<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[x] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Amax Gold, Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(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
August 19, 1996
Dear Stockholders:
On behalf of the management of Amax Gold Inc. (the "Company"), we urge you
to provide your consent to the Company's new financing arrangement with Cyprus
Amax Minerals Company ("Cyprus Amax"). The financial support provided to the
Company by Cyprus Amax under the arrangement is described in the attached
consent solicitation materials.
For 1996 and 1997 the Company's primary goal is to complete three major
development projects in three major gold districts around the globe, Refugio
in Chile, Fort Knox in Alaska, and Kubaka in Far Eastern Russia. These
projects contain proven and probable reserves of over 7.0 million ounces of
gold, and they represent the cornerstone of the Company's strategic growth
plan. Bringing these projects into production should dramatically increase
production, decrease cash costs and transform the Company into a major
international gold producer. But, as the year has progressed, Refugio has
commenced initial production amid continuing start-up problems, while Kubaka
and Fort Knox have experienced increases in estimated costs to reach
production. These projected cost overruns have presented the need for
additional financing. Cyprus Amax has agreed to provide additional financial
support and we are very enthusiastic about the potential of these projects and
our new management team's ability to bring the projects into production
successfully.
The need for additional financial support became clear in February and March
1996 as the Company faced significantly increased projections for capital
costs at the Fort Knox project and the need to restructure the Company's $250
million bank loan. Presented with the potential violation of covenants under
the bank loan and the need for additional financing to keep the Company's
development projects on course, the Company and Cyprus Amax reached agreements
under which Cyprus Amax would provide the Company with the necessary financial
support. Under those agreements, Cyprus Amax would guaranty the $250 million
bank loan until economic completion of Fort Knox and would provide the Company
with a $250 million demand loan facility and in exchange the Company would pay
finance, guaranty and interest differential fees to Cyprus Amax, grant
security interests in the collateral for the bank loan to Cyprus Amax and not
borrow additional amounts from Cyprus Amax under an existing line of credit
without its prior consent.
Cyprus Amax may request payment of these obligations in cash or Common Stock
of the Company, valued at an average market price at the time of payment.
Assuming that Cyprus Amax elects to receive all payments in shares of Common
Stock, that the guaranty of the bank loan is not called and that between $150
and $250 million is borrowed from Cyprus Amax under the new demand loan
facility, the ownership of the Company's outstanding Common Stock by Cyprus
Amax would increase from 51.2 percent currently to between 62.8 percent and
67.4 percent. If Cyprus Amax elects to receive all payments in cash, no shares
of Common Stock would be issued under the new financing arrangement.
The Special Committee of the Board of Directors, acting on behalf of the
Board, approved the proposed financing arrangement with Cyprus Amax, and the
Special Committee has concluded the financing arrangement is fair to the
stockholders of the Company, other than Cyprus Amax and its affiliates. The
Special Committee considered the range of the potential costs associated with
the completion of the Fort Knox project, as well as the relative costs to the
Company of the proposed financing and alternative financings, the nature of
Cyprus Amax's commitment to the Company and Cyprus Amax's expressed intention
to make additional needed financing available to the Company.
The Special Committee of the Board of Directors recommends that stockholders
consent to the financing arrangement with Cyprus Amax.
<PAGE>
The potential payment of amounts owed under the financing arrangement with
Common Stock requires the approval of the Company's stockholders under the
rules of the New York Stock Exchange, and therefore we are seeking your
consent to the financing arrangement.
We urge you to consider carefully the information in the attached consent
solicitation materials. It is important to us that your vote be represented.
Cyprus Amax owns approximately 51 percent of the outstanding shares of Common
Stock of the Company and has agreed to consent to the financing arrangement.
The consent of Cyprus Amax will be sufficient to approve the proposal without
the consent of any other stockholder. Please indicate your decision on the
enclosed Consent Form, and date, sign and return it in the enclosed envelope.
Sincerely,
[SIGNATURE OF MILTON H. WARD APPEARS HERE]
Milton H. Ward
Chairman of the Board and
Chief Executive Officer
[SIGNATURE OF S. SCOTT SHELLHAAS APPEARS HERE]
S. Scott Shellhaas
President and Chief Operating Officer
<PAGE>
[LOGO OF AMAX GOLD INC. APPEARS HERE]
CONSENT SOLICITATION STATEMENT
DATED AUGUST 19, 1996
This Consent Solicitation Statement is being furnished to the stockholders
of Amax Gold Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of consents 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 August 15, 1996 (the "Record Date").
This Consent Solicitation Statement and the form of Consent enclosed
herewith are being mailed to the stockholders of the Company on or about
August 19, 1996.
Stockholders are being asked to approve a financing arrangement with Cyprus
Amax Minerals Company, a Delaware corporation ("Cyprus Amax"), and a
stockholder owning 51.2 percent of the outstanding shares of Common Stock of
the Company, under which Cyprus Amax has guaranteed (the "Cyprus Amax
Guaranty") the Company's $250 million secured financing (the "Loan") until
economic completion of the Company's Fort Knox project and has provided the
Company with a $250 million demand loan facility (the "Demand Loan Facility"),
in exchange for which the Company will (i) pay Cyprus Amax a financing and
guaranty fee of $10 million (the "Financing and Guaranty Fee"), (ii) pay
Cyprus Amax 1.75 percent on amounts outstanding under the Loan (the "Interest
Differential Payments"), (iii) reimburse Cyprus Amax for any payments made or
costs incurred under the Cyprus Amax Guaranty (the "Reimbursement Payments"),
(iv) make no additional borrowings under the Company's existing $100 million
convertible line of credit with Cyprus Amax ("DOCLOC I") without the prior
consent of Cyprus Amax, and (v) grant Cyprus Amax a first priority security
interest in the collateral for the Loan, and if requested, security interests
in certain additional assets to the extent available; all of the Company's
obligations to Cyprus Amax are payable in cash or, at the election of Cyprus
Amax, in shares of Common Stock, valued at the time of issuance of the shares.
Stockholder approval shall include, but not be limited to, approval of the
authorization and issuance of shares of Common Stock to Cyprus Amax under the
foregoing arrangement (the "Financing Arrangement" or the "Proposal").
Cyprus Amax has the right to request that the Company pay amounts due under
the Financing Arrangement in cash or shares of Common Stock. The Company would
issue to Cyprus Amax between approximately 30.2 million and 48.3 million
shares (based on an assumed price per share of Common Stock of $6.125, the
closing sale price of the Common Stock on the Record Date) under the
transactions contemplated by the Proposal, assuming that Cyprus Amax elects to
receive all payments in shares of Common Stock, that the Cyprus Amax Guaranty
is not called and that between $150 million and $250 million is borrowed under
the Demand Loan Facility (with interest accruing over the period from April 1,
1996 through December 31, 1997). If Cyprus Amax elects to receive all payments
in cash, no shares of Common Stock would be issued under the Financing
Arrangement. See "CAPITALIZATION," "THE PROPOSAL--Background" and "THE
PROPOSAL--Effects of the Proposal Upon the Rights of Existing Holders of
Common Stock."
Pursuant to the General Corporation Law of the State of Delaware ("Delaware
Law"), approval of the Proposal requires the consent of at least a majority of
the shares of Common Stock outstanding as of the Record Date. Abstentions and
broker non-votes will have the effect of withholding consent. Cyprus Amax
holds approximately 51.2 percent of the outstanding shares of Common Stock.
The consent of Cyprus Amax will be sufficient to approve the Proposal without
the consent of any other stockholder. See "THE PROPOSAL--Effects Upon Rights
of Existing Holders of Common Stock." Cyprus Amax has agreed to consent to the
Proposal and has advised the Company that Cyprus Amax will give its consent to
the Proposal at 5:00 p.m., Mountain Time, on September 19, 1996 (the
"Expiration Time"). Upon receipt of the written consent of Cyprus Amax, the
Proposal will be adopted. Prior to the Expiration Time, consents may be
revoked. Subsequent to the Expiration Time, the Company will not consider any
additional consents, and consents previously delivered may not be revoked.
<PAGE>
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS CONSENT SOLICITATION
STATEMENT, THE COMPANY WILL ACCEPT ALL WRITTEN CONSENTS FROM HOLDERS OF RECORD
ON THE RECORD DATE RECEIVED ON OR PRIOR TO THE EXPIRATION TIME (5:00 P.M.,
MOUNTAIN TIME, ON SEPTEMBER 19, 1996).
The Proposal is being submitted to stockholders for their consent to satisfy
a rule of the New York Stock Exchange (the "NYSE"), which requires the
approval of a majority of the consents received on the Proposal (provided that
the total consents received on the Proposal represent over 50 percent of the
shares of Common Stock outstanding on the Record Date) as a prerequisite to
the listing of the Common Stock to be issued to Cyprus Amax in connection with
the Financing Arrangement, on the basis that the Proposal contemplates that a
"tangible or intangible asset" is to be acquired directly or indirectly from a
substantial security holder of the Company (a holder of five percent or more
of the Company's outstanding shares of Common Stock) and the number of shares
of Common Stock to be issued in such transaction may exceed one percent of the
number of shares of Common Stock outstanding before such issuance. The Common
Stock also is listed on The Toronto Stock Exchange (the "TSE"), and rules of
the TSE also require stockholder approval in certain circumstances.
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 and Russia. The Company was
incorporated in Delaware in April 1987 and is the surviving corporation
following a reincorporation merger effective June 1995. The Company's
principal offices are located at 9100 East Mineral Circle, Englewood, Colorado
80112, and its telephone number is (303) 643-5500.
For additional information regarding the business of the Company, see
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY CONCERNING THE PROPOSAL IF NOT
CONTAINED IN THIS CONSENT SOLICITATION STATEMENT, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS CONSENT SOLICITATION STATEMENT DOES NOT CONSTITUTE THE
SOLICITATION OF A CONSENT BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH SOLICITATION
IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
SOLICITATION. DELIVERY OF THIS CONSENT SOLICITATION STATEMENT SHALL NOT, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR THEREIN SINCE THE DATE OF THIS CONSENT
SOLICITATION STATEMENT.
The date of this Consent Solicitation Statement is August 19, 1996.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 4
The Proposal............................................................ 4
The Company............................................................. 4
Cyprus Amax............................................................. 4
Relationship Between the Company and Cyprus Amax........................ 4
Background of and Reasons for the Financing Arrangement................. 5
Recommendation of the Special Committee................................. 6
Consent Solicitation.................................................... 6
Effects of the Proposal Upon Rights of Existing Holders of Common
Stock.................................................................. 7
STOCKHOLDER ACTION BY WRITTEN CONSENT..................................... 8
Recommendation of the Special Committee................................. 8
Record Date............................................................. 8
Consent Procedures; Revocation of Consents.............................. 8
Consents Required....................................................... 8
Cost of Solicitation.................................................... 9
MARKET PRICES OF THE COMPANY'S STOCK...................................... 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS........................... 10
CERTAIN TRANSACTIONS-RELATIONSHIP WITH CYPRUS AMAX........................ 11
Agreements with Cyprus Amax............................................. 11
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS.............................. 13
THE PROPOSAL.............................................................. 14
Background.............................................................. 14
Reasons for the Financing Arrangement; Recommendation of the Special
Committee.............................................................. 16
Material Terms of the Cyprus Amax Guaranty.............................. 17
Material Terms of the Demand Loan Facility.............................. 18
Fee and Support Agreements.............................................. 19
Consent of Cyprus Amax; Intention of the Directors and Executive
Officers............................................................... 20
Effects of the Proposal Upon Rights of Existing Holders of Common
Stock.................................................................. 20
CAPITALIZATION............................................................ 22
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY............................... 23
Common Stock............................................................ 23
Preferred Stock......................................................... 23
PROPOSALS FOR 1997 ANNUAL MEETING......................................... 26
AVAILABLE INFORMATION..................................................... 26
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... 27
</TABLE>
APPENDIX A--Cyprus Amax Guaranty
APPENDIX B--Demand Loan Facility
APPENDIX C--Fee and Support Agreements
3
<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 Consent Solicitation
Statement, the Appendices hereto and the documents incorporated herein by
reference. Stockholders are urged to read carefully, in their entirety, this
Consent Solicitation Statement, the Appendices hereto and the documents
incorporated herein by reference.
THE PROPOSAL
Stockholders are being asked to approve the Financing Arrangement under which
Cyprus Amax has provided the Cyprus Amax Guaranty for the Loan until economic
completion of the Fort Knox project and has provided the Company with the
Demand Loan Facility, in exchange for which the Company will (i) pay Cyprus
Amax the Financing and Guaranty Fee, (ii) pay Cyprus Amax Interest Differential
Payments, (iii) make Reimbursement Payments to Cyprus Amax for any payments
made or costs incurred under the Cyprus Amax Guaranty, (iv) make no additional
borrowings under DOCLOC I without the prior consent of Cyprus Amax, and (v)
grant Cyprus Amax a first priority security interest in the collateral for the
Loan, and if requested, security interests in certain additional assets to the
extent available; all of the Company's obligations to Cyprus Amax are payable
in cash or, at the election of Cyprus Amax, in shares of Common Stock, valued
at the average closing price per share for the five-day period ending on the
business day prior to the date payment is requested. Stockholder approval shall
include, but not be limited to, approval of the authorization and issuance of
shares of Common Stock to Cyprus Amax under the foregoing arrangement.
The number of shares of Common Stock that will be issued to Cyprus Amax
pursuant to the Financing Arrangement will depend on a number of factors
described in this Consent Solicitation Statement. Cyprus Amax has the right to
request that the Company pay amounts due under the Financing Arrangement in
cash or shares of Common Stock. The Company would issue to Cyprus Amax between
approximately 30.2 million and 48.3 million shares (based on an assumed price
per share of Common Stock of $6.125) under the transactions contemplated by the
Proposal, assuming that Cyprus Amax elects to receive all payments in shares of
Common Stock, that the Cyprus Amax Guaranty is not called and that between $150
million and $250 million is borrowed under the Demand Loan Facility (with
interest accruing over the period from April 1, 1996 through December 31,
1997). If Cyprus elects to receive all payments in cash, no shares of Common
Stock would be issued under the Financing Arrangement. See "CAPITALIZATION,"
"THE PROPOSAL--Background" and "THE PROPOSAL--Effects of the Proposal Upon the
Rights of Existing Holders of Common Stock."
THE COMPANY
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 and Russia.
CYPRUS AMAX
Cyprus Amax is a diversified mining company engaged in the exploration for
and the extraction, processing and marketing of mineral resources, primarily
copper, molybdenum, coal, lithium and gold.
RELATIONSHIP BETWEEN THE COMPANY AND CYPRUS AMAX
Cyprus Amax currently owns 49,361,557 shares or approximately 51.2 percent of
the outstanding shares of Common Stock of the Company. Directors and officers
of Cyprus Amax comprise four of the seven members of the Company's Board.
Milton H. Ward, Chairman of the Board of Directors and Chief Executive Officer
of the Company, is Chairman of the Board of Directors, President and Chief
Executive Officer of Cyprus Amax; Gerald J. Malys, a director of the Company,
is Senior Vice President and Chief Financial Officer of Cyprus Amax; and Allen
Born and Rockwell A. Schnabel, both directors of the Company, are directors of
Cyprus Amax.
4
<PAGE>
Cyprus Amax is party to a number of contracts with the Company, including
DOCLOC I, a Stock Issuance Agreement, the Kubaka Acquisition Agreement, an
Exploration Joint Venture Agreement, a Services Agreement, an Employee Transfer
Agreement and a Net Operating Loss Agreement. See "CERTAIN TRANSACTIONS--
RELATIONSHIP WITH CYPRUS AMAX."
BACKGROUND OF AND REASONS FOR THE FINANCING ARRANGEMENT
In January 1992, the Company acquired the Fort Knox gold project located in
the Fairbanks Mining District, approximately 15 miles northeast of Fairbanks,
Alaska. Construction of the Fort Knox project began in the first quarter of
1995 and start-up is anticipated around the end of 1996. The Fort Knox project
has proven and probable gold ore reserves of approximately 162 million tons,
with an average grade of 0.025 ounces of gold per ton and 4.1 million contained
ounces of gold.
