
Cyprus only or with respect to Cyprus and any other stockholder that might
become an interested stockholder in the future, the Board considered it
beneficial to eliminate this potential hurdle in connection with a change
of control transaction involving the Company. The Board believes it has or
could implement adequate means to assure that stockholders are treated
fairly in such a transaction.
THE BOARD (WITH THOSE MEMBERS OTHER THAN MEMBERS OF THE AUDIT COMMITTEE
ABSTAINING) HAS APPROVED AND RECOMMENDS THAT STOCKHOLDERS APPROVE THE
REINCORPORATION PROPOSAL.
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REINCORPORATION
The Reincorporation will be effected by means of a merger by the Company with
and into NEW AGI, a wholly owned subsidiary of the Company. The Certificate of
Incorporation of NEW AGI is identical to the Restated Certificate of
Incorporation of the Company, except that the Certificate of Incorporation of
NEW AGI contains a provision electing not to be governed by Section 203. All
benefit plans of the Company will be adopted by NEW AGI. The Merger will become
effective upon the filing of a certificate of merger with the Secretary of
State of Delaware. The Merger Agreement provides that, upon the filing of the
certificate of merger, the name of NEW AGI will be changed to "Amax Gold Inc."
It is anticipated that such filing will be effected immediately following the
approval of the Merger by the stockholders of the Company. Except as discussed
below, the Merger will have no effect on the rights of the stockholders of the
Company.
EFFECT OF THE REINCORPORATION PROPOSAL ON THE RIGHTS OF THE COMPANY'S
STOCKHOLDERS
The Certificate of Incorporation of NEW AGI will be identical to the Restated
Certificate of Incorporation of the Company, except that the Certificate of
Incorporation contains a provision electing not to be governed by Section 203.
As a result, stockholders of the Company will not have the right to a vote in
connection with transactions between Cyprus and NEW AGI unless the requirement
of stockholder approval is imposed by another provision of Delaware Law or the
rules of the NYSE or the TSE. In addition, if any other person or entity
acquires 15% or more of NEW AGI, whether through an acquisition from Cyprus or
otherwise, such person or entity will not be subject to Section 203.
The Reincorporation Proposal, if approved, would allow the Company to enter
into "business combinations" (including financing arrangements involving the
issuance of Common Stock) without requiring the approval of 66 2/3% of the
holders of Common Stock excluding Cyprus. Rules of the NYSE will continue to
require the affirmative vote of 50% of all stockholders to complete such
transactions and the TSE may also require stockholder approval. If Cyprus has
exercised its right to acquire additional shares of Common Stock under DOCLOC I
and DOCLOC II (if approved), Cyprus' ownership of Common Stock may be greater
than 50%. Therefore, under Delaware Law and NYSE rules, Cyprus alone could
approve all corporate action and elect all members of the Board.
PROPOSAL 6. THE STOCKHOLDER PROPOSAL
Laborers National Pension Fund, 14140 Midway Road, Suite 200, Dallas, Texas
75244-3672, a holder of 76,272 shares of Common Stock, has stated its intention
to present the following proposal for consideration at the Annual Meeting. The
proposal and supporting statement, which the Board and the Company oppose, are
set forth below.
RESOLUTION TO ADOPT CUMULATIVE VOTING
RESOLVED: that the shareholders of Amax Gold, Inc. ("Company") recommend our
Board of Directors take the necessary steps to adopt and implement a policy of
cumulative voting for all elections of directors.
SUPPORTING STATEMENT
Set forth below is the supporting statement of the Laborers National Pension
Fund for the above proposal.
"In the American corporate governance system, the election of corporate
directors is the primary vehicle for shareholders to influence corporate
affairs and exert accountability on management. We believe the Company's
financial performance is affected by its corporate governance policies and
procedures and the level of accountability they impose. We believe cumulative
voting increases the possibility of electing independent-minded directors that
will enforce management's accountability to shareholders.
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The election of independent-minded directors can have an invigorating effect
on the Board of Directors, fostering improved financial performance and
increased shareholder wealth. Management nominees often bow to a Chairman's
desires on business strategies and executive pay without question.
Cumulative voting grants shareholders the number of votes equal to the number
of shares owned multiplied by the number of directors to be elected. The
shareholder may cast all of his or her votes for a single director or apportion
the votes among the candidates. At Amax Gold, Inc., shareholders owning 10% of
the outstanding shares casting all their votes for one individual would be
required to elect one director, absent any other support.
Currently, the Company's Board of Directors is composed entirely of
management nominees. Cumulative voting places a check and balance on management
nominees by creating more competitive elections.
The argument that the adoption of cumulative voting will lead to the election
of dissidents to the Board of Directors who represent the special interests of
a minority of shareholders instead of the best interests of all shareholders is
misleading. Legally binding standards of fiduciary duty compel all directors,
no matter what combination of shareholders elected them, to act in the best
interest of all shareholders. Any director who fails to respect the fiduciary
duties of loyalty and/or care exposes himself or herself to significant
liability. Legal recourse is available to correct any breaches of fiduciary
duty.
We do not accept the claim that in the complex world our Company competes in,
an honest difference of opinion over business strategies and other policies of
the Company makes the minority view a so called "special interest." Quite the
contrary, dissent stimulates debate which leads to thoughtful action.
Cumulative voting will increase the competitiveness of director elections. We
believe competitive elections for director will deter complacency on the Board
of Directors, which in turn will improve the performance of our Company and
increase shareholder wealth.
We urge your support for this proposal."
RECOMMENDATION OF THE BOARD
The Board recommends a vote AGAINST this proposal for several reasons. The
Company's present system, like that of most major companies, allows all holders
of Common Stock one vote per share for each directorship. The Board remains
convinced that this approach is the fairest and the one most likely to produce
an effective Board that will represent the interests of all of the Company's
stockholders. In contrast, cumulative voting is a procedure which inflates the
voting power of minority stockholders so that conceivably a director could be
elected who would represent and further a special interest as opposed to taking
action for the benefit of all stockholders. The Board also believes that
cumulative voting could encourage factionalism and partisanship and introduce
an element of discord on the Board, thus impairing the ability of directors to
effectively work together for the best interests of the Company and its
stockholders. The present method, by which the holders of the majority of the
shares of Common Stock can elect the Board, is guided by the principle of
majority rule and, in the judgment of the Board, should be retained. The Board
is focused on successful long-term performance of the Company and believes that
the present system of electing directors should be retained in the best
interest of all stockholders.
For the foregoing reasons, the Board opposes this proposal.
THE BOARD RECOMMENDS A VOTE AGAINST THE STOCKHOLDER PROPOSAL.
47
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following table sets forth the capitalization of the Company and its
consolidated subsidiaries at December 31, 1994, and as adjusted on a pro forma
basis assuming: (i) DOCLOC II is converted into 14,919,806 shares of Common
Stock at a purchase price of $5.362 per share, and (ii) the proceeds from such
conversion provide additional working capital, including funding a portion of
the initial construction of Fort Knox.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current maturities of gold and currency financings(1).... $ 23,900 $ 23,900
======== ========
Long-term portion of gold and currency financings(2)..... $ 83,200 $ 83,200
-------- --------
Note payable to Cyprus under DOCLOC I.................... -- --
-------- --------
Shareholder's equity:
Preferred stock, par value $1.00 per share, authorized
10,000,000 shares, of which 2,000,000 shares have been
designated as Series A Preferred Stock, no shares
issued and outstanding, and 1,840,000 shares have been
designated as Series B Preferred Stock, 1,840,000
shares issued and outstanding......................... 1,800 1,800
Common stock, par value $.01 per share, authorized
200,000,000 shares, issued and outstanding 81,267,708
shares and, as adjusted on a pro forma basis,
96,187,514 shares..................................... 800 1,000
Paid-in capital.......................................... 258,400 338,200
Retained earnings (deficit).............................. (15,500) (15,500)
Common stock in treasury at cost (1,991 shares) -- --
-------- --------
Total shareholder's equity........................... 245,500 325,500
-------- --------
Total capitalization............................... $328,700 $408,700
======== ========
</TABLE>
- --------
(1) Includes $11.3 million of currently scheduled amortization payments on the
Hayden Hill loan, $3.0 million of currently scheduled amortization on
Chilean debt for the Guanaco Mine, $8.0 million of currently scheduled
amortization payments on the Company's loan for the Guanaco Mine and $1.6
million of currently scheduled amortization payments under the Sleeper gold
loan (representing 4,000 gold ounces).
(2) Includes $29.6 million under the Hayden Hill loan, $27.0 million under the
Company's loan for the Guanaco Mine, $3.1 million of Chilean debt, $23.5
million of working capital gold loans (representing 60,951 gold ounces).
48
<PAGE>
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
The Company is authorized by its Restated Certificate of Incorporation to
issue 200,000,000 shares of Common Stock and 10,000,000 shares of preferred
stock. As of March 31, 1995, there were approximately 81.3 million shares of
Common Stock issued and outstanding and 1,840,000 shares of the Series B
Preferred Stock issued and outstanding. In addition, 2,000,000 shares of the
Series A Preferred Stock and 1,600,000 shares of the Series C Preferred Stock
have been authorized by the Board for issuance. All of the shares of Series A
Preferred Stock have been reserved for issuance under DOCLOC I and all of the
shares of Series C Preferred Stock have been reserved for issuance under DOCLOC
II. See "Preferred Stock--Series A Preferred Stock" and "--Series C Preferred
Stock."
COMMON STOCK
The Company's Restated Certificate of Incorporation authorizes the issuance
of 200,000,000 shares of Common Stock. A summary of the terms and provisions of
the Common Stock is set forth below.
Dividends. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board out of funds legally available therefor,
provided that if any shares of Series A Preferred Stock, Series B Preferred
Stock or any Series C Preferred Stock issued in connection with the
arrangements described in this Prospectus and the accompanying Prospectus
Supplement, or any other shares of preferred stock are at the time outstanding,
the payment of dividends on Common Stock or other distributions (including
Company repurchases of Common Stock) will be subject to the declaration and
payment of all cumulative dividends on outstanding shares of the Series A
Preferred Stock, Series B Preferred Stock and any Series C Preferred Stock
issued in connection with the arrangements described in this Prospectus and the
accompanying Prospectus Supplement and any other shares of preferred stock
which are then outstanding.
Liquidation. In the event of the dissolution, liquidation or winding up of
the Company, holders of Common Stock are entitled to share ratably in any
assets remaining after the satisfaction in full of the prior rights of
creditors, including holders of the Company's indebtedness, and the payment of
the aggregate liquidation preference of the Series A Preferred Stock, the
Series B Preferred Stock and any Series C Preferred Stock issued in connection
with the arrangements described in this Prospectus and the accompanying
Prospectus Supplement and any other shares of preferred stock then outstanding.
Voting. The Company's stockholders are entitled to one vote for each share on
all matters voted on by stockholders, including election of directors. Shares
of Common Stock held by the Company or any entity controlled by the Company do
not have voting rights and are not counted in determining the presence of a
quorum. Directors are elected annually. Holders of Common Stock have no
cumulative voting rights.
No Other Rights. The holders of Common Stock do not have any conversion,
redemption or preemptive rights.
Transfer Agent. The transfer agent for the Common Stock is Chemical Bank, 450
West 33rd Street, New York, New York 10001.
Listing. Shares of the Company's outstanding Common Stock are listed on the
NYSE and the TSE.
PREFERRED STOCK
The authorized capital stock of the Company includes 10,000,000 shares of
preferred stock, $1.00 par value per share. As a result of a public offering in
August 1994, 1,840,000 shares of Series B Preferred Stock are currently
outstanding. In addition, 2,000,000 shares of Series A Preferred Stock have
been authorized for issuance pursuant to DOCLOC I and 1,600,000 shares of
Series C Preferred Stock have been authorized for issuance pursuant to DOCLOC
II.
49
<PAGE>
Shares of the Company's preferred stock may be issued from time to time in
one or more series. The Company's Board of Directors is authorized, without
stockholder approval, to fix the voting rights, dividend rights and terms, any
conversion rights, rights and terms of redemption (including sinking fund
provisions), liquidation preferences and any other rights, preferences and
restrictions of any series of preferred stock and the number of shares
constituting such series and designation thereof. The terms of such preferred
stock may affect adversely the voting power and other rights of the holders of
Common Stock and may make it more difficult for a third party to gain control
of the Company.
Series A Preferred Stock
The Series A Preferred Stock was designated as a series of preferred stock in
connection with DOCLOC I. The Series A Preferred Stock consists of 2,000,000
shares. A summary of the terms and provisions of the Series A Preferred Stock
is set forth below.
Dividends. The holders of shares of Series A Preferred Stock are entitled to
receive dividends at an annual rate of $2.25 per share, which is cumulative,
accrues without interest and is payable in cash in equal semi-annual
installments. The Company may elect to pay any dividend due and payable in
shares of Common Stock in lieu of a dividend payment in cash, unless the holder
of Series A Preferred Stock delivers written notice stating that such holder
elects to receive cash. The Series A Preferred Stock ranks, as to dividends, on
a parity with the Series B Preferred Stock and no dividends may be made on the
Series A Preferred Stock for any period unless full cumulative dividends have
been or contemporaneously are paid or set apart for payment on the Series B
Preferred Stock.
Liquidation Preference. Upon the liquidation, dissolution or winding up of
the Company, the holders of Series A Preferred Stock are entitled to receive
from the assets of the Company 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. Payment to the holders of shares of Series A Preferred Stock will be made
before any payment is made or any assets distributed to holders of Common Stock
or any other class or series of the Company's capital stock ranking junior as
to liquidation rights to the Series A Preferred Stock. The Series A Preferred
Stock ranks, as to liquidation rights, on a parity with the Series B Preferred
Stock.
Redemption at the Option of the Company. The Company, at its option, may at
any time redeem the Series A Preferred Stock in whole or, from time to time, in
part, for that number of shares of Common Stock obtained by dividing $50.00 by
the lesser of (i) the call price (defined below) and (ii) the conversion price
(defined below), plus accrued and unpaid dividends, whether or not declared or
due, to the date fixed for redemption. The Company may issue up to a maximum of
12,099,213 shares of Common Stock upon redemption and conversion of and the
payment of dividends on the Series A Preferred Stock, subject to adjustment of
the conversion price. In the case of the redemption of shares of Series A
Preferred Stock that would result in the issuance of more than 12,099,213
shares of Common Stock, the Company would pay an amount in cash in lieu of such
shares equal to the lesser of the call price or the conversion price multiplied
by the number of shares in excess of 12,099,213. Such cash payment will be made
in 12 consecutive substantially equal quarterly payments.
The call price with respect to a redemption of Series A Preferred Stock is
equal to the greater of (i) $5.854 (subject to adjustment of the conversion
price) and (ii) the average closing price per share of Common Stock as
calculated for a ten day trading period ending on the fifth trading day prior
to the date the notice of redemption is mailed.
Conversion. The holder of any shares of Series A Preferred Stock will have
the right, at the holder's option, to convert any or all shares of Series A
Preferred Stock held by such holder into Common Stock at any time. Each share
of Series A Preferred Stock is convertible into that number of shares of Common
Stock obtained by dividing $50.00 by the conversion price in effect at the
time. The conversion price is $8.265 and
50
<PAGE>
is subject to adjustment upon payment by the Company of a dividend or the
making by the Company of a distribution on Common Stock in shares of Common
Stock, upon the subdivision, combination or issuance by reclassification of
Common Stock, or upon the issuance of rights, options or warrants to purchase
shares of Common Stock at a price per share less than the then current market
price. The maximum number of shares of Common Stock that the Company may issue
upon redemption and conversion of and the payment of dividends on the Series A
Preferred Stock is 12,099,213 shares, subject to adjustment of the conversion
price. No fractional shares of Common Stock will be issued upon conversion but,
in lieu thereof, an appropriate amount will be paid in cash. No adjustment will
be made to the conversion price unless such adjustment would require an
increase or decrease of at least 1% of such price.
Voting Rights. The holders of Series A Preferred Stock are not entitled to
vote except as described below or as required by law. Shares of Series A
Preferred Stock held by the Company or any entity controlled by the Company do
not have voting rights and are not counted in determining the presence of a
quorum. If dividends on the Series A Preferred Stock are in arrears in an
amount equal to at least three semi-annual dividend payments (whether or not
consecutive), the number of members of the Board will be increased by two and
the holders of Series A Preferred Stock, voting separately as a class, will
have the right to vote for and elect two additional directors of the Company
during the period that such dividends remain in arrears.
The affirmative vote or consent of the holders of at least 66 2/3% of all
outstanding shares of Series A Preferred Stock is required for the Company (i)
to amend, alter or repeal any provision of the Restated Certificate of
Incorporation or the Bylaws of the Company so as to affect adversely the
relative rights, preferences, qualifications, limitations or restrictions of
the Series A Preferred Stock, (ii) to authorize, 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 senior to the Series A
Preferred Stock as to the payment of dividends or upon liquidation, dissolution
or winding up of the Company or (iii) to effect any reclassification of the
Series A Preferred Stock.
No Preemptive Rights. The Series A Preferred Stock does not have any
preemptive or subscription rights in respect of any securities of the Company.
Cyprus, however, does have the right to convert from time to time all or a
portion of DOCLOC I and any outstanding indebtedness and/or Series A Preferred
Stock into up to 12,099,213 shares of Common Stock at a conversion price of
$8.265 per share (or $100 million if all 12,099,213 shares of Common Stock are
converted).
Series B Convertible Preferred Stock
There are 1,840,000 shares of Series B Preferred Stock currently outstanding.
A summary of the terms and provisions of the Series B Preferred Stock is set
forth below.
Dividends. The holders of shares of Series B Preferred Stock are entitled to
receive dividends at an annual rate of $3.75 per share, which is cumulative,
accrues without interest and is payable in cash in equal quarterly
installments. The Series B Preferred Stock ranks, as to dividends, on a parity
with the Series A Preferred Stock and no dividends may be made on the Series B
Preferred Stock for any period unless full cumulative dividends have been or
contemporaneously are paid or set apart for payment on any Series A Preferred
Stock outstanding.
Liquidation Preference. Upon the liquidation, dissolution or winding up of
the Company, the holders of Series B Preferred Stock are entitled to receive
from the assets of the Company 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. Payment to the holders of shares of Series B Preferred Stock will be made
before any payment is made or any assets distributed to holders of Common Stock
or any other class or series of the Company's capital stock ranking junior as
to liquidation rights to the Series B Preferred Stock. The Series B Preferred
Stock ranks, as to liquidation rights, on a parity with the Series A Preferred
Stock.
51
<PAGE>
Redemption at Option of the Company. Shares of Series B Preferred Stock are
not redeemable prior to August 15, 1997. On and after such date, the Series B
Preferred Stock will be redeemable at the option of the Company, in whole or,
from time to time, in part, 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 PER
YEARS 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.
Conversion. The holder of any shares of Series B Preferred Stock will have
the right, at the option of the holder, to convert any and all shares of Series
B Preferred Stock held by such holder into shares of Common Stock at any time.
Each share of Series B Preferred Stock is convertible into that number of
shares of Common Stock obtained by dividing $50.00 by the conversion price in
effect at the time. The conversion price is $8.25 and is subject to adjustment
upon certain events, including (i) the issuance of Common Stock as a dividend
or distribution on the Common Stock; (ii) a combination, subdivision or
reclassification of the Common Stock; (iii) the issuance to all holders of
Common Stock of rights, options or warrants entitling them to subscribe for or
to purchase Common Stock at a price per share less than the then current market
price; and (iv) the distribution to all holders of Common Stock of capital
stock (other than Common Stock), evidences of indebtedness of the Company,
assets (excluding regular periodic cash dividends), or rights, options or
warrants to subscribe for or to purchase securities of the Company. No
adjustment will be made to the conversion price unless such adjustment would
require an increase or decrease of at least 1% of such price.
Voting Rights. The holders of Series B Preferred Stock are not entitled to
vote except as described below or as required by law. Shares of Series B
Preferred Stock held by the Company or any entity controlled by the Company do
not have voting rights and are not counted in determining the presence of a
quorum. If dividends on the Series B Preferred Stock are in arrears in an
amount equal to at least six quarterly dividend payments (whether or not
consecutive), the number of members of the Board will be increased by two and
the holders of Series B Preferred Stock, voting separately as a class, will
have the right to elect two additional directors to the Company's Board of
Directors during that period that such dividends remain in arrears.
The affirmative vote or consent of the holders of at least 66 2/3% of all
outstanding shares of Series B Preferred Stock is required for the Company (i)
to amend, alter or repeal any provision of the Certificate of Incorporation or
By-laws of the Company so as to affect adversely the relative rights,
preferences, qualifications, limitations or restrictions of the Series B
Preferred Stock, (ii) to authorize, 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 senior to the Series B Preferred Stock as to
the payment of dividends or upon liquidation, dissolution or winding up of the
Company or (iii) to effect any reclassification of the Series B Preferred
Stock.
No Preemptive Rights. The Series B Preferred Stock does not have any
preemptive or subscription rights in respect of any securities of the Company.
52
<PAGE>
Series C Preferred Stock
The Series C Preferred Stock was designated as a series of preferred stock in
connection with DOCLOC II. The Series C Preferred Stock consists of 1,600,000
shares. A summary of the terms and provisions of the Series C Preferred Stock
is set forth below.
Dividends. The holders of shares of Series C Preferred Stock are entitled to
receive dividends at an annual rate of $2.25 per share, which is cumulative,
accrues without interest and is payable in cash in equal semi-annual
installments. The Company may elect to pay any dividend due and payable in
shares of Common Stock in lieu of a dividend payment in cash, unless the holder
of Series C Preferred Stock delivers written notice stating that such holder
elects to receive cash.
Liquidation Preference. Upon the liquidation, dissolution or winding up of
the Company, the holders of Series C Preferred Stock are entitled to receive
from the assets of the Company 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. Payment to the holders of shares of Series C Preferred Stock will be made
before any payment is made or any assets distributed to holders of Common Stock
or any other class or series of the Company's capital stock ranking junior as
to liquidation rights to the Series C Preferred Stock.
Redemption at the Option of the Company. The Company, at its option, may at
any time redeem the Series C Preferred Stock in whole or, from time to time in
part, for that number of shares of Common Stock obtained by dividing $50.00 by
the lesser of (i) the call price (defined below) and (ii) the conversion price
(defined below), plus accrued and unpaid dividends, whether or not declared or
due, to the date fixed for redemption. The Company may issue up to a maximum of
14,919,806 shares of Common Stock upon redemption and conversion of and the
payment of dividends on the Series C Preferred Stock, subject to adjustment of
the conversion price. In the case of the redemption of shares of Series C
Preferred Stock that would result in the issuance of more than 14,919,806
shares of Common Stock, the Company would pay an amount in cash in lieu of such
shares equal to the lesser of the call price or the conversion price multiplied
by the number of shares in excess of 14,919,806. Such cash payment will be made
in 12 consecutive substantially equal quarterly payments.
The call price with respect to a redemption of Series C Preferred Stock is
equal to the greater of (i) $4.196 (subject to adjustment of the conversion
price) and (ii) the average closing price per share of Common Stock as
calculated for a ten day trading period ending on the fifth trading day prior
to the date the notice of redemption is mailed.
Conversion. The holder of any shares of Series C Preferred Stock will have
the right, at the holder's option, to convert any or all shares of Series C
Preferred Stock held by such holder into Common Stock at any time. Each share
of Series C Preferred Stock is convertible into that number of shares of Common
Stock obtained by dividing $50.00 by the conversion price in effect at the
time. The conversion price is $5.326 and is subject to adjustment upon payment
by the Company of a dividend or the making by the Company of a distribution on
Common Stock in shares of Common Stock, upon the subdivision, combination or
issuance by reclassification of Common Stock, or upon the issuance of rights,
options or warrants to purchase shares of Common Stock at a price per share
less than the then current market price. The maximum number of shares of Common
Stock that the Company may issue upon redemption and conversion of and the
payment of dividends on the Series C Preferred Stock is 14,919,806 shares,
subject to adjustment of the conversion price. No fractional shares of Common
Stock will be issued upon conversion but, in lieu thereof, an appropriate
amount will be paid in cash. No adjustment will be made to the conversion price
unless such adjustment would require an increase or decrease of at least 1 % of
such price.
