<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year-ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-9620
AMAX GOLD INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1199974
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
9100 EAST MINERAL CIRCLE 80112
ENGLEWOOD, COLORADO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(303) 643-5500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Title of each class Name of each exchange on which registered
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Common Stock, $0.01 par value (114,873,878 shares New York Stock Exchange, Inc.
outstanding at February 9, 1998) The Toronto Stock Exchange
$3.75 Series B Convertible Preferred Stock, $1.00 par New York Stock Exchange, Inc.
value (1,840,000 shares outstanding
at February 9, 1998)
======================================================================================================================
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. X
-----
The aggregate market value of voting stock held by non-affiliates at the closing
price of $3 5/16 on February 9, 1998, was approximately $136,600,000.
Items 10, 11, 12 and 13 to be filed by amendment to the Company's Form 10-K
within 120 days after the end of the fiscal year.
<PAGE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Amax Gold Inc. (Amax Gold or the Company) and its subsidiaries are 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 the
Americas, Russia, Australia and Africa. The Company's share of production from
its operating properties totaled 729,831 ounces during 1997, and its share of
reserves as of December 31, 1997, in all its properties totaled approximately
228 million tons of ore reserves with an average grade of 0.031 ounces of gold
per ton, or 7.1 million contained ounces of gold.
The Company was incorporated in Delaware in 1987 and reincorporated in 1995.
Cyprus Amax Minerals Company (Cyprus Amax) owns approximately 58.8 percent of
the Company's outstanding Common Stock and has the right to acquire additional
shares under certain financing arrangements.
The Company's operating properties consist of a 100 percent interest in the Fort
Knox mine near Fairbanks, Alaska; a 50 percent interest in the Kubaka mine in
the Magadan Oblast situated in Far East Russia; and a 50 percent interest in the
Refugio mine in Chile. The Company also owns a 100 percent interest in the
Hayden Hill mine in Lassen County, California; and a 90 percent interest in the
Guanaco mine in Chile. Mining at Hayden Hill and Guanaco was completed during
1997 and residual leaching will continue during 1998 at both mines. In addition
the Company owns a 62.5 percent venture interest in the Haile property in
Lancaster County, South Carolina. The Company also owns the Sleeper mine in
Humboldt County, Nevada, and the Wind Mountain mine in Washoe County, Nevada,
which are in reclamation. The locations of Amax Gold's properties are shown on
the map on page 2, and descriptions are set forth below. Data relating to the
Company's domestic and foreign operations and export sales are included at Note
13 to the Consolidated Financial Statements.
Unless otherwise indicated, reserves represent proven and probable reserves, and
all reserve information is given as of December 31, 1997. Other mineralized
material represents a mineralized body with established geologic continuity that
requires additional work to qualify as reserves. Except as otherwise noted,
references to tons and ounces are to short tons of 2,000 pounds and to troy
ounces of 31.103 grams, respectively. Production is defined as gold or silver
produced in the form of dore plus any inventory in mill carbon circuits. Tons
mined include removal of waste required to access ore. Total cash costs include
all operating costs at the mine site, including overhead, proceeds taxes and
royalties, are net of credits for silver by-product and exclude reclamation
costs.
All of the Company's operating properties are open pit mines. Except for mining
equipment owned by contract miners at Refugio and mobile mining equipment leased
by the Company at Fort Knox, the Company owns its mining and processing
equipment, which is maintained in good operating condition. Ore is processed by
milling or heap leaching. Milling is the traditional process for recovering
gold from ore. After ore is crushed, the gold and silver are concentrated and
then smelted into dore, which is shipped to refiners for further processing.
The milling process is typically used to achieve higher recovery from oxide and
sulfide ores.
Heap leaching is a lower cost processing method applied principally to oxidized
ores. The heap leach recovery rate is generally lower than for milling. In the
heap leaching process, crushed and/or run-of-mine ore is loaded onto leach pads.
The ore is irrigated with a weak cyanide solution that penetrates the ore,
dissolving the gold and silver. The pregnant solution is collected and pumped
through activated carbon or a Merrill Crowe zinc precipitation plant to remove
the metals from the solution. After the gold and silver is stripped from the
carbon or processed from the zinc precipitate, it is smelted into dore, which is
shipped to refiners for further processing.
The terms Amax Gold and the Company when used herein may refer collectively to
Amax Gold Inc. and its subsidiaries and affiliates or to one or more of them
depending on the context.
<PAGE>
[MAP OF AMAX GOLD LOCATIONS]
-2-
<PAGE>
FORT KNOX MINE
The Fort Knox mine is located in the Fairbanks Mining District, 15 air miles
northeast of Fairbanks, Alaska.
Operations. Fort Knox achieved commercial production on March 1, 1997.
Construction of the mine was completed at a capital cost of approximately $373
million, which includes about $28 million in capitalized interest. The
operation includes an open pit mine, a conventional 36,000 tons per day (13.1
million tons per year) mill and process plant, a tailings storage facility and a
fresh water reservoir to supply process water. The process facilities are
designed as a zero discharge system. Power is supplied by the public utility
serving the area over a distribution line paid for by the Company. Access is
provided by paved highway for 21 miles from Fairbanks and then for five miles by
unpaved road. The mine and plant are designed to operate year round and to
produce approximately 300,000 to 400,000 ounces of gold per year depending on
the ore grade processed, with the higher grades expected during the early years.
The following table presents operating data for the Fort Knox mine for the
period from the commencement of commercial production on March 1, 1997, through
December 31, 1997.
Fort Knox Mine
(AGI 100% Share)
<TABLE>
<CAPTION>
1997
- ---------------------------------------------------------------------
<S> <C>
Tons mined 27,536,150
Tons of ore milled 10,584,156
Average mill head grade (oz. per ton) 0.034
Mill recovery rate (%) 89
Ounces of gold produced 320,522
Ounces of silver produced 15,958
Cost per ounce of gold produced:
Total cash costs $170
Reclamation 3
Depreciation and depletion 169
- ---------------------------------------------------------------------
Total production costs $342
- ---------------------------------------------------------------------
</TABLE>
Property Position. The Fort Knox mine covers approximately 47,000 acres and
consists of two state mining leases, approximately 1,400 state mining claims,
seven patented federal mining claims, and the mineral rights to 38 patented
federal mining claims. The current reserve is located on approximately 1,150
acres of land held under a state mining lease that expires in 2014 and may be
renewed for a period not to exceed 55 years. This lease is subject to a 3
percent royalty payable to the State of Alaska based on net income. Claims
surrounding the current reserve are subject to net smelter return royalties
ranging from 3 percent to 6 percent on the state mining claims, and both a 1
percent net smelter return royalty and a 10 percent overriding net profits
interest on certain of the patented federal mining claims.
Geology and Ore Reserves. The Fort Knox gold deposit occurs as porphyry-style
mineralization of the type usually associated with copper and molybdenum ore
bodies. The ore is hosted within the upper margins of a granitic intrusion in a
stockwork of small quartz veins and shear zones. The veins and shears are
fractions of an inch to 10 inches wide with erratic and widely-spaced
distribution. The gold occurs as fine grains of free gold disseminated within
and along the margins of the veins and shears. In plan view, the deposit has a
dimension of about 4,000 by 2,000 feet, elongated in an east-west direction and
extending to depths of 1,000 feet. The geology is relatively simple and the
rocks are weakly altered. Grade is usually related to the degree of fracturing
and veining of the rocks. Because of the low grade and erratic distribution of
gold, the Company is mining on a bulk tonnage basis. The following table sets
forth the proven and probable reserves for the Fort Knox mine.
-3-
<PAGE>
Fort Knox Mine
Proven and Probable Ore Reserves
As of December 31, 1997
<TABLE>
<CAPTION>
Gold Gold
Tons Avg. Grade Content
(000) (oz./ton) (000 oz.)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Mill Ore 170,273 0.024 4,099
- -----------------------------------------------------------------------------
</TABLE>
The December 31, 1997 Fort Knox reserves were calculated by the Company and
verified by Mineral Resources Development, Inc. in its report dated February
1998. Reserves are calculated using a gold price of $375 per ounce and a gold
cut-off grade of 0.0125 ounces per ton. The Company has determined that
calculating the reserves at $350 per ounce would not materially change the
results. Changes from the 1996 reserves reflect the production of gold during
1997 and the addition of approximately 450,000 contained ounces of reserves.
The Company estimates that mill recovery will continue to be approximately 90
percent.
In addition to proven and probable reserves, the Company has estimated 137.5
million tons of other mineralized material at an average grade of 0.022 ounces
per ton.
KUBAKA MINE
The Company indirectly owns a 50 percent interest in Omolon Gold Mining Company
(Omolon), which owns and operates the Kubaka mine. Kubaka is located in the
Russian Far East, approximately 200 miles south of the Arctic Circle and 600
miles northeast of the major port city of Magadan. Amax Gold completed the
acquisition of Kubaka from Cyprus Amax during May 1997. See Notes 6 and 7 to the
Consolidated Financial Statements for further discussion of the acquisition and
financing of the mine.
Operations. Commercial production was achieved at Kubaka on June 1, 1997.
Construction of the mine was completed at a total capital cost of approximately
$242 million. This amount includes certain financing costs, working capital and
about $14 million in capitalized interest. The operation consists of an open pit
mine, a conventional 1,900 tons per day (approximately 700,000 tons per year)
mill and process plant, a tailings storage facility and a reclaim water
retention facility to supply process water. Power is supplied by on-site diesel
generators. Facilities include a permanent camp with access from Magadan
provided by helicopter as well as by a winter road, which is generally open from
January through April. The Kubaka mine's remote location in the sub-Arctic
region requires the Company to plan for operations in extreme cold and to
provide all services and facilities on site. The mine and plant are designed to
produce approximately 400,000 to 450,000 ounces of gold per year, of which the
Company's share is 50 percent.
The following table presents operating data for the Kubaka mine for the period
from the commencement of commercial production on June 1, 1997, through December
31, 1997.
-4-
<PAGE>
Kubaka Mine
Operating Data
(AGI 50% Share)
<TABLE>
<CAPTION>
1997
- -----------------------------------------------------------------------
<S> <C>
Tons mined 3,288,724
Tons of ore milled 186,092
Average mill head grade (oz. per ton) 0.725
Mill recovery rate (%) 97
Ounces of gold produced 129,970
Ounces of silver produced 127,090
Cost per ounce of gold produced
Total cash costs $175
Depreciation and depletion 100
- -----------------------------------------------------------------------
Total production costs $275
- -----------------------------------------------------------------------
</TABLE>
Property Position. Omolon holds the license from the Russian government to
operate the Kubaka mine and to explore and develop the Evenskoye property, also
in the Magadan region (the Kubaka License). The Kubaka License is for a period
of 18 years, subject to extension of up to an additional two years, and limits
the ownership of a foreign party (i.e. the Company) in Omolon to a maximum of 50
percent. The Kubaka License establishes certain production requirements for
Kubaka, requires the payment of a 4 percent royalty on the total value of gold
extracted and requires Omolon to complete exploration activities, a feasibility
study and its assessment of the reserves at Evenskoye prior to December 31,
1998, or a later date, if extended.
Geology and Ore Reserves. The Kubaka ore deposit is an epithermal quartz-
adularia vein system hosted by volcanic rocks and their sedimentary derivatives.
Kubaka is older than, but otherwise very similar to, volcanic hosted epithermal
gold deposits found in the North American Western Cordillera.
Kubaka Mine
Proven and Probable Ore Reserves
As of December 31, 1997
<TABLE>
<CAPTION>
Gold Content
Gold (000 oz.)
---------------------
Tons Avg. Grade The Company's
(000) (oz./ton) Total 50% Share
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mill Ore 4,203 0.522 2,196 1,098
- ----------------------------------------------------------------------------
</TABLE>
The December 31, 1997 Kubaka reserves were calculated by the Company. Reserves
are calculated using a gold price of $375 per ounce and a gold cut-off grade of
0.044 ounces per ton. The Company has determined that calculating the reserves
at $350 per ounce would not materially change the results. Changes in reserves
from 1996 primarily relate to production. The Company estimates that mill
recovery will continue to be approximately 97 percent.
In addition to proven and probable reserves, the Company has estimated its share
of other mineralized material to be 2.7 million tons at an average grade of
0.330 ounces per ton.
-5-
<PAGE>
REFUGIO MINE
The Company owns a 50 percent interest in the Refugio mine, located in the
Maricunga Mining District in central Chile, approximately 75 miles east of
Copiapo. The property, situated between 13,800 feet and 14,800 feet above sea
level, is held by Compania Minera Maricunga (CMM), a Chilean contractual mining
company indirectly owned 50 percent by the Company and 50 percent by Bema Gold
Corporation, a publicly traded company based in Vancouver, British Columbia.
Operations. The Refugio mine consists of an open pit mine and a three-stage
crushing and heap leach operation capable of processing 33,000 tons of ore per
day, or 11.5 million tons per year. The mine and plant are designed to produce
an estimated 200,000 to 250,000 ounces of gold per year, of which the Company's
share is 50 percent. Production commenced in April 1996; however, start-up was
delayed due to mechanical problems with the secondary and tertiary crushers and
the collapse of fill underlying the fine ore storage bin and commercial
production commenced on October 1, 1996. The Company is currently pursuing
insurance claims and claims against Refugio's construction contractor. During
the second and third quarters of 1997, abnormally severe winter weather resulted
in the suspension of mining and crushing operations for nearly three months,
which caused lower production and higher cash costs. Full production levels are
expected to be achieved during the first quarter of 1998. CMM has retained an
experienced mining contractor with its own equipment to drill, blast, load and
transport all ore and waste. Facilities include a permanent camp with access to
the site from Copiapo provided by road. Power is supplied by on-site diesel
powered generators. Water extraction rights expected to be sufficient to supply
the mine are owned by CMM.
The following table presents operating data for the Refugio mine for the year
ended December 31, 1997, and the period from commencement of commercial
production on October 1, 1996, through December 31, 1996.
Refugio Mine
Operating Data
(AGI 50% Share)
<TABLE>
<CAPTION>
1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
Tons mined 9,336,697 3,297,800
Tons of ore to heap leach 4,491,853 1,720,875
Average grade to heap leach (oz. per ton) 0.030 0.031
Heap leach recovery rate (%) 55 58
Ounces of gold produced 73,543 30,612
Ounces of silver produced 10,366 2,620
Cost per ounce of gold produced:
Total cash costs $341 $242
Reclamation 2 -
Depreciation and depletion 95 95
- ----------------------------------------------------------------------------
Total production costs $438 $337
- ----------------------------------------------------------------------------
</TABLE>
Property Position. The Refugio property comprises approximately 14,500 acres,
consisting of mineral rights, surface rights and water rights expected to be
sufficient for the mine. The principal ore deposit is situated on mining claims
that are owned by CMM. Essentially all of the mineral rights surrounding the
claims are held by a joint venture formed by Bema and the former owner of the
Refugio claims. CMM has agreements in place with this joint venture that will
allow CMM to mine any extensions of its major ore deposits extending onto
surrounding mineral rights and to use the surrounding areas for project needs.
CMM owns or controls surface rights covering the known
-6-
<PAGE>
mineralization and the currently anticipated mining operation under two leases
from the Chilean Army, which expire in 2001 and 2005 and may be extended for an
additional 10 years.
The Company, through its 50 percent ownership of CMM, is responsible for payment
of a net smelter return to the former owners of the Refugio property that is
expected to average 2.5 percent of total production from the currently defined
ore reserves. An additional sliding scale net smelter return related to net
profits and ranging from 2.5 to 5 percent is payable on the Company's share of
any production in excess of current reserves.
Geology and Ore Reserves. The Refugio property encompasses the Verde, Pancho
and Guanaco gold deposits, which are disseminated gold porphyry deposits
containing minor amounts of copper. Gold mineralization is contained within a
strong stockwork system hosted by silicified intrusive rocks. The Verde deposit
contains all the current reserves and consists of oxide, mixed and unoxidized
ore types and it is open at depth. Additional exploration potential also exists
in the Guanaco and Pancho deposits. The Refugio property lies at the southern
end of a 90-mile-long belt of Miocene-aged volcanic rocks that contains a number
of large disseminated gold-silver deposits. The following table sets forth the
proven and probable reserves in the Verde deposit.
Refugio Mine
Proven and Probable Ore Reserves in the Verde Deposit
As of December 31, 1997
<TABLE>
<CAPTION>
Gold Content
(000 oz.)
Gold ---------------------
Tons Avg. Grade The Company's
(000) (oz./ton) Total 50% Share
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Heap Leach Ore 100,793 0.029 2,920 1,460
- -----------------------------------------------------------------------------
</TABLE>
The December 31, 1997, Refugio reserves were calculated by CMM. The reserves
are confined to the Verde pit zone. The variable cut-off grades for pit design
and reserve summary were based on a $375 per ounce gold price and costs and
recoveries which vary by rock type and alteration. The Company has determined
that calculating the reserves at $350 per ounce would result in a decrease in
proven and probable reserves of approximately 10 percent. Changes in reserves
from 1996 relate to production. The Company expects the average ultimate
recovery rate for the reserve to be approximately 66 percent.
In addition to proven and probable reserves, the Company has estimated its share
of other mineralized material to be 154 million tons at an average grade of
0.026 ounces per ton.
HAYDEN HILL MINE
The Hayden Hill mine in Lassen County, California, is located approximately 120
miles northwest of Reno, Nevada.
Operations. The Hayden Hill operation is an open pit mine with two pits and heap
leach pads. Access to the mine is provided by a county road that connects to a
state highway. Power for operations is purchased from the local rural electric
association. Water for mining and processing operations is provided by two wells
located in close proximity to the mine. Potable water is supplied by truck.
Mining was completed in late 1997 and residual leaching is expected to continue
during 1998.
-7-
<PAGE>
The following table presents operating data for the Hayden Hill mine for the
years indicated.
Hayden Hill Mine
Operating Data
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Tons mined 8,727,325 8,275,944 8,522,982
Tons of ore to heap leach 6,194,712 5,505,849 5,538,965
Average grade to heap leach (oz. per ton) 0.031 0.028 0.024
Heap leach recovery rate (%) 59 68 60
Ounces of gold produced 112,202 103,502 80,031
Ounces of silver produced 325,494 320,574 227,125
Cost per ounce of gold produced:
Total cash costs $186 $229 $253
Reclamation 41 30 22
Depreciation and depletion 52 87 87
- -----------------------------------------------------------------------------------
Total production costs $279 $346 $362
- -----------------------------------------------------------------------------------
</TABLE>
Property Position. The Company controls approximately 6,300 acres through
ownership of federal patented and unpatented mining claims and fee lands, and a
long-term lease of federal unpatented mining claims, which has an indefinite
term. Approximately 75 percent of the production is subject to a gross receipts
net smelter return royalty of approximately 2 percent. See Item 3 "Legal
Proceedings" for discussion of a related royalty dispute.
GUANACO MINE
The Company owns a 90 percent interest in and operates the Guanaco mine, located
in the Guanaco Mining District in northern Chile, approximately 145 miles
southeast of Antofagasta, Chile.
Operations. The operation consists of an open pit mine, heap leach facilities
capable of processing approximately 2.4 million tons of ore per year and
permanent camp facilities. The facility includes three stages of crushing,
permanent pad heap leaching and Merrill Crowe zinc precipitation of gold.
Access to the mine from Antofagasta is provided by the Pan American Highway
(approximately 120 miles south) and a gravel surface road (approximately 25
miles east). Power is supplied by an on-site power plant. The water supply for
mine operations comes primarily from nearby wells and from nearby surface
springs, which also provide potable water.
Mining was completed in July 1997 and residual leaching is expected to continue
during 1998. Based on a detailed study of the continuity of ore, costs and
production rates, a $35.5 million pre-tax write-down was recorded during the
fourth quarter of 1996. See Note 6 of the Consolidated Financial Statements for
further discussion.
-8-
<PAGE>
The following table presents operating data for the Guanaco mine for the years
indicated.
Guanaco Mine
Operating Data
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tons mined 5,406,411 13,332,872 13,389,543
Tons of ore to heap leach 2,883,422 2,479,645 2,030,848
Average grade to heap leach (oz. per ton) 0.059 0.070 0.063
Heap leach recovery rate (%) 55 55 55
Ounces of gold produced 93,594 96,018 70,850
Ounces of silver produced 306,552 359,869 268,066
Cost per ounce of gold produced:
Total cash costs $229 $290 $375
Reclamation 18 4 -
Depreciation and depletion 102 156 151
- --------------------------------------------------------------------------------------
Total production costs $349 $450 $526
- --------------------------------------------------------------------------------------
</TABLE>
Property Position. The Guanaco property position consists of approximately
25,000 acres consisting of mineral claims leased from Empresa Nacional de
Mineria (ENAMI), an entity of the Chilean government, and certain other mineral
rights. Nearly all of the production was mined from land covered by the ENAMI
lease, which expires in 2006 and may be extended by the Company for additional
five-year terms thereafter. The lease is subject to royalties varying with the
level of production, with the royalty on gold ranging from a 7 percent gross
royalty to a 3 percent gross royalty plus a 2 percent net profits royalty; there
is a gross royalty of 2 percent for all other metals. The property remains
subject to a 1.1 percent net smelter return royalty to the minority owners for
metals other than gold. The Company is in discussions with ENAMI regarding
continuation of the lease following cessation of production.
SLEEPER MINE
The Sleeper mine is located in Humboldt County, Nevada, approximately 28 miles
north of Winnemucca.
Operations. Operations at Sleeper were completed at the end of the third
quarter of 1996 and there was no reported production during 1997. Production at
Sleeper during 1996 and 1995 was 38,199 ounces and 82,062 ounces at a cash cost
of $247 per ounce and $325 per ounce, respectively. Reclamation activities have
commenced and are expected to be substantially completed by 2000. The operation
included an open pit mine, mill, heap leach pads and tailings disposal
facilities. Access to the mine is provided by a gravel road that connects to a
paved public highway. Power is purchased from the local rural electric
association. Water is provided by a well system that is currently being used to
fill the pits, and potable water is supplied by truck.
Property Position. Current facilities occupy approximately 2,000 acres of
unpatented mining claims. The Company has entered into an agreement with a third
party for further exploration of the Sleeper property. Currently, the third
party has earned a 50 percent interest in the property.
HAILE PROPERTY
The Company owns a 62.5 percent venture interest in the Haile property in
Lancaster County, South Carolina. The remaining 37.5 percent interest is owned
by Kershaw Gold Company, Inc., a wholly owned subsidiary of Piedmont Mining
Company, Inc. (Piedmont). The Company is involved in a dispute with Piedmont
regarding certain agreements. See Item 3. "Legal Proceedings." The Company has
not made a decision to develop the Haile property and is considering various
options with respect to its interest in Haile. Currently the Company has
capitalized approximately
-9-
<PAGE>
$14.5 million of costs related to the Haile property.
Property Position. The Haile property covers approximately 3,600 acres and
consists entirely of fee property that is either owned by the venture
participants, leased from third parties under leases that can be extended to
2001 or controlled by purchase agreements. The leased property is subject to a
4 percent net smelter return royalty.
Geology and Ore Reserves. Ore grade mineralization on the Haile property is
generally hosted within silicified and pyritized fine-grained metasedimentary
rocks near the folded and faulted contact with overlying volcaniclastic and
metavolcanic rocks. Current reserves are contained in four separate deposits.
The following table sets forth the proven and probable reserves at the Haile
property.
Haile Property
Proven and Probable Ore Reserves
As of December 31, 1997
<TABLE>
<CAPTION>
Gold Content
(000 oz.)
Gold ---------------------
Tons Avg. Grade The Company's
(000) (oz./ton) Total 62.5% Share
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mill Ore 8,736 0.089 780 488
- ----------------------------------------------------------------------------
</TABLE>
The reserves were calculated by the Company and verified by Derry, Michner,
Booth & Wahl in its April 1994 audit. No changes were made to reserves during
1997, 1996 or 1995. Pits were designed on the basis of a $375 per ounce gold
price while ore within the pit was summarized using a gold price of $400 per
ounce. The Company estimates ultimate gold recoveries would range from 65
percent to 85 percent.
EXPLORATION
The Company's primary exploration objective continues to be the acquisition and
evaluation of near-surface gold deposits that can be mined by open pit methods.
The Company is continuing exploration activity on the Fort Knox and Refugio
properties and in the area of the Guanaco mine. The Company has increased its
exploration activities in the Russian Federation following the acquisition of
Kubaka. In connection with a reserve replenishment tax levied on Kubaka gold
sales, the Company can offset certain exploration expenditures that are
preapproved by the Russian agency responsible for exploration in the Magadan
region.
Pursuant to an Exploration Joint Venture Agreement effective since January 1994,
the Company and Cyprus Amax have agreed to pool their efforts for 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. A Cyprus Amax subsidiary manages exploration activities, with equal
participation by Amax Gold in decisions affecting property acquisition and
divestiture. The Agreement was extended for one year and will terminate
December 31, 1998 unless extended by mutual agreement. Amax Gold has the first
right to acquire any gold property owned by the joint venture and Cyprus Amax
has the first right to acquire properties containing deposits of minerals other
than gold or silver. During 1997, the joint venture conducted exploration
activities principally in the Americas, Australia, Russia and Africa.
Exploration expenditures were $5.5 million in 1997 compared with $3.5 million in
1996. Exploration expenditures for 1998 are expected to be approximately $4
million.
-10-
<PAGE>
GOLD MARKET AND PRICES
Gold has two principal uses: product fabrication and bullion investment.
Fabricated gold has a wide variety of end uses, including jewelry manufacture
(the largest fabrication component), electronics, dentistry, industrial and
decorative uses, medals, medallions and official coins. The Company sells all
of its refined gold to banks and other bullion dealers, using a variety of
hedging techniques. Substantially all of the Company's 1997 sales were export
sales made in Europe.
The profitability of the Company's operations is significantly affected by the
market price of gold. The price of gold has fluctuated widely and is affected
by numerous factors, including international economic trends, currency exchange
fluctuations, expectations for inflation, consumption patterns (such as
purchases of gold jewelry and the development of gold coin programs), sales of
gold bullion holdings by central banks or other large gold bullion holders or
dealers and global and regional political events, particularly in the Middle
East and Asia and major gold-producing countries such as South Africa and the
Commonwealth of Independent States (the former Soviet Union). Gold prices also
are affected by worldwide production levels and on occasion have been subject to
rapid short-term changes because of market speculation.
The following table sets forth for the years indicated the high and low closing
prices of gold, first position, as provided by the Commodity Exchange, Inc.
(COMEX) in New York.
<TABLE>
<CAPTION>
High Low
------- -------
Year (dollars per ounce)
---- -------------------
<S> <C> <C>
1993 $407.00 $326.30
1994 398.00 370.60
1995 395.40 372.20
1996 414.70 368.00
1997 365.70 282.80
</TABLE>
Declines in the market price of gold and related precious metals also may render
reserves containing relatively lower grades of mineralization uneconomic to
exploit. The prices used in estimating Amax Gold's ore reserves at December 31,
1997 ranged from $375 to $400 per ounce of gold. The market price was $290 per
ounce of gold at December 31, 1997, which was below the price at which Amax Gold
has estimated its reserves. However, Amax Gold has historically realized prices
that are an average of $32 per ounce above the market price of gold since the
inception of its hedging program in 1988. If Amax Gold were to determine that
its reserves and future cash flows should be calculated at a significantly lower
gold price, there would likely be a material reduction in the amount of gold
reserves. In addition, if the price realized by Amax Gold for its gold were to
decline substantially below the price at which ore reserves were calculated for
a sustained period of time, Amax Gold potentially could experience material
write-downs of its investment in its mining properties.
REFINING, SALES AND HEDGING ACTIVITIES
Refining arrangements are in place with third parties for the Company's
production. Because of the availability of refiners other than those with whom
such arrangements have been made, the Company believes that no adverse effect
would result if any of these arrangements were terminated.
The Company employs a number of hedging techniques with the objective of
mitigating the impact of downturns in the gold market and providing adequate
cash flow for operations while maintaining significant upside potential in a
market upswing. During 1997, 1996 and 1995 the Company's hedging efforts
resulted in average realized prices of $360 per ounce, $412 per ounce and $406
per ounce, respectively, compared with the average COMEX price of $331 per ounce
in 1997, $388 per ounce in 1996 and $384 per ounce in 1995.
-11-
<PAGE>
AGREEMENTS WITH CYPRUS AMAX
Amax Gold has entered into the following agreements with Cyprus Amax.
Financing Arrangements with Cyprus Amax. During December 1997, the Company
completed a $40 million credit facility with a group of banks, which was used to
refinance the existing Refugio gold loan and for working capital and debt
service requirements. In May 1997, the Company completed a $71 million tax-
exempt industrial revenue bond financing for the solid waste disposal facility
at the Fort Knox mine. Cyprus Amax has guaranteed both loans and the Company
pays a 1.75 percent interest differential to Cyprus Amax as a guaranty fee on
the industrial revenue bond and a 0.75 percent interest differential on the
Refugio loan. The Company has also agreed to reimburse Cyprus Amax for any
payments made under the guaranties. Additionally, the Company agreed not to
borrow $40 million under an existing convertible line of credit with Cyprus Amax
as part of the Refugio refinancing. See Note 7 to the Consolidated Financial
Statements for further discussion of the terms of each loan.
Pursuant to a financing arrangement with Cyprus Amax, approved by the Company's
stockholders in September 1996, Cyprus Amax has guaranteed the Company's $250
million Fort Knox loan until economic completion of the Company's Fort Knox mine
and has provided the Company with a $250 million demand loan facility, in
exchange for which the Company (i) paid Cyprus Amax a financing and guaranty fee
of $10 million, (ii) pays Cyprus Amax 1.75 percent annually on amounts
outstanding under the Fort Knox loan, (iii) would reimburse Cyprus Amax for any
payments made or costs incurred under the Cyprus Amax guaranty, (iv) agreed to
make no additional borrowing under the convertible line of credit without the
prior consent of Cyprus Amax, and (v) granted Cyprus Amax a first priority
security interest in the collateral for the Fort Knox loan, and if requested,
would grant security interests in certain additional assets to the extent
available. All of these 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.
In April 1994, Cyprus Amax agreed to make loans to the Company under a revolving
credit agreement from time to time until December 31, 2001, in an aggregate
principal amount not to exceed at any time $100 million. The Company may elect
to repay amounts of outstanding indebtedness either by payment in cash or
payment in shares of its $2.25 Series A Convertible Preferred Stock and Cyprus
Amax may convert any indebtedness into Common Stock of the Company at a stated
conversion price. As stated above, the Company has agreed not to make
additional draws under this line of credit without the prior consent of Cyprus
Amax.
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
from time to time may be paid in shares of Common Stock valued at the most
recent 30-day average closing price. Of the 879,500 shares issuable, 128,042
shares were issued to Cyprus Amax in 1995 as payment for $835,473 due Cyprus
Amax under a financing arrangement.
Acquisition Agreement. Pursuant to the Amended and Restated Agreement and Plan
of Merger and Reorganization, dated as of October 9, 1996 (the Acquisition
Agreement), the Company acquired Cyprus Amax's indirect 50 percent interest in
the Kubaka mine in May 1997. The Company issued 15.4 million shares of Common
Stock as payment and has an obligation to make 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 which
the Company acquires the right to mine in the Russian Federation, excluding
properties covered by the Kubaka License or acquired by the Company's joint
venture with Cyprus Amax, on or before June 30, 2004, and (b) valued at the then
current 10-day average stock price. See Note 6 to the Consolidated Financial
Statements for further discussion.
NOL Agreement. An agreement in principle to monetize a portion of the Company's
foreign tax net operating losses was entered into with Cyprus Amax in February
1998. In connection with the proposed transaction, the Company is expected to
record a gain of approximately $6.7 million.
-12-
<PAGE>
Exploration Joint Venture Agreement. Under the Exploration Joint Venture
Agreement, the Company and Cyprus Amax have agreed to pool their efforts for the
principal purpose of discovering and developing future gold prospects. See
"Exploration."
Services Agreement. Pursuant to the Services Agreement, the Company and Cyprus
Amax provide a variety of managerial and other services to each other on a full
cost-reimbursement basis. The Company paid Cyprus Amax approximately $4.1
million for 1997 services, including insurance coverage, and Cyprus Amax paid
the Company approximately $1.3 million, including reimbursement for services for
the Kubaka mine prior to the closing of the Acquisition Agreement.
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 between the companies with minimal effect on an employee's
benefits.
EMPLOYEES
At December 31, 1997, the Company and its consolidated subsidiaries employed
1,353 persons in addition to 260 contract miners at its Refugio mine. The
hourly employees at the Guanaco mine are represented by the Sociedad Contractual
Minera Guanaco labor union and are covered by a labor contract that expires at
the end of May 1999. The hourly employees at Refugio are represented by the
Sindicato de Trabajadores de Compania Minera Maricunga labor union and are
covered by a labor contract that expires at the end of February 2001. None of
the Company's employees in the United States are members of a labor union and
the Company considers its employee relations to be good. The Company obtains
certain administrative and other services from Cyprus Amax pursuant to the
Services Agreement.
COMPETITION
The Company competes with other companies in the acquisition of mineral
interests and the recruitment and retention of qualified employees. A number of
these companies are larger than the Company in terms of annual gold production
and total reserves and have been engaged in gold mining and exploration longer
than the Company. Management does not believe, however, that such competition
has had a material effect on the development of the Company's business or the
sale of its products.
FOREIGN OPERATIONS
Foreign operations and investments such as those that the Company has in Chile
and Russia may be adversely affected by exchange controls, currency
fluctuations, taxation and laws or policies of particular countries or by
political events in those countries as well as by laws and policies of the
United States affecting foreign trade, investment and taxation.
Certain of the Company's mineral rights, property interests, gold sales
contracts, tax agreements and other contractual rights and interests are subject
to foreign government performance, approvals, and licenses. Such governmental
actions are, as a practical matter, subject to the discretion of the applicable
governments or governmental officials. In addition, in the event of a dispute
arising from foreign operations, the Company may be subject to the exclusive
jurisdiction of foreign courts, may not be successful in subjecting foreign
persons to the jurisdiction of courts in the United States or may be hindered or
prevented from enforcing its rights with respect to a governmental
instrumentality because of the doctrine of sovereign immunity.
REGULATION AND ENVIRONMENTAL MATTERS
The Company's mining and processing operations and exploration activities in the
United States, Chile, Russia and other countries are subject to various laws and
regulations governing the protection of the environment, exploration,
development, production, exports, taxes, labor standards, occupational health,
waste disposal, toxic substances, mine safety and other matters. New laws and
regulations, amendments to existing laws and regulations, or more stringent
-13-
<PAGE>
implementation of existing laws and regulations could have a material adverse
impact on the Company, increase costs, cause a reduction in levels of production
and/or delay or prevent the development of new mining properties. Amax Gold
expects to be able to comply with all existing environmental laws and
regulations. Such compliance requires significant expenditures and increases
the Company's mine development and operating costs.
In March 1994, the U.S. Forest Service notified the Company that it considers
the Company to be a Potentially Responsible Party (PRP) under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA), jointly and
severally liable with other PRP's, for damages attributable to alleged releases
of hazardous substances from the Siskon Mine, located in the Klamath National
Forest in Siskiyou County, California. The Company conducted a limited
exploration drilling program in the summer of 1991 on property at the Siskon
mine site which the Company believes is not involved in the alleged releases.
Based on facts currently known to management, the Company does not anticipate
that this matter will have a material effect on the Company's financial
condition or results of operations.
EXECUTIVE OFFICERS
As of December 31, 1997, the names, ages and offices of all executive officers
of the Company were as follows.
<TABLE>
<CAPTION>
Name Age Office
- -------------------------------------------------------------------------------
<S> <C> <C>
Milton H. Ward 65 Chairman of the Board and Chief Executive Officer
S. Scott Shellhaas 49 President and Chief Operating Officer
Leland O. Erdahl 69 Vice President and Chief Financial Officer
Robert B. Blakestad 51 Vice President, Exploration
Larry D. Clark 51 Vice President
Deborah J. Friedman 45 Vice President, General Counsel and Secretary
Mark A. Lettes 48 Vice President, Trading
David L. Mueller 47 Vice President, Controller and Assistant Secretary
Andrew F. Pooler 39 Vice President
</TABLE>
Mr. Ward was elected Chairman of the Board and Chief Executive Officer of the
Company in November 1993 and served as President from November 1993 until
February 1995. He has been Chairman of the Board, President and Chief Executive
Officer of Cyprus Amax since May 1992. Prior to joining Cyprus Amax, Mr. Ward
had been President and Chief Operating Officer of Freeport-McMoRan Inc. and
Chairman and Chief Executive Officer of Freeport McMoRan Copper & Gold Inc.
since 1984.
Mr. Shellhaas was elected President and Chief Operating Officer of the Company
in April 1996. From 1994 to 1996 he was President of Cyprus Foote Mineral
Company, from 1991 to 1994 he was President of Cyprus Northshore Mining
Corporation and from 1989 to 1991 he was Senior Vice President of Cyprus Amax's
South Pacific operations. He held various positions in Cyprus Amax's law
department from 1982 to 1989.
Mr. Erdahl was elected Vice President and Chief Financial Officer of the Company
in March 1997 and a Director of the Company in June 1997. Prior to joining the
Company and continuing to the present, Mr. Erdahl has served on the boards of
several companies since prior to 1992, including Hecla Mining Company, Canyon
Resources Corporation, Uranium Resources, Inc. and Original Sixteen to One Mine,
Inc. and as a trustee for John Hancock Mutual Fund.
Mr. Blakestad was elected Vice President, Exploration in May 1996. From 1990 to
1996, he held various management positions for Cyprus Amax's exploration
department, including Exploration Manager, South Pacific and Exploration
Manager, North America.
Mr. Clark was elected Vice President of the Company in April 1996. From 1988 to
1996, he held various management positions in Cyprus Amax's business
development, operating and law departments.
-14-
<PAGE>
Ms. Friedman was elected Vice President, General Counsel and Secretary of the
Company in September 1994. From 1982 to 1993, she held various positions in the
law department of Cyprus Amax, including General Counsel and Associate General
Counsel. In 1994, she served as a legal consultant handling various matters for
Cyprus Amax.
Mr. Lettes was elected Vice President, Trading of the Company and appointed a
Director in the Cyprus Amax Treasury Department in August 1996. He has held
various management positions in the Company's financial departments since 1987,
including Chief Financial Officer from 1994 to 1996, Treasurer from May 1988 to
February 1991, and Vice President since August 1989.
Mr. Mueller was elected Vice President, Controller and Assistant Secretary in
October 1994. He was Director of Financial Reporting at Echo Bay Mines, Ltd.
from October 1990 until 1994. Prior to October 1990, he was a Senior Manager at
Ernst & Young LLP.
Mr. Pooler was elected Vice President of the Company in February 1992 and is
responsible for the Company's operations in the contiguous United States and in
Chile. From May 1988 until February 1992 he was General Manager of the Wind
Mountain mine.
Each executive officer holds office subject to removal at any time by the Board
of Directors of Amax Gold.