The Company originally estimated that its total capital requirements to
construct and develop the Fort Knox project would be approximately $256
million. In the second and third quarters of 1995, the Company borrowed $80
million from Cyprus Amax under DOCLOC II to fund initial construction at the
Fort Knox project and to repay approximately $18 million in outstanding
indebtedness. During the fourth quarter of 1995, the Company secured an
additional $250 million of financing pursuant to the Loan Agreement, dated
October 31, 1995 (the "Loan Agreement"), among the Company, certain of its
subsidiaries and a group of banks (the "Lenders"). In the second half of 1995,
the Company encountered unexpected geotechnical conditions in the underlying
bedrock at the Fort Knox project, which increased excavation and design
foundation requirements. The Company also was required to make design changes
to comply with more stringent fire code requirements and to accommodate the
difficult seismic conditions. As a result, at the end of February 1996, the
Company increased its estimate of the cost to complete the Fort Knox project to
at least $330 million, subject to further increases once final cost estimates
were available. Subsequently, on April 30, 1996 the Company announced
anticipated total project capital costs to be approximately $370 million,
excluding approximately $26 million of capitalized interest.
From mid-February through mid-March 1996, management of the Company and
Cyprus Amax negotiated with the Lenders regarding the status of the Fort Knox
project, the estimated costs to complete the project and a restructuring of the
Loan. Over the course of the negotiations, the Lenders agreed to waive any
noncompliance with the Loan Agreement and to eliminate all financial and most
other covenants under the Loan Agreement until economic completion of the Fort
Knox project if Cyprus Amax would agree to guarantee the Loan until economic
completion.
A special meeting of the Company's Board was held on March 1, 1996 to inform
the Board of the status of the Fort Knox project, including costs overruns, and
the need for additional financing. The Special Committee of the Board
(consisting of Messrs. Taylor and Wood, two members of the Board who are
neither affiliates of Cyprus Amax nor officers or employees of the Company) met
on March 17, 1996 to discuss the status of the Fort Knox project and the
alternatives available to finance the project. On March 18, 1996, the Board
confirmed the delegation to the Special Committee of authority to evaluate the
proposed Financing Arrangement and to approve or reject the Financing
Arrangement on behalf of the Company. The Special Committee, with its financial
advisors and legal counsel, met with the Company's management on March 18,
1996. The Special Committee considered the range of the potential costs
associated with the completion of the Fort Knox project, as well as the
Lenders' views of those costs. The Special Committee also considered the
relative costs to the Company of the proposed financing and alternative
financings, the nature of Cyprus Amax's commitment to the Company and Cyprus
Amax's expressed intention to make additional needed financing available to the
Company. The Special Committee, with the advice of its financial advisors,
determined that it was in the best interests of the Company to proceed with the
Financing Arrangement and authorized the Company's officers to negotiate and
sign definitive agreements on behalf of the Company. See "THE PROPOSAL--Reasons
for the Financing Arrangement; Recommendation of the Special Committee."
5
<PAGE>
During the first quarter of 1996, the Company borrowed the remaining $50
million available under the Loan to fund construction of the Fort Knox project
and for general corporate purposes. Through the date of this Consent
Solicitation Statement, the Company had borrowed a total of $75 million under
the Demand Loan Facility. The Company intends to seek third party financing, if
available on terms acceptable to the Company, to fund a portion of the costs
associated with the completion of the Fort Knox project. If third party
financing is obtained, the amounts that may be required to be borrowed from
Cyprus Amax under the Demand Loan Facility (and, correspondingly, the number of
shares of Common Stock obtainable by Cyprus Amax in satisfaction of borrowings
under such loan) would be reduced. There can be no assurance that third party
financing will be available on terms acceptable to the Company.
For further information on the background of the transaction and the factors
considered by the Special Committee, see "THE PROPOSAL--Background" and "THE
PROPOSAL--Reasons for the Financing Arrangement; Recommendation of the Special
Committee."
RECOMMENDATION OF THE SPECIAL COMMITTEE
The Special Committee, acting on behalf of the Board, believes that the
Proposal is fair to and in the best interests of all stockholders and
recommends that stockholders consent to the Proposal. See "THE PROPOSAL--
Background" and "THE PROPOSAL--Reasons for the Financing Arrangement;
Recommendation of the Special Committee."
CONSENT SOLICITATION
This Consent Solicitation Statement is being furnished to stockholders in
connection with the solicitation of written consents by the Board from holders
of outstanding shares of Common Stock. The Board has set August 15, 1996 as the
Record Date for determining the stockholders of record whose written consent is
to be solicited. Only stockholders of record at the close of business as of the
Record Date will be entitled to consent to the Financing Arrangement. Approval
of the Proposal requires the consent of at least a majority of the shares of
Common Stock outstanding as of the Record Date. Abstentions and broker non-
votes will have the effect of withholding consent.
Cyprus Amax owns approximately 51.2 percent of the outstanding shares of
Common Stock of the Company. The consent of Cyprus Amax will be sufficient to
approve the Proposal without the consent of any other stockholder. Cyprus Amax
has agreed to consent to the Proposal and has advised the Company that Cyprus
Amax will deliver its written consent at the Expiration Time (5:00 p.m.,
Mountain Time, on September 19, 1996). Upon receipt of the written consent of
Cyprus Amax, the Proposal will be adopted. Prior to the Expiration Time,
consents may be revoked. Subsequent to the Expiration Time, the Company will
not consider any additional consents and consents previously delivered may not
be revoked.
The directors and executive officers of the Company (with four of the seven
directors and one of the seven executive officers being directors and/or
executive officers of Cyprus Amax), holding in the aggregate less than one
percent of the shares of Common Stock as of the Record Date, have advised the
Company that they intend to give their written consent to the Proposal.
Written consents must be signed, dated and received by the Company prior to
the Expiration Time. If a stockholder submits a consent form which fails to
indicate whether the stockholder does or does not consent to the Proposal, the
stockholder shall be deemed to have consented to the Proposal. A stockholder
who signs and returns the enclosed consent may revoke it by a written
revocation delivered to Georgeson & Company Inc. ("Georgeson") any time before
the Expiration Time. Consents will be tabulated by Georgeson. THERE WILL BE NO
MEETING AT WHICH STOCKHOLDERS MAY VOTE IN PERSON.
6
<PAGE>
EFFECTS OF THE PROPOSAL UPON RIGHTS OF EXISTING HOLDERS OF COMMON STOCK
The percentage of the Company's voting securities owned of record by existing
holders of shares of Common Stock, other than Cyprus Amax, may be reduced
significantly if the Financing Arrangement is approved by the Company's
stockholders. The number of shares of Common Stock that may be issued to Cyprus
Amax will depend on the actual amount borrowed under the Demand Loan Facility,
Cyprus Amax's decision to satisfy borrowings under the Demand Loan Facility
and/or related interest and fee obligations with shares of Common Stock,
whether the Cyprus Amax Guaranty is called and the price per share of Common
Stock at the time payments are requested. Accordingly, the Company can not
predict with certainty the number of additional shares of Common Stock that
will be issued to Cyprus Amax under the Financing Arrangement. Assuming that
Cyprus Amax elects to receive all payments in shares of Common Stock, that the
Cyprus Amax Guaranty is not called and that between $150 million and $250
million is borrowed under the Demand Loan Facility, the Financing Arrangement
would reduce the interest of existing holders of outstanding shares of Common
Stock, other than Cyprus Amax, from approximately 48.8 percent to between
approximately 32.6 percent and 37.2 percent and increase Cyprus Amax's record
ownership from approximately 51.2 percent to between approximately 62.8 percent
and 67.4 percent of the outstanding shares of Common Stock. If Cyprus Amax
elects to receive all payments in cash, no shares of Common Stock would be
issued under the Financing Arrangement.
There are other agreements pursuant to which Cyprus Amax could acquire
additional shares of Common Stock. See "CERTAIN TRANSACTIONS--RELATIONSHIP WITH
CYPRUS AMAX" and "THE PROPOSAL--Effects of the Proposal Upon Rights of Existing
Holders of Common Stock."
Cyprus Amax, as the holder of greater than 50 percent of the outstanding
shares of Common Stock, will continue to be able to elect all the directors of
the Company and to direct corporate policy.
7
<PAGE>
STOCKHOLDER ACTION BY WRITTEN CONSENT
RECOMMENDATION OF THE SPECIAL COMMITTEE
On March 18, 1996, the Special Committee (consisting of Messrs. Wood and
Taylor, two directors who are neither affiliates of Cyprus Amax nor officers
or employees of the Company), acting on behalf of the Board, determined that
the Proposal is fair to and in the best interests of all stockholders and
recommends that stockholders consent to the Proposal. See "THE PROPOSAL--
Background" and "THE PROPOSAL--Reasons for the Financing Arrangement;
Recommendation of the Special Committee."
RECORD DATE
The close of business on August 15, 1996 shall be the Record Date for the
determination of the holders of Common Stock entitled to receive this Consent
Solicitation Statement and to give or withhold their written consent.
CONSENT PROCEDURES; REVOCATION OF CONSENTS
Cyprus Amax owns approximately 51.2 percent of the outstanding shares of
Common Stock. The consent of Cyprus Amax will be sufficient to approve the
Proposal without the consent of any other stockholder. Cyprus Amax has agreed
to consent to the Proposal and has advised the Company that Cyprus Amax will
deliver its written consent at the Expiration Time (5:00 p.m., Mountain Time,
on September 19, 1996). Upon receipt of the written consent of Cyprus Amax,
the Proposal will be adopted. Prior to the Expiration Time, consents may be
revoked. Subsequent to the Expiration Time, the Company will not consider any
additional consents and consents previously delivered may not be revoked.
To be effective, consents must be signed and dated and mailed or delivered
to Georgeson prior to 5:00 p.m., Mountain Time, on September 19, 1996, the
Expiration Time. Any consent form mailed or delivered to the Company that
fails to indicate whether the stockholder does or does not consent to the
Proposal shall be deemed to be a consent to the Proposal. Any consent given
pursuant to this solicitation may be revoked by the person giving it at any
time before the Expiration Time by a written revocation mailed or delivered to
Georgeson. There will not be a meeting at which stockholders may vote in
person. Consents will be tabulated by Georgeson.
If a stockholder consents to the Proposal, such consent may limit the right
of the stockholder to challenge the Financing Arrangement in the future.
CONSENTS REQUIRED
The Proposal is being submitted to stockholders for their consent to satisfy
a rule of the NYSE which requires the approval of stockholders as a
prerequisite to the listing of the Common Stock to be issued to Cyprus Amax in
connection with the Financing Arrangement on the basis that the Proposal
contemplates that a "tangible or intangible asset" is to be acquired directly
or indirectly from a substantial security holder of the Company (a holder of
five percent or more of the Company's outstanding shares of Common Stock) and
the number of shares of Common Stock to be issued in such transaction may
exceed one percent of the number of shares of Common Stock outstanding before
such issuance. The Common Stock also is listed on the TSE, and rules of the
TSE also require stockholder approval in certain circumstances.
Under Section 228 of Delaware Law and the Company's By-Laws, any action that
could be taken by stockholders at a meeting may be taken without a meeting if
consents in writing, setting forth the actions so taken, are signed by the
holders of a majority of the outstanding shares of Common Stock. Under this
provision of Delaware Law, no written consent shall be effective to take the
corporate action referred to therein unless, within 60 days of the earliest
dated consent delivered in accordance with Delaware Law to the corporation,
written consents signed by a sufficient number of holders (here, holders of a
majority of the outstanding shares of Common Stock on the Record Date) to take
such action are so delivered.
8
<PAGE>
As of the Record Date, there were 96,500,960 shares of Common Stock
outstanding. 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 the Proposal. Abstentions and broker non-votes will
have the effect of withholding consent.
As of the Record Date, Cyprus Amax had an indirect record ownership of
49,361,557 shares of Common Stock or approximately 51.2 percent of the shares
of Common Stock outstanding on such date. Cyprus Amax has agreed to consent to
the Proposal. The consent of Cyprus Amax will be sufficient to approve the
Proposal without the consent of any other stockholder. As of the Record Date,
directors and executive officers of the Company (with four of the seven
directors and one of the seven executive officers of the Company being
directors and/or executive officers of Cyprus Amax) owned beneficially less
than one percent of the shares of Common Stock (including shares which may be
acquired within 60 days upon exercise of employee stock options) outstanding
on such date. The directors and executive officers of the Company have advised
the Company that they intend to consent to the Proposal.
COST OF SOLICITATION
The Company will bear the cost of solicitation of consents. In addition to
the use of mails, consents 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 solicitation material to their principals.
Additional solicitation of consents of brokers, banks, nominees and
institutional investors will be made by Georgeson at a cost to the Company of
approximately $5,000 plus out-of-pocket expenses.
9
<PAGE>
MARKET PRICES OF THE COMPANY'S STOCK
The Common Stock is listed on the NYSE under the symbol "AU" and on the TSE
under the symbol "AXG." The Company's $3.75 Series B Convertible Preferred
Stock, par value $1.00 per share (the "Series B Preferred Stock"), is listed
on the NYSE under the symbol "AUPrB." The following table sets forth the
quarterly high and low sales prices of the Common Stock and the Series B
Preferred Stock for the fiscal quarters indicated as reported on the NYSE
Composite Transactions Tape and the dividends paid on such stocks. On March
19, 1996 (the date prior to the public announcement of the Financing
Arrangement), the last sale prices of the Common Stock and the Series B
Preferred Stock reported on the NYSE were $6 3/4 and $58 7/8, respectively.
The approximate number of holders of shares of Common Stock and the Series B
Preferred Stock as of August 15, 1996 was 8,600 and 60, respectively.
<TABLE>
<CAPTION>
COMMON STOCK SERIES B PREFERRED STOCK
----------------------- ------------------------
FISCAL YEAR HIGH LOW DIVIDEND HIGH LOW DIVIDEND
- ----------- ------- ------ -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1996
Third Quarter
(through August 15, 1996).... $ 6 1/8 $5 1/4 $ -- $52 1/8 $49 3/4 $ --
Second Quarter............... 7 1/8 5 3/8 -- 57 3/8 51 1/8 .9375
First Quarter................ 9 5/8 6 3/8 -- 66 5/8 54 3/8 .9375
1995
Fourth Quarter............... 7 5/8 5 5/8 -- 55 7/8 47 .9375
Third Quarter................ 6 7/8 5 1/2 -- 52 1/2 47 7/8 .9375
Second Quarter............... 6 1/4 5 -- 49 1/2 46 1/2 .9375
First Quarter................ 6 1/8 4 1/2 -- 49 42 3/4 .9375
1994
Fourth Quarter............... 7 5/8 5 5/8 -- 56 1/4 47 7/8 .9791
Third Quarter................ 7 7/8 6 1/8 -- 55 5/8 50 --
Second Quarter............... 8 1/4 6 5/8 -- -- -- --
First Quarter................ 8 1/4 6 1/4 -- -- -- --
1993
Fourth Quarter............... 8 6 .02 -- -- --
Third Quarter................ 10 1/2 6 3/4 .02 -- -- --
Second Quarter............... 9 1/2 6 7/8 .02 -- -- --
First Quarter................ 9 3/8 7 3/4 .02 -- -- --
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of December 31, 1995, the following is, to the knowledge of the Company,
the only person (including any "group" as that term is used in Section
13(d)(3) of the Exchange Act) who is a beneficial owner of more than five
percent of the Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------------------ ----------------------------------------- ----------------
<S> <C> <C>
Cyprus Amax............. 62,212,228 shares(1) 56.9%
9100 East Mineral Cir-
cle
Englewood, Colorado
80112
</TABLE>
- --------
(1) Includes 12,850,671 shares of Common Stock that Cyprus Amax has the right
to acquire within 60 days pursuant to DOCLOC I and the Stock Issuance
Agreement (defined below). Does not include 16,000,000 shares of Common
Stock that Cyprus Amax has the right to acquire in connection with the
Kubaka Acquisition Agreement or any shares that may be issued to Cyprus
Amax under the Financing Arrangement.