Voting Rights. The holders of Series C Preferred Stock are not entitled to
vote except as described below or as required by law. Shares of Series C
Preferred Stock held by the Company or any entity controlled by
53
<PAGE>
the Company do not have voting rights and are not counted in determining the
presence of a quorum. If dividends on the Series C Preferred Stock are in
arrears in an amount equal to at least three semi-annual dividend payments
(whether or not consecutive), the number of members of the Board will be
increased by two and the holders of Series C Preferred Stock, voting separately
as a class, will have the right to vote for and elect two additional directors
of the Company during the period that such dividends remain in arrears.
The affirmative vote or consent of the holders of at least 66 2/3% of all
outstanding shares of Series C Preferred Stock is required for the Company (i)
to amend, alter or repeal any provision of the Restated Certificate of
Incorporation or the Bylaws of the Company so as to affect adversely the
relative rights, preferences, qualifications, limitations or restrictions of
the Series C Preferred Stock, (ii) to authorize, 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 C
Preferred Stock as to the payment of dividends or upon liquidation, dissolution
or winding up of the Company or (iii) to effect any reclassification of the
Series C Preferred Stock.
No Preemptive Rights. The Series C Preferred Stock does not have any
preemptive or subscription rights in respect of any securities of the Company.
In the event DOCLOC II is approved by the Company's stockholders, Cyprus will
have the right to convert from time to time all or a portion of DOCLOC II and
any outstanding indebtedness and/or Series C Preferred Stock into up to
14,919,806 shares of Common Stock at a conversion price of $5.362 per share (or
$80 million if all 14,919,806 shares of Common Stock are purchased).
WARRANTS
The Company issued warrants to purchase 4,066,649 shares of Common Stock in
connection with the acquisition of the Fort Knox property (the "$21 Warrants").
Each of the $21 Warrants permits the holder to purchase one share of Common
Stock at a price of $21.00 per share, subject to adjustment upon the occurrence
of certain events described below. The $21 Warrants are currently exercisable
and will expire at 5:00 p.m., New York City time, on January 8, 1996. Other
than as described below, the $21 Warrant holders are not protected against
dilution of their interests in the Company if the Company should issue
additional shares of Common Stock (other than by way of stock dividends, stock
splits, reclassifications, mergers and other similar events described in the
$21 Warrant Agreement) or preferred stock in the future. No preemptive rights
exist with respect to the $21 Warrants. No commissions are to be paid to
broker-dealers upon the exercise of the $21 Warrants, although the Company may
agree in the future to pay such commissions. Shares of Common Stock will be
issued upon surrender of the $21 Warrants and payment of the exercise price in
accordance with the terms of the $21 Warrant Agreement.
Expiration. Unless exercised within the time provided for exercise, the $21
Warrants will automatically expire.
Purchase of Common Stock. There is no minimum number of shares of Common
Stock which must be purchased upon exercise of the $21 Warrants. The maximum
number of shares of Common Stock which can be purchased upon exercise of the
$21 Warrants is 4,066,649.
Antidilution Provisions. The holders of the $21 Warrants in certain instances
are protected against dilution of their interests represented by the underlying
shares of Common Stock upon the issuance to holders of Common Stock of stock
dividends or other distributions of capital stock of the Company without
payment of consideration, upon the issuance of rights or warrants exercisable
for Common Stock at a price per share which is less than the then fair market
value per share, or upon the occurrence of stock splits, reclassifications,
mergers and other similar events described in the $21 Warrant Agreement. If
such events were to occur, the exercise price and number of shares of Common
Stock issuable upon exercise of each $21 Warrant would be adjusted in
accordance with the provisions of the $21 Warrant Agreement.
No Voting Power. The holders of the $21 Warrants are not entitled to vote or
to the payment of dividends. In the event of a liquidation, dissolution or
winding up of the Company, the $21 Warrant holders will not be entitled to
participate in the distribution of the Company's assets.
54
<PAGE>
Transferability. The $21 Warrants are transferable, subject, in the case of
certain stockholders who formerly held securities of the joint venturers which
owned the property, to certain agreements entered into between the Company and
such stockholders.
Listing. The $21 Warrants are listed on the American Stock Exchange and the
TSE. The shares of Common Stock issuable upon exercise of the $21 Warrants have
been listed on the NYSE, subject to notification of issuance.
OTHER MATTERS
The Board is not aware of any other matters that may properly come before the
meeting. Should any such matters arise, however, it is the intention of the
persons named in the enclosed form of proxy to vote said proxy in accordance
with their judgment on such matters.
PROPOSALS FOR 1996 ANNUAL MEETING
The Company anticipates that the 1996 Annual Meeting of Stockholders will be
held on or about May 7, 1996. The exact date, time and place for such meeting
has yet to be determined. A stockholder who intends to present a proposal at
that Annual Meeting must submit the written text of the proposal so that it is
received by the Company at its principal executive offices no later than
December 16, 1995, in order for the proposal to be considered for inclusion in
the Company's Proxy Statement for that meeting.
55
<PAGE>
APPENDIX A
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement, dated as of April 15, 1994 ("Agreement"), by
and between Amax Gold Inc., a Delaware corporation (the "Borrower"), and Cyprus
Amax Minerals Company, a Delaware corporation (the "Lender");
WITNESSETH:
WHEREAS, the parties previously have entered into that certain letter
agreement dated February 11, 1994 as extended by a letter agreement dated March
7, 1994 (the "Commitment Letter") providing for, among other things, agreed
upon share purchase prices and the preparation of definitive documents to
implement the terms thereof;
WHEREAS, this Revolving Credit Agreement is one of the definitive documents
contemplated in the Commitment Letter;
WHEREAS, on the date of this Agreement the Lender indirectly owns 31,313,709
shares of the Borrower's common stock, par value $0.01 per share ("Common
Stock"), which constitutes approximately 40% of the Borrower's outstanding
Common Stock;
WHEREAS, the Borrower needs financial support from the Lender to refinance
certain of the Borrower's short term debt, to make required amortization
payments on its Guanaco and Hayden Hill financings and to provide working
capital, and the Lender is willing to provide to the Borrower up to
$100,000,000 of financing for such needs, on the terms of this Agreement;
WHEREAS, the Borrower owns interests in several promising gold prospects,
including 100% of the Fort Knox Project near Fairbanks, Alaska, and 50% of the
Refugio Project in northern Chile, as well as certain other advanced stage
projects (collectively the "Projects"), each of which is expected to require
substantial additional development capital;
WHEREAS, the Borrower is developing one or more of its Projects and is
otherwise taking steps to increase its cash flow from operations to enable the
Borrower to fund its ongoing working capital requirements and required
development capital from operating cash flow or establish third party sources
of financing without reliance on guarantees or other financial support from the
Lender;
WHEREAS, each party has determined (in the Borrower's case, after consulting
with an independent investment banking firm) that it is in the best interest of
such party's stockholders (in the case of the Borrower, including but not
limited to, the Lender) that such financing from the Lender be provided on the
terms and conditions set forth in this Agreement;
WHEREAS, the Borrower and the Lender each have had the transactions
contemplated by this Agreement approved by its Board of Directors (and the
Borrower having had such transactions approved separately by the Audit
Committee of the Borrower's Board of Directors, which consists solely of those
Directors who are unaffiliated with the Lender), and having received a fairness
opinion from an independent investment bank, establishing that the transactions
contemplated herein are, on the whole, in the best interest of the Borrower and
the Lender respectively;
NOW THEREFORE, the parties hereby agree to the following terms and
conditions:
A-1
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ARTICLE I
AMOUNTS AND TERMS OF THE LOAN
SECTION 1.01 Revolving Credit Commitment. Subject to the terms and conditions
hereof, the Lender agrees to make one or more loans (individually a "Loan" and
collectively the "Loans") to the Borrower from time to time during the period
that commences on the date hereof and ends on the earlier of (i) April 30, 1997
or (ii) the date on which the Commitment is terminated pursuant to this
Agreement inclusive (the expiration date determined by (i) or (ii) is herein
called the "Revolver Expiration Date"), in an aggregate principal amount up to
but not exceeding at any one time outstanding the sum of $100,000,000 (the
"Commitment"). During such period the Borrower may use the Commitment by
borrowing, paying and prepaying in whole or in any part and reborrowing, on a
revolving basis, all in accordance with the terms and conditions hereof. To the
extent that the Borrower pays (including any prepayment) any principal amount
of Loans in Preferred Stock pursuant to and as defined in Section 1.08 hereof
prior to the Revolver Expiration Date, the amount of the Commitment shall
automatically be reduced by the amount of any Preferred Stock so issued, based
upon the value of such Preferred Stock at the time of issuance as determined in
accordance with Section 1.08. Each borrowing and cash prepayment of principal,
if any, shall be in an amount equal to an integral multiple of $1,000,000.00.
Notwithstanding the foregoing, the Commitment shall terminate if the conditions
for making the initial Loan under Section 2.01 shall not have been satisfied on
or prior to January 4, 1995, unless extended by the parties.
SECTION 1.02 Making the Loans. The Borrower shall give the Lender notice of
each borrowing hereunder not later than 11:00 a.m. Denver, Colorado, time at
least two (2) Business Days prior to the date a Loan is requested to be made,
specifying the inception date, the amount thereof and the initial Interest
Period for such Loan. The Lender will arrange the loan and confirm the details
in writing to the Borrower. On the inception date of the borrowing, the Lender
will make the proceeds of the Loan available to the Borrower in immediately
available funds at the Borrower's account with Chemical Bank, New York, or as
the Borrower may otherwise direct in such notice.
The Loans to the Borrower shall be evidenced by a grid Note of the Borrower
substantially in the form of Exhibit A hereto (the "Note"). The Note will
evidence the obligation of the Borrower to pay the aggregate unpaid principal
amount of all Loans made by the Lender pursuant to Section 1.01 of this
Agreement, together with all accrued interest on such Loans. Entries made on
the grid schedules of the Note by the Lender reflecting borrowings, payments
and interest rate calculations under this Agreement shall constitute, absent
proven error, prima facie evidence of the transactions represented by such
entries. The Note shall (i) be dated the date of the initial Loan hereunder,
(ii) be payable in accordance with its terms and the terms of this Agreement
and (iii) evidence the obligation of the Borrower to pay interest on each Loan
made hereunder from the date of such Loan on the unpaid principal amount
thereof outstanding from time to time, calculated in accordance with the
provisions of Section 1.03 and the outstanding principal amount of such Loan in
accordance with Section 1.06 or Section 1.08 of this Agreement pursuant to the
repayment notice given by the Borrower under the applicable section of this
Agreement. Except for the payment referenced in Section 1.08 hereof, the
Borrower shall make each payment (including any cash prepayment) hereunder and
under the Note, not later than the close of business of the day when due by
wire transfer, in lawful money of the United States of America to the Lender,
at its address referred to in Section 7.02 or as otherwise directed by the
Lender, in immediately available funds.
SECTION 1.03 Payment of Interest. Each Loan made by the Lender pursuant to
this Agreement shall bear interest on the principal balance thereof from time
to time unpaid at an annual rate equal to the LIBOR Rate (as defined herein)
for the interest period selected by the Borrower at its option for a period of
one, three or six months, or such other periods as are agreed between the
Borrower and the Lender (each, an "Interest Period"), and as set forth in the
notice of borrowing referred to in Section 1.02 hereof or the notice of
Interest Period selection referred to in Section 1.05 hereof, as the case may
be, plus 0.30% except as otherwise provided in this Section. Interest on each
Loan shall be due and payable in full on the last day of
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the Interest Period applicable to such Loan and, in the case of any Interest
Period in excess of three months, at the end of each calendar quarter occurring
during the term thereof. The term "LIBOR Rate" shall mean the rate of interest
per annum at which U.S. dollar deposits, in an amount equal to the aggregate
principal balance of the Loan are offered (as reasonably determined by the
Lender) at or about 11:00 a.m. Denver time on the date that is two Business
Days immediately prior to the beginning of such Interest Period in the London
Interbank Eurodollar Market for delivery on the first day of such Interest
Period for approximately the number of days contained therein (as appearing on
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 for dollar deposits of major banks); provided, however,
that if at least two such offered rates appear on the LIBOR page in respect of
such Interest Period, the arithmetic mean of all such rates (as determined by
the Lender and rounded upwards to the nearest 1/16th of 1%) will be the rate
used; and provided further that if Reuters Monitor Money Rates Service ceases
to provide LIBOR quotations, such rate shall be the average rate of interest
(as determined by the Lender) and rounded upwards to the nearest 1/16th of 1%)
at which U.S. dollar deposits are offered for the relevant Interest Period by
three of the leading banks selected by the Lender in the London interbank
market as of 11:00 a.m. Denver time on the date which is two (2) Business Days
prior to the first day of such Interest Period, or as reasonably determined by
the Lender by reference to the LIBOR rate for an equivalent interest period in
the most recent edition of the Wall Street Journal under the section headed
"Money Rates", or otherwise as the Lender and the Borrower may mutually agree.
If the Borrower fails to make any payment to the Lender of the principal of or
interest on any Loan when such payment becomes due, such Loan shall accrue
interest at a rate that is 1.0% per annum higher than the rate otherwise
payable with respect to such Loan and such higher rate shall continue until
such default in payment by the Borrower is cured. All computations of interest
under the Note shall be made by the Lender on the basis of a year of 360 days,
consisting of twelve 30-day months, for the actual number of days (including
the first day but excluding the last day) elapsed.
SECTION 1.04 Prepayments in Cash. On any interest payment date, or as
otherwise agreed by the Lender, the Borrower may make cash prepayments of
principal (which, unless the commitment is earlier terminated pursuant to
Section 6.02, may be reborrowed on or prior to the Revolver Expiration Date but
not thereafter) of one or more Loans (which Loans shall be designated by the
Borrower) in an amount equal to an integral multiple of $1,000,000, and shall
be made without premium or penalty, but together with interest accrued, if any,
on the amount of each prepaid Loan (at the interest rate applicable to such
Loan) to the date of prepayment and shall be applied to the Loans in the
inverse order of maturity. The Borrower shall give Lender at least two Business
Days notice of any such prepayment. All such cash payments shall be made by
wire transfer in immediately available funds to an account designated by the
Lender.
SECTION 1.05 Interest Period Selection. The Borrower shall have the option to
select a new Interest Period for each Loan, which period shall take effect at
the end of the then current Interest Period with respect to such Loan. The
Borrower shall give the Lender notice of such Interest Period selection
pursuant to this Section 1.05 not later than 11:00 a.m. Denver, Colorado, time
at least two (2) Business Days prior to the last day of the applicable Interest
Period, specifying the new Interest Period for such Loan. If the Borrower does
not deliver such notice of Interest Period selection to the Lender as set forth
herein, the Interest Period for such Loan shall be the same number of months as
the immediately preceding Interest Period for such Loan. The selection of a
subsequent Interest Period shall not be deemed to constitute a reborrowing or a
new Loan for purposes of this Agreement.
SECTION 1.06 Amortization of Principal. On the Revolver Expiration Date all
accrued interest shall be paid and the aggregate principal balance of all Loans
outstanding shall become due and payable in twenty equal quarterly installments
on March 31, June 30, September 30, and December 31 of each of the following
five years with the first installment due on June 30, 1997; provided, however,
that the last such installment shall be in the amount necessary to repay in
full the unpaid principal amount thereof. The outstanding principal balance of
the Note shall bear interest in accordance with Section 1.03 until the Note is
paid in full. Accrued interest on the Note shall be added to and paid with each
such quarterly amortization payment.
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SECTION 1.07 Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a date which is a
Saturday, Sunday or a public holiday or the equivalent for Lender or for banks
generally under the laws of the State of Colorado (any other day being a
"Business Day"), such payment may be made on the next succeeding Business Day
and such extension of time shall in such case be included in the computation of
interest due.
SECTION 1.08 Payment in Preferred Stock. At the Borrower's election, which
may be exercised by its giving written notice to the Lender at least 20
Business Days prior to the date such repayment or prepayment of the Note or a
required amortization payment due under the Note is to be made, the Borrower
may (i) repay the entire principal balance of the Note, (ii) pay the required
amortization payment due under the Note, (iii) upon the Lender's prior consent
given not later than two Business Days prior to the payment date, pay the
required interest payment due under the Note, and/or (iv) prepay increments of
at least $5,000,000 of principal of Loans outstanding under the Note (which
Loans shall be designated by the Borrower), in each case by issuing to the
Lender the Borrower's $2.25 Series A Convertible Preferred Stock, par value
$1.00 per share (the "Preferred Stock"), which shall have the powers,
preferences and relative participating, optional or other special rights and
qualifications, limitations or restrictions thereof as are set forth in Exhibit
B to this Agreement and otherwise as the Board of Directors of the Borrower may
determine (consistent with the provisions of such Exhibit B) by resolution or
resolutions adopted by the Board of Directors of the Borrower providing for the
issue of such Preferred Stock. The amount of such Preferred Stock issued to the
Lender shall (w) in the event the payment is to be made pursuant to clause (i)
above, be equal in value to the outstanding principal amount of all Loans
outstanding at the time of such payment, plus accrued interest thereon to the
date of such payment; (x) in the event the payment is to be made pursuant to
clause (ii) above, be equal in value to the amount of such required
amortization payment to be made plus accrued interest thereon to the date of
such payment; (y) in the event the payment is to be made pursuant to clause
(iii) above, be equal in value to the amount of such required interest payment
to be made on the date of such payment; or (z) in the event the payment is to
be made pursuant to clause (iv) above, be equal in value to the incremental
amount of such Loans that the Borrower elects to prepay, plus accrued interest
thereon to the date of such payment, in each case as specified in the notice
given to the Lender pursuant to this Section 1.08, except that no fractional
shares of Preferred Stock shall be issued. In lieu of a fraction of a share of
Preferred Stock, the Borrower shall pay the Lender in cash an amount equivalent
to such fraction of a share. The value of the Preferred Stock shall be
determined by multiplying the number of shares of Preferred Stock to be issued
to the Lender by $50.00 per share. The number of shares of Preferred Stock to
be issued to the Lender pursuant to this Section 1.08 (which shall not exceed
the number authorized in the Borrower's Restated Certificate of Incorporation,
as amended) will be determined by the Borrower based on the amount of the Loans
to be repaid or prepaid with such Preferred Stock, subject to adjustment for
arithmetic errors.
SECTION 1.09 Regulatory Approvals. As a condition precedent to issuing any
Preferred Stock to the Lender pursuant to Section 1.08 hereof, the Borrower
shall have obtained all authorizations and approvals of, and all other actions
required to be taken by, any applicable governmental authority or regulatory
body or stock exchange and shall have given all notices to, and made all
filings with, any such governmental authority or regulatory body or stock
exchange, that may be required in connection with such issuance of such
Preferred Stock.
SECTION 1.10 Failure to Obtain Regulatory Approvals. In the event the
Borrower is unable to obtain all authorizations and approvals required for the
issuance of any Preferred Stock pursuant to Section 1.09 hereof, such failure
shall not constitute a default but the written notice given by the Borrower to
the Lender with respect to making such repayment or prepayment by issuing
Preferred Stock shall be null and void, without prejudice to the rights of the
Borrower to exercise its option under Section 1.08 on any other occasion. If
the Preferred Stock was to be issued to pay an interest payment or required
amortization due under the Note, such payment shall be made by the Borrower in
immediately available funds on the date such payment is due in accordance with
Section 1.03 or 1.06 of this Agreement, as the case may be, and the Note.
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SECTION 1.11 Restrictions on Transfer of Preferred Stock.
(i) Notice of Intended Dispositions. Except for dispositions pursuant to
this Section 1.11, if at any time the Lender desires to sell, assign,
transfer, pledge, encumber or otherwise dispose of any shares of Preferred
Stock held by it, then the Lender shall deliver written notice (a
"Disposition Notice") to the Borrower under Section 7.02, of its intention
to sell, setting forth the Lender's desire to make such sale, the identity
of the prospective purchaser, the number of shares of Preferred Stock
proposed to be sold (the "Offered Shares") the price ("Offer Price") at
which the Lender proposes to dispose of the Offered Shares and the other
material terms of such disposition. Such proposed sale, transfer, etc.,
shall be for cash only.
(ii) Borrower's First Refusal Option. Upon the receipt of the Disposition
Notice, the Borrower shall then have the right to purchase at the Offer
Price all, but not less than all, of the Offered Shares. In order to
exercise its first refusal option, the Borrower must give written notice (a
"First Refusal Exercise Notice") under Section 7.02, of such exercise to
the Lender, not more than 45 calendar days from the date of its receipt of
the Disposition Notice. In the event that the Borrower exercises its first
refusal option with respect to the Offered Shares, then the Lender shall
sell to the Borrower and the Borrower shall purchase the Offered Shares
within 30 calendar days after the date of receipt by the Lender of the
First Refusal Exercise Notice. Upon the consummation of any purchase by the
Borrower of Offered Shares, the Lender shall deliver certificates
evidencing the Offered Shares sold duly endorsed, or accompanied by written
instruments of transfer, free and clear of any liens and encumbrances,
against delivery of the Offer Price. From and after the time at which cash
necessary to pay the Offer Price for shares of Preferred Stock pursuant to
the exercise of the first refusal option irrevocably shall have been
deposited or set aside, then, notwithstanding that the certificates
representing the Offered Shares shall not have been surrendered, all rights
(other than the right to receive payment of the Offer Price with respect to
such shares of Preferred Stock) of the Lender with respect to the shares of
Preferred Stock for which tender has been made, including without
limitation all conversion, voting and dividend rights, permanently shall
cease and terminate, except only the right to receive payment for such
shares of Preferred Stock, and the Lender shall no longer be considered the
owner of such shares of Preferred Stock.
(iii) Permitted Dispositions. If the Disposition Notice has been duly
given and the Borrower shall not have timely given the First Refusal Notice
to exercise its first refusal option, then the Lender shall have the right,
for a period of 30 calendar days after expiration of the 45 day period
referred to in the second sentence of subsection (ii) of this Section 1.11,
to sell to the prospective purchaser referred to in such notice the Offered
Shares at no less than the Offer Price and on the other terms and
provisions set forth in the Disposition Notice.
ARTICLE II
CONDITIONS OF LENDING
SECTION 2.01 Conditions Precedent to Making the Initial Loan. The obligation
of the Lender to make the initial Loan is subject to the following conditions
precedent:
(a) The Lender shall have received on or before the day the initial Loan
is made all of the following, in form and substance reasonably satisfactory
to the Lender:
(i) The Note duly executed by the Borrower;
(ii) Copies of the borrowing resolutions of the Board of Directors of
the Borrower authorizing the execution and delivery of this Agreement
and the Note as well as the Borrower's performance of all of the
covenants, obligations and other undertakings of the Borrower
contemplated by this Agreement and the Note, (including the specific
authorization of the Preferred Stock to be issued pursuant to Section
1.08 of this Agreement on the terms of Exhibit B to this Agreement) and
of all documents evidencing other necessary corporate action and
governmental approvals, if any, with
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respect to this Agreement and the Note, certified by the Secretary or
an Assistant Secretary of the Borrower;
(iii) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of
the Borrower authorized to sign this Agreement and the Note and any
other documents to be delivered hereunder;
(iv) A favorable opinion of counsel of the Borrower, as to matters
referred to in Section 3.01 (except subsection (e) thereof) of this
Agreement;
(v) A Notice of Borrowing under Section 1.02; and
(vi) Evidence reasonably satisfactory to the Lender that the New York
Stock Exchange shall have accepted a listing application for the Common
Stock to be issued pursuant to this Agreement or upon conversion of the
Preferred Stock and if so required as a condition to listing, that the
majority of the shareholders of the Borrower have approved the issuance
of such Common Stock.
(b) On the date of such Loan the following statements shall be true:
(i) The representations and warranties of the Borrower contained in
Section 3.01 are true and correct in all material respects and the
covenants of the Borrower made in Article IV hereof shall be deemed to
have been made on and as of the date of such Loan (or of a subsequent
Loan for the purposes of Section 2.02);
(ii) No event has occurred and is continuing, or would result from
such Loan (or from a subsequent Loan for the purposes of Section 2.02),
which constitutes an Event of Default (as defined in Article V) or
would constitute an Event of Default but for the requirement that
notice be given or time elapse or both; and
(c) The Borrower shall deliver to the Lender a certificate of the
Borrower's Chief Financial Officer stating the purpose of the borrowing,
which shall be consistent with Section 7.05 and the other terms and
conditions of this Agreement and, if required by Section 7.05, resolutions
of the Borrower's Board of Directors, which resolutions shall be certified
to Lender by the Secretary or an Assistant Secretary of the Borrower.