ITEM 3. LEGAL PROCEEDINGS
In October 1996, a purported derivative action was filed in the Court of
Chancery of Delaware on behalf of a purported stockholder of the Company titled
Harry Lewis v. Milton H. Ward, et al., C.A. No. 15255-NC, against Cyprus Amax,
- -------------------------------------
the directors of the Company, and the Company as a nominal defendant. The
complaint alleges, among other things, that the defendants engaged in self-
dealing in connection with the Company's entry in March 1996 into the demand
loan facility provided by Cyprus Amax, that Cyprus Amax controls the Company's
Board of Directors and management, that the terms of the transaction were not
negotiated by persons independent of Cyprus Amax, that the timing of the
transaction precluded the Company from seeking financing in the commercial or
public debt markets and prevented the Special Committee of the Board of
Directors of the Company that approved entry into the transaction from seeking
alternatives to the transaction. The complaint seeks, among other things, a
declaration that the demand loan facility is not entirely fair to the Company
and damages in an unspecified amount. The Company believes that the complaint
is without merit and intends to defend the matter vigorously.
In October 1995, a purported derivative action was filed in the Court of
Chancery of Delaware on behalf of a purported stockholder of the Company titled
Harbor Finance Partners v. Allen Born, et al. and v. Amax Gold Inc., as nominal
- -------------------------------------------------------------------------------
defendant, C.A. No. 14637, with respect to the proposed Kubaka transaction. The
- ---------
complaint alleged that the individual defendants breached their fiduciary duty
in connection with the Kubaka transaction. In connection with the settlement of
this action in June 1997, the number of shares of Common Stock issued by the
Company in connection with the Kubaka transaction was reduced by approximately
600,000. The settlement was recently approved by the Delaware Court of
Chancery.
Litigation was filed in United States District Court for the District of
South Carolina, Rock Hill Division, litigation filed by Kershaw Gold Company,
Inc., Piedmont Mining Company's subsidiary that owns 37.5 percent of the Haile
project, against the Company alleging that the Company tortiously interfered
with the performance by its subsidiaries, Lancaster Mining Company Inc. and
Haile Mining Company, of their obligations under certain agreements. Kershaw
alleged that, among other things, Amax Gold caused Lancaster to fail to complete
the exploration expenditures authorized in the 1994 venture budget and initiated
attempts to sell its interest in the Haile property without informing Kershaw.
The Company was awarded judgment notwithstanding the $9 million jury verdict in
the case. The plaintiff has appealed the decision to the U.S. Court of Appeals
for the Fourth Circuit.
The litigation described above is part of a lawsuit filed originally in South
Carolina Circuit Court in March 1995 by Piedmont Mining Company and Kershaw Gold
Company, Inc. against Amax Gold, Lancaster and Haile, alleging breach of
contract, fraud and tortious interference with contract rights. Pursuant to
motions filed by the defendants,
-15-
<PAGE>
all claims of Piedmont and Kershaw were dismissed on the grounds that
jurisdiction was to be determined by arbitration, except the claim of Kershaw
against the Company described above. The plaintiff's motion for reconsideration
is pending.
Pursuant to certain agreements among Piedmont, Kershaw and the Company, Piedmont
and Kershaw indemnified the Company from all environmental and other liabilities
arising from Piedmont's operations or other conditions existing on the Haile
property prior to July 1, 1992. Following Piedmont's and Kershaw's continued
refusal to pay environmental costs that the Company believed were covered by the
indemnity, the Company submitted to arbitration its claim for $1.4 million, the
amount of such costs incurred through August 1995. The Company prevailed in this
matter and the $1.4 million arbitration award, including accrued interest, has
been received. In November 1997, the Company submitted to arbitration its claim
for $1.7 million, the amount of environmental costs from August 1995 through
October 1997 which the Company believes are covered by the indemnity and cash
contributions to property maintenance and operations which the Company has made
on behalf of Kershaw.
In September 1996, Joseph and Mark Munkhoff and Katherine Munkhoff Brake (the
"Munkhoffs") initiated arbitration against Amax, Amax Exploration Inc. and
Lassen Gold Mining Inc. seeking damages in connection with the calculation and
payment of a royalty payable to the Munkhoffs under a mining lease. Their leased
claims cover approximately 75% of the production from the Hayden Hill Mine. The
Munkhoffs allege that their royalty on all or part of the production should have
been calculated at a 5% rate rather than at the 2% rate utilized in royalty
calculations by Lassen, and that they are entitled to a royalty on the proceeds
of hedging activities. The Munkhoffs have not specified the amount of damages
they seek. The Company has denied the Munkhoffs' claims and does not believe
this matter will have a material adverse effect on the Company's financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Amax Gold Inc.'s Common Stock is listed on the New York Stock Exchange (AU) and
The Toronto Stock Exchange (AXG); the $3.75 Series B Convertible Preferred Stock
is listed on the New York Stock Exchange (AUPrB). Stockholders of record as of
February 9, 1998: Common Stock, 7,757, Preferred Stock 76.
The following table sets forth for the periods indicated the high and the low
sale prices per share of the Company's Common Stock and $3.75 Series B
Convertible Preferred Stock as reported on the New York Stock Exchange Composite
Tape and the dividends paid on such stock.
-16-
<PAGE>
Stock Prices and Dividends Per Share
<TABLE>
<CAPTION>
Series B Convertible
Common Stock Preferred Stock
------------------- -----------------------------
Quarter High Low High Low Dividends
- ----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
- ----------
First $ 7 7/8 $ 5 7/8 $56 3/8 $51 1/2 $.9375
Second 6 7/8 5 5/8 54 51 1/4 .9375
Third 6 15/16 5 9/16 54 3/4 51 1/2 .9375
Fourth 6 7/8 1 15/16 55 1/2 34 .9375
1996
- ----------
First $ 9 5/8 $ 6 3/8 $66 5/8 $54 3/8 $.9375
Second 7 1/8 5 3/8 57 3/8 51 1/8 .9375
Third 6 5/8 5 1/4 53 3/4 49 3/4 .9375
Fourth 6 5/8 5 1/4 54 3/ 50 .9375
</TABLE>
-17-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
AMAX GOLD INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(IN MILLIONS EXCEPT PER SHARE AMOUNTS, PERCENTAGES,
PRODUCTION AND SALES OUNCES AND AMOUNTS PER OUNCE)
YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR:
Revenues $ 259.5 $ 108.2 $ 96.6 $ 94.6 $ 81.9
Earnings (loss) from operations/(1)(2)(3)/ 1.9 (42.9) (19.7) (39.5) (116.0)
Loss before cumulative effect of
accounting changes, net/(1)(2)(3)/ (37.9) (39.2) (26.4) (38.6) (89.0)
Net loss/(1)(2)(3)(4)/ (33.4) (39.2) (26.4) (31.1) (104.2)
Per common share:
Loss before cumulative effect
of accounting changes/(1)(2)(3)(4)/ (.41) (.48) (.38) (.51) (1.14)
Net basic and diluted loss/(1)(2)(3)(4)/ (.37) (.48) (.38) (.42) (1.34)
Weighted average common shares outstanding 108.2 96.9 86.5 79.3 77.8
Capital and cash acquisition expenditures 30.8 187.7 206.2 23.0 23.4
Cash dividends to common stockholders - - - - 2.0
Dividends declared per common share - - - - .08
Cash dividends to preferred stockholders 6.9 6.9 6.9 1.8 -
Dividends declared per preferred share/(5)/ 3.75 3.75 3.75 .9791 -
AT YEAR-END:
Current assets 129.7 60.7 67.1 77.1 37.9
Total assets 870.6 762.2 613.0 407.6 381.0
Current liabilities 226.0 212.3 42.8 45.6 37.6
Long-term debt 345.7 272.6 238.2 83.2 111.8
Note payable to parent - - 5.0 - 24.7
Shareholders' equity 273.8 259.4 298.2 249.9 173.3
Working capital (deficit) (96.3) (151.6) 24.3 31.5 0.3
Book value per common share 1.71 1.77 2.43 2.04 2.22
Long-term debt to total capitalization 56% 51% 44% 25% 39%
KEY OPERATING FACTORS FOR THE YEAR:
Total ounces of gold produced 729,831 268,331 238,255 240,885 210,880
Total ounces of gold sold 720,889 262,975 238,094 235,664 209,290
Average realized price per ounce sold $ 360 $ 412 $ 406 $ 401 $ 392
Average cost per ounce produced/(6)/:
Total cash costs/(7)/ $ 198 $ 255 $ 313 $ 329 $ 375
Reclamation costs 10 16 13 11 13
Depreciation, depletion and amortization 123 110 91 105 122
- ------------------------------------------------------------------------------------------------------------
Total production costs per ounce $ 331 $ 381 $ 417 $ 445 $ 510
------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ During the first quarter of 1997, Amax Gold elected to change its method
of accounting for inventory from the last-in, first-out (LIFO) method to
a three-month rolling average method. In accordance with generally
accepted accounting principles when changing from the LIFO method, prior
years' results have been restated to reflect the effect of this change
in policy. The effect of this restatement on the years ended December
31, 1996 and 1995 was to increase the previously reported net loss by
$5.0 million and $2.5 million, or $.06 and $.02 per share, respectively.
The effect of this restatement on the year ended December 31, 1994 was
to decrease the previously reported net loss by $4.4 million or $.06 per
share. Additionally, as of January 1, 1997, the Company changed its
accounting policy to include depreciation and depletion in inventory,
which has
-18-
<PAGE>
the effect of recording depreciation and depletion expense in the
statement of operations as gold is sold rather than as it is produced.
The cumulative effect of this accounting change is a $4.5 million
reduction of the net loss as of January 1, 1997.
/(2)/ In the fourth quarter of 1996, the Company recorded a $35.5 million pre-
tax write-down of the Guanaco mine and an unrelated $10 million deferred
tax benefit. These special items increased the net loss by $25.5
million, or $.26 per share. In 1994, the Company recorded an $18.6
million pre-tax ($14.4 million after-tax) write-down of the Hayden Hill
mill to its estimated salvage value and a $2.5 million pre-tax ($2.1
million after-tax) write-down of other assets that increased the net
loss by $16.5 million, or $.21 per common share. In 1993, the Company
recognized a $64.1 million pre-tax ($41.9 million after-tax) write-down
of Hayden Hill and a $23.6 million pre-tax ($15.6 million after-tax)
write-down of Sleeper, which increased the 1993 net loss by $57.5
million, or $.74 per common share.
/(3)/ Effective January 1, 1994, the Company changed its method of accounting
for the cost of ore loaded on heap leach pads to record such costs as
work-in-process inventory. The 1994 net loss is reduced by a $7.5
million, or $.09 per common share, after-tax benefit relating to the
cumulative effect of this accounting change. Effective January 1, 1993,
Amax Gold changed its exploration accounting policy such that prior
period exploration expenses would no longer be capitalized and restored
to earnings when a property became exploitable. The 1993 net loss
includes a $13.4 million, or $.17 per common share, after-tax charge
relating to the cumulative effect of this accounting change.
/(4)/ The 1993 net loss includes a $1.8 million, or $.03 per common share,
after-tax cumulative effect of the January 1, 1993, adoption of
Statement of Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits."
/(5)/ The Company issued 1.8 million preferred shares in August 1994.
Preferred share dividends were $1.8 million during the fourth quarter of
1994.
/(6)/ Average costs weighted by ounces of gold produced at each mine.
/(7)/ Effective January 1, 1996, the Company adopted the Gold Production Cost
Standard developed by the Gold Institute in order to facilitate
comparisons among companies in the gold industry. Cash production costs
reported in prior periods have been restated as cash operating costs and
total cash costs in accordance with the new standard. Cash operating
costs calculated under the new standard include all operating costs
(including overhead) at the mine sites, but exclude royalties,
production taxes and reclamation. Total cash costs include royalties and
production taxes, but exclude reclamation. Total production costs remain
unchanged and include reclamation and depreciation, depletion and
amortization. Total cash costs in 1996 exclude the impact of the write-
down of heap leach inventories at Guanaco.
-19-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Amax Gold reported a 1997 net loss of $33.4 million, or $.37 per share, on
revenue of $259.5 million compared with a 1996 net loss of $39.2 million, or
$.48 per share on revenue of $108.2 million and a 1995 net loss of $26.4
million, or $.38 per share on revenue of $96.6 million. The 1997 results
included a $4.5 million benefit for a first quarter inventory accounting change
while the 1996 results included a $35.5 million write-down of the Guanaco mine
and an unrelated $10 million deferred tax benefit. Excluding special items, the
1997 net loss was $37.9 million, or $.41 per share, compared with a 1996 net
loss of $13.7 million, or $.21 per share. See Note 5 to the Consolidated
Financial Statements for further discussion of the changes in accounting
policies during the first quarter of 1997.
The Company's operating income improved to $1.9 million for 1997 compared with
1996 and 1995 operating losses of $7.4 million and $19.7 million, respectively,
excluding special items and the Guanaco write-down. The improved operating
results were attributed to lower cash costs and higher production, partially
offset by significantly lower gold prices.
Revenue increased to $259.5 million in 1997 compared with $108.2 million in 1996
and $96.6 million in 1995. The improvement is a result of significantly higher
gold sales of 720,889 ounces in 1997 due to the commencement of commercial
production at Fort Knox and Kubaka and a full year of production at Refugio,
offset by the closure of the Sleeper mine. Gold sales were 262,975 ounces in
1996 and 238,094 ounces in 1995. The increased sales volume was partially
offset by a lower 1997 average realized price of $360 per ounce compared with
$412 per ounce for 1996 and $406 per ounce for 1995. These realized prices
compare with average spot gold prices of $331 per ounce in 1997, $388 per ounce
in 1996 and $384 per ounce in 1995. Amax Gold's average realized price exceeded
the average spot price in each year due to the positive impact of hedging
activities.
Gold production was a record 729,831 ounces, compared with 268,331 ounces in
1996 and 238,255 ounces in 1995. Fort Knox, Kubaka and Refugio contributed a
total of 524,035 ounces, or more than 70 percent of 1997 production. For 1998,
these three mines are expected to contribute more than 90 percent of the
Company's total production as Hayden Hill and Guanaco complete operations. Fort
Knox and Kubaka have outperformed expectations throughout 1997 as mill
throughput at both mines was higher than plan for the year, resulting in higher
than anticipated production. Commercial production was achieved at Fort Knox on
March 1, 1997, resulting in 320,522 ounces of production during 1997. At
Kubaka, commercial production commenced on June 1, 1997, and 129,970 ounces were
produced for Amax Gold's account during 1997. Operations at Refugio were
hampered by the abnormally severe winter weather in mid-1997, which resulted in
the suspension of crushing operations for nearly three months. The Company's 50
percent share of 1997 production at Refugio was 73,543 ounces compared with
30,612 ounces for 1996, when commercial production commenced on October 1, 1996.
Production at Refugio is expected to improve during the first quarter of 1998 as
the weather related problems and other operational inefficiencies are addressed.
Mining was completed at Guanaco during July 1997, which resulted in the decrease
in production to 93,594 ounces in 1997 compared with 96,018 ounces in 1996.
Production at Guanaco will decline substantially during 1998 as residual
leaching continues. Hayden Hill produced a record 112,202 ounces during 1997,
an eight percent increase over 1996 production of 103,502 ounces due to higher
ore grades, crusher throughput and recovery rate. Hayden Hill completed mining
in December 1997 and production is expected to decline substantially during 1998
as residual leaching commences. Production in 1996 was 13 percent higher than
1995 due to the addition of Refugio during the fourth quarter of 1996. During
1998, consolidated production is expected to be more than 750,000 ounces as Fort
Knox and Kubaka will have a full year of production.
The Company's cost of sales as a percentage of revenue declined to 61 percent in
1997 compared with 68 percent in 1996 and 84 percent in 1995, reflecting
significantly lower average total cash costs. Consolidated total cash costs fell
by 22 percent to $198 per ounce for 1997 from $255 per ounce in 1996 and $313
per ounce in 1995. Fort Knox's cash costs of $170 per ounce for 1997 were lower
than expected as crusher and mill throughput and ore grade were higher than
anticipated. As a result of higher mill throughput, Kubaka's 1997 cash costs of
$175 per ounce were also lower than anticipated. Refugio's 1997 cash costs of
$341 per ounce, compared with $242 per ounce for 1996, were higher primarily due
to the adverse impact of the abnormal winter weather, partially offset by a $1.4
million insurance payment received relating to business interruption caused by
the severe winter weather. Cash costs at Refugio are
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<PAGE>
expected to improve significantly during 1998. Cash costs continued to decline
at Guanaco during 1997 to $229 per ounce compared with $290 per ounce in 1996
and $375 per ounce in 1995 due to improved crusher throughput and reduced
spending. Cash costs at Hayden Hill improved to $186 per ounce in 1997 compared
to $229 per ounce and $253 per ounce in 1996 and 1995, respectively. Higher ore
grades at Hayden Hill, which resulted in increased production, were the main
factor in the improved cash costs. Cash costs at both Guanaco and Hayden Hill
are expected to increase during 1998 when production declines as operations are
scaled back in preparation for the mines' closure. Consolidated average total
cash costs for 1998 are anticipated to be similar to 1997 cash costs.
Depreciation and depletion nearly tripled to $88.4 million in 1997 compared with
1996, primarily as a result of increased production and sales. Additionally,
the Company's consolidated depreciation and depletion rate increased to $123 per
ounce in 1997 compared with $110 per ounce in 1996 due to the higher Fort Knox
rate of $169 per ounce. At year-end 1997, approximately 450,000 contained
ounces were added to the Fort Knox reserves, which will reduce the 1998
depreciation and depletion rate at the mine by about $20 per ounce. Lowering
the gold price used to calculate ore reserves from $400 per ounce at December
31, 1996, to $375 per ounce at December 31, 1997, did not have a significant
impact on Kubaka or Refugio reserves, however, higher than anticipated 1997 and
future capital spending will result in increased 1998 depreciation and depletion
rates at both mines. The consolidated depreciation and depletion rate for Amax
Gold is not expected to change significantly during 1998.
General and administrative expenses decreased by 23 percent to $6.4 million in
1997 compared with $8.3 million in 1996. The decline was mainly attributed to
the management fee the Company earns for operating the Kubaka project which is
recorded as an offset to general and administrative expenses.
Expanded exploration activities during 1997 resulted in higher exploration
expense of $5.5 million compared with $3.5 million in 1996. Spending at the
Company's three new mines as well as exploration drilling on the subsequently
abandoned Long Valley Project in California were the main factors causing the
increase. During 1998, the Company expects to reduce its exploration costs to
about $4 million due to lower gold prices.
Interest expense in 1997 was $42.5 million compared with $29.7 million in 1996.
The increase was attributed to higher average debt balances, which were
necessary to complete the Company's capital spending on construction projects.
Capitalized interest declined to $4.2 million in 1997 from $22.8 million in
1996, as the Fort Knox project was completed during the first quarter of 1997.
Interest income of $1.9 million in 1997 was slightly higher than 1996 and
primarily relates to interest received on a loan to the Company's Refugio joint
venture partner.
Other expense of $3.0 million was $2.0 million higher than 1996 due to the
absence of a $1.4 million arbitration award received during 1996 as well as
higher legal fees, as the Haile tortious interference case was tried during
August 1997.
LIQUIDITY AND CAPITAL RESOURCES
Amax Gold's 1997 operating cash flow of $68.0 million was about four times
higher than 1996 and more than 25 times higher than 1995 operating cash flow as
a result of lower cash costs and higher production. Due to the low gold prices,
the Company has tightened its spending in all areas in order to preserve cash.
Working capital was negative for the 1997 and 1996 year ends due in part to the
classification of the amount due under the Cyprus Amax demand loan facility as a
current liability. Additionally, current maturities of long-term debt also
contributed to the negative working capital and the Company is currently
considering restructuring opportunities.
Capital expenditures declined to $30.8 million in 1997 from $187.7 million in
1996 due to the completion of the Fort Knox project during the first quarter of
1997. Capital spending at Fort Knox, excluding capitalized interest, was
approximately $14 million in 1997 compared with $173 million in 1996, for a
total project cost of about $345 million, which excludes $28 million in
capitalized interest. The Kubaka acquisition was completed in May 1997, and
capital spending following the purchase, excluding capitalized interest, was
about $12 million. At Refugio, capital spending, excluding capitalized
interest, totaled about $5 million in 1997 compared with $12 million in 1996.
Most of the capital spent at Refugio during 1997 relates to operational
inefficiencies that are being addressed and are expected to be
-21-
<PAGE>
remedied in the first part of 1998. Capital spending is expected to further
decline during 1998 as only sustaining capital projects will be completed in
order to preserve cash.
Net financing activities for 1997 used $24.6 million in cash as a result of loan
repayments. In May 1997, the Company completed a $71 million tax-exempt
industrial revenue bond financing for the solid waste disposal facility at the
Fort Knox mine. Proceeds were used to repay amounts borrowed to complete
construction of the Fort Knox mine under the Cyprus Amax demand loan facility.
A total of $49.5 million was borrowed and $106.2 million was repaid on the
demand loan facility during 1997, resulting in an outstanding balance of $73.3
million at December 31, 1997. The Company currently has available approximately
$70 million under the Cyprus Amax demand loan facility. During December 1997,
the Company refinanced its $34 million portion of the Refugio gold loan with
approximately $28 million borrowed under a new $40 million credit facility. The
decline in gold prices since the gold was borrowed in early 1995 resulted in a
gain of approximately $6 million, which will be amortized, net of approximately
$2 million in deferred financing costs, over the four remaining years of the
original loan life. In connection with the refinancing, the Company also
received repayment of $10 million from the other 50 percent owner of Refugio.
This amount, together with $10 million of the remaining proceeds from the new
facility, was lent to the 50 percent owned Company that operates the Kubaka mine
to fund debt service and working capital requirements. Scheduled 1997 Fort Knox
debt repayments of approximately $30.8 million and a Refugio gold loan repayment
of $4.3 million were made with 1997 cash flow from operations.
During 1998, Amax Gold's capital spending is expected to be approximately $15
million. With this lower capital spending and the anticipated higher production
and lower cash costs, the Company expects to generate sufficient funds for
general corporate purposes, capital expenditures and interest payments.
However, assuming the price of gold remains at current levels, the Company
anticipates borrowing additional amounts under the Cyprus Amax demand loan
facility for a portion of its 1998 debt service. The Company is currently
considering other opportunities to restructure its debt and capital.
The Company is participating in a Year 2000 Program established by Cyprus Amax
to oversee and coordinate Year 2000 conversion. The program includes
involvement from site and corporate personnel and communication with customers,
suppliers and financial institutions to address Year 2000 compliance. Projects
are underway to identify, evaluate and implement Year 2000 compliance solutions.
The total cost of Year 2000 projects for the Company is not expected to be
material and all critical applications are anticipated to be compliant by the
end of 1999.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed in this report
are forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from projected results. Such forward-
looking statements include statements regarding expected dates for gold sales,
reserve additions, return to full production at Refugio, projected quantities of
future gold production, estimated reserves and recovery rates, anticipated
production rates, costs and expenditures, prices realized by the Company and
expected to be realized, expected future cash flows, anticipated financing
needs, growth plans and sources of financing and repayment alternatives and
possible business combinations. Factors that could cause actual results to
differ materially include, among others: risks and uncertainties relating to
general domestic and international economic and political conditions, the
cyclical and volatile price of gold, the political and economic risks associated
with foreign operations, cost overruns, unanticipated ground and water
conditions, unanticipated grade and geological problems, metallurgical and other
processing problems, availability of materials and equipment, the timing of
receipt of necessary governmental permits and approvals, the occurrence of
unusual weather or operating conditions, force majeure events, lower than
expected ore grades, the failure of equipment or processes to operate in
accordance with specifications or expectations, labor relations, accidents,
environmental risks, the results of financing efforts and financial market
conditions and other risk factors detailed in the Company's Securities and
Exchange Commission filings. Refer to the Risk Factors on pages 7 to 13 of
Amendment No. 1 to the Company's Registration Statement on Form S-3 (No. 333-
22598) as filed with the Securities and Exchange Commission on March 26, 1997,
for a more detailed discussion of risks. Many of such factors are beyond the
Company's ability to control or predict. Readers are cautioned not to put undue
reliance on forward-looking statements. The Company disclaims any intent or
obligation to update publicly these forward-looking statements, whether as a
result of new information, future events or otherwise.
-22-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF MANAGEMENT
The management of Amax Gold Inc. is responsible for the integrity and
objectivity of the financial statements and other financial information
contained in this Annual Report. The financial statements were prepared in
accordance with generally accepted accounting principles and include estimates
that are based on management's best judgment.
Amax Gold maintains an internal control system which includes formal policies
and procedures designed to provide reasonable assurance that assets are
safeguarded and transactions are properly recorded and executed in accordance
with management's authorization. Amax Gold's internal audit function audits
compliance with the internal control system and issues reports to Amax Gold's
management and the Audit Committee of the Board of Directors.
Amax Gold's financial statements have been audited by independent accountants,
whose appointment is ratified yearly by the shareholders at the annual
shareholders' meeting. The independent accountants conducted their audits in
accordance with generally accepted auditing standards. These standards include
an evaluation of the internal accounting controls in establishing the scope of
audit testing necessary to allow them to render an independent professional
opinion on the fairness of Amax Gold's financial statements.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets periodically with representatives of management and the
independent accountants to review their work and ensure that they are properly
discharging their responsibilities.
Milton H. Ward
Chairman and Chief Executive Officer
S. Scott Shellhaas
President and Chief Operating Officer
Leland O. Erdahl
Vice President and Chief Financial Officer
-23-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Amax Gold Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Amax Gold
Inc. and its subsidiaries at December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 5 to the consolidated financial statements, the Company
changed its method of accounting for inventory in 1997.
Price Waterhouse LLP
Denver, Colorado
February 9, 1998
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<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Year-ended December 31,
(In millions except per share amounts)
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $259.5 $108.2 $ 96.6
Costs and operating expenses:
Cost of sales 157.3 74.0 80.8
Depreciation and depletion 88.4 29.8 21.5
Asset write-downs - 35.5 -
General and administrative 6.4 8.3 8.1
Exploration 5.5 3.5 5.9
- -------------------------------------------------------------------------------
Total costs and operating expenses 257.6 151.1 116.3
- -------------------------------------------------------------------------------
Income (loss) from operations 1.9 (42.9) (19.7)
Interest expense (42.5) (29.7) (13.3)
Capitalized interest 4.2 22.8 5.9
Interest income 1.9 1.6 3.0
Other (3.0) (1.0) (2.3)
- -------------------------------------------------------------------------------
Loss before income taxes and cumulative
effect of accounting change (37.5) (49.2) (26.4)
Income tax benefit (expense) (0.4) 10.0 -
- -------------------------------------------------------------------------------
Loss before cumulative effect of
accounting change (37.9) (39.2) (26.4)
Cumulative effect of accounting change 4.5 - -
- -------------------------------------------------------------------------------
Net loss (33.4) (39.2) (26.4)
Preferred stock dividends (6.9) (6.9) (6.9)
- -------------------------------------------------------------------------------
Loss attributable to common shares $(40.3) $(46.1) $(33.3)
- -------------------------------------------------------------------------------
Per common share:
Loss before cumulative effect of
accounting change $ (.41) $ (.48) $ (.38)
Cumulative effect of accounting change .04 - -
- -------------------------------------------------------------------------------
Net basic and diluted loss $ (.37) $ (.48) $ (.38)
- -------------------------------------------------------------------------------
Weighted average common shares outstanding 108.2 96.9 86.5
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
-25-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31,
(In millions except share amounts)
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 16.0 $ 11.1
Restricted cash 3.5 -
Inventories 57.1 28.5
Receivables 32.9 3.2
Other 20.2 17.9
- --------------------------------------------------------------------------------
Current assets 129.7 60.7
Property, plant and equipment, net 723.3 667.1
Other 17.6 34.4
- --------------------------------------------------------------------------------
Total assets $ 870.6 $762.2
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Cyprus Amax demand loan $ 73.3 $130.0
Current maturities of long-term debt 81.4 39.3
Accounts payable, trade 24.2 14.7
Accrued and other current liabilities 39.1 23.8
Reclamation reserve, current portion 8.0 4.5
- --------------------------------------------------------------------------------
Current liabilities 226.0 212.3
Long-term debt 345.7 272.6
Reclamation reserve, non-current portion 13.8 11.2
Other 11.3 6.7
- --------------------------------------------------------------------------------
Total liabilities 596.8 502.8
Commitments and contingencies (Notes 8 and 14) - -
Shareholders' equity:
Preferred stock, par value $1.00 per share, authorized
10,000,000 shares, 2,000,000 shares designated as
$2.25 Series A Convertible Preferred Stock,
no shares issued and outstanding; and 1,840,000 shares
designated as $3.75 Series B Convertible Preferred
Stock, issued and outstanding 1,840,000 shares 1.8 1.8
Common Stock, par value $.01 per share, authorized
200,000,000 shares, issued and outstanding 114,850,103
shares in 1997 and 99,308,979 shares in 1996 1.1 1.0
Paid-in capital 408.6 355.7
Accumulated deficit (130.8) (90.5)
Unearned equity - financing costs (6.9) (8.6)
- --------------------------------------------------------------------------------
Total shareholders' equity 273.8 259.4
- --------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 870.6 $762.2
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
-26-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Year-ended December 31,
(In millions)
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (33.4) $ (39.2) $ (26.4)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and depletion 88.4 29.8 21.5
Asset write-downs - 35.5 -
Increase (decrease) in reclamation reserve 6.1 (0.2) 2.8
Cumulative effect of accounting change (4.5) - -
Non-cash interest* - 5.2 -
Amortization of financing costs* 5.8 4.0 2.2
Decrease in deferred taxes 0.4 (10.0) -
Deferred hedging costs 9.8 0.5 (3.2)
Other, net 6.4 0.5 0.8
Decrease (increase) in working capital, net of businesses acquired:
Receivables (8.5) (0.5) 0.2
Accrued and other current liabilities 10.3 (0.1) (2.0)
Inventories 5.9 (8.5) 4.5
Other assets 5.7 (0.7) (0.5)
Accounts payable, trade (24.4) 0.2 2.7
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 68.0 16.5 2.6
- ------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures (30.8) (187.7) (206.2)
Net loans to/from joint venture partners - (2.0) (8.8)
Capitalized interest (4.2) (22.8) (5.9)
Increase in restricted cash (3.5) - -
Other - - 1.5
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (38.5) (212.5) (219.4)
- ------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from financings 111.0 74.3 242.5
Repayments of financings (75.3) (8.1) (104.0)
Issuance of Common Stock to Cyprus Amax* - - 80.8
Advances from Cyprus Amax 49.5 130.0 5.0
Repayments to Cyprus Amax (106.2) (5.0) -
Cash acquired in connection with purchase of Kubaka investment 7.0 - -
Deferred financing costs (3.7) (2.8) (11.7)
Preferred dividends paid (6.9) (6.9) (6.9)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities (24.6) 181.5 205.7
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 4.9 (14.5) (11.1)
Cash and equivalents at January 1 11.1 25.6 36.7
- ------------------------------------------------------------------------------------------------------------
Cash and equivalents at December 31 $ 16.0 $ 11.1 $ 25.6
- ------------------------------------------------------------------------------------------------------------
Non-cash Transaction:
Issuance of Common Stock for purchase of Kubaka, net of cash acquired:
Working capital, other than cash $ (10.3) $ - $ -
Property, plant and equipment (114.2) - -
Debt 79.5 - -
- ------------------------------------------------------------------------------------------------------------
$ (45.0) $ - $ -
- ------------------------------------------------------------------------------------------------------------
</TABLE>
*During the fourth quarter of 1996, the Company issued $15.2 million in stock to
Cyprus Amax in payment of $5.2 million in interest and a $10 million guaranty
and financing fee. The guaranty and financing fee was recorded as unearned
equity and $3.1 million has been amortized through December 31, 1997.
Cash paid for interest (including interest capitalized) was $35.0 million, $17.9
million and $9.2 million in 1997, 1996 and 1995, respectively. There were no
income taxes paid during 1997, 1996 or 1995.
The accompanying notes are an integral part of these statements.
-27-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In millions)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Paid-In Accumulated Unearned
--------------- ---------------
Shares Amount Shares Amount Capital Deficit Equity
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 1.8 $1.8 81.3 $0.8 $258.4 $ (11.1) $ -
Net loss - - - - - (26.4) -
Issuance of common shares:
Employee and director plans - - 0.1 - 0.7 - -
Repayment of Cyprus Amax debt,
including interest - - 15.0 0.2 80.7 - -
Preferred stock dividends - - - - - (6.9) -
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 1.8 1.8 96.4 1.0 339.8 (44.4) -
Net loss - - - - - (39.2) -
Issuance of common shares:
Employee and director plans - - 0.1 - 0.7 - -
Repayment of fees and
interest to Cyprus Amax - - 2.8 - 15.2 - (10.0)
Amortization of financing costs - - - - - - 1.4
Preferred stock dividends - - - - - (6.9) -
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 1.8 1.8 99.3 1.0 355.7 (90.5) (8.6)
Net loss - - - - - (33.4) -
Issuance of common shares:
Employee and director plans - - 0.2 - 1.0 - -
Kubaka acquisition - - 15.4 0.1 51.9 - -
Amortization of financing costs - - - - - - 1.7
Preferred stock dividends - - - - - (6.9) -
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 1.8 $1.8 114.9 $1.1 $408.6 $(130.8) $ (6.9)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
-28-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
1. NATURE OF OPERATIONS
Amax Gold Inc. and its subsidiaries (Amax Gold or the Company) are engaged in
the mining and processing of gold and silver ore and the exploration for, and
acquisition of, gold-bearing properties, principally in the Americas, Russia,
Australia and Africa. The Company's primary products are gold and silver
produced in the form of dore and then shipped to refiners for final processing.
The Company is currently 58.8 percent owned by Cyprus Amax Minerals Company
(Cyprus Amax).
The Company produces gold and silver using both the traditional milling process
and heap leaching. All of the Company's operating properties are open pit
mines. The Company's operating properties consist of a 100 percent interest in
the Fort Knox mine near Fairbanks, Alaska; a 50 percent interest in the Kubaka
mine in the Russian Federation; and a 50 percent interest in the Refugio mine in
Chile. The Company also owns a 100 percent interest in the Hayden Hill mine in
Lassen County, California; and a 90 percent interest in the Guanaco mine in
Chile. Mining was completed at Hayden Hill and Guanaco during 1997 and residual
leaching will continue during 1998 at both mines. In addition, the Company owns
a 62.5 percent venture interest in the Haile property in Lancaster County, South
Carolina. The Company also owns the Sleeper mine in Humboldt County, Nevada, and
the Wind Mountain mine in Washoe County, Nevada, which are in reclamation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Amax Gold and the
related entities that it controls. Investments in companies over which the
Company can exercise significant influence but not control are accounted for
using the equity method. Investments in joint ventures are accounted for using
proportionate consolidation, consistent with accepted mining industry practice.
All material intercompany balances and transactions have been eliminated.
Certain 1996 and 1995 amounts have been reclassified to conform to the 1997
presentation.
EARNINGS PER SHARE
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share", was issued in February 1997. SFAS No. 128 replaces the presentation of
primary earnings per share with a presentation of basic earnings per share. It
requires a reconciliation of the numerators and denominators of the basic and
diluted earnings per share computation. Basic earnings per share is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding for the period. For the year ended December 31,
1997, basic and diluted earnings per share were the same as primary earnings per
share. Outstanding Company stock options were not considered in the diluted
earnings per share calculation as these were antidilutive.
CASH AND EQUIVALENTS
Cash and equivalents include cash and highly liquid investments with an original
maturity of three months or less. The Company invests cash in time deposits
maintained in high credit quality financial institutions.
INVENTORIES
Gold inventory is valued at the lower of aggregate cost, computed using a three-
month rolling average method, or market. See Note 5 for discussion of the change
in inventory accounting method during 1997. Materials and supplies are valued
at average cost less reserves for obsolescence.
-29-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including development expenditures and
capitalized interest, are carried at cost. Expenditures for major improvements
are capitalized. Gains and losses on retirements are included in earnings.
Depreciation and depletion are computed using the units-of-production method
based on the estimated ounces of gold to be recovered and estimated salvage
values. Mobile equipment and assets that have useful lives shorter than the
mine life are depreciated on a straight-line basis over estimated useful lives
of one to five years.
Amax Gold follows Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." In the event that facts and circumstances indicate that the
carrying amount of an asset may not be recoverable and an estimate of future
undiscounted cash flows is less than the carrying amount of the asset, an
impairment loss will be recognized. The impairment is measured based on an
estimate of future discounted cash flows. See Note 6 for discussion of the
write-down of the Guanaco mine recorded in the fourth quarter of 1996 in
accordance with SFAS No. 121.
EXPLORATION
Exploration expenditures are charged against earnings in the period incurred.
GOLD AND CURRENCY FINANCINGS
The Company uses various gold and currency financings to fund its mining
activities. To finance investments with gold loans the Company borrows gold
from banks and sells the gold on the open market. Gold loans are recorded on
the balance sheet at the price received when the borrowed gold is sold. The
banks are repaid from future gold production, at which time revenues are
recorded. Gold loans bear relatively low interest rates, result in a hedge
against future gold price fluctuations and limit realized prices to the amounts
received when the borrowed gold is sold.
Currency financings represent borrowings in hard currency, typically U.S.
dollars. The terms, including interest rates, are negotiated with lenders based
on market conditions at the time the financing is arranged.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the functional currency of all of the Company's foreign
subsidiaries. The financial statements of foreign subsidiaries are remeasured
in U.S. dollars based on a combination of both current and historical exchange
rates; gains and losses due to this remeasurement are reflected in the
consolidated statement of operations. For the year ended December 31, 1997,
translation losses were $1.0 million while for the years ended December 31, 1996
and 1995, translation losses were insignificant.
DERIVATIVE CONTRACTS
Forward sale and purchase contracts, generally on a spot deferred basis, put and
call option contracts and compound options are entered into to manage the effect
of price changes on the Company's precious metals that are produced and sold.
Premiums paid for purchased options and premiums earned on sold options are
deferred and recognized in income over the term of the related option. The
results of gold hedging activities are included in revenues at the time the
hedged production is sold. Silver hedging results are reflected as a by-product
credit. Gains and losses on derivative contracts that do not qualify as hedges
are recognized currently.
Interest rate swap options are entered into as a hedge against interest rate
exposure on the Company's floating rate financing facilities in order to fix
the Company's interest costs. The differences to be paid or received on swap
options are included in interest expense as incurred.
-30-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
POSTRETIREMENT BENEFITS
Postretirement benefits other than pensions are calculated in accordance with
the provisions set forth in SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," which requires the expected cost
of postretirement benefits other than pensions to be accrued during the years
the employee renders service.
POSTEMPLOYMENT BENEFITS
Postemployment benefits are calculated in accordance with the provisions set
forth in SFAS No. 112, "Employers' Accounting for Postemployment Benefits."
SFAS No. 112 requires the Company to expense postemployment benefits as they are
earned by the employee for services rendered, rather than as they are paid.