10
<PAGE>
CERTAIN TRANSACTIONS--RELATIONSHIP WITH CYPRUS AMAX
Cyprus Amax is a diversified mining company engaged in the exploration for
and the extraction, processing and marketing of mineral resources, primarily
copper, molybdenum, coal, lithium and gold. Cyprus Amax was incorporated in
Delaware in 1969 and operates primarily in the United States. Cyprus Amax's
principal executive offices are located at 9100 East Mineral Circle,
Englewood, Colorado 80112, and its telephone number is (303) 643-5000.
Cyprus Amax currently owns 49,361,557 shares or approximately 51.2 percent
of the outstanding shares of Common Stock of the Company. Cyprus Amax holds
these shares of Common Stock as a result of the following events: (i) the
acquisition of approximately 40 percent of the outstanding shares of Common
Stock of the Company pursuant to the merger on November 15, 1993 of AMAX Inc.,
a New York corporation ("AMAX"), which owned approximately 68 percent of the
outstanding shares of Common Stock, with and into Cyprus Minerals Company
(renamed Cyprus Amax Minerals Company), (ii) the acquisition in July 1994 by
Cyprus Amax of 3,000,000 shares of Common Stock under a Stock Purchase
Agreement for the purpose of retiring debt owed by the Company to Cyprus Amax,
(iii) the issuance of 6,601,133 and 8,318,673 shares of Common Stock to Cyprus
Amax in July 1995 and September 1995, respectively, as payment for interest
and principal due Cyprus Amax under DOCLOC II (defined below), and (iv) the
purchase of 128,042 shares of Common Stock by Cyprus Amax on September 29,
1995 under the Stock Issuance Agreement in lieu of the remaining principal
amount owed Cyprus Amax under DOCLOC II. Cyprus Amax is the beneficial owner
of 62,212,228 shares or approximately 56.9 percent of the Common Stock as a
result of Cyprus Amax's rights under existing agreements that permit the
issuance of Common Stock in lieu of outstanding indebtedness and other
obligations. See "THE PROPOSAL--Effects of the Proposal Upon Rights of
Existing Holders of Common Stock."
Directors and officers of Cyprus Amax comprise four of the seven members of
the Company's Board. Milton H. Ward, Chairman of the Board and Chief Executive
Officer of the Company, is Chairman of the Board of Directors, President and
Chief Executive Officer of Cyprus Amax; Gerald J. Malys, a director of the
Company, is Senior Vice President and Chief Financial Officer of Cyprus Amax;
Allen Born and Rockwell A. Schnabel, both directors of the Company, are
directors of Cyprus Amax.
AGREEMENTS WITH CYPRUS AMAX
In addition to the proposed Financing Arrangement, Cyprus Amax is party to a
number of contracts with the Company, which are described below.
Revolving Credit Agreements. Under DOCLOC I, the Company can borrow up to
$100 million and pay any indebtedness with up to two million shares of the
Company's $2.25 Series A Convertible Preferred Stock, par value $1.00 per
share ("Series A Preferred Stock"). Such shares of Series A Preferred Stock
may be redeemed by the Company for 12,099,213 shares of Common Stock at a
price equal to the greater of $5.854 per share or the average closing price
per share over a period prior to redemption. Cyprus Amax may acquire at any
time up to 12,099,213 shares of Common Stock at a price of $8.265 per share,
in which event DOCLOC I would be terminated and any outstanding principal and
interest would be deemed repaid. Under the Proposal, the Company's ability to
borrow under DOCLOC I would become subject to the consent of Cyprus Amax. See
"THE PROPOSAL--Fee and Support Agreements."
In March 1995, the Company and Cyprus Amax entered into a convertible line
of credit ("DOCLOC II"), under which the Company borrowed the entire $80
million available. During 1995 Cyprus Amax acquired 14,919,806 shares of
Common Stock at $5.362 per share pursuant to DOCLOC II, DOCLOC II was
terminated and the outstanding indebtedness was deemed repaid.
Stock Issuance Agreement. In September 1995, the Company and Cyprus Amax
entered into an Agreement Regarding Stock Issuance pursuant to which, with the
agreement of both parties, obligations owing from the Company to Cyprus Amax
under existing or future contractual arrangements may be paid in shares of
11
<PAGE>
Common Stock, valued at the 30-day average closing price per share prior to
the date of payment. Of the 879,500 shares issuable, 128,042 shares were
issued to Cyprus Amax as payment for $835,473 due Cyprus Amax under DOCLOC II.
Exploration Joint Venture Agreement. The Company entered into an Exploration
Joint Venture Agreement with Cyprus Amax effective January 1, 1994. Under the
Exploration Agreement, the Company and Cyprus Amax have agreed to pool their
efforts for the principal purpose of discovering and developing future gold
prospects, with Cyprus Amax providing 75 percent and the Company providing 25
percent of the initial exploration funding for such prospects. Properties held
by the parties prior to January 1, 1994 (including the Kubaka deposit) are
excluded from the joint venture. A subsidiary of Cyprus Amax has been
appointed as Manager to manage, direct and control exploration activities.
Either party may withdraw upon giving 60 days' notice to the other party.
Pursuant to the Exploration Agreement, the Company has the first right to
acquire any gold property covered by the Exploration Agreement, and Cyprus
Amax has the first right to acquire property containing deposits of minerals
or precious metals other than gold. The agreement will terminate on January 1,
1998.
Kubaka Acquisition Agreement. Pursuant to the Kubaka Acquisition Agreement,
the Company has agreed to acquire, subject to the satisfaction of certain
conditions, Cyprus Amax's indirect interest in the Kubaka project located in
the Magadan Region of the Russian Federation for a purchase price payable in
shares of Common Stock as follows: (i) approximately 11.8 million shares of
Common Stock to be paid upon closing the Kubaka Acquisition Agreement; (ii)
approximately 4.2 million shares of Common Stock to be paid within ten days of
commencement of commercial production of the Kubaka project; (iii) a
contingent payment in shares of Common Stock (a) equal to $10 per gold
equivalent ounce (up to a maximum of $45 million) of the Company's pro rata
share of proven and probable reserves that the Company acquires the right to
mine in the Russian Federation (excluding properties covered by the license to
develop Kubaka or properties acquired under the Exploration JV Agreement) on
or before June 30, 2004, and (b) valued at the 10-day average closing price
per share ending two business days prior to the date of payment.
Due to a delay in start-up, higher logistics, freight and labor costs and
higher than anticipated taxes, the total capital construction costs to
complete the Kubaka project have been increased from approximately $182
million to $228 million. Cyprus Amax has informed the Company that Cyprus Amax
is exploring various methods by which the increased costs at the Kubaka
project may be funded. The Company is evaluating the impact of these cost
increases on the project and the acquisition transaction. Subject to
satisfactory resolution of these issues and approval by the Company's
stockholders of the Kubaka Acquisition Agreement, the Company expects to
complete the acquisition during 1996.
Services Agreement. Pursuant to the terms of the Services Agreement, the
Company and Cyprus Amax 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 Amax as of the end of any month on
180 days' prior written notice. During the first six months of 1996, amounts
charged to the Company by Cyprus Amax pursuant to the Services Agreement were
approximately $1.4 million, including the cost of insurance coverage for the
Company, and amounts charged to Cyprus Amax by the Company pursuant to the
Services Agreement were approximately $.8 million.
Employee Transfer Agreement. Pursuant to the Employee Transfer Agreement,
the Company and Cyprus Amax have amended their respective benefit plans to
allow employees to transfer from the Company to Cyprus Amax or from Cyprus
Amax to the Company with minimal effect on an employee's benefits.
Net Operating Loss Agreement. Pursuant to the Net Operating Loss Agreement,
the Company agreed to allow Cyprus Amax to use the Company's net operating
loss generated in 1993 (the "1993 NOL") which resulted in refunds of taxes
paid by Cyprus Amax in prior years, and Cyprus Amax 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.
12
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
As of July 31, 1996, the following table sets forth the amount of all equity
securities of the Company and Cyprus Amax that are beneficially owned by each
director of the Company, the chief executive officer and each of the four most
highly compensated executive officers of the Company in 1995, and all
directors and executive officers of the Company as a group. A person is
considered the beneficial owner of 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 forth opposite his or her name.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES OF NUMBER OF SHARES
NAME OF OF COMPANY COMPANY SERIES B OF CYPRUS AMAX
BENEFICIAL OWNER COMMON STOCK(1)* PREFERRED STOCK(1) COMMON STOCK
----------------- ----------------- ------------------- ----------------
<S> <C> <C> <C>
Milton H. Ward.......... 20,000 -- 964,005(2)
Richard H. Block(3)..... -- -- --
Allen Born.............. 20,466(4) -- 97,609(2)(5)
Gerald J. Malys......... 12,622(4) -- 187,529(2)(6)
Rockwell A. Schnabel.... 34,620(4) 2,500 18,276(5)
Vernon F. Taylor, Jr. .. 24,660(7) 3,000(7) 24,094(8)
Russell L. Wood......... 13,639(4) -- --
Roger A. Kauffman(9).... 92,315(10) 200 --
Deborah J. Friedman..... 21,252 400 26,864(2)
Mark A. Lettes.......... 61,313(10) -- --
Neil Muncaster(9)....... 57,555(10) 500 1,003
All directors and execu-
tive officers
as a group (17 per-
sons).................. 449,787(11) 7,100 1,355,997
</TABLE>
- --------
*All amounts shown are less than one percent of the class.
(1) Each share of Series B Preferred Stock is convertible into 6.061 shares
of Common Stock. Shares of Common Stock include shares obtainable upon
conversion of the Series B Preferred Stock. Also included in the table
above are shares of Common Stock held pursuant to the Company's Employee
Thrift Plan and shares of restricted stock granted under the Company's
Performance Share Plan.
(2) Includes shares subject to options exercisable within 60 days: 632,294
shares for Mr. Ward; 75,461 shares for Mr. Born; 97,088 shares for Mr.
Malys; and 21,700 shares for Ms. Friedman.
(3) Mr. Block was elected a director of the Company on July 1, 1996.
(4) Includes shares held in the Deferred Compensation Plan for Members of the
Board of Directors: 5,828 shares for Mr. Born; 6,122 shares for Mr.
Malys; 4,968 shares for Mr. Schnabel; and 9,139 shares for Mr. Wood.
(5) Includes shares held in the Cyprus Amax Non-Employee Director Deferred
Compensation Plan.
(6) Includes 10,000 shares held by Mrs. Malys.
(7) Includes 1,227 shares of Common Stock and 3,000 shares of Series B
Preferred Stock owned by trusts in which Mr. Taylor, as trustee, has
investment or voting power.
(8) Includes 12,344 shares of Cyprus Amax common stock obtainable upon
conversion of 6,000 shares of $4.00 Series A Convertible Preferred Stock
of Cyprus Amax.
(9) Mr. Kauffman and Mr. Muncaster resigned their positions with the Company
effective April 1, 1996 and May 1, 1996, respectively.
(10) Includes shares subject to options exercisable within 60 days: 60,000
shares for Mr. Kauffman; 43,000 shares for Mr. Lettes; and 35,000 shares
for Mr. Muncaster.
(11) Includes 187,000 shares subject to options exercisable within 60 days and
1,033 shares owned by executive officers who have joined the Company
since December 31, 1995.
13
<PAGE>
THE PROPOSAL
BACKGROUND
The Fort Knox project is located in the Fairbanks Mining District,
approximately 15 miles northeast of Fairbanks, Alaska. Construction of the
Fort Knox project began in the first quarter of 1995 and start-up is
anticipated around the end of 1996. The Fort Knox operations will include an
open pit mine, a conventional 36,000 tons per day (13.1 million tons per year)
process plant, a tailings storage facility and a reservoir to supply process
water. The Fort Knox project has proven and probable gold ore reserves of
approximately 162 million tons, with an average grade of 0.025 ounces of gold
per ton and 4.1 million contained ounces of gold.
The Company originally estimated that its total capital requirements to
construct and develop the Fort Knox project would be approximately $256
million. In the second and third quarters of 1995, the Company borrowed $80
million from Cyprus Amax under DOCLOC II to fund initial construction at the
Fort Knox project and to repay approximately $18 million in outstanding
indebtedness.
During the fourth quarter of 1995, the Company secured an additional $250
million of financing pursuant to the Loan Agreement among the Company, certain
of its subsidiaries and the Lenders. The original Loan Agreement provides for
an interest rate of LIBOR plus 2.25 percent, a commitment fee of a 2.5
percent, security interests in the Company's assets at the Fort Knox project
and the Hayden Hill mine and a maturity date of December 31, 2001. The Loan
Agreement contains standard financial and other covenants. The Loan Agreement
was amended in December 1995 to clarify certain provisions.
In the second half of 1995, the Company encountered unexpected geotechnical
conditions in the underlying bedrock at the Fort Knox project, which increased
excavation and design foundation requirements for two dams, the primary
crusher and the access road. The Company also was required to make design
changes to comply with more stringent fire code requirements and to
accommodate the difficult seismic conditions.
At a meeting of the Board held on December 13, 1995, the Board discussed the
status of the Fort Knox project and its financing requirements. The Company
had projected that as of December 31, 1995, it would have borrowed $200
million under the Loan Agreement and that additional funding, beyond amounts
remaining available under the Loan Agreement and from operating cash flows,
would be required for capital expenditures and working capital for the Fort
Knox project and debt repayments. To fund completion of the Fort Knox project
on schedule, the Company anticipated borrowing under DOCLOC I or accessing the
public markets. The Board requested that management present a complete
assessment of the Company's financing situation for the Board at its meeting
in February 1996, when updated construction cost estimates were expected to be
available for both the Fort Knox project and the Kubaka project in the Russian
Federation, which the Company has agreed to acquire, subject to certain
conditions, from Cyprus Amax (see "CERTAIN TRANSACTIONS--RELATIONSHIP WITH
CYPRUS AMAX").
At a meeting of the Board held on February 14, 1996, the Company's
management reported to the Board that a recently completed review of the costs
for the Fort Knox project indicated a preliminary cost to complete estimate of
at least $330 million. The Board also reviewed the schedule and costs for the
Kubaka project. Additionally, in late February 1996, the Company requested
assistance from the Cyprus Amax project development group with the final
determination of the required costs to complete the Fort Knox and Kubaka
projects. In light of the significant cost overruns expected at the Fort Knox
project, the Company determined that financing in addition to DOCLOC I would
be needed.
The Company's management began negotiations with the Lenders in mid-February
1996 regarding the status of the Fort Knox project, the estimated costs to
complete the project and a possible restructuring of the Loan. Over the course
of the negotiations, the Lenders agreed to waive any noncompliance with the
Loan Agreement and to eliminate all financial and most other covenants under
the Loan Agreement until economic completion of the Fort Knox project if
Cyprus Amax would agree to guarantee the Loan until economic completion.
14
<PAGE>
At a special meeting of the Board held on March 1, 1996, the Board met with
the Company's management to discuss the projected cost overruns at the Fort
Knox project, the Company's potential violation of its covenants under the
Loan Agreement and the progress of negotiations with the Lenders to
restructure the Loan. The Board also discussed the status of the Kubaka
project. The Board reviewed the Company's immediate cash needs based on
anticipated spending levels. The Board also was informed that Cyprus Amax had
agreed, subject to the approval of its board of directors, to guarantee the
Loan Agreement and to provide additional financing. The Board considered
funding the cash shortfall with equity or other financing; however, concerns
were expressed about the feasibility of completing such financings in time to
meet the Company's needs. The Board discussed the proposed financing
arrangement with Cyprus Amax as an attractive alternative for the Company and
noted that the support thus offered to the Company by Cyprus Amax should be
perceived positively in the market.
During the first weeks of March 1996, management of the Company and of
Cyprus Amax continued negotiations with the Lenders regarding restructuring
the Loan, and the Company continued its review of the estimated cost to
complete the Fort Knox project, which cost had been increased due to difficult
site conditions, expanded excavation work and design enhancements at the Fort
Knox project.
On March 17, 1995, Messrs. Taylor and Wood, two members of the Board who are
neither affiliates of Cyprus Amax nor officers or employees of the Company, as
the Special Committee, met by telephone with the Company's management to
discuss the terms of the proposed Financing Arrangement.