SECTION 2.02 Conditions Precedent to Subsequent Loans. The obligation of the
Lender to make each subsequent Loan is subject to the conditions precedent that
(i) on the date of any such subsequent Loan the statements made in Section
2.01(b)(i) and (ii) shall be true; and (ii) the condition set forth in Section
2.01(c), shall be satisfied with respect to such subsequent Loan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite corporate power to execute, deliver and perform its obligations
under this Agreement and the Note.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Note have been, or in the case of the issuance of Common
Stock will be on or prior to the date of issuance, duly authorized by all
necessary corporate action (including authorization of the Board of
Directors of the Borrower to issue the Preferred Stock in the event the
Borrower elects to pay or prepay in Preferred Stock pursuant to Section
1.08 of this Agreement and to issue the Common Stock required to be issued
upon conversion of the Preferred Stock or pursuant to Articles of this
Agreement) and do not (and the issuance of such Preferred Stock on the
terms of Exhibit B or, in the case of the Common Stock, such Common Stock
will not at the time the same is to be issued):
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(i) violate any provision of the Restated Certificate of
Incorporation, as amended, or By-Laws of the Borrower or any law,
order, writ, judgment, decree, determination or award, in each case as
presently in effect and having applicability to the Borrower; or
(ii) result in a breach of or constitute a default under any material
indenture, bank loan agreement, credit agreement, bullion loan or other
material agreement to which the Borrower is a party or by which any of
its properties or the properties of any of its Subsidiaries, are
presently bound. As used in this Agreement, the term "Subsidiary" shall
mean, as to the Borrower, any corporation of which at least a majority
of the outstanding shares of stock, having by the terms thereof
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether or not at the time stock of
any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), is at the
time directly or indirectly owned or controlled by the Borrower or one
of more of its Subsidiaries.
(c) No authorization or approval of, or other action by, and no notice to
or filing with, any governmental authority or regulatory body, other than
the Securities and Exchange Commission ("SEC"), is required for the due
execution, delivery and performance by the Borrower of this Agreement
(except for such notices, any necessary shareholder approvals,
registrations, stock exchange listings or filings as may be required in
connection with issuing the Preferred Stock and the Common Stock) or the
Note.
(d) This Agreement is, and the Note when executed and delivered will be,
legal, valid and binding obligations of the Borrower enforceable against it
in accordance with their respective terms (subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles).
(e) The consolidated statements of financial position of the Borrower and
its consolidated Subsidiaries as at December 31, 1993, and the related
consolidated statements of operations, cash flows and changes in Common
Stock, paid-in capital and retained earnings of the Borrower and such
Subsidiaries for the period then ended (copies of which have been furnished
to the Lender) fairly present the financial condition of the Borrower and
such Subsidiaries as at such date and the results of the operations of the
Borrower and its Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles.
(f) Except as disclosed in the Borrower's most recent Annual Report on
Form 10-K filed with the SEC for the fiscal year then ended, the most
recent Quarterly Reports on Form 10-Q, or as otherwise disclosed in writing
to the Lender, there is not to the actual knowledge of the executive
officers of the Borrower any pending or threatened action or proceeding
against or affecting the Borrower before any court, governmental agency or
arbitrator that reasonably could be expected to materially and adversely
affect the ability of the Borrower to perform its obligations under the
Agreement or the Note.
(g) The Preferred Stock and the Common Stock, when issued in accordance
with the terms of this Agreement (and any Common Stock when issued on
conversion of or pursuant to the terms of the Preferred Stock), will be
validly issued, fully paid and nonassessable.
ARTICLE IV
COVENANTS OF THE BORROWER
SECTION 4.01 Payment of Principal, Premium and Interest. The Borrower duly
and punctually will pay or cause to be paid the principal of and interest on
the Loans evidenced by the Note according to the terms thereof.
SECTION 4.02 Reports, etc. The Borrower will furnish to the Lender the
following reports, information and documents:
(i) within 15 days after the Borrower is required to file the same with
the SEC, copies of the annual reports on Form 10-K, proxy statements,
quarterly reports on Form 10-Q, and of such reports, notices,
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documents and other information (or copies of such portions of any of the
foregoing as the SEC may from time to time by rules and regulations
prescribe) that the Borrower may be required to file with the SEC pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended, or with the principal securities exchange (or successor thereto)
in the United States on which securities of the Borrower are listed and,
upon distribution thereof, a copy of each report, proxy statement, notice,
document or other information sent by the Borrower to all of its
stockholders; and
(ii) promptly upon demand, such other information respecting the
financial condition, operations and properties of the Borrower and its
consolidated Subsidiaries as the Lender reasonably may request; provided
that the Lender shall maintain the confidentiality thereof in the same
manner as the Lender maintains the confidentiality of its own information
of like nature.
SECTION 4.03 Inspection. So long as the Lender is obligated to make Loans
under this Agreement or so long as the Note is outstanding, the Borrower will
permit the Lender or any of its authorized representatives, at the Lender's
expense, to inspect at all reasonable times all properties, books and records
of the Borrower or any of its consolidated Subsidiaries reasonably related to
the overall financial and business condition of the Borrower and its
consolidated Subsidiaries or to the observance and performance by the Borrower
of its obligations hereunder and under the Note, and to discuss the business
and affairs of the Borrower and its consolidated Subsidiaries with its officers
and independent accountants (and by this provision the Borrower authorizes said
accountants to discuss with the Lender or such authorized representatives, the
finances and affairs of the Borrower and its consolidated Subsidiaries), all as
often as reasonably may be requested, subject to appropriate obligations of
confidentiality.
SECTION 4.04 Payment of Taxes. The Borrower will pay and discharge, or cause
to be paid and discharged, all taxes, assessments and governmental charges
levied on it or against any of its properties or assets prior to the date on
which penalties are attached thereto, unless and to the extent only that the
same shall be contested in good faith and by appropriate proceedings by the
Borrower, or except to the extent that the failure to so pay or to so discharge
would not have a material adverse effect on the ability of the Borrower to
perform its obligations under this Agreement or the Note.
SECTION 4.05 Officers' Certificate. The Borrower will deliver a certificate
to the Lender on or before April 30 in each year (beginning with 1995), signed
by the Chairman of the Board or the President, the Chief Financial Officer, any
Senior Vice President or any Vice President (the foregoing being hereafter
referred to as "Senior Officers") and by the Secretary or any Assistant
Secretary of the Borrower, stating that in the course of the performance by the
signers of their duties as officers of the Borrower they normally would have
knowledge of any condition or event that constitutes or which, after the giving
of notice or lapse of time or both, would constitute, an Event of Default under
this Agreement or under the Note, stating whether or not they have knowledge of
any such condition or event and, if so, specifying each such condition or event
of which the signers have knowledge and the nature thereof, and the steps taken
by the Borrower to correct the same.
SECTION 4.06 Compliance With Laws. The Borrower shall comply, in all material
respects, with all applicable laws, rules, regulations and orders, except where
the failure would not have a material adverse effect on the Borrower's ability
to perform under this Agreement and the Note.
SECTION 4.07 Mergers and Consolidations. Without the Lender's prior consent
which will not be unreasonably withheld, the Borrower will not enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution). The Borrower
will not convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or substantially all of its
business or assets. Notwithstanding the foregoing provisions of this Section
4.07:
(a) Any Subsidiary of the Borrower may be merged or consolidated with or
into (x) the Borrower if the Borrower shall be the continuing or surviving
corporation, or (y) any such other Subsidiary;
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(b) Any Subsidiary of the Borrower may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or to a Subsidiary of the Borrower; and
(c) The Borrower or any of its Subsidiaries may merge or consolidate with
any other Person if (x) in the case of a merger or consolidation of the
Borrower, the Borrower is the surviving corporation and, in any other case,
the surviving corporation is a Subsidiary of the Borrower, and (y) after
giving effect thereto, no Event of Default would exist hereunder, and there
will be no material adverse impact on the ability of the Borrower to
perform any of its obligations hereunder or under the Note in accordance
with the respective terms thereof.
SECTION 4.08 Listing Approval. The Borrower promptly shall use all reasonable
efforts to obtain the acceptance of the New York Stock Exchange of a listing
application for the Common Stock to be issued pursuant to the terms of this
Agreement and, if so required as a condition to such listing, to obtain the
approval of a majority of its shareholders for the issuance for such Common
Stock.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01 Events of Default. If any of the following events (each, an
"Event of Default") shall occur and be continuing:
(a) The Borrower shall (i) fail to pay the principal of or any interest
on the Note when due, or (ii) fail to perform or observe any other term,
covenant or condition contained in this Agreement or in the Note on its
part to be performed or observed and any such failure shall remain
unremedied for five (5) Business Days in the case of clause (i) and thirty
(30) days in the case of clause (ii) after the same is discovered by any
Senior Officer of the Borrower; or
(b) Any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) in any certificate or other document
delivered pursuant to this Agreement shall prove to have been incorrect in
any material respect when made and such incorrect representation or
warranty shall not have been corrected within ten (10) days after the same
is discovered by any Senior Officer of the Borrower; or
(c) The Borrower shall admit in writing its inability to pay its debts,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Borrower or seeking to
adjudicate it a bankrupt or insolvent or seeking reorganization,
arrangement, adjustment, or composition of it or its debts under the law of
any jurisdiction relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and,
with respect to any involuntary proceeding instituted against the Borrower,
such proceeding shall not be dismissed within sixty (60) days;
then, and in any such event, the Lender, by notice to the Borrower, may take
either or both of the following actions: (i) terminate the Commitment,
whereupon the same shall terminate forthwith; or (ii) declare the principal
balance outstanding under the Note and all interest accrued and unpaid thereon,
and all other sums due hereunder, to be due and payable without presentment,
demand, protest, or further notice of any kind, all of which are hereby
expressly waived by the Borrower; provided, however, that upon the occurrence
of an Event of Default specified in subparagraph (c) above, (x) the Commitment
automatically shall be terminated and (y) the Note, all such principal and
interest and all such other sums due hereunder automatically shall become and
be due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Borrower.
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ARTICLE VI
LENDER'S STOCK PURCHASE OPTION
SECTION 6.01 Description of Lender's Option. At any time after the acceptance
by the New York Stock Exchange of a listing application for the issuance of the
shares of Common Stock described herein, and prior to the later of (i) the
Revolver Expiration Date or (ii) payment in full of the Note and all other
amounts, if any, due to the Lender under this Agreement, the Lender shall have
the option from time to time (the "Lender's Purchase Option") to purchase an
amount not to exceed 12,099,213 shares of the Borrower's Common Stock at a
purchase price per share (the "Purchase Price") of $8.265, subject to
adjustment in accordance with Section 6.03 hereof, and, in connection with the
consummation of such purchase (the "Closing"), to terminate such portion of the
Commitment as is equal to the product of (i) the number of shares so purchased
multiplied by (ii) the Purchase Price (as adjusted under Section 6.03);
provided if less than 12,099,213 shares are purchased (taking into account all
shares previously purchased under this provision), the number of shares shall
be an integral multiple of one million shares. The Lender may exercise any
Lender's Purchase Option under this Article VI by giving written notice to the
Borrower, if at all, at least 20 Business Days prior to the date stated in such
notice for the Closing of such stock purchase. If there are no amounts
outstanding under the Note at the time such notice is given, the Lender shall
give such notice to the Borrower at least 20 Business Days prior to the
Revolver Expiration Date. Such notice shall state the Lender's decision to
exercise its option hereunder and the date for Closing of such stock purchase.
Upon receipt of such notice, the Borrower and the Lender shall select a time
and place for the Closing and if the Borrower and the Lender are unable to
agree, the Closing shall take place at the Borrower's offices at 9:00 a.m.,
local time, on the date specified for Closing in the Lender's notice.
SECTION 6.02 Transactions at Closing. At the Closing, the Purchase Price for
the shares of the Borrower's Common Stock to be purchased by the Lender shall
be paid and applied by the Lender in the following order:
(i) First, to all accrued interest to the date of Closing and then to
such portion of and such portion of the principal amount of the outstanding
balance under the Note in stated order of maturity, as is determined by (y)
the product of (i) the number of shares so purchased multiplied by (ii) the
Purchase Price (as adjusted under Section 6.03); less (z) the amount of
accrued interest to the date of Closing; (which amount shall be deemed
repaid by the Borrower, irrespective of whether such amounts are then due
and payable, by the issuance of a credit against the Purchase Price payable
by the Lender for such Common Stock and the Lender shall deliver a receipt
to the Borrower for the amount of such payment). Amounts of principal paid
pursuant hereto may not be reborrowed.
(ii) Secondly, in the event the aggregate amount of the Purchase Price
shall exceed the amount in Section 6.02(i), the Lender shall deliver to the
Borrower the number of shares of Preferred Stock previously issued to the
Lender pursuant to Section 1.08, to the extent that such shares have not
been converted into or redeemed for shares of the Borrower's Common Stock
pursuant to the terms of such Preferred Stock as are equal in value to the
aggregate Purchase Price in excess of the amount applied in clause 6.02 (i)
above. To the extent that shares of Preferred Stock have been converted
into or redeemed for shares of the Borrower's Common Stock and to the
extent that any shares of Common Stock have been issued in lieu of cash
dividend payments on the Preferred Stock, the amount of Common Stock to be
purchased by the Lender pursuant to this Article VI first shall be reduced
by an amount equal to the number of such shares of Common Stock which have
been issued by the Borrower (x) on conversion or redemption of such shares
of Preferred Stock, or (y) in lieu of cash dividend payments on Preferred
Stock.
(iii) Thirdly, the amount of the excess of the aggregate Purchase Price
over the amounts applied in Section 6.02 (i) and (ii) above, if any, shall
next be applied by the Lender paying to the Borrower by wire transfer,
certified or official bank check payable in United States currency in
immediately available funds, to the account of the Borrower, or as the
Borrower shall direct by written notice given at least
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two Business Days prior to Closing, an amount up to the remainder of the
Commitment less the amount of the outstanding principal balance of the
Note.
Upon payment of the Purchase Price in the manner described above, the
Borrower shall deliver to the Lender a Certificate for the number of shares of
the Borrower's Common Stock purchased at Closing, together with a legal opinion
from the Borrower's General Counsel, or such other counsel as the Borrower may
choose, which other counsel shall be reasonably acceptable to the Lender, to
the effect that such shares of Common Stock purchased by the Lender have been
duly authorized, validly issued, and are fully paid and non-assessable. Upon
delivery of the certificate for the Common Stock and the legal opinion
described herein, such portion of the Commitment as is equal to the product
described in Section 6.01 above, shall terminate.
SECTION 6.03 Adjustment of Purchase Price and Number of Shares
Purchasable. The Purchase Price and the number of shares of Common Stock
purchasable upon the exercise of any Lender's Purchase Option shall be subject
to adjustment from time to time by the Borrower as follows:
(i) In case the Borrower 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 Borrower, then in each such case the number of shares of Common
Stock purchasable upon the exercise of the Lender's Purchase Option
immediately prior thereto shall be adjusted so that the Lender shall be
entitled to receive the kind and number of shares of Common Stock or other
securities of the Borrower which the Lender would have owned or have been
entitled to receive immediately following such action had such shares of
Common Stock been purchased 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. If, as a result of an
adjustment made pursuant to this subsection (i), the Lender shall become
entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Borrower, the Audit
Committee of the Board of Directors of the Borrower (whose reasonable
determination shall be conclusive except for arithmetic errors and shall be
described in a statement filed by the Borrower with the Lender) shall
determine the equitable allocation of the adjusted Purchase Price between
or among shares of such classes of capital stock or shares of Common Stock
and other capital stock.
(ii) In case the Borrower 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 6.03) 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
Borrower in effect at the time hereof or any other similar plan adopted or
implemented hereafter), to the extent that the same have not expired by
their terms prior to the exercise of the Lender's Purchase Option, then the
number of shares of Common Stock thereafter purchasable upon the exercise
of the Lender's Purchase Option shall be determined by multiplying the
number of shares of Common Stock theretofore purchasable upon exercise of
the Lender's Purchase Option immediately prior to the date of issuance of
such rights, options or warrants by a fraction of which the 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 additional shares of Common Stock offered for
subscription or purchase, 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 shares which the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at such current market
price. Such adjustment successively shall be made whenever any such rights,
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options or warrants are issued, and immediately shall become effective on
the date of issuance retroactive to 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 Purchase Price shall be readjusted to the Purchase Price that
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 no event, however,
shall there be any adjustment made with respect any shares previously
issued pursuant to the exercise of the Lender's Purchase Option. 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 Borrower for such rights, options or warrants. The value of
such consideration, if other than cash, shall be determined by the Audit
Committee of the Borrower's Board of Directors (whose reasonable
determination shall be conclusive, except for arithmetic errors, and shall
be described in a statement filed by the Borrower with the Lender).
(iii) In case the Borrower 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 Borrower 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 6.03) or rights, options or warrants to subscribe for or
purchase securities of the Borrower (excluding those referred to in
subsection (ii) of this Section 6.03), then in each such case the number of
shares of Common Stock thereafter purchasable upon the exercise of the
Lender's Purchase Option shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon the exercise of the
Lender's Purchase Option by a fraction of which the numerator shall be the
current market price per share of the Common Stock as determined pursuant
to subsection (iv) of this Section 6.03, and of which the denominator shall
be such current market price per share of Common Stock less the fair market
value on such record date (as determined by the Audit Committee of its
Board of Directors of the Borrower, whose reasonable determination shall be
conclusive except for arithmetic errors and shall be described in a
statement filed by the Borrower with the Lender) 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. 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 6.03, the current market price per share of Common Stock on
any date shall be deemed to be the average of the "Closing Price", as
defined below, 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. The
term "Closing Price" for any day in question shall be the last reported
sale price regular way or, in case no such reported sales take place on
such day, the average of the closing bid and asked prices regular way for
such day, in each case on the New York Stock Exchange Composite Tape or, if
not listed on the New York Stock Exchange, on the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading on a national
securities exchange, the last sale price regular way for the Common Stock
as published by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or if such last sale price is not so published
by NASDAQ or if no such sale takes place on such day, the average between
the closing bid and asked prices for the Common Stock as published by
NASDAQ. The term "trading day" shall mean a day on which the market used
for calculating the Closing Price is open for the transaction of business
or, if the
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shares of such securities are not so listed or admitted to trading, a
business day. 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 6.03 (ii) and (iii) or (II) the commencement of "ex-dividend"
trading on the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading or, if not listed or
admitted to trading on a national securities exchange, the NASDAQ.
(v) In any case in which this Section 6.03 shall require that an
adjustment be made immediately following a record date or an effective
date, the Borrower may elect to defer (but only until the delivery by the
Borrower of the notice required by subsection (viii) of this Section 6.03)
issuing to the Lender the shares of Common Stock issuable upon exercise of
the Lender's Purchase Option over and above the shares of Common Stock
issuable upon exercise of the Lender's Purchase Option on the basis of the
number of shares of Common Stock purchasable upon exercise of the Lender's
Purchase Option prior to adjustment, and paying to the Lender any amount of
cash in lieu of a fractional share.
(vi) Whenever the number of shares of Common Stock purchasable upon the
exercise of the Lender's Purchase Option is adjusted as herein provided,
the Purchase Price payable upon exercise of the Lender's Purchase Option
shall be adjusted by multiplying such Purchase Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number
of shares of Common Stock purchasable upon the exercise of the Lender's
Purchase Option immediately prior to such adjustment, and of which the
denominator shall be the number of shares of Common Stock so purchasable
immediately thereafter.
(vii) No adjustment in the number of shares of Common Stock purchasable
upon exercise of the Lender's Purchase Option shall be required to be made
unless such adjustment would require an increase or decrease of at least
1.0% of the number of shares of Common Stock purchasable upon exercise of
the Lender's Purchase Option; provided, however, that any adjustments which
by reason of this subsection (vii) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 6.03 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 6.03 to the contrary notwithstanding, the Borrower shall be
entitled to make such reduction in the Purchase Price, in addition to the
adjustments required by this Section 6.03, 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 Borrower to its stockholders shall not be taxable to
the recipients. Except as set forth in subsections (i), (ii) and (iii)
above, the Purchase 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.
(viii) Whenever the Purchase Price is adjusted as herein provided, the
Borrower shall promptly deliver or mail, or cause to be delivered or mailed
by first class mail, postage prepaid, as soon as practicable to the Lender
a notice under Section 7.02 setting forth the Purchase Price and number of
shares of Common Stock purchasable upon the exercise of the Lender's
Purchase Option 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.
(ix) In the event that at any time, as a result of an adjustment made
pursuant to subsection (i) of this Section 6.03, the Lender shall become
entitled to receive any shares of the Borrower other than shares of Common
Stock, thereafter the Purchase Price of such other shares that the Lender
shall be entitled to purchase 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.
(x) The Borrower from time to time may decrease the Purchase 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 Purchase Price is
so decreased, the Borrower shall deliver or mail to the Lender a notice of
the decrease
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at least 15 days before the date the decreased Purchase Price takes effect,
and such notice shall state the decreased Purchase Price and the period it
will be in effect.
Notwithstanding the foregoing provisions of this Section 6.03, no such
adjustments shall be made if the adjustment effectively duplicates the effect
of an adjustment made in connection with Section (5)(d) of the Certificate of
Designation relating to the Convertible Preferred Stock.
SECTION 6.04 Reservation of Shares of Common Stock. The Borrower covenants
that it will, at all times prior to the expiration of the Lender's Purchase
Option, 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 enabling it to satisfy any obligation to issue shares of Common Stock upon
the exercise of the Lender's Purchase Option, the full number of shares of
Common Stock deliverable upon the exercise of the Lender's Purchase Option not
theretofore purchased and on or before (and as a condition of) taking any
action that would cause an adjustment of the Purchase Price resulting in an
increase in the number of shares of Common Stock deliverable upon the exercise
of the Lender's Purchase Option above the number thereof previously reserved
and available therefor, the Borrower shall take all such action so required.
Before taking any action that would cause an adjustment reducing the Purchase
Price below the then par value (if any) of the shares of Common Stock
deliverable upon exercise of the Lender's Purchase Option, the Borrower shall
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Borrower may validly and legally issue fully paid
and non-assessable shares of Common Stock at such adjusted Purchase Price.
SECTION 6.05 Transfer Taxes, Etc. The Borrower 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 exercise of
the Lender's Purchase Option; provided, however, that the Borrower 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 Lender and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Borrower the amount of
any such tax or has established, to the satisfaction of the Borrower, that such
tax has been paid.
SECTION 6.06 Consolidation or Merger or Sale of Assets. Notwithstanding any
other provision herein to the contrary, in case of any consolidation or merger,
sale or transfer to which the Borrower is a party and which is permitted under
Section 4.07 above or otherwise upon the Lender's prior written consent (which
shall not be unreasonably withheld) and pursuant to which there is a change in
the Common Stock of the Borrower, then lawful provision, in a manner and on
terms reasonably satisfactory to counsel for the Lender, shall be made by the
corporation formed by such consolidation or the corporation whose securities,
cash or other property will immediately after the merger or consolidation 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 Borrower (collectively the
"Formed, Surviving or Acquiring Corporation"), as the case may be, providing
that the Lender shall have the right thereafter upon payment of the Purchase
Price in effect immediately prior to such action to purchase upon exercise of
the Lender's Purchase Option the kind and amount of securities, cash or other
property that the Lender would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale, lease or transfer had
the Lender's Purchase Option been exercised immediately prior to such action
(provided that, if the kind or amount of securities, cash or other property
that the Lender would have owned or have been entitled to receive after the
happening of 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 6.06 the kind and amount of securities, cash or other property
which the Lender would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, lease or transfer for each
nonelecting share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). The Formed,
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Surviving or Acquiring Corporation, as the case may be, shall make provision in
a manner and on terms reasonably satisfactory to counsel for the Lender, in its
certificate or articles of incorporation or other constituent documents to the
end that the provisions set forth in this Section 6.06 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
upon exercise of the Lender's Purchase Option.
The above provisions of this Section 6.06 shall similarly apply to successive
consolidations, mergers, sales, leases or transfers.
SECTION 6.07 Transfer Restrictions.
(a) Legends on Common Stock.
(i) Until the third anniversary of the date of original issuance of the
shares of Common Stock, certificates representing the shares of Common
Stock purchased by the Lender upon exercise of the Lender's Purchase Option
and not otherwise registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities
Act") shall bear a legend substantially to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY SIMILAR
STATE SECURITIES LAWS AND THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION, UNDER SAID ACT AND LAWS.