STOCK-BASED COMPENSATION
Amax Gold adopted SFAS No. 123 "Accounting for Stock-Based Compensation," in
1996 and has elected to continue to measure compensation cost using the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." See Note 12 for further discussion
of net income and earnings per share as if the fair value based method of
accounting as defined in SFAS No. 123 had been applied.
RECLAMATION
Reclamation, site restoration and closure costs for each producing mine are
estimated based primarily on environmental and regulatory requirements and are
accrued over the expected life of each mine using the units-of-production
method. Ongoing environmental and reclamation expenditures are expensed as
incurred.
INCOME TAXES
Income taxes are calculated in accordance with the provisions set forth in SFAS
No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred income
taxes are determined using an asset and liability approach. This method gives
consideration to the future tax consequences associated with differences between
the financial accounting and tax basis of assets and liabilities and gives
immediate effect to changes in income tax laws. The income statement effect is
derived from current taxes payable and changes in deferred income taxes on the
balance sheet.
USE OF ESTIMATES
The preparation of Amax Gold's consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Management's estimates are made in
accordance with mining industry practice. Significant areas requiring the use
of management estimates relate to the determination of mineral reserves,
reclamation and environmental obligations, impairment of assets, postretirement
and other employee benefits, useful lives for depreciation, depletion and
amortization, and valuation allowances for deferred tax assets. Actual results
could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
As of December 31, 1997, Cyprus Amax owned approximately 68 million Common
Shares, or approximately 58.8 percent, of the Company's outstanding Common
Stock. As discussed below, the increase in Cyprus Amax's ownership resulted
from various financial transactions with Cyprus Amax. See also Note 6 for
discussions related to the Kubaka acquisition agreement.
-31-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
FINANCING ARRANGEMENTS
During December 1997, the Company completed a $40 million credit facility which
was used to refinance the existing Refugio gold loan and for working capital and
debt service requirements. In May 1997, the Company completed a $71 million
tax-exempt industrial revenue bond financing for the solid waste disposal
facility at the Fort Knox mine. Cyprus Amax has guaranteed both loans and the
Company pays a 1.75 percent interest differential to Cyprus Amax as a guaranty
fee on the industrial revenue bond and a 0.75 percent interest differential on
the Refugio loan. The Company has also agreed to reimburse Cyprus Amax for any
payments made under the guaranties. Additionally, the Company agreed not to
borrow $40 million under an existing convertible line of credit with Cyprus Amax
as part of the Refugio refinancing. See Note 7 for further discussion of the
terms of each loan.
Pursuant to a financing arrangement with Cyprus Amax, approved by the Company's
shareholders in September 1996, Cyprus Amax has guaranteed the Company's $250
million Fort Knox loan until economic completion of the Company's Fort Knox mine
and has provided the Company with a $250 million demand loan facility, in
exchange for which the Company (i) paid Cyprus Amax a financing and guaranty fee
of $10 million, (ii) pays Cyprus Amax 1.75 percent annually on amounts
outstanding under the Fort Knox loan, (iii) would reimburse Cyprus Amax for any
payments made or costs incurred under the Cyprus Amax guaranty, (iv) agreed to
make no additional borrowing under the $100 million convertible line of credit
without the prior consent of Cyprus Amax, and (v) granted Cyprus Amax a first
priority security interest in the collateral for the Fort Knox loan, and if
requested, would grant security interests in certain additional assets to the
extent available. All of these 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.
On November 1, 1996, Cyprus Amax elected to receive payment in shares of Common
Stock of an aggregate of $15.2 million for all accrued interest on the demand
loan and interest differential payments due through October 31, 1996, as well as
the $10 million financing and guaranty fee. On November 12, 1996, the Company
issued 2.8 million shares of Common Stock to Cyprus Amax as payment for such
obligations. As of December 31, 1997 and 1996, the Company had borrowed $73.3
million and $130 million under the demand loan at average rates of 8.1 percent.
Interest and interest differential expense accrued as of December 31, 1997 and
1996 totaled $7.1 million and $2.3 million, respectively. Funding is provided
solely at the discretion of Cyprus Amax and as of December 31, 1997 the Company
had approximately $70 million available under the demand loan. The Company
anticipates borrowing a portion of its scheduled 1998 debt service from Cyprus
Amax under the demand loan. The $10 million guaranty and financing fee was
recorded as unearned equity and is being amortized over the expected period of
the demand loan and Cyprus Amax guaranty. Through December 31, 1997, $3.1
million had been amortized.
In April 1994, Cyprus Amax provided the Company with a $100 million convertible
line of credit. Outstanding amounts under the credit line bear interest at
LIBOR plus 0.3 percent and may be repaid through the issuance of up to two
million shares of $2.25 Series A Convertible Preferred Stock. Amax Gold may
redeem the Convertible Preferred Stock by issuing up to 12,099,213 shares of
Common Stock at a maximum price of $8.265 per share and a minimum price of
$5.854 per share. Cyprus Amax may convert the line of credit, any outstanding
indebtedness and/or Convertible Preferred Stock to 12,099,213 shares of Amax
Gold Common Stock valued at $8.265 per share. No amounts were outstanding under
this credit line as of December 31, 1997 or 1996.
In March 1995, Cyprus Amax provided the Company with an additional $80 million
convertible line of credit. During 1995, the full amount was borrowed by the
Company and subsequently converted by Cyprus Amax to 14,919,806 shares of Amax
Gold Common Stock at $5.362 per share.
-32-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
OTHER AGREEMENTS
In September 1995, the Company and Cyprus Amax entered into an agreement
regarding stock issuance pursuant to which obligations owing from the Company to
Cyprus Amax under existing or future contractual arrangements may be paid in
shares of Common Stock with the consent of both parties. The stock will be
valued based on the most recent 30-day average closing price, and the maximum
number of shares of Common Stock that may be issued is 879,500 shares. In
September 1995, 128,042 shares of such Common Stock were issued to Cyprus Amax
as payment for $835,473 due under the $80 million convertible line of credit.
An agreement in principle to monetize a portion of the Company's foreign tax net
operating losses was entered into with Cyprus Amax in February 1998. In
connection with the proposed transaction, the Company is expected to record a
gain of approximately $6.7 million.
The Company has entered into several additional agreements with Cyprus Amax.
Under an exploration joint venture agreement the two companies pool efforts to
discover and develop new gold properties, with Cyprus Amax providing 75 percent
and the Company providing 25 percent of initial funding. Amax Gold was charged
$4.2 million, $2.5 million and $3.1 million under this agreement for the years
ended December 31, 1997, 1996 and 1995, respectively.
A services agreement governs the provision of and payment for general
administrative services between Cyprus Amax and the Company. For the years
ended December 31, 1997, 1996 and 1995, insurance, management and other services
were supplied to the Company on a full cost reimbursement basis. The Company
was charged $4.1 million, $3.4 million and $4.3 million for the years ended
December 31, 1997, 1996 and 1995, respectively, for reimbursable costs. As of
December 31, 1997 and 1996, the Company had outstanding amounts due to Cyprus
Amax of $0.5 million and $0.3 million, respectively, relating to such services.
Pursuant to an 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.
4. INCOME TAXES
Income (loss) before income taxes consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $(13.7) $ 3.5 $ (5.5)
Foreign (19.3) (52.7) (20.9)
- -------------------------------------------------------------------------------------------------
$(33.0) $(49.2) $(26.4)
- -------------------------------------------------------------------------------------------------
</TABLE>
-33-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The income tax (benefit) expense consists of the following:
1997 1996 1995
- -------------------------------------------------------------------------------------------------
Current:
Federal $ - $ - $ -
State - - -
Foreign - - -
- -------------------------------------------------------------------------------------------------
Deferred:
Federal - - -
State - (10.0) -
Foreign 0.4 - -
- -------------------------------------------------------------------------------------------------
0.4 (10.0) -
- -------------------------------------------------------------------------------------------------
$ 0.4 $(10.0) $ -
- -------------------------------------------------------------------------------------------------
</TABLE>
The components of deferred tax (assets) liabilities are as follows:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Reclamation liabilities $ (6.1) $ (5.8)
Postretirement benefits (1.0) (1.5)
Accrued liabilities (6.6) (8.7)
Net operating loss carryforwards (62.4) (53.4)
Minimum tax credit carryforwards (5.1) (2.8)
Other (0.4) (0.3)
- -------------------------------------------------------------------------------------------------
Total deferred tax assets (81.6) (72.5)
Valuation allowance 28.8 18.1
- -------------------------------------------------------------------------------------------------
Net deferred tax assets (52.8) (54.4)
Deferred tax liabilities:
Properties 53.2 54.4
- -------------------------------------------------------------------------------------------------
Net deferred tax liabilities $ 0.4 $ -
- -------------------------------------------------------------------------------------------------
</TABLE>
The following is a reconciliation between the amount determined by applying the
federal statutory rate of 34 percent to the loss before taxes and the income tax
(benefit) expense:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at statutory rate $(11.2) $(16.7) $(9.0)
Increases (decreases) resulting from:
Losses with no expected tax benefit 13.5 16.7 10.0
State income taxes, net of federal benefit - (10.0) (0.2)
Percentage depletion (2.3) - (0.8)
- -------------------------------------------------------------------------------------------------
Income tax (benefit) expense - (10.0) -
- -------------------------------------------------------------------------------------------------
State income taxes, net of federal benefit - - -
Foreign losses with no expected tax benefit 0.4 - -
$ 0.4 $(10.0) $ -
- -------------------------------------------------------------------------------------------------
</TABLE>
-34-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
The valuation allowance increased $11 million in 1997 due to uncertainties of
realizing loss carryforwards in the future.
At December 31, 1997, the Company had federal tax net operating loss
carryforwards of $119 million and alternative minimum tax net operating loss
carryforwards of $83 million expiring in the years 2004 through 2012 and minimum
tax credit carryforwards of $5 million, which do not expire. At December 31,
1997, the Company also had Chilean tax net operating loss carryforwards of $105
million, which do not expire.
During 1996, $10 million of state deferred income taxes were reversed due to
revised mine economics.
The Company will file certain state income tax returns for 1997 on a combined
basis with Cyprus Amax. State tax expense and related liabilities have been
determined as if the Company filed separate income tax returns. The Company is
not included in the Cyprus Amax federal income tax return.
5. INVENTORIES
Inventories at December 31, 1997 and 1996, consisted of the following:
<TABLE>
<CAPTION>
1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
Gold:
Finished goods $23.3 $16.7
Work-in-process 3.6 3.1
Materials and supplies 30.2 8.7
- ---------------------------------------------------------------------------
$57.1 $28.5
- ---------------------------------------------------------------------------
</TABLE>
During the first quarter of 1997, Amax Gold elected to change its method of
accounting for inventory from the last-in, first-out (LIFO) method to a three-
month rolling average method. In accordance with generally accepted accounting
principles when changing from the LIFO method, prior years' results have been
restated to reflect the effect of this change in policy. The effect of this
restatement on the years ended December 31, 1996 and 1995 was to increase the
previously reported net loss by $5.0 million and $2.5 million, or $.06 and $.02
per share, respectively. The effect on beginning retained earnings as of
January 1, 1995 was to increase retained earnings by $4.4 million.
Additionally, as of January 1, 1997, the Company changed its accounting policy
to include depreciation and depletion in inventory, which has the effect of
recording depreciation and depletion expense in the statement of operations as
gold is sold rather than as it is produced. The cumulative effect of this
accounting change is a $4.5 million reduction of the net loss as of January 1,
1997. On a pro forma basis this change would have reduced the 1996 net loss by
$2.3 million. Both accounting changes were made in order to better match
current costs with revenues and to conform with prevailing gold industry
practice.
-35-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
6. PROPERTY, PLANT AND EQUIPMENT AND WRITE-DOWNS
The components of property, plant and equipment at December 31, 1997 and 1996,
were as follows:
<TABLE>
<CAPTION>
1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Mining plant and equipment $ 698.6 $ 197.5
Mining properties 405.9 231.3
Development properties and construction-in-progress 20.4 555.9
- ------------------------------------------------------------------------------
1,124.9 984.7
Less accumulated depreciation, depletion
and write-downs (401.6) (317.6)
- ------------------------------------------------------------------------------
$ 723.3 $ 667.1
- ------------------------------------------------------------------------------
</TABLE>
ACQUISITION OF KUBAKA
During May 1997, the Company completed the acquisition of a Cyprus Amax
subsidiary that owns 50 percent of Omolon Gold Mining Company (Omolon). Omolon
owns and operates the Kubaka gold mine, located in Far East Russia. Kubaka
poured its first gold in February 1997 and achieved commercial production
effective June 1, 1997. The project was completed at a capital cost of
approximately $228 million, excluding about $14 million in capitalized interest.
Under terms of the transaction, Cyprus Amax received a total of approximately
15.4 million shares of Amax Gold common stock, increasing Cyprus Amax's
ownership of Amax Gold to approximately 58.8 percent. Additional Amax Gold
common stock may be issued to Cyprus Amax in the future if more reserves are
acquired in Russia outside of the Kubaka concession area.
The Kubaka acquisition has been recorded as a transfer between companies under
common control, which requires the transfer of the assets and liabilities
acquired at their net book values. Approximately $121.1 million in property,
plant and equipment and $10.4 million in net working capital were acquired,
offset by the assumption of $79.5 million in debt and the issuance of $52
million in equity. As of December 31, 1997, the Kubaka project was funded
through $86 million of equity contributions from the partners, on a pro rata
basis to their ownership interests, and borrowings of $147 million. Accounts
payable includes approximately $6 million of advances to Omolon by Cyprus Amax
for which Amax Gold agreed to reimburse Cyprus Amax under certain circumstances,
offset in part by approximately $3 million in accounts receivable, the net
amount the Company would expect to receive.
ASSET WRITE-DOWNS
As a result of a detailed study of the continuity of ore, costs and production
rates at the Company's Guanaco mine, the Company recorded a $35.5 million pre-
tax write-down during the fourth quarter of 1996. Included in the write-down
were $9.4 million of heap leach inventories, which were impaired due to lower
actual and expected future recovery rates. Mining was completed at Guanaco in
July 1997 with residual leaching continuing into 1998.
-36-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
At December 31 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fort Knox project financing, 8.2% and 8.1% for 1997 and 1996, due 1998 - 2001 $222.2 $250.0
Kubaka project financing, 8.9% for 1997, due 1998 - 2001 58.8 -
Kubaka subordinated debt, 12.0% for 1997, due 1998 - 2000 7.0 -
Kubaka working capital line of credit, 12.0% for 1997, due 1998 7.5 -
Industrial Revenue Bond, 6.3% for 1997, due 2009 71.0 -
Credit facility, 7.0% for 1997, due 2002 40.0 -
Refugio gold loan, 5.4% and 6.9% for 1997 and 1996 - 38.3
Sale-leaseback, 8.6% and 8.4% for 1997 and 1996, due 1998 - 2004 20.6 23.6
- ------------------------------------------------------------------------------------------------------------
427.1 311.9
Less current portion 81.4 39.3
- ------------------------------------------------------------------------------------------------------------
$345.7 $272.6
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Scheduled debt maturities as of December 31, 1997, (in millions) were $81.4,
$73.2, $74.3, $81.5, $45.7 and $71.0 for the years 1998 through 2002 and
thereafter, respectively.
During December 1997, the Company refinanced the remaining $34 million balance
of the Refugio gold loan with approximately $28 million borrowed under a new $40
million credit facility. The new credit facility is a five year term loan with
a $40 million bullet payment due in December 2002. The loan bears interest at
LIBOR plus 1.0 percent. Cyprus Amax has guaranteed this loan and the Company
pays 0.75 percent to Cyprus Amax as a guaranty fee. The Company has also agreed
to reimburse Cyprus Amax for any payments made under the guaranty. The decline
in gold prices since the gold was borrowed under the original Refugio gold loan
in early 1995 resulted in a gain of approximately $6 million, which will be
amortized, net of approximately $2 million in deferred financing costs, over the
four remaining years of the original loan life.
During the second quarter, the Company completed a $71 million tax-exempt
industrial revenue bond financing for the solid waste disposal facility at the
Fort Knox mine. The 12-year variable rate bonds were issued by the Alaska
Industrial Development and Export Authority and are backed by a letter of credit
guaranteed by Cyprus Amax. The Company's interest rate on the bonds is currently
approximately 4.5 percent and an additional 1.75 percent interest differential
is paid to Cyprus Amax as a guaranty fee. Amax Gold has agreed to reimburse
Cyprus Amax for any payments made or costs incurred under the guaranty. The
Company received proceeds of approximately $66.3 million with the remaining
approximately $4.7 million maintained in an interest-bearing escrow account that
becomes available to the Company over the next three years as additional funds
are spent on the solid waste disposal facility. Through December 31, 1997,
approximately $3.5 million remained restricted. The Company expects to fund the
solid waste expansion and draw down the remaining amount during 1998. Proceeds
were used to repay amounts borrowed under the Cyprus Amax demand loan facility.
In connection with the Kubaka acquisition, the Company assumed approximately
$79.5 million in debt. Project financing of $130 million was provided by the
European Bank for Reconstruction and Development and the U.S. Overseas Private
Investment Corporation while a bank licensed to do business in Russia provided
$14 million in subordinated debt and a $15 million working capital line of
credit. Approximately $12.4 million of the project financing was repaid during
1997. Interest on the project financing is variable based upon LIBOR and
currently is approximately 9 percent with final maturity in December 2001. The
subordinated debt and working capital line of credit also have variable interest
rates based on LIBOR, which are both currently approximately 12 percent. The
-37-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
subordinated debt does not have a defined term for repayment but will be repaid
out of available cash, while the working capital line of credit expires in April
1998. These financings are guaranteed by Cyprus Amax and the Company agreed to
reimburse Cyprus Amax under certain circumstances for guaranty payments. As a
guaranty fee for the subordinated debt and the working capital line of credit,
Cyprus Amax receives a portion of the interest. Omolon also is seeking to
arrange additional working capital financing.
In August 1996, the Company completed a sale-leaseback of Fort Knox mobile
mining equipment for proceeds of $24.3 million, which were used primarily to
fund construction of the Fort Knox mine. Lease payments are due quarterly with
maturity in 2004. Interest rates on the equipment leases range from 7.7 percent
to 8.7 percent with approximately 73 percent of the equipment leases at 8.4
percent, maturing in 2001.
During October 1995, the Company completed a term loan agreement for $250
million to be used for construction of the Fort Knox mine and repayment of
certain existing debt obligations. The loan has a six-year term with repayments
beginning in 1997. As of December 31, 1997, the Company owes $23.1 million in
gold at $381 per ounce and the remaining $199.1 million in currency. Interest
on the loan is calculated at LIBOR for the dollar portion and at the bank's
lease rate for the gold portion, plus 2.25 or 2.0 percent at certain intervals
of construction or plus 1.75 percent after completion tests are passed.
Collateral for the loan includes the assets and production of the Fort Knox and
Hayden Hill mines and the stock of the subsidiaries owning the Sleeper and
Guanaco mines. The loan agreement places restrictions on proceeds of future
equity offerings and borrowings, restricts dividends and requires certain net
worth and cash ratios be maintained. Interest rate protection agreements must
be in place for at least 50 percent of any dollar portion of the borrowing. In
addition, Amax Gold must maintain gold reserve minimums and hedge a portion of
future production in order to obtain specified minimum cash flows.
In March 1996, as a result of projected higher capital costs to complete the
Fort Knox mine and other cash needs anticipated in 1996, the Company
renegotiated the Fort Knox loan and entered into certain other financial
arrangements with Cyprus Amax. See "Financing Arrangements" in Note 3 for
further discussion. Cyprus Amax has guaranteed the loan until economic
completion of the Fort Knox mine, as defined in the loan agreement, and the
Company has agreed not to borrow without the consent of Cyprus Amax under the
$100 million credit line previously provided by Cyprus Amax, which forms part of
the guaranty.
8. DERIVATIVE CONTRACTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS
COMMODITY DERIVATIVE CONTRACTS
Precious metal contracts include forward sales and purchase contracts, spot
deferred forward sales, put and call options and compound options and are
entered into by the Company to manage the effect of price changes on the
Company's precious metals that are produced and sold. Realization under these
contracts is dependent upon the counterparties performing in accordance with the
terms of the contracts. The Company does not anticipate non-performance by the
counterparties.
Forward sales contracts require the future delivery of gold at a specified
price. Forward sales contracts that are made on a spot deferred basis allow the
Company, at the option of the counterparty, to defer the delivery of gold to a
later date at a renegotiated gold price. Forward purchase contracts, which
require the future purchase of gold at a specified price, were established to
take advantage of a rising market and are offset by purchased puts. Various
factors influence the decision to close a spot deferred forward sales contract
or to roll the contract forward to a later date.
-38-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
A put option gives the put buyer the right, but not the obligation, to sell gold
to the put seller at a predetermined price on or before a predetermined date. A
call option gives the call buyer the right, but not the obligation, to buy gold
from the call seller at a predetermined price on or before a predetermined date.
The Company also uses compound options to protect against decreases in gold
prices and to reduce the initial cash outlay needed to provide this protection.
The call portion of a compound option allows the Company to purchase a put. The
Company's risk in purchasing compound options is limited to the premium paid.
Historically, the Company's price risk management activities have utilized
principally derivative instruments and strategies that qualified for hedge
accounting. The Company increased its use of derivative instruments during 1997
and the total program has put the Company in the position whereby it is
partially protected from further downward pressure in the price of gold during
1998 and future years and at the same time will enable the Company to
participate in any upward price movement. Some of the instruments utilized in
this program do not qualify for hedge accounting and, consequently, must be
marked to market. At December 31, 1997, the mark to market gain on this program
was $5.0 million, which has been reflected in the 1997 results.
As of December 31, 1997, the Company's outstanding hedge contracts were as
follows:
<TABLE>
<CAPTION>
Average
Realized Price
Gold Ounces Per Ounce Period
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Forward sales/(1)/ 326,000 $399 Jan. 1998 - Dec. 2002
Purchased put options 126,000 $419 Jan. 1998 - Dec. 2000
</TABLE>
/(1)/Primarily on a spot deferred forward basis, which allows for deferral
of the delivery of gold ounces to a later date at a renegotiated gold
price.
As of December 31, 1997, the Company's outstanding commodity derivative
contracts which are marked to market are as follows:
<TABLE>
<CAPTION>
Average
Realized Price
Gold Ounces Per Ounce Period
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Forward purchases 514,000 $327 Jan. 1998 - Dec. 1998
Purchased put options 448,000 $364 Jan. 1998 - Dec. 1998
Purchased compound put options 625,000 $325 Sept. 1998 - Dec. 2000
Sold put options 412,000 $337 Jan. 1998 - June 1998
Purchased call options 3,000 $315 Jan 1998
Purchased compound call options 300,000 $333 Sept. 1998 - Dec. 1998
Sold call options 199,000 $314 Jan. 1998 - June 1998
</TABLE>
The market value of the Company's forward contracts and put and call options at
December 31, 1997 and 1996, was approximately $51.0 million and $25.1 million.
Market valuations for these contracts are dependent on gold market prices,
option volatility and interest rates, which can vary significantly.
-39-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
INTEREST RATE PROTECTION AGREEMENTS
As a requirement of the Fort Knox loan, the Company has entered into interest
rate swaps and swap option agreements to reduce the impact of changes in
interest rates. At December 31, 1997, the Company had interest rate swaps and
swap option sales contracts that if exercised between January 1998 and April
1998 would obligate the Company to pay a fixed rate of 5.97 percent over an
average term of 0.8 years on a principal amount of $205 million. The Company
also purchased swap options with the right to pay 6.9 percent over an average
term of 1.5 years on a principal amount of $138 million. Gains or losses
realized on these contracts will be amortized over the term of the loan. Amax
Gold would break even if required to terminate these interest rate swap
agreements, given market interest rates at December 31, 1997. Due to the
requirements placed on the Company as a condition of its Fort Knox borrowings,
the Company does not expect to close these contracts.
CREDIT RISK
Amax Gold is exposed to credit losses in the event of non-performance by
counterparties to financial instruments, but does not expect any counterparties
to fail to meet their obligations. The Company generally does not obtain
collateral or other security to support financial instruments subject to credit
risk but monitors the credit standing of counterparties.
The estimated fair values for financial instruments under SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments," are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The estimated
fair values of the Company's financial instruments, as measured on December 31,
1997 and 1996, are as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and equivalents $ 18.7 $ 18.7 $ 11.1 $ 11.1
Long-term receivables 2.0 2.0 12.6 12.6
Long-term debt 345.7 345.7 272.6 272.6
Commodity derivative contracts 10.0 51.0 10.7 25.1
Interest rate protection agreements - - - -
</TABLE>
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:
CASH AND EQUIVALENTS
The carrying amounts approximate fair value because of the short maturity of
these instruments.
LONG-TERM RECEIVABLES
The fair value is estimated based on expected discounted future cash flows,
including applicable interest.
LONG-TERM DEBT
The fair value is estimated based on the quoted market prices for the same or
similar issues offered to the Company for debt of similar maturities.
-40-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
DERIVATIVE CONTRACTS
The fair value of options is estimated based on market prices, volatilities and
interest rates, while the fair value of forward sales and purchases are
estimated based on the quoted market price for the contracts at December 31,
1997 and 1996. The net asset of $10.0 million and $10.7 million recorded on the
financial statements as of December 31, 1997 and 1996, respectively, is
comprised of $14.7 million and $11.7 million in prepaid option costs, $0.8
million and $6.3 million in deferred option costs and net of $5.5 million and
$7.3 million in current deferred premiums, respectively.
INTEREST RATE PROTECTION AGREEMENTS
The fair value of interest rate protection agreements is estimated by obtaining
quotes from financial institutions and represents the cost to buy out the swaps
and options at December 31, 1997 and 1996. The Company does not expect to buy
out these agreements.
9. EMPLOYEE BENEFITS
PENSION PLAN
Substantially all employees in the United States are covered by a non-
contributory defined benefit pension plan. Benefits are based generally on
years of service and compensation levels prior to retirement. The Company makes
annual contributions to the plan in accordance with the requirements of the
Employee Retirement Income Security Act of 1974 (ERISA). Plan assets are
invested in a balanced fund and small capital equity fund.
Net annual pension cost includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 0.5 $ 0.6 $ 0.5
Interest cost 0.3 0.3 0.3
Actual return on assets (0.2) (0.3) (0.5)
Deferred gain - 0.1 0.2
Net amortization of prior service
cost and losses - (0.1) (0.1)
- ------------------------------------------------------------------------
Net periodic expense $ 0.6 $ 0.6 $ 0.4
- ------------------------------------------------------------------------
</TABLE>
-41-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
The following table summarizes the funded status of the plan and the related
amounts recognized in the Company's financial statements at December 31:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation, including vested
benefits of $3.0 in 1997 and $2.8 in 1996 $ 4.1 $ 3.5
- ------------------------------------------------------------------------
Projected benefit obligation $(4.3) $(3.6)
Plan assets at fair value 3.0 2.4
- ------------------------------------------------------------------------
Plan assets less than projected (1.3) (1.2)
benefit obligation Unrecognized prior (0.6) (0.7)
service cost Estimated additional liability (0.4) -
Unrecognized net loss 1.3 0.8
- ------------------------------------------------------------------------
Accrued pension cost $(1.0) $(1.1)
- ------------------------------------------------------------------------
</TABLE>
The following assumptions were used in calculating the funded status of the plan
at December 31 and the pension cost for the subsequent year:
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Expected long-term rate of return on assets 9.0% 9.0%
Discount rate 7.25% 7.75%
Rate of increase in compensation levels 5.0% 5.83%
</TABLE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company also provides certain health care and life insurance benefits for
retired employees in the United States. The postretirement health care plans are
contributory in certain cases based upon years of service, age and retirement
date. The Company currently does not fund postretirement benefits and may modify
plan provisions at its discretion. Net periodic postretirement benefit costs
for the years ended December 31, 1997, 1996 and 1995, were insignificant.
The following table sets forth the status of the plan and the related amounts
recognized in the Company's financial statements at December 31:
<TABLE>
<CAPTION>
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 0.9 $ 1.0
Active plan participants 0.7 1.0
- --------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation 1.6 2.0
Plan assets at fair value - -
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation
in excess of plan assets (1.6) (2.0)
Unrecognized prior service cost (1.6) (1.4)
Unrecognized net loss 0.3 0.5
- --------------------------------------------------------------------------------
Accrued postretirement benefit cost $(2.9) $(2.9)
- --------------------------------------------------------------------------------
</TABLE>
-42-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
The accumulated postretirement benefit obligation was determined using a
weighted average annual discount rate of 7.25 percent in 1997 and 7.75 percent
in 1996. The assumed health care cost trend rate for 1998 is 10.0 percent,
declining to 9.5 percent in 1999 and thereafter when Company costs associated
with the plan are capped. A one percent increase in the health care cost trend
rate used would have resulted in an insignificant increase in the 1997
postretirement benefit cost and the accumulated postretirement benefit
obligation at December 31, 1997.
POSTEMPLOYMENT BENEFITS
The Company also has a number of postemployment plans covering severance,
disability income, and continuation of health and life insurance for disabled
employees. At December 31, 1997 and 1996, the Company's liability for
postemployment benefits totaled $2.7 million and $3.9 million, respectively, and
is included in other liabilities.
10. PREFERRED STOCK
In August 1994, the Company sold publicly 1.8 million shares of $3.75 Series B
Convertible Preferred Stock (Preferred Stock) for net proceeds of $88.3 million.
The Preferred Stock is convertible at the option of the holder at any time at an
initial conversion price of $8.25 per share (equivalent to a conversion rate of
6.061 shares of Common Stock for each share of Preferred Stock), subject to
adjustment in certain events. If all of the Preferred Stock were to be
converted, an additional 11.2 million Common Shares would be issued.
The Preferred Stock is redeemable at the option of the Company at any time on or
after August 15, 1997, in whole or in part, for cash, initially at a redemption
price of $52.625 per share declining ratably annually to $50.00 per share on or
after August 15, 2004, plus accrued and unpaid dividends.
Annual cumulative dividends of $3.75 per share are payable quarterly on each
November 15, February 15, May 15 and August 15, as and if declared by the Board
of Directors.
11. COMMON STOCK
In February 1992, the Company's Board of Directors approved a Dividend
Reinvestment Plan whereby shareholders of the Company may elect to reinvest any
future Common Stock dividend payments in additional shares of the Company's
Common Stock. Three million shares of the Company's Common Stock are reserved
for issuance pursuant to this plan.
In 1994, the Company's shareholders approved a plan to grant Common Shares to
non-employee directors, under which 100,000 shares of Common Stock were reserved
for issuance. Through December 31, 1997, a total of 30,000 shares had been
issued.
During 1995, Amax Gold was reincorporated in Delaware and elected not to be
governed by Section 203 of the Delaware General Corporation Law, permitting the
Company to engage in business transactions with Cyprus Amax without requiring
the approval of 66 2/3 percent of all shareholders excluding Cyprus Amax and its
affiliates and associates. As a result of the reincorporation, Amax Gold's
treasury stock was canceled.
12. STOCK-BASED COMPENSATION PLANS
At December 31, 1997, the Company has two stock-based compensation plans, which
are described below. The Company applies APB Opinion 25 and related
interpretations in accounting for its plans. Accordingly, no
-43-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
compensation cost has been recognized for its fixed stock option plan. The
compensation cost that has been charged against income for its long-term
incentive plan was insignificant for 1997 and 1996. Had compensation cost for
the Company's two stock based compensation plans been determined based on the
fair value at the grant dates for awards under those plans consistent with the
method of SFAS No. 123, the difference in the Company's net loss and loss per
share would have been immaterial. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants in 1997 and 1996,
respectively: no dividend payments; expected volatility of 172 and 37 percent;
risk-free interest rates of 6.08 and 6.02 percent; and expected lives of 3.00
and 3.18 years.
The Company maintains a fixed stock option plan for officers and salaried
employees to purchase Common Shares. Options are exercisable at prices equal to
the market value on the date of grant. Options vest in two years and remain
exercisable until 10 years from date of grant. As of December 31, 1997, 1.9
million Common Shares are reserved for future grants.
A summary of the status of the Company's fixed stock option plan as of December
31, 1997 and 1996 and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
1997 1996
-------------------------- --------------------------
Weighted- Weighted-
Average Average
Fixed Options Shares Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 1,035,125 $7.16 1,060,000 $7.19
Granted 332,200 $6.25 50,000 $6.75
Exercised 12,400 $4.98 300 $8.75
Forfeited 283,025 $7.16 74,575 $7.21
- --------------------------------------------------------------------------------
Outstanding at
end of year 1,071,900 $6.91 1,035,125 $7.16
- --------------------------------------------------------------------------------
Options exercisable
at end of year 688,900 $7.21 738,925 $7.16
Weighted-average
fair value of
options granted
during the year 332,200 $5.46 50,000 $2.24
- --------------------------------------------------------------------------------
</TABLE>
During 1993, Amax Gold implemented a long-term incentive plan. Under this plan,
officers of the Company may receive restricted stock awards based on the rate of
return received by investors in the Company's Common Stock, compared with that
of its peers in the gold industry. Such awards may be deferred, accelerated or
otherwise adjusted based upon a strategic and comparative performance
assessment. At December 31, 1997, cumulative shares awarded were 143,750 and
706,250 were authorized and unissued. On January 2, 1998, an additional 70,910
shares were awarded. The valuation of the shares issued under the performance
share plan as calculated under SFAS No. 123 approximates the amounts recorded as
compensation expense by the Company and is insignificant for the years ended
December 31, 1997 and 1996.
-44-
<PAGE>
13. DOMESTIC AND FOREIGN OPERATIONS
The Company's foreign operations consist of the Kubaka mine in Russia and the
Guanaco and Refugio mines in Chile. The components of the Company's domestic and
foreign operations were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
United States $163.3 $ 65.7 $ 68.2
Foreign 96.2 42.5 28.4
- -------------------------------------------------------------------------------------
$259.5 $108.2 $ 96.6
- -------------------------------------------------------------------------------------
Income (loss) from operations:
United States $ 6.0 $ (1.0) $ (7.1)
Foreign (4.1) (41.9) (12.6)
- -------------------------------------------------------------------------------------
$ 1.9 $(42.9) $(19.7)
- -------------------------------------------------------------------------------------
Net income (loss) attributable to common shares:
United States $(20.6) $ 6.6 $(12.4)
Foreign (19.7) (52.7) (20.9)
- -------------------------------------------------------------------------------------
$(40.3) $(46.1) $(33.3)
-------------------------------------------------------------------------------------
Identifiable assets:
United States $537.1 $630.8 $451.0
Foreign 333.5 131.4 162.0
- -------------------------------------------------------------------------------------
$870.6 $762.2 $613.0
-------------------------------------------------------------------------------------
</TABLE>
Substantially all of the Company's 1997, 1996 and 1995 sales were made in Europe
through a wholly owned subsidiary of the Company. The Company's sales to major
customers that exceeded 10 percent of total sales were $138 million to three
customers during 1997, $95 million to four customers in 1996 and $58 million to
two customers in 1995. The Company believes that the loss of any of these
customers would have no material adverse impact on the Company because of the
active worldwide market for gold.
14. COMMITMENTS AND CONTINGENCIES
The Company estimates future reclamation and closure costs for properties
operated by the Company to be approximately $49.5 million based on currently
applicable federal, state and foreign laws and regulations. At December 31,
1997, $21.8 million has been accrued. Changes in applicable laws and
regulations could have a significant impact on estimates of future costs.
The Company used a gold price of $330 per ounce for 1998 and $375 per ounce for
1999 and beyond to evaluate any impairment of long lived assets. Management's
estimate of long-term gold prices may change if the gold price remains at the
current low level, which could result in an asset impairment.
Russian tax legislation is subject to varying interpretations and constant
changes, which may be retroactive. Further, the interpretation of tax
legislation by tax authorities as applied to the transactions and activity of
the Company may not
-45-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
coincide with that of management. As a result, transactions may be challenged by
tax authorities and the Company may be assessed additional taxes, penalties and
interest, which can be significant. Tax periods remain open to review by the tax
authorities for six years.
15. QUARTERLY DATA (UNAUDITED)
Quarterly earnings data for the years ended December 31, 1997 and 1996, follow:
<TABLE>
<CAPTION>
1997 Quarters First Second Third Fourth
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $38.4 $ 73.3 $ 79.6 $ 68.2
Income (loss) from operations (0.9) 1.5 2.5 (1.2)
Loss before cumulative effect of accounting change (6.1) (9.2) (9.3) (13.3)
Net loss (1.6) (9.2) (9.3) (13.3)
Loss attributable to common shares (3.3) (10.9) (11.0) (15.1)
- -----------------------------------------------------------------------------------------------
Per common share:
Loss before cumulative effect of accounting change (.08) (.11) (.10) (.13)
Cumulative effect of accounting change .05 - - -
- -----------------------------------------------------------------------------------------------
Net basic and diluted loss $(.03) $ (.11) $ (.10) $ (.13)
-----------------------------------------------------------------------------------------------
1996 Quarters First Second Third Fourth
- -----------------------------------------------------------------------------------------------
Revenues $25.6 $ 25.6 $ 23.4 $ 33.6
Loss from operations (4.5) (4.0) (1.2) (33.2)
Net loss (5.5) (5.8) (2.5) (25.4)
Loss attributable to common shares (7.2) (7.5) (4.2) (27.2)
- -----------------------------------------------------------------------------------------------
Per common share:
Net basic and diluted loss $(.07) $ (.08) $ (.04) $ (.28)
- -----------------------------------------------------------------------------------------------
</TABLE>
Fourth quarter 1996 results included a pre-tax charge of $35.5 million due to
the write-down of the Guanaco mine and an unrelated $10 million deferred tax
benefit.
-46-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
16. RESERVE DATA (UNAUDITED)
The following table presents proven and probable ore reserves by property at
December 31. Ore reserves are calculated by the Company and verified by
independent mining engineers with respect to the Fort Knox mine and Haile
property.
Ore Reserves/(1)/
(thousands, except average grades)
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------- ----------- ------------
Contained Contained Contained
Average ounces ounces ounces
grade Contained (the (the (the
(ounces ounces Company's Company's Company's
Tons per ton) (100%) share) share) share)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GOLD
Producing mines:
Fort Knox/(2)/ 170,273 0.024 4,099 4,099 4,079 4,094
Kubaka/(3)/ 4,203 0.522 2,196 1,098 1,332 -
Refugio/(4)/ 100,793 0.029 2,920 1,460 1,558 1,672
Guanaco/(5)/ - - - - 119 378
Hayden Hill - - - - 164 273
Sleeper - - - - - 48
---------------------------------------------------
Total producing mines 9,215 6,657 7,252 6,465
---------------------------------------------------
Other properties/(6)/:
Haile 8,736 0.089 780 488 488 488
---------------------------------------------------
Total gold 9,995 7,145 7,740 6,953
---------------------------------------------------
</TABLE>
The following table presents the Company's share of other mineralized material
for each of the three new mines as of December 31, 1997, as calculated by the
Company.