The Company's Board met on March 18, 1996 to review the Financing
Arrangement proposed to be entered into with Cyprus Amax. The Board confirmed
the delegation to the Special Committee (consisting of Messrs. Taylor and
Wood) of authority to evaluate the proposed Financing Arrangement (including
the issuance of shares of Common Stock) and to approve or reject the Financing
Arrangement on behalf of the Company. The Board also confirmed the retention
of Salomon Brothers Inc as financial advisors and Willkie Farr & Gallagher as
legal counsel to the Special Committee.
Later on March 18, 1996, the Special Committee, with its financial advisors
and legal counsel, met with the Company's management. The Special Committee
considered the range of the potential costs associated with the completion of
the Fort Knox project, as well as the Lenders' views of those costs. Mr. Malys
reported to the Special Committee that the Cyprus Amax board had approved the
proposed Financing Arrangement earlier in the day. The Special Committee
considered the possibility of the Company seeking alternative financing
arrangements but determined that any third party debt financing likely would
require the guaranty of Cyprus Amax and that no other source of funding would
be available when the Company needed additional financing. The Special
Committee considered the relative costs to the Company of the proposed
financing and alternative financings, the potential dilution of the percentage
ownership of stockholders other than Cyprus Amax, the nature of Cyprus Amax's
commitment to the Company and Cyprus Amax's expressed intention to make
additional needed financing available to the Company. The Special Committee,
with the advice of its financial advisors, determined that it was in the best
interests of the Company to proceed with the Financing Arrangement and
authorized the Company's officers to negotiate and sign definitive agreements
on behalf of the Company. See "--Reasons for the Financing Arrangement;
Recommendation of the Special Committee."
On March 19, 1996, the Company and the Lenders amended the Loan Agreement
(the "Amended Loan Agreement"), and Cyprus Amax guaranteed the Company's
repayment of the loan. See "--Material Terms of the Cyprus Amax Guaranty."
Cyprus Amax also agreed to provide the Company with the Demand Loan Facility
to be used to support the Company's additional costs to construct the Fort
Knox project, to provide working capital and for general corporate purposes.
Cyprus Amax's right under the Demand Loan Facility to require repayment in
shares of Common Stock could not be exercised, however, until stockholders of
the Company approved the Financing Arrangement. See "--Material Terms of the
Demand Loan Facility."
During the first quarter of 1996, the Company borrowed the remaining $50
million available under the Loan, which amount was required to fund short-term
operating needs of the Company and construction of the Fort
15
<PAGE>
Knox project. In April 1996, the Company borrowed $20 million under the Demand
Loan Facility to fund construction at Fort Knox and for general corporate
purposes.
Also in the first quarter of 1996, the Cyprus Amax project development group
was seconded to the Company to complete both the Fort Knox and the Kubaka
projects. On April 1, 1996, S. Scott Shellhaas was elected to serve as the
Company's President and Chief Operating Officer, replacing the Company's
previous President and Chief Operating Officer who had resigned. Mr. Shellhaas
joined the Company from Cyprus Foote Mineral Company, a wholly owned
subsidiary of Cyprus Amax and the world's largest lithium producer, where he
had served as President since 1993. Following Mr. Shellhaas' appointment, the
Company, with the assistance of the Cyprus Amax project development group,
continued to review and update the estimated costs to complete the Fort Knox
and Kubaka projects.
The Company's Board met on April 30, 1996 to review the final cost estimates
for the Fort Knox and Kubaka projects and to receive the reports of the
Company's management and of the Cyprus Amax project development group. The
members of the Special Committee met separately with the Company's management
to review the cost to complete reports and the Company's proposed press
release. On April 30, 1996, the Company reported that updated reviews of the
Fort Knox project indicated that due to costs associated with the expanded
excavation and design foundation requirements and higher than anticipated
costs in several areas such as labor, freight and engineering, total project
capital costs were expected to be approximately $370 million, in addition to
approximately $26 million of capitalized interest.
The Company also determined that revised estimates for the Kubaka project
indicated that the Kubaka project probably would commence operations later
than expected, and that due to delayed start-up, higher logistics and freight
costs, higher than anticipated labor costs and taxes, and some design changes,
the total capital construction costs for the Kubaka project had increased to
approximately $228 million from an original estimate of approximately $182
million.
From May 1 through August 19, 1996, the Company borrowed an additional $55
million under the Demand Loan Facility and pursued a number of other financing
arrangements. The Company estimates that, with the Demand Loan Facility and
the Cyprus Amax Guaranty, the Company has sufficient financing to complete the
Fort Knox project. The Company intends to seek third party financing, if
available on terms acceptable to the Company, to fund a portion of the costs
associated with the completion of the Fort Knox project. If third party
financing is obtained, the amounts that may be required to be borrowed from
Cyprus Amax under the Demand Loan Facility (and, correspondingly, the number
of shares of Common Stock obtainable by Cyprus Amax in satisfaction of
borrowings under such loan) would be reduced. There can be no assurance that
third party financing will be available on terms acceptable to the Company.
REASONS FOR THE FINANCING ARRANGEMENT; RECOMMENDATION OF THE SPECIAL COMMITTEE
The Special Committee (comprised of Messrs. Taylor and Wood, two directors
who are neither affiliates of Cyprus Amax nor officers or employees of the
Company), with the advice of its financial advisors and legal counsel, on
behalf of the Board determined on March 18, 1996 that the Financing
Arrangement was fair to and in the best interests of the Company and its
stockholders (exclusive of Cyprus Amax). This determination was based on the
following factors (not necessarily in order of importance), among others:
(i) The projected total capital costs to complete the Fort Knox project
had increased significantly from $256 million to a minimum of approximately
$330 million, and the Company faced compliance issues regarding covenants
contained in the Loan Agreement. In addition, the Company would have been
out of cash in the near future, would not have had the capital resources to
fund its projects and operations and effectively would have been precluded
from raising funds in the public markets. Without Cyprus Amax's agreement
to guarantee the Loan Agreement, the Company might not have been able to
avoid a default under the Loan Agreement.
(ii) The Special Committee evaluated various financing alternatives
considered most likely to be available to the Company. The Special
Committee determined that any third party debt financing would
16
<PAGE>
have required the guaranty of Cyprus Amax. The Special Committee considered
the possibility of selling assets and seeking third party investors or
joint venture partners for the Fort Knox project, but determined that these
steps likely could not be completed in the necessary time frame, on
acceptable terms and without detrimental effects on the Company's business.
The Special Committee also concluded that it was not the appropriate time
to complete an equity offering in light of the Company's financial
position. The Special Committee was advised by its financial advisors that
the Financing Arrangement with Cyprus Amax was the best alternative
available.
(iii) The possibility that the Company may issue shares of Common Stock
(subject to Cyprus Amax's election to receive shares instead of cash) for
payment of the Financing and Guaranty Fee, the Interest Differential
Payments, principal and interest due under the Demand Loan Facility and the
Reimbursement Payments under the Cyprus Amax Guaranty is advantageous to
the Company and its stockholders in that payments with equity would permit
the Company to conserve its cash and minimize borrowing requirements.
(iv) The Demand Loan Facility provides the Company with relatively low
interest financing for its working capital and capital expenditure needs.
Under the Demand Loan Facility, the Company may borrow up to $250 million
from time to time, subject to the discretion of Cyprus Amax. Although under
the Demand Loan Facility Cyprus Amax has discretion whether or not to lend,
Cyprus Amax has informed the Company that it intends to make additional
needed financing available to the Company. The Demand Loan Facility does
not impose restrictive covenants. The Demand Loan Facility provides for an
interest rate of LIBOR plus 2.25 percent, currently a rate of approximately
8.0 percent. The Special Committee was advised that third party financing
would not have been available within the required time frame and that such
financing likely would have required higher interest rates and higher
transactions costs.
(v) The margin over LIBOR or the gold lease rate paid as interest by the
Company to the Lenders was reduced in the Amended Loan Agreement from 2.25
percent to 0.50 percent as a result of the Cyprus Amax Guaranty. Although
the Company agreed to pay Cyprus Amax this interest differential of 1.75
percent, the Company was able to maintain the same interest cost as the
original interest rate on the Loan. The Amended Loan Agreement also
eliminated all financial and most other covenants of the Company under the
original Loan Agreement until economic completion of the Fort Knox project.
(vi) Under the Financing Arrangement, the collateral provided by the
Company to its third party lenders remains unchanged, except that Cyprus
Amax receives first priority security interests in the collateral and the
right to require the grant of security interests in the Company's Refugio
and Guanaco mines, subject to previously granted security interests.
(vii) In consideration for the Cyprus Amax Guaranty, the Company agreed
to pay Cyprus Amax a one-time Financing and Guaranty Fee of $10 million,
i.e., 2.5 percent of funding facilitated by Cyprus Amax, which is the same
percentage as the commitment fee charged by the Lenders with respect to the
Loan Agreement. The Special Committee's financial advisors advised that the
fee was lower than the fee that would have been available from a third
party.
(viii) The Financing Arrangement permits the Company to avoid a cross-
default under its financing for its Refugio mine.
MATERIAL TERMS OF THE CYPRUS AMAX GUARANTY
The following is a description of the material terms of the Cyprus Amax
Guaranty, which is attached as Appendix A to this Consent Solicitation
Statement and incorporated herein by reference. All stockholders are urged to
read the Cyprus Amax Guaranty in its entirety. See also "--Background" for a
summary of the principal terms of the Loan Agreement and the Amended Loan
Agreement."
Guaranty. Cyprus Amax agreed to guaranty the Company's payment of up to $250
million of principal and interest at LIBOR plus 0.50 percent due under the
Amended Loan Agreement. The Cyprus Amax Guaranty
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<PAGE>
terminates on achievement of economic completion at the Fort Knox project as
defined in the Amended Loan Agreement.
Indemnification. The Company has agreed to indemnify Cyprus Amax for any
costs it may incur under the Cyprus Amax Guaranty.
MATERIAL TERMS OF THE DEMAND LOAN FACILITY
The following is a description of the material terms of the Demand Loan
Facility, which is attached as Appendix B to this Consent Solicitation
Statement and incorporated herein by reference. All Stockholders are urged to
read the Demand Loan Facility in its entirety.
Demand Loan. Under the Demand Loan Facility, Cyprus Amax will agree to make
loans (at its discretion) to the Company from time to time until the earlier
of December 31, 2001 or the date on which Cyprus Amax notifies the Company
that loans will no longer be made available under the Demand Loan Facility
(the "Expiration Date") in an aggregate principal amount not to exceed $250
million at any time outstanding. The Company may repay the outstanding
indebtedness either by payment in cash or, at the election of Cyprus Amax and
subject to the approval of the Company's stockholders of the Financing
Arrangement (which is being sought in this Consent Solicitation Statement), by
payment in shares of Common Stock. The amount of the Demand Loan Facility
commitment will be reduced by the amount paid or prepaid in cash or Common
Stock.
Interest Rate. Each loan made by Cyprus Amax to the Company bears interest
at an annual rate equal to the LIBOR for the interest period selected by the
Company at its option (a period of one, three or six months) plus 2.25
percent. The Demand Loan Facility also bears a default interest rate that is
1.0 percent per annum higher than the above rate.
Principal and Interest Payments. All principal and accrued and unpaid
interest on the loans are payable upon demand by Cyprus Amax. The Company may
make prepayments of principal without premium or penalty in integral multiples
of $1,000,000.
Payment with Common Stock. Cyprus Amax may require that the Company pay any
amounts due or being repaid under the Demand Loan Facility by issuing shares
of Common Stock. The number of shares of Common Stock to be issued can be
determined by dividing the amount of the payment under the Demand Loan
Facility to be repaid with shares of Common Stock by the average closing price
of the Common Stock on the NYSE over the five trading day period ending on the
business day prior to the date that payment in shares of Common Stock is
requested (the "Average Market Price"). The Company's obligation to issue
shares of Common Stock is subject to the acceptance by the NYSE of a listing
application for the issuance of shares of Common Stock therefor and approval
by the Company's stockholders of the Financing Arrangement (which is being
sought in this Consent Solicitation Statement).
Covenants. The Demand Loan Facility requires the Company (i) to pay
principal and interest on the loans as required, (ii) to provide reports to
Cyprus Amax, (iii) to list with the NYSE the shares of Common Stock issuable
at Cyprus Amax's election on repayment of the loan, (iv) to permit Cyprus Amax
to inspect its books and records and (v) to enter into appropriate security
agreements providing Cyprus Amax with a security interest in the collateral.
Events of Default. Events of default occur under the Demand Loan Facility in
the event (i) of a failure to pay, for a period of five business days,
principal or interest when due, (ii) of a default for 30 calendar days in the
performance of any other term, covenant or condition in the Demand Loan
Facility, (iii) any representation or warranty made by the Company, pursuant
to the Demand Loan Facility, proves to have been incorrect in any material
respect when made and is not corrected within ten days after discovery by the
Company, or (iv) bankruptcy or insolvency of the Company. If an event of
default occurs, Cyprus Amax may, at its option, terminate the Demand Loan
Facility or declare the principal and interest and any other sums due under
the
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<PAGE>
Demand Loan Facility immediately due and payable. Upon the occurrence of an
event of default pursuant to subparagraph (iv) above, the Demand Loan Facility
automatically will be terminated and all principal and interest and any other
sums due under the Demand Loan Facility automatically will become due and
payable.
Use of Proceeds. The proceeds of the Demand Loan Facility will be used
primarily to finance increases in actual and projected capital expenditures
necessary to construct and develop the Fort Knox project, to provide working
capital and for general corporate purposes.
Demand Registration Rights. Cyprus Amax may make one or more written
requests (a "Demand") for registration under the Securities Act of 1933 of not
less than 1,000,000 shares of Common Stock per demand of shares issued
pursuant to the Demand Loan Facility. If, at the time of such Demand, Cyprus
Amax directly or indirectly owns less than five percent of the number of
shares of Common Stock outstanding, the Company may, if the Special Committee
of the Board determines that it would be inadvisable to effect a demand
registration, defer such demand registration (for up to three months) until
the earliest practicable time at which such demand registration can be
reasonably effected. All expenses of registration incurred in connection with
the first registration statement to be filed pursuant to Cyprus Amax's 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 Amax's registration rights will be paid by Cyprus Amax.
Representations and Warranties. The Company made representations and
warranties to Cyprus Amax concerning corporate existence, corporate power and
authority concerning the Demand Loan Facility, government approvals and
enforceability and to the effect that the shares of Common Stock issued
pursuant to the Demand Loan Facility would be validly issued, fully paid and
nonassessable.
FEE AND SUPPORT AGREEMENTS
The following is a description of the material terms of the Fee Agreement
and the Reimbursement Agreement, both dated March 19, 1996 (the "Fee and
Support Agreements"), between the Company and Cyprus Amax, which are attached
as Appendix C to this Consent Solicitation Statement and incorporated herein
by reference. All stockholders are urged to read the Fee and Support
Agreements in their entirety.
Security. The Cyprus Amax Guaranty and the Demand Loan Facility are secured
by a first priority lien in the collateral for the Amended Loan Agreement,
including the assets at the Fort Knox project and the Hayden Hill mine. At the
request of Cyprus Amax, the Company must grant Cyprus Amax the highest
priority security interest in the assets at the Guanaco and the Refugio mines
permitted after giving effect to all outstanding security interests. The
Company's interest in the Refugio mine has been pledged to a group of banks
that have provided financing for the Refugio mine.
Reimbursement Payments. The Company has agreed to reimburse Cyprus Amax for
all payments made and all reasonable out-of-pocket expenses incurred by Cyprus
Amax under the Cyprus Amax Guaranty. Any reimbursement obligation that arises
will be treated as a demand loan, bearing interest at an annual rate equal to
LIBOR plus 3.25 percent, and will be payable by the Company within five
business days of demand from Cyprus Amax. Payment may be in cash or such other
consideration as may be agreed upon by the Company and Cyprus Amax, including
shares of Common Stock valued at the Average Market Price.
Financing and Guaranty Fee. In consideration for both the Cyprus Amax
Guaranty and the Demand Loan Facility, the Company has agreed to pay Cyprus
Amax the Financing and Guaranty Fee of $10 million. The Financing and Guaranty
Fee is payable in cash, or at the election of Cyprus Amax, in shares of Common
Stock, valued at the Average Market Price. Cyprus Amax has advised the Company
that it will not seek payment of the Financing and Guaranty Fee until the
later of the date the Company's stockholders approve the Financing Arrangement
and December 31, 1996.