The shares of Common Stock purchased by the Lender upon exercise of the
Lender's Purchase Option and not otherwise registered pursuant to an effective
registration statement under the Securities Act shall be subject to the
restrictions on transfer set forth in the legends referred to above until the
third anniversary of the date of original issuance of such shares of Common
Stock; provided, however, and notwithstanding the foregoing, such shares of
Common Stock may be resold under and pursuant to the terms and conditions of
Regulation S of the Securities Act, prior to the end of the third anniversary
date of the issuance of such shares.
(ii) The certificates evidencing shares of Common Stock purchased by the
Lender upon exercise of the Lender's Purchase Option and not otherwise
registered pursuant to an effective registration statement under the
Securities Act shall bear, until such time as the Borrower and the transfer
agent for the Common Stock shall have received evidence satisfactory to
each of them that the transfer of such shares of Common Stock has been
effected in accordance with the limitations on transfer set forth in
paragraph (a)(i) above, the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES, OPINIONS OF COUNSEL AND
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(b) Transfer Agent Requirements. The transfer agent and registrar for the
Common Stock shall not be required to accept for registration of transfer any
Common Stock bearing the legend contained in paragraph (a)(ii) above, except
upon presentation of satisfactory evidence that the restrictions on transfer of
the Common Stock referred to in the legend in paragraph (a)(i) have been
complied with, all in accordance with such reasonable regulations and
procedures as the Borrower may from time to time agree with the transfer agent
and registrar for the Common Stock.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or the Note, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender and the Borrower, in the case of an amendment, or by the party to
be charged, in the case of a waiver or a consent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 7.02 Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and delivered to an officer of the other party or
mailed or transmitted by facsimile; if to the Lender to its address at 9100
East Mineral Circle, Englewood, Colorado 80112-3299, Attention: Chief Financial
Officer (Fax No. 303-643-5269); if to the Borrower, to its address at 9100 East
Mineral Circle, Englewood, Colorado 80112-3299, Attention: Chief Financial
Officer (Fax No. 303-643-5505) or, as to each party, to such other address as
shall be designated by such party in a written notice to the other party. All
such notices and communications shall, when delivered to an officer of the
other party, be effective upon such delivery and, when mailed or transmitted by
facsimile, be effective when deposited in the mails or when transmitted
respectively, addressed as aforesaid; except that notices by the Borrower to
the Lender or by the Lender to the Borrower pursuant to the provisions of
Section 1.05 shall not be effective until received by the Lender or the
Borrower, as the case may be, but such notices may be given by telephone and
confirmed in writing or by facsimile on the same day and shall be effective
upon such telephonic notice.
SECTION 7.03 No Waiver; Remedies. No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder or under the Note,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder or under the Note preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 7.04 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Lender and their respective successors
and assigns, except that (i) the Borrower shall not have the right, to assign
its rights hereunder or any interest herein except to a successor by merger,
consolidation or sale of all or substantially all of the Borrower's assets, in
each case if permitted under Section 4.07 above, without the prior written
consent of the Lender, and (ii) the Lender shall not assign any of its rights
or obligations hereunder or under the Note, except to a successor by merger,
consolidation or sale of substantially all of the Lender's assets without the
prior written consent of the Borrower.
SECTION 7.05 Use of Proceeds. The proceeds of the Loans shall be used by the
Borrower primarily for support of existing borrowings and working capital
needs. Specifically, (i) an amount equal to the aggregate amount of the
obligations outstanding under the credit facility referred to in this clause
(i) is designated solely for the repayment of obligations of the Borrower under
that certain Continuing Corporate Guarantee of the Borrower given to NM
Rothschild & Sons Limited and Citibank N.A. in support of borrowing by the
wholly owned subsidiary of the Borrower, AGI Chile Credit Corp., Inc., under
that certain Term Loan Agreement dated as of March 15, 1994; provided, however,
that such amount shall not exceed $36,000,000; (ii) an amount equal to the
aggregate amount of the obligations outstanding under the credit facility
referred to in this clause (ii) is designated solely for the repayment of
obligations of the Borrower under that certain Guarantee and Pledge Agreement
dated as of March 21, 1991 given to The Chase Manhattan Bank (National
Association) as Agent for the Banks which are party to that certain Bullion
Loan Agreement dated as of March 21, 1991, as amended (the "Loan Agreement") in
support of borrowings by the wholly owned subsidiary of the Borrower, Lassen
Gold Mining Inc. under the Loan Agreement; provided, however, that such amount
shall not exceed $30,000,000; and (iii) all proceeds of the Loans, if any,
remaining after giving effect to clauses (i) and (ii) of this Section 7.05
shall be used for the Borrower's general working capital requirements and for
any other purposes approved by the Borrower's Board of Directors or, within the
limits prescribed by the
A-16
<PAGE>
Board of Directors, by management of the Borrower, including but not limited to
general corporate purposes, working capital, capital expenditures for
development of the Projects or for the development or acquisition of other
properties and the acquisition of all or part of the capital stock or assets of
other companies; provided, however, that if on the date of any Loan the average
spot price of gold traded on the Commodity Exchange Inc. (COMEX) in New York
City for the thirty trading days immediately preceding the date of such Loan is
less than $300.00 per ounce, the purpose of such borrowing shall not be for
development of any of the Projects or for the development or acquisition of any
other properties or the acquisition of securities or assets of any other
company unless a resolution duly adopted by at lease two-thirds of the
Borrower's Board of Directors authorizes the specific amount to be borrowed
from the Lender for such purpose as in the best interest of the Borrower's
stockholders. If any Loans in an aggregate principal amount outstanding in
excess of $5,000,000.00, or such higher amount as may be approved from time to
time by its Board of Directors and certified to the Lender, are borrowed for
purposes other than as described in clause (i) or (ii), the Borrower shall, as
an additional condition precedent to the Lender's making of such Loans, be
required to obtain approval of its Board of Directors for such Loans and to
certify such resolutions to the Lender pursuant to Section 2.01 (c) of this
Agreement.
SECTION 7.06 Demand Registration Rights. (i) At any time after the earlier to
occur of (i) the conversion of the Preferred Stock into shares of Common Stock
or (ii) the exercise of the Lender's Purchase Option, the Lender may make one
or more written requests to the Borrower (a "Demand") for registration under
and in accordance with the provisions of the Securities Act of all or part (but
not less than 1,000,000 shares per Demand) of the shares of Common Stock issued
to the Lender pursuant to Section 1.08 or Section 6.01 of this Agreement
("Registrable Shares"). Each such request shall specify the aggregate number of
Registrable Shares proposed to be registered and the intended method of
disposition thereof.
(ii) Upon receipt of a Demand, the Borrower shall use its best efforts to
effect such registration to permit the sale of Registrable Shares in accordance
with the intended method of disposition thereof and pursuant thereto, the
Borrower shall as expeditiously as possible:
(a) execute and deliver all such instruments and documents and do or
cause to be done all such other acts and things as may be necessary or, in
the opinion of the Lender, advisable to register such Registrable Shares
under the provisions of the Securities Act, and to cause the registration
statement relating thereto to become effective and to remain effective for
such period as prospectuses are required by law to be furnished, and to
make all amendments and supplements thereto and to the related prospectus
which, in the opinion of the Lender, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the SEC applicable thereto;
(b) use its best efforts to qualify the Registrable Shares under the
applicable state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Registrable Shares, as requested
by the Lender;
(c) make available to the Lender, as soon as practicable, an earnings
statement that will satisfy the provisions of Section 11(a) of the
Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Registrable Shares or any part thereof
valid and binding and in compliance with applicable law.
(iii) If any such Demand is made at a time when the Lender directly or
indirectly owns less than five percent 5% of the number of shares of Common
Stock outstanding, the Borrower may, if its Audit Committee of its Board of
Directors determines in the good faith exercise of its reasonable judgment that
it would be inadvisable to effect a demand registration, defer such demand
registration until the earliest practicable time at which such demand
registration can be reasonably effected, which period shall not exceed three
(3) months.
(iv) All Registration Expenses incurred in connection with the first
registration statement to be filed hereunder or under that certain Stock
Purchase Agreement between the Lender and the Borrower of even date herewith
(the "Stock Agreement") shall be paid by the Borrower. All Registration
Expenses incurred in
A-17
<PAGE>
connection with each additional registration statement to be filed hereunder or
under the Stock Agreement shall be paid by the Lender. For purposes of this
Agreement, "Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with this Section 7.06, including, without
limitation, (i) all SEC and stock exchange registration and filing fees, (ii)
all fees and expenses of complying with state securities or "Blue Sky" laws
(including fees and disbursements of counsel in connection with Blue Sky
qualifications of the Registrable Shares and determination of the eligibility
of the Registrable Shares for investment under the laws of such jurisdiction as
the Lender may indicate), (iii) all printing, messenger and delivery expenses,
(iv) all fees and expenses incurred in connection with the listing of
Registrable Shares on any exchange, and (v) the fees and disbursements of
counsel for the Borrower and of its independent public accountants, but
excluding underwriting discounts and commissions, brokerage fees, transfer
taxes, if any, fees and disbursements of counsel, accountants or other experts
or advisors to the Lender, and National Association of Securities Dealers Inc.
registration and filing fees.
SECTION 7.07 Expenses. The Borrower shall pay (i) all out-of-pocket expenses
of the Lender, including fees and disbursements of special counsel for the
Lender, in connection with the preparation of this Agreement, any waiver or
consent hereunder or any amendment hereof or any default or alleged default
hereunder and (ii) if an Event of Default occurs, or upon the occurrence of an
event that with notice or the lapse of time or both would constitute an Event
of Default, all out-of-pocket expenses incurred by the Lender, including fees
and disbursements of counsel, in connection with such actual or potential Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings, actions or negotiations resulting therefrom. The Borrower shall
indemnify the Lender against any transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the execution and
delivery to the Lender of this Agreement, or any Note.
SECTION 7.08 Prior Agreement. This Agreement and the Note issued hereunder
shall supersede in their entirety any prior negotiations, discussions,
understandings or arrangements between the Lender and the Borrower pertaining
to the subject matter of this Agreement.
SECTION 7.9 Governing Law. This Agreement and the Note shall be governed by,
and construed in accordance with, the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AMAX GOLD INC.
By /s/ Mark A. Lettes
----------------------------------
Title: Vice President & Chief
Financial Officer
ATTEST:
/s/ R. Craig Johnson
- -------------------------------------
CYPRUS AMAX MINERALS COMPANY
By /s/ Francis J. Kane
----------------------------------
Title: Vice President Investor
Relations & Treasurer
ATTEST:
/s/ Philip C. Wolf
- -------------------------------------
A-18
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$100,000,000.00 Date: April , 1994
FOR VALUE RECEIVED, Amax Gold Inc., a Delaware corporation (the "Borrower"),
promises to pay to the order of Cyprus Amax Minerals Company, a Delaware
corporation (the "Lender") at the office of the Lender located at 9100 East
Mineral Circle, Englewood, Colorado 80112, or at such other place as the Lender
may direct in writing, in lawful money of the United States of America and in
immediately available funds, the principal amount of One Hundred Million
Dollars or, if less than such principal amount, the aggregate unpaid principal
amount of all Loans made by the Lender to the Borrower pursuant to Article I of
the Agreement referred to below in accordance with the respective Schedules
applicable to such Loans attached to and made part of this Note. All principal
amounts outstanding under this Note on April 30, 1997 shall be paid in twenty
equal quarterly installments in accordance with Section 1.06 of such Agreement;
provided, however, that the last such installment shall be in the amount
necessary to repay in full the unpaid principal amount hereof; and, provided,
further, that the Lender, upon exercise of its Stock Purchase Option under
Article VI of such Agreement, may terminate or reduce the "Commitment", as
defined therein, whereupon such installments shall be due as of the date set
for closing such stock purchase pursuant to Section 6.01 of such Agreement.
The Borrower further promises to pay interest at said office in like money,
from the date hereof on the unpaid principal amount hereof outstanding from
time to time, at the rates and at the times set forth in Article I of such
Agreement. Notwithstanding anything contained herein to the contrary, at the
election of the Borrower the principal of this Note may be paid by the Borrower
in Preferred Stock of the Borrower in accordance with the provisions of Section
1.08 of the Agreement, subject to satisfaction of the conditions set forth in
Section 1.09 of such Agreement.
This Note is the Note referred to in Section 1.02 of the Revolving Credit
Agreement between the Borrower and the Lender dated as of April 15, 1994, as
the same may hereafter from time to time be amended or supplemented in
accordance with the terms thereof ("Agreement"), is entitled to the benefits
thereof and subject to the terms and conditions set forth therein (including,
without limitation, the Lender's rights to accelerate the due date hereof) and
may be paid and prepaid as provided therein.
Upon the occurrence of any of the Events of Default specified in the
Agreement, all amounts then remaining unpaid on this Note may be declared to be
or shall automatically become immediately due and payable as provided therein.
Amax Gold Inc.
By
-----------------------------------
ATTEST:
-------------------------------------
Secretary
A-19
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS
MADE UNDER NOTE DATED APRIL , 1994,
FROM AMAX GOLD INC.*
TO CYPRUS AMAX MINERALS COMPANY
<TABLE>
<S> <C>
Principal Amount of the Initial Loan: $______
Date of the Initial Loan: ______
Interest Rate for the Initial Loan: ______
</TABLE>
PRINCIPAL BORROWINGS
AND PAYMENTS OF THIS NOTE
<TABLE>
<CAPTION>
AMOUNT INTEREST PRINCIPAL UNPAID
DATE BORROWED RATE PAID PAID BALANCE
- ---- -------- ---- -------- --------- -------
<S> <C> <C> <C> <C> <C>
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
</TABLE>
- --------
* All terms used in this Schedule shall have the meanings given them in the
Agreement.
A-20
<PAGE>
APPENDIX B
AMENDMENT TO REVOLVING CREDIT AGREEMENT
This amendment, dated as of March 10, 1995, to Revolving Credit Agreement,
dated as of April 15, 1994 (the "DOCLOC Agreement"), by and between Amax Gold
Inc., a Delaware corporation (the "Borrower"), and Cyprus Amax Minerals
Company, a Delaware corporation (the "Lender"). Terms not expressly defined
herein have the meanings ascribed to them in the DOCLOC Agreement.
WHEREAS, the Borrower and the Lender desire to extend the term of the DOCLOC
Agreement,
WHEREAS, the Borrower and the Lender each have had the amendment approved by
its Board of Directors (and the Borrower having had such transactions, among
others, approved separately by the Audit Committee of the Board of Directors,
which consists solely of those Directors who are not affiliated with the
Lender); and
WHEREAS, this Agreement is subject to the approval of the stockholders of the
Borrower at the Annual Meeting of Stockholders to be held on May 23, 1995.
NOW, THEREFORE, the parties hereby agree to the following terms and
conditions:
1. Subject to Section 4, Section 1.01 of the DOCLOC Agreement hereby is
amended to delete the words "April 30, 1997" and to substitute therefor the
words "December 31, 2001."
2. Subject to Section 4, Section 1.06 of the DOCLOC Agreement hereby is
amended to delete the words "June 30, 1997" from the fourth line thereof
and substitute therefor the words "March 31, 2002."
3. All of the other terms and provisions of the DOCLOC Agreement shall
remain unchanged.
4. This Agreement shall not be effective unless and until the Borrower
has obtained the approval of its stockholders of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AMAX GOLD INC.
/s/ Mark A. Lettes
By: _________________________________
Title: Vice President and
Chief Financial Officer
ATTEST:
/s/ Deborah J. Friedman
- -------------------------------------
CYPRUS AMAX MINERALS COMPANY
/s/ Francis J. Kane
By: _________________________________
Title:Vice President, Investor
Relations and Treasurer
ATTEST:
/s/ Kathleen J. Gormley
- -------------------------------------
B-1
<PAGE>
APPENDIX C
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement, dated as of March 10, 1995 ("Agreement"), by
and between Amax Gold Inc., a Delaware corporation (the "Borrower"), and Cyprus
Amax Minerals Company, a Delaware corporation (the "Lender");
WITNESSETH:
WHEREAS, the parties previously have entered into that certain letter
agreement dated February 16, 1995 (the "Commitment Letter") providing for,
among other things, agreed upon share purchase prices and the preparation of
definitive documents to implement the terms thereof;
WHEREAS, this Revolving Credit Agreement is one of the definitive documents
contemplated in the Commitment Letter;
WHEREAS, on the date of this Agreement the Lender indirectly owns
approximately 34,313,709 shares of the Borrower's common stock, par value $0.01
per share ("Common Stock");
WHEREAS, the Borrower needs financial support from the Lender to support the
planned development of the Fort Knox mine construction and development project
in Alaska and other growth opportunities and for general corporate purposes,
and the Lender is willing to provide to the Borrower up to $80,000,000 of
financing for such needs, on the terms of this Agreement;
WHEREAS, the Borrower owns interests in several promising gold prospects,
including 100% of the Fort Knox Project near Fairbanks, Alaska, as well as
certain other advanced stage projects (collectively the "Projects"), each of
which is expected to require substantial additional development capital;
WHEREAS, the Borrower is developing one or more of its Projects and is
otherwise taking steps to increase its cash flow from operations to enable the
Borrower to fund its ongoing working capital requirements and required
development capital from operating cash flow or establish third party sources
of financing without reliance on guarantees or other financial support from the
Lender;
WHEREAS, each party has determined, after consulting with an independent
investment banking firm, that it is in the best interest of such party's
stockholders (in the case of the Borrower, without regard to the Lender) that
such financing from the Lender be provided on the terms and conditions set
forth in this Agreement;
WHEREAS, the Borrower and the Lender each have had the transactions
contemplated by this Agreement approved by its Board of Directors (and the
Borrower having had such transactions approved separately by the Audit
Committee of the Borrower's Board of Directors, which consists solely of those
Directors who are unaffiliated with the Lender), and having received a fairness
opinion from an independent investment bank, establishing that the transactions
contemplated herein are, on the whole, fair from a financial point of view to
the shareholders of the Borrower and the Lender respectively;
NOW THEREFORE, the parties hereby agree to the following terms and
conditions:
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<PAGE>
ARTICLE I
AMOUNTS AND TERMS OF THE LOAN
SECTION 1.01 Revolving Credit Commitment. Subject to the terms and conditions
hereof, the Lender agrees to make one or more loans (individually a "Loan" and
collectively the "Loans") to the Borrower from time to time during the period
that commences on the date hereof and ends on the earlier of (i) December 31,
2001 or (ii) the date on which the Commitment is terminated pursuant to this
Agreement (the expiration date determined by (i) or (ii) is herein called the
"Revolver Expiration Date"), in an aggregate principal amount up to but not
exceeding at any one time outstanding the sum of $80,000,000 (the
"Commitment"). During such period the Borrower may use the Commitment by
borrowing, paying and prepaying in whole or in any part and reborrowing, on a
revolving basis, all in accordance with the terms and conditions hereof. To the
extent that the Borrower repays (including any prepayment) any principal amount
of Loans in the Borrower's $2.25 Series C Convertible Preferred Stock, par
value $1.00 per share (the "Preferred Stock") pursuant to and as defined in
Section 1.08 hereof prior to the Revolver Expiration Date, the amount of the
Commitment shall automatically be reduced by the amount of any Preferred Stock
so issued, based upon the value of such Preferred Stock at the time of issuance
as determined in accordance with Section 1.08. Each borrowing and cash
prepayment of principal, if any, shall be in an amount equal to an integral
multiple of $1,000,000.00. Notwithstanding the foregoing, the Commitment shall
terminate if the conditions for making the initial Loan under Section 2.01
shall not have been satisfied on or prior to June 16, 1995, unless extended by
the parties.
SECTION 1.02 Making the Loans. The Borrower shall give the Lender notice of
each borrowing hereunder not later than 11:00 a.m. Denver, Colorado, time at
least two (2) Business Days prior to the date a Loan is requested to be made,
specifying the inception date, the amount thereof and the initial Interest
Period for such Loan. The Lender will arrange the loan and confirm the details
in writing to the Borrower. On the inception date of the borrowing, the Lender
will make the proceeds of the Loan available to the Borrower in immediately
available funds at the Borrower's account with Chemical Bank, New York, or as
the Borrower may otherwise direct in such notice.
The Loans to the Borrower shall be evidenced by a grid Note of the Borrower
substantially in the form of Exhibit A hereto (the "Note"). The Note will
evidence the obligation of the Borrower to pay the aggregate unpaid principal
amount of all Loans made by the Lender pursuant to Section 1.01 of this
Agreement, together with all accrued interest on such Loans. Entries made on
the grid schedules of the Note by the Lender reflecting borrowings, payments
and interest rate calculations under this Agreement shall constitute, absent
proven error, prima facie evidence of the transactions represented by such
entries. The Note shall (i) be dated the date of the initial Loan hereunder,
(ii) be payable in accordance with its terms and the terms of this Agreement
and (iii) evidence the obligation of the Borrower to pay interest on each Loan
made hereunder from the date of such Loan on the unpaid principal amount
thereof outstanding from time to time, calculated in accordance with the
provisions of Section 1.03 and the outstanding principal amount of such Loan in
accordance with Section 1.06 or Section 1.08 of this Agreement pursuant to the
repayment notice given by the Borrower under the applicable section of this
Agreement. Except for the payment referenced in Section 1.08 hereof, the
Borrower shall make each payment (including any cash prepayment) hereunder and
under the Note, not later than the close of business of the day when due by
wire transfer, in lawful money of the United States of America to the Lender,
at its address referred to in Section 7.02 or as otherwise directed by the
Lender, in immediately available funds.
SECTION 1.03 Payment of Interest. Each Loan made by the Lender pursuant to
this Agreement shall bear interest on the principal balance thereof from time
to time unpaid at an annual rate equal to the LIBOR Rate (as defined herein)
for the interest period selected by the Borrower at its option for a period of
one, three or six months, or such other periods as are agreed between the
Borrower and the Lender (each, an "Interest Period"), and as set forth in the
notice of borrowing referred to in Section 1.02 hereof or the notice of
Interest Period selection referred to in Section 1.05 hereof, as the case may
be, plus 0.30% except as
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<PAGE>
otherwise provided in this Section. Interest on each Loan shall be due and
payable in full on the last day of the Interest Period applicable to such Loan
and, in the case of any Interest Period in excess of three months, at the end
of each calendar quarter occurring during the term thereof. The term "LIBOR
Rate" shall mean the rate of interest per annum at which U.S. dollar deposits,
in an amount equal to the aggregate principal balance of the Loan are offered
(as reasonably determined by the Lender) at or about 11:00 a.m. Denver time on
the date that is two Business Days immediately prior to the beginning of such
Interest Period in the London Interbank Eurodollar Market for delivery on the
first day of such Interest Period for approximately the number of days
contained therein (as appearing on 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 for dollar
deposits of major banks); provided, however, that if at least two such offered
rates appear on the LIBOR page in respect of such Interest Period, the
arithmetic mean of all such rates (as determined by the Lender and rounded
upwards to the nearest 1/16th of 1%) will be the rate used; and provided
further that if Reuters Monitor Money Rates Service ceases to provide LIBOR
quotations, such rate shall be the average rate of interest (as determined by
the Lender) and rounded upwards to the nearest 1/16th of 1%) at which U.S.
dollar deposits are offered for the relevant Interest Period by three of the
leading banks selected by the Lender in the London interbank market as of 11:00
a.m. Denver time on the date which is two (2) Business Days prior to the first
day of such Interest Period, or as reasonably determined by the Lender by
reference to the LIBOR rate for an equivalent interest period in the most
recent edition of the Wall Street Journal under the section headed "Money
Rates", or otherwise as the Lender and the Borrower may mutually agree. If the
Borrower fails to make any payment to the Lender of the principal of or
interest on any Loan when such payment becomes due, such Loan shall accrue
interest at a rate that is 1.0% per annum higher than the rate otherwise
payable with respect to such Loan and such higher rate shall continue until
such default in payment by the Borrower is cured. All computations of interest
under the Note shall be made by the Lender on the basis of a year of 360 days,
consisting of twelve 30-day months, for the actual number of days (including
the first day but excluding the last day) elapsed.