<TABLE>
<CAPTION>
Tons Average Grad
(000) (Ounces Per Ton)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Fort Knox 137,500 0.022
Refugio 154,000 0.026
Kubaka 2,723 0.330
- --------------------------------------------------------------------------------------------------------------
294,223 0.027
- --------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ RESERVES. That part of a mineral deposit that could be economically and
legally extracted or produced at the time of the reserve determination.
Reserves have been calculated using a $375 per ounce gold price at all
properties except for Haile, for which a $400 per ounce gold price was
used. The Company has determined that calculating the Fort Knox and
Kubaka reserves at $350 per ounce would not materially change the
results;
-47-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
however, calculating the Refugio reserves at $350 per ounce would result
in a decrease in proven and probable reserves of approximately 10
percent.
PROVEN RESERVES. Reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade
and/or quality are computed from the results of detailed sampling and (b)
the sites for inspection, sampling and measurement are spaced so closely
and the geologic character is so well defined that size, shape, depth and
mineral content of reserves are well established.
PROBABLE RESERVES. Reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven reserves,
but the sites for inspection, sampling and measurement are farther apart
or are otherwise less adequately spaced. The degree of assurance, although
lower than that for proven reserves, is high enough to assume continuity
between points of observation.
These definitions comply with those issued by the Securities and Exchange
Commission, which are based on definitions used by the United States
Bureau of Mines and the United States Geological Survey.
OTHER MINERALIZED MATERIAL. A mineralized body that has been physically
delineated by drilling, underground work, surface trenching, etc., and
found to contain a sufficient amount of mineralized material with an
average grade of metal or metals to warrant further exploration
expenditures. The Company's reported mineralized material must be defined
by a conceptual mine plan and have established geologic continuity but
does not qualify as a commercially mineable ore body until final legal,
technical and economic factors have been resolved.
/(2)/ Commercial production at the Fort Knox mine commenced on March 1, 1997.
/(3)/ Amax Gold acquired the Kubaka mine from Cyprus Amax in May 1997.
Commercial production at the Kubaka mine commenced on June 1, 1997.
/(4)/ Commercial production at the Refugio mine commenced on October 1, 1996.
/(5)/ The Company owns a 90 percent interest in the Guanaco mine and under
existing shareholder arrangements receives 100 percent of production until
certain conditions are met. Based on management's belief that those
conditions would not be met, 100 percent of Guanaco's reserves were
included in the Company's reserve table for 1996 and 1995.
/(6)/ The Company has not yet reached a decision regarding whether to proceed
with development of the property.
The Company reports extractable (mineable) ore reserves. Reserves do not
reflect losses in the milling or heap leaching processes, but do include
allowance for ore dilution in the mining process.
-48-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
Recovery rates for 1997 were as follows:
<TABLE>
<CAPTION>
Heap
Leach Mill
- -------------------------------------------------------------------------------
<S> <C> <C>
Refugio 55% -%
Fort Knox -% 89%
Kubaka -% 97%
Guanaco 55% -%
Hayden Hill 59% -%
- -------------------------------------------------------------------------------
</TABLE>
17. SUBSEQUENT EVENT
On February 9, 1998, the Company announced that they entered into a merger
agreement with Kinross Gold Corporation (Kinross) providing for a combination of
their businesses. In the merger, each share of the Company's common stock will
be converted into 0.8 of a share of Kinross common stock. Cyprus Amax agreed to
contribute $135 million of cash and indebtedness to Kinross at the effective
time of the merger in exchange for approximately 35 million shares of Kinross
common stock. The merger will result in the current shareholders of Kinross
owning 50 percent of the new Kinross and the current shareholders of Amax Gold
(after giving effect to the infusion of the $135 million) owning 50 percent of
the new Kinross.
-49-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be filed by amendment to the
Company's Annual Report on Form 10-K within 120 days after the end of the fiscal
year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be filed by amendment to the
Company's Annual Report on Form 10-K within 120 days after the end of the fiscal
year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be filed by amendment to the
Company's Annual Report on Form 10-K within 120 days after the end of the fiscal
year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will be filed by amendment to the
Company's Annual Report on Form 10-K within 120 days after the end of the fiscal
year.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
10-K Page
---------
1. Financial Statements
Report of Independent Accountants 24
Consolidated Statement of Operations for
each of the three years in the period ended
December 31, 1997 25
Consolidated Balance Sheet at December 31, 1997
and 1996 26
Consolidated Statement of Cash Flows for each
of the three years in the period ended
December 31, 1997 27
Consolidated Statement of Shareholders'
Equity for each of the three years in the
period ended December 31, 1997 28
Notes to Consolidated Financial Statements 29 - 49
2. Financial Statement Schedules
Financial statement schedules are not included in this Annual Report
on Form 10-K because they are not applicable.
3. Exhibits
-50-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
3(ii) By-Laws, dated April 27, 1995, adopted on April 26, 1995, as amended and
restated effective June 21, 1995, filed as Exhibit 3(ii) to the Company's
Registration Statement on Form 8-B filed June 21, 1995 and incorporated
herein by reference.
4.1 Certificate of Designations for the $2.25 Series A Convertible Preferred
Stock, filed as Exhibit 4.1 to the Company's Registration Statement on
Form 8-B filed June 21, 1995 and incorporated herein by reference.
4.2 Certificate of Designations for the $3.75 Series B Convertible Preferred
Stock, filed as Exhibit 4.2 to the Company's Form 8-B filed June 21, 1995
and incorporated herein by reference.
10.1 Agreement regarding issuance of stock dated September 29, 1995 between
the Company and Cyprus Amax, filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995
and incorporated herein by reference.
10.2 Directors' Deferred Compensation Plan for Members of the Board of
Directors of Amax Gold Inc., filed as Exhibit 10.14.2 to the Company's
Registration Statement No. 33-22645 and incorporated herein by reference.
Second Amendment to the Deferred Compensation Plan for Members of the
Board of Directors of Amax Gold Inc. filed as Exhibit (10)(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, and incorporated herein by reference.
10.3 Amax Gold Inc. Excess Benefit Plan, filed as Exhibit EX-10(g) to the
Company's Annual Report on Form 10-K for the year-ended December 31, 1993
and incorporated herein by reference.
10.4 Amax Gold Inc. Deferred Compensation Plan, filed as Exhibit EX-10(h) to
the Company's Annual Report on Form 10-K for the year-ended December 31,
1993 and incorporated herein by reference.
10.5 Amax Gold Inc. 1992 Stock Option Plan, filed as Exhibit A to the
Company's Proxy Statement for the 1993 Annual Meeting of Stockholders and
incorporated herein by reference. First Amendment to the Amax Gold Inc.
1992 Stock Option Plan, filed as Exhibit (10)(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, and
incorporated herein by reference.
10.6 Amax Gold Inc. Key Executive Long-Term Incentive Plan (formerly the Amax
Gold Performance Share Plan), filed as Exhibit B to the Company's Proxy
Statement for the 1993 Annual Meeting of Stockholders and incorporated
herein by reference. First and Second Amendments to the Amax Gold Inc.
Key Employee Long-Term Incentive Plan filed as Exhibit (10)(d) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997, and incorporated herein by reference.
10.7 Term Loan Agreement, dated October 31, 1995, between Amax Gold Inc.,
Fairbanks Mining, Inc., Guanaco Mining Company, Inc., Lassen Gold Mining,
Inc., Melba Creek Mining Inc., Nevada Gold Mining, Inc. and a group of
banks, filed as Exhibit 10.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995 and incorporated herein by
reference; Amendment to Term Loan Agreement dated December 7, 1995;
Amendment to Term Loan Agreement dated March 19, 1996; and Cyprus Amax
Guaranty, dated as of March 19, 1996 by Cyprus Amax, in favor of the
administrative agent for the group of banks, filed as Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated herein by reference; Third Amendment Agreement, dated as
-51-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
of March 24, 1997, filed as Exhibit 10.8 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997, and incorporated
herein by reference.
10.8 Exploration Joint Venture Agreement, effective January 1, 1994, between
the Company and Cyprus Amax, filed as Exhibit 10.1 to the Company's
Registration Statement on Form S-3 (Registration No. 33-53963) and
incorporated herein by reference; and Amendment to Exploration Joint
Venture Agreement, dated December 29, 1995, between the Company and
Cyprus Amax, filed as Exhibit 10.8 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference; and Amendment to
Exploration Joint Venture Agreement dated as of December 15, 1997,
between the Company and Cyprus Amax.
10.9 Revolving Credit Agreement, dated as of April 15, 1994 between the
Company and Cyprus Amax, filed as Appendix A to the Company's Proxy
Statement for the July 26, 1994 Special Meeting of Stockholders and
incorporated herein by reference; and Amendment to Revolving Credit
Agreement, dated as of March 10, 1994, between the Company and Cyprus
Amax, filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K
for the year-ended December 31, 1994 and incorporated herein by
reference.
10.10 Loan Agreement, dated as of November 23, 1994, amended February 7 and 14,
1995, among Compania Minera Maricunga, as borrower, Amax Gold Inc. and
Bema Gold Corporation, as guarantors, and certain banks, and related
documents, as amended, filed as Exhibit 10.13 to the Company's Annual
Report on Form 10-K for the year-ended December 31, 1994 and incorporated
herein by reference; as amended by Letter Agreement, dated as of November
1, 1996, and Letter Agreement, dated as of December 19, 1996, filed as
Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference.
10.11 Credit Agreement, dated as of March 19, 1996, between the Company and
Cyprus Amax; Guaranty Fee Agreement, dated as of March 19, 1996, between
the Company and Cyprus Amax; and Reimbursement Agreement, dated as of
March 19, 1996, between the Company and Cyprus Amax filed as Exhibit
10.12 to the Company's Annual Report on Form 10-K for the year-ended
December 31, 1995 and incorporated herein by reference; Amendment
Agreement dated October 31, 1996, amending the Credit Agreement dated
March 19, 1996 between the Company and Cyprus Amax, filed as Exhibit
(10b) to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996 and incorporated herein by reference.
10.12 Services Agreement, dated as of January 1, 1994, between the Company and
Cyprus Amax, filed as Exhibit 10.13 to the Company's Annual Report on
Form 10-K for the year-ended December 31, 1995 and incorporated herein by
reference.
10.13 Amended and Restated Agreement and Plan of Merger and Reorganization,
dated as of October 9, 1996 among the Company, Amax Russia Corporation,
Cyprus Amax, Cyprus Gold Company and Cyprus Magadan Gold Company, filed
as Exhibit (10a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated herein by reference.
10.14 Loan Agreement, dated as of May 1, 1997, between Alaska Development
Export Authority and Fairbanks Gold Mining, Inc.; Reimbursement
Agreement, dated as of May 1, 1997, between Fairbanks Gold Mining, Inc.
And Union Bank of Switzerland, New York Branch; Guaranty, dated May 22,
1997, of Cyprus Amax in favor of Union Bank of Switzerland, New York
Branch; and Reimbursement Agreement, dated May 22, 1997, of the Company
in favor of Cyprus Amax, filed as Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997, and incorporated
herein by reference.
10.15 Finance Agreement, dated as of June 30, 1995, between Omolon and Overseas
Private Investment Corporation ("OPIC"); First Amendment to Finance
Agreement, dated as of April 22, 1996, between Omolon Gold Mining Company
and OPIC, amending the Finance Agreement dated June 30, 1995 between
Omolon and OPIC; and Second Amendment to Finance Agreement, dated as of
January 28, 1997, between Omolon and OPIC, amending the Finance Agreement
dated June 30, 1995 between Omolon and OPIC,
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<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, and incorporated herein by reference.
10.16 Loan Agreement, dated as of June 30, 1995, between Omolon and European
Bank for Reconstruction and Development ("EBRD"); Amendment Agreement to
Loan Agreement, dated November 7, 1995, between Omolon and EBRD, amending
the Loan Agreement dated June 30, 1995 between Omolon and EBRD; Second
Amendment Agreement to Loan Agreement, dated April 22, 1996, between
Omolon and EBRD, amending the Loan Agreement dated June 30, 1995 between
Omolon and EBRD; and Third Amendment to Loan Agreement, dated November
20, 1996, between Omolon and EBRD, amending the Loan Agreement dated as
of June 30, 1995 between Omolon and EBRD, filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997, and incorporated herein by reference.
10.17 Support Agreement, dated as of August 30, 1995, among Omolon, Cyprus
Amax, Cyprus Magadan Gold Corporation, EBRD and OPIC; and Amendment
Agreement to Support Agreement, dated as of January 28, 1997 among
Omolon, Cyprus Amax, Cyprus Magadan Gold Corporation and EBRD, amending
the Support Agreement dated as of August 30, 1995 among the parties,
filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997, and incorporated herein by reference.
10.18 Guaranty Agreement, dated as of August 30, 1995, among Cyprus Amax,
EBRD and OPIC; and Amendment Agreement to Cyprus Amax Guaranty, dated
January 30, 1997, among Cyprus Amax, EBRD and OPIC, amending the Guaranty
Agreement dated as of August 30, 1995 among the parties, filed as Exhibit
10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, and incorporated herein by reference.
10.19 Loan Agreement, dated as of November 29, 1996, between Omolon and ABN
Amro Bank (Moscow) Ltd.; and Guaranty and Indemnity Agreement, dated as
of November 26, 1996, by Cyprus Amax in favor of ABN Amro Bank NV, filed
as Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, and incorporated herein by reference.
10.20 Agreement, dated April 8, 197, between Omolon Gold Mining Company and ABN
Amro Bank (Moscow) Ltd.; and Guaranty and Indemnity Agreement, dated as
of April 1, 1997, by Cyprus Amax in favor of ABN Amro Bank NV, filed as
Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997, and incorporated herein by reference.
10.21 Loan Agreement, dated as of December 18, 1997, between Amax Gold Inc.,
various banks and other financial institutions and Standard Bank London
Limited as the agent for the lenders.
10.22 Guaranty Agreement, dated as of December 18, 1997, between Cyprus Amax
Minerals Company and Standard Bank London Limited.
10.23 Agreement dated March 24, 1997 between the Company and Leland O. Erdahl,
filed as Exhibit (10)(a) to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, and incorporated herein by
reference. Amendment dated September 11, 1997 to Agreement between the
Company and Leland O. Erdahl, filed as Exhibit (10)(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997,
and incorporated herein by reference.
10.24 Amax Gold Inc. Separation Plan for Key Employees, effective March 5,
1997.
10.25 Merger Agreement among Kinross Gold Corporation, Kinross Merger
Corporation, and Amax Gold Inc., dated February 9, 1998.
10.26 Stockholder Agreement dated as of February 9, 1998, among Kinross Gold
Corporation, Kinross Merger Corporation, Cyprus Amax Minerals Company and
each of the other persons identified on Exhibit A.
10.27 Restructuring Agreement dated as of December 18, 1997, between COMPANIA
MINERA MARICUNGA as borrower and the other parties and Banks named
therein.
-53-
<PAGE>
AMAX GOLD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions unless otherwise indicated and
except per share amounts and amounts per ounce)
21 Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Mineral Resources Development, Inc.
23.3 Consent of Derry, Michner, Booth & Wahl.
27 Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of 1997.
-54-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMAX GOLD INC.
Date: February 11, 1998 By /s/ Leland O. Erdahl
-----------------------------------------
Leland O. Erdahl
Vice President and Chief Financing Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on February 11, 1998.
Signature Title
- -------------------------------------- --------------------------------------
/s/ Milton H. Ward Chairman of the Board, Chief
- -------------------------------------- Executive Officer (principal
Milton H. Ward executive officer) and Director
/s/ Leland O. Erdahl Vice President, Chief Financial
- -------------------------------------- Officer (principal
Leland O. Erdahl financial officer) and Director
/s/ David L. Mueller Vice President, Controller and
- -------------------------------------- Assistant Secretary (principal
David L. Mueller accounting officer)
/s/ Richard H. Block Director
- --------------------------------------
Richard H. Block
/s/ Allen Born Director
- --------------------------------------
Allen Born
/s/ Gerald J. Malys Director
- --------------------------------------
Gerald J. Malys
/s/ Vernon F. Taylor, Jr. Director
- --------------------------------------
Vernon F. Taylor, Jr.
/s/ Russell L. Wood Director
- --------------------------------------
Russell L. Wood
-55-
<PAGE>
EXHIBIT 10.8
December 15, 1997
Mr. David H. Watkins
Senior Vice President, Exploration
Cyprus Amax Minerals Company
9100 East Mineral Circle
Englewood, CO 80112
RE: AMENDMENT TO EXPLORATION JOINT VENTURE AGREEMENT DATED AS OF JANUARY 1,
1994 AMONG CYPRUS AMAX MINERALS COMPANY, CYPRUS EXPLORATION AND
DEVELOPMENT CORPORATION, AMAX GOLD INC. AND AMAX GOLD EXPLORATION, INC.
(THE "AGREEMENT")
--------------------------------------------------------------------------
Dear David:
Please accept this letter on behalf of Amax Gold Inc. and Amax Gold Exploration,
Inc. as evidence of our mutual agreement to extend the above referenced
Agreement pursuant to Section 12.1 of such Agreement for a period of one year,
from December 31, 1997 to December 31, 1998. Please confirm the agreement of
Cyprus Amax Minerals Company and Cyprus Exploration and Development Corporation
to such extension by executing this letter below and returning one original to
me.
Very truly yours,
S. Scott Shellhaas
President and Chief Operating Officer, Amax Gold Inc. and
Senior Vice President, Amax Gold Exploration, Inc.
<PAGE>
Mr. David Watkins
December 15, 1997
Page 2
Agreed and accepted this _____ day of December, 1997:
CYPRUS AMAX MINERALS COMPANY and
CYPRUS EXPLORATION AND DEVELOPMENT CORPORATION
_______________________________________
David H. Watkins
Senior Vice President, Exploration, Cyprus Amax Minerals Company and
President, Cyprus Exploration and Development Corporation
cc: Deborah J. Friedman, Amax Gold Inc.
Philip C. Wolf, Cyprus Amax Minerals Company
<PAGE>
EXHIBIT 10.21
CONFORMED COPY
DATED AS OF DECEMBER 18 1997
----------------------------
AMAX GOLD INC.
as the Borrower
- and -
VARIOUS BANKS AND OTHER FINANCIAL INSTITUTIONS
- and -
STANDARD BANK LONDON LIMITED
as the Agent for the Lenders
______________________________________
LOAN AGREEMENT
______________________________________
Ashurst Morris Crisp
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel : 0171-638-1111
Fax : 0171-972-7990
MAS/627S00108/365465
<PAGE>
THIS AGREEMENT is dated as of December 18 1997 (this "AGREEMENT").
BETWEEN:-
(1) AMAX GOLD INC., a Delaware corporation (the "BORROWER");
(2) The banking and/or financial institutions referred to on the signature
pages hereof (collectively, the "LENDERS"); and
(3) STANDARD BANK LONDON LIMITED, a bank organized under the laws of England,
in its capacity as the agent for the Lenders (in such capacity, the
"AGENT").
RECITALS
(A) The Borrower has requested that the Lenders provide commitments to the
Borrower to advance Loans for the purposes of , inter alia, refinancing
Indebtedness (such and other capitalized terms having the meanings
assigned to such terms in Section 1.1) of certain of its Subsidiaries,
-----------
providing working capital requirements for those Subsidiaries and also for
general corporate purposes.
(B) The Lenders are willing, on the terms and conditions hereinafter set
forth, to extend commitments to make Loans to the Borrower denominated in
Dollars and to maintain and continue such Loans.
(C) Cyprus Amax Minerals Company, a Delaware corporation (the "GUARANTOR"),
owns 58.8% of the issued and outstanding share capital of the Borrower.
(D) To induce the Lenders to make the Loans to the Borrower, the Guarantor has
agreed to enter into the Guaranty Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy
whereof is hereby acknowledged by each party hereto, the parties hereto hereby
agree as follows:
1. DEFINITIONS
1.1 DEFINED TERMS
The following terms (whether or not underscored) when used in this
Agreement, including its preamble and recitals, shall have the following
meanings:
"ADVISORY CAPACITY" is defined in Section 9.6.
-----------
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls or is controlled by or under common control with
such Person (excluding any trustee under, or any committee with
responsibility for administering, any compensation, welfare or similar
plan). A Person shall be deemed to be "controlled by" any other Person if
such other Person possesses, directly or indirectly, power:
-1-
<PAGE>
(a) to vote ten percent (10%) or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners of such Person; or
(b) to direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.
"AGENT" is defined in the preamble.
--------
"AGREEMENT" is defined in the preamble.
--------
"APPLICABLE LAW" means, with respect to any Person or matter, any supranational,
national, federal, state, regional, tribal or local statute, law, rule, treaty,
convention, regulation, order, decree, directive, consent decree, determination
or other requirement (whether or not having the force of law but, if not having
the force of law, the compliance with which statute, etc would be prudent for a
Person conducting a similar business) relating to such Person or matter and,
where applicable, any interpretation thereof by any Governmental Agency having
jurisdiction with respect thereto or charged with the administration or
interpretation thereof.
"APPLICABLE MARGIN" means three quarters of one per cent (0.75%) per annum.
"APPROVAL" means an approval, authorization, license, permit, consent, filing
or registration by or with any Governmental Agency or other Person.
"ASSIGNEE LENDER" is defined in Section 10.11.1.
---------------
"ASSIGNOR LENDER" is defined in Section 10.11.1.
---------------
"AUTHORIZED REPRESENTATIVE" means, relative to either Obligor, those of its
officers whose signatures and incumbency shall have been certified to the Agent
pursuant to Section 5.1.
-----------
"BANKRUPTCY CODE" means Chapter 11 of 11 U.S.C. Sections 101 -133.
"BORROWER" is defined in the preamble.
--------
"BORROWING DATE" means the Business Day on which the Loans are to be made
pursuant to Section 2.2.
-----------
"BORROWING REQUEST" means the loan request and certificate duly executed by an
Authorized Representative of the Borrower, substantially in the form of Exhibit
-------
A attached hereto.
- -
"BUSINESS DAY" means:
(a) any day which is not a Saturday, Sunday, legal holiday or any other
day on which banks are authorized or required to be closed in
London, England or New York, New York; and/or
-2-
<PAGE>
(b) relative to the making, continuation, repayment or prepayment of
any Loan or the calculation of the LIBO Rate, any day on which
dealings in Dollars are carried on in the London interbank market.
"CAPITALIZED LEASE LIABILITIES" means all monetary obligations of any Person
under any leasing or similar arrangement which would be classified as
capitalised leases, and, for purposes of this Agreement and each other Loan
Document, the amount of such obligations shall be the capitalized amount
thereof, and the stated maturity thereof shall be the date of the last payment
of rent or any other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment of a penalty.
"CODE" means the Internal Revenue Code of 1986.
"COMMITMENT" means, relative to any Lender, such Lender's obligation to make
its Loan pursuant to the terms and subject to the conditions of this Agreement.
"COMMITMENT AMOUNT" means (a) in relation to any Lender party hereto on the
Effective Date, the amount set forth opposite its name on the signature pages
hereto as the same may be reduced pursuant to this Agreement (including Section
-------
2.3) and (b) in relation to an Assignee Lender which becomes a Lender subsequent
- ---
to the Effective Date, the amount (if any) assumed from the Assignor Lender
pursuant to the Lender Assignment Agreement by which such Assignee Lender became
party to this Agreement, in each case as such amount may be adjusted pursuant to
any other Lender Assignment Agreement to which such Lender or Assignee Lender,
as the case may be, is a party.
"COMMITMENT TERMINATION DATE" means December 31, 1997 or, if earlier, the date
on which either of the following events shall occur:
(a) the termination of the Commitments pursuant to Section 8.2 or 8.3; or
----------- ---
(b) the Borrowing Date.
"CONTINGENT LIABILITY" means any agreement, undertaking or arrangement by which
any Person guarantees, endorses or otherwise becomes or is contingently liable
upon (by direct or indirect agreement, contingent or otherwise, to provide funds
for payment, to supply funds to, or otherwise to invest in, a debtor, or
otherwise to assure a creditor against loss in respect of) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum principal amount, if larger) of the debt,
obligation or other liability guaranteed thereby.
"CONTRACTUAL OBLIGATION" means, relative to any Person, any provision of any
security issued by such Person or of any instrument or undertaking to which such
Person is a party or by which it or any of its property is bound.
-3-
<PAGE>
"CONTROLLED GROUP" means relative to the Borrower, all members of a controlled
group of corporations and all members of a controlled group of trades or
businesses (whether or not incorporated) under common control which, together
with the Borrower, are treated as a single employer under Section 414(b) or
Section 414(c) of the Code or Section 4001 of ERISA.
"DEFAULT" means any Event of Default or any condition or event which, after
notice, lapse of time, the making of any required determination or any
combination of the foregoing, would constitute an event of default.
"DOLLAR" and the sign "$" mean lawful money of the United States of America.
"EFFECTIVE DATE" is defined in Section 10.8.
------------
"ENFORCEMENT EVENT" shall mean either (a) the occurrence of any Insolvency
Default or (b) the acceleration of all or any portion of the outstanding
principal amount of the Loans and/or other Obligations pursuant to Section 8.2
-----------
or 8.3 as a result of the occurrence of any Event of Default.
---
"ENVIRONMENTAL LAW" means any Applicable Law relating to or imposing liability
or standards of conduct concerning the environment including laws relating to
reclamation of land and waterways and laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the environment
(including ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes.
"EVENT OF DEFAULT" is defined in Section 8.1.
-----------
"FINAL MATURITY DATE" means December 22, 2002.
"FISCAL QUARTER" means any quarter of a Fiscal Year ending on March 31, June
30, September 30 or December 31.
"FISCAL YEAR" means, with respect to either Obligor, any period of twelve
consecutive calendar months ending on December 31.
"F.R.S. BOARD" means the Board of Governors of the U.S. Federal Reserve
System.
"GAAP" is defined in Section 1.4.
-----------
"GOVERNMENTAL AGENCY" means any supranational, national, federal, state,
regional, tribal or local government or governmental department or other entity
charged with the administration, interpretation or enforcement of any Applicable
Law.
"GUARANTOR" is defined in Recital (C).
-----------
"GUARANTY AGREEMENT" means the Guaranty Agreement, between the Guarantor and
the Agent, substantially in the form of Exhibit E attached hereto.
---------
-4-
<PAGE>
"HAZARDOUS MATERIAL" means any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material, substance or waste within the meaning of
any Environmental Law.
"HEDGING OBLIGATIONS" means, with respect to any Person, all liabilities of
such Person under interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements, and all other agreements, options or
arrangements designed to protect such Person against fluctuations in interest
rates, currency exchange rates or metals prices.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or report of any
independent certified public accountant or any independent chartered accountant
as to any financial statement of either Obligor, any qualification or exception
to such opinion or report:
(a) which is of a "going concern" or similar nature;
(b) which relates to any limited scope of examination of material matters
relevant to such financial statement; or
which relates to the treatment or classification of any item in such financial
statement.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money or borrowed precious
metals (including in the case of such obligations, all notes payable
and drafts accepted representing extensions of credit) and all
obligations evidenced by bonds, debentures, notes, or other similar
instruments on which interest charges are customarily paid;
(b) all obligations, contingent or otherwise, relative to the face amount
of all letters of credit, whether or not drawn, and banker's
acceptances and similar instruments, in each such case issued for the
account of such Person;
(c) all obligations of such Person as lessee under leases which have been
or should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities;
(d) net payment liabilities of such Person under all Hedging Obligations;
(e) whether or not so included as liabilities in accordance with GAAP, all
obligations of such Person to pay the deferred purchase price of
property or services, and indebtedness (excluding prepaid interest
thereon) secured by a Lien on property owned or being purchased by such
Person (including indebtedness arising under conditional sales or other
title retention agreements), whether or not such indebtedness shall
have been assumed by such Person or is limited in recourse; and
(f) all Contingent Liabilities of such Person in respect of any of the
foregoing items of Indebtedness of any other Person.
"INDEMNIFIED LIABILITIES" is defined in Section 10.4.
------------
"INDEMNIFIED PARTIES" is defined in Section 10.4.
------------
-5-
<PAGE>
"INSOLVENCY DEFAULT" means any condition or event which, after notice, lapse
of time, the making of any required determination or any combination of the
following, would constitute an Event of Default of the nature referred to in
Section 8.1.6.
- -------------
"INTEREST PERIOD" means, relative to the Loan:
(a) initially, the period from the Borrowing Date to the day which
numerically corresponds to the date one, three or six months thereafter
(or such other date as agreed between all the Lenders and the Borrower
and, subject to the availability of funds for such period to each
Lender) as the Borrower may irrevocably select in the Borrowing Request
delivered pursuant to Section 2.2; and
-----------
(b) thereafter, each period from the last day of the immediately preceding
Interest Period applicable to such Loan to the day which numerically
corresponds to such date one, three or six months thereafter (or such
other date as may be agreed between all the Lenders and the Borrower
and subject to clauses (d) and (e)) as the Borrower may irrevocably
----------- ---
select in the Interest Period Notice delivered pursuant to Section 2.4;
-----------
provided, however, that:
-----------------
(c) absent the timely delivery of an Interest Period Notice, the Borrower
shall be deemed to have selected that the Loan be continued for an
Interest Period of one month's or such other duration as shall be
required in order to comply with the other provisions of this
Agreement;
(d) if any Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next following
Business Day, unless such Business Day occurs in the next following
calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day;
(e) the Borrower shall not be permitted to select, and there shall not be
in effect, any Interest Period that would end later than the Final
Maturity Date; and
(f) the Agent shall be able to select Interest Periods satisfactory to it
pursuant to Section 3.2.2 or after any Enforcement Event.
-------------
"INTEREST PERIOD NOTICE" means a notice of continuation and certificate duly
executed by an Authorized Representative of the Borrower, substantially in the
form of Exhibit B attached hereto.
---------
"LENDER ASSIGNMENT AGREEMENT" means an assignment agreement, duly executed by
an Assignor Lender and an Assignee Lender, substantially in the form of Exhibit
-------
C attached hereto.
- -
"LENDER PARTIES" means, collectively, the Agent and the Lenders.
"LENDERS" is defined in the preamble.
--------
-6-
<PAGE>
"LENDING OFFICE" means (a) with respect to each Lender, the office of such
Lender designated as such below its signature hereto or such other office of
such Lender as may be designated from time to time by notice from such Lender to
the Agent and the Borrower, and (b) with respect to the Agent, the office of the
Agent designated as such below its signature hereto or such other office of the
Agent as may be designated from time to time by notice to the Borrower and each
Lender.
"LIBO RATE" means, relative to any Interest Period, the offered rate of
interest per annum which appears on Telerate Page 3750 (or such other page or
service in replacement thereof as may be utilised by banks generally from time
to time for the purpose of displaying London interbank offered rates for
deposits denominated in Dollars) as at 11:00 a.m. (London time) for the number
of months (or different period) comprising such Interest Period, calculated at
the date which is two Business Days prior to the first day of such Interest
Period; provided, however, that in the event that no such display rate is
-------- -------
available for Dollars at such time, the Agent will request the principal London
office of each Lender to provide the Agent with its quotation for offers of
Dollar deposits to leading banks in the London interbank market for such period
and in an amount comparable to the principal amount of such Loan, and the "LIBO
RATE" shall equal the average (rounded upwards to the nearest four decimal
places) of such quoted rates.
"LIEN" means any security interest, mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or otherwise), charge against
or interest in property to secure payment of a debt or performance of an
obligation or other priority or preferential arrangement of any kind or nature
whatsoever.
"LOAN" is defined in Section 2.1(a).
--------------
"LOAN DOCUMENT" means any of this Agreement, the Guaranty Agreement and each
other instrument executed by the Borrower evidencing any obligation (monetary or
otherwise) to any Lender Party in connection with and pursuant to this
Agreement.
"MATERIALLY ADVERSE EFFECT" means, with respect to the Borrower, an effect,
resulting from any occurrence of whatever nature (including any adverse
determination in any labor controversy, litigation, arbitration or governmental
or administrative investigation or proceeding), which is materially adverse, or
is or would be reasonably likely to be materially adverse, to the ability of the
Borrower to make any payment (for principal, interest, fees or otherwise) or
perform any other material obligation required under any Loan Document or in
respect of its consolidated financial condition, business, operations, assets or
prospects.
"OBLIGATIONS" means all obligations of the Borrower's payment and performance
obligations (monetary or otherwise) arising under or in connection with this
Agreement and each other Loan Document to which it is a party.
"OBLIGORS" means, collectively, the Borrower and the Guarantor.
"OECD" means the Organization for Economic Cooperation and Development.
-7-
<PAGE>
"ORGANIC DOCUMENT" means with respect to either Obligor, its certificate of
incorporation and its by-laws together with all shareholder agreements, voting
trusts, and similar arrangements applicable to any of its authorised shares of
capital stock or other equity interests.
"OTHER DIVISIONS" is defined in Section 9.6.
-----------
"PARTICIPANT" is defined in Section 10.11.2.
---------------
"PENSION PLAN" means a "pension plan" as such term is defined in Section 3(2)
of ERISA which is subject to Title IV of ERISA (other than a multi-employer plan
as defined in Section 4001(a)(3) of ERISA), and to which the Borrower or any
corporation, trade or business that is, along with the Borrower, a member of a
Controlled Group, may have liability, including any liability by reason of
having been a substantial employer within the meaning of Section 4063 of ERISA
at any time during the preceding five years, or by reason of being deemed to be
a contributing sponsor under Section 4069 of ERISA.
"PERCENTAGE" means, relative to any Lender and at any time, (a) if any Loans
are outstanding, the ratio (expressed as a percentage) of (i) the principal
amount of such Lender's Loans at such time to (ii) the principal amount of all
the Lenders' Loans at such time or (b) if no Loans are outstanding, the ratio
(expressed as a percentage) of (i) such Lender's Commitment Amount at such time
to (ii) the Total Commitment Amount at such time.
"PERSON" means any natural person, corporation, partnership firm, association,
trust, government, governmental agency or any other entity, whether acting in an
individual, fiduciary or other capacity.
"PLAN" means any Pension Plan or Welfare Plan.
"PROCESS AGENT" is defined in Section 10.12.
-------------
"PROCESS AGENT ACCEPTANCE" means a letter from the Process Agent to the Agent,
substantially in the form of Exhibit D attached hereto.
---------
"REGULATORY CHANGE" means the occurrence after the Effective Date of any change
in or abrogation of, or introduction, adoption, effectiveness or phase-in of
any:
(a) statute, law, rule or regulation applicable to any Lender Party, or
(b) guideline, interpretation, directive, consent decree, administrative
order, request or determination (whether or not having the force of
law) applicable to such Lender Party of any court, central bank or
governmental or regulatory authority charged with the interpretation or
administration of any statute, law, rule or regulation referred to in
clause (a) or of any fiscal, monetary or other authority having
----------
jurisdiction over such Lender Party,
or any interpretation or reinterpretation of any item or matter referred to in
clause (a) or (b) by any Person with authority in connection with such
- ---------- ---
interpretation or reinterpretation.
-8-
<PAGE>
"REQUIRED LENDERS" means, at any time, Lenders having, in the aggregate, a
Percentage of more than sixty six and two thirds.
"REQUIREMENT OF LAW" means, as to any Person, its Organic Documents and
any Applicable Law or Contractual Obligation binding on or applying to
such Per son.
"RESTRUCTURING AGREEMENT" means the Restructuring Agreement dated as of
December 18/th/ 1997, between (1) Compania Minera Maricunga, (2) Amax Gold
Refugio, Inc. and Bema Gold (Bermuda) Limited, (3) the Borrower and Bema
Gold Corporation, (4) AGI Chile Credit Corp., Inc., (5) Minera Bema Gold
(Chile) Limitada, (6) Barclays Bank PLC and (7) N M Rothschild & Sons
Limited.
"SEC" means the United States Securities and Exchange Commission.
"STANDARD BANK" is defined in the preamble.
---------
"SUBSIDIARY" means, with respect to any Person, any corporation at least a
majority or more of the outstanding shares of capital stock of which
having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether at the time capital stock of
any other class or classes of such corporation shall or might have voting
power upon the occurrence of any contingency) is at the time owned by such
Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person. For the avoidance of
doubt, each of Compania Minera Maricunga, a company organized under the
laws of Chile and Omolon Gold Mining Company, a company organized under
the laws of Russia, shall be considered Subsidiaries of the Borrower.
"TAX CREDIT" is defined in Section 4.7(b).
--------------
"TAX PAYMENT" is defined in Section 4.7(b).
--------------
"TAXES" is defined in Section 4.6(a).
--------------
"TOTAL COMMITMENT AMOUNT" means, at any time, subject to the terms and
conditions of this Agreement, the excess, if any, of (a) $40,000,000, less
(b) any reduction of the Total Commitment Amount effected pursuant to
Section 2.3.
-----------
"WELFARE PLAN" means a "welfare plan" as such term is defined in Section
3(1) of ERISA.
1.2 USE OF DEFINED TERMS
Unless otherwise defined or the context otherwise requires, terms for which
meanings are provided in this Agreement shall have such meanings when used
in the Guaranty Agreement and other Loan Document and each notice and other
communication delivered from time to time in connection with this Agreement
or any other Loan Document.
1.3 CROSS-REFERENCES
Unless otherwise specified, references in this Agreement and in each other
Loan Document to any Article or Section are references to such Article or
Section of this Agreement or such other
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<PAGE>
Loan Document, as the case may be, and unless otherwise specified,
references in any Article, Section or definition to any clause are
references to such clause of such Article, Section or definition.
1.4 ACCOUNTING AND FINANCIAL DETERMINATIONS
All accounting terms used herein or in any other Loan Document shall be
interpreted, all accounting determinations and computations hereunder or
thereunder shall be made, and all financial statements required to be
delivered hereunder or thereunder shall be prepared in accordance with,
generally accepted accounting principles in the United States ("GAAP") as
in effect from time to time.
1.5 GENERAL PROVISIONS AS TO CERTIFICATES AND OPINIONS, ETC.
Whenever the delivery of a certificate is a condition precedent to the
taking of any action by any Lender Party hereunder, the truth and accuracy
of the facts and the diligent and good faith determination of the opinions
stated in such certificate shall in each case be conditions precedent to
the right of the Borrower to have such action taken, and any certificate
executed by the Borrower shall be deemed to represent and warrant that the
facts stated in such certificate are true and accurate.