Interest Differential Payments. Also in consideration for the Cyprus Amax
Guaranty and the Demand Loan Facility, the Company has agreed to pay Cyprus
Amax Interest Differential Payments equal to 1.75 percent
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<PAGE>
of the portion of the guaranteed obligations constituting principal under the
Amended Loan Agreement to the extent that accrued interest is due on such
principal amount. Interest Differential Payments are payable in cash, or at
the election of Cyprus Amax and subject to the approval of the Company's
stockholders of the Financing Arrangement (which is being sought in this
Consent Solicitation Statement), in shares of Common Stock valued at the
Average Market Price.
Borrowings Under DOCLOC I. Until economic completion of the Fort Knox
project, the Company has agreed not to borrow under DOCLOC I for purposes
other than repaying the Lenders or the lenders for the Refugio project without
the prior written consent of Cyprus Amax.
CONSENT OF CYPRUS AMAX; INTENTION OF THE DIRECTORS AND EXECUTIVE OFFICERS
Cyprus Amax owns approximately 51.2 percent of the outstanding shares of
Common Stock as of the Record Date. The consent of Cyprus Amax will be
sufficient to approve the Proposal without the consent of any other
stockholder. Cyprus Amax has agreed to consent to the Proposal and has advised
the Company that Cyprus Amax will deliver its written consent on September 19,
1996.
The directors and executive officers of the Company (with four of the seven
directors and one of the seven executive officers being directors and/or
executive officers of Cyprus Amax), holding in the aggregate less than one
percent of the shares of Common Stock as of the Record Date, have advised the
Company that they intend to give their written consent to the Proposal.
EFFECTS OF THE PROPOSAL UPON RIGHTS OF EXISTING HOLDERS OF COMMON STOCK
The percentage of the Company's voting securities owned of record by
existing holders of shares of Common Stock, other than Cyprus Amax, may be
reduced significantly if the Financing Arrangement is approved by the
Company's stockholders. The number of shares of Common Stock that may be
issued to Cyprus Amax will depend on the actual amount borrowed under the
Demand Loan Facility, Cyprus Amax's decision to satisfy borrowings under the
Demand Loan Facility and/or related interest and fee obligations with shares
of Common Stock, whether the Cyprus Amax Guaranty is called and the price per
share of Common Stock at the time payments are requested. The actual amount
borrowed under the Demand Loan Facility will depend on a number of factors,
including, without limitation, the actual cost to complete the Fort Knox
project, the availability of third party debt or equity financing on
attractive terms to fund a portion of such costs and Cyprus Amax's discretion
in making additional funding available under such facility. Accordingly, the
Company can not predict with certainty the number of additional shares of
Common Stock that will be issued to Cyprus Amax under the Financing
Arrangement. If all amounts due in connection with the Financing Arrangement
are repaid in cash, no shares of Common Stock will be issued to Cyprus Amax
and the voting securities owned of record by Cyprus Amax will not change. The
Company would issue to Cyprus Amax between approximately 30.2 million and 48.3
million shares (based on an assumed price per share of Common Stock of $6.125)
under the transactions contemplated by the Proposal, assuming that Cyprus Amax
elects to receive payment in shares of Common Stock, that the Cyprus Amax
Guaranty is not called and that between $150 million and $250 million is
borrowed under the Demand Loan Facility (with interest accruing over the
period from April 1, 1996 to December 31, 1997). The Financing Arrangement, if
approved by stockholders, would reduce the interest of existing holders of
outstanding shares of Common Stock, other than Cyprus Amax, based on the above
assumptions from approximately 48.8 percent to between approximately 32.6
percent and 37.2 percent and increase Cyprus Amax's record ownership from
approximately 51.2 percent to between approximately 62.8 percent and 67.4
percent of the outstanding shares of Common Stock.
As a result of Cyprus Amax's rights under existing agreements that permit
the issuance of Common Stock in lieu of outstanding indebtedness and other
obligations, Cyprus Amax is deemed to be the beneficial owner of 62,212,228
shares or approximately 56.9 percent of the shares of Common Stock, excluding
shares of Common Stock that may be issued under the Kubaka Acquisition
Agreement (defined below). If the Proposal is approved
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<PAGE>
by stockholders, Cyprus Amax's beneficial ownership could increase to between
approximately 66.2 percent and 70.1 percent of the outstanding shares of
Common Stock.
In addition, the Company and Cyprus Amax have executed an Agreement and Plan
of Merger and Reorganization, dated January 24, 1996 (the "Kubaka Acquisition
Agreement"), which provides for the acquisition by the Company of Cyprus
Amax's interest in the Kubaka gold project in the Russian Federation. In the
event the Kubaka Acquisition Agreement is consummated and approved by the
Company's stockholders, Cyprus Amax's beneficial ownership of shares of Common
Stock would increase by 16 million shares to approximately 62.4 percent,
before the issuance of shares of Common Stock in connection with the Financing
Arrangement. The number of shares issuable to Cyprus Amax under the Kubaka
Acquisition Agreement is subject to further increase if additional shares are
issued to satisfy certain potential obligations under the Kubaka Acquisition
Agreement. See "CERTAIN TRANSACTIONS--RELATIONSHIP WITH CYPRUS AMAX."
Cyprus Amax, as the holder of greater than 50 percent of the outstanding
shares of Common Stock, will continue to be able to elect all the directors of
the Company and to direct corporate policy.
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CAPITALIZATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following table presents the Company's other current liabilities and
capitalization as of June 30, 1996, as adjusted to give effect to (i) assumed
borrowings by the Company on July 1, 1996 of $250 million under the Demand
Loan Facility and (ii) assumed repayment of all amounts owed pursuant to the
Financing Arrangement with shares of Common Stock.
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------------------------------------
BORROWING AND AS ADJUSTED
INTEREST WITH
FUNDS AS ADJUSTED FOR CONVERTED TO BORROWINGS
ACTUAL BORROWED BORROWING COMMON STOCK CONVERTED(1)(2)
------ --------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Cyprus Amax Demand
Loan................... 45.0(3) 205.0(3) 250.0 (250.0) --
Current maturities of
long-term debt......... 5.8 -- 5.8 -- 5.8
Accrued and other
current liabilities.... 46.6 38.3(4) 84.9 (40.6) 44.3
------ ------ ------ ------- ------
Total Current
Liabilities............ $ 97.4 $243.3 $340.7 $(290.6) $ 50.1
====== ====== ====== ======= ======
Long-term debt.......... $288.2 $ -- $288.2 $ -- $288.2
Stockholders' Equity:
Preferred stock....... 1.8 -- 1.8 -- 1.8
Common stock.......... 1.0 -- 1.0 0.5 1.5
Paid-in capital....... 340.2 -- 340.2 290.1 630.3
Accumulated deficit... (55.7) (25.5) (81.2) -- (81.2)
------ ------ ------ ------- ------
Total Stockholder's
Equity................. 287.3 (25.5) 261.8 290.6 552.4
------ ------ ------ ------- ------
Total Capitalization.... $575.5 $(25.5) $550.0 $ 290.6 $840.6
====== ====== ====== ======= ======
</TABLE>
- --------
(1) Represents conversion of the maximum available under the Demand Loan
Facility and accrued interest payable to Cyprus Amax into 47.2 million
shares of Common Stock at a conversion price of $6.125 per share, the
closing sale price per share of Common Stock on August 15, 1996. Actual
column includes $2.3 million in accrued interest and fees relating to
these arrangements through June 30, 1996.
(2) Does not include the previously announced purchase of the Kubaka project
from Cyprus Amax (subject to the satisfaction of certain conditions) for
16.0 million shares of Common Stock, valued at $5.935 per share; and $73.0
million of debt funded by the Company's 50 percent share of assumed
outside financing guaranteed by Cyprus Amax until project completion. The
purchase of Kubaka, if consummated, will be recorded at $40.2 million,
plus any capitalized interest. Project financing of $73.0 million will be
recorded using proportionate consolidation and will be repaid from
operations.
(3) Represents an aggregate of $250.0 million maximum borrowing under the
Demand Loan Facility note from Cyprus Amax to be used to fund remaining
capital requirements for the Fort Knox project and for other general
corporate purposes. Amounts will be borrowed under the Demand Loan
Facility as needed to complete the Fort Knox project, to provide working
capital and for general corporate purposes.
(4) The increase in other current liabilities includes accrued interest of
$29.1 million on $250.0 million borrowed under the Demand Loan Facility,
$6.6 million of interest differential payable to Cyprus Amax on amounts
borrowed under the Loan Agreement and $2.6 million representing
amortization of a portion of the $10.0 million Financing and Guaranty Fee
paid to Cyprus Amax. Interest and amortization of the Financing and
Guaranty Fee have been computed as though the maximum amounts were
outstanding for the period from July 1, 1996 through December 31, 1997.
Interest for the period from April 1 through December 31, 1997 will be
capitalized as part of the Fort Knox construction project. Interest in
1997 will be expensed.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
The Company is authorized by its Certificate of Incorporation to issue 200
million shares of Common Stock and 10 million shares of preferred stock. As of
March 31, 1996, there were approximately 96.4 million shares of Common Stock
issued and outstanding and 1,840,000 shares of the Series B Preferred Stock
issued and outstanding. In addition, two million shares of the Series A
Preferred Stock have been authorized by the Board for issuance. All of the
shares of Series A Preferred Stock are reserved for issuance under DOCLOC I.
See "--Preferred Stock--Series A Preferred Stock."
COMMON STOCK
The Company's Certificate of Incorporation authorizes the issuance of 200
million 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 and Series B Preferred
Stock, 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 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 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 KeyCorp
Shareholder Services, Inc., 1515 Arapahoe Street, Suite 1505, Denver, Colorado
80202.
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 million 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, two million shares of Series A Preferred Stock are
authorized for issuance pursuant to DOCLOC I.
Shares of the Company's preferred stock may be issued from time to time in
one or more series. The Company's Board 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.
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<PAGE>
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 two million 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 paid, are paid contemporaneously or are 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 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 one percent of such price.
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<PAGE>
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 percent 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 Amax, 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
paid, are paid contemporaneously or are 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.
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>
YEARS PRICE PER SHARE
----- ---------------
<S> <C>
1997...................................................... $52.625
1998...................................................... 52.250
1999...................................................... 51.875
2000...................................................... 51.500
2001...................................................... 51.125
2002...................................................... 50.750
2003...................................................... 50.375
2004 and thereafter....................................... 50.000
</TABLE>
plus in each case accrued and unpaid dividends to, but excluding, the date of
redemption.
25
<PAGE>
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 one percent 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 during
that period that such dividends remain in arrears.
The affirmative vote or consent of the holders of at least 66 2/3 percent 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.
PROPOSALS FOR 1997 ANNUAL MEETING
The Company anticipates that the 1997 Annual Meeting of Stockholders will be
held on or about May 6, 1997. 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 should submit the written text of the proposal to the
Company at its principal executive offices by November 27, 1996, in order for
the proposal to be considered for inclusion in the Company's Proxy Statement
for that meeting.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Company with the Commission can
be inspected and copied at the Commission's public reference facilities in the
Commission's regional offices located at: 7 World Trade Center, 13th Floor,
New York, New York 10048; and Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60604. Copies of such material can be
obtained at prescribed rates by writing to the Securities and Exchange
Commission, Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Company is also subject to the information and
reporting requirements of the
26
<PAGE>
securities regulatory authorities of certain provinces of Canada and files
similar reports, proxy statements and other information with such authorities.
The Common Stock is listed on the New York and Toronto Stock Exchanges and
certain warrants to purchase Common Stock are listed on the American Stock
Exchange. Such reports, proxy statements and other information can also be
inspected and copied at the respective offices of these exchanges at 20 Broad
Street, New York, New York 10005, 2 First Canadian Place, Toronto, Ontario,
Canada M5X 1J2, and 86 Trinity Place, New York, NY 10006-1881.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
This Consent Solicitation 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) 643-5375. In order to ensure timely delivery of
the documents, any request should be made by September 10, 1996.
The following portions of the following documents are incorporated herein by
reference:
(i) "Management's Discussion and Analysis of Financial Condition and Results
of Operations" on pages 21-24 and "Financial Statements and
Supplementary Data" on pages 25-50 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, filed with the
Commission on March 29, 1996 (File No. 1-9620);
(ii) "Management's Discussion and Analysis of Financial Condition and Results
of Operations" on pages 8-11 and "Financial Statements and Supplementary
Data" on pages 2-7 of the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, filed with the Commission on May 15,
1996; and
(iii) "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 8-11 and "Financial Statements and
Supplementary Data" on pages 2-7 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, filed with the
Commission on August 13, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, as amended, subsequent to the date hereof and prior
to August 19, 1996 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.
27
<PAGE>
INDEX TO APPENDICES
APPENDIX A--Cyprus Amax Guaranty
APPENDIX B--Demand Loan Facility
APPENDIX C--Fee and Support Agreements
<PAGE>
APPENDIX A
CYPRUS AMAX GUARANTY
This Guaranty, dated as of March 19, 1996 (this "Agreement"), by Cyprus Amax
Minerals Company, a Delaware corporation (the "Guarantor"), in favor of N M
Rothschild & Sons Limited, a bank organized under the laws of England
("Rothschild"), in its capacity as the administrative agent for the Lender
Parties (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
Whereas, pursuant to that certain Loan Agreement, dated as of October 31,
1995 and amended as of December 7, 1995 and pursuant to the Second Amendment
Agreement (as so amended, the "Loan Agreement"), among (1) Amax Gold Inc., a
Delaware corporation (the "Borrower"), (2) Fairbanks Gold Mining, Inc., a
Delaware corporation, Guanaco Mining Company, Inc., a Delaware corporation,
Lassen Gold Mining, Inc., a Delaware corporation, Melba Creek Mining, Inc., an
Alaska corporation, and Nevada Gold Mining, Inc., a Delaware corporation
(collectively, the "Principal Subsidiaries"), (3) Merrill Lynch Capital
Corporation, a Delaware corporation ("Merrill Lynch"), ABN AMRO Bank N.V., a
bank organized under the laws of The Netherlands, Rothschild and The Toronto-
Dominion Bank, a bank organized under the federal laws of Canada ("Toronto-
Dominion"), as the Arrangers, (4) the banks and other financial institutions
party thereto (collectively, the "Lenders"), (5) Merrill Lynch, as Syndication
Agent for the Lenders, (6) Toronto-Dominion, as Documentation and Technical
Agent for the Lender Parties, (7) LaSalle National Trust, N.A., a U.S.
national banking association, as Collateral Agent for the Lender Parties, and
(8) Rothschild, as Administrative Agent for the Lender Parties, the Lenders
extended Commitments to make Loans to the Borrower;
Whereas, the parties to the Loan Agreement have entered into the Second
Amendment Agreement thereto, dated as of March 19, 1996 (the "Second Amendment
Agreement");
Whereas, the Guarantor owns as of the date hereof approximately 51.2% of the
issued and outstanding capital stock of the Borrower and the Borrower owns,
either directly or indirectly, all of the outstanding shares of capital stock
of the Principal Subsidiaries;
Whereas, in consideration of the Lender Parties agreeing to the waivers and
other transactions contemplated by the Second Amendment Agreement, the
Guarantor has agreed to enter into this Agreement;
Whereas, the Guarantor will derive substantial direct and indirect benefit
from the waivers and other transactions contemplated by the Second Amendment
Agreement; and
Whereas, this Agreement is the Cyprus Amax Guaranty referred to in the
Second Amendment Agreement, and it is a condition precedent to the
effectiveness of the Second Amendment Agreement that the Guarantor execute and
deliver this Agreement;
Now Therefore, for good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged by the Guarantor, the Guarantor undertakes and
agrees, for the rateable benefit of each Lender Party, as follows:
ARTICLE 1.
Definitions; Interpretation
Section 1.1. Loan Agreement Terms; Interpretation. Capitalized terms used
but not defined herein (including in the preamble and recitals) have the
meanings provided in the Second Amendment Agreement. This
A-1
<PAGE>
Agreement is a Loan Document, and shall be interpreted and construed in
accordance with the terms and provisions of the Second Amendment Agreement
(including Section 1.1 thereof).