SECTION 1.04 Prepayments in Cash. On any interest payment date, or as
otherwise agreed by the Lender, the Borrower may make cash prepayments of
principal (which, unless the Commitment is earlier terminated pursuant to
Section 6.02, may be reborrowed on or prior to the Revolver Expiration Date but
not thereafter) of one or more Loans (which Loans shall be designated by the
Borrower) in an amount equal to an integral multiple of $1,000,000, and shall
be made without premium or penalty, but together with interest accrued, if any,
on the amount of each prepaid Loan (at the interest rate applicable to such
Loan) to the date of prepayment and shall be applied to the Loans in the
inverse order of maturity. The Borrower shall give Lender at least two Business
Days notice of any such prepayment. All such cash payments shall be made by
wire transfer in immediately available funds to an account designated by the
Lender.
SECTION 1.05 Interest Period Selection. The Borrower shall have the option to
select a new Interest Period for each Loan, which period shall take effect at
the end of the then current Interest Period with respect to such Loan. The
Borrower shall give the Lender notice of such Interest Period selection
pursuant to this Section 1.05 not later than 11:00 a.m. Denver, Colorado, time
at least two (2) Business Days prior to the last day of the applicable Interest
Period, specifying the new Interest Period for such Loan. If the Borrower does
not deliver such notice of Interest Period selection to the Lender as set forth
herein, the Interest Period for such Loan shall be the same number of months as
the immediately preceding Interest Period for such Loan. The selection of a
subsequent Interest Period shall not be deemed to constitute a reborrowing or a
new Loan for purposes of this Agreement.
SECTION 1.06 Amortization of Principal. On the Revolver Expiration Date all
accrued interest shall be paid and the aggregate principal balance of all Loans
outstanding shall become due and payable in twenty equal quarterly installments
on March 31, June 30, September 30, and December 31 of each of the following
five years with the first installment due on March 31, 2002; provided, however,
that the last such installment shall be in the amount necessary to repay in
full the unpaid principal amount thereof. The outstanding principal balance of
the Note shall bear interest in accordance with Section 1.03 until the Note is
paid in full. Accrued interest on the Note shall be added to and paid with each
such quarterly amortization payment.
C-3
<PAGE>
SECTION 1.07 Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a date which is a
Saturday, Sunday or a public holiday or the equivalent for Lender or for banks
generally under the laws of the State of Colorado (any other day being a
"Business Day"), such payment may be made on the next succeeding Business Day
and such extension of time shall in such case be included in the computation of
interest due.
SECTION 1.08 Payment in Preferred Stock. At the Borrower's election, which
may be exercised by its giving written notice to the Lender at least 20
Business Days prior to the date such repayment or prepayment of the Note or a
required amortization payment due under the Note is to be made, the Borrower
may (i) repay the entire principal balance of the Note, (ii) pay the required
amortization payment due under the Note, (iii) upon the Lender's prior consent
given not later than two Business Days prior to the payment date, pay the
required interest payment due under the Note, and/or (iv) prepay increments of
at least $5,000,000 of principal of Loans outstanding under the Note (which
Loans shall be designated by the Borrower), in each case by issuing to the
Lender the Preferred Stock, which shall have the powers, preferences and
relative participating, optional or other special rights and qualifications,
limitations or restrictions thereof as are set forth in Exhibit B to this
Agreement and otherwise as the Board of Directors of the Borrower may determine
(consistent with the provisions of such Exhibit B) by resolution or resolutions
adopted by the Board of Directors of the Borrower providing for the issue of
such Preferred Stock. The amount of such Preferred Stock issued to the Lender
shall (w) in the event the payment is to be made pursuant to clause (i) above,
be equal in value to the outstanding principal amount of all Loans outstanding
at the time of such payment, plus accrued interest thereon to the date of such
payment; (x) in the event the payment is to be made pursuant to clause (ii)
above, be equal in value to the amount of such required amortization payment to
be made plus accrued interest thereon to the date of such payment; (y) in the
event the payment is to be made pursuant to clause (iii) above, be equal in
value to the amount of such required interest payment to be made on the date of
such payment; or (z) in the event the payment is to be made pursuant to clause
(iv) above, be equal in value to the incremental amount of such Loans that the
Borrower elects to prepay, plus accrued interest thereon to the date of such
payment, in each case as specified in the notice given to the Lender pursuant
to this Section 1.08, except that no fractional shares of Preferred Stock shall
be issued. In lieu of a fraction of a share of Preferred Stock, the Borrower
shall pay the Lender in cash an amount equivalent to such fraction of a share.
The value of the Preferred Stock shall be determined by multiplying the number
of shares of Preferred Stock to be issued to the Lender by $50.00 per share.
The number of shares of Preferred Stock to be issued to the Lender pursuant to
this Section 1.08 (which shall not exceed the number authorized in the
Borrower's Restated Certificate of Incorporation, as amended) will be
determined by the Borrower based on the amount of the Loans to be repaid or
prepaid with such Preferred Stock, subject to adjustment for arithmetic errors.
SECTION 1.09 Regulatory Approvals. As a condition precedent to issuing any
Preferred Stock to the Lender pursuant to Section 1.08 hereof, the Borrower
shall have obtained all authorizations and approvals of, and all other actions
required to be taken by, any applicable governmental authority or regulatory
body or stock exchange and shall have given all notices to, and made all
filings with, any such governmental authority or regulatory body or stock
exchange, that may be required in connection with such issuance of such
Preferred Stock.
SECTION 1.10 Failure to Obtain Regulatory Approvals. In the event the
Borrower is unable to obtain all authorizations and approvals required for the
issuance of any Preferred Stock pursuant to Section 1.09 hereof, such failure
shall not constitute a default but the written notice given by the Borrower to
the Lender with respect to making such repayment or prepayment by issuing
Preferred Stock shall be null and void, without prejudice to the rights of the
Borrower to exercise its option under Section 1.08 on any other occasion. If
the Preferred Stock was to be issued to pay an interest payment or required
amortization due under the Note, such payment shall be made by the Borrower in
immediately available funds on the date such payment is due in accordance with
Section 1.03 or 1.06 of this Agreement, as the case may be, and the Note.
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<PAGE>
SECTION 1.11 Restrictions on Transfer of Preferred Stock.
(i) Notice of Intended Dispositions. Except for dispositions pursuant to
this Section 1.11, if at any time the Lender desires to sell, assign,
transfer, pledge, encumber or otherwise dispose of any shares of Preferred
Stock held by it, then the Lender shall deliver written notice (a
"Disposition Notice") to the Borrower under Section 7.02, of its intention
to sell, setting forth the Lender's desire to make such sale, the identity
of the prospective purchaser, the number of shares of Preferred Stock
proposed to be sold (the "Offered Shares") the price ("Offer Price") at
which the Lender proposes to dispose of the Offered Shares and the other
material terms of such disposition. Such proposed sale, transfer, etc.,
shall be for cash only.
(ii) Borrower's First Refusal Option. Upon the receipt of the Disposition
Notice, the Borrower shall then have the right to purchase at the Offer
Price all, but not less than all, of the Offered Shares. In order to
exercise its first refusal option, the Borrower must give written notice (a
"First Refusal Exercise Notice") under Section 7.02, of such exercise to
the Lender, not more than 45 calendar days from the date of its receipt of
the Disposition Notice. In the event that the Borrower exercises its first
refusal option with respect to the Offered Shares, then the Lender shall
sell to the Borrower and the Borrower shall purchase the Offered Shares
within 30 calendar days after the date of receipt by the Lender of the
First Refusal Exercise Notice. Upon the consummation of any purchase by the
Borrower of Offered Shares, the Lender shall deliver certificates
evidencing the Offered Shares sold duly endorsed, or accompanied by written
instruments of transfer, free and clear of any liens and encumbrances,
against delivery of the Offer Price. From and after the time at which cash
necessary to pay the Offer Price for shares of Preferred Stock pursuant to
the exercise of the first refusal option irrevocably shall have been
deposited or set aside, then, notwithstanding that the certificates
representing the Offered Shares shall not have been surrendered, all rights
(other than the right to receive payment of the Offer Price with respect to
such shares of Preferred Stock) of the Lender with respect to the shares of
Preferred Stock for which tender has been made, including without
limitation all conversion, voting and dividend rights, permanently shall
cease and terminate, except only the right to receive payment for such
shares of Preferred Stock, and the Lender shall no longer be considered the
owner of such shares of Preferred Stock.
(iii) Permitted Dispositions. If the Disposition Notice has been duly
given and the Borrower shall not have timely given the First Refusal Notice
to exercise its first refusal option, then the Lender shall have the right,
for a period of 30 calendar days after expiration of the 45 day period
referred to in the second sentence of subsection (ii) of this Section 1.11,
to sell to the prospective purchaser referred to in such notice the Offered
Shares at no less than the Offer Price and on the other terms and
provisions set forth in the Disposition Notice.
ARTICLE II
CONDITIONS OF LENDING
SECTION 2.01 Conditions Precedent to Making the Initial Loan. The obligation
of the Lender to make the initial Loan is subject to the following conditions
precedent:
(a) The Lender shall have received on or before the day the initial Loan
is made all of the following, in form and substance reasonably satisfactory
to the Lender:
(i) The Note duly executed by the Borrower;
(ii) Copies of the borrowing resolutions of the Board of Directors of
the Borrower authorizing the execution and delivery of this Agreement
and the Note as well as the Borrower's performance of all of the
covenants, obligations and other undertakings of the Borrower
contemplated by this Agreement and the Note (including the specific
authorization of the Preferred Stock to be issued pursuant to Section
1.08 of this Agreement on the terms of Exhibit B to this Agreement),
and of all documents evidencing other necessary corporate action and
governmental approvals, if any, with
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respect to this Agreement and the Note, certified by the Secretary or
an Assistant Secretary of the Borrower;
(iii) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of
the Borrower authorized to sign this Agreement and the Note and any
other documents to be delivered hereunder;
(iv) A favorable opinion of counsel of the Borrower, as to matters
referred to in Section 3.01 (except subsection (e) thereof) of this
Agreement;
(v) A Notice of Borrowing under Section 1.02; and
(vi) Evidence reasonably satisfactory to the Lender that the New York
Stock Exchange shall have accepted a listing application for the Common
Stock to be issued pursuant to this Agreement or upon conversion of the
Preferred Stock and if so required as a condition to listing, that the
majority of the shareholders of the Borrower have approved the issuance
of such Common Stock.
(b) On the date of such Loan the following statements shall be true:
(i) The representations and warranties of the Borrower contained in
Section 3.01 are true and correct in all material respects and the
covenants of the Borrower made in Article IV hereof shall be deemed to
have been made on and as of the date of such Loan (or of a subsequent
Loan for the purposes of Section 2.02);
(ii) No event has occurred and is continuing, or would result from
such Loan (or from a subsequent Loan for the purposes of Section 2.02),
which constitutes an Event of Default (as defined in Article V) or
would constitute an Event of Default but for the requirement that
notice be given or time elapse or both; and
(c) The Borrower shall deliver to the Lender a certificate of the
Borrower's Chief Financial Officer stating the purpose of the borrowing,
which shall be consistent with Section 7.05 and the other terms and
conditions of this Agreement and, if required by Section 7.05, resolutions
of the Borrower's Board of Directors, which resolutions shall be certified
to Lender by the Secretary or an Assistant Secretary of the Borrower.
SECTION 2.02 Conditions Precedent to Subsequent Loans. The obligation of the
Lender to make each subsequent Loan is subject to the conditions precedent that
(i) on the date of any such subsequent Loan the statements made in Section
2.01(b)(i) and (ii) shall be true; and (ii) the condition set forth in Section
2.01(c), shall be satisfied with respect to such subsequent Loan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite corporate power to execute, deliver and perform its obligations
under this Agreement and the Note.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Note have been, or in the case of the issuance of Common
Stock will be on or prior to the date of issuance, duly authorized by all
necessary corporate action (including authorization of the Board of
Directors of the Borrower to issue the Preferred Stock in the event the
Borrower elects to pay or prepay in Preferred Stock pursuant to Section
1.08 of this Agreement and to issue the Common Stock required to be issued
upon conversion of the Preferred Stock or pursuant to Articles of this
Agreement) and do not (and the issuance of such Preferred Stock on the
terms of Exhibit B or, in the case of the Common Stock, such Common Stock
will not at the time the same is to be issued):
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(i) violate any provision of the Restated Certificate of
Incorporation, as amended, or By-Laws of the Borrower or any law,
order, writ, judgment, decree, determination or award, in each case as
presently in effect and having applicability to the Borrower; or
(ii) result in a breach of or constitute a default under any material
indenture, bank loan agreement, credit agreement, bullion loan or other
material agreement to which the Borrower is a party or by which any of
its properties or the properties of any of its Subsidiaries, are
presently bound. As used in this Agreement, the term "Subsidiary" shall
mean, as to the Borrower, any corporation of which at least a majority
of the outstanding shares of stock, having by the terms thereof
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether or not at the time stock of
any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), is at the
time directly or indirectly owned or controlled by the Borrower or one
of more of its Subsidiaries.
(c) No authorization or approval of, or other action by, and no notice to
or filing with, any governmental authority or regulatory body, other than
the Securities and Exchange Commission ("SEC"), is required for the due
execution, delivery and performance by the Borrower of this Agreement
(except for such notices, any necessary shareholder approvals,
registrations, stock exchange listings or filings as may be required in
connection with issuing the Preferred Stock and the Common Stock) or the
Note.
(d) This Agreement is, and the Note when executed and delivered will be,
legal, valid and binding obligations of the Borrower enforceable against it
in accordance with their respective terms (subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles).
(e) The consolidated statements of financial position of the Borrower and
its consolidated Subsidiaries as at December 31, 1993, and the related
consolidated statements of operations, cash flows and changes in Common
Stock, paid-in capital and retained earnings of the Borrower and such
Subsidiaries for the period then ended (copies of which have been furnished
to the Lender) fairly present the financial condition of the Borrower and
such Subsidiaries as at such date and the results of the operations of the
Borrower and its Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles.
(f) Except as disclosed in the Borrower's most recent Annual Report on
Form 10-K filed with the SEC for the fiscal year then ended, the most
recent Quarterly Reports on Form 10-Q, or as otherwise disclosed in writing
to the Lender, there is not to the actual knowledge of the executive
officers of the Borrower any pending or threatened action or proceeding
against or affecting the Borrower before any court, governmental agency or
arbitrator that reasonably could be expected to materially and adversely
affect the ability of the Borrower to perform its obligations under the
Agreement or the Note.
(g) The Preferred Stock and the Common Stock, when issued in accordance
with the terms of this Agreement (and any Common Stock when issued on
conversion of or pursuant to the terms of the Preferred Stock), will be
validly issued, fully paid and nonassessable.
ARTICLE IV
COVENANTS OF THE BORROWER
SECTION 4.01 Payment of Principal, Premium and Interest. The Borrower duly
and punctually will pay or cause to be paid the principal of and interest on
the Loans evidenced by the Note according to the terms thereof.
SECTION 4.02 Reports, etc. The Borrower will furnish to the Lender the
following reports, information and documents:
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(i) within 15 days after the Borrower is required to file the same with
the SEC, copies of the annual reports on Form 10-K, proxy statements,
quarterly reports on Form 10-Q, and of such reports, notices, documents and
other information (or copies of such portions of any of the foregoing as
the SEC may from time to time by rules and regulations prescribe) that the
Borrower may be required to file with the SEC pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, or with
the principal securities exchange (or successor thereto) in the United
States on which securities of the Borrower are listed and, upon
distribution thereof, a copy of each report, proxy statement, notice,
document or other information sent by the Borrower to all of its
stockholders; and
(ii) promptly upon demand, such other information respecting the
financial condition, operations and properties of the Borrower and its
consolidated Subsidiaries as the Lender reasonably may request; provided
that the Lender shall maintain the confidentiality thereof in the same
manner as the Lender maintains the confidentiality of its own information
of like nature.
SECTION 4.03 Inspection. So long as the Lender is obligated to make Loans
under this Agreement or so long as the Note is outstanding, the Borrower will
permit the Lender or any of its authorized representatives, at the Lender's
expense, to inspect at all reasonable times all properties, books and records
of the Borrower or any of its consolidated Subsidiaries reasonably related to
the overall financial and business condition of the Borrower and its
consolidated Subsidiaries or to the observance and performance by the Borrower
of its obligations hereunder and under the Note, and to discuss the business
and affairs of the Borrower and its consolidated Subsidiaries with its officers
and independent accountants (and by this provision the Borrower authorizes said
accountants to discuss with the Lender or such authorized representatives, the
finances and affairs of the Borrower and its consolidated Subsidiaries), all as
often as reasonably may be requested, subject to appropriate obligations of
confidentiality.
SECTION 4.04 Payment of Taxes. The Borrower will pay and discharge, or cause
to be paid and discharged, all taxes, assessments and governmental charges
levied on it or against any of its properties or assets prior to the date on
which penalties are attached thereto, unless and to the extent only that the
same shall be contested in good faith and by appropriate proceedings by the
Borrower, or except to the extent that the failure to so pay or to so discharge
would not have a material adverse effect on the ability of the Borrower to
perform its obligations under this Agreement or the Note.
SECTION 4.05 Officers' Certificate. The Borrower will deliver a certificate
to the Lender on or before April 30 in each year (beginning with 1995), signed
by the Chairman of the Board or the President, the Chief Financial Officer, any
Senior Vice President or any Vice President (the foregoing being hereafter
referred to as "Senior Officers") and by the Secretary or any Assistant
Secretary of the Borrower, stating that in the course of the performance by the
signers of their duties as officers of the Borrower they normally would have
knowledge of any condition or event that constitutes or which, after the giving
of notice or lapse of time or both, would constitute, an Event of Default under
this Agreement or under the Note, stating whether or not they have knowledge of
any such condition or event and, if so, specifying each such condition or event
of which the signers have knowledge and the nature thereof, and the steps taken
by the Borrower to correct the same.
SECTION 4.06 Compliance With Laws. The Borrower shall comply, in all material
respects, with all applicable laws, rules, regulations and orders, except where
the failure would not have a material adverse effect on the Borrower's ability
to perform under this Agreement and the Note.
SECTION 4.07 Mergers and Consolidations. Without the Lender's prior consent
which will not be unreasonably withheld, the Borrower will not enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution). The Borrower
will not convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or substantially all of its
business or assets. Notwithstanding the foregoing provisions of this Section
4.07:
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(a) Any Subsidiary of the Borrower may be merged or consolidated with or
into (x) the Borrower if the Borrower shall be the continuing or surviving
corporation, or (y) any such other Subsidiary;
(b) Any Subsidiary of the Borrower may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or to a Subsidiary of the Borrower; and
(c) The Borrower or any of its Subsidiaries may merge or consolidate with
any other Person if (x) in the case of a merger or consolidation of the
Borrower, the Borrower is the surviving corporation and, in any other case,
the surviving corporation is a Subsidiary of the Borrower, and (y) after
giving effect thereto, no Event of Default would exist hereunder, and there
will be no material adverse impact on the ability of the Borrower to
perform any of its obligations hereunder or under the Note in accordance
with the respective terms thereof.
SECTION 4.08 Listing Approval. The Borrower promptly shall use all reasonable
efforts to obtain the acceptance of the New York Stock Exchange of a listing
application for the Common Stock to be issued pursuant to the terms of this
Agreement and, if so required as a condition to such listing, to obtain the
approval of a majority of its shareholders for the issuance for such Common
Stock.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01 Events of Default. If any of the following events (each, an
"Event of Default") shall occur and be continuing:
(a) The Borrower shall (i) fail to pay the principal of or any interest
on the Note when due, or (ii) fail to perform or observe any other term,
covenant or condition contained in this Agreement or in the Note on its
part to be performed or observed and any such failure shall remain
unremedied for five (5) Business Days in the case of clause (i) and thirty
(30) days in the case of clause (ii) after the same is discovered by any
Senior Officer of the Borrower; or
(b) Any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) in any certificate or other document
delivered pursuant to this Agreement shall prove to have been incorrect in
any material respect when made and such incorrect representation or
warranty shall not have been corrected within ten (10) days after the same
is discovered by any Senior Officer of the Borrower; or
(c) The Borrower shall admit in writing its inability to pay its debts,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Borrower or seeking to
adjudicate it a bankrupt or insolvent or seeking reorganization,
arrangement, adjustment, or composition of it or its debts under the law of
any jurisdiction relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and,
with respect to any involuntary proceeding instituted against the Borrower,
such proceeding shall not be dismissed within sixty (60) days;
then, and in any such event, the Lender, by notice to the Borrower, may take
either or both of the following actions: (i) terminate the Commitment,
whereupon the same shall terminate forthwith; or (ii) declare the principal
balance outstanding under the Note and all interest accrued and unpaid thereon,
and all other sums due hereunder, to be due and payable without presentment,
demand, protest, or further notice of any kind, all of which are hereby
expressly waived by the Borrower; provided, however, that upon the occurrence
of an Event of Default specified in subparagraph (c) above, (x) the Commitment
automatically shall be terminated and (y) the Note, all such principal and
interest and all such other sums due hereunder automatically shall become and
be due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Borrower.
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ARTICLE VI
LENDER'S STOCK PURCHASE OPTION
SECTION 6.01 Description of Lender's Option. At any time after the acceptance
by the New York Stock Exchange of a listing application for the issuance of the
shares of Common Stock described herein, and prior to the later of (i) the
Revolver Expiration Date or (ii) payment in full of the Note and all other
amounts, if any, due to the Lender under this Agreement, the Lender shall have
the option from time to time (the "Lender's Purchase Option") to purchase an
amount not to exceed 14,919,806 shares of the Borrower's Common Stock at a
purchase price per share (the "Purchase Price") of $5.362, subject to
adjustment in accordance with Section 6.03 hereof, and, in connection with the
consummation of such purchase (the "Closing"), to terminate such portion of the
Commitment as is equal to the product of (i) the number of shares so purchased
multiplied by (ii) the Purchase Price (as adjusted under Section 6.03);
provided if less than 14,919,806 shares are purchased (taking into account all
shares previously purchased under this provision), the number of shares shall
be an integral multiple of one million shares. The Lender may exercise any
Lender's Purchase Option under this Article VI by giving written notice to the
Borrower, if at all, at least 20 Business Days prior to the date stated in such
notice for the Closing of such stock purchase. If there are no amounts
outstanding under the Note at the time such notice is given, the Lender shall
give such notice to the Borrower at least 20 Business Days prior to the
Revolver Expiration Date. Such notice shall state the Lender's decision to
exercise its option hereunder and the date for Closing of such stock purchase.
Upon receipt of such notice, the Borrower and the Lender shall select a time
and place for the Closing and if the Borrower and the Lender are unable to
agree, the Closing shall take place at the Borrower's offices at 9:00 a.m.,
local time, on the date specified for Closing in the Lender's notice.
SECTION 6.02 Transactions at Closing. At the Closing, the Purchase Price for
the shares of the Borrower's Common Stock to be purchased by the Lender shall
be paid and applied by the Lender in the following order:
(i) First, to all accrued interest to the date of Closing and then to
such portion of and such portion of the principal amount of the outstanding
balance under the Note in stated order of maturity, as is determined by (y)
the product of (i) the number of shares so purchased multiplied by (ii) the
Purchase Price (as adjusted under Section 6.03); less (z) the amount of
accrued interest to the date of Closing (which amount shall be deemed
repaid by the Borrower, irrespective of whether such amounts are then due
and payable, by the issuance of a credit against the Purchase Price payable
by the Lender for such Common Stock and the Lender shall deliver a receipt
to the Borrower for the amount of such payment). Amounts of principal paid
pursuant hereto may not be reborrowed.
(ii) Secondly, in the event the aggregate amount of the Purchase Price
shall exceed the amount in Section 6.02(i), the Lender shall deliver to the
Borrower the number of shares of Preferred Stock previously issued to the
Lender pursuant to Section 1.08, to the extent that such shares have not
been converted into or redeemed for shares of the Borrower's Common Stock
pursuant to the terms of such Preferred Stock as are equal in value to the
aggregate Purchase Price in excess of the amount applied in clause 6.02 (i)
above. To the extent that shares of Preferred Stock have been converted
into or redeemed for shares of the Borrower's Common Stock and to the
extent that any shares of Common Stock have been issued in lieu of cash
dividend payments on the Preferred Stock, the amount of Common Stock to be
purchased by the Lender pursuant to this Article VI first shall be reduced
by an amount equal to the number of such shares of Common Stock which have
been issued by the Borrower (x) on conversion or redemption of such shares
of Preferred Stock, or (y) in lieu of cash dividend payments on Preferred
Stock.