1.6 INTERPRETATION
Unless a clear contrary intention appears, this Agreement and each other
Loan Document shall be construed and interpreted in accordance with the
provisions set forth below:
(a) the singular number includes the plural number and vice versa;
(b) reference to any Person includes such Person's successors, substitutes
and assigns but, if applicable, only if such successors, substitutes
and assigns are permitted by this Agreement or such other Loan
Document, and reference to a Person in a particular capacity excludes
such Person in any other capacity or individually;
(c) reference to any gender includes any other gender;
(d) reference to any agreement or instrument means such agreement, document
or instrument as amended, supplemented, novated, refinanced, replaced,
waived, restated or modified, and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms hereof;
(e) reference to any Applicable Law means such Applicable Law as amended,
modified, codified or re-enacted, in whole or in part, and in effect
from time to time, including rules and regulations promulgated
thereunder;
(f) "HEREUNDER", "HEREOF", "HERETO", "HEREIN" and words of similar import
shall be deemed references to this Agreement or such other Loan
Document, as the case may be, as a whole and not to any particular
Article, Section, clause or other provision hereof or thereof;
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<PAGE>
(g) "INCLUDING" (and with correlative meaning "INCLUDE") means including
without limiting the generality of any description preceding such term;
(h) relative to the determination of any period of time, "FROM" means "FROM
(AND INCLUDING)" and "TO" means "TO (BUT EXCLUDING)";
(i) reference to a "CORPORATION" or "COMPANY" shall be construed as a
reference to the analogous form of business entity used in any relevant
jurisdiction; and
(j) when an expression is defined, another part of speech or grammatical
form of that expression has a corresponding meaning.
2. COMMITMENTS; BORROWING AND CONTINUATION PROCEDURES
2.1 COMMITMENTS
(a) Subject to the terms and conditions of this Agreement each Lender
severally and for itself alone agrees that it will, from time to time
make a single loan (with respect to each Lender, its "LOAN") to the
Borrower as set forth in this Article. Each Loan shall be advanced,
denominated, maintained and continued in Dollars. Each Lender will
make its Loan to the Borrower on any Business Day coinciding with or
occurring prior to the Commitment Termination Date. To the extent the
Borrower does not request that Loans be made in the Total Commitment
Amount on the Borrowing Date, any remaining portion of the Total
Commitment Amount shall not be available to the Borrower at any time
after the Borrowing Date.
(c) No Lender shall be permitted or required to make its Loan if, after
giving effect thereto, the aggregate original principal amount of all
Loans:
(i) of all Lenders would exceed the Total Commitment Amount as at the
Borrowing Date; or
(ii) of such Lender would exceed such Lender's Commitment Amount as at
the Borrowing Date.
2.2 PROCEDURE FOR MAKING LOANS
By delivering the Borrowing Request to the Agent on or before 10:00 a.m.,
London time, the Borrower may request on any Business Day scheduled to
coincide with or occurring prior to the Commitment Termination Date, on not
less than three (3) nor more than five (5) Business Days' notice (counting
the date on which such Borrowing Request is given), that the Loans be made
by all Lenders on the Borrowing Date set forth in the Borrowing Request in
the principal amount specified in the Borrowing Request. Upon receipt of
the Borrowing Request, the Agent shall promptly notify each Lender of the
contents thereof, and the Borrowing Request shall not thereafter be
revocable by the Borrower.
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<PAGE>
Subject to the terms and conditions of this Agreement, the Loans requested
to be made in the Borrowing Request shall be made on the requested
Borrowing Date. On such Business Day and subject to such terms and
conditions, each Lender shall, on or before 11:00 a.m., London time credit
such Dollar account of the Agent at its Lending Office as the Agent may
notify to the Lenders with an amount of Dollars, in each case equal to such
Lender's Percentage of the aggregate principal amount of the Loans to be
made pursuant to the Borrowing Request. To the extent funds are received by
the Agent from the Lenders, the Agent shall make such funds available to
the Borrower by crediting the principal amount of such Loans to such
account as the Borrower may designate. No Lender's obligation to make its
Loan as aforesaid shall be affected by any other Lender's failure to make
its Loan.
Notwithstanding any other provision of this Agreement, no Loans shall be
made until such time as the Borrower has received telephonic or facsimile
confirmation from Barclays Bank Plc (or its authorized representative), and
the Borrower shall have confirmed the same to the Agent, that the transfers
of funds and assignments of loans as contemplated by the Restructuring
Agreement shall be in process.
2.3 CANCELLATION
The Borrower may cancel the unutilized portion of the Total Commitment
Amount in whole or in part on giving not less than thirty (30) Business
Days prior written notice thereof to the Agent. Cancellation of any
portion of the Total Commitment Amount shall be in a multiple of
$1,000,000. Effective upon the cancellation of a portion of the Total
Commitment Amount each Lender's Commitment Amount will immediately be
reduced by an amount equivalent to its Percentage of the amount of such
cancellation. Any such notice once given shall be irrevocable.
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<PAGE>
2.4 CONTINUATION ELECTIONS
By delivering an Interest Period Notice to the Agent on or before 10:00
a.m., London time, on a Business Day, the Borrower may from time to time
irrevocably elect, on not less than three (3) nor more than five (5)
Business Days' notice (counting the date on which such Interest Period
Notice is given) prior to the expiration of any Interest Period with
respect to any then outstanding Loans, that all of such Loans (or a portion
of such Loans, but in multiples of $5,000,000) be, upon the expiration of
such Interest Period, continued as Loans for the Interest Period or
Interest Periods specified in such Interest Period Notice; provided,
--------
however, that, at any one time, only two Interest Periods may be in effect.
-------
2.5 RECORDS
Each Lender's Loan shall be evidenced by a loan account maintained by such
Lender. The Borrower hereby irrevocably authorizes each Lender to make (or
cause to be made) appropriate account entries, which account entries, if
made, shall evidence inter alia the date of, the principal amount of, any
repayments of, the interest rate on, and the Interest Period applicable to,
the Loan then outstanding to such Lender. Any such account entries
indicating the outstanding principal amount of the Loan outstanding to such
Lender shall be prima facie evidence of the principal amount thereof owing
and unpaid, but the failure to make any such entry shall not limit or
otherwise affect the obligations of the Borrower hereunder to make payments
of the principal amount of, or interest on, such Loans when due.
2.6 FUNDING
Each Lender may, if it so elects, fulfil its obligation to make or maintain
any portion of the principal amount of its Loan by causing a foreign
branch, Affiliate or international banking facility of such Lender to make
such Loans; provided, however, that in such event any Loans shall be deemed
-----------------
to have been made by a foreign branch, Affiliate or international banking
facility of such Lender, the obligation of the Borrower to repay the
principal amount of such Loans, and pay interest thereon, shall
nevertheless be to such Lender and shall be deemed to be held by it, to the
extent of such Loans, for the account of such foreign branch, Affiliate or
international banking facility; and provided, further, however, that no
-------------------------
Lender may make any election of the nature contemplated by this Section if,
as a direct result thereof, the Borrower would then immediately be under
any obligation to pay any incremental amount of the nature contemplated by
Section 4.1, 4.2, 4.4, 4.5 or 4.6 or under any obligation pursuant to any
------------------ ---
such Section to prepay all or any portion of any Loan made by such Lender.
3. PRINCIPAL PAYMENTS; INTEREST; FEES
3.1 PRINCIPAL PAYMENTS
The Borrower shall make payment in full of the unpaid principal amount of
all Loans at the Final Maturity Date. Prior thereto, the Borrower may, from
time to time on any Business Day which is the last day of the Interest
Period for the Loans to be prepaid or (subject to Section 4.3) on any other
-----------
Business Day, make a voluntary prepayment, in whole or in part, of the
then outstanding principal amount of all Loans; provided, however, that:
-----------------
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<PAGE>
(a) the Borrower shall give the Agent not less than three (3) nor more
than five (5) Business Days' prior written notice (counting the date
on which such notice is given) of any such voluntary prepayment,
which notice, once given, shall be irrevocable; and
(b) all such partial voluntary prepayments shall, be in an aggregate
principal amount of a multiple of $5,000,000.
3.2 INTEREST PAYMENTS
The Borrower shall make payments of interest in accordance with this
Section.
3.2.1 RATE
The Borrower shall pay interest on the principal amount of the Loans
outstanding from time to time at a rate per annum equal to the sum of the
LIBO Rate plus the Applicable Margin.
----
3.2.2. POST-MATURITY RATE
After the maturity of all or any portion of the principal amount of the
Loans or after any other Obligations shall have become due and not been
paid, the Borrower shall pay interest (after as well as before judgment)
on that principal amount so matured or on any such other Obligations due,
at a rate per annum equal to the sum of (i) the LIBO Rate for such
Interest Periods as the Agent may from time to time select, (ii) the
Applicable Margin plus (iii) two percent (2%).
----
3.2.3 PAYMENT DATES
Interest accrued on each Loan shall be payable, without duplication, on:
(a) the last day of each Interest Period with respect to such Loan (and,
in addition to such day, if any Interest Period shall exceed three
months, on each date which is the last day of each successive three-
monthly period occurring during such Interest Period commencing with
the first three month period commencing on the first day of such
Interest Period);
(b) the Final Maturity Date; and
(c) with respect to any portion of any Loan repaid or prepaid pursuant
to Section 3.1, 4.1 or 4.5, the date of such repayment or
---------------- ---
prepayment, as the case may be.
Interest accrued on each Loan after the maturity thereof and interest on
other overdue amounts shall be payable upon demand. The amount of
accruing interest on any Loans shall be calculated during each Interest
Period applicable thereto by the Agent on the daily outstanding principal
amount of such Loans.
3.2.4 RATE DETERMINATIONS
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<PAGE>
All determinations by the Agent of the rate of interest applicable to any
Loan shall be conclusive absent manifest error.
3.3 AGENCY FEE
The Borrower agrees to pay to the Agent (for its own account) the agency fee
in the amount and at the times set forth in the letter of even date herewith.
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<PAGE>
4. INCREASED COSTS; TAXES; MARKET DISRUPTIONS; GENERAL PAYMENT PROVISIONS
4.1 DOLLARS UNAVAILABLE
(a) If, prior to the date on which the Agent shall make any determination
of the LIBO Rate for any Interest Period, the Agent shall have
determined or shall have been notified (for any reason whatsoever) that
either (x) Dollar certificates of deposit or Dollar deposits, as the
case may be, in the relevant amount and for the relevant Interest
Period are not available to the Lenders in the London interbank market,
or (y) by reason of circumstances affecting the Lenders in the London
interbank market, adequate means do not exist for ascertaining the
interest rate applicable hereunder to such Loan, then the Agent shall
promptly give telephonic notice of such determination confirmed in
writing to the Borrower (which determination shall, in the absence of
manifest error, be conclusive and binding on the Borrower).
(b) As soon as practicable following the giving of any notice described in
clause (a), the Agent, the affected Lenders and the Borrower shall
----------
negotiate for a period not exceeding thirty (30) days with a view to
agreeing an alternative basis for making or maintaining the Loans
affected by the circumstances described in clause (a). During such
----------
period interest shall accrue on the principal amount of each affected
Lender's affected Loans at the rate applicable to each such Loan
immediately prior to the giving of such notice. If no such alternative
basis is agreed within such period, each affected Lender's affected
Loans shall bear interest at a rate per annum equal to the sum of (i)
the cost to such Lender of funding such Loans (as determined by such
Lender which determination shall, in the absence of manifest error, be
conclusive and binding on the Borrower) plus (ii) the Applicable Margin
----
as in effect from time to time.
4.2 INCREASED COSTS, ETC.
(a) The Borrower agrees to reimburse each Lender for any increase (other
than as specifically covered in any other Section of this Article) in
the cost to such Lender of making, continuing or maintaining (or of its
obligation to make, continue or maintain) any Loans, and for any
reduction (other than as specifically covered in any other Section of
this Article) in the amount of any sum receivable by such Lender
hereunder in respect of making, continuing or maintaining any portion
of any such Loans, in either case from time to time by reason of any
Regulatory Change (including with respect to Regulation D of the F.R.S.
Board). In the event of the incurrence of any such increased cost or
reduced amount, such Lender shall promptly notify the Agent and the
Borrower thereof stating in reasonable detail the reasons therefor and
the additional amount required fully to compensate such Lender for such
increased cost or reduced amount. Such notice shall, in the absence of
manifest error, be conclusive and binding on the Borrower.
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<PAGE>
(b) As soon as practicable following the giving of any notice described in
clause (a), the affected Lender, the Agent and the Borrower shall
----------
negotiate for a period not exceeding thirty (30) days with a view to
avoiding or minimising the circumstances described in clause (a). If
----------
no steps mutually agreeable to the affected Lender, the Agent and the
Borrower are decided within such thirty (30) day period, the Borrower
may elect either to prepay the principal amount of and interest on such
affected Lender's then affected outstanding Loans (subject, however, to
Section 4.3) or pay, within five days after the expiry of such thirty
-----------
(30) day period, any additional amount required fully to compensate
such affected Lender for the increased cost or reduced amount described
in clause (a).
----------
4.3 FUNDING LOSSES
In the event any Lender shall incur any loss or expense (including any loss
or expense incurred by reason of the liquidation or reemployment of Dollar
deposits or other funds acquired by such Lender to make, continue, or
maintain any portion of the principal amount of a Loan) as a result of:
(a) any payment or prepayment of the principal amount of a Loan on a date
other than the scheduled last day of the Interest Period applicable
thereto, whether pursuant to Section 3.1 or otherwise;
-----------
(b) or any action of the Borrower resulting in any Loans not being made,
continued or maintained in accordance with the Borrowing Request or the
Interest Period Notice given therefor,
then, upon the request of such Lender to the Borrower (with a copy to the
Agent), the Borrower shall pay to the Agent for the account of such Lender
such amount as will (in the reasonable determination of such Lender)
reimburse such Lender for such loss or expense. A statement as to any such
loss or expense (including calculations thereof in reasonable detail) shall
be submitted by such Lender to the Agent and the Borrower and shall, in the
absence of manifest error, be conclusive and binding on the Borrower. Each
Lender Party agrees that, for the purpose of this Section, "loss or
expense" refers to losses or expenses actually incurred by the Lenders and
shall not include compensation to the Lenders for lost margin on the Loans.
4.4 CAPITAL COSTS
(a) If any Regulatory Change affects or would affect the amount of capital
required or expected to be maintained by any Lender or any Person
controlling such Lender, and such Lender determines (in its reasonable
discretion) that the rate of return on its or such controlling Person's
capital is reduced to a level below that which such Lender or such
controlling Person could have achieved but for the occurrence of any
such Regulatory Change, then, in any such case upon notice from time to
time by such Lender to the Borrower, the Borrower may, at its option
(i) within five days of receipt of such notice, pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return or (ii) prepay
the principal amount of and interest on such affected Lender's then
outstanding Loans (subject, however, to Section 4.3). A statement of
-----------
such Lender as to any such additional amount or amounts (including
calculations thereof in reasonable detail)
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<PAGE>
shall, in the absence of manifest error, be conclusive and binding on
the Borrower. In determining such amount, such Lender may use any
method of averaging and attribution that it (in its reasonable
discretion) shall deem applicable.
(b) Notwithstanding clause (a), the Borrower shall not be obligated to pay
----------
any amount to any Lender in respect of any such reduction in the rate
of return which arises as a consequence of any Applicable Law
implementing (i) the proposals for international convergence of capital
measurement and capital standards published by the Basle Committee on
Banking Regulations and Supervisory Practices in July 1988 and/or (ii)
(x) the Council of the European Communities Directive of 17 April 1989,
on the own funds of credit institutions (89/299/EEC), (y) the Council
of the European Communities Directive of 18 December 1989, on a
solvency ratio for credit institutions (89/647/EEC) and/or (z) the
Council of the European Communities Directive of 15 March 1993 on the
capital adequacy of investment firms and credit institutions
(93/6/EEC), as each of the foregoing items in this clause may be
amended from time to time, to the extent that the impact of any such
Applicable Law can reasonably be calculated at the Effective Date. In
addition, no Lender may make any claim for compensation in respect of
any such reduction in return to the extent that such claim relates to a
period occurring prior to the date which is six (6) months prior to the
notification by such Lender of the event leading to such reduction in
the rate of return; provided, however, that nothing in this sentence
-------- -------
shall restrict the ability of such Lender to make any further claim for
compensation in respect of any event notified to the Borrower at any
time on or after such date of notification.
4.5 ILLEGALITY
(a) If, as the result of any Regulatory Change, any Lender shall determine
(which determination, in the absence of manifest error, shall be
conclusive and binding on the Borrower) that it is unlawful for such
Lender to make its Loan, the obligations of such Lender to make any
portion of the principal amount of its Loan shall, upon such
determination (and telephonic notice thereof confirmed in writing to
the Agent and the Borrower), forthwith be suspended until such Lender
shall become aware that the circumstances causing such suspension no
longer exist and shall have notified the Agent and the Borrower to such
effect, at which time the obligation of such Lender to make its Loan
shall be reinstated.
(b) If, as the result of any Regulatory Change, any Lender shall determine
(which determination, in the absence of manifest error, shall be
conclusive and binding on the Borrower) that it is unlawful for such
Lender to continue its Loan, then, upon notice by such Lender to the
Agent and the Borrower, such Lender shall consult with the Borrower and
the Agent for a period of up to thirty (30) days from the date of such
notice, with a view to agreeing upon a mutually acceptable alternative
arrangement which will avoid or minimize such illegality. If no steps
mutually agreeable to the affected Lender, the Agent and the Borrower
are decided within such thirty (30) day period (or if such period of
consultation shall be effectively prohibited by such Regulatory Change)
the Borrower shall prepay, within five days after the expiry of such
thirty (30) day period (or on such earlier date as may be required by
such Regulatory Change) the principal amount of and interest on such
affected Lender's then outstanding Loan (subject, however, to Section
-------
4.3).
---
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<PAGE>
4.6 TAXES
(a) All payments by the Borrower of principal of, and interest on, the
Loans and all other amounts payable pursuant to this Agreement or any
other Loan Document to any Lender Party shall be made free and clear
of, and without deduction for any, present or future income, excise,
stamp or other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any taxing authority of any
jurisdiction, in each case other than franchise taxes and taxes imposed
on or measured by the recipient's net income or receipts (such non-
excluded items referred to as "TAXES"). In the event that any
withholding or deduction from any payment to be made by the Borrower
hereunder or under any other Loan Document is required in respect of
any Taxes pursuant to any Applicable Law, then the Borrower will:
(i) to the extent that any such Taxes are payable by the Borrower,
pay directly to the relevant authority the full amount to be so
withheld or deducted;
(ii) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent (to the extent the same
is available to the Borrower) evidencing such payment to such
authority; and
(iii) pay to the Agent for the account of the Person or Persons
entitled thereto such additional amount or amounts as is
necessary to ensure that the net amount actually received by such
Person will be equal to the full amount such Person would have
received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any Lender Party
with respect to any payment received by such Lender Party hereunder or
under any other Loan Document, such Lender Party may pay such Taxes
and the Borrower will promptly pay such additional amounts (including
any penalties, interest or expenses except to the extent that the same
are incurred as a result of the gross negligence or wilful misconduct
of the relevant Lender Party) as is or are necessary in order that the
net amount received by such Lender Party after the payment of such
Taxes (including any Taxes on such additional amount) shall equal the
amount such Lender Party would have received had such Taxes not been
asserted.
(b) If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for its own account
and/or, as the case may be, the account of the relevant Lender Parties,
the required receipts or other required documentary evidence, the
Borrower shall indemnify the Agent or the relevant Lender Parties, as
the case may be, for any incremental Taxes, interest or penalties that
may become payable by any such Lender Party as a result of any such
failure (excluding, however, any such incremental Taxes, interest or
penalties incurred as a result of the gross negligence or wilful
misconduct of the relevant Lender Party). For purposes of this
Section, a distribution hereunder or under any other Loan Document by
the Agent or any Lender to or for the account of any Lender shall be
deemed a payment by the Borrower.
(c) The Lender Parties agree to cooperate with the Borrower in completing
and delivering or filing tax-related forms which would reduce or
eliminate any amount of taxes of the
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<PAGE>
nature referred to in clause (a) required to be deducted or withheld
----------
on account of any payment made by the Borrower under this Agreement
or any other Loan Document; provided, however, that no Lender Party
-------- -------
shall be under any obligation to execute and deliver any such form if,
in the opinion of such Lender Party, completion of any such form might
reasonably be expected to result in an adverse consequence with respect
to the business or tax position of such Lender Party.
4.7 MITIGATION
(a) In the event that the Borrower (or any Person on its behalf) makes
payment of any amount pursuant to Section 4.4 or 4.6 or that any Lender
----------- ---
Party seeks payment of an amount pursuant to Section 4.4 or 4.6 or
----------- ---
because of circumstances resulting in the thirty (30) day negotiation
period described in clause (b) of any of Section 4.1, 4.2, or 4.5, such
----------------- ---
affected Lender Party agrees that it will take such reasonable steps as
may reasonably be open to it to mitigate the effects of the
circumstances described in the foregoing Sections (including the
transfer of such Lender Party's Lending Office to another jurisdiction
and the application for a Tax Credit); provided, however, that no
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Lender Party shall be obligated to (i) take any such steps if, in its
opinion, such steps would require it to achieve less than its expected
return under this Agreement or would have an adverse effect upon its
assets or financial condition, (ii) achieve any particular result in
the case of any such steps resulting in less than complete mitigation
of the relevant circumstances or (iii) take any such steps if, in its
opinion, it would incur a liability to the Borrower as a result
thereof.
(b) If, pursuant to clause (a), any Lender Party effectively obtains a
----------
refund of tax or credit (a "TAX CREDIT") against a payment made by the
Borrower pursuant to Section 4.6 (a "TAX PAYMENT"), and such Lender
-----------
Party is able to identify such Tax Credit as being attributable to such
Tax Payment, then such Lender Party, after actual receipt of such Tax
Credit, shall reimburse the Borrower for such amount as such Lender
Party shall reasonably determine to be the proportion of such Tax
Credit as shall be reasonably attributable to such Tax Payment;
provided, however, that no Lender Party shall be required to make any
-----------------
such reimbursement which would cause it to lose the benefit of such Tax
Credit or would otherwise adversely affect any matter relating to such
Lender Party in connection with the assessment or payment of any Taxes.
Each Lender Party shall have absolute discretion as to whether to claim
any Tax Credit, and if it does so claim, the extent, order and manner
in which it does so. No Lender Party shall be obliged to disclose
information regarding its tax affairs or computations to the Borrower.
4.8 PAYMENTS, COMPUTATIONS, ETC
All payments by the Borrower pursuant to this Agreement or any other Loan
Document shall be paid in Dollars. All such payments shall be made by the
Borrower to the Agent for the account of each Lender Party entitled
thereto, by delivery of Dollars in immediately available funds to an
account of the Agent in New York City at the Agent's Lending Office, which
account shall be designated from time to time by notice to the Borrower
from the Agent in either such case for the account of each Lender Party
entitled thereto (and, if such payment shall be of less than the due amount
of the relevant payment Obligation then due and owing, for the pro rata
benefit of each Lender Party entitled to share in such payment in
accordance with its respective portion of the
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aggregate unpaid amount of similar payment Obligations). All such payments
shall be made, without setoff, deduction, or counterclaim, not later than
11:00 a.m., New York time, on the date when due. Any payments received
hereunder after the time and date specified in this Section shall be deemed
to have been received by the Agent on the next following Business Day. The
Agent shall promptly remit to each Lender its share (calculated as
aforesaid), if any, of such payments to an account designated by such
Lender to the Agent by notice from time to time and maintained at such
Lender's Lending Office. All interest and fees shall be computed on the
basis of the actual number of days (including the first day but excluding
the last day) occurring during the period for which such interest or fee is
payable over a year comprised of 360 days. Subject to clauses (d) and (e)
----------- ---
of the definition of "INTEREST PERIOD", whenever any payment to be made
shall otherwise be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection
with such payment.
4.9 PRORATION OF PAYMENTS
If any Lender shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of setoff, or otherwise) on account
of the principal amount of or interest on any Loan or of any other payment
Obligation of the Borrower in excess of its pro rata share of payments then
or therewith obtained by all Lenders entitled thereto upon the principal
amount of and interest on all Loans or the relevant such payment
Obligation, such Lender shall purchase from the other Lenders such
participations in Loans (or other Obligations) held by them as shall be
necessary to cause such purchasing Lender to share the excess payment or
other recovery ratably with each of them; provided, however, that if all
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or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing holder, the purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but without
interest. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section may, to the fullest extent
permitted by Applicable Law, exercise all its rights of payment (including
pursuant to Section 4.10) with respect to such participation as fully as if
------------
such Lender were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the Lender entitled under this Section to share in the
benefit of any recovery on such secured claim.
4.10 APPLICATION OF PROCEEDS
If at any time any amount received by the Agent is less than the amount
then due and payable pursuant to this Agreement or any other Loan Document
such amount may, in the discretion of the Agent (after consultation with
the Lenders), be applied (after payment of any amounts payable to the Agent
pursuant to Sections 10.3 and 10.4 and similar provisions contained in any
------------- ----
other Loan Document) in whole or in part by the Agent against, all or any
part of the Obligations in the following order:
(a) first, to amounts outstanding to the Lender Parties under any Loan
Document in respect of any amount other than interest on, or the
principal amount of, any Loan;
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(b) second, to amounts outstanding to the Lender Parties (or any of them)
under any Loan Document in respect of interest on any Loan; and
(c) third, to amounts outstanding to the Lender Parties under any Loan
Document in respect of the principal amount of any Loan.
Any surplus of such cash or cash proceeds held by the Agent and remaining
after payment in full of all the Obligations, and the termination of all
Commitments (if not then already terminated), shall be paid over to
whomsoever may be lawfully entitled to receive such surplus.
4.11 JUDGMENT CURRENCY, ETC
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in Dollars into another
currency, the Borrower agrees, to the fullest extent permitted by
Applicable Law, that the rate of exchange used shall be that at which
in accordance with normal banking procedures the Agent could purchase
Dollars with such other currency on the Business Day preceding that on
which final judgment is given.
(b) The obligation of the Borrower in respect of any sum denominated in
Dollars due from it to any Lender Party shall, notwithstanding any
judgment in a currency other than Dollars, be discharged only to the
extent that on the Business Day following receipt by such Lender Party
of any sum adjudged to be so due in such other currency, such Lender
Party may in accordance with normal banking procedures, purchase
Dollars with such other currency. In the event that the Dollars so
purchased are less than the sum originally due to such Lender Party in
Dollars, the Borrower, as a separate obligation and notwithstanding any
such judgment, hereby indemnifies and holds harmless such Lender Party
against such loss, and if the Dollars so purchased exceed the sum
originally due to such Lender Party, such Lender Party shall remit to
the Borrower such excess.
5. CONDITIONS PRECEDENT TO MAKING LOANS
The obligations of the Lenders to make the Loans shall be subject to the
prior or concurrent satisfaction of each of the conditions precedent set
forth in this Article.
5.1 RESOLUTIONS, ETC
The Agent shall have received:
(a) from each Obligor, a certificate of its Secretary or similar officer as
to:
(i) resolutions of (or other confirmation of authority granted by) its
Board of Directors or similar body then in full force and effect
authorizing the execution, delivery and performance of this
Agreement and each other Loan Document to be executed by it in
connection with the transactions contemplated hereby and thereby
(in the case of the Borrower) and the Guaranty Agreement (in the
case of Guarantor);
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(ii) the incumbency and signatures of those of its officers authorised
to act with respect to this Agreement and each other Loan Document
or other document executed or to be executed by it (in the case of
the Borrower) and the Guaranty Agreement (in the case of the
Guarantor); and
(iii) its Organic Documents as then in effect.
5.2 GUARANTY AGREEMENT
The Agent shall have received counterparts of the Guaranty Agreement, duly
executed by an Authorized Representative of the Guarantor.
5.3 PROCESS AGENT ACCEPTANCE
The Agent shall have received a counterpart of the Process Agent
Acceptance, duly executed by the Process Agent, together with evidence of
the appointment of the Process Agent by each Obligor.
5.4 OPINIONS OF COUNSEL
The Agent shall have received opinions from:
(a) Debevoise & Plimpton, New York counsel to the Lender Parties,
substantially in the form of Exhibit F attached hereto;
---------
(b) Deborah Friedman, Esq., counsel to the Borrower, substantially in the
form of Exhibit G attached hereto; and
---------
(c) Dale E. Huffman, counsel to the Guarantor, substantially in the form
of Exhibit H attached hereto.
---------
The Borrower hereby instructs counsel referred to in clause (b) to
----------
deliver the opinion referred to in such clause to the Lender Parties.
5.5 COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC
The representations and warranties of the Borrower set forth in Article 6
---------
and of the Guarantor set forth in Article 3 of the Guaranty Agreement shall
be true and correct in all material respects as of the date initially made,
and both immediately before and immediately after the making of the Loans
(but, if any Default of the nature referred to in Section 8.1.5 shall have
-------------
occurred with respect to any other Indebtedness, without giving effect to
the application, directly or indirectly, of the proceeds of such Loans to
such other Indebtedness):
(a) such representations and warranties shall be true and correct in all
material respects with the same effect as if then made (unless stated
to relate solely to an earlier date, in which case such representations
and warranties shall be true and correct as of such earlier date); and
(b) no Default shall have then occurred and be continuing.
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5.6 BORROWING REQUEST
The Agent shall have received the Borrowing Request.
6. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender Parties to enter into this Agreement and, in
the case of the Lenders, to make and continue Loans hereunder, the Borrower
individually for itself and with respect to matters hereinafter relating to
it represents and warrants unto each Lender Party as set forth in this
Article. The representations and warranties set forth in this Article shall
be made upon the delivery of the Borrowing Request and each Interest Period
Notice, and shall be deemed to have been made on the Borrowing Date and on
the effective date of any Interest Period Notice.
6.1 ORGANIZATION, POWER, AUTHORITY, ETC
The Borrower is a corporation validly organized and existing and in good
standing under the laws of the State of Delaware and is duly qualified to
do business and is in good standing (where such concept is applicable) as a
foreign company in each jurisdiction where the nature of its business makes
such qualification necessary and where the failure to so qualify would have
a Materially Adverse Effect and has full power and authority, and holds all
requisite Approvals, to own and hold under lease its property, to sue and
to be sued in its own name and to conduct its business substantially as
currently conducted by it. The Borrower has full power and authority to
enter into and perform its obligations under this Agreement and the other
Loan Documents executed or to be executed by it.
6.2 DUE AUTHORIZATION; NON-CONTRAVENTION
The execution and delivery by the Borrower of this Agreement and each other
Loan Document executed or to be executed by it and the performance by the
Borrower of its obligations hereunder and thereunder, have been duly
authorized by all necessary corporate action on its part, do not require
any Approval, do not and will not conflict with, result in any violation
of, or constitute any default under, any provision of any Requirement of
Law or Approval binding on it, and will not result in or require the
creation or imposition of any Lien on any of its properties pursuant to the
provisions of any Contractual Obligation.
6.3 VALIDITY, ETC.
This Agreement constitutes, and each other Loan Document executed or to be
executed by the Borrower constitutes, the legal, valid, and binding
obligation of the Borrower enforceable in accordance with its terms,
subject as to enforceability only, to Applicable Laws relating to
bankruptcy and the enforceability of creditors' rights generally and by the
fact that the availability of equitable remedies is discretionary.
6.4 FINANCIAL INFORMATION
The financial information of the Borrower which has been furnished to the
Agent for the purposes of or in connection with this Agreement as contained
in the Borrower's annual report
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on Form 10-K for the 1996 Fiscal Year and quarterly reports on Form 10-Q
for the first three Fiscal Quarters of the 1997 Fiscal Year, in each case
as filed with the SEC, has been prepared in accordance with GAAP
consistently applied throughout the periods involved (except as disclosed
therein) and presents fairly the financial position of the Borrower as at
the dates thereof and the results of its operations for the periods then
ended. The Borrower does not have on the date hereof any material
Contingent Liability or liability for taxes, long-term leases or unusual
forward or long-term commitments which are not reflected in its financial
statements described in this Section or in the notes thereto.
6.5 ABSENCE OF DEFAULT
The Borrower is not in default in the payment of (or in the performance of
any material obligation applicable to) any Indebtedness or any material
Requirement of Law.
6.6 LITIGATION, ETC.
Except as previously disclosed to the Agent in writing, there is no pending
or, to the knowledge of the Borrower, threatened labour controversy,
litigation, arbitration or governmental investigation or proceeding against
the Borrower or any of its Subsidiaries, or to which any of its business,
operations, properties, assets, revenues or prospects is subject as to
which the Borrower believes there is a reasonable likelihood of an adverse
outcome which, if adversely determined, might have a Materially Adverse
Effect. In the case of any litigation so disclosed, there has been no
development in such litigation since the Effective Date which might have a
Materially Adverse Effect.
6.7 MATERIALLY ADVERSE EFFECT
Since December 31 1996 there have been no occurrences which, individually
or in the aggregate, have or may have a Materially Adverse Effect with
respect to the Borrower.
6.8 TAXES AND OTHER PAYMENTS
The Borrower has filed, or caused to be filed, all tax returns and reports
required by Applicable Law to have been filed by or on its behalf except as
permitted hereunder, except any such taxes, charges or amounts (a) in
respect of which the relevant invoice or demand for payment was issued not
more than one hundred and twenty (120) days prior to the payment thereof
(and in respect of which the relevant Person will pay prior to the end of
such period), (b) which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on the books of the relevant Person or (c)
taxes relating to any period prior to January 1, 1992 with respect to the
payment of which the Borrower has been indemnified by Amax, Inc.
6.9 ENVIRONMENTAL COMPLIANCE
Except as disclosed in the Borrower's annual report on Form 10-K for the
1996 Fiscal Year or to the Agent in writing, (a) the Borrower and its
Subsidiaries have complied with all applicable Environmental Laws, except
where the failure to be in compliance therewith would not have a Materially
Adverse Effect, (b) the Borrower and its Subsidiaries do not manage any
Hazardous
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Materials at any of their facilities and assets in violation of any
Environmental Laws, except where any such violation would not reasonably
be expected to have a Materially Adverse Effect and (c) there are no
events, conditions or circumstances occurring at or relating to any
facilities or assets of the Borrower or its Subsidiaries involving any
environmental pollution or contamination that have, or would reasonably be
expected to have, a Materially Adverse Effect.
6.10 PARI PASSU
The payment Obligations of the Borrower under this Agreement and each
other Loan Document to which it is a party rank at least pari passu in
right of payment with all of the Borrower's other unsecured and
unsubordinated Indebtedness, other than any such Indebtedness which is
preferred by mandatory provisions of Applicable Law.
7. COVENANTS
7.1 CERTAIN COVENANTS
The Borrower agrees with each Lender Party that, until all Commitments
have terminated and all Obligations have been paid and performed in full,
it will perform its obligations set forth in this Article.
7.1.1 FINANCIAL INFORMATION, ETC.
The Borrower will furnish, or will cause to be furnished, to the
Agent copies (with sufficient copies for each other Lender Party) of
the following financial statements, reports and information:
(a) promptly when available, and in any event within ninety (90)
days after the close of each Fiscal Year of the Borrower, a copy
of each Obligor's annual report on Form 10-K for such Fiscal
Year, and reported on without Impermissible Qualification by
independent certified public or chartered accountants of
recognized international standing;
(b) promptly when available, and in any event within forty five (45)
days after the close of each of the first three Fiscal Quarters
of each Fiscal Year of the Borrower , a copy of each Obligor's
quarterly report on Form 10-Q for such Fiscal Quarter;
(c) as soon as possible and in any event within five (5) Business
Days after the occurrence of any Default, a statement of its
chief financial Authorized Representative setting forth details
of such Default and the action which it has taken and/or
proposes to take with respect thereto;
(d) as soon as possible and in any event within five (5) Business
Days after the occurrence of any adverse development with
respect to any labor controversy, litigation, arbitration or
governmental investigation or proceeding described in
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Section 6.6 which has a reasonable likelihood of having a
-----------
Materially Adverse Effect;
(e) notice of the occurrence as soon as possible and in any event
within five (5) Business Days after it knows or has reason to
know of any circumstance which has a reasonable likelihood of
having a Materially Adverse Effect;
(f) promptly after the sending or filing thereof, copies of all
reports that it sends to its public shareholders and copies of
registration statements and filings made with the SEC or any
national or regional securities exchange or commission which, in
any such case, relate to or describe any material matter in
connection with the business, operations, assets, financial
condition or prospects of the Borrower; and
(g) such other information with respect to the business, operations,
assets, financial condition, or prospects of the Borrower as the
Agent or any Lender (acting through such Agent) may from time to
time reasonably request.
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7.1.2 COMPLIANCE WITH LAWS
The Borrower will comply in all material respects with all Applicable
Laws relating to it and to its assets and properties except where such
failure to comply would not have a Materially Adverse Effect.
7.1.3 MAINTENANCE OF CORPORATE EXISTENCE
The Borrower will do and will cause to be done at all times all things
necessary to maintain and preserve its corporate existence and will do
and cause to be done at all times all things necessary to be duly
qualified to do business and be in good standing (where such concept is
relevant) as a foreign corporation in each jurisdiction where the nature
of its business makes such qualification necessary.
7.1.4 PAYMENT OF TAXES, ETC
The Borrower will pay and discharge, as the same may become due and
payable, all taxes, assessments, fees and other governmental charges or
levies against it or on any of its property, as well as claims of any
kind or character (including claims for sums due for labour, material,
supplies, personal property and services); provided, however, that the
---------
foregoing shall not require the Borrower to pay or discharge any such
tax, assessment, fee, charge, levy or claim so long as it shall be
diligently contesting the validity or amount thereof in good faith by
appropriate proceedings and shall have set aside on its books adequate
reserves in accordance with GAAP with respect thereto.
7.1.5 BOOKS AND RECORDS
The Borrower will keep financial records and statements reflecting all of
its business affairs and transactions in accordance with GAAP.
7.1.6 PROCEEDS
The Borrower shall apply the proceeds of the Loans strictly in accordance
with this Agreement including as set forth in Recital (B).
-----------
7.1.7 ENVIRONMENTAL COVENANT
(a) The Borrower will, and will use its best efforts to ensure that each
other Subsidiary will, use and operate all of its facilities and
properties related thereto in material compliance with, keep all
material Approvals relating to environmental matters in effect and
remain in material compliance with and handle all Hazardous
Materials in material compliance with, all applicable Environmental
Laws.
(b) The Borrower will immediately notify the Agent and (upon the request
of the Agent) provide (and ensure that each Subsidiary provides)
copies upon receipt of all material written claims or complaints or
(to the extent any matter referred to in any notice or inquiry might
have a Materially Adverse Effect) notices or
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inquiries relating to the condition of its facilities and properties
or compliance with all applicable Environmental Laws, and shall
promptly cure (to the extent necessary to terminate such action or
proceeding) any actions and proceedings relating to compliance with
all applicable Environmental Law.
(c) The Borrower will provide such information and certifications
which the Agent may reasonably request from time to time to evidence
compliance with this Section.
7.1.8 PARI PASSU
The Borrower will ensure that its payment Obligations under this
Agreement and each other Loan Document to which it is a party rank at
least pari passu in right of payment with all of the Borrower's
unsecured and unsubordinated Indebtedness, other than any such
Indebtedness which is preferred by mandatory provisions of Applicable
Law.
7.1.9 ACCURACY OF INFORMATION
All factual information hereafter furnished by or on behalf of the
Borrower in writing to any Lender Party for the purposes of or in
connection with this Agreement or any transactions contemplated thereby
will be true and accurate in all material respects on the dates of which
such information is dated or certificate and such information shall not
be incomplete by omitting to state any material fact necessary to make
such information not misleading in any material respect.