Section 1.2. Defined Terms. In this Agreement (including its preamble and
recitals), the following capitalized terms shall have the following meanings:
"Administrative Agent" is defined in the preamble.
"Agreement" is defined in the preamble.
"AS" is defined in clause (b)(i) of Section 3.3.
"Borrower" is defined in the first recital.
"Guaranteed Obligations" is defined in clause (a) of Section 2.1.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in clause (a) of Section 2.1.
"Insolvency Proceeding" is defined in clause (f)(ii) of Section 2.4.
"Lenders" is defined in the first recital.
"Loan Agreement" is defined in the first recital.
"Merrill Lynch" is defined in the first recital.
"Principal Subsidiaries" is defined in the first recital.
"Rothschild" is defined in the preamble.
"Second Amendment Agreement" is defined in the second recital.
"Toronto-Dominion" is defined in the first recital.
ARTICLE 2.
Guaranty; Obligations With Respect to Sale/Leaseback of Fort Knox Assets
Section 2.1. Guaranty of the Borrower's Obligations.
(a) The Guarantor hereby absolutely, unconditionally and irrevocably
guarantees (the "Guaranty"), for the rateable benefit of the Lender Parties,
the full and punctual payment of principal and interest from time to time
outstanding under the Loan Agreement (as such amounts may be reduced by any
prepayment or repayment made by the Borrower with the proceeds of the 1994
DOCLOC Facility or otherwise, but without prejudice to any right or remedy of
the Lender Parties with respect thereto) in accordance with the stated
maturities thereof (and not by way of acceleration of any Obligation pursuant
to Section 8.2 or 8.3 of the Loan Agreement other than any such acceleration
arising as a result of any Event of Default under Section 8.1.15 of the Loan
Agreement) and all payments in respect of relevant Hedging Agreements and
Interest Rate Protection Agreements (including all such amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, or the operation of Sections 502(b), 502(d) and 506(b) of
the Bankruptcy Code, and any other similar provisions arising under Applicable
Law; all such amounts and other obligations being hereinafter referred to as
the "Guaranteed Obligations"). The Guarantor hereby further covenants to
indemnify and hold harmless each Lender Party for any and all costs and
expenses (including reasonable attorney's fees and expenses) incurred by such
Lender Party in enforcing any rights under this Section. Notwithstanding the
foregoing, except with respect to any claim made by any Lender Party under the
Guaranty on or prior to the Fort Knox Economic Completion Date and subject to
Section 2.3, the Guaranty shall terminate, and the Guarantor shall be released
from its obligations under the Guaranty and this Agreement on the Fort Knox
Economic Completion Date.
(b) The Guaranty constitutes a guaranty of payment when due and not of
collection, and the Guarantor specifically agrees that it shall not be
necessary or required that any Lender Party exercise any right, assert any
A-2
<PAGE>
claim or demand or enforce any remedy whatsoever against any Obligor or any
other Person before or as a condition to the obligations of the Guarantor
under the Guaranty and this Agreement.
(c) The Guarantor agrees that the Guaranteed Obligations will be paid as
contemplated by this Agreement, regardless of any Applicable Law affecting any
of such terms or the rights of any Lender Party with respect thereto.
Section 2.2. Reinstatement. The Guarantor agrees that the Guaranty shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment (in whole or in part) of any of the Guaranteed Obligations is
rescinded or must otherwise be restored by any Lender Party, upon an
Insolvency Default, all as though such payment had not been made to such
Lender Party; provided, however, that for the avoidance of doubt, to the
extent permitted by Applicable Law, if any payment is rescinded or restored as
aforesaid at any time after the Termination Date (as defined in the Priority
Agreement), the arrangements contemplated by the Priority Agreement shall be
reinstated.
Section 2.3. Waiver. In addition to the other waivers provided in this
Agreement, the Guarantor hereby waives each of the following to the fullest
extent permitted by Applicable Law:
(a) all presentments, demands for performance, promptness, diligence,
notices of nonperformance, protests, notices of protest, notices of
dishonor, notices of acceptance of this Agreement, and demands and notices
of every kind with respect to any of the Guaranteed Obligations and the
Guaranty except for any demand or notice expressly provided for in this
Agreement;
(b) subject to the Priority Agreement, any requirement that any Lender
Party protect, secure, perfect or insure any Lien securing any of the
Guaranteed Obligations or the Guarantor's performance of its obligations
hereunder, or any property subject thereto;
(c) all statutes of limitations as a defense to any action or proceeding
brought against the Guarantor by the Lender Parties or any of them, to the
fullest extent permitted by Applicable Law;
(d) any right it may have (whether by contract, in equity or at law) to
require any of the Lender Parties to proceed against, or proceed against or
exhaust any security held from, any Obligor or any other Person (including
any other guarantor or surety of all or any of the Guaranteed Obligations)
or any collateral securing any of the Guaranteed Obligations or the
Guarantor's performance of its obligations hereunder, or to pursue any
other remedy in such Lender Party's power to pursue and which would lighten
the Guarantor's burden;
(e) any defense based on any claim that the Guarantor's obligations
exceed or are more burdensome than those of any Obligor;
(f) any defense based on: (i) any legal disability of the Borrower or any
other Obligor, (ii) any release, discharge, modification, impairment or
limitation of the liability of the Borrower or any other Obligor to any of
the Lender Parties from any cause, whether consented to by the
Administrative Agent or any of the other Lender Parties, or arising by
operation of Applicable Law or from any bankruptcy or other voluntary or
involuntary proceeding, in or out of court, for the adjustment of debtor-
creditor relationships (any such proceeding, an "Insolvency Proceeding")
including any Insolvency Proceeding which results in the delay or
modification of the stated maturity of payments (or the amounts thereof) of
the Loans pursuant to the Loan Agreement, and (iii) any rejection or
disaffirmance of any or all of the Guaranteed Obligations, or any security
held for such Guaranteed Obligations, in any such Insolvency Proceeding;
(g) any defense based on any action taken or omitted by the
Administrative Agent or any of the other Lender Parties in any Insolvency
Proceeding involving the Borrower or any other Obligor, including any
election to have such Lender Party's claim allowed as being secured,
partially secured or unsecured, any extension of credit by any of the
Lender Parties to the Borrower or any other Obligor in any Insolvency
Proceeding, and the taking and holding by any of the Lender Parties of any
security for any such extension of credit;
A-3
<PAGE>
(h) any defense based on or arising out of any defense that the Borrower
may have to the payment or performance of the Guaranteed Obligations or any
part of them; and
(i) all other suretyship defenses and rights of every kind or nature
otherwise available under Applicable Law.
Section 2.4. Sale/Leaseback of Fort Knox Assets. Upon the occurrence of any
Event of Default permitting or requiring acceleration of any of the
Obligations pursuant to Section 8.2 or 8.3 of the Loan Agreement, or upon
default by the Borrower (or Fairbanks Gold) in the performance of any of its
obligations pursuant to the Permitted Fort Knox Sale-Leaseback if as a
consequence of any such default by the Borrower (or Fairbanks Gold) the lessor
of any of the relevant equipment shall elect to exercise any of its remedies
as a consequence thereof, the Guarantor will immediately, upon the request of
the Administrative Agent, issue in favor of the lessor under the Permitted
Fort Knox Sale-Leaseback an unconditional and irrevocable guaranty of all of
the obligations of the Borrower (or Fairbanks Gold) in connection therewith in
form and substance reasonably satisfactory to the Administrative Agent (acting
in consultation with the Required Lenders); provided, however, that the
obligations of the Guarantor to the Lender Parties to maintain such guaranty
shall be discontinued in the event that the Guarantor shall have fully
discharged the Borrower's (or Fairbanks Gold's) obligations with respect to
the Permitted Fort Knox Sale-Leaseback or shall have arranged for equipment of
a substantially similar nature to that subject to the Permitted Fort Knox
Sale-Leaseback to be delivered to the Borrower (or Fairbanks Gold) at the Fort
Knox Mine free and clear of all Liens and such equipment shall actually have
been delivered within 180 days after the implementation of such arrangement.
ARTICLE 3.
Provisions of General Application
Section 3.1. Obligations Absolute, etc. Subject to Section 2.3, this
Agreement shall remain in full force and effect until the earlier to occur of
the Fort Knox Economic Completion Date and the payment in full of the
Guaranteed Obligations. The liability of the Guarantor under this Agreement
shall be absolute, unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Loan
Agreement or any other Operative Document;
(b) the failure of any Lender Party:
(i) to assert any claim or demand or to enforce any right or remedy
against any other guarantor or surety of all or any of the Guaranteed
Obligations, the Borrower, any guarantor under any Principal Subsidiary
Guaranty or any other Person under the provisions of the Loan Agreement
or any other document, instrument or agreement related thereto, or
otherwise; or
(ii) to exercise any right or remedy against any other guarantor or
surety of, or collateral (whether pursuant to any Security Document,
any Principal Subsidiary Guaranty or otherwise) securing, the
Guaranteed Obligations;
(c) any change in the time, manner or place of payment or performance of,
or in any other term of, all or any of the Guaranteed Obligations or any
other extension, compromise or renewal of any Guaranteed Obligation;
(d) any reduction, limitation, impairment or termination of any
Guaranteed Obligation for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to
(and the Guarantor hereby waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of or any other event or occurrence affecting, any
Obligation of any Obligor or otherwise;
(e) any amendment to, rescission, waiver or other modification of, or any
consent to departure from, any of the terms of the Loan Agreement, any
Principal Subsidiary Guaranty or any other Operative Document;
A-4
<PAGE>
(f) any addition, enforcement, exchange, change in the priorities
relating to, release, abandonment, liquidation, surrender or non-perfection
of any collateral granted pursuant to any Security Document securing
performance of all or any of the Guaranteed Obligations or the Guaranty or
any other obligations of the Guarantor arising pursuant to this Agreement,
or any amendment to or waiver or release or addition to, or consent to
departure from, any other guaranty held by any Lender Party securing any of
the Guaranteed Obligations; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Obligor, any
guarantor under any Principal Subsidiary Guaranty, or any other surety or
any guarantor.
The Guarantor agrees that the Guaranty is an "instrument for the payment of
money only" within the meaning of Section 3213 of the New York Civil Practice
Law and Rules.
Section 3.2. Rights of Lender Parties. The Guarantor authorizes each of the
Lender Parties to perform any or all of the actions described or implied in
Section 3.1 and in addition, the following actions at any time, in each case,
in its sole discretion, all without notice to the Guarantor and without
affecting the Guarantor's obligations under this Agreement:
(a) Any Lender Party may, subject to the Priority Agreement, direct the
order and manner of any sale of all or any part of any security now or
later to be held for any of the Guaranteed Obligations or the Guarantor's
obligations under this Agreement, and such Lender Party may also bid and
purchase at any such sale.
(b) Subject to the provisions of Section 4.13 of the Loan Agreement and
the Priority Agreement, any Lender Party may accept and apply any payments
or recoveries from the Borrower, the Guarantor or any other source, and any
proceeds of any security, to the Guaranteed Obligations in such manner,
order and priority as such Lender Party may elect, whether or not those
obligations are guarantied by this Agreement or secured at the time of the
application.
(c) Any Lender Party may substitute, add or release any one or more
guarantors or endorsers.
(d) In addition to the Loans, any one or more of the Lender Parties may
extend any other credit to any Obligor, and may take and hold security for
the credit so extended, all without affecting the Guarantor's liability
under this Agreement or the obligations of any other guarantor under any
Principal Subsidiary Guaranty to which it is a party.
Section 3.3. Waivers of Subrogation and Other Rights.
(a) If any default by the Guarantor under this Agreement shall have occurred
and be continuing, but at all times subject to the Priority Agreement, the
Lender Parties, in their sole discretion, with prior notice to the Guarantor,
may elect to: (i) foreclose either judicially or nonjudicially against any
real or personal property security held for the Guaranteed Obligations, (ii)
accept a transfer of any such security in lieu of foreclosure, (iii)
compromise or adjust any of the Guaranteed Obligations or any part of any
Guaranteed Obligation or any guarantor or surety of any of the Guaranteed
Obligations or (iv) exercise any other remedy against the Guarantor or any
security. Subject to the Priority Agreement, no such action by a Lender Party
shall release or limit the liability of the Guarantor, who shall remain liable
under this Agreement after the action, even if the effect of the action is to
deprive the Guarantor of any subrogation rights, rights of indemnity, or other
rights to collect reimbursement from the Borrower or any Principal Subsidiary
for any sums paid to any of the Lender Parties, whether contractual or arising
by operation of Applicable Law or otherwise. Subject to the Priority
Agreement, the Guarantor expressly agrees that under no circumstances shall it
be deemed to have any right, title, interest or claim in or to any real or
personal property to be held by any of the Lender Parties or any third party
after any foreclosure or transfer in lieu of foreclosure of any security for
the Guaranteed Obligations.
A-5
<PAGE>
(b) Regardless of whether the Guarantor may have made any payments to any
Lender Party, the Guarantor waives, subject to the Priority Agreement, until
the prior payment, in full and in cash, of all Guaranteed Obligations:
(i) all rights of subrogation and reimbursement, all rights of indemnity,
and any other rights to collect reimbursement from the Borrower or any
Principal Subsidiary for any sums paid to any Lender Party, whether
contractual or arising by operation of Applicable Law (including under
Alaska Statutes ("AS") 45.03.419, Sections 2847 or 2848 of the California
Civil Code, under any provisions of the United States Bankruptcy Code, or
any successor or similar statutes) or otherwise,
(ii) all rights to enforce any remedy that any Lender Party may have
against the Borrower or any Principal Subsidiary, and
(iii) all rights to participate in any security now or later to be held
by any Lender Party for any of the Guaranteed Obligations. The Guarantor
further agrees that, to the extent the waiver or agreement to withhold the
exercise of its rights of subrogation, reimbursement, indemnification and
contribution as set forth herein is found by a court of competent
jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement, indemnification and contribution the Guarantor
may have against the Borrower or any Principal Subsidiary or against any
collateral or security, shall be junior and subordinate, and to all right,
title and interest any Lender Party may have in any such collateral or
security. If any amount shall be paid to the Guarantor on account of any
such subrogation, reimbursement, indemnification or contribution rights at
any time when all of the Guaranteed Obligations have not been paid or
otherwise performed in full, such amount shall be held in trust for the
Lender Parties and shall forthwith be paid over to the Lender Parties to be
credited and applied against the Guaranteed Obligations, whether matured or
unmatured, in accordance with the terms of the Loan Documents (including
Section 4.13 of the Loan Agreement).
(c) THE GUARANTOR WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION
OF REMEDIES BY ANY OF THE LENDER PARTIES (SUBJECT TO THE PRIORITY AGREEMENT),
EVEN THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH
RESPECT TO SECURITY FOR A GUARANTEED OBLIGATION, HAS DESTROYED THE GUARANTOR'S
RIGHTS OF SUBROGATION AND REIMBURSEMENT AGAINST THE BORROWER OR ANY PRINCIPAL
SUBSIDIARY BY THE OPERATION OF APPLICABLE LAW, INCLUDING AS 45.03.605 OR
SECTION 580d OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR OTHERWISE.