(iii) Thirdly, the amount of the excess of the aggregate Purchase Price
over the amounts applied in Section 6.02 (i) and (ii) above, if any, shall
next be applied by the Lender paying to the Borrower by wire transfer,
certified or official bank check payable in United States currency in
immediately available funds, to the account of the Borrower, or as the
Borrower shall direct by written notice given at least
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two Business Days prior to Closing, an amount up to the remainder of the
Commitment less the amount of the outstanding principal balance of the
Note.
Upon payment of the Purchase Price in the manner described above, the
Borrower shall deliver to the Lender a Certificate for the number of shares of
the Borrower's Common Stock purchased at Closing, together with a legal opinion
from the Borrower's General Counsel, or such other counsel as the Borrower may
choose, which other counsel shall be reasonably acceptable to the Lender, to
the effect that such shares of Common Stock purchased by the Lender have been
duly authorized, validly issued, and are fully paid and non-assessable. Upon
delivery of the certificate for the Common Stock and the legal opinion
described herein, such portion of the Commitment as is equal to the product
described in Section 6.01 above, shall terminate.
SECTION 6.03 Adjustment of Purchase Price and Number of Shares
Purchasable. The Purchase Price and the number of shares of Common Stock
purchasable upon the exercise of any Lender's Purchase Option shall be subject
to adjustment from time to time by the Borrower as follows:
(i) In case the Borrower 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 Borrower, then in each such case the number of shares of Common
Stock purchasable upon the exercise of the Lender's Purchase Option
immediately prior thereto shall be adjusted so that the Lender shall be
entitled to receive the kind and number of shares of Common Stock or other
securities of the Borrower which the Lender would have owned or have been
entitled to receive immediately following such action had such shares of
Common Stock been purchased 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. If, as a result of an
adjustment made pursuant to this subsection (i), the Lender shall become
entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Borrower, the Audit
Committee of the Board of Directors of the Borrower (whose reasonable
determination shall be conclusive except for arithmetic errors and shall be
described in a statement filed by the Borrower with the Lender) shall
determine the equitable allocation of the adjusted Purchase Price between
or among shares of such classes of capital stock or shares of Common Stock
and other capital stock.
(ii) In case the Borrower 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 6.03) 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
Borrower in effect at the time hereof or any other similar plan adopted or
implemented hereafter), to the extent that the same have not expired by
their terms prior to the exercise of the Lender's Purchase Option, then the
number of shares of Common Stock thereafter purchasable upon the exercise
of the Lender's Purchase Option shall be determined by multiplying the
number of shares of Common Stock theretofore purchasable upon exercise of
the Lender's Purchase Option immediately prior to the date of issuance of
such rights, options or warrants by a fraction of which the 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 additional shares of Common Stock offered for
subscription or purchase, 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 shares which the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at such current market
price. Such adjustment successively shall be made whenever any such rights,
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options or warrants are issued, and immediately shall become effective on
the date of issuance retroactive to 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 Purchase Price shall be readjusted to the Purchase Price that
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 no event, however,
shall there be any adjustment made with respect any shares previously
issued pursuant to the exercise of the Lender's Purchase Option. 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 Borrower for such rights, options or warrants. The value of
such consideration, if other than cash, shall be determined by the Audit
Committee of the Borrower's Board of Directors (whose reasonable
determination shall be conclusive, except for arithmetic errors, and shall
be described in a statement filed by the Borrower with the Lender).
(iii) In case the Borrower 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 Borrower 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 6.03) or rights, options or warrants to subscribe for or
purchase securities of the Borrower (excluding those referred to in
subsection (ii) of this Section 6.03), then in each such case the number of
shares of Common Stock thereafter purchasable upon the exercise of the
Lender's Purchase Option shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon the exercise of the
Lender's Purchase Option by a fraction of which the numerator shall be the
current market price per share of the Common Stock as determined pursuant
to subsection (iv) of this Section 6.03, and of which the denominator shall
be such current market price per share of Common Stock less the fair market
value on such record date (as determined by the Audit Committee of its
Board of Directors of the Borrower, whose reasonable determination shall be
conclusive except for arithmetic errors and shall be described in a
statement filed by the Borrower with the Lender) 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. 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 6.03, the current market price per share of Common Stock on
any date shall be deemed to be the average of the "Closing Price", as
defined below, 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. The
term "Closing Price" for any day in question shall be the last reported
sale price regular way or, in case no such reported sales take place on
such day, the average of the closing bid and asked prices regular way for
such day, in each case on the New York Stock Exchange Composite Tape or, if
not listed on the New York Stock Exchange, on the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading on a national
securities exchange, the last sale price regular way for the Common Stock
as published by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or if such last sale price is not so published
by NASDAQ or if no such sale takes place on such day, the average between
the closing bid and asked prices for the Common Stock as published by
NASDAQ. The term "trading day" shall mean a day on which the market used
for calculating the Closing Price is open for the transaction of business
or, if the
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<PAGE>
shares of such securities are not so listed or admitted to trading, a
business day. 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 6.03 (ii) and (iii) or (II) the commencement of "ex-dividend"
trading on the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading or, if not listed or
admitted to trading on a national securities exchange, the NASDAQ.
(v) In any case in which this Section 6.03 shall require that an
adjustment be made immediately following a record date or an effective
date, the Borrower may elect to defer (but only until the delivery by the
Borrower of the notice required by subsection (viii) of this Section 6.03)
issuing to the Lender the shares of Common Stock issuable upon exercise of
the Lender's Purchase Option over and above the shares of Common Stock
issuable upon exercise of the Lender's Purchase Option on the basis of the
number of shares of Common Stock purchasable upon exercise of the Lender's
Purchase Option prior to adjustment, and paying to the Lender any amount of
cash in lieu of a fractional share.
(vi) Whenever the number of shares of Common Stock purchasable upon the
exercise of the Lender's Purchase Option is adjusted as herein provided,
the Purchase Price payable upon exercise of the Lender's Purchase Option
shall be adjusted by multiplying such Purchase Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number
of shares of Common Stock purchasable upon the exercise of the Lender's
Purchase Option immediately prior to such adjustment, and of which the
denominator shall be the number of shares of Common Stock so purchasable
immediately thereafter.
(vii) No adjustment in the number of shares of Common Stock purchasable
upon exercise of the Lender's Purchase Option shall be required to be made
unless such adjustment would require an increase or decrease of at least
1.0% of the number of shares of Common Stock purchasable upon exercise of
the Lender's Purchase Option; provided, however, that any adjustments which
by reason of this subsection (vii) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 6.03 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 6.03 to the contrary notwithstanding, the Borrower shall be
entitled to make such reduction in the Purchase Price, in addition to the
adjustments required by this Section 6.03, 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 Borrower to its stockholders shall not be taxable to
the recipients. Except as set forth in subsections (i), (ii) and (iii)
above, the Purchase 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.
(viii) Whenever the Purchase Price is adjusted as herein provided, the
Borrower shall promptly deliver or mail, or cause to be delivered or mailed
by first class mail, postage prepaid, as soon as practicable to the Lender
a notice under Section 7.02 setting forth the Purchase Price and number of
shares of Common Stock purchasable upon the exercise of the Lender's
Purchase Option 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.
(ix) In the event that at any time, as a result of an adjustment made
pursuant to subsection (i) of this Section 6.03, the Lender shall become
entitled to receive any shares of the Borrower other than shares of Common
Stock, thereafter the Purchase Price of such other shares that the Lender
shall be entitled to purchase 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.
(x) The Borrower from time to time may decrease the Purchase 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 Purchase Price is
so decreased, the Borrower shall deliver or mail to the Lender a notice of
the decrease
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<PAGE>
at least 15 days before the date the decreased Purchase Price takes effect,
and such notice shall state the decreased Purchase Price and the period it
will be in effect.
Notwithstanding the foregoing provisions of this Section 6.03, no such
adjustments shall be made if the adjustment effectively duplicates the effect
of an adjustment made in connection with Section (5)(d) of the Certificate of
Designation relating to the Convertible Preferred Stock.
SECTION 6.04 Reservation of Shares of Common Stock. The Borrower covenants
that it will, at all times prior to the expiration of the Lender's Purchase
Option, 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 enabling it to satisfy any obligation to issue shares of Common Stock upon
the exercise of the Lender's Purchase Option, the full number of shares of
Common Stock deliverable upon the exercise of the Lender's Purchase Option not
theretofore purchased and on or before (and as a condition of) taking any
action that would cause an adjustment of the Purchase Price resulting in an
increase in the number of shares of Common Stock deliverable upon the exercise
of the Lender's Purchase Option above the number thereof previously reserved
and available therefor, the Borrower shall take all such action so required.
Before taking any action that would cause an adjustment reducing the Purchase
Price below the then par value (if any) of the shares of Common Stock
deliverable upon exercise of the Lender's Purchase Option, the Borrower shall
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Borrower may validly and legally issue fully paid
and non-assessable shares of Common Stock at such adjusted Purchase Price.
SECTION 6.05 Transfer Taxes, Etc. The Borrower 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 exercise of
the Lender's Purchase Option; provided, however, that the Borrower 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 Lender and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Borrower the amount of
any such tax or has established, to the satisfaction of the Borrower, that such
tax has been paid.
SECTION 6.06 Consolidation or Merger or Sale of Assets. Notwithstanding any
other provision herein to the contrary, in case of any consolidation or merger,
sale or transfer to which the Borrower is a party and which is permitted under
Section 4.07 above or otherwise upon the Lender's prior written consent (which
shall not be unreasonably withheld) and pursuant to which there is a change in
the Common Stock of the Borrower, then lawful provision, in a manner and on
terms reasonably satisfactory to counsel for the Lender, shall be made by the
corporation formed by such consolidation or the corporation whose securities,
cash or other property will immediately after the merger or consolidation 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 Borrower (collectively the
"Formed, Surviving or Acquiring Corporation"), as the case may be, providing
that the Lender shall have the right thereafter upon payment of the Purchase
Price in effect immediately prior to such action to purchase upon exercise of
the Lender's Purchase Option the kind and amount of securities, cash or other
property that the Lender would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale, lease or transfer had
the Lender's Purchase Option been exercised immediately prior to such action
(provided that, if the kind or amount of securities, cash or other property
that the Lender would have owned or have been entitled to receive after the
happening of 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 6.06 the kind and amount of securities, cash or other property
which the Lender would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, lease or transfer for each
nonelecting share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). The Formed,
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<PAGE>
Surviving or Acquiring Corporation, as the case may be, shall make provision in
a manner and on terms reasonably satisfactory to counsel for the Lender, in its
certificate or articles of incorporation or other constituent documents to the
end that the provisions set forth in this Section 6.06 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
upon exercise of the Lender's Purchase Option.
The above provisions of this Section 6.06 shall similarly apply to successive
consolidations, mergers, sales, leases or transfers.
SECTION 6.07 Transfer Restrictions.
(a) Legends on Common Stock.
(i) Until the third anniversary of the date of original issuance of the
shares of Common Stock, certificates representing the shares of Common
Stock purchased by the Lender upon exercise of the Lender's Purchase Option
and not otherwise registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities
Act") shall bear a legend substantially to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY SIMILAR
STATE SECURITIES LAWS AND THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION, UNDER SAID ACT AND LAWS."
The shares of Common Stock purchased by the Lender upon exercise of the
Lender's Purchase Option and not otherwise registered pursuant to an effective
registration statement under the Securities Act shall be subject to the
restrictions on transfer set forth in the legends referred to above until the
third anniversary of the date of original issuance of such shares of Common
Stock; provided, however, and notwithstanding the foregoing, such shares of
Common Stock may be resold under and pursuant to the terms and conditions of
Regulation S of the Securities Act, prior to the end of the third anniversary
date of the issuance of such shares.
(ii) The certificates evidencing shares of Common Stock purchased by the
Lender upon exercise of the Lender's Purchase Option and not otherwise
registered pursuant to an effective registration statement under the
Securities Act shall bear, until such time as the Borrower and the transfer
agent for the Common Stock shall have received evidence satisfactory to
each of them that the transfer of such shares of Common Stock has been
effected in accordance with the limitations on transfer set forth in
paragraph (a)(i) above, the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES, OPINIONS OF COUNSEL AND
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(b) Transfer Agent Requirements. The transfer agent and registrar for the
Common Stock shall not be required to accept for registration of transfer any
Common Stock bearing the legend contained in paragraph (a)(ii) above, except
upon presentation of satisfactory evidence that the restrictions on transfer of
the Common Stock referred to in the legend in paragraph (a)(i) have been
complied with, all in accordance with such reasonable regulations and
procedures as the Borrower may from time to time agree with the transfer agent
and registrar for the Common Stock.
C-15
<PAGE>
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or the Note, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender and the Borrower, in the case of an amendment, or by the party to
be charged, in the case of a waiver or a consent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 7.02 Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and delivered to an officer of the other party or
mailed or transmitted by facsimile; if to the Lender to its address at 9100
East Mineral Circle, Englewood, Colorado 80112-3299, Attention: Chief Financial
Officer (Fax No. 303-643-5269); if to the Borrower, to its address at 9100 East
Mineral Circle, Englewood, Colorado 80112-3299, Attention: Chief Financial
Officer (Fax No. 303-643-5505) or, as to each party, to such other address as
shall be designated by such party in a written notice to the other party. All
such notices and communications shall, when delivered to an officer of the
other party, be effective upon such delivery and, when mailed or transmitted by
facsimile, be effective when deposited in the mails or when transmitted
respectively, addressed as aforesaid; except that notices by the Borrower to
the Lender or by the Lender to the Borrower pursuant to the provisions of
Section 1.05 shall not be effective until received by the Lender or the
Borrower, as the case may be, but such notices may be given by telephone and
confirmed in writing or by facsimile on the same day and shall be effective
upon such telephonic notice.
SECTION 7.03 No Waiver; Remedies. No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder or under the Note,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder or under the Note preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 7.04 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Lender and their respective successors
and assigns, except that (i) the Borrower shall not have the right, to assign
its rights hereunder or any interest herein except to a successor by merger,
consolidation or sale of all or substantially all of the Borrower's assets, in
each case if permitted under Section 4.07 above, without the prior written
consent of the Lender, and (ii) the Lender shall not assign any of its rights
or obligations hereunder or under the Note, except to a successor by merger,
consolidation or sale of substantially all of the Lender's assets without the
prior written consent of the Borrower.
SECTION 7.05 Use of Proceeds. The proceeds of the Loans shall be used by the
Borrower for the planned construction and development of Fort Knox, other
growth opportunities and general corporate purposes.
SECTION 7.06 Demand Registration Rights. (i) At any time after the earlier to
occur of (i) the conversion of the Preferred Stock into shares of Common Stock
or (ii) the exercise of the Lender's Purchase Option, the Lender may make one
or more written requests to the Borrower (a "Demand") for registration under
and in accordance with the provisions of the Securities Act of all or part (but
not less than 1,000,000 shares per Demand) of the shares of Common Stock issued
to the Lender pursuant to Section 1.08 or Section 6.01 of this Agreement
("Registrable Shares"). Each such request shall specify the aggregate number of
Registrable Shares proposed to be registered and the intended method of
disposition thereof.
(i) Upon receipt of a Demand, the Borrower shall use its best efforts to
effect such registration to permit the sale of Registrable Shares in
accordance with the intended method of disposition thereof and pursuant
thereto, the Borrower shall as expeditiously as possible:
(a) execute and deliver all such instruments and documents and do or
cause to be done all such other acts and things as may be necessary or,
in the opinion of the Lender, advisable to register
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<PAGE>
such Registrable Shares under the provisions of the Securities Act, and
to cause the registration statement relating thereto to become
effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectus which, in the opinion
of the Lender, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
SEC applicable thereto;
(b) use its best efforts to qualify the Registrable Shares under the
applicable state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of the Registrable
Shares, as requested by the Lender;
(c) make available to the Lender, as soon as practicable, an earnings
statement that will satisfy the provisions of Section 11(a) of the
Securities Act; and (d) do or cause to be done all such other acts and
things as may be necessary to make such sale of the Registrable Shares
or any part thereof valid and binding and in compliance with applicable
law.
(ii) If any such Demand is made at a time when the Lender directly or
indirectly owns less than five percent 5% of the number of shares of Common
Stock outstanding, the Borrower may, if its Audit Committee of its Board of
Directors determines in the good faith exercise of its reasonable judgment
that it would be inadvisable to effect a demand registration, defer such
demand registration until the earliest practicable time at which such
demand registration can be reasonably effected, which period shall not
exceed three (3) months.
(iii) All Registration Expenses incurred in connection with the first
registration statement to be filed hereunder or under that certain Stock
Purchase Agreement between the Lender and the Borrower of even date
herewith (the "Stock Agreement") shall be paid by the Borrower. All
Registration Expenses incurred in connection with each additional
registration statement to be filed hereunder or under the Stock Agreement
shall be paid by the Lender. For purposes of this Agreement, "Registration
Expenses" shall mean any and all expenses incident to performance of or
compliance with this Section 7.06, including, without limitation, (i) all
SEC and stock exchange registration and filing fees, (ii) all fees and
expenses of complying with state securities or "Blue Sky" laws (including
fees and disbursements of counsel in connection with Blue Sky
qualifications of the Registrable Shares and determination of the
eligibility of the Registrable Shares for investment under the laws of such
jurisdiction as the Lender may indicate), (iii) all printing, messenger and
delivery expenses, (iv) all fees and expenses incurred in connection with
the listing of Registrable Shares on any exchange, and (v) the fees and
disbursements of counsel for the Borrower and of its independent public
accountants, but excluding underwriting discounts and commissions,
brokerage fees, transfer taxes, if any, fees and disbursements of counsel,
accountants or other experts or advisors to the Lender, and National
Association of Securities Dealers Inc. registration and filing fees.
SECTION 7.07 Expenses. The Borrower shall pay (i) all out-of-pocket expenses
of the Lender, including fees and disbursements of special counsel for the
Lender, in connection with the preparation of this Agreement, any waiver or
consent hereunder or any amendment hereof or any default or alleged default
hereunder and (ii) if an Event of Default occurs, or upon the occurrence of an
event that with notice or the lapse of time or both would constitute an Event
of Default, all out-of-pocket expenses incurred by the Lender, including fees
and disbursements of counsel, in connection with such actual or potential Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings, actions or negotiations resulting therefrom. The Borrower shall
indemnify the Lender against any transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the execution and
delivery to the Lender of this Agreement, or any Note.
SECTION 7.08 Prior Agreement. This Agreement and the Note issued hereunder
shall supersede in their entirety any prior negotiations, discussions,
understandings or arrangements between the Lender and the Borrower pertaining
to the subject matter of this Agreement.
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<PAGE>
SECTION 7.09 Governing Law. This Agreement and the Note shall be governed by,
and construed in accordance with, the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AMAX GOLD INC.
/s/ MARK A. LETTES
By __________________________________
Title: Vice President and Chief
Financial Officer
ATTEST:
/s/ DEBORAH J. FRIEDMAN
- -------------------------------------
CYPRUS AMAX MINERALS COMPANY
/s/ FRANCIS J. KANE
By __________________________________
Title: Vice President Investor
Relations and Treasurer
ATTEST:
/s/ KATHLEEN J. GORMLEY
- -------------------------------------
C-18
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$80,000,000.00 Date: March 10, 1995
FOR VALUE RECEIVED, Amax Gold Inc., a Delaware corporation (the "Borrower"),
promises to pay to the order of Cyprus Amax Minerals Company, a Delaware
corporation (the "Lender") at the office of the Lender located at 9100 East
Mineral Circle, Englewood, Colorado 80112, or at such other place as the Lender
may direct in writing, in lawful money of the United States of America and in
immediately available funds, the principal amount of Eighty Million Dollars or,
if less than such principal amount, the aggregate unpaid principal amount of
all Loans made by the Lender to the Borrower pursuant to Article I of the
Agreement referred to below in accordance with the respective Schedules
applicable to such Loans attached to and made part of this Note. All principal
amounts outstanding under this Note on December 31, 2002 shall be paid in
twenty equal quarterly installments in accordance with Section 1.06 of such
Agreement; provided, however, that the last such installment shall be in the
amount necessary to repay in full the unpaid principal amount hereof; and,
provided, further, that the Lender, upon exercise of its Stock Purchase Option
under Article VI of such Agreement, may terminate or reduce the "Commitment",
as defined therein, whereupon such installments shall be due as of the date set
for closing such stock purchase pursuant to Section 6.01 of such Agreement.
The Borrower further promises to pay interest at said office in like money,
from the date hereof on the unpaid principal amount hereof outstanding from
time to time, at the rates and at the times set forth in Article I of such
Agreement. Notwithstanding anything contained herein to the contrary, at the
election of the Borrower the principal of this Note may be paid by the Borrower
in Preferred Stock of the Borrower in accordance with the provisions of Section
1.08 of the Agreement, subject to satisfaction of the conditions set forth in
Section 1.09 of such Agreement.
This Note is the Note referred to in Section 1.02 of the Revolving Credit
Agreement between the Borrower and the Lender dated as of March 10, 1995, as
the same may hereafter from time to time be amended or supplemented in
accordance with the terms thereof ("Agreement"), is entitled to the benefits
thereof and subject to the terms and conditions set forth therein (including,
without limitation, the Lender's rights to accelerate the due date hereof) and
may be paid and prepaid as provided therein.
Upon the occurrence of any of the Events of Default specified in the
Agreement, all amounts then remaining unpaid on this Note may be declared to be
or shall automatically become immediately due and payable as provided therein.
Amax Gold Inc.
By __________________________________
ATTEST:
-------------------------------------
Secretary
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<PAGE>
SCHEDULE OF LOANS AND PAYMENTS
MADE UNDER NOTE DATED MARCH 10, 1995
FROM AMAX GOLD INC.*
TO CYPRUS AMAX MINERALS COMPANY
<TABLE>
<S> <C>
Principal Amount of the Initial Loan: $
---
Date of the Initial Loan:
---
Interest Rate for the Initial Loan:
---
</TABLE>
PRINCIPAL BORROWINGS
AND PAYMENTS OF THIS NOTE
<TABLE>
<CAPTION>
AMOUNT INTEREST PRINCIPAL UNPAID
DATE BORROWED RATE PAID PAID BALANCE
---- -------- ---- -------- --------- -------
<S> <C> <C> <C> <C> <C>
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
</TABLE>
- --------
* All terms used in this Schedule shall have the meanings given them in
Agreement.
C-20
<PAGE>
APPENDIX D
FORM OF
CERTIFICATE OF DESIGNATIONS
$2.25 SERIES C 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 1995, 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:
"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 1,600,000 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 "$2.25 Series C Convertible Preferred Stock" (hereinafter referred to
as the "Convertible Preferred Stock"). Each share of Convertible Preferred
Stock shall be identical in all respects with the other shares of Convertible
Preferred Stock.
D-1
<PAGE>
All shares of 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.
The number of shares of Convertible Preferred Stock shall initially be
1,600,000, which number may from time to time be increased or decreased (but
not below the number then outstanding) by further resolution of the Board of
Directors of the Corporation or any duly authorized committee thereof and by
the filing of a certificate pursuant to the provisions of Section 151 of the
DGCL stating that such increase or reduction has been so authorized. Shares of
Convertible Preferred Stock redeemed, purchased by the Corporation or converted
into Common Stock shall be cancelled and shall revert to authorized but
unissued shares of Preferred Stock undesignated as to series.
(2) Dividends. The holders of shares of 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 $2.25 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 semi-annual installments on the 1st day of January and
July of each year, commencing on July 1, 1995 (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 or in Denver, Colorado. 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 Convertible Preferred Stock for each
semi-annual dividend period shall be computed by dividing the annual amount by
two. The amount of dividends payable on the Convertible Preferred Stock for the
initial dividend period and for any period less than a full semi-annual
dividend period shall be computed on the basis of a 360 day year consisting of
twelve 30-day months. Holders of shares of 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 Convertible Preferred
Stock.
On each Dividend Payment Date all dividends which shall have accrued on each
share of 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 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 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.