7.1.10 PLANS
The Borrower will maintain and operate each Plan in material compliance
with ERISA and the Code.
7.1.11 BUSINESS ACTIVITIES; ORGANIC DOCUMENTS; FISCAL YEAR
(a) The Borrower will not amend its Organic Documents in any material
respect, change its corporate name or change its Fiscal Year.
(b) The Borrower will not engage in any business activity, directly or
indirectly through its Subsidiaries, other than the exploration for
and exploitation of metals and minerals and the construction,
development and operation of metal and mineral mines and any
activity incidental thereto.
8. EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT
The term "EVENT OF DEFAULT" shall mean any of the events set forth in
this Section.
8.1.1 NON-PAYMENT OF OBLIGATIONS
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The Borrower:
(a) shall default in the payment, repayment or prepayment when due of
any principal amount of or interest on any Loan; or
(b) shall default in the payment when due of interest on any Loan or
any other Obligation (and such default shall continue unremedied
for a period of five (5) Business Days).
8.1.2 NON-PERFORMANCE OF CERTAIN COVENANTS
The Borrower shall default in the due performance and observance of
any of its obligations under Section 7.1.6, 7.1.8 or 7.1.11 or the
--------------------- ------
Guarantor shall default in the due performance and observance of its
obligations under Section 4.3 of the Guaranty Agreement.
-----------
8.1.3 NON-PERFORMANCE OF OTHER OBLIGATIONS
Either Obligor shall default in the due performance or observance of any
term, condition, covenant or agreement contained in any Loan Document
executed by it (other than a default referred to in Section 8.1.1 or
-------------
8.1.2), and, if capable of cure or remedy, such default shall continue
-----
unremedied for a period of thirty (30) Business Days (or such longer
period as the Agent may in its absolute discretion agree in the event
that the Agent determines that such default is reasonably capable of
being cured within such longer period) after notice thereof shall have
been given to such Obligor by the Agent.
8.1.4 BREACH OF REPRESENTATION OR WARRANTY
(a) Any representation or warranty of the Borrower made hereunder or in
any other writing furnished by it or on its behalf for the purposes
of or in connection with this Agreement shall prove to have been
incorrect in any material respect when made.
(b) Any representation or warranty of the Guarantor made under the
Guaranty Agreement shall prove to have been incorrect in any material
respect when made.
8.1.5 DEFAULT ON OTHER INDEBTEDNESS
A default shall occur in the payment when due (subject to any applicable
grace period), whether by acceleration or otherwise, of any Indebtedness
(other than Indebtedness described in Section 8.1.1 but including for
-------------
the avoidance of doubt, as may be arising under or in connection with the
Restructuring Agreement) of either Obligor (or any of its Subsidiaries)
having a principal amount, individually or in the aggregate, in excess of
$5,000,000 (or the equivalent thereof in any other currency) in the case
of the Borrower or in excess of $30,000,000 (or the equivalent thereof in
any other currency)
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in the case of the Guarantor or a default shall occur in the performance
or observance of any obligation or condition with respect to such
Indebtedness if (a) (i) the effect of such default is to permit (after
the passage of time, the giving of notice, the making of any required
determination or any combination of the foregoing) the acceleration of
the maturity of any such Indebtedness and (ii) in the reasonable opinion
of the Required Lenders such default is not capable of being cured within
the applicable period for cure set forth in the relevant documentation
relating to such Indebtedness or (b) such default shall continue
unremedied for any applicable period of time sufficient to permit the
holder or holders of such Indebtedness, or any trustee or agent for such
holders, to cause such Indebtedness to become due and payable prior to
its expressed maturity.
8.1.6 BANKRUPTCY, INSOLVENCY ETC
Either Obligor shall:
(a) become insolvent or generally fail to pay, or admit in writing its
inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a trustee,
receiver, sequestration or other custodian for such Person, or any
property of any thereof, or make a general assignment for the benefit
of creditors;
(c) in the absence of such application, consent or acquiescence, permit
or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for such Person or for a substantial
part of the property of any thereof, and such trustee, receiver,
sequestrator or other custodian shall not be discharged within sixty
(60) days, provided that the Borrower hereby expressly authorizes
each Lender Party to appear in any court conducting any relevant
proceeding during such sixty (60) day period to preserve, protect and
defend their rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganisation, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or
liquidation proceeding, in respect of either Obligor and, if such
case or proceeding is not commenced by such Person, such case or
proceeding shall be consented to or acquiesced in by such Person or
shall result in the entry of an order for relief or shall remain for
sixty (60) days undismissed, provided that the Borrower hereby
expressly authorizes each Lender Party to appear in any court
conducting any relevant proceeding during such sixty (60) day period
to preserve, protect and defend their rights under the Loan
Documents;
(e) suffer any comparable event to any of the foregoing in any
jurisdiction; or
(f) take any corporate action authorising, or in furtherance of, any of
the foregoing.
8.1.7 IMPAIRMENT OF LOAN DOCUMENTS
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This Agreement or the Guaranty Agreement shall cease in whole or part to
be the legal, valid, binding and enforceable obligation of the relevant
Obligor party thereto or such Obligor or any other Person (other than any
Lender Party) shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability.
8.1.8 JUDGMENTS
Any judgment or order for the payment of money in excess of $5,000,000
(or the equivalent thereof in any other currency) in the case of the
Borrower shall be rendered against the Borrower and either:
(a) enforcement proceedings shall have been commenced by any creditor upon
such judgment or order; or
(b) there shall be any period of ten (10) consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect.
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8.1.9 MATERIALLY ADVERSE EFFECT
Any event shall occur or condition shall exist which constitutes a
Materially Adverse Effect.
8.1.10 PLANS
Any of the following events shall occur with respect to any Plan:
(a) the institution of any steps by the Borrower, any member of its
Controlled Group or any other Person to terminate a Pension Plan if,
as a result of such termination, the Borrower or any such member
could be required to make a contribution to such Pension Plan, or
could reasonably incur a liability or obligation to such Pension
Plan, in excess of $1,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA.
8.2 ACTION IF BANKRUPTCY
If any Event of Default described in Section 8.1.6 shall occur, the
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Commitments (if not therefore terminated) shall automatically terminate
and the outstanding principal amount of all outstanding Loans and all
other Obligations shall automatically be and become immediately due and
payable, without notice or demand.
8.3 ACTION IF OTHER EVENT OF DEFAULT
If any Event of Default (other than any Event of Default described in
Section 8.1.6) shall occur for any reason, whether voluntary or
-------------
involuntary, and be continuing, the Agent may, and upon the direction of
the Required Lenders, shall, upon notice or demand to the Borrower,
declare all or any portion of the outstanding Loans to be due and
payable and any or all other Obligations to be due and payable and/or
the Commitments (if not therefore terminated) to be terminated, whereon
the full unpaid principal amount of such Loans and any and all other
Obligations which shall be so declared due and payable shall be and
become immediately due and payable, without further notice, demand, or
presentment, and/or as the case may be, the Commitments shall terminate.
9. THE AGENT
9.1 ACTIONS
Each Lender authorises the Agent to act on behalf of such Lender under
this Agreement and each other Loan Document and, in the absence of other
written instructions from the Required Lenders, received from time to
time by the Agent (with respect to which the Agent agrees that it will,
subject to the last paragraph of this Section, comply in good faith
except as otherwise advised by counsel to the effect that any such
compliance might subject the Agent to any liability of whatsoever
nature), to exercise such powers hereunder and thereunder as are
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specifically delegated to or required of the Agent by the terms hereof
and thereof, together with such powers as may be reasonably incidental
thereto.
Each Lender agrees (which agreement shall survive any termination of
this Agreement) to indemnify the Agent, pro rata according to such
Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which
may at any time be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or any
other Loan Document, including the reimbursement of the Agent for all
out-of-pocket expenses (including attorneys' fees and expenses on a full
indemnity basis) incurred by the Agent hereunder or thereunder or in
connection herewith or therewith or in enforcing the Obligations of
either Obligor under this Agreement or any other Loan Document, in all
cases as to which the Agent is not reimbursed by such Obligor; provided,
---------
however, that no Lender shall be liable for the payment of any portion
-------
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements determined by a court
of competent jurisdiction in a final proceeding to have resulted from
the Agent's gross negligence or wilful misconduct.
The Agent shall not be required to take any action hereunder or under
any other Loan Document, or to prosecute or defend any suit in respect
of this Agreement or any other Loan Document, unless it is indemnified
to its satisfaction by the Lenders against loss, costs, liability and
expense. If any indemnity in favor of the Agent shall become impaired,
it may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given.
9.2 FUNDING RELIANCE, ETC
Unless the Agent shall have been notified by telephone, confirmed in
writing, by any Lender by 5:00 p.m., London time, on the day prior to
the proposed Borrowing Date that such Lender will not make available the
amount which would constitute its Percentage of the Loans to be made by
all the Lenders on such date, the Agent may assume that such Lender has
made such amount available to the Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If
and to the extent that such Lender shall not have made such amount
available to the Agent, such Lender and the Borrower jointly and
severally agree to repay the Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from
the date the Agent made such amount available to the Borrower to the
date such amount is repaid to the Agent, at the interest rate applicable
at the time to the relevant Loans.
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9.3 EXCULPATION
Neither the Agent nor any of its directors, officers, employees or agents
shall be liable to any Lender for any action taken or omitted to be taken
by it under this Agreement or any other Loan Document, or in connection
herewith or therewith, except for its own wilful misconduct or gross
negligence, or responsible for any recitals or warranties herein or
therein, or for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Loan Document or to make any
inquiry respecting the performance by either Obligor of its obligations
hereunder or thereunder. The Agent shall be entitled to rely upon the
advice of counsel concerning legal matters and upon any notice, consent,
certificate, statement, or writing which it believes to be genuine and to
have been presented by a proper Person.
9.4 SUCCESSORS
The Agent may resign as such at any time upon at least thirty (30) days'
prior notice to the Borrower and all the Lenders. If the Agent at any time
shall resign, the Required Lenders may appoint (subject, as long as no
Default shall have occurred and be continuing, to the prior written consent
of the Borrower, such consent not to be unreasonably withheld or delayed)
another Lender as the successor Agent which shall thereupon become the
Agent hereunder. If no successor Agent shall have been so appointed as
aforesaid, and shall have accepted such appointment, within thirty (30)
days after the retiring Agent's giving notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint (subject, as long as
no Default shall have occurred and be continuing, to the prior written
consent of the Borrower, such consent not to be unreasonably withheld or
delayed) a successor Agent, which shall be one of the Lenders or a
commercial banking institution having a combined capital and surplus of at
least $500,000,000 (or the equivalent thereof in another currency). Upon
the acceptance of any appointment as an Agent hereunder by the successor
Agent, such successor Agent shall be entitled to receive from the retiring
Agent, such documents of transfer and assignment as the successor Agent may
reasonably request, and shall thereupon succeed to and become vested with
all rights, powers, privileges and duties of the retiring Agent and the
retiring Agent shall be discharged from its duties and obligations under
this Agreement and each other Loan Document.
9.5 LOANS BY STANDARD BANK
Standard Bank shall have the same rights and powers with respect to the
Loans made by it as any Lender and may exercise the same as if it were not
the Agent. Standard Bank and its Affiliates may accept deposits from, lend
money to, and generally engage in any kind of business with either Obligor
or any Affiliate of any thereof as if Standard Bank were not the Agent.
9.6 STANDARD BANK AS THE AGENT
In acting as Agent for the Lenders, the Administrative Agent's banking
division will be treated as a separate entity from any other of its
divisions (or similar unit of the Agent in any subsequent re-organization)
or Subsidiaries (the "OTHER DIVISIONS") and, in the event that the Agent
should act for either Obligor or any Affiliate of either in a corporate
finance or other advisory capacity ("ADVISORY CAPACITY"), any information
given by such Person to one of the
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Other Divisions is to be treated as confidential and will not be available
to the Lender Parties without the consent of such person provided that:-
(a) the consent of such Obligor or such Affiliate will not be required in
relation to any information which the Agent in its discretion
determines relates to a Default or in respect of which the Lenders
have given a confidentiality undertaking in a form satisfactory to the
Agent and the relevant Obligor or Affiliate acting reasonably; and
(b) if representatives or employees of the Agent receive information in
relation to either Obligor or while acting in an Advisory Capacity
they will not be obliged to disclose such information to
representatives or employees of the Agent in their capacity as agent
bank hereunder or to any of the Lenders if to do so would breach any
rule or regulation or fiduciary duty imposed upon such persons.
9.7 CREDIT DECISIONS
Each Lender acknowledges that it has, independently of the Agent and each
other Lender, and based on such documents, information and investigations
as it has deemed appropriate, made its own credit decision to extend its
Commitment. Each Lender also acknowledges that it will, independently of
the Agent and each other Lender, and based on such other documents,
information and investigations as it shall deem appropriate at any time,
continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it
under this Agreement or any other Loan Document.
10. MISCELLANEOUS
10.1 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 Borrower (and in the case of the third paragraph of
Section 2.2 only, Cyprus Amax), the Agent and the Required Lenders;
-----------
provided, however, that no such amendment, modification or waiver which
-----------------
would:
(a) modify any requirement hereunder that any particular action be taken or
a determination be made by, or with the consent of or in consultation
with, all the Lenders or by the Required Lenders shall be effective
unless consented to by each Lender;
(b) modify this Section, change the definition of "REQUIRED LENDERS",
increase the Total Commitment Amount or the Percentage of any Lender or
otherwise subject any Lender to any additional obligation, shall be
made without the consent of each Lender;
(c) extend the due date for, or reduce the amount of, any payment or
prepayment of principal of or interest on any Loan or any other amount
payable hereunder or under any other Loan Document shall be made
without the consent of each Lender; or
(d) affect the interests, rights or obligations of the Agent qua the Agent
---
shall be made without consent of the Agent.
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No failure or delay on the part of any Lender Party in exercising any power
or right under this Agreement or any other Loan Document 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 Borrower in any
case shall entitle it to any notice or demand in similar or other
circumstances. No waiver or approval by any Lender Party under this
Agreement or any other Loan Document 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.
10.2 NOTICES
All notices and other communications provided to any party hereto under
this Agreement or any other Loan Document shall be in writing and shall be
sent by hand delivery, courier delivery, 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 the relevant Loan Document or in a notice to the other parties.
Any notice, (a) if sent by hand delivery or courier delivery, shall be
deemed received when delivered and (b) if transmitted by telex or
facsimile, shall be deemed given when transmitted (answerback received at
both the beginning and end of the relevant transmission in the case of
telexes and transmission confirmed by the sending facsimile machine in the
case of facsimiles).
10.3 COSTS AND EXPENSES.
(a) The Borrower agrees to pay on demand all reasonable out-of-pocket
expenses (inclusive of United Kingdom Value Added Tax or any other
similar tax) of each Lender Party for the negotiation, preparation,
execution and delivery of this Agreement and each other Loan Document,
including schedules and exhibits, and any amendments, waivers,
consents, supplements or other modifications to this Agreement or any
other Loan Document as may from time to time hereafter be required
(including the reasonable fees and expenses of counsel to the Agent on
a full indemnity basis) from time to time incurred in connection
therewith), whether or not the transactions contemplated hereby are
consummated, and all reasonable out-of-pocket expenses (inclusive as
aforesaid) of the Lender Parties (including reasonable fees and
expenses of counsel to the Agent on a full indemnity basis, and any
stamp or other taxes incurred in connection with the preparation and
review of the form of any instrument relevant to this Agreement or any
other Loan Document, the consideration of legal questions relevant
hereto and thereto and the filing, recording, refiling or re-recording
of any Loan Document and all amendments or supplements to any thereof
and any and all other documents or instruments of further assurance
required to be filed or recorded or refiled or re-recorded by the terms
hereof or of any other Loan Document.
(b) The Borrower agrees to reimburse each Lender Party upon demand for all
reasonable out-of-pocket expenses (including reasonable attorneys' fees
and expenses on a full indemnity basis and inclusive of United Kingdom
Value Added Tax or other similar tax incurred by such Lender Party in
connection with (i) the negotiation of any restructuring or "work-out",
whether or not consummated, of any Obligations, and (ii) the
enforcement of any Obligations.
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10.4 INDEMNIFICATION
In consideration of the execution and delivery of this Agreement by each
Lender Party and the extension of the Commitments, the Borrower hereby
indemnifies, exonerates and holds each Lender Party and each of its
officers, directors, shareholders, employees and agents (the "INDEMNIFIED
PARTIES") free and harmless from and against any and all actions, causes of
action, suits, losses, costs, liabilities and damages and expenses in
connection therewith, including reasonable attorneys' fees and
disbursements on a full indemnity basis (the "INDEMNIFIED LIABILITIES"),
incurred by any of the Indemnified Parties as a result of, or arising out
of, or relating to:
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement and any other Loan
Document by any of the Indemnified Parties (including any action
brought by or on behalf of either Obligor as the result of any
determination by the Lenders pursuant to Article 5 not to fund the
----------
Loans);
(c) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
the protection of the environment or the release by the Borrower of any
Hazardous Material; or
(d) the presence on or under, or the escape, seepage, leakage, spillage,
discharge, emission, discharging or releases or threatened releases
from, any real property owned or operated by the Borrower of any
Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), regardless of whether caused by, or within the
control of, the Borrower,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under Applicable Law.
10.5 SURVIVAL
The obligations of the Borrower under Sections 3.3, 4.2, 4.3, 4.4, 4.6,
--------------------------------
10.3 and 10.4 and the obligations of the Lenders under Section 9.1, shall, in
- ------------- -----------
each case, survive any termination of this Agreement. The representations and
warranties made by the Borrower in this Agreement and the Guarantor in the
Guaranty Agreement shall survive the execution and delivery of this Agreement
and the Guaranty Agreement.
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10.6 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.
10.7 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.
10.8 COUNTERPARTS, EFFECTIVENESS, ETC
This Agreement may be executed by the parties hereto in several
counterparts, each of which shall be executed by the Borrower and the Agent
and be deemed to be an original and all of which shall constitute together
but one and the same agreement. This Agreement shall become effective on
the date (the "EFFECTIVE DATE") when counterparts hereof executed on behalf
of the Borrower and each Lender (or notice thereof satisfactory to the
Agent) shall have been received by the Agent.
10.9 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) This Agreement and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject
matter hereof and thereof and supersede any prior agreements, written
or oral, with respect thereto.
10.10 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns; provided,
--------
however, that:
-------
(a) the Borrower may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Agent and all the
Lenders; and
(b) the rights of sale, assignment, and transfer of the Lenders are
subject to Section 10.11.
-------------
10.11 SALE AND TRANSFER OF LOANS; PARTICIPATIONS IN LOANS
Each Lender may assign, or sell participations in, its Loans and
Commitments to one or more other Persons in accordance with this Section.
10.11.1 ASSIGNMENTS
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Any Lender, with notice to the Borrower and the other Lenders, may
assign and delegate to any of its Affiliates or to any other Lender or
to one or more commercial banks or other commercial lending
institutions (each Person described as being the Person from or to
whom such assignment and delegation is to be made, being hereinafter
referred to as an "ASSIGNOR LENDER" or "ASSIGNEE LENDER",
respectively), all or any fraction of such Lender's total Loans and
Commitment (which assignment and delegation shall be of a constant,
and not a varying, percentage of all the Assignor Lender's Loans and
Commitment) in a minimum aggregate amount of $5,000,000 and an
integral multiple of $1,000,000; provided however, that no such
-------- -------
assignment shall be made if, as a direct result thereof, the Borrower
would then immediately be under any obligation to pay any incremental
amount of the nature contemplated by Section 4.1, 4.2, 4.4, 4.5 or 4.6
-------------------------- ---
or under any obligation pursuant to any such Section to prepay all or
any portion of any Loan to be made by any proposed Assignee Lender;
and provided, further, however, that, the Borrower and the Agent shall
--------------------------
be entitled to continue to deal solely and directly with the Assignor
Lender in connection with the interests so assigned and delegated to
an Assignee Lender until:
(a) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the
Borrower and the Agent by such Assignor Lender and such Assignee
Lender;
(b) such Assignee Lender shall have executed and delivered to the
Borrower and the Agent a Lender Assignment Agreement, which shall
have been accepted by the Agent;
(c) the Agent shall have been provided with such other evidence as the
Agent may reasonably request in connection with any Approval
required or advisable in connection with such assignment and
delegation; and
(d) the processing fees (if any) described below shall have been paid.
From and after the date that the Agent accepts such Lender Assignment
Agreement, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that
rights and obligations hereunder have been assigned and delegated to
such Assignee Lender in connection with such Lender Assignment
Agreement, shall have the rights and obligations of a Lender hereunder
and under the other Loan Documents and (y) the Assignor Lender, to the
extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Agreement,
shall be released from its obligations hereunder and under the other
Loan Documents. Accrued interest on that part of the Loans assigned
to the Assignee Lender, and accrued fees in respect thereof, shall be
paid as provided in the Lender Assignment Agreement. Except in the
case where any such Assignee Lender is an Affiliate of such Assignor
Lender, such Assignor Lender or such Assignee Lender shall also pay a
processing fee to the Agent upon delivery of any Lender Assignment
Agreement in the amount of $1,500. Any attempted assignment and
delegation not made in accordance with this Section shall be null and
void.
The Agent will promptly notify the Borrower and the Lenders of the
accession of any Assignee Lender as aforesaid.
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10.11.2 PARTICIPATIONS
Any Lender may at any time sell to one or more commercial banks or
other commercial lending institutions (each of such commercial banks
and other commercial lending institutions being herein called a
"PARTICIPANT") participating interests in any of the Loans,
Commitments or other interests of such Lender hereunder; provided,
however, that:
(a) no participation contemplated in this Section shall relieve such
Lender from its Commitment or its other obligations hereunder or
under any other Loan Document;
(b) such Lender shall remain solely responsible for the performance
of its Commitment and such other obligations;
(c) the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights
and obligations under this Agreement and each of the other Loan
Documents;
(d) no Participant, unless such Participant is an Affiliate of such
Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or
under any other Loan Document, except that such Lender may agree
with any Participant that such Lender will not, without such
Participant's consent, take any actions of the type described in
Section 10.1(b) or (c); and
--------------- ---
(e) notwithstanding the final sentence of this Section the Borrower
shall not be required to pay any amount under Section 4.2, 4.3,
-----------------
4.4 or 4.6 that is greater than the amount which it would have
--- ---
been required to pay had no participating interest been sold.
The Borrower and each Lender acknowledges and agrees that each
Participant, for purposes of Sections 4.2, 4.3,4.4, 4.6, 4.7, 4.10,
--------------------------------------
10.3 and 10.4, shall be considered a Lender.
---- ----
10.12 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 OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER SHALL BE BROUGHT AND
MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY PROPERTY MAY BE
BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE
ANY PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF ANY SUCH
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LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY
FINAL JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE
BORROWER HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEM WITH OFFICES
ON THE DATE HEREOF AT 1633 BROADWAY, NEW YORK, NEW YORK 10019 AS ITS
AGENT FOR SERVICE OF PROCESS IN NEW YORK (HEREIN WITH RESPECT TO THE
BORROWER, ITS "PROCESS AGENT"). SERVICE OF PROCESS MAY BE MADE UPON THE
BORROWER BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO IT IN CARE
OF THE PROCESS AGENT AT THE PROCESS AGENT'S RELEVANT ADDRESS AND THE
BORROWER HEREBY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
IN ANY SUIT, ACTION OR PROCEEDING IN NEW YORK ARISING OUT OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT BY THE MAILING OF COPIES OF SUCH
PROCESS TO IT AT ITS ADDRESS FOR NOTICES SET FORTH BELOW ITS SIGNATURE
HERETO. THE BORROWER 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 BORROWER 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 BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.13 WAIVER OF JURY TRIAL
THE AGENT, THE LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHTS THEY 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 OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN), OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER. THE
BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF
EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO
THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT.
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<PAGE>
IN WITNESS WHEREOF, the parties 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.
AMAX GOLD INC., as the Borrower
By: Leland O. Erdahl
Name Printed: LELAND O. ERDAHL
Title: VICE PRESIDENT & CHIEF FINANCIAL
OFFICER
Address for Notices: 9100 East Mineral Circle
Englewood
Colorado 80112
U.S.A.
Facsimile No.: 1-303-643-5507
Attention: Chief Financial Officer
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<PAGE>
Commitment Amount
- -----------------
U.S.$40,000,000 STANDARD BANK LONDON LIMITED
individually as a Lender and as
the Agent
By: S. L. Sharpe
Name Printed: S. L. SHARPE
Title: ASSISTANT GENERAL MANAGER
By: K. Russell
Name Printed: KELVIN RUSSELL
Title: ASSISTANT GENERAL MANAGER
Address
for Notices: Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
Facsimile No: 0171 815 3099
Attention: Steven L.C. Sharpe
Lending
Office: Barclays Bank plc
75 Wall Street
New York, New York
U.S.A.
For the account of: Standard Bank London Limited
A/C No.: 050-03587-8
Facsimile No.: 0171-815 4284
Attention: Mark Turner
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EXHIBIT A
to
Loan Agreement
BORROWING REQUEST
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
England
Attention: Mark Turner
RE: AMAX GOLD INC. LOAN AGREEMENT
-----------------------------
Dear Sirs
This Borrowing Request (this "REQUEST") is delivered to you pursuant to Section
-------
2.2 of the Loan Agreement dated as of December 18, 1997 (the "LOAN AGREEMENT")
- ---
between (1) Amax Gold Inc., a Delaware corporation (the "BORROWER"), (2) the
banks and other financial institutions party thereto (the "LENDERS"), and (3)
Standard Bank London Limited, as Agent for the Lender Parties. Unless otherwise
defined herein or the context otherwise requires, terms used herein have the
meanings provided in, and shall be interpreted in accordance with, the Loan
Agreement.
The Borrower hereby requests that on [ ] (the
"BORROWING DATE") Loans in the principal amount of $______________________ be
made to the Borrower for an Interest Period of [one/three/six] months.
The Borrower, individually for itself and for the Guarantor and with respect to
matters hereinbelow relating to it and the Guarantor, certifies, represents and
warrants, as may be relevant, to the Lender Parties that on the date of this
Request (and both immediately before and after giving effect to the Loans to be
made pursuant hereto but, if any Default of the nature of Section 8.1.5 of the
-------------
Loan Agreement shall have occurred with respect to any other Indebtedness,
without giving effect to the application, directly or indirectly, of the
proceeds of such Loans to such other Indebtedness):
(a) the representations and warranties of the Borrower set forth in
Article 6 of the Loan Agreement and the Guarantor set forth in
---------
Article 3 of the Guaranty Agreement are and shall be true and correct
---------
with the same effect as if then made (unless stated to relate solely
to an earlier date, in which case such representations and warranties
were true and correct as of such earlier date); and
(b) no Default has occurred and is continuing or will have occurred and
be continuing.
-1-
<PAGE>
The Borrower hereby agrees that if prior to the Borrowing Date any matter
certified or warranted to herein by it will not be true and correct at such time
as if then made, it will immediately so notify the Agent. Except to the extent,
if any, that prior to the Borrowing Date, the Administrative Agent shall receive
written notice to the contrary from the Borrower, each matter certified or
warranted to herein shall be deemed to be certified or warranted, as the case
may be, at the Borrowing Date as if then made.
The Borrower hereby requests that the proceeds of the Loans requested hereby be
credited into the following account of the Borrower: [ ].
The Borrower has caused this Request to be executed and delivered, and the
certifications, representations and warranties contained herein to be made, by
its duly Authorized Representative this [ ] day of December, 1997.
AMAX GOLD INC.
By:______________________________________________
Name Printed: ______________________________
Title: ____________________________________
-2-
<PAGE>
EXHIBIT B
to
Loan Agreement
INTEREST PERIOD SELECTION NOTICE
__________________________, [199./200.]
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
England
Attention: Mark Turner
RE: AMAX GOLD INC. LOAN AGREEMENT
-----------------------------
Dear Sirs
This Interest Period Selection Notice (this "NOTICE") is delivered to you
pursuant to Section 2.4 of the Loan Agreement dated as of December 18, 1997 (the
-----------
"LOAN AGREEMENT") among (1) Amax Gold Inc., a Delaware corporation (the
"BORROWER"), (2) the banks and other financial institutions party thereto (the
"LENDERS") and (3) Standard Bank London Limited, as Agent for the Lender
Parties. Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in, and shall be interpreted in
accordance with, the Loan Agreement.
The Borrower hereby requests that on [ ] [199./200.] [all]/[a portion
of] the Loans, presently in the principal amount of [$ ]/1/ be
continued with an Interest Period of [one/three/six] months.
The Borrower, individually for itself and for the Guarantor and with respect to
matters hereinbelow relating to it and the Guarantor, certifies, represents and
warrants, as may be relevant, to the Lender Parties that on the date of this
Notice (and both immediately before and after giving effect to the continuation
of the Loans to be made pursuant hereto):
(a) the representations and warranties of the Borrower set forth in
Article 6 of the Loan Agreement and the Guarantor set forth in
---------
Article 3 of the Guaranty Agreement are and shall be true and correct
---------
with the same effect as if then made (unless stated to relate solely
to an earlier date, in which case such representations and warranties
were true and correct as of such earlier date); and
- --------------------------
/1/ Partial conversions only permitted in multiples of $5,000,000.
-1-
<PAGE>
(b) no Default has occurred and is continuing or will have occurred and
be continuing.
The Borrower hereby agrees that if prior to the continuation requested hereby
any matter certified or warranted to herein by it will not be true and correct
at such time as if then made, it will immediately so notify the Agent. Except to
the extent, if any, that prior to the time of the continuation requested hereby,
the Agent shall receive written notice to the contrary from the Borrower, each
matter certified or warranted to herein shall be deemed to be certified or
warranted, as the case may be, at the date of the continuation subject of this
Notice as if then made.
The Borrower has caused this Notice to be executed and delivered, and the
certifications, representations and warranties contained herein to be made, by
its duly Authorized Representative this [ ] day of [ ], [199./200.].
AMAX GOLD INC.
By: ______________________________
Name Printed: ____________________
Title: __________________________
-2-
<PAGE>
EXHIBIT C
to
Loan Agreement
LENDER ASSIGNMENT AGREEMENT
, [199./200.]
------------------------
Amax Gold Inc.
9100 East Mineral Circle
Englewood
Colorado 80112
U.S.A.
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
England
Attention: Steve Sharpe
RE: AMAX GOLD INC. LOAN AGREEMENT
-----------------------------
Dear Sirs
We refer to the Loan Agreement, dated as of December 18, 1997 (the "LOAN
AGREEMENT") among (1) Amax Gold Inc., a Delaware corporation (the "BORROWER"),
(2) the banks and other financial institutions party thereto (the "LENDERS") and
(3) Standard Bank London Limited, as Agent for the Lender Parties. Unless
otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in, and shall be interpreted in accordance with, the
Loan Agreement.
This Lender Assignment Agreement (this "AGREEMENT") is delivered to you pursuant
to Section 10.11.1(b) of the Loan Agreement and also constitutes notice to each
-------------------
of you, pursuant to clause Section 10.11.1(a) of the Loan Agreement, of the
-------------------
assignment and delegation to [name of commercial lender or other financial
institution] (the "ASSIGNEE LENDER") of a [Commitment Amount in the amount of
$ ] [principal amount of Loans in the amount of $_________]
---------------------
under the Loan Agreement on the date hereof. After giving effect to the
foregoing assignment and delegation, the Commitment Amount and principal amount
of Loans, to the extent applicable, of each of the Assignor Lender and the
Assignee Lender for the purposes of the Loan Agreement shall be as set forth
opposite each such Person's name on the signature pages hereof.
[Add paragraph describing agreement with respect to accrued interest and fees to
date of assignment.]
-1-
<PAGE>
The Assignee Lender hereby acknowledges and confirms that it has received a copy
of the Loan Agreement and the other Loan Documents, together with copies of the
other documents which were required to be delivered under the Loan Agreement as
a condition to the making of the Loans thereunder (collectively, the "CONDITION
PRECEDENT DOCUMENTS"). The Assignee Lender further confirms and agrees that in
becoming a Lender and in extending its Commitments, if any, and making its
Loans, if any, under the Loan Agreement (and without prejudice to the provisions
of Article 9 of the Loan Agreement), such actions have and will be made without
---------
recourse to, or representation or warranty by any Lender Party.
The Assignee Lender additionally confirms that, prior to executing this
Agreement, it has independently of the Assignor Lender and each other Person,
and based on the Condition Precedent Documents and such other documents,
information and investigations as it has deemed appropriate, made its own
decision to enter into this Agreement and assume the Assignor Lender's
Commitments (if any) and outstanding Loans and that it will, independently of
the Assignor Lender and each other Person, and based on such other documents,
information and investigations as it shall deem appropriate at any time,
continue to make its own credit decisions as to exercising or not exercising
from time to time any rights and privileges available to it under any Loan
Document.
For the avoidance of doubt, the Assignor Lender makes no representation of any
kind under this Agreement, other than that it is transferring its interest in
its Commitments (if any) and its outstanding Loans to the Assignee Lender, free
and clear of any Liens.
Except as otherwise provided in the Loan Agreement, effective as of the date of
acceptance of this Agreement by the Administrative Agent:
(a) the Assignee Lender:
(i) shall be deemed automatically to have become a party to the Loan
Agreement and each other relevant Loan Document and have all the
rights and obligations of a "Lender" under the Loan Agreement and the
other Loan Documents as if it were an original signatory thereto to
the extent of its Percentage (determined after giving effect to this
Agreement); and
(ii) agrees to be bound by the terms and conditions set forth in the Loan
Agreement and the other Loan Documents as if it were an original
signatory thereto; and
(b) the Assignor Lender shall be released from its obligations under the Loan
Agreement and the other relevant Loan Documents to the extent of the
Percentage specified in the second paragraph hereof.
The Assignor Lender and the Assignee Lender hereby agree that the [Assignor
Lender] [Assignee Lender]/1/ will pay to the Agent the processing fee referred
to in Section 10.11.1 of the Loan Agreement upon the delivery hereof.
- ------------------------------------------
/1/ Delete as appropriate.
-2-
<PAGE>
The Assignee Lender hereby advises each of you of the following administrative
details and requests the Administrative Agent to acknowledge receipt of this
Agreement:
(A) Address for Notices:
Telex No.:
Facsimile No.:
Attention:
Lending Office:
Telex No.:
Facsimile No.:
Attention:
(B) Payment Instructions:
This Agreement may be executed by the Assignor Lender and Assignee Lender in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
This Agreement shall be deemed to be a contract made under and governed by the
internal laws of the State of New York.
Commitment Amount [ASSIGNOR LENDER]
- -----------------
$ By: ................
- ---------------------------- Name Printed: ................
Title: ................
Principal Amount of Loans
- ----------------------------
$
- ----------------------------
Commitment Amount [ASSIGNEE LENDER]
- ----------------------------
-3-
<PAGE>
$ By: ...............
- ---------------------------- Name Printed: ...............
Title: ...............
Principal Amount of Loans
- ----------------------------
$
- ----------------------------
-4-
<PAGE>
Accepted and Acknowledged this . day of . [199.]/[200.]
STANDARD BANK LONDON LIMITED
By: ....................................
Name Printed: ....................................
Title: ....................................
By: ....................................
Name Printed: ....................................
Title: ....................................
-5-
<PAGE>
EXHIBIT D
to
Loan Agreement
PROCESS AGENT ACCEPTANCE
Standard Bank London Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
England
Attention: Steve Sharpe
RE: AMAX GOLD INC. LOAN AGREEMENT
- ---------------------------------
Dear Sirs,
This Process Agent Acceptance (the "ACCEPTANCE") is delivered to you pursuant to
Section 5.3 of the Loan Agreement, dated as of December 18 1997 (the "LOAN
- ------------
AGREEMENT"), among (1) Amax Gold Inc., a Delaware corporation (the "BORROWER"),
(2) the banks and other financial institutions party thereto (the "LENDERS") and
(3) Standard Bank London Limited, as Agent for the Lenders. Unless otherwise
defined herein or the context otherwise requires, terms used herein have the
meanings provided in, and shall be interpreted in accordance with, the Loan
Agreement.
Attached hereto are copies of letters in which each of the Borrower and the
Guarantor have appointed the undersigned CT Corporation, located at 1633
Broadway, New York, New York 10019 as agent for service of process (in such
capacity, the "PROCESS AGENT") in connection with each Loan Document listed
below to which such Person is a party in each case as such process may be served
for purposes of any proceeding in any state court of the State of New York or
the United States District Court for the Southern District of New York. The
appointments, each of which has been accepted by the undersigned, are as
follows:
(a) the Borrower in connection with the Loan Agreement; and
(b) the Guarantor in connection with the Guaranty Agreement.
The term of each of the above appointments is for a period of six (6) years
commencing on the date of execution of this Acceptance. The undersigned
acknowledges that it has received all fees from the relevant Persons for each of
the foregoing appointments required to be paid for the entire term of this
Acceptance.
<PAGE>
We undertake to inform you of any circumstance whereby any of the foregoing
Persons may be in breach of its obligations with respect to its appointment of
the undersigned as Process Agent.
Very truly yours,
CT CORPORATION
By:
Name Printed:
Title:
Accepted this day of , 1997
STANDARD BANK LONDON LIMITED
By:
Name Printed:
Title:
By:
Named Printed:
Title:
<PAGE>
EXHIBIT 10.22
THIS GUARANTY AGREEMENT, dated as of December 18, 1997 (this "AGREEMENT")
BETWEEN:
(1) CYPRUS AMAX MINERALS COMPANY, a Delaware corporation (the "GUARANTOR"),
and
(2) STANDARD BANK LONDON LIMITED, a company organized and existing under the
laws of England ("STANDARD BANK"), in its capacity as the Agent for the
Lenders (in such capacity, the "AGENT").
W I T N E S S E T H:
(A) Pursuant to a Loan Agreement, dated as of December 18, 1997 (the "LOAN
AGREEMENT"), between (1) Amax Gold Inc., a Delaware corporation, as the
borrower (the "BORROWER"), (2) the banks and other financial institutions
party thereto, as the Lenders (the "LENDERS"), and (3) Standard Bank, as
the Agent for the Lenders, the Lenders have extended Commitments to make
Loans to the Borrower.
(B) The Guarantor owns 58.8% of the issued and outstanding share capital of
the Borrower.
(C) In consideration of the Lenders agreeing to extend the Commitments to make
their Loans to the Borrower under the Loan Agreement, the Guarantor has
agreed, inter alia, to guarantee the due and punctual payment of the
Borrower's obligations at all times prior to the Final Maturity Date (such
and other capitalized terms used as defined in Article 1), as more
---------
particularly set forth in this Agreement.
(D) This Agreement is the Guaranty Agreement referred to in the Loan Agreement,
and it is a condition precedent to the obligation of the Lenders to make
their Loans that the Guarantor execute and deliver this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged by the Guarantor, the Guarantor undertakes and
agrees, for the ratable benefit of each Lender Party, as follows:
1. DEFINITIONS; INTERPRETATION
1.1 LOAN AGREEMENT TERMS. Capitalized terms used but not defined herein
(including in the preamble and recitals) have the meanings provided in the
Loan Agreement. This Agreement is a Loan Document, and shall be
interpreted and construed in accordance with the terms and provisions of
the Loan Agreement (including Sections 1.4 and 1.6 thereof).