(d) The Guarantor understands and acknowledges that if the Lender Parties
foreclose, subject to the Priority Agreement, judicially or nonjudicially
against any real property security for any of the Guaranteed Obligations, that
foreclosure could impair or destroy any ability that the Guarantor may have to
seek reimbursement, contribution or indemnification from the Borrower or any
Principal Subsidiary or others based on any right the Guarantor may have of
subrogation, reimbursement, contribution or indemnification for any amounts
paid by the Guarantor under this Agreement. The Guarantor further understands
and acknowledges that in the absence of the waivers by the Guarantor set forth
in this Section, such potential impairment or destruction of the Guarantor's
rights, if any, might entitle such Guarantor to assert a defense to this
Agreement based on AS 45.03.605, Section 580d of the California Code of Civil
Procedure as interpreted in Union Bank v. Gradsky, 265, Cal. App.2d 40 (1968)
or other Applicable Law. With such understanding and without limitation on any
of the foregoing provisions of this Section, by executing this Agreement,
pursuant to AS 45.03.605(h) or other Applicable Law, the Guarantor freely,
irrevocably and unconditionally (but subject to the Priority Agreement):
(i) waives and relinquishes that defense and agrees that the Guarantor
will be fully liable under this Agreement even though the Lender Parties
may foreclose judicially or nonjudicially against any real property
security for the Guaranteed Obligations;
(ii) agrees that the Guarantor will not assert that defense in any action
or proceeding which a Lender Party may commence to enforce this Agreement;
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(iii) acknowledges and agrees that the rights and defenses waived by the
Guarantor in this Agreement include any right or defense that the Guarantor
may have or be entitled to assert based upon or arising out of any one or
more of the circumstances set forth in AS 45.03.605 or Sections 580a, 580b,
580d or 726 of the California Code of Civil Procedure of Section 2848 of
the California Civil Code (including any defense that any exercise by the
Lender Parties of any right or remedy hereunder or under the Loan Documents
violates, or would, in combination with the previous or subsequent exercise
by the Guarantor of any rights of subrogation, reimbursement, contribution
or indemnification against the Borrower or any Principal Subsidiary or any
other Person, directly or indirectly result in, or be deemed to be, a
violation of any of such statutory provisions); and
(iv) acknowledges and agrees that each of the Lender Parties is relying
on this waiver in entering into the Second Amendment Agreement, and that
this waiver is a material part of the consideration which each of the
Lender Parties is entering into the Second Amendment Agreement.
(e) Based on the representations and warranties of the Guarantor set forth
herein, the Guarantor hereby forever and completely waives any right the
Guarantor might otherwise have to assert or claim, as part of a defense
against any action taken by any Lender Party against the Guarantor under this
Agreement after a Lender Party shall have, subject to the Priority Agreement,
completed an action against the Borrower or another Obligor for the
enforcement of any of the Guaranteed Obligations, that such action against the
Guarantor is barred by operation of California Civil Code Section 7260 or any
"one action" or "one form of action" statute (or any similar Applicable Law
limiting a creditor's remedies or the manner in which such remedies may be
enforced) on the theory that this Agreement and the Loan Agreement are part
and parcel with the Guaranteed Obligations as one integrated transaction,
rather than related but separate and distinct transactions, or on the theory
that any Obligor is the alter ego of the Guarantor or the Guarantor is the
alter ego of any Obligor.
(f) Without limitation on any of the other waivers of the Guarantor
hereunder, the Guarantor hereby specifically waives the benefit of (and any
and all rights arising out of) California Civil Code Section 2845, or any
similar statute arising under Applicable Law, which gives a guarantor or
surety the power to require a creditor to proceed against the principal, or to
pursue any other remedy in the creditor's power which the guarantor or surety
can not pursue, and which would lighten the guarantor's or the surety's
burden.
(g) The covenants and waivers of the Guarantor contained in this Section
shall survive termination of this Agreement and are made for the benefit of
each of the Lender Parties, the Borrower, the Principal Subsidiaries and any
other person against whom the Guarantor shall at any time have any rights of
subrogation, reimbursement, contribution or indemnification with respect to
the Guarantor's obligations under this Agreement. The covenants and waivers of
the Guarantor contained in this Section are in all cases subject to the
Priority Agreement.
Section 3.4. Consent of Guarantor. Prior to the Fort Knox Economic
Completion Date, the Administrative Agent shall not enter into any amendment
to, waiver or other modification of, or give any consent to a departure from,
any of the material terms of the Loan Agreement, any Principal Subsidiary
Guaranty or any other Operative Document without the prior written consent of
the Guarantor.
ARTICLE 4.
Representations and Warranties
In order to induce the Lender Parties to enter into the Second Amendment
Agreement and, in the case of the Lenders, to make, maintain, continue and/or
convert Loans, the Guarantor represents and warrants unto the Administrative
Agent (for the rateable benefit of the Lender Parties) as set forth in
Sections 4.01, 4.02, 4.03 and 4.04 of the Competitive Advance Facility
Agreement as in effect on the Amendment Effective Date with the intent that
references therein to "this Agreement", "Loan Documents" and the like shall be
deemed to be references to this Agreement and the Priority Agreement. The
representations and warranties set forth in this Section shall be made upon
the date hereof, the Amendment Effective Date and the delivery of each
Borrowing Request.
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ARTICLE 5.
Covenants
Cyprus Amax agrees with the Administrative Agent (for the rateable benefit
of the Lender Parties) that, at all times on or prior to the Fort Knox
Economic Completion Date, it will perform the obligations set forth in
Sections 7.01 and 7.05 of the Competitive Advance Facility Agreement as in
effect on the Amendment Effective Date with (a) references to this "Agreement"
being deemed to be references to the Loan Agreement and the other Loan
Documents and (b) references to the "Required Lenders" being deemed to be
references to the Required Lenders under the Loan Agreement.
ARTICLE 6.
Miscellaneous
Section 6.1. Waivers, Amendments, etc. The provisions of this Agreement may
from time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by the Guarantor and the
Administrative Agent (acting with the approval of the Required Lenders or all
the Lenders, as may be required pursuant to the Loan Agreement).
No failure or delay on the part of the Administrative Agent in exercising
any power or right under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No notice to or demand on the Guarantor in any case shall entitle it to any
notice or demand in similar or other circumstances. No waiver or approval by
the Administrative Agent under this Agreement shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
Section 6.2. Notices. All notices and other communications provided to any
party hereto under this Agreement shall be in writing and sent by hand
delivery, courier delivery, first class prepaid post, telex (if the receiving
party shall have telex facilities) or facsimile and addressed or delivered to
it at its address set forth below its signature hereto and designated as its
"Address for notices" or at such other address as may be designated by such
party in a notice to the other parties. Any notice, if mailed and properly
addressed with first class postage prepaid, shall be deemed given when
delivered; any notice, if sent by hand or courier delivery, shall be deemed
given when delivered; and any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted (answerback received at both the
beginning and the end of the relevant transmission in the case of telexes and
transmission completed and confirmed by the sending facsimile machine in the
case of facsimiles).
Section 6.3. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto (and in the case of the
Administrative Agent, to the rateable benefit of the Lender Parties) and their
respective successors and assigns; provided, however, that:
(a) the Guarantor may not assign, delegate or transfer its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and all the Lenders; and
(b) the rights of sale, assignment and transfer of the Agents and the
Lenders are subject to Article 9 and Section 10.11 of the Loan Agreement.
Section 6.4. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
Section 6.5. Headings. The various headings of this Agreement are inserted
for convenience only and shall not affect the meaning or interpretation of
this Agreement or any provisions hereof or thereof.
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Section 6.6. Governing Law; Entire Agreement.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(b) Upon the Amendment Effective Date, except with respect to the Borrower's
obligations to indemnify and pay the costs and expenses of the Underwriters as
set forth in the Commitment Letter, this Agreement, together with the other
Loan Documents, constitutes the entire understanding between the parties
hereto with respect to the subject matter hereof and supersedes any prior
agreements, written or oral, with respect thereto (including the Commitment
Letter (except as aforesaid), the Indicative Summary Terms for $250,000,000
Senior Term Loan Facility, dated August 15, 1995, and the Information
Memorandum).
Section 6.7. Forum Selection and Consent to Jurisdiction, Waiver of
Immunity. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT OR
THE GUARANTOR MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW
YORK, BOROUGH OF MANHATTAN, OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND IN ADDITION ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY PROPERTY OF THE GUARANTOR MAY BE BROUGHT, AT THE ADMINISTRATIVE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH PROPERTY MAY BE
LOCATED OR DEEMED LOCATED. THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, BOROUGH OF
MANHATTAN, AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH LITIGATION. SERVICE OF PROCESS MAY BE MADE UPON THE GUARANTOR BY
MAILING OR DELIVERING A COPY OF SUCH PROCESS TO IT IN CARE OF THE PROCESS
AGENT AT THE PROCESS AGENT'S ADDRESS AND THE GUARANTOR HEREBY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING IN NEW YORK ARISING OUT OF THIS AGREEMENT BY THE MAILING OF COPIES
OF SUCH PROCESS TO IT AT ITS ADDRESS FOR NOTICES SET FORTH BELOW ITS SIGNATURE
HERETO. THE GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. TO THE EXTENT THAT THE GUARANTOR HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT
IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE
GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT.
Section 6.8. Waiver of Jury Trial. EACH OF THE ADMINISTRATIVE AGENT, ON
BEHALF OF THE OTHER LENDER PARTIES, AND THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS EACH MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR
IN CONNECTION WITH, THIS AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE
AGENT OR ANY OTHER LENDER PARTY, THE GUARANTOR, AND ANY AND ALL OTHER
GUARANTORS OR SURETIES OF ALL OR ANY OF THE GUARANTEED OBLIGATIONS. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT ENTERING INTO
THIS AGREEMENT.
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Section 6.9. Incorporation of Miscellaneous Provisions. The parties hereto
agree that the provisions of Sections 4.6 (Taxes), 4.7 (Mitigation), 4.8
(Payments, Computations, etc.), 4.9 (Proration of Payments), 4.10
(Miscellaneous Provisions for Payments in Gold) and 4.11 (Setoff), and the
last sentence of Section 10.11.2 (Participations) of the Loan Agreement shall
apply mutatis mutandis to the Guarantor as if set forth herein except that
references to an "Obligor" or the like shall be deemed to be references to the
Guarantor.
In Witness Whereof, the parties hereto have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the day and year first above written.
The Guarantor:
Cyprus Amax Minerals Company
By: /s/ Francis J. Kane
Name Printed: Francis J. Kane
Title: Vice President Investor
Relations and Treasurer
Address for notices:
9100 East Mineral Circle
Englewood
Colorado 80112
USA
The Administrative Agent:
per pro N M Rothschild & Sons Limited
By: /s/ Andrew Wright
Name Printed: Andrew Wright
Title: Assistant Director
By: /s/ D.R. Beadle
Name Printed: D.R. Beadle
Title: Assistant Director
Address for notices:
New Court
St. Swithin's Lane
London EC4P 4DU
England
Attention: Dr. Michael A. Price
Facsimile No.: 44-171-280-5679
Telex No.: 888031
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APPENDIX B
CREDIT AGREEMENT
This Credit Agreement, dated as of March 19, 1996 ("Agreement"), by and
between Amax Gold Inc., a Delaware corporation (the "Borrower"), and Cyprus
Amax Minerals Company, a Delaware corporation (the "Lender");
W I T N E S S E T H:
Whereas, on the date of this Agreement the Lender indirectly owns shares of
the Borrower's common stock, par value $0.01 per share ("Common Stock")
constituting approximately 51.2% of the Borrower's outstanding Common Stock;
Whereas, the Borrower needs financial support from the Lender to finance
increases in actual and projected capital expenditures necessary to construct
and develop the Fort Knox mine and to provide working capital, and the Lender
is willing to provide to the Borrower up to $250,000,000 of financing for such
needs and for general corporate purposes, on the terms of this Agreement;
Whereas, each party has determined, after consulting with an independent
investment banking firm, that it is in the best interest of such party 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 Special
Committee of the Borrower's Board of Directors, which consists solely of those
Directors who are unaffiliated with the Lender);
Now Therefore, the parties hereby agree to the following terms and
conditions:
ARTICLE I
Amounts and Terms of the Loan
Section 1.01. Amount of Credit. 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 Lender notifies Borrower that Loans will no
longer be made available hereunder (the expiration date determined by (i) or
(ii) is herein called the "Expiration Date"), in an aggregate principal amount
up to but not exceeding at any one time outstanding the sum of $250,000,000
(the "Maximum Loan Amount"). During such period the Borrower may borrow, pay
and prepay in whole or in any part, all in accordance with the terms and
conditions hereof. Each borrowing and cash prepayment of principal, if any,
shall be in an amount equal to an integral multiple of $1,000,000.
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 shall have no obligation to make any Loans
hereunder. The Lender shall advise the Borrower prior to the end of the
Business Day prior to the date upon which a Loan is requested to be made
whether the Lender has agreed to make the Loan. If the Lender agrees to make a
Loan hereunder, 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
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Borrower's account with Chemical Bank, New York (or any successor thereto), or
as the Borrower may otherwise direct in such notice.
Without regard to the applicable Interest Period of any Loan, the Loans
hereunder shall be payable upon demand by Lender specifying the amount of
Loans to be repaid and the date of payment.
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 upon demand 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 1.07 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 1.07 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 2.25% per annum, except as otherwise provided in this Section.
Interest on each Loan shall be due and payable in full on the earlier of (i)
last day of the Interest Period applicable to such Loan and (ii) the date upon
which the Lender demands that the Loan be repaid, 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 have the
meaning ascribed to it in the Revolving Credit Agreement, dated as of April
15, 1994, between the Lender and the Borrower, whether or not such Agreement
shall have been terminated at the time of such interest calculation. 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 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 as
requested by the Lender. The Borrower shall give Lender at least ten (10)
Business Days notice of any such prepayment; provided, that, if the Lender
shall require additional time to obtain the approvals that are necessary to
elect to accept such payment in Common Stock pursuant to Section 1.07, the
Lender may extend such payment date for a reasonable period of time. All such
cash payments shall be made by wire transfer in immediately available funds to
an account designated by the Lender.
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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 new Loan for purposes of this Agreement.
Section 1.06. 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 1.07. Payment in Common Stock. At the Lender's election, which may
be exercised by its giving written notice to the Borrower at least two (2)
Business Days prior to the date (i) upon which the Lender has demanded payment
of the Note, (ii) upon which any interest payment is due, or (iii) on which
any repayment or prepayment of the Note is to be made in accordance with
Section 1.04 (unless such date is extended for a reasonable period of time by
the Lender at the Lender's election), the Lender may require the Borrower to
issue to the Lender Common Stock in lieu of a payment of amounts outstanding
under the Note; provided, that such issuance shall be subject to (a) the
acceptance by the New York Stock Exchange (the "NYSE") of a listing
application for the issuance of shares of Common Stock of the Borrower
therefor and (b) shareholder approval by the shareholders of the Borrower as
to such issuance. The number of shares of Common Stock that shall be issued
shall be equal to (I) the dollar amount of payment demanded or due on such
date divided by (II) the Average Market Price (as defined below). The "Average
Market Price" shall equal the average of the closing prices of the Common
Stock on the NYSE over the five (5) NYSE trading days ending on the Business
Day prior to the date that such demand is made, provided, that such Average
Market Price shall be subject to adjustment for extraordinary dividends or
distributions, stock splits, stock dividends and similar capital events
occurring during such five (5) NYSE trading-day period.
Section 1.08. Regulatory Approvals. As a condition precedent to issuing any
Common Stock to the Lender pursuant to Section 1.07 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 Common
Stock.
Section 1.09. Failure to Obtain Regulatory Approvals. In the event the
Borrower is unable to obtain all authorizations and approvals required for the
issuance of any Common Stock pursuant to Section 1.08 hereof, such failure
shall not constitute a default. If the Common Stock was to be issued to pay an
interest or principal payment 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 1.04 of this Agreement, as the case may be,
and the Note.
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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 and of all documents
evidencing other necessary corporate action and governmental approvals,
if any, with 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 of this Agreement; and
(v) A Notice of Borrowing under Section 1.02.
(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 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
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 on the date of any such subsequent Loan the statements made in Section
2.01(b)(i) and (ii) shall be true.
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 Common Stock required to be issued
pursuant to Articles of this Agreement) and do not (and, 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 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 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 Common Stock, when issued in accordance with the terms of this
Agreement 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, 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 this Agreement is in effect or 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
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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. 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 4.05. Listing Approval. The Borrower promptly shall use all
reasonable efforts to obtain the acceptance of the NYSE 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.
Section 4.06. Security for Obligations. As security for the full and
punctual payment when due of all obligations arising under this Agreement
(including all such amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy Code, 11
U.S.C. Section 362(a), and the operation of Sections 502(b) and 506(b) of the
United States Bankruptcy Code, 11 U.S.C. Sections 502(b) and 506(b), and any
other similar provisions arising under applicable law), the Borrower hereby
grants to the Lender a security interest in all of the Borrower's right, title
and interest, whether now existing or hereafter arising or acquired, in the
Collateral (as defined in the Collateral Agreements referred to in the Loan
Agreement pursuant to which the Borrower is financing the construction of the
Fort Knox Mine) in the form and manner contemplated by the Collateral
Agreements. The Borrower agrees to execute such documents and to make such
filings as shall be necessary and desirable in the opinion of the Lender to
perfect and protect the security interest granted hereby over the Collateral
as soon as practicable after the date hereof.