The Corporation may, at its option exercised by written notice by first class
mail, postage prepaid, to each holder of record of the Convertible Preferred
Stock given at least 10 business days prior to the applicable Dividend Payment
Date, elect to pay any dividend due and payable hereunder in shares of Common
Stock in lieu of a dividend payment in cash; provided, however, that the
Corporation may not pay any such dividend in shares of Common Stock in lieu of
cash to any holder of record of the Convertible Preferred Stock that delivers
written notice to the Corporation no more than 5 business days prior to the
applicable Dividend Payment Date stating that such holder elects to receive
such dividend payment in cash. The number of shares
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of Common Stock issuable to each holder of Convertible Preferred Stock pursuant
to this paragraph on each such Dividend Payment Date shall equal the amount of
dividends payable per share of Convertible Preferred Stock on such Dividend
Payment Date divided by the average Closing Price per share of the Common Stock
as calculated for the last 10 trading days (the "Trading Period") ending on the
fifth trading day prior to the date that such dividend is declared multiplied
by the total number of shares of Convertible Preferred Stock registered in the
name of each such holder of the Convertible Preferred Stock on the record date
for the payment of the dividend. As used herein, the term "Closing Price" for
any day in question shall be the last reported sale price regular way or, in
case no such reported sales take place on such day, the average of the closing
bid and asked prices regular way for such day, in each case on the New York
Stock Exchange Composite Tape or, if not listed on the New York Stock Exchange,
on the principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if not listed or admitted to
trading on a national securities exchange, the last sale price regular way for
the Common Stock as published by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), or if such last sale price is not so
published by NASDAQ or if no such sale takes place on such day, the average
between the closing bid and asked prices for the Common Stock as published by
NASDAQ. The term "trading day" shall mean a day on which the market used for
calculating the Closing Price is open for the transaction of business or, if
the shares of such security are not so listed or admitted to trading, a
business day. No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued in respect of the payment of any dividend in
shares of Common Stock. In lieu of any fractional interest in a share of Common
Stock which otherwise would be deliverable in respect of the payment of any
dividend in shares of Common 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 the Common Stock as calculated for the
Trading Period ending on the fifth trading day prior to the date that such
dividend is declared multiplied by the fractional interest that otherwise would
have been deliverable in respect of the payment of such dividend in shares of
Common Stock.
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 Convertible Preferred Stock (the "Junior Dividend
Stock") unless and until all accrued and unpaid dividends on the 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 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
Convertible Preferred Stock (the "Parity Dividend Stock") for any period unless
full cumulative dividends have been, or contemporaneously are, paid or declared
and set apart for such payment on the Convertible Preferred Stock for all
dividend payment periods 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 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 Convertible Preferred
Stock and the Parity Dividend Stock, all dividends paid or declared and set
apart for payment upon shares of 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 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 Convertible Preferred Stock and the Parity Dividend
Stock bear to each other.
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The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of 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 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 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 Convertible Preferred Stock and
any other class or series of the Corporation's capital stock which may
hereafter be created ranking on a parity as to liquidation rights with the
Convertible Preferred Stock (the "Parity Liquidation Stock"), the holders of
the Convertible Preferred Stock and the holders of the Parity Liquidation Stock
shall share ratably in any distribution of 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 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 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 Convertible Preferred Stock and (ii) transfer
instrument(s) satisfactory to the Corporation and sufficient to transfer such
shares of 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
Convertible Preferred Stock, in whole or from time to time in part, on any date
set by the Board of Directors of the Corporation, for that number of fully paid
and non-assessable shares of Common Stock (calculated as to each redemption to
the nearest 1/100th of a share) obtained by dividing $50.00 by the lesser of
the Call Price (as defined in paragraph (e)) and the Conversion Price (as
defined in Section 5(d)), as the same may be in effect at such time, plus
accrued and unpaid dividends, whether or not declared or due, to the date fixed
for redemption (such shares of Common Stock and dividends, together with any
cash in lieu of Common Stock pursuant to paragraph (d), being hereinafter
referred to herein as the "Redemption Price"), subject to the right of the
holder of record of shares of Convertible Preferred Stock on a record date for
the payment of a dividend on the Convertible Preferred Stock to receive the
dividend due on such shares of Convertible Preferred Stock on the corresponding
Dividend Payment Date.
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In case of the redemption of less than all of the then outstanding
Convertible Preferred Stock, the shares of 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 Convertible Preferred Stock at any time outstanding until all dividends
accrued and in arrears upon all 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 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 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 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 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
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 Convertible Preferred Stock. On or after the
date fixed for redemption as stated in such notice, each holder of the shares
of 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, shares of Common Stock and cash necessary for the redemption shall
be available for such purpose and 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 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. Shares of Common Stock and any cash necessary for the
redemption of shares of Convertible Preferred Stock shall be deemed to be
available therefor for purposes of the preceding sentence and for purposes of
Section 7, 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, shares of Common Stock and any
cash necessary for such redemption, in trust, with irrevocable instructions
that such shares of Common Stock and cash be applied to the redemption of the
shares of the Convertible Preferred Stock and any Parity Dividend Stock so
called for redemption. At the close of business on the redemption date, each
holder of shares of Convertible Preferred Stock to be redeemed (unless the
Corporation defaults in the delivery of the shares of Common Stock or cash
payable on such redemption date) shall be deemed to be the record holder of the
number of shares of Common Stock into which such shares of Convertible
Preferred Stock are to be redeemed, regardless of whether such holder has
surrendered the certificates representing such shares of Convertible Preferred
Stock. No interest shall accrue for the benefit of the holders of shares of
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
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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 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
Convertible Preferred Stock redeemed and (ii) transfer instruments satisfactory
to the Corporation and sufficient to transfer such shares of Convertible
Preferred Stock to the Corporation free of any adverse interest. No interest
shall accrue on the Redemption Price of any share of Convertible Preferred
Stock after its redemption date.
In the event that any shares of 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
Convertible Preferred Stock shall be returned to the Corporation immediately
after such conversion (subject to declared dividends payable to holders of
shares of Convertible Preferred Stock on the record date for such dividends, to
the extent set forth in Section 5 hereof, regardless 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 or scrip
representing fractions of shares of Common Stock shall be issued upon
redemption of Convertible Preferred Stock. If more than one share of
Convertible Preferred Stock shall be surrendered for redemption at one time by
the same holder, the number of full shares of Common Stock issuable upon
redemption 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 Common Stock which otherwise would be deliverable upon the redemption
of any share of 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 lesser of the Call Price and the Conversion Price, as the same may be in
effect at such time, multiplied by the fractional interest in a share of Common
Stock that otherwise would have been deliverable upon conversion of such share.
(d) Limitation on Number of Shares Issuable Upon Redemption. The maximum
number of shares of Common Stock that the Corporation may issue upon redemption
of the Convertible Preferred Stock shall be 14,919,806 shares, as such amount
shall be increased or decreased from time to time by the Board of Directors of
the Corporation in connection with any adjustment to the Conversion Price
pursuant to Section 5(d) and as such amount further may be reduced in
accordance with this paragraph. In the case of the redemption of shares of
Convertible Preferred Stock that would result in the issuance of shares of
Common Stock that, when added to the number of shares of Common Stock issued
(i) in connection with the redemption of any shares of Convertible Preferred
Stock previously redeemed in accordance with this Section 4, (ii) in connection
with the conversion of any shares Convertible Preferred Stock previously
converted in accordance with Section 5, and (iii) as a dividend on the shares
of Convertible Preferred Stock previously paid pursuant to Section 2, would be
greater than 14,919,806 shares, the Corporation shall pay an amount of cash in
lieu of such shares of Common Stock in excess of 14,919,806 shares equal to the
lesser of the Call Price and the Conversion Price, as the same may be in effect
at such time, multiplied by the number of shares of Common Stock in excess of
14,919,806 shares that otherwise would have been issuable but for this
paragraph. The shares of Convertible Preferred Stock that shall be redeemed for
cash in lieu of Common Stock pursuant to this paragraph shall be selected pro
rata or by lot or in such other equitable manner as the Board of Directors of
the Corporation reasonably may determine. Each such cash payment shall be made
in twelve consecutive substantially equal quarterly payments, commencing on the
last business day of the calendar quarter immediately subsequent to the
applicable redemption date.
(e) Call Price. The "Call Price" with respect to a redemption of Convertible
Preferred Stock pursuant to this Section 4 shall be equal to the greater of (i)
$4.196, as such amount shall be adjusted from time to
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time by the Board of Directors of the Corporation in connection with any
adjustment to the Conversion Price pursuant to Section 5(d) by applying the
Conversion Price adjustment formula set forth in such Section 5(d) to the Call
Price, and (ii) the average Closing Price per share of the Common Stock as
calculated for the Trading Period ending on the fifth trading day prior to the
date that the notice of redemption with respect to such redemption is mailed
pursuant to paragraph (b).
(f) Covenant as to Common Stock. The Corporation covenants that all shares of
Common Stock which may be delivered upon redemption of shares of Convertible
Preferred Stock will upon delivery be duly and validly issued and fully paid
and nonassessable, free of all liens and charges and not subject to any
preemptive rights.
If permitted by the rules of the New York Stock Exchange, the Corporation
will list and keep listed so long as the Common Stock shall be so listed on
such exchange, all shares of Common Stock issuable upon redemption of the
shares of Convertible Preferred Stock.
(5) Conversion.
(a) Right of Conversion. Subject to and upon compliance with the provisions
of this Section 5, each share of 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 business day immediately prior to 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 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
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 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
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 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 and an amount
sufficient to pay any transfer or similar tax. As promptly as practicable after
the surrender of such shares of Convertible Preferred Stock and the receipt of
such notice, instruments of transfer and funds, if any, as aforesaid, the
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
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 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
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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, but such conversion shall be at the Conversion Price in effect on the
twentieth business day following the date upon which such shares of Convertible
Preferred Stock shall have been surrendered and such notice received by the
Corporation.
Any shares of 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 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; provided, however, that no such payment
need be made if there shall exist at the time of conversion a default in the
payment of dividends on the shares of Convertible Preferred Stock. An amount of
cash equal to such payment shall be paid by the Corporation on such Dividend
Payment Date to the holder of such shares of Convertible Preferred Stock at the
close of business on such record date, notwithstanding any election by the
Corporation to pay such dividend in Common Stock in lieu of cash and
notwithstanding the conversion of such shares of Convertible Preferred Stock;
provided, however, that if the Corporation shall default in the payment of
dividends on such Dividend Payment Date, such amount shall be paid to the
person who made such required payment. Except as provided for above in this
Section, no adjustment shall be made for dividends accrued on any shares of
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 Convertible Preferred Stock. If more than one share of
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 Common Stock which would otherwise be deliverable upon the conversion
of any share of 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
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
$5.362, 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 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. If, as a result of an
adjustment made pursuant to this subsection (i), the holder of any share of
Convertible Preferred Stock thereafter surrendered for conversion shall
become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Corporation, 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
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with the stock transfer or conversion agent, as appropriate) shall
determine the equitable allocation of the adjusted Conversion Price between
or among shares of such classes of capital stock or shares of Common Stock
and other capital stock.
(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 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 or conversion agent, as appropriate).
(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 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 or conversion agent, as appropriate) 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
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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 exchange or market referred to in the definition of "Closing
Price" in Section 3.
(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 or conversion agent, as the case may
be, of the certificate required by subsection (vii) of this Section 5(d))
issuing to the holder of any share of 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; 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 or conversion
agent, as appropriate, 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 Convertible
Preferred Stock a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price. The stock
transfer or conversion agent, as the case may be, 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
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
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 Convertible Preferred Stock
shall be subject to adjustment from time to time in a manner and on
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terms as nearly equivalent as practicable to the provisions with respect to
Common Stock contained in this Section.
(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 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 Convertible Preferred Stock and the stock
transfer or conversion agent, as appropriate, 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 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 Convertible Preferred Stock,
the full number of shares of Common Stock deliverable upon the conversion of
all outstanding shares of 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 Convertible Preferred Stock shall be computed as if at the time of
computation all outstanding shares of 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 Convertible
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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
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 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 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
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
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 nonelecting 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
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 Convertible
Preferred Stock will upon delivery be duly and validly issued and fully paid
and nonassessable, free of all liens and charges and not subject to any
preemptive rights.
If permitted by the rules of the New York Stock Exchange, the Corporation
will list and keep listed so long as the Common Stock shall be so listed on
such exchange, all Common Stock issuable upon conversion of the shares of
Convertible Preferred Stock.
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(j) Limitation on Number of Shares Issuable Upon Conversion. Notwithstanding
any other provision of this Section 5 to the contrary, the maximum number of
shares of Common Stock that the Corporation may issue upon conversion of the
Convertible Preferred Stock shall be 14,919,806 shares, as such amount shall be
increased or decreased from time to time by the Audit Committee of the Board of
Directors of the Corporation in connection with any adjustment to the
Conversion Price pursuant to Section 5(d) and as such amount further may be
reduced in accordance with this paragraph. In the case of the conversion of
shares of Convertible Preferred Stock that would result in the issuance of
shares of Common Stock that, when added to the number of shares of Common Stock
issued (i) in connection with the redemption of any shares of Convertible
Preferred Stock previously redeemed in accordance with Section 4, (ii) in
connection with the conversion of any shares Convertible Preferred Stock
previously converted in accordance with this Section 5, and (iii) as a dividend
on the shares of Convertible Preferred Stock previously paid pursuant to
Section 2, would be greater than 14,919,806 shares, the Corporation shall pay
an amount of cash in lieu of such shares of Common Stock in excess of
14,919,806 shares equal to the Conversion Price, as the same may be in effect
at such time, multiplied by the number of shares of Common Stock in excess of
14,919,806 shares that would otherwise have been issuable but for this
paragraph. Each such cash payment shall be made in twelve consecutive
substantially equal quarterly payments, commencing on the last business day of
the calendar quarter immediately subsequent to the date such shares of
Convertible Preferred Stock have been surrendered for conversion.
(6) Voting Rights.
(a) General. The holders of 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
Convertible Preferred Stock will have one vote for each share held. Any shares
of 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 Convertible Preferred
Stock shall be in arrears in an amount equal to at least three semi-annual
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 Convertible Preferred Stock (voting separately as a class)
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 Convertible Preferred Stock
to vote for such two additional directors shall terminate when all accrued and
unpaid dividends on the 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
Convertible Preferred Stock and such Parity Dividend Stock to vote for such two
additional directors.
The foregoing right of the holders of the 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 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
holders of at least ten percent (10%) of the Convertible Preferred Stock then
outstanding, call a special meeting of the holders of the 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 Convertible Preferred Stock and any Parity Dividend Stock
referred to above voting as a class shall have the right to remove without
cause at any time and replace any directors such holders have elected pursuant
to this Section 6.
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(c) Class Voting Rights. So long as the Convertible Preferred Stock is
outstanding, the Corporation shall not, without the affirmative vote or consent
of the holders of at least 66 and 2/3 percent of all outstanding shares of
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 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 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 Convertible Preferred
Stock. A class vote on the part of the 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 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 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 Convertible Preferred Stock shall be deemed outstanding except (i)
from the date fixed for redemption pursuant to Section 4, all shares of
Convertible Preferred Stock that have been so called for redemption under
Section 4 if shares of Common Stock or cash necessary for payment of the
Redemption Price irrevocably have been set aside; (ii) from the date of
surrender of certificates representing shares of Convertible Preferred Stock,
all shares of Convertible Preferred Stock converted into Common Stock; and
(iii) from the date of registration of transfer, all shares of Convertible
Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.
(8) No Other Rights and Powers. The shares of 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 Convertible Preferred Stock is not entitled to any
preemptive or subscription rights in respect of any securities of the
Corporation.
(10) Transfer Restrictions.
(a) Legends on Convertible Preferred Stock.
(i) The certificates evidencing shares of Convertible Preferred Stock
shall, until the third anniversary of the date of original issuance of such
shares, unless otherwise agreed by the Corporation and the holders of any
such certificates, bear a legend substantially to the following effect:
"This Security (or its predecessor) is subject to, and is
transferable only upon compliance with, the provisions of a Revolving
Credit Agreement, dated as of , 1995 among Amax Gold Inc. and
Cyprus Amax Minerals Company. A copy of the above referenced Revolving
Credit Agreement is on file at the offices of Amax Gold Inc. This
Security (or its predecessor) has not been registered under the
Securities Act of 1933, as amended, or any similar state securities
laws, and this Security and any shares of common stock issued upon
conversion or redemption hereof may not be transferred except pursuant
to an effective registration statement, or an exemption from
registration, under said act and laws. Amax Gold Inc. will furnish
without charge to the holder hereof, upon request, the powers,
designations, preferences and relative participating, optional or other
special rights of the class of capital stock represented hereby, and
the qualifications limitations or restrictions of such preferences
and/or rights."
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Until the third anniversary of the date of original issuance of the
shares of Convertible Preferred Stock, certificates representing the shares
of Common Stock issued upon conversion or redemption of Convertible
Preferred Stock and not otherwise registered pursuant to an effective
registration statement under the Securities Act shall bear a comparable
legend. The shares of Convertible Preferred Stock and the shares of Common
Stock issued upon conversion or redemption thereof and not otherwise
registered pursuant to an effective registration statement under the
Securities Act shall be subject to the restrictions on transfer set forth
in the legends referred to above until the third anniversary of the date of
original issuance of such shares of Convertible Preferred Stock; provided,
however, and notwithstanding the foregoing, such shares of Convertible
Preferred Stock and such shares of Common Stock may be resold under and
pursuant to the terms and conditions of Regulation S of the Securities Act,
prior to the end of the third anniversary date of the issuance of such
shares.
(ii) The certificates evidencing shares of Convertible Preferred Stock
(and shares of Common Stock issued upon conversion thereof and not
otherwise registered pursuant to an effective registration statement under
the Securities Act) issued to any "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is not a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act shall bear, until such time as the Corporation and the
transfer agent for the Convertible Preferred Stock or Common Stock shall
have received evidence satisfactory to each of them that the transfer of
such shares of Convertible Preferred Stock or Common Stock has been
effected in accordance with the limitations on transfer set forth in
paragraph (a)(1) above, the following additional legend:
"In connection with any transfer, the holder will deliver to the
registrar and transfer agent such certificates, opinions of counsel and
other information as it may reasonably require to confirm that the
transfer complies with the foregoing restrictions."
(b) Transfer Agent Requirements. The transfer agent and registrar for the
Convertible Preferred Stock and the transfer agent and registrar for the Common
Stock shall not be required to accept for registration of transfer any
Convertible Preferred Stock or Common Stock bearing the legend contained in
paragraph (a)(ii) above, except upon presentation of satisfactory evidence that
the restrictions on transfer of the Convertible Preferred Stock or Common Stock
referred to in the legend in paragraph (a)(i) have been complied with, all in
accordance with such reasonable regulations and procedures as the Corporation
may from time to time agree with the transfer agent and registrar for the
Convertible Preferred Stock and the transfer agent and registrar for the Common
Stock.
(11) 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 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;
"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; and
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed in its name by Mark A. Lettes, its Vice President and Chief Financial
Officer, and attested by its Secretary, this day of , 1995.
Amax Gold Inc.
By __________________________________
Mark A. Lettes
Vice President and
Chief Financial Officer
Attest:
By __________________________________
Deborah J. Friedman
Secretary
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APPENDIX E
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger Agreement")
is made as of April 27, 1995, by and between Amax Gold Inc., a Delaware
corporation ("Oldco"), and New AGI Corporation, a Delaware corporation
("Newco"). Oldco and Newco are sometimes referred to herein as the "Constituent
Corporations." The Boards of Directors of each of the Constituent Corporations
deem it advisable and to the advantage of each Constituent Corporation that
Oldco merge into Newco upon the terms and conditions herein provided.
NOW, THEREFORE, the parties do hereby adopt the plan encompassed by this
Merger Agreement and do hereby agree that Oldco shall merge into Newco on the
following terms, conditions and other provisions:
I. TERMS AND CONDITIONS
1.1 Merger. Oldco shall be merged with and into Newco, and Newco shall be the
surviving corporation (the "Surviving Corporation") effective upon the date and
time when this Merger Agreement, or a certificate of merger in lieu thereof, is
filed with the Secretary of State of the State of Delaware (the "Effective
Date").
1.2 Succession. On the Effective Date, Newco shall succeed to all of the
rights, privileges, powers and property, including without limitation all
rights, privileges, franchises, patents, trademarks, licenses, registrations
and other assets of every kind and description, of Oldco in the manner of and
as more fully set forth in Section 259 of the General Corporation Law of the
State of Delaware (the "DGCL").
1.3 Common Stock of Oldco and Newco. Upon the Effective Date, by virtue of
the merger and without any further action on the part of the Constituent
Corporations or their stockholders, (i) each share of Common Stock of Oldco,
par value $.01 per share ("Oldco Common Stock"), issued and outstanding
immediately prior thereto shall be changed and converted into one fully paid
and nonassessable share of Common Stock of Newco, par value $.01 per share
("Newco Common Stock"), (ii) each share of Newco Common Stock issued and
outstanding immediately prior thereto shall be cancelled and returned to the
status of authorized but unissued shares and (iii) each share of Oldco Common
Stock issued but held in the treasury of Oldco shall be cancelled.
1.4 Preferred Stock of Oldco. Upon the Effective Date, by virtue of the
merger and without any further action on the part of the Constituent
Corporations or their stockholders, (i) each share of Oldco $2.25 Series A
Convertible Preferred Stock, par value $1.00 per share, $3.75 Series B
Convertible Preferred Stock, par value $1.00 per share, and $2.25 Series C
Convertible Preferred Stock, par value $1.00 per share ("Oldco Preferred
Stock," and together with the Oldco Common Stock, "Oldco Stock"), issued and
outstanding immediately prior thereto shall be changed and converted into one
fully paid and nonassessable share of Newco $2.25 Series A Convertible
Preferred Stock, par value $1.00 per share, $3.75 Series B Convertible
Preferred Stock, par value $1.00 per share, and $2.25 Series C Convertible
Preferred Stock, par value $1.00 per share ("Newco Preferred Stock," and,
together with the Newco Common Stock, "Newco Stock"), and (ii) each share of
Oldco Preferred Stock issued but held in the treasury of Oldco shall be
cancelled.
1.5 Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of Oldco
Stock shall be deemed for all purposes to evidence ownership of and to
represent the shares of Newco Stock into which the shares of Oldco Stock
represented by such certificates have been converted as herein provided and
shall be so registered on the books and records of Newco or its transfer
agents. The registered owner of any such outstanding stock certificate shall,
until such certificate shall have been surrendered for transfer or otherwise
accounted for to Newco or its transfer agent, have and be entitled to exercise
any voting or other right with respect to and to receive any dividend or other
distribution upon the shares of Newco Stock evidenced by such outstanding
certificate as above provided.
1.6 Options. Upon the Effective Date, Newco will assume and continue all of
Oldco's stock option plans, including but not limited to the Amax Gold Inc.
1992 Stock Option Plan, and any other options,
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warrants or rights to acquire Oldco Stock and the outstanding and unexercised
portions of all options, warrants or rights to acquire Oldco Stock shall become
options for, warrants or rights to acquire the same number of shares of Newco
Stock with no other changes in the terms and conditions of such options,
warrants or rights to acquire, including exercise prices, and effective upon
the Effective Date, Newco hereby assumes the outstanding and unexercised
portions of such options, warrants or rights to acquire and the obligations of
Oldco with respect thereto.
II. CERTIFICATE OF INCORPORATION AND BY-LAWS
2.1 Certificate of Incorporation. The certificate of incorporation of Newco
shall be the certificate of incorporation of the Surviving Corporation (the
"Newco Charter"), provided, however, that Article FIRST of the Newco Charter
shall be amended to read in its entirety as follows:
The name of the corporation is Amax Gold Inc.
2.2 By-laws. The By-laws of Newco in effect on the Effective Date shall
continue to be the By-laws of the Surviving Corporation without change or
amendment until further amended in accordance with the provisions thereof and
applicable law.
III. DIRECTORS AND OFFICERS
3.1 Directors. The directors of Newco shall continue as directors of the
Surviving Corporation.
3.2 Officers. The officers of Oldco shall become the officers of the
Surviving Corporation to serve at the pleasure of its Board of Directors.
IV. MISCELLANEOUS
4.1 Further Assurances. From time to time, as and when required by Newco or
by its successors and assigns, there shall be executed and delivered on behalf
of Oldco such deeds and other instruments, and there shall be taken or caused
to be taken by it such further and other action, as shall be appropriate or
necessary in order to vest or perfect in or to conform of record or otherwise,
in Newco the title to and possession of all the property, interests, assets,
rights, privileges, immunities, powers, franchises, and authority of Oldco and
otherwise to carry out the purposes of this Merger Agreement, and the officers
and directors of Newco are fully authorized in the name and on behalf of Oldco
or otherwise to take any and all such action and to execute and deliver any and
all such deeds and other instruments.