------------ ---
1.2 DEFINED TERMS. In this Agreement (including its preamble and recitals), the
following capitalized terms shall have the following meanings:
-1-
<PAGE>
"AGENT" is defined in the preamble.
--------
"AGREEMENT" is defined in the preamble.
--------
"BORROWER" is defined in the first recital.
-------------
"GUARANTEED OBLIGATIONS" is defined in Section 2.1(a).
--------------
"GUARANTY" is defined in Section 2.1(a).
--------------
"LENDERS" is defined in the first recital.
-------------
"LOAN AGREEMENT" is defined in the first recital.
-------------
"STANDARD BANK" is defined in the preamble.
--------
2. GUARANTY
2.1 GUARANTY OF THE BORROWER'S OBLIGATIONS
(a) The Guarantor hereby absolutely, unconditionally and irrevocably
guarantees (the "GUARANTY"), for the ratable benefit of the Lender
Parties, the full and punctual payment when due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise, of all Obligations of the Borrower to any Lender Party now
or hereafter existing under or in connection with the Loan Agreement
(other than Section 10.3 thereof) and each other Loan Document to
which the Borrower is or may become a party, whether for principal,
interest, fees, expenses or otherwise (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) and 506(b) of the Bankruptcy Code or any other similar
provisions arising under Applicable Law; all such amounts referred to
as the "GUARANTEED OBLIGATIONS") and indemnifies and holds harmless
each Lender Party for any and all reasonable and documented costs and
expenses (including reasonable attorney's fees and expenses) incurred
by such Lender Party in enforcing against the Borrower any rights
under this Section.
(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 claim or demand or enforce any remedy whatsoever against the
Borrower or any other Person before or as a condition to the
obligations of the Guarantor under the Guaranty.
(c) The Guarantor agrees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the Loan Agreement and each
other Loan Document under which they arise, regardless of any
Applicable Law affecting any of such terms or the rights of any Lender
Party with respect thereto.
-2-
<PAGE>
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 or otherwise,
all as though such payment had not been made.
2.3 WAIVER
The Guarantor hereby waives promptness, diligence, notice of acceptance and
any other notice with respect to any of the Guaranteed Obligations and the
Guaranty, and any requirement that any Lender Party exhaust any right or
take any action against the Borrower or any other Person (including any
other guarantor) or any collateral at any time securing any Guaranteed
Obligations.
2.4 GUARANTY ABSOLUTE, ETC
This Agreement shall become effective upon the making of the Loans in
accordance with Section 2.2 of the Loan Agreement and shall remain in full
force and effect until all Guaranteed Obligations have been paid and
performed in full. The liability of the Guaranty 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 Loan Document;
(b) the failure of any Lender Party to assert any claim or demand or to
enforce any right or remedy against the Borrower or any other Person
(including any other guarantor) under the provisions of the Loan
Agreement or any other Loan Document or otherwise;
(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
Obligations 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 the Borrower 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 or
any other Loan Document;
(f) any addition, exchange, release, surrender or non-perfection of any
collateral, 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
-3-
<PAGE>
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of the Borrower.
The Guarantor agrees that the Guaranty is intended to be an "instrument for
the payment of money only" within the meaning of Section 3213 of the New
York Civil Practice Law and Rules.
2.5 SUBROGATION, ETC.
The Guarantor will not exercise any rights which it may acquire by reason
of any payment made hereunder, whether by way of subrogation, reimbursement
or otherwise, until the prior payment in full of the Guaranteed
Obligations. Any amount paid to the Guarantor on account of any payment
made hereunder prior to the payment in full of all Guaranteed Obligations
shall be held in trust for the benefit of the Lender Parties and shall
immediately be paid to the Agent (for the ratable benefit of the Lender
Parties) and credited and applied against the Guaranteed Obligations,
whether matured or unmatured, in accordance with the terms of the Loan
Agreement; provided, however, upon the payment in full of all Guaranteed
-------- -------
Obligations, the Guarantor and the Agent agree that, at the Guarantor's
request and expense, the Agent will execute and deliver to the Guarantor
appropriate documents (without recourse and without representation or
warranty except to the effect that the Agent shall not have theretofore
transferred or otherwise disposed of any such interest) necessary to
evidence the transfer by subrogation to the Guarantor of an interest in the
Guaranteed Obligations from such payment by the Guarantor. In furtherance
of the foregoing, for so long as any Guaranteed Obligations remain
outstanding, the Guarantor shall refrain from taking any action or
commencing any proceeding adverse to the interests of the Lender Parties
against the Borrower (whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Agreement to the Lender Parties.
2.6 INDEMNITY AND EXPENSES
In addition to similar obligations contained in this Agreement and each
other Loan Document, the Guarantor hereby indemnifies and holds harmless
each Lender Party from and against any and all claims, losses and
liabilities arising out of or resulting from this Agreement (including the
enforcement hereof), except claims, losses or liabilities resulting from
such Lender Parties' gross negligence or wilful misconduct. Upon demand,
the Guarantor will pay to the Agent the amount of any and all reasonable
expenses, including the reasonable fees and disbursements of its counsel,
on full indemnity basis, and of any experts and agents, which the Agent may
incur in connection with:
(a) the administration of this Agreement;
(b) the exercise or enforcement of any of the rights of the Agent or the
other Lender Parties hereunder; or
(c) the failure by the Guarantor to perform or observe any of the
provisions hereof.
3. REPRESENTATIONS AND WARRANTIES
-4-
<PAGE>
In order to induce the Lender Parties to enter into the Loan Agreement and,
in the case of the Lenders, to make and continue Loans thereunder, the
Guarantor individually for itself and with respect to matters hereinafter
relating to it represents and warrants unto each Lender Party as set forth
in this Article. The representations and warranties set forth in this
Article shall be deemed to have been made upon the delivery of the
Borrowing Request and each Interest Period Notice and on the Borrowing Date
and on the effective date of any Interest Period Notice.
3.1 ORGANIZATION, POWER, AUTHORITY, ETC
The Guarantor is a corporation validly organized and existing and in good
standing under the laws of the State of Delaware and has corporate power
and authority to own its property and assets and to carry on its business
in every jurisdiction where such qualification is necessary except where
the failure to so qualify would not result in a material adverse effect on
the business, assets, operations or condition (financial or otherwise) of
the Guarantor and its Subsidiaries on a consolidated basis. The Guarantor
has corporate power and authority to enter into and perform its obligations
under this Agreement executed or to be executed by it.
3.2 DUE AUTHORIZATION; NON-CONTRAVENTION
The execution and delivery by the Guarantor of this Agreement and the
performance by the Guarantor of its obligations hereunder (i) have been
duly authorized by all requisite corporate action, (ii) will not violate
(A) any provision of law, any order of any court, or any rule, regulation
or order of any other agency of government, (B) the Organic Documents of
the Guarantor or (C) any provision of any material indenture, agreement or
other instrument to which the Guarantor is a party, or by which the
Guarantor or any of its properties or assets are or may be bound; and (iii)
will not be in conflict with, result in a breach of or constitute (alone,
with notice, with lapse of time, or with any combination of these factors)
a default under any indenture, agreement or other instrument referred to in
Clause (ii)(C).
--------------
3.3 VALIDITY, ETC.
This Agreement constitutes the legal, valid, and binding obligation of the
Guarantor enforceable in accordance with its terms subject, as to
enforcement and remedies only, to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws of general applicability relating to
or affecting creditors' rights from time to time in effect and to general
principles of equity (regardless of whether such enforcement is considered
in a proceeding at law or in equity).
3.4 PARI PASSU
The payment Obligations of the Guarantor under this Agreement rank at least
pari passu in right of payment with all of the Guarantor's other unsecured
and unsubordinated Indebtedness.
4. COVENANTS
The Guarantor agrees with each Lender Party that, until all Commitments
have terminated and all Guaranteed Obligations have been paid and performed
in full, it will perform its obligations set forth in this Article.
4.1 MAINTENANCE OF CORPORATE EXISTENCE
-5-
<PAGE>
The Guarantor will do and will cause to be done at all times all things
necessary to maintain and preserve its corporate existence and will do and
cause to be done at all times all things necessary to be duly qualified to
do business and be in good standing (where such concept is relevant) as a
foreign corporation in each jurisdiction where the nature of its business
makes such qualification necessary.
4.2 PARI PASSU
The Guarantor will ensure that its payment Obligations under this Agreement
rank at least pari passu in right of payment with all of the Guarantor's
unsecured and unsubordinated Indebtedness.
5. MISCELLANEOUS
5.1 WAIVERS, AMENDMENTS, ETC
(a) 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 Agent (acting with
the approval of all the Lenders).
(b) No failure or delay on the part of the 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 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.
5.2 NOTICES
All notices and other communications provided to any party hereto under
this Agreement shall be in writing and shall be sent by hand delivery,
courier delivery, by telex (if the receiving party shall have telex
facilities) or by 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 party. Any notice, if sent by hand delivery or courier
delivery, shall be deemed received when delivered; and any notice, if
transmitted by telex or facsimile, shall be deemed given when transmitted
(answerback confirmed in the case of telexes and transmission confirmed by
the sending facsimile machine in the case of facsimiles).
5.3 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 Agent, to the ratable benefit of the
Lender Parties) and their respective successors and assigns; provided,
--------
however, that:
-------
(a) the Guarantor may not assign or transfer its rights or obligations
hereunder without the prior written consent of the Agent and all the
Lenders; and
-6-
<PAGE>
(b) the rights of sale, assignment and transfer of the Agent and the
Lenders are subject to Article 9 and Section 10.11 of the Loan
--------- -------------
Agreement.
5.4 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.
5.5 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.
5.6 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) This Agreement constitutes the entire understanding between the
parties hereto with respect to the subject matter hereof and
supersedes any prior agreements, written or oral, or documents with
respect thereto.
5.7 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 AGENT OR THE
GUARANTOR SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW
YORK OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK AND IN ADDITION ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER 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 AND 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 IN NEW YORK AND THE GUARANTOR HEREBY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR
-7-
<PAGE>
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 OF
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.
5.8 WAIVER OF JURY TRIAL
THE AGENT AND THE GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY 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 AGENT AND THE GUARANTOR. THE
GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER
LOAN DOCUMENT TO WHICH IT IS A PARTY). THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENT ENTERING INTO THIS AGREEMENT.
5.9 INCORPORATION BY REFERENCE
The Guarantor and the Agent agree that the provisions of Sections 4.6, 4.7,
4.8, 4.9 and 4.12 of the Loan Agreement (to the extent that such provisions
would be applicable to the Guarantor's payment provisions hereunder) are
incorporated by reference mutatis mutandis as if set forth herein, except
that each reference to the "Borrower" shall be deemed a reference to the
"Guarantor".
-8-
<PAGE>
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.
-9-
<PAGE>
CYPRUS AMAX MINERALS COMPANY
By: G. J. Malys
Name Printed: GERALD J. MALYS
Title: SENIOR VICE PRESIDENT
Address for notices: 9100 East Mineral Circle
Englewood
Colorado 80112
U.S.A.
Facsimile No: 1-303-643-5269
Attention: Treasurer
STANDARD BANK LONDON LIMITED, in its
capacity as the Agent
By: S. L. Sharpe
Name Printed: S. L. SHARPE
Title: ASSISTANT GENERAL MANAGER
By: K. Russell
Name Printed: KELVIN RUSSELL
Title: ASSISTANT GENERAL MANAGER
Address for notices: Cannon Bridge House
25 Dowgate Hill
London EC4R 2SB
England
Facsimile: 0171 815 3099
Attention: Steven L.C. Sharpe
-10-
<PAGE>
EXHIBIT 10.24
AMAX GOLD INC.
SEPARATION PLAN FOR KEY EMPLOYEES
EFFECTIVE MARCH 5, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS AND CONSTRUCTION............ 1
1.1. Definitions.................................. 1
1.2. Gender and Number............................ 4
ARTICLE II - BENEFITS............................... 4
2.1. Eligibility for Benefits..................... 4
2.2. Amount of Benefit............................ 5
2.3. Offset....................................... 7
2.4. Certain Additional Payments.................. 7
2.5. Source of Benefits........................... 9
ARTICLE III - ADMINISTRATION........................ 9
3.1. Administrator and Named Fiduciary............ 9
3.2. Duties and Powers of the Administrator....... 10
3.3. Disputes..................................... 10
3.4. Indemnification.............................. 11
3.5. Statement of ERISA Rights.................... 11
3.6. General Information.......................... 12
ARTICLE IV - AMENDMENT AND TERMINATION.............. 13
4.1. Power of Amendment and Termination........... 13
4.2. Automatic Termination of Plan................ 13
4.3. Disposition of Benefits Upon Termination..... 13
ARTICLE V - MISCELLANEOUS........................... 14
5.1. Effect on Employment......................... 14
5.2. Alienation of Benefits....................... 14
5.3. Facility of Payment.......................... 14
5.4. Lost Distributees............................ 14
5.5. Controlling Provisions....................... 14
5.6. Severability................................. 14
5.7. Withholding.................................. 14
5.8. Governing Law................................ 15
</TABLE>
GENERAL RELEASE OF CLAIMS (Individual Termination)
GENERAL RELEASE OF CLAIMS (Group Termination)
i
<PAGE>
AMAX GOLD INC.
SEPARATION PLAN FOR KEY EMPLOYEES
---------------------------------
Amax Gold Inc. has established a plan to provide severance pay for its eligible
key employees under certain limited circumstances. This document sets forth
provisions which constitute the Amax Gold Inc. Separation Plan for Key
Employees.
ARTICLE I - DEFINITIONS AND CONSTRUCTION
----------------------------------------
1.1 Definitions. Whenever used in this Plan:
-----------
"Accounting Firm" means, for the purposes of Section 2.4, Price
---------------
Waterhouse or such other certified public accounting firm as may be designated
by the Eligible Employee and agreed to by the Administrator.
"Administrator" means the party identified in Section 3.1.
-------------
"AGI" means Amax Gold Inc.
---
"Benefits" means payments according to the terms of Article II in the
--------
event of the Separation from Service of an Eligible Employee.
"Board of Directors" means the Board of Directors of AGI or the
------------------
Compensation Committee of the Board of Directors of AGI, which has authority
with respect to the Plan.
"Change of Control" means the happening of any of the following
-----------------
events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning
------
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1)
the then outstanding shares of Common Stock (the "Outstanding Company Common
--------------------------
Stock") or (2) the combined voting power of the then outstanding voting
- -----
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
-------------------------------------
the following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company, or
(iv) any acquisition by any corporation pursuant to a transaction described in
Clauses (i), (ii) and (iii) of Paragraph (c) of this definition; or
(b) Individuals who, as of March 5, 1997, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
---------------
majority of the Board of Directors; provided, however, that any individual
becoming a director subsequent to March 5, 1997, whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
<PAGE>
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation (a "Business Combination"), in each case, unless,
--------------------
following such Business Combination,
(1) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 80% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company through one
or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(2) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination, and
(3) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of:
(1) a complete liquidation or dissolution of the Company or
(2) the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with respect to which
following such sale or other disposition,
(i) more than 80% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to
2
<PAGE>
such sale or other disposition, in substantially the same proportion as their
ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be,
(ii) less than 20% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by any Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation), except to the extent that such
Person owned 20% or more of the Outstanding Company Common Stock or Outstanding
Company Voting Securities prior to the sale or disposition, and
(iii) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of the Board, providing
for such sale or other disposition of assets of the Company or were elected,
appointed or nominated by the Board.
"Code" means the Internal Revenue Code of 1986, as amended, and any
----
regulations or other guidance issued thereunder.
"Company" means AGI and any of its subsidiaries.
-------
"Comparable Employment" means the employment of an Eligible Employee
---------------------
by an employer in a position that (a) is reasonably comparable without
substantial diminution of duties to the position the Eligible Employee held
immediately prior to the Change of Control, (b) pays substantially the same
Compensation, and (c) is entitled to participate in an incentive plan at
substantially the same long-term incentive award level in effect for the
Eligible Employee immediately prior to the Change of Control.
"Compensation" means an Eligible Employee's annual base salary plus
------------
target bonus in effect at the Eligible Employee's Separation from Service not
including any other bonus, back-pay or other awards, or contributions to any
employee benefit plan; provided, however, that any portion of the Eligible
Employee's salary reduction for elective deferrals under a cash or deferred
arrangement sponsored by the Company and elective contributions under any
cafeteria plan sponsored by the Company to the extent attributable to base
salary or target bonus shall be included.
"Cyprus Amax" means Cyprus Amax Minerals Company and any of its
-----------
subsidiaries and affiliates.
"Effective Date" means March 5, 1997.
--------------
3
<PAGE>
"Eligible Employee" means any key employee of the Company who is
-----------------
salary grade 17 or higher at his Separation from Service, excluding any officer
who has an employment or similar agreement with the Company that provides
benefits in the event of a "change of control," or substantially similar event
as set forth in such agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Excise Tax" means, for purposes of Section 2.4, the excise tax
----------
imposed under Section 4999 of the Code together with any interest or penalties
incurred by the Eligible Employee with respect to such excise tax.
"Gross-Up Payment" means an additional payment to the Eligible
----------------
Employee in accordance with Section 2.4.
"Pay" means 1/52 of the Eligible Employee's Compensation.
---
"Plan" means the Amax Gold Inc. Separation Plan for Key Employees, as
----
set forth herein and as amended from time to time.
"Separation from Service" means the date an Eligible Employee
-----------------------
terminates employment with the Company as a result of a Change of Control.
"Severance Plan" means the Amax Gold Inc. Severance Plan, which
--------------
provides severance pay benefits to salaried employees under certain limited
circumstances, as amended from time to time.
"Successor" means the purchaser, transferee, or such other successor
---------
of AGI, the assets of AGI, any subsidiary of AGI, or the assets of such
subsidiary as a result of a Change of Control, or any parent, subsidiary, or
affiliate of such successor.
1.2 Gender and Number. Except where otherwise clearly indicated by
-----------------
context, the masculine shall include the feminine and the singular shall include
the plural, and vice versa.
ARTICLE II - BENEFITS
---------------------
2.1 Eligibility for Benefits.
------------------------
(a) Except as set forth in Subsections (b) and (c), an Eligible
Employee who incurs a Separation from Service and meets the terms and conditions
of the Severance Plan for a benefit payment due to a "change of control," as
such term is defined in the Severance Plan, shall be eligible to receive
Benefits.
4
<PAGE>
(b) Notwithstanding Subsection (a) or any other provision of this
Plan, an Eligible Employee is not entitled to Benefits in any of the following
situations:
(1) AGI or Cyprus Amax offers the Eligible Employee Comparable
Employment within the Company or Cyprus Amax, as applicable, in lieu of
Separation from Service, regardless whether the Eligible Employee accepts such
offer; provided, however, neither the Company nor Cyprus Amax have any
obligation to offer such employment;
(2) the Eligible Employee has a Separation from Service, and a
Successor offers the Eligible Employee Comparable Employment following the
Change of Control regardless whether the Eligible Employee accepts such offer;
or
(3) there exists a special situation or circumstance for which it
is necessary to establish a separate policy disallowing severance pay, on a
group or individual basis, as determined by the Administrator in its sole
discretion.
(c) Notwithstanding Subsection (a) or any other provision of the Plan,
an Eligible Employee shall not be eligible to receive Benefits unless the
Eligible Employee:
(1) has performed his job assignments satisfactorily and to the
best of his abilities until his Separation from Service;
(2) has abided by the terms of any and all agreements, if any,
between the Eligible Employee and the Company relating to confidentiality and
noncompetition until his Separation from Service and continues to do so on and
after his Separation from Service; or
(3) executes a general release of claims in the form that AGI
prescribes for this purpose and returns it to the Administrator by the date that
will be specified by the Administrator. By executing this agreement of general
release, the Eligible Employee will release any and all claims that he may have
against the Company, including without limitation any claim in any way connected
with his employment or separation therefrom. A copy of the general release of
claims, as in effect as of the Effective Date, is attached hereto as Appendix A.
AGI reserves the right to modify in whole or in part this general release of
claims for any reason and at any time.
If any Eligible Employee ceases to abide by the terms of any confidentiality and
noncompetition agreement with the Company after his Benefits have commenced, the
Administrator may, in its discretion, require the Eligible Employee to repay any
amounts that the Eligible Employee has already received in Benefits.
2.2 Amount of Benefit.
-----------------
(a) Subject to Section 2.3, an Eligible Employee who has a Separation
from Service, meets the requirements of Section 2.1, and whom the Administrator
in its sole discretion determines to be eligible for Benefits shall receive
Benefits in the following amount based on his salary grade at his Separation
from Service:
5
<PAGE>
<TABLE>
<CAPTION>
Salary Grade Benefits
------------ --------
<S> <C>
Exempt 17 52 weeks of Pay
Exempt 18 78 weeks of Pay
Exempt 19 78 weeks of Pay
Exempt 20 104 weeks of Pay
Exempt 21 104 weeks of Pay
President 156 weeks of Pay
</TABLE>
(b) The Benefits for which an Eligible Employee is eligible pursuant
to Sections 2.1 and 2.2 shall be paid in a single lump sum payment as soon as
administratively practicable following such Eligible Employee's Separation from
Service.
(c) Notwithstanding any provision of this Plan to the contrary, if an
Eligible Employee has entered into an individual agreement with the Company that
provides for the payment of severance pay or salary continuance as a result of a
"change of control," as defined therein, and such agreement is in effect on the
Eligible Employee's Separation from Service, no Benefits shall be payable to the
Eligible Employee under this Plan.
(d) Notwithstanding any provision of this Plan to the contrary, if an
Eligible Employee accepts an offer of Comparable Employment made by the Company,
Cyprus Amax, or any successor where such offer is made at any time within 78
weeks of his Separation from Service, the Eligible Employee shall repay to AGI
that portion of his Benefit equal to:
(1) (i) for salary grade 17, 52 weeks, and
(ii) for all other salary grades and the President, 78 weeks;
reduced by
(2) the number of full weeks between the Eligible Employee's
Separation from Service and the Eligible Employee's reemployment date.
(e) The Company will endeavor to provide notice of termination of an
Eligible Employee to that Eligible Employee in advance of the Separation from
Service, but such notice may not always be possible or practical. Any Benefits
shall be reduced by the amount of any payment by the Company to the Eligible
Employee:
(1) because of insufficient advance notice of employment loss as
may be required by law or
(2) required by law because of the termination of employment.
2.3 Offset. The Benefits for which an Eligible Employee is eligible
------
under Section 2.2 shall be reduced by:
(a) such Eligible Employee's indebtedness to the Company; and
6
<PAGE>
(b) any amount which may be due to such Eligible Employee under the
Severance Plan or any other severance plan, policy or program sponsored by the
Company.
2.4 Certain Additional Payments.
---------------------------
(a) Anything in this Plan to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any payment or
distribution by AGI to or for the benefit of the Eligible Employee (whether paid
or payable or distributed or distributable pursuant to the terms of this Plan or
otherwise, but determined without regard to any additional payments required
under this Section 2.4) (a "Payment") would be subject to the Excise Tax, then
-------
the Eligible Employee shall be entitled to receive a Gross-Up Payment in an
amount such that after payment by the Eligible Employee of all taxes (including
any interest or penalties imposed with respect to such taxes), including,
without limitation, any income federal, state and local taxes (and any interest
and penalties imposed with respect thereto), the Hospital Insurance Tax portion
of the FICA tax, and Excise Tax imposed upon the Gross-Up Payment, the Eligible
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 2.4(a), if it shall be determined that the Eligible Employee is entitled
to a Gross-Up Payment, but that the Eligible Employee, after taking into account
the Payments and the Gross-Up Payment, would not receive net after-tax proceeds
of at least $50,000 (taking into account both income taxes and any Excise Tax)
more than the net after-tax proceeds to the Eligible Employee resulting from an
elimination of the Gross-Up Payment and a reduction of the Payments, in the
aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments
--------------
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to
the Eligible Employee and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 2.4(c), all determinations
required to be made under this Section 2.4, including whether and when a Gross-
Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
the Accounting Firm, which shall provide detailed supporting calculations both
to AGI and the Eligible Employee within 15 business days of the receipt of
notice from the Eligible Employee that there has been a Payment, or such earlier
time as is requested by AGI. In the event that the Accounting Firm is serving
as accountant or auditor for the individual, entity or group effecting the
Change of Control, the Eligible Employee shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by AGI. Any
Gross-Up Payment, as determined pursuant to this Section 2.4, shall be paid by
AGI to the Eligible Employee within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon AGI and the Eligible Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by AGI should have been made ("Underpayment") consistent
------------
with the calculations required to be made hereunder. In the event that AGI
exhausts its remedies pursuant to Section 2.4(c) and the Eligible Employee
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
7
<PAGE>
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by AGI to or for the benefit of the Eligible
Employee.
(c) The Eligible Employee shall notify AGI in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
AGI of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Eligible Employee is
informed in writing of such claim and shall apprise AGI of the nature of such
claim and the date on which such claim is requested to be paid. The Eligible
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to AGI (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If AGI notifies the Eligible Employee in writing prior to the expiration of such
period that AGI desires to contest such claim, the Eligible Employee shall:
(1) give AGI any information reasonably requested by AGI relating
to such claim,
(2) take such action in connection with contesting such claim as
AGI shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by AGI,
(3) cooperate with AGI in good faith in order to effectively
contest such claim, and
(4) permit AGI to participate in any proceedings relating to such
claim;
provided, however, that AGI shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Eligible Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 2.4(c), AGI shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Eligible Employee to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Eligible Employee shall agree to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as AGI
shall determine; provided, however, that if AGI directs the Eligible Employee to
pay such claim and sue for a refund, AGI shall advance the amount of such
payment to the Eligible Employee, on an interest-free basis and shall indemnify
and hold the Eligible Employee harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of
8
<PAGE>
the Eligible Employee with respect to which such contested amount is claimed to
be due is limited solely to such contested amount. Furthermore, AGI's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Eligible Employee shall be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Eligible Employee of an amount
advanced by AGI pursuant to Section 2.4(c), the Eligible Employee becomes
entitled to receive any refund with respect to such claim, the Eligible Employee
shall (subject to AGI's complying with the requirements of Section 2.4(c))
promptly pay to AGI the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt by
the Eligible Employee of an amount advanced by AGI pursuant to Section 2.4(c), a
determination is made that the Eligible Employee shall not be entitled to any
refund with respect to such claim and AGI does not notify the Eligible Employee
in writing of its intent to contest such denial of refund prior to the
expiration of 60 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
(e) If an Eligible Employee fails to comply with the requirements of
this Section 2.4, he shall forfeit any right to any payment that is described in
this Section 2.4.
2.5 Source of Benefits. All Benefits shall be paid exclusively by AGI
------------------
out of its general assets. AGI shall have no obligation to fund the Plan.
ARTICLE III - ADMINISTRATION
----------------------------
3.1 Administrator and Named Fiduciary.
---------------------------------
(a) AGI shall be the named fiduciary which shall control and manage
the operation of the Plan and shall administer the Plan. AGI may delegate to
any person, committee of persons, or entity any or all of its powers or duties
under the Plan. To the extent of any such delegation, the delegate shall become
the named fiduciary responsible for the administration of the Plan (if the
delegate is a fiduciary by reason of the delegation) and references to AGI shall
apply instead to the delegate. Such delegate shall serve at the pleasure of
AGI. To the extent individuals serving as delegates are directors, officers, or
employees of AGI, the delegation should not be deemed a delegation of the AGI's
responsibility, but rather shall be treated as the manner in which AGI has
determined internally to discharge such responsibility. AGI shall reimburse all
delegates described in this Section 3.1 for expenses they incur as delegates.
(b) AGI has delegated its authority to the Amax Gold Inc. Benefits
Committee. The Committee shall act in accordance with its own internal
procedures.
3.2 Duties and Powers of the Administrator.
--------------------------------------
9
<PAGE>
(a) The Administrator shall have complete and discretionary authority
to construe and interpret the Plan, correct defects, supply omissions, and
reconcile inconsistencies and ambiguities in and with respect to the Plan. The
decisions and actions of the Administrator shall be final, binding and
conclusive upon each Eligible Employee and all other persons or parties
interested or concerned.
(b) In addition to the duties and powers described elsewhere
hereunder, the Administrator shall have the following additional duties and
powers:
(1) to retain such consultants, accountants and attorneys as may
be deemed necessary or desirable to render statements, reports and advice with
respect to the Plan and to assist AGI in complying with all rules and
regulations affecting the Plan;
(2) to decide appeals under this Article;
(3) to enact such rules for administration as it considers
desirable provided they do not conflict with any specific provision of the Plan;
(4) to determine eligibility for Benefits and resolve questions or
disputes relating to eligibility for Benefits or the amount of Benefits;
(5) to evaluate administrative procedures; and
(6) to delegate such duties and powers as AGI may determine from
time to time to any person or persons.
3.3 Disputes. If an Eligible Employee believes he has not received
--------
Benefits to which he is entitled, he may file a claim for such Benefits with the
Administrator. This claim must be filed within 90 days of his Separation from
Service or, if the claim concerns the cessation of Benefits after they have
commenced, within 90 days of the date on which Benefits ceased.
(a) If the Administrator denies, in whole or in part, a claim for
Benefits, AGI shall notify the claimant of the Administrator's decision in
writing. AGI's notice of denial shall state:
(1) the specific reasons for denial with specific reference to
pertinent Plan provisions upon which the denial is based;
(2) a description of any additional materials or information
necessary for the claimant to perfect the claim and an explanation of why such
materials or information is necessary; and
(3) an explanation of the Plan's claim review procedure.
(b) Within 60 days of receipt of a notice of claim denial, a claimant
or his duly authorized representative may petition the Administrator in writing
for a full and fair
10
<PAGE>
review of the denial. The claimant or his duly authorized representative shall
have the opportunity to review pertinent documents and to submit issues and
comments in writing to the Administrator. The Administrator shall review the
denial and shall communicate its decision and the reasons therefor to the
claimant in writing within 60 days of receipt of the petition; provided,
however, that in special circumstances the Administrator may extend the response
period for up to an additional 60 days, in which event it shall notify the
claimant in writing prior to the commencement of the extension. The appeals
procedure set forth in this Subsection (b) shall be the exclusive means for
contesting a decision denying benefits under the Plan.
3.4 Indemnification. Each person who is the Administrator or director
---------------
of the Company shall be indemnified and held harmless by the Company against and
with respect to all damages, losses, obligations, liabilities, liens,
deficiencies, costs and expenses, including without limitation, reasonable
attorney's fees and other costs incident to any suit, action, investigation,
claim or proceedings to which he may be a party by reason of his performance of
administrative functions and duties under the Plan, except in relation to
matters as to which he shall be held liable for an act of willful misconduct in
the performance of his duties. The foregoing right to indemnification shall be
in addition to such other rights as the individual may enjoy as a matter of law
or contract or by reason of insurance coverage of any kind. Rights granted
hereunder shall be in addition to and not in lieu of any rights to
indemnification to which the individual may be entitled pursuant to the by-laws
of the Company.
3.5 Statement of ERISA Rights. As a participant in the Plan, an
-------------------------
Eligible Employee is entitled to certain rights and protections under ERISA.
ERISA provides that all plan participants shall be entitled to:
(a) Examine without charge plan documents and copies of all plan
documents filed with the U.S. Department of Labor, such as detailed annual
reports and plan descriptions, to the extent that AGI is required to maintain
and/or file such documents under law. The documents may be examined at the
Administrator's office and at other specific locations such as work sites.
(b) Obtain copies of all Plan documents and other Plan information
upon written request to the Administrator, who may make a reasonable charge for
the copies.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people, called "fiduciaries," who are responsible for the
operation of the employee benefit plan. The Plan fiduciaries have a duty to
operate the Plan prudently and in the interest of Plan participants.
The Company may not discharge a Plan participant or otherwise
discriminate against a participant in any way to prevent him from obtaining a
benefit or exercising his rights under ERISA. If a Plan participant's claim for
a Benefit is denied in whole or in part, the participant must receive a written
explanation of the reason for the denial. The participant has the right to have
the claim reviewed and reconsidered.
11
<PAGE>
Under ERISA, there are steps a Plan participant can take to enforce
the above rights. For instance, if a participant requests materials from the
Plan which AGI is required to maintain and provide and does not receive them
within 30 days, the participant may file suit in federal court. The court may
require the Administrator to provide the materials and pay the participant up to
$110 a day until he receives them (unless the materials were not sent because of
reasons beyond the Administrator's control). If a claim for benefits is denied
in whole or in part, or ignored, the participant may file suit in a state or
federal court. If Plan fiduciaries misuse the Plan's money, or discriminate
against a participant for asserting his rights, the participant may seek
assistance from the U.S. Department of Labor, or file suit in a federal court.
If successful, the court may order the person sued to pay court costs and legal
fees. if the participant loses, the court may order him to pay these costs and
fees, for example, if it finds that the claim is frivolous.
If a participant has any questions about the Plan, he may contact the
Administrator. If a participant has any questions about this document or about
his rights under ERISA, he should contact the nearest Area Office of the U.S.
Labor - Management Services Administration, Department of Labor.
3.6 General Information.
-------------------
(a) Plan Sponsor:
Amax Gold Inc.
9100 East Mineral Circle
Englewood, CO 80112
Telephone: (303) 643-5532
(b) Administrator:
Amax Gold Inc. Benefits Committee
9100 East Mineral Circle
Englewood, CO 80112
Telephone: (303) 643-5532
(c) Employer Identification Number: 06-1199974
(d) Plan Number: 515
(e) Plan Year: January 1 - December 31
(f) Type of Plan: Unfunded welfare benefit plan, known as the Amax
Gold Inc. Separation Plan for Key Employees.
(g) Agent for Service of Legal Process:
12
<PAGE>
General Counsel
Amax Gold Inc.
9100 East Mineral Circle
Englewood, CO 80112
(h) Type of Administration: The Plan is self-administered by AGI.
ARTICLE IV - AMENDMENT AND TERMINATION
--------------------------------------
4.1 Power of Amendment and Termination. AGI reserves the right, whether
----------------------------------
in an individual case or generally, to amend or terminate the Plan, in whole or
in part, at any time by or pursuant to action of the Board of Directors.
(a) Amendments that do not significantly affect the cost of the Plan
or that may be necessary to meet the requirements of the ERISA or other
applicable law may be adopted by the Administrator or appropriate officers of
AGI as delegated by the Administrator in accordance with its operating
procedures.
(b) Any action to terminate the Plan prior to the date identified in
Section 4.2 shall be effective only if each Eligible Employee is provided with
90 days advance written notice of such termination.
4.2 Automatic Termination of Plan. Unless earlier terminated pursuant
-----------------------------
to Section 4.1, the Plan shall automatically terminate as of the close of
business on December 31, 1999.
4.3 Disposition of Benefits Upon Termination. In the event the Plan is
----------------------------------------
terminated in whole or in part, AGI shall have no obligation to make any further
payments under the Plan to Eligible Employees or any other individual, except
for Eligible Employees who have had a Separation from Service before the
effective date of plan termination shall be entitled to receive Benefits, and
AGI shall recognize liability with respect to such payments.
ARTICLE V - MISCELLANEOUS
-------------------------
5.1 Effect on Employment. This Plan shall not confer upon a person any
--------------------
right to be employed by, or to be continued in the employment of, the Company
and shall not constitute a contract for such employment or continued employment.
5.2 Alienation of Benefits. The Benefits under this Plan may not be
----------------------
assigned or alienated, voluntarily or involuntarily.
5.3 Facility of Payment. If the Administrator deems any person
-------------------
incapable of receiving Benefits to which he is entitled by reason of minority,
illness, infirmity, or other
13
<PAGE>
incapacity, it may direct that payment be made for the benefit of such person
directly to any person selected by the Administrator as qualified to disburse
it. To the extent thereof, such payments shall completely discharge all
liability of the Company, the Board and the Administrator.
5.4 Lost Distributees. If the Administrator is unable to locate an
-----------------
Eligible Employee to whom payment is due after making reasonable efforts to
locate such Eligible Employee, any Benefits shall be forfeited.
5.5 Controlling Provisions. In the event of any discrepancy, conflict
----------------------
or inconsistency between this Plan document and any other documents or
communications related to Benefits, whether in writing or otherwise, the
provisions of this Plan document shall control.
5.6 Severability. If any provision of the Plan shall be held invalid or
------------
unenforceable by a court of competent jurisdiction, the Plan shall continue to
operate and, for the purposes of the jurisdiction of that court only, shall be
deemed not to include the provisions determined to be void.
5.7 Withholding. The Company shall have the right to withhold any and
-----------
all state, local and Federal taxes which may be due in accordance with
applicable law.
5.8 Governing Law. Except to the extent superseded by the ERISA, the
-------------
Plan shall be governed by and construed in accordance with the laws of the State
of Colorado.
Executed as of the 5th day of March, 1998.
[SEAL] AMAX GOLD INC.
By: /s/ S. Scott Shellhaas
Title: President and Chief Operating Officer
Attest: /s/ Deborah J. Friedman
14
<PAGE>
(Individual Termination)
GENERAL RELEASE OF CLAIMS
KNOW BY ALL THESE PRESENTS, that I, ________________________, [NAME]
for myself, my heirs, administrators, executors, agents, beneficiaries and
assigns, in consideration of the promises and mutual covenants contained herein,
and other good and valuable consideration, the receipt of which is acknowledged
hereby, agree as follows.
1. CONSIDERATION. AGI (as defined in Section 2(b) below) has
advised me that my employment is being terminated effective
____________________. I have elected to receive severance pay from the Amax
Gold Inc. Separation Plan for Key Employees (the "Plan") in the gross amount of
________________, less all ordinary deductions for local, state or federal
taxes, FICA, and other deductions which are required or authorized by law to be
withheld. I agree that I will execute and be bound by this General Release of
Claims in exchange for the above stated payment which AGI shall provide. In
exchange for the foregoing, I agree that:
2. GENERAL RELEASE OF CLAIMS AND COVENANT NOT TO SUE. I hereby
waive, release and forever discharge AGI (as defined in Section 2(b) below) of
and from any and all Claims (as defined in Section 2(a) below). I agree not to
file a lawsuit to assert any such Claim. This General Release covers all Claims
arising from the beginning of time up to and including the date of this General
Release, but does not cover Claims relating to the validity or enforcement of
this Release.
A. DEFINITION OF "CLAIMS". For purposes of this General
Release, "Claims" includes without limitation all actions or demands of any kind
that I now have, or may have or claim to have in the future. More specifically,
Claims include all rights, causes of action, demands, grievances, damages,
penalties, losses, attorneys' fees, costs, expenses, obligations, agreements,
judgments and all other liabilities of any kind or description whatsoever,
either in law or equity, whether known or unknown, suspected or unsuspected.