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;
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then, and in any such event, the Lender, by notice to the Borrower, may take
either or both of the following actions: (i) terminate this Agreement; 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 Borrower's ability to borrow hereunder 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.
ARTICLE VI
Provisions Regarding Common Stock
Section 6.01. Reservation of Shares of Common Stock. The Borrower agrees
that it will, at all times prior to the Expiration Date, undertake all such
further acts and assurances as may be reasonably required to 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 pursuant to Section 1.07,
shares of Common Stock deliverable pursuant to Section 1.07. Before taking any
action that would cause an issuance of shares of Common Stock below the then
par value (if any) of the shares of Common Stock issuable pursuant to Section
1.07, 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.
Section 6.02. 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 issuable
pursuant to Section 1.07; 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 6.03. 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 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 to receive shares of common stock of such Formed, Surviving
or Acquiring Entity pursuant to Section 1.07. The above provisions of this
Section 6.06 shall similarly apply to successive consolidations, mergers,
sales, leases or transfers.
Section 6.04. 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 issued pursuant to Section 1.07 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:
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"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 issued pursuant to Section 1.07 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 issued to the
Lender pursuant to Section 1.07 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.
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.
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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 to finance increases in actual and projected capital expenditures
necessary to construct and develop the Fort Knox mine and to provide working
capital, and for general corporate purposes.
Section 7.06. Demand Registration Rights.
(i) At any time after the issuance of Common Stock pursuant to Section 1.07,
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 1.07 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 use reasonable efforts
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, provided, that in no event shall the Borrower be obligated
to qualify to do business or file a general consent to service of process
in any jurisdiction;
(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 Special 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.
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(iv) All Registration Expenses incurred in connection with the first
registration statement to be filed hereunder shall be paid by the Borrower.
All Registration Expenses incurred in connection with each additional
registration statement to be filed hereunder 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. Fees and Expenses. The Borrower shall pay (i) all reasonable
out-of-pocket expenses of the Lender, including reasonable 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
reasonable out-of-pocket expenses incurred by the Lender, including reasonable
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 7.09. 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.
By /s/ Mark A. Lettes
----------------------------------
TITLE: VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Attest:
/s/ Deborah J. Friedman
- -----------------------
SECRETARY
Cyprus Amax Minerals Company
By /s/ Francis J. Kane
----------------------------------
TITLE: VICE PRESIDENT INVESTOR
RELATIONS AND TREASURER
Attest:
/s/ Dale E. Huffman
- -----------------------
ASSISTANT SECRETARY
B-10
<PAGE>
EXHIBIT A
CREDIT NOTE
$250,000,000.00 Date: March 19, 1996
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"), upon demand by 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 Two Hundred Fifty Million Dollars ($250,000,000) 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; provided, that to the extent that the
Borrower repays (including any prepayment) any principal amount of Loans in
Common Stock pursuant to and as defined in Section 1.07 of the Agreement prior
to the Expiration Date (as defined below), the Maximum Loan Amount shall
automatically be reduced by the amount of any Common Stock so issued, based
upon the value of such Common Stock at the time of issuance as determined in
accordance with Section 1.07 of the Agreement. The Lender shall have the right
to demand payment of the Loans at any time. Loans may be made 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 Lender
notifies Borrower that Loans will no longer be made available hereunder (the
expiration date determined by (i) or (ii) is herein called the "Expiration
Date").
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 Lender, the principal of and interest on this Note may be paid
by the Borrower in Common Stock of the Borrower, in accordance with the
provisions of Section 1.07 of the Agreement, subject to satisfaction of the
conditions set forth in Section 1.08 of such Agreement.
This Note is the Note referred to in Section 1.02 of the Credit Agreement
between the Borrower and the Lender dated as of March 19, 1996, 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 19, 1996
FROM AMAX GOLD INC.*
TO CYPRUS AMAX MINERALS COMPANY
Principal Amount of the Initial Loan:
$
Date of the Initial Loan:
Interest Rate for the Initial Loan:
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.
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<PAGE>
APPENDIX C
AMAX GOLD INC.
9100 EAST MINERAL CIRCLE
ENGLEWOOD, COLORADO 80112
March 19, 1996
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, Colorado 80112
Dear Sirs:
Reference is made to the Guaranty, dated the date hereof (the "Guaranty"),
by Cyprus Amax Minerals Company ("Cyprus Amax") in favor of N M Rothschild &
Sons Limited ("Rothschild"), in its capacity as the administrative agent for
the Lender Parties referred to in the Guaranty, a copy of which Guaranty is
attached to this letter as Exhibit A. Reference is also made to the Collateral
Sharing, Priority and Agency Agreement, dated as of March 19, 1996 (the
"Collateral Agreement"), among Cyprus Amax, Rothschild, LaSalle National
Trust, N.A., Amax Gold Inc. ("AGI"), Fairbanks Gold Mining, Inc., Lassen Gold
Mining, Inc., Melba Creek Mining, Inc. and Fairbanks Gold Canada Limited, a
copy of which Collateral Agreement is attached to this letter as Exhibit B.
In consideration of the execution and delivery by Cyprus Amax of the
Guaranty, AGI is entering into this letter agreement and undertaking the
obligations set forth below.
AGI hereby agrees to reimburse Cyprus Amax for (i) all payments made by
Cyprus Amax under the Guaranty, (ii) all reasonable out-of-pocket expenses of
Cyprus Amax, including reasonable fees and disbursements of counsel, incurred
in connection with the performance of Cyprus Amax's obligations under the
Guaranty, and (iii) all transfer taxes, documentary taxes, assessments or
charges made by any governmental authority by reason of the performance of
Cyprus Amax's obligations under the Guaranty. Any such reimbursement
obligation that arises shall be in the nature of a demand loan obligation
bearing interest as set forth in the immediately succeeding paragraph and
payable in cash (or such other consideration as may be agreed by AGI and
Cyprus Amax at the time of such payment) by AGI to Cyprus Amax within five (5)
Business Days (as defined in the Loan Agreement referred to in the Guaranty)
after receipt by AGI of a written notice of demand from Cyprus Amax.
Any such demand loan obligation shall bear interest at an annual rate equal
to the LIBOR Rate (as defined herein) for an interest period selected by
Cyprus Amax at its option for a period of one, three or six months, or such
other periods as are agreed between AGI and Cyprus Amax (each, an "Interest
Period"), plus 3.25% per annum, except as otherwise provided herein. Interest
on each amount shall be due and payable in full on the earlier of (i) last day
of the Interest Period applicable to such amount and (ii) the date upon which
Cyprus Amax demands that the amount be repaid, 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 have the
meaning ascribed to it in the Revolving Credit Agreement, dated as of April
15, 1994, between Cyprus Amax and AGI, whether or not such Agreement shall
have been terminated at the time of such interest calculation. All
computations of interest hereunder shall be made by Cyprus Amax 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.
As security for the full and punctual payment when due of all obligations
arising under this letter agreement (including all such amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. Section 362(a), and the operation
of Sections 502(b)
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<PAGE>
and 506(b) of the United States Bankruptcy Code, 11 U.S.C. Sections 502(b) and
506(b), and any other similar provisions arising under applicable law), AGI
hereby grants to Cyprus Amax a security interest in all of AGI's right, title
and interest, whether now existing or hereafter arising or acquired, in the
Collateral (as defined in the Collateral Agreement) in the form and manner
contemplated by the Collateral Agreement. AGI agrees to execute such documents
and to make such filings as shall be necessary and desirable in the opinion of
Cyprus Amax to perfect and protect the security interest granted hereby over
the Collateral as soon as practicable after the date hereof.
AGI agrees, if and to the extent requested by Cyprus Amax, to execute such
documents and to make such filings as shall be necessary to grant to Cyprus
Amax security interests in the Guanaco project and the Refugio project with
the highest priority permitted after giving effect to all prior security
interests in such projects, and subject to the receipt of any necessary
governmental and other approvals from third parties (including, without
limitation, the lenders to such projects).
AGI agrees to indemnify and hold harmless Cyprus Amax for any losses,
claims, damages or liabilities to which Cyprus Amax may become subject as a
result of executing or delivering the Guaranty or performing the obligations
contemplated thereby.
This letter shall be governed by and construed in accordance with the laws
of the State of Colorado.
Very truly yours,
Amax Gold Inc.
/s/ Mark A. Lettes
-------------------------------------
MARK A. LETTES
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
Accepted and Acknowledged:
Cyprus Amax Minerals Company
/s/ Francis J. Kane
- -------------------------------------
FRANCIS J. KANE
VICE PRESIDENT AND TREASURER
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<PAGE>
March 19, 1996
Cyprus Amax Minerals Company
9100 E. Mineral Circle
Englewood, Colorado 80112
Dear Sirs:
Reference is made to (i) the Guaranty (the "Guaranty"), dated the date
hereof, by Cyprus Amax Minerals Company ("Cyprus Amax") in favor of N M
Rothschild & Sons Limited, in its capacity as the administrative agent for the
Lender Parties referred to in the Guaranty, and (ii) the Credit Agreement,
dated as of the date hereof ("the Credit Agreement"), by and between Amax Gold
Inc. ("AGI") and Cyprus Amax. Copies of the Guaranty and Credit Agreement are
attached to this letter.
In consideration of the execution and delivery by Cyprus Amax of the
Guaranty and the Credit Agreement and in consideration of the obligation by
Cyprus Amax to maintain the Guaranty until the Fort Knox Economic Completion
Date (as defined in the Loan Agreement, as amended (the "Loan Agreement")),
AGI hereby agrees to pay to Cyprus Amax:
(i) an upfront fee (the "Upfront Fee") of $10,000,000 payable by AGI to
Cyprus Amax on any date after the date hereof upon Cyprus Amax' giving AGI
at least two (2) Business Days prior written notice of a demand for
payment; and
(ii) commitment fee (the "Commitment Fee") on each date upon which
accrued interest is payable under Section 3.2.3 of the Loan Agreement, or
such later date as Cyprus Amax may designate, equal to the product of (A)
the portion of the Guaranteed Obligations (as defined in the Guaranty)
constituting principal under the Loan Agreement to the extent that accrued
interest is due on such principal amount on such interest payment date
times (B) 1.75% per annum, on the basis and at the times that such interest
is calculated and due pursuant to the Loan Agreement.
AGI agrees to pay (i) all reasonable out-of-pocket expenses of Cyprus Amax,
including reasonable fees and disbursements of special counsel for Cyprus
Amax, in connection with the preparation of the Guaranty, any waiver or
consent thereunder or any amendment thereof and (ii) if Cyprus Amax is
required to make any payments under the Guaranty, all reasonable out-of-pocket
expenses of Cyprus Amax, including reasonable fees and disbursements of
counsel, in connection with any collection, bankruptcy, insolvency or other
enforcement proceedings, actions or negotiations resulting therefrom. AGI also
agrees to indemnify Cyprus Amax against any transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution or delivery by Cyprus Amax of the Guaranty. The expenses, taxes and
other amounts set forth in this paragraph are hereinafter referred to as the
"Other Expenses". The Other Expenses shall be payable from time to time by AGI
to Cyprus Amax on any date after the date incurred upon Cyprus Amax' giving
AGI at least two (2) Business Days prior written notice of a demand for
payment.
At the election of Cyprus Amax, which may be exercised by its giving written
notice to AGI at least two (2) Business Days prior to the date upon which
payment of the Upfront Fee or the Other Expenses is demanded or a Commitment
Fee payment is due and subject to (i) the acceptance by the New York Stock
Exchange (the "NYSE") of a listing application for the issuance of shares of
Common Stock of AGI therefor and (ii) shareholder approval by the shareholders
of AGI as to such issuance, Cyprus Amax may request that the Upfront Fee, the
Other Expenses, the Commitment Fee or any part thereof shall be paid in shares
of Common Stock of AGI equal to (a) the dollar amount of the Upfront Fee, the
Other Expenses, the Commitment Fee or any part thereof demanded or due, as the
case may be, on such date divided by (b) the Average Market Price (as defined
below). The "Average Market Price" shall equal the average of the closing
prices of the Common Stock of AGI on the NYSE over the five (5) NYSE trading
days ending on the Business Day prior to the date upon which payment in Common
Stock of AGI is requested, provided, that such Average Market Price shall be
subject to adjustment for extraordinary dividends or distributions, stock
splits, stock dividends and similar capital events occurring during such five
(5) NYSE trading-day period.
C-3
<PAGE>
AGI further agrees that, until the occurrence of the Fort Knox Economic
Completion Date, AGI will not make any borrowing under the Revolving Credit
Agreement, dated April 15, 1994, by and between AGI and Cyprus Amax for
purposes other than making a payment of the Obligations under the Loan
Agreement without the prior written consent (subject to the DOCLOC Support
Agreement, dated February 14, 1995, between Cyprus Amax on the one hand and
AGI and N M Rothschild & Sons Limited and the other parties thereto on the
other hand, in respect of the Refugio project) of Cyprus Amax.
This letter shall be governed by and construed in accordance with the laws
of the State of Colorado.
Very truly yours,
Amax Gold Inc.
/s/ Mark A. Lettes
-------------------------------------
MARK A. LETTES
VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Accepted and Acknowledged:
Cyprus Amax Minerals Company
/s/ Francis J. Kane
- -------------------------------------
FRANCIS J. KANE
VICE PRESIDENT AND TREASURER
C-4
<PAGE>
AMAX GOLD INC.
THIS CONSENT FORM IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
OR THE TRUSTEE NAMED BELOW
The undersigned hereby takes the action indicated on the reverse side with
respect to all the shares of common stock, par value $.01 per share (the
"Common Stock"), of Amax Gold Inc. held of record by the undersigned at the
close of business on August 15, 1996, and directs the Trustee of the Thrift
Plan for Employees of Amax Gold Inc. and its Subsidiaries (the "Plan"), with
respect to the shares of Common Stock held for the benefit of the undersigned,
to take the action indicated on the reverse side. The Trustee of the Plan will
take action with respect to unallocated and undirected shares of Common Stock
held by the Plan in direct proportion to the action taken by Plan participants
for Plan shares for which instructions have been received.
THIS CONSENT IS BEING SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS.
IMPORTANT--YOUR CONSENT WILL NOT BE VALID IF IT IS NOT SIGNED, DATED AND
RECEIVED BY THE COMPANY PRIOR TO 5:00 P.M., MOUNTAIN TIME, ON SEPTEMBER 19,
1996.
SEE REVERSE SIDE
<PAGE>
+
+
[X] PLEASE MARK YOUR ++++++
VOTES AS IN THIS
EXAMPLE.
Pursuant to Section 228 of the General Corporation Law of the State of
Delaware, the undersigned, as the record holder of shares of Common Stock,
hereby takes the following action with respect to all of the shares of Common
Stock of which the undersigned is the record holder on August 15, 1996:
WITHHOLDS
CONSENTS CONSENT ABSTAINS
[___] [___] [___]
PROPOSAL:
To the Financing Arrangement with Cyprus Amax Minerals Company described in the
Consent Solicitation Statement.
The undersigned acknowledges receipt of the Consent Solicitation Statement.
IF THE UNDERSIGNED HAS FAILED TO CHECK A BOX MARKED "CONSENTS" OR "WITHHOLDS
CONSENT" OR "ABSTAINS" TO THE PROPOSAL, THE UNDERSIGNED AGREES THAT HE, SHE OR
IT SHALL BE DEEMED TO HAVE CONSENTED TO THE ACTIONS DESCRIBED IN THE PROPOSAL.
SIGNATURE(S) _________________________________________ DATE_______________
SIGNATURE(S) _________________________________________ DATE ______________
NOTE: Your signature should appear as your name appears hereon. In signing as
attorney, executor, administrator, trustee or guardian, indicate such
capacity. All joint tenants should sign. When the Consent is given by a
corporation, it should be signed by an autho-rized officer.