4.2 Amendment. At any time before or after approval by the stockholders of
the Constituent Corporations, this Merger Agreement may be amended in any
manner (except as otherwise provided by the DGCL) as may be determined in the
judgment of the respective Boards of Directors of Newco and Oldco to be
necessary, desirable or expedient.
4.3 Termination. At any time before the Effective Date, this Merger Agreement
may be terminated and the merger may be terminated by the Board of Directors of
either Oldco or Newco or both, notwithstanding the approval of this Merger
Agreement by the stockholders of Oldco and Newco.
4.4 Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved by
the Board of Directors of Oldco and Newco, is hereby executed on behalf of each
Constituent Corporation by its duly authorized officer.
AMAX GOLD INC.
By: /s/ Mark A. Lettes
__________________________________
NEW AGI CORPORATION
By: /s/ Deborah J. Friedman
__________________________________
E-2
<PAGE>
APPENDIX F
CERTIFICATE OF INCORPORATION
OF
NEW AGI CORPORATION
ARTICLE 1
The name of the corporation is New AGI Corporation (hereinafter, the
"Corporation").
ARTICLE 2
The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE 3
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE 4
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is two hundred ten million (210,000,000), of
which ten million (10,000,000) shares shall be shares of Preferred Stock
(hereinafter referred to as the "Preferred Stock"), par value of one dollar
($1.00) per share, and two hundred million (200,000,000) shares shall be shares
of Common Stock (hereinafter referred to as the "Common Stock"), par value of
one cent ($0.01) per share.
A statement of the designations of the authorized classes of Preferred Stock
or of any series thereof, and the powers, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, or of the authority of the Board of
Directors to fix by resolution or resolutions such designations and other terms
not fixed by the Restated Certificate of Incorporation, is as follows:
A. The Preferred Stock may be issued in one or more series, from time to
time, with each such series to have 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 in accordance with the provisions hereof,
the Board of Directors being hereby expressly vested with authority to
adopt any such resolution or resolutions. The authority of the Board of
Directors with respect to each such series shall include, but not be
limited to, the determination or fixing of the following:
1. The distinctive designation and number of shares comprising such
series, which number may (except where otherwise provided by the Board
of Directors in creating such series) be increased or decreased (but
not below the number of shares then outstanding) from time to time by
like action of the Board of Directors;
2. The dividend rate of such series (which may be a floating or fixed
rate or rates and which may be determined by formula or formulas), the
conditions and times upon which such dividends
F-1
<PAGE>
shall be payable, the relation which such dividends shall bear to the
dividends payable on any other class or classes of stock or series
thereof, or any other series of the same class, and whether dividends
shall be cumulative or non-cumulative;
3. The conditions upon which the shares of such series shall be
subject to redemption by the Corporation and the times, prices and
other terms and provisions upon which the shares of the series may be
redeemed;
4. Whether or not the shares of the series shall be subject to the
operation of a retirement or sinking fund to be applied to the purchase
or redemption of such shares and, if such retirement or sinking fund be
established, the annual amount thereof and the terms and provisions
relative to the operation thereof;
5. Whether or not the shares of the series shall be convertible into
or exchangeable for shares of any other class or classes, with or
without par value, or of any other series of the same class, and, if
provision is made for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or
exchange;
6. Whether or not the shares of the series shall have voting rights,
in addition to the voting rights provided by law, and, if so, the terms
of such voting rights;
7. The rights of the shares of the series in the event of voluntary
or involuntary liquidation, dissolution, or upon the distribution of
assets of the Corporation; and
8. Any other powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of such series, as the Board of
Directors may deem advisable and as shall not be inconsistent with the
provisions of this Restated Certificate of Incorporation.
B. The holders of shares of the Preferred Stock of each series shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available for the payment of dividends, dividends at the rate
or rates fixed by the Board of Directors for such series, or determined in
the manner prescribed in the resolution or resolutions by the Board of
Directors creating such series, and no more, before any dividends, other
than dividends payable in Common Stock, shall be declared and paid, or set
apart for payment, on the Common Stock with respect to the same dividend
period.
C. Whenever, at any time, dividends on the then outstanding Preferred
Stock as may be required with respect to any series outstanding shall have
been paid or declared and set apart for payment on the then outstanding
Preferred Stock, and after complying with respect to any retirement or
sinking fund or funds for any series of Preferred Stock, the Board of
Directors may, subject to the provisions of the resolution or resolutions
creating any series of Preferred Stock, declare and pay dividends on the
Common Stock, and the holders of shares of the Preferred Stock shall not be
entitled to share therein.
D. The holders of shares of the Preferred Stock of each series shall be
entitled upon liquidation or dissolution or upon the distribution of the
assets of the Corporation to such preferences as provided in the resolution
or resolutions creating such series of Preferred Stock, and no more, before
any distribution of the assets of the Corporation shall be made to the
holders of shares of the Common Stock. Whenever the holder of shares of the
Preferred Stock shall have been paid in full amounts to which they shall be
entitled, the holders of shares of the Common Stock shall be entitled to
share ratably in all assets of the Corporation then remaining.
At all meetings of the stockholders of the Corporation, the holders of shares
of the Common Stock shall be entitled to one vote for each share of Common
Stock held by them. Except as otherwise provided by a resolution or resolutions
of the Board of Directors creating any series of Preferred Stock or by the
General Corporation Law of Delaware, the holders of shares of the Common Stock
issued and outstanding shall have and possess the exclusive right to notice of
stockholders' meetings and the exclusive power to vote.
F-2
<PAGE>
ARTICLE 5
The Board of Directors of the Corporation is expressly authorized to adopt,
amend or repeal by-laws of the Corporation.
ARTICLE 6
The name and mailing address of the incorporator is:
Paul Hilton
Davis, Graham & Stubbs, L.L.C.
370 Seventeenth Street, Suite 4700
Denver, CO 80202
ARTICLE 7
The name and mailing address of the person who is to serve as director until
the first annual meeting of stockholders or until her successor is elected and
qualify are:
Deborah J. Friedman
9100 East Mineral Circle
Englewood, CO 80112
ARTICLE 8
A director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of Delaware as currently in effect
or as the same may hereafter be amended.
No amendment, modification or repeal of this Article 8 shall adversely affect
any right or protection of a director that exists at the time of such
amendment, modification or repeal.
ARTICLE 9
The Corporation reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in this Restated
Certificate of Incorporation in the manner now or hereafter prescribed by law;
and all rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Restated Certificate of Incorporation in its present form or as hereafter
amended are granted subject to the rights reserved in this Article 9.
ARTICLE 10
The Corporation elects not to be governed by Section 203 of the General
Corporation Law of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of this
13th day of April, 1995.
Incorporator:
/s/ Paul Hilton
-------------------------------------
Paul Hilton
F-3
<PAGE>
APPENDIX G
Salomon Brothers Inc
8700 Sears Tower
Chicago, Illinois 60606
312-876-8700
----------------
SALOMON BROTHERS
----------------
Salomon Brothers Inc & Worldwide Affiliates Atlanta Berlin Boston Chicago
Dallas Frankfurt Hong Kong London Los Angeles Madrid Melbourne New York Osaka
Paris San Francisco Seoul Singapore Sydney Taipei Tokyo Toronto Zurich
April 27, 1995
Amax Gold Inc.
9100 East Mineral Circle
Englewood, Colorado 80112
Attention: Audit Committee of the Board of Directors
Gentlemen:
Reference is made to the engagement, confirmed in the letter dated February
16, 1995, between Amax Gold Inc., a Delaware corporation (the "Company"), and
Salomon Brothers Inc. This opinion is delivered to you pursuant to such
engagement letter.
You have advised us that the Company and Cyprus Amax Minerals Company, a
Delaware corporation ("Cyprus Amax"), have entered into a financing
arrangement pursuant to a Revolving Credit Agreement, dated as of March 10,
1995 (the "Agreement"), between the Company and Cyprus Amax. The Agreement
provides for the availability by Cyprus Amax of an $80 million double
convertible line of credit ("DOCLOC II") to the Company. The availability of
the DOCLOC II to the Company is referred to herein as the "Transaction." You
have asked us to advise you with respect to the fairness, from a financial
point of view, of the Transaction to the Company's shareholders generally
(solely in their capacity as such), exclusive of Cyprus Amax and its
affiliates.
As you are aware, Salomon Brothers Inc has acted as financial advisor to the
Company in connection with the Transaction and will receive a fee for our
services. Additionally, Salomon Brothers has previously rendered financial
advisory and investment banking services to the Company for which we have
received customary compensation. In the ordinary course of our securities
business we trade the debt or equity securities of the Company and Cyprus Amax
for our own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
G-1
<PAGE>
Salomon Brothers Inc
Amax Gold Inc.
April 27, 1995
Page 2
----------------
SALOMON BROTHERS
----------------
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) the Agreement; (ii) the letter
agreement between the Company and Cyprus Amax (including a summary of terms of
the Agreement) dated February 16, 1995; (iii) the Proxy Statement of the
Company, dated the date hereof; (iv) certain publicly-available business and
financial information concerning the Company and Cyprus Amax; (v) certain
internal information primarily financial in nature (including projections,
forecasts, estimates and analyses prepared by or on behalf of the Company's
management), concerning the business, assets, liabilities, operations and
prospects of the Company and the anticipated effects on the Company of the
consummation or the non-consummation of the Transaction, including
alternatives to implementing the Transaction, furnished to us by or on behalf
of the Company; (vi) certain publicly-available and other information
concerning the trading of, and the trading market for, the publicly traded
securities of the Company; (vii) certain publicly-available information with
respect to other companies that we believe to be comparable in certain
respects to the Company; (viii) the proposed resolution of certain existing
financial and other relationships between the Company and its banks with
respect to certain project financings; (ix) the flexibility provided by DOCLOC
II to further the continued development of certain existing mining projects,
including the Fort Knox gold project; (x) the Company's public filings; and
(xi) such other information that we have considered relevant to our inquiry.
We have held discussions with certain members of the Company's senior
management and its representatives about the Company's views as to the
financial and other information described above and other matters we believe
relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all financial and other
information provided to or reviewed for us or publicly available and have not
attempted independently to verify any of such information, including, without
limitation, the Company's views discussed above, nor have we assumed any
responsibility for any independent verification of any of such information. We
have also relied upon the reasonableness and accuracy of the financial
projections, forecasts, estimates and analyses, including, without limitation,
those forecasts, estimates and analyses relating to the cash flows and value
of assets and current and contingent liabilities of the Company at present and
on a pro forma basis, assuming the Transaction is consummated, provided to or
reviewed for us and we have assumed that they were all reasonably prepared in
accordance with accepted industry practice on bases reflecting the best
currently available estimates and judgment of the Company's management.
To the extent that evaluation of the Transaction requires analysis of legal,
as opposed to financial matters, including, without limitation, all matters
related to identifying and quantifying current and pro forma off balance sheet
liabilities, we have relied, with your consent, on the views of the Company
and its counsel with respect to these matters.
We have not made or obtained any independent evaluations or appraisals of
any of the Company's assets, properties, liabilities or securities, nor have
we assumed any responsibility to
G-2
<PAGE>
Salomon Brothers Inc
Amax Gold Inc.
April 27, 1995
Page 3
----------------
SALOMON BROTHERS
----------------
make or obtain any such independent evaluations or appraisals, nor have we
been furnished with any such evaluations or appraisals other than certain
evaluations and market studies provided to us by the Company. We have assumed
that the terms of the Agreement are the most beneficial terms from the
Company's perspective that could, under the circumstances, be negotiated among
the parties to the Transaction. We did not participate in such negotiations
and have not been authorized to, and we have not, solicited or investigated
alternative transactions which might be available to the Company. We were not
requested to, and did not, solicit third party indications of interest in
entering into a transaction of the nature comprising the Transaction; although
it should be noted that we acted as lead manager on a $92 million convertible
preferred stock offering, unrelated to the Transaction, for the Company which
closed in August 1994, and, unrelated to the Transaction, have been named as a
potential underwriter in connection with the Company's Registration Statement
on Form S-3 for a universal shelf covering the offering from time to time of
subordinated debt, preferred stock, common stock and/or warrants to acquire
common stock, which the Securities and Exchange Commission declared effective
in July 1994.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other information, including the
financial and non-financial judgments and views of the Company's management
and representatives, along with other factors, including, without limitation,
the information (including the financial projections, forecasts, estimates and
analyses) discussed above, as we have deemed appropriate under the
circumstances. In addition, we have taken into account limited discussions
which we had with certain of the Company's lenders. We have also taken into
account our assessment of general economic, market and financial conditions
generally and the particular circumstances currently applicable to the
Company. Our opinion necessarily is based upon conditions and circumstances as
they exist and could be evaluated as of the date hereof and does not address
the underlying business decision of the Company to effect the Transaction or
constitute a recommendation to any holder of the Company's common stock as to
how the stockholder should vote with respect to the Transaction.
Based upon and subject to the foregoing and in light of the particular
circumstances currently applicable to the Company, it is our opinion as
investment bankers that, as of the date hereof, the Transaction is fair, from
a financial point of view, to the Company's shareholders generally (solely in
their capacity as such), exclusive of Cyprus Amax and its affiliates.
Very truly yours,
Salomon Brothers
G-3
<PAGE>
Salomon Brothers Inc
8700 Sears Tower
Chicago, Illinois 60606
312-876-8700
----------------
SALOMON BROTHERS
----------------
Salomon Brothers Inc& Worldwide Affiliates Atlanta Berlin Boston Chicago
Dallas Frankfurt Hong Kong London Los Angeles Madrid Melbourne New York Osaka
Paris San Francisco Seoul Singapore Sydney Taipei Tokyo Toronto Zurich
April 27, 1995
Amax Gold Inc.
9100 East Mineral Circle
Englewood, Colorado 80112
Attention: Audit Committee of the Board of Directors
Gentlemen:
Reference is made to the engagement, confirmed in the letter dated February
16, 1995, between Amax Gold Inc., a Delaware corporation (the "Company"), and
Salomon Brothers Inc. This opinion is delivered to you pursuant to such
engagement letter.
You have advised us that last year the Company and Cyprus Amax Minerals
Company, a Delaware corporation ("Cyprus Amax"), entered into a financing
arrangement which was effected pursuant to the Revolving Credit Agreement,
dated as of April 15, 1994, (the "Agreement"), between the Company and Cyprus
Amax. The Agreement provides for the availability by Cyprus Amax of a $100
million double convertible line of credit ("DOCLOC I") to the Company. In
addition, you have advised us that the Company and Cyprus Amax have entered
into an agreement dated March 10, 1995, to amend the Agreement by extending
its termination date from April 30, 1997 to December 31, 2001. This amendment
to the Agreement is referred to herein as the "Amendment." You have asked us
to advise you with respect to the fairness, from a financial point of view, of
the Amendment to the Company's shareholders generally (solely in their
capacity as such), exclusive of Cyprus Amax and its affiliates.
As you are aware, Salomon Brothers Inc has acted as financial advisor to the
Company in connection with the Amendment and will receive a fee for our
services. Additionally, Salomon Brothers has previously rendered financial
advisory and investment banking services to the Company for which we have
received customary compensation. In the ordinary course of our securities
business we trade the debt or equity securities of the Company and Cyprus Amax
for our own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
G-4
<PAGE>
Salomon Brothers Inc
Amax Gold Inc.
April 27, 1995
Page 2
----------------
SALOMON BROTHERS
----------------
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) the Agreement; (ii) the Amendment;
(iii) the Proxy Statement of the Company, dated the date hereof; (iv) certain
publicly-available business and financial information concerning the Company
and Cyprus Amax; (v) certain internal information primarily financial in
nature (including projections, forecasts, estimates and analyses prepared by
or on behalf of the Company's management), concerning the business, assets,
liabilities, operations and prospects of the Company and the anticipated
effects on the Company of the consummation or the non-consummation of the
Amendment; (vi) certain publicly-available and other information concerning
the trading of, and the trading market for, the publicly traded securities of
the Company; (vii) certain publicly-available information with respect to
other companies that we believe to be comparable in certain respects to the
Company; (viii) the proposed resolution of certain existing financial and
other relationships between the Company and its banks with respect to certain
project financings; (ix) the proposed $80 million double convertible line of
credit ("DOCLOC II") to be provided to the Company by Cyprus Amax pursuant to
the Revolving Credit Agreement, dated as of March 10, 1995, between the
Company and Cyprus Amax; (x) the Company's public filings; and (xi) such other
information that we have considered relevant to our inquiry. We have held
discussions with certain members of the Company's senior management and its
representatives about the Company's views as to the financial and other
information described above and other matters we believe relevant to our
inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all financial and other
information provided to or reviewed for us or publicly available and have not
attempted independently to verify any of such information, including, without
limitation, the Company's views discussed above, nor have we assumed any
responsibility for any independent verification of any of such information. We
have also relied upon the reasonableness and accuracy of the financial
projections, forecasts, estimates and analyses, including, without limitation,
those forecasts, estimates and analyses relating to the cash flows and value
of assets and current and contingent liabilities of the Company at present and
on a pro forma basis, assuming the Amendment is consummated, provided to or
reviewed for us and we have assumed that they were all reasonably prepared in
accordance with accepted industry practice on bases reflecting the best
currently available estimates and judgment of the Company's management.
To the extent that evaluation of the Amendment requires analysis of legal,
as opposed to financial matters, including, without limitation, all matters
related to identifying and quantifying current and pro forma off balance sheet
liabilities, we have relied, with your consent, on the views of the Company
and its counsel with respect to these matters.
We have not made or obtained any independent evaluations or appraisals of
any of the Company's assets, properties, liabilities or securities, nor have
we assumed any responsibility to make or obtain any such independent
evaluations or appraisals, nor have we been furnished with
G-5
<PAGE>
Salomon Brothers Inc
Amax Gold Inc.
April 27, 1995
Page 3
----------------
SALOMON BROTHERS
----------------
any such evaluations or appraisals other than certain evaluations and market
studies provided to us by the Company. We have assumed that the terms of the
Amendment are the most beneficial terms from the Company's perspective that
could under the circumstances, be negotiated among the parties to the
Amendment. We did not participate in such negotiations and have not been
authorized to, and we have not, solicited or investigated alternative
transactions which might be available to the Company. We were not requested
to, and did not, solicit third party indications of interest in entering into
a transaction of the nature comprising the Agreement, as amended by the
Amendment; although it should be noted that we acted as lead manager on a $92
million convertible preferred stock offering, unrelated to the Agreement or
Amendment, for the Company which closed in August 1994, and, unrelated to the
Agreement or Amendment, have been named as a potential underwriter in
connection with the Company's Registration Statement on Form S-3 for a
universal shelf covering the offering from time to time of subordinated debt,
preferred stock, common stock and/or warrants to acquire common stock, which
the Securities and Exchange Commission declared effective in July 1994.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other information, including the
financial and non-financial judgments and views of the Company's management
and representatives, along with other factors, including, without limitation,
the information (including the financial projections, forecasts, estimates and
analyses) discussed above, as we have deemed appropriate under the
circumstances. In addition, we have taken into account limited discussions
which we had with certain of the Company's lenders. We have also taken into
account our assessment of general economic, market and financial conditions
generally and the particular circumstances currently applicable to the
Company. Our opinion necessarily is based upon conditions and circumstances as
they exist and could be evaluated as of the date hereof and does not address
the underlying business decision of the Company to effect the Amendment or
constitute a recommendation to any holder of the Company's common stock as to
how such stockholder should vote with respect to the Amendment.
Based upon and subject to the foregoing and in light of the particular
circumstances currently applicable to the Company, it is our opinion as
investment bankers that, as of the date hereof, the Amendment is fair, from a
financial point of view, to the Company's shareholders generally (solely in
their capacity as such), exclusive of Cyprus Amax and its affiliates.
Very truly yours
Salomon Brothers
G-6
<PAGE>
- -------------------------------------------------------------------------------
P R O X Y
AMAX GOLD INC.
THIS PROXY/VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OR THE TRUSTEE NAMED BELOW
The undersigned hereby appoints Milton H. Ward, Roger A. Kauffman and
Deborah J. Friedman, and each or any of them, the proxies and agents of the
undersigned, with full power of substitution, to represent and vote in
accordance with the instructions on the reverse side all the shares of the
Common Stock of Amax Gold Inc. held of record by the undersigned at the close
of business on April 10, 1995 at the Annual Meeting of Stockholders of Amax
Gold Inc. to be held at the Inverness Hotel & Golf Club, Inverness Business
Park, 200 Inverness Drive West, Englewood, Colorado 80112, on June 2, 1995 at
10:00 a.m. (Denver time) or at any adjournment thereof. The undersigned
directs the Trustee of the Thrift Plan for Employees of Amax Gold Inc. and Its
Subsidiaries (the "Plan"), with respect to shares of Common Stock held for the
benefit of the undersigned, to vote in person or by proxy at such Annual
Meeting, all shares held by or for the benefit of the undersigned in
accordance with such instructions. The Trustee of the Plan will vote
unallocated and undirected shares of the Company's Common Stock held by them
in direct proportion to the voting of shares for which instructions have been
received.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 THROUGH 5
AND AGAINST PROPOSAL 6, EXCEPT AS NOTED ABOVE WITH RESPECT TO THE PLAN.
THE BOARD RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5 AND AGAINST
PROPOSAL 6.
ELECTION OF DIRECTORS. Nominees:
Allen Born, Gerald J. Malys, Rockwell A. Schnabel, Vernon F. Taylor, Jr.,
Milton H. Ward and Russell L. Wood
INSTRUCTIONS: To withhold authority to vote for one or more nominees, write
the name of each nominee for whom authority is withheld in the space provided
on the reverse side. UNLESS AUTHORITY TO VOTE FOR ALL NOMINEES IS WITHHELD, A
VOTE FOR THE ELECTION OF DIRECTORS WILL BE DEEMED TO CONFER AUTHORITY TO VOTE
FOR ANY NOMINEE WHOSE NAME IS NOT WRITTEN IN THE SPACE PROVIDED ON THE REVERSE
SIDE AND FOR ANOTHER NOMINEE IF ANY OF THE NAMED NOMINEES IS UNABLE TO SERVE
OR FOR GOOD CAUSE WILL NOT SERVE.
(Continued and to be signed on other side)
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
[X] Please mark
your votes
as in this
example
-------- -----------------------
COMMON DIVIDEND REINVESTMENT
THE BOARD RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3, 4 AND 5.
1. Election of Directors. (see reverse)
FOR WITHHELD
[_] [_]
For, except vote withheld for the following nominee(s):
- -------------------------------------------------------------------------------
2. The selection of Price Waterhouse LLP as independent accountants.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. DOCLOC I Amendment, pursuant to which DOCLOC I will be extended to December
31, 2001.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. DOCLOC II, pursuant to which Cyprus will provide an $80 million convertible
line of credit and up to 1,600,000 shares of Series C Preferred Stock and up
to 14,919,806 shares of Common Stock may be issued to Cyprus.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. Reincorporation, pursuant to which the Company will elect not to be
governed by Section 203 of the Delaware Law, thereby permitting the Company to
engage in business transactions with Cyprus (or any interested stockholder)
without requiring the approval of 66 2/3% of all stockholders excluding Cyprus
(or the interested stockholder) and its affiliates and associates.
FOR AGAINST ABSTAIN
[_] [_] [_]
- -------------------------------------------------------------------------------
THE BOARD RECOMMENDS A VOTE AGAINST PROPOSAL 6.
- -------------------------------------------------------------------------------
6. Stockholder proposal to permit cumulative voting.
FOR AGAINST ABSTAIN
[_] [_] [_]
- -------------------------------------------------------------------------------
7. Transact such other business as may properly come before the meeting or any
adjournments thereof.
___
|
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PREPAID ENVELOPE.
Signature ______________ Date ________ Signature ______________ Date ________
NOTE: Please sign exactly as name appears. Joint owners should each sign. If
signing as attorney, executor, administrator, agent, trustee or guardian,
please give full title as such. If signing on behalf of a corporation, the
full corporate name should be included and an authorized corporate officer
should sign. If signing on behalf of a partnership, the full partnership name
should be included and an authorized person should sign.
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