The nature of Claims covered by this General Release and covenant
not to sue includes without limitation all actions or demands in any way based
on my employment with AGI, my separation from employment and all terms and
conditions of my employment, including all rights and entitlements under the
Plan.
More specifically, all of the following are among the types of
Claims which will be barred by this General Release and covenant not to sue:
. Contract Claims (whether express or implied);
. Tort Claims, such as for defamation or emotional distress;
. Claims under federal, state and municipal laws, regulations,
ordinance or court decisions of any kind;
. Claims of discrimination, harassment or retaliation, whether
based on race, color, religion, gender, sex, age, sexual
orientation, handicap and/or disability, national origin or any
other legally protected class;
1
<PAGE>
. Claims under the AGE DISCRIMINATION IN EMPLOYMENT ACT, Title VII
of the Civil Rights Act of 1964, as amended, the Americans with
Disabilities Act and similar state and municipal ordinances;
. Claims under the Employee Retirement Income Security Act of 1974,
as amended, the Fair Labor Standards Act, state wage payment laws
and state wage and hour laws; and
. Claims for wrongful discharge.
B. DEFINITION OF "AGI". For purposes of this General Release,
"AGI" includes without limitation Amax Gold Inc. and its respective past,
present and future parents, affiliates, subsidiaries, divisions, predecessors,
successors, assigns, employee benefit plans and trusts. It also includes all
past, present and future managers, directors, officers, partners, agents,
employees, attorneys, representatives, consultants, associates, fiduciaries,
administrators and trustees of each of the foregoing.
3. CONFIDENTIAL INFORMATION. In addition to any existing common law
obligation to do so, I hereby promise and covenant for all time that all
confidential information (whether written, graphic, oral, committed to memory or
otherwise in my possession) regarding the operations and businesses of AGI will
remain strictly confidential and secret. This includes without limitation the
terms of this General Release, which I agree shall be deemed to be secret. I
understand and agree that AGI does not authorize or permit me to make disclosure
of any such information except as may be necessary to enforce the terms of this
General Release.
4. RETURN OF PROPERTY. I agree to promptly return all AGI property
of any kind or character. I understand that this includes employee
identification cards, any AGI equipment, books, keys, journals, tapes, computer
disks, records, publications, files, memoranda and documents of any kind or
description, or any other AGI property which may be in my possession. I agree
to settle all expense account advances that I have received as an employee and
any other indebtedness prior to ____________________[DATE].
5. LAST DAY OF EMPLOYMENT. My last day of employment by AGI will be
_________________[DATE].
6. SEVERABILITY. I understand, and it is my intent, that in the
event this General Release is ever held to be invalid and unenforceable (in
whole or in part) as to any particular type of Claim or as to any particular
circumstances, this General Release will remain fully valid and enforceable as
to all other Claims and circumstances.
7. CONSIDERATION PERIOD. I acknowledge that I have ben provided
with a period of twenty-one (21) days to consider the terms of the General
Release of Claims contained herein from the date this General Release first was
presented to me on ________________________[DATE]. I further agree to notify
AGI of my acceptance of this General Release by delivering a signed and
notarized copy to AGI, addressed to the attention of
_________________________[NAME] on or before ____________________[DATE AT LEAST
21 DAYS FROM THE ABOVE DATE]. I agree that any changes to this offer, whether
material or immaterial, will not restart the running of the 21-day period.
2
<PAGE>
I understand that I may take the entire 21-day period to consider this
General Release. I may return this General Release in less than the full 21-day
period only if my decision to shorten the consideration period is knowing and
voluntary and was not induced in any way by AGI.
8. REVOCATION PERIOD. I acknowledge that I will have seven (7) days
after signing this General Release to revoke it if I choose to do so. If elect
to revoke this General Release, I will give written notice to AGI by delivering
it to _______________________[NAME] in such manner that it is actually received
within the 7-day period. This General Release will not take effect and I will
not be paid the amount indicated in Section 1 above until the expiration of the
revocation period without my electing to revoke it.
9. ADVICE TO CONSULT LEGAL REPRESENTATIVE. I acknowledge that I
have been advised to consult with legal counsel of my choosing, at my own
expense, regarding the meaning and binding effect of this General Release and
each and every term hereof prior to executing it.
10. CERTIFICATION OF UNDERSTANDING AND COMPETENCE. Intending to be
legally bound hereby, I certify and warrant that I have carefully read this
General Release and have executed it voluntarily and with full knowledge and
understanding of its significance, meaning and binding effect. I acknowledge
that in executing this General Release I have not relied on any representation
or statement not set forth in this General Release and that the terms of this
General Release may not be modified orally. I further declare that I am
competent to understand the content and effect of this General Release.
____________________________________________
[NAME]
Date: ______________________________________
Sworn to and Subscribed Before Me
This ___________ Day of _____________,
19___________.
_____________________________________
Notary Public
3
<PAGE>
(Group Termination)
GENERAL RELEASE OF CLAIMS
KNOW BY ALL THESE PRESENTS, that I, ________________________, [NAME]
for myself, my heirs, administrators, executors, agents, beneficiaries and
assigns, in consideration of the promises and mutual covenants contained herein,
and other good and valuable consideration, the receipt of which is acknowledged
hereby, agree as follows.
1. CONSIDERATION. AGI (as defined in Section 2(b) below) has
advised me that my employment is being terminated effective __________________.
I have elected to receive severance pay from the Amax Gold Inc. Separation Plan
for Key Employees (the "Plan") in the gross amount of ________________, less all
ordinary deductions for local, state or federal taxes, FICA, and other
deductions which are required or authorized by law to be withheld. I agree that
I will execute and be bound by this General Release of Claims in exchange for
the above stated payment which AGI shall provide. In exchange for the foregoing,
I agree that:
2. GENERAL RELEASE OF CLAIMS AND COVENANT NOT TO SUE. I hereby
waive, release and forever discharge AGI (as defined in Section 2(b) below) of
and from any and all Claims (as defined in Section 2(a) below). I agree not to
file a lawsuit to assert any such Claim. This General Release covers all Claims
arising from the beginning of time up to and including the date of this General
Release, but does not cover Claims relating to the validity or enforcement of
this Release.
A. DEFINITION OF "CLAIMS". For purposes of this General
Release, "Claims" includes without limitation all actions or demands of any kind
that I now have, or may have or claim to have in the future. More specifically,
Claims include all rights, causes of action, demands, grievances, damages,
penalties, losses, attorneys' fees, costs, expenses, obligations, agreements,
judgments and all other liabilities of any kind or description whatsoever,
either in law or equity, whether known or unknown, suspected or unsuspected.
The nature of Claims covered by this General Release and covenant
not to sue includes without limitation all actions or demands in any way based
on my employment with AGI, my separation from employment and all terms and
conditions of my employment, including all rights and entitlements under the
Plan.
More specifically, all of the following are among the types of
Claims which will be barred by this General Release and covenant not to sue:
. Contract Claims (whether express or implied);
. Tort Claims, such as for defamation or emotional distress;
. Claims under federal, state and municipal laws, regulations,
ordinance or court decisions of any kind;
. Claims of discrimination, harassment or retaliation, whether
based on race, color, religion, gender, sex, age, sexual
orientation, handicap and/or disability, national origin or any
other legally protected class;
1
<PAGE>
. Claims under the AGE DISCRIMINATION IN EMPLOYMENT ACT, Title VII
of the Civil Rights Act of 1964, as amended, the Americans with
Disabilities Act and similar state and municipal ordinances;
. Claims under the Employee Retirement Income Security Act of 1974,
as amended, the Fair Labor Standards Act, state wage payment laws
and state wage and hour laws; and
. Claims for wrongful discharge.
B. DEFINITION OF "AGI". For purposes of this General Release,
"AGI" includes without limitation Amax Gold Inc. and its respective past,
present and future parents, affiliates, subsidiaries, divisions, predecessors,
successors, assigns, employee benefit plans and trusts. It also includes all
past, present and future managers, directors, officers, partners, agents,
employees, attorneys, representatives, consultants, associates, fiduciaries,
administrators and trustees of each of the foregoing.
3. CONFIDENTIAL INFORMATION. In addition to any existing common law
obligation to do so, I hereby promise and covenant for all time that all
confidential information (whether written, graphic, oral, committed to memory or
otherwise in my possession) regarding the operations and businesses of AGI will
remain strictly confidential and secret. This includes without limitation the
terms of this General Release, which I agree shall be deemed to be secret. I
understand and agree that AGI does not authorize or permit me to make disclosure
of any such information except as may be necessary to enforce the terms of this
General Release.
4. RETURN OF PROPERTY. I agree to promptly return all AGI property
of any kind or character. I understand that this includes employee
identification cards, any AGI equipment, books, keys, journals, tapes, computer
disks, records, publications, files, memoranda and documents of any kind or
description, or any other AGI property which may be in my possession. I agree
to settle all expense account advances that I have received as an employee and
any other indebtedness prior to ____________________[DATE].
5. LAST DAY OF EMPLOYMENT. My last day of employment by AGI will be
_________________[DATE].
6. SEVERABILITY. I understand, and it is my intent, that in the
event this General Release is ever held to be invalid and unenforceable (in
whole or in part) as to any particular type of Claim or as to any particular
circumstances, this General Release will remain fully valid and enforceable as
to all other Claims and circumstances.
7. CONSIDERATION PERIOD. I acknowledge that I have ben provided
with a period of forty-five (45) days to consider the terms of the General
Release of Claims contained herein from the date this General Release first was
presented to me on ________________________[DATE]. I further agree to notify
AGI of my acceptance of this General Release by delivering a signed and
notarized copy to AGI, addressed to the attention of
_________________________[NAME] on or before ____________________[DATE AT LEAST
45 DAYS FROM THE ABOVE DATE]. I agree that any changes to this offer, whether
material or immaterial, will not restart the running of the 45-day period.
2
<PAGE>
I understand that I may take the entire 45-day period to consider this
General Release. I may return this General Release in less than the full 45-day
period only if my decision to shorten the consideration period is knowing and
voluntary and was not induced in any way by AGI.
8. REVOCATION PERIOD. I acknowledge that I will have seven (7) days
after signing this General Release to revoke it if I choose to do so. If elect
to revoke this General Release, I will give written notice to AGI by delivering
it to _______________________[NAME] in such manner that it is actually received
within the 7-day period. This General Release will not take effect and I will
not be paid the amount indicated in Section 1 above until the expiration of the
revocation period without my electing to revoke it.
9. ADVICE TO CONSULT LEGAL REPRESENTATIVE. I acknowledge that I
have been advised to consult with legal counsel of my choosing, at my own
expense, regarding the meaning and binding effect of this General Release and
each and every term hereof prior to executing it.
10. CERTIFICATION OF UNDERSTANDING AND COMPETENCE. Intending to be
legally bound hereby, I certify and warrant that I have carefully read this
General Release and have executed it voluntarily and with full knowledge and
understanding of its significance, meaning and binding effect. I acknowledge
that in executing this General Release I have not relied on any representation
or statement not set forth in this General Release and that the terms of this
General Release may not be modified orally. I further declare that I am
competent to understand the content and effect of this General Release.
11. GROUP ACKNOWLEDGMENT. I acknowledge that I have been provided
with a description of the group of individuals covered by this severance
opportunity, any eligibility factors and applicable time limits, the job titles
and ages of employees eligible for or selected for the current severance, as
well as the ages of employees in the same job classification or unit who have
not been selected or are not eligible.
____________________________________________
[NAME]
Date: ______________________________________
Sworn to and Subscribed Before Me
This ___________ Day of _____________,
19___________.
_____________________________________
Notary Public
3
<PAGE>
EXHIBIT 10.25.
MERGER AGREEMENT
AMONG
KINROSS GOLD CORPORATION,
KINROSS MERGER CORPORATION,
AND
AMAX GOLD INC.
DATED
FEBRUARY 9, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
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Page
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<S> <C>
Article I GENERAL........................................................... 2
Section 1.01 Defined Terms................................................. 2
Section 1.02 Merger........................................................ 2
Section 1.03 Charter and By-laws; Directors and Officers................... 2
Section 1.04 No Separate Identity.......................................... 2
Section 1.05 Effectiveness................................................. 2
Section 1.06 Conversion and Amendment of Shares............................ 3
Section 1.07 Treasury Shares, Etc.......................................... 3
Section 1.08 Amax Preferred Shares......................................... 3
Section 1.09 Options, Etc.................................................. 3
Section 1.10 Amax Stock Options and Restricted Stock....................... 4
Section 1.11 No Fractional Shares.......................................... 5
Section 1.12 Stock Transfer Books.......................................... 5
Section 1.13 Exchange of Certificates...................................... 5
Section 1.14 Corporate Governance.......................................... 6
Article II REPRESENTATIONS AND WARRANTIES OF AMAX........................... 7
Section 2.01 Organization and Good Standing................................ 7
Section 2.02 Consents, Authorizations, and Binding Effect.................. 7
Section 2.03 SEC Documents; Financial Statements........................... 9
Section 2.04 Title and Condition of Assets................................. 10
Section 2.05 Insurance..................................................... 10
Section 2.06 Litigation and Compliance..................................... 10
Section 2.07 Taxes......................................................... 11
Section 2.08 Pension and Other Employee Plans and Agreements............... 12
Section 2.09 Labor Relations............................................... 14
Section 2.10 Contracts, Etc................................................ 15
Section 2.11 Absence of Certain Changes, Etc............................... 16
Section 2.12 Subsidiaries.................................................. 16
Section 2.13 Capitalization................................................ 17
Section 2.14 Environmental Matters......................................... 18
Section 2.15 Brokers....................................................... 18
Section 2.16 Intercorporate Indebtedness................................... 19
Section 2.17 Reserve Reports and Reserve Estimates......................... 19
Section 2.18 Fairness Opinions............................................. 19
Article III REPRESENTATIONS AND WARRANTIES OF KINROSS AND
MERGER CORP..................................................... 19
Section 3.01 Organization and Good Standing................................ 19
Section 3.02 Consents, Authorizations, and Binding Effect.................. 20
Section 3.03 Securities Documents; Financial Statements.................... 21
Section 3.04 Title and Condition of Assets................................. 22
Section 3.05 Insurance..................................................... 22
Section 3.06 Litigation and Compliance..................................... 23
Section 3.07 Taxes......................................................... 23
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C>
Section 3.08 Pension and Other Employee Plans and Agreements....................... 24
Section 3.09 Labor Relations....................................................... 26
Section 3.10 Contracts, Etc........................................................ 27
Section 3.11 Absence of Certain Changes, Etc....................................... 27
Section 3.12 Subsidiaries.......................................................... 28
Section 3.13 Capitalization........................................................ 29
Section 3.14 Environmental Matters................................................. 30
Section 3.15 Brokers............................................................... 30
Section 3.16 Valid Issuance of Kinross Shares...................................... 30
Section 3.17 Reserve Reports and Reserve Estimates................................. 31
Section 3.18 Ownership of Merger Corp.; No Prior Activities; Assets of Merger Corp. 31
Section 3.19 Cash on Hand.......................................................... 31
Section 3.20 Opinions.............................................................. 31
Article IV COVENANTS OF AMAX........................................................ 32
Section 4.01 Access................................................................ 32
Section 4.02 Ordinary Course....................................................... 32
Section 4.03 Insurance............................................................. 34
Section 4.04 Closing Conditions.................................................... 35
Section 4.05 Amax Stockholders' Approval........................................... 35
Section 4.06 Rule 145 Affiliates................................................... 35
Section 4.07 No Shop............................................................... 35
Section 4.08 Information in Joint Proxy Statement and Canadian Prospectus.......... 37
Article V KINROSS AND MERGER CORP.'S COVENANTS...................................... 38
Section 5.01 Access................................................................ 38
Section 5.02 Ordinary Course....................................................... 38
Section 5.03 Insurance............................................................. 40
Section 5.04 Closing Conditions.................................................... 41
Section 5.05 Kinross Shareholders' Approval........................................ 41
Section 5.06 Stock Exchange Listing................................................ 41
Section 5.07 No Shop............................................................... 41
Section 5.08 Information in Registration Statement and Joint Proxy Statement....... 44
Section 5.09 Compliance with Canadian Securities Laws.............................. 44
Article VI OTHER COVENANTS OF THE PARTIES........................................... 44
Section 6.01 Consents and Notices.................................................. 44
Section 6.02 Joint Proxy Statement and Registration Statement; Equity Offering..... 45
Section 6.03 Press Releases........................................................ 46
Section 6.04 Tax Representation Letters............................................ 46
Section 6.05 Transfer Taxes........................................................ 46
Section 6.06 Indemnification of Directors and Officers............................. 46
Article VII CONDITIONS TO OBLIGATIONS OF KINROSS AND MERGER CORP.................... 47
Section 7.01 Representations and Warranties........................................ 47
Section 7.02 Compliance with Covenants............................................. 48
Section 7.03 No Material Adverse Change............................................ 48
Section 7.04 Consents.............................................................. 48
Section 7.05 Tax Opinion........................................................... 48
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Article VIII CONDITIONS TO OBLIGATIONS OF Amax....................................... 48
Section 8.01 Representations and Warranties........................................ 48
Section 8.02 Compliance with Covenants............................................. 49
Section 8.03 No Material Adverse Change............................................ 49
Section 8.04 Consents.............................................................. 49
Section 8.05 Tax Opinion........................................................... 49
Article IX CONDITIONS TO OBLIGATIONS OF AMAX AND KINROSS............................. 49
Section 9.01 Equity Offering....................................................... 49
Section 9.02 No Injunctions........................................................ 50
Section 9.03 Stock Exchange Approval - Kinross..................................... 50
Section 9.04 Shareholder Approval - Amax........................................... 50
Section 9.05 Securities Filings.................................................... 50
Section 9.06 No Litigation......................................................... 50
Section 9.07 Completion of Transactions............................................ 50
Article X CLOSING AND TERMINATION.................................................... 51
Section 10.01 Closing............................................................... 51
Section 10.02 Termination of this Agreement......................................... 51
Section 10.03 Termination Fee and Expenses Kinross................................. 53
Section 10.04 Termination Fee and Expenses - Amax................................... 54
Article XI MISCELLANEOUS............................................................. 55
Section 11.01 Further Actions....................................................... 55
Section 11.02 Expenses.............................................................. 55
Section 11.03 Entire Agreement...................................................... 55
Section 11.04 Descriptive Headings.................................................. 55
Section 11.05 Notices............................................................... 55
Section 11.06 Governing Law......................................................... 56
Section 11.07 Assignability......................................................... 57
Section 11.08 Employee Benefit Plan................................................. 57
Section 11.09 Remedies.............................................................. 57
Section 11.10 Waivers and Amendments................................................ 57
Section 11.11 Third-Party Rights.................................................... 58
Section 11.12 Illegalities.......................................................... 58
Section 11.13 Currency.............................................................. 58
Section 11.14 Counterparts.......................................................... 59
SCHEDULE A........................................................................... 60
</TABLE>
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MERGER AGREEMENT
THIS AGREEMENT dated February 9, 1998 is made
A M O N G:
KINROSS GOLD CORPORATION, an Ontario corporation
("Kinross");
OF THE FIRST PART
- and -
KINROSS MERGER CORPORATION, a Delaware corporation
and a wholly-owned subsidiary of Kinross ("Merger
Corp.");
OF THE SECOND PART
- and -
AMAX GOLD INC., a Delaware corporation ("Amax");
OF THE THIRD PART
WHEREAS, the common stock, par value $0.01 per share, of Amax ("Amax Shares")
is publicly traded in the United States and Canada and is listed on the TSE and
the NYSE;
WHEREAS, the common shares of Kinross ("Kinross Shares") are publicly traded
in Canada and the United States and are listed on the TSE and the NYSE;
WHEREAS Amax and Kinross have agreed to a merger in which Amax will become a
subsidiary of Kinross and the holders of outstanding Amax Shares at the
Effective Time will have the right to receive Kinross Shares;
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger qualify as a reorganization within the meaning of Section 368(a) of
the Tax Code and that the holders of Amax Shares who will not be "five percent
transferee shareholders" as defined in Treasury Regulation Section 1.367(a)
3(c)(5)(ii) or who enter into five-year gain recognition agreements in the form
provided in Treasury Regulation Section 1.367(a) 3T(g) (the "Eligible Amax
Shareholders") not recognize a taxable gain in the Merger under Section 367(a)
of the Tax Code;
WHEREAS the Significant Shareholder and certain of its subsidiaries, Kinross,
Merger Corp. and Amax are entering into the Stockholder Agreement and Kinross
and the Significant Shareholder are entering into the Investor Agreement
simultaneously with the execution and delivery hereof as a condition to Kinross
entering into this Agreement; and
WHEREAS, Kinross, Merger Corp. and Amax desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to set forth various conditions precedent to completion of the
Merger;
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NOW, THEREFORE, in consideration of the mutual benefits to be derived and the
representations and warranties, conditions and promises herein contained, and
intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
GENERAL
Section 1.01 Defined Terms.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in Schedule A.
Section 1.02 Merger.
In accordance with the terms and provisions of this Agreement, the GCL, and
other applicable Law, at the Effective Time Merger Corp. shall be merged with
and into Amax (the "Merger") and Amax shall be, and is hereinafter sometimes
referred to as, the "Surviving Corporation". Merger Corp. and Amax shall be,
and are hereinafter sometimes referred to as, the "Constituent Corporations".
Section 1.03 Charter and By-laws; Directors and Officers.
(a) The Certificate of Incorporation and the By-laws of Amax shall be
the Certificate of Incorporation and the By-laws of the Surviving
Corporation after the Effective Time, and may thereafter be
amended in accordance with their terms and as provided by law and
this Agreement; and
(b) The directors and officers of Merger Corp. immediately prior to
the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation until their respective
successors are duly elected and qualified.
Section 1.04 No Separate Identity.
The separate existence and the corporate organization of Merger Corp. and Amax,
except insofar as they may continue by statute, shall cease as of the Effective
Time.
Section 1.05 Effectiveness.
The Merger shall not become effective until, and shall become effective at the
point in time at which, a Certificate of Merger (the "Certificate of Merger") in
a form mutually acceptable to the parties shall have been executed by the
Constituent Corporations and filed with the Secretary of State of the State of
Delaware in accordance with Section 251 of the GCL and in accordance with the
terms of this Agreement or at such later time as shall be agreed upon by Amax
and Kinross and specified in the Certificate of Merger. The date and time when
the Merger becomes effective is referred to as the "Effective Time". The
Parties shall cause the Certificate of Merger to be executed and filed as
aforesaid on the Closing Date upon the satisfaction or waiver of the conditions
contained in Articles VII, VIII, and IX.
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Section 1.06 Conversion and Amendment of Shares.
As of the Effective Time, by virtue of the Merger and without any action on the
part of any holder of Amax Shares or Amax Preferred Shares, each outstanding
Amax Share (other than Amax Shares held by Amax, Kinross or Merger Corp.) shall
be converted automatically into 0.8004 fully paid and non-assessable Kinross
Shares (the "Exchange Ratio"). Each outstanding share of the common stock of
Merger Corp. shall, at the Effective Time, be converted automatically into one
share of common stock of the Surviving Corporation and the Surviving Corporation
shall, at or immediately following the Effective Time, issue one share of its
common stock to Kinross for each Amax Share outstanding at the Effective Time as
consideration for the issue of the Kinross Shares in the Merger.
In the event of any stock dividend, stock split, reclassification,
recapitalization, combination or exchange of shares with respect to, or rights
issued in respect of, Kinross Shares or Amax Shares after the date hereof and
prior to the Effective Time, the Exchange Ratio shall be adjusted accordingly so
as to maintain the relative proportionate interests of the holders of Kinross
Shares and the holders of Amax Shares.
Section 1.07 Treasury Shares, Etc.
Each outstanding Amax Share which, immediately prior to the Effective Time, is
held by:
(a) Amax;
(b) Merger Corp.; or
(c) Kinross;
shall be cancelled as of the Effective Time and no consideration shall be paid
or delivered with respect thereto.
Section 1.08 Amax Preferred Shares.
The Amax Preferred Shares shall remain outstanding following the Merger and the
rights, preferences and privileges of the Amax Preferred Shares shall not be
affected by the Merger except:
(a) as provided in the Certificate of Incorporation of Amax;
(b) such Amax Preferred Shares shall, after the Effective Time,
become convertible into the right to receive Kinross Shares in
the manner prescribed in the Certificate of Incorporation of
Amax; and
(c) Amax and Kinross shall take all action necessary so that,
immediately before the Effective Time each Amax Preferred Share
shall be entitled to 1.4 votes per share, voting together as a
class with the Amax Shares (and any other shares of capital stock
of Amax at the time entitled to vote) on all matters submitted to
a vote of stockholders of Amax.
Section 1.09 Options, Etc.
As of the Effective Time, Amax's 1992 Stock Option Plan and the Stock Grant Plan
for Non-Employee Directors shall terminate and cease to be of any further force
or effect, subject to the assumption by
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Kinross, in accordance with Section 1.10, of all stock options outstanding under
such plans as of the Effective Time.
Section 1.10 Amax Stock Options and Restricted Stock.
(a) Prior to the Effective Time, Amax and Kinross shall take all
necessary action such that, as of the Effective Time, each Amax
Stock Option (and related stock appreciation right ("SAR")) that
is outstanding immediately prior to the Effective Time pursuant
to Amax's stock option plans (other than any "stock purchase
plan" within the meaning of Section 423 of the Tax Code) in
effect on the date hereof (the "Stock Plans") shall be assumed by
Kinross and become and represent a fully exercisable option (and
related SAR) to purchase the number of Kinross Shares (a
"Substitute Option") determined by multiplying: (i) the number of
Amax Shares subject to such Amax Stock Option immediately prior
to the Effective Time; by (ii) the Exchange Ratio, at an exercise
price per Kinross Share (rounded up the nearest tenth of a cent)
equal to the exercise price per Amax Share immediately prior to
the Effective Time divided by the Exchange Ratio. Kinross shall
pay cash to holders of Amax Stock Options in lieu of issuing
fractional Kinross Shares upon the exercise of Substitute
Options. As of the Effective Time, each Substitute Option shall
be subject to the same terms and conditions as were applicable
immediately prior to the Effective Time under the related Amax
Stock Option and Stock Plan under which it was granted, including
those providing for the accelerated exercisability and other
special rights arising upon a "Change in Control" in accordance
with the terms of such Stock Plan, including, without limitation,
the optionees' right under the Amax's 1992 Stock Option Plan to
receive the cash value of their Amax Stock Options upon an
election made prior to or within 60 days after the approval of
the Merger by the stockholders of Amax. Holders of Amax Stock
Options who so elect in accordance with the terms of a stock plan
prior to the Effective Time shall be paid the cash value of their
Amax Stock Options immediately following the Effective Time. Amax
agrees to use all reasonable efforts to obtain any necessary
consents of holders of Amax Stock Options and take such other
actions as may be necessary to effect this Section 1.10.
(b) In respect of each Amax Stock Option (and related SAR) as
converted into a Substitute Option pursuant to Section 1.10(a)
and assumed by Kinross, and the Amax Shares underlying such
option, Kinross shall file and keep current a Registration
Statement on Form S-8 (or a post-effective amendment to a
Registration Statement on Form S-8) or other appropriate form for
as long as such options remain outstanding.
(c) As of and after the Effective Time, each person who immediately
prior to the Effective Time held restricted Amax Shares
("Restricted Stock") granted to such person pursuant to Amax's
Key Executive Long-Term Incentive Plan (the "Incentive Plan")
shall have the right to receive the cash value of such Restricted
Stock following the Effective Time upon the terms and conditions
as were applicable to such Restricted Stock under the Incentive
Plan immediately prior to the Effective Time. Members of the
Incentive Plan (other than those members who elect, prior to the
Change in Control, as defined in the Incentive Plan, not to have
the vesting of their Restricted Stock accelerated and the value
of such Restricted Stock paid to them in cash) shall be paid the
cash value of their Restricted Stock immediately following the
Effective Time.
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<PAGE>
(d) The provisions of this Section 1.10 are intended to be for the
benefit of, and shall be enforceable by, each person who is or
has been an employee of Amax or any of its subsidiaries and is a
holder of Amax Stock Options, SARs or Restricted Stock and such
employee's heirs and personal representatives and shall be
binding on all successors and assigns of Kinross.
Section 1.11 No Fractional Shares.
Fractional Kinross Shares shall not be issued in exchange for Amax Shares.
Notwithstanding any other provision of this Agreement, each holder of Amax
Shares converted pursuant to the Merger who would otherwise have been entitled
to receive a fraction of a Kinross Share (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a Kinross Share
multiplied by the Average Closing Price. "Average Closing Price" shall equal
the average closing price of Kinross Shares on the NYSE Composite Tape (as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source) for the ten consecutive trading days ending on the third
trading day immediately preceding the Effective Time. As soon as practicable
after determination of the amount of cash to be paid in lieu of any fractional
shares, the Exchange Agent shall make available in accordance with this
Agreement such amounts to the former holders of Amax Shares.
Section 1.12 Stock Transfer Books.
The stock transfer books of Amax shall be closed as of the Effective Time, and
no transfer of Amax Shares shall be made or consummated thereafter except by the
Surviving Corporation.
Section 1.13 Exchange of Certificates.
(a) Kinross and Amax shall authorize Montreal Trust Company of Canada
(or such other Person as shall be reasonably acceptable to
Kinross and Amax) to act as Exchange Agent hereunder (the
"Exchange Agent"). As soon as practicable after the Effective
Time, Kinross shall deposit with the Exchange Agent for the
benefit of the holders of certificates which immediately prior to
the Effective Time represented Amax Shares (the "Certificates")
certificates representing Kinross Shares and cash in lieu of
fractional shares as provided in Section 1.11 hereof (together
with any dividends or distributions with respect thereto payable
as provided in Section 1.13(c) (the "Exchange Fund") issuable
pursuant to Section 1.06 in exchange for outstanding Amax Shares.
(b) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a Certificate whose
Amax Shares were converted into Kinross Shares pursuant to
Section 1.06 a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual and proper delivery of
the Certificates to the Exchange Agent, shall contain
instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing Kinross
Shares, and shall be in such form and contain such other
provisions as Kinross and Amax may reasonably specify). Upon
surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole
Kinross Shares which such holder has the right to receive
pursuant to this Article and cash in lieu of fractional shares as
provided in Section 1.11 hereof, and the Certificate so
surrendered shall forthwith be canceled. Until surrendered as
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<PAGE>
contemplated by this Section, each Certificate shall, at and
after the Effective Time, be deemed to represent only the right
to receive, upon surrender of such Certificate, a certificate
representing the appropriate number of Kinross Shares and cash in
lieu of fractional shares as provided in Section 1.11 hereof and
certain dividends and other distributions as contemplated by
Section 1.13(c).
(c) No dividends or other distributions that are declared on or after
the Effective Time on Kinross Shares or are payable to the
holders of record thereof on or after the Effective Time will be
paid to persons entitled by reason of the Merger to receive
certificates representing Kinross Shares until such persons
surrender their Certificates, as provided in Section 1.13(b).
Subject to the effect of applicable Law, there shall be paid to
such record holders of the certificates representing such Kinross
Shares:
(i) at the time of such surrender or as promptly as practicable
thereafter, the amount of any dividends or other
distributions theretofore paid with respect to whole
Kinross Shares and having a record date on or after the
Effective Time and a payment date prior to such surrender;
and
(ii) at the appropriate payment date or as promptly as
practicable thereafter, the amount of dividends or other
distributions payable with respect to whole Kinross Shares
and having a record date on or after the Effective Time but
prior to surrender and a payment date subsequent to
surrender.
In no event shall the person entitled to receive such dividends
or other distributions be entitled to receive interest on such
dividends or other distributions. If any cash or certificate
representing Kinross Shares is to be paid to or issued in a name
other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange
that the Certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person
requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of
certificates for such Kinross Shares in a name other than that of
the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable.
(d) Any portion of the Exchange Fund which remains undistributed to
the former stockholders of Amax for one year after the Effective
Time shall be delivered to Kinross, upon demand of Kinross, and
any former stockholders of Amax who have not theretofore complied
with this Section shall thereafter look only to Kinross for
payment of their claim for Kinross Shares and any dividends or
distributions with respect to Kinross Shares. Neither Kinross nor
Amax shall be liable to any holder of Amax Shares for Kinross
Shares (or dividends or distributions with respect thereto)
delivered to a public official pursuant to any applicable
abandoned property, escheat, or similar Law.
Section 1.14 Corporate Governance.
The Board of Directors of Kinross shall make, or if such approval is required,
at the Kinross Shareholders' Meeting shall submit for approval of the holders of
Kinross Shares, amendments to Kinross's Articles of Incorporation or By-laws to
provide that immediately following such meeting the Kinross Board of Directors
shall consist of: (i) four (4) directors ("Class I Directors") who shall have
terms of three years; (ii) three (3) directors ("Class II Directors") who shall
have an initial term of two
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<PAGE>
years and subsequent terms of three years; and (iii) three (3) directors ("Class
III Directors") who shall have an initial term of one year and subsequent terms
of three years. Kinross shall take all action to cause the Board of Directors of
Kinross as of the Effective Time to be comprised of ten (10) directors, five (5)
of whom shall be nominees of Kinross, who are currently members of the Board of
Directors of Kinross, three (3) of whom shall be nominees of the Significant
Shareholder and two (2) of whom shall be nominees of Amax. Of such nominees, at
least three (3) of the Kinross nominees shall be Class I Directors. The Chairman
and Chief Executive Officer and the Vice Chairman of Kinross as of the Effective
Time shall be as set forth in Section 1.14 of each of the Amax and Kinross
Disclosure Letters. Obtaining the Board structure set forth in the first
sentence of this Section 1.14 or the designation set forth in the third sentence
of this Section 1.14 shall not be a condition to consummation of the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF AMAX
Except as set forth in the Amax SEC Documents, Amax hereby represents
and warrants as follows to and in favour of Kinross:
Section 2.01 Organization and Good Standing.
(a) Except as set forth in Section 2.01 of the Amax Disclosure
Letter, Amax and each Amax Group Member is a corporation duly
organized, validly existing, and in good standing under the Laws
of the jurisdiction of its incorporation and is qualified to
transact business and is in good standing as a foreign
corporation in the jurisdictions (which are listed in Section
2.01 of the Amax Disclosure Letter) where it is required to
qualify in order to conduct its business as presently conducted,
except where the failure to be so qualified would not have a
Material Adverse Effect on Amax. Except as listed in Section 2.01
of the Amax Disclosure Letter, there are no subsidiaries of Amax
and none of Amax's subsidiaries has any subsidiaries.
(b) Each Amax Group Member has the corporate power and authority to
own, lease, or operate its properties and to carry on its
business as now conducted.
(c) Amax has heretofore delivered or made available to Kinross
complete and correct copies of Amax's Certificate of
Incorporation and By-laws, as each has been amended and is in
effect on the date hereof.
Section 2.02 Consents, Authorizations, and Binding Effect.
(a) Amax may execute, deliver and perform this Agreement without the
necessity of Amax or any Amax Group Member obtaining any consent,
approval, authorization or waiver, or giving any notice or
otherwise, except:
(i) those disclosed in Section 2.02 of the Amax Disclosure
Letter;
(ii) those, with respect to consents, approvals, authorizations
and waivers, which have been obtained, are unconditional,
and are in full force and effect and, with respect to
notices, which have been given on a timely basis;
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<PAGE>
(iii) the approval of the Merger and the other transactions
contemplated hereby and by the Stockholder Agreement by
the holders of a majority of the outstanding Amax Shares
(including the Significant Shareholder) either at a
meeting of the Amax stockholders duly called and held or
pursuant to approval by written consent pursuant to
Section 228 of the GCL ("Approval by Consent");
(iv) the filing with the SEC of: (A) the Registration
Statement; (B) the Joint Proxy Statement; and (C) such
reports and information under the Exchange Act and the
rules and regulations promulgated by the SEC thereunder,
as may be required in connection with this Agreement and
the transactions contemplated hereby;
(v) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of
other states in which Amax is qualified to do business;
(vi) such as may be required under state takeover laws;
(vii) as may be required under foreign laws, state securities
laws and the rules of the NYSE or the TSE;
(viii) such as may be necessary under the HSR Act;
(ix) such as may be required under the Investment Canada Act
and the Competition Act (Canada); or
(x) those which, if not obtained or made, would not prevent
or delay the consummation of the Merger or otherwise
prevent Amax from performing its obligations under this
Agreement and would not be reasonably likely to have a
Material Adverse Effect on Amax.
(b) Amax has full corporate power and authority to execute and
deliver this Agreement and, subject to the approval of the Merger
and the transactions contemplated hereby and by the Stockholder
Agreement by the holders of Amax Shares at the Amax Stockholders'
Meeting or by way of Approval by Consent, to perform its
obligations hereunder and to consummate the Merger.
(c) The Board of Directors of Amax (at a meeting duly called and
held) has or, in the case of clause (c)(iv) below, will, by the
requisite vote of directors:
(i) determined that the Merger is advisable and fair and in
the best interests of Amax and its shareholders;
(ii) approved the Merger in accordance with the provisions of
Section 251 of the GCL;
(iii) recommended the approval of this Agreement, and the
Merger and the other matters required to be approved in
connection with this Agreement and the Stockholder
Agreement by the holders of the Amax Shares and directed
that the Merger be submitted for consideration by the
Amax stockholders; and
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<PAGE>
(iv) establish as promptly as practicable in compliance with
applicable Law and stock exchange rules, a record date
for Approval by Consent and, if applicable, the Amax
Stockholders' Meeting.
(d) This Agreement has been duly executed and delivered by Amax and
constitutes the legal, valid, and binding obligation of Amax,
enforceable against Amax in accordance with its terms, except:
(i) as may be limited by bankruptcy, reorganization,
insolvency and similar Laws of general application
relating to or affecting the enforcement of creditors'
rights or the relief of debtors; and
(ii) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(e) Except as disclosed in Section 2.02 of the Amax Disclosure Letter
or referenced in clauses (i) through (ix) of Section 2.02(a)
hereof, the execution, delivery, and performance of this
Agreement by Amax will not:
(i) constitute a violation of the respective Certificates or
Articles of Incorporation (or like charter documents) or
By-laws, each as amended, of any Amax Group Member;
(ii) with respect to the Amax Group, conflict with, result in
the breach of or constitute a default or give to others a
right of termination, cancellation or acceleration of any
obligation under, or the loss of any material benefit
under, any Contract to which any Amax Group Member is a
party or as to which any of their respective property is
subject which would have a Material Adverse Effect on
Amax;
(iii) constitute a violation of any Law applicable or relating
to any Amax Group Member or the businesses of the Amax
Group except for such violations which would not have a
Material Adverse Effect on Amax; or
(iv) with respect to the Amax Group, result in the creation of
any Lien upon any of the assets of any Amax Group Member,
other than such Liens as would not have a Material
Adverse Effect on Amax.
Section 2.03 SEC Documents; Financial Statements.
Amax has filed all required documents with the SEC since January 1, 1996 (the
"Amax SEC Documents"). As of their respective dates, the Amax SEC Documents
complied in all material respects with the then applicable requirements of the
Securities Act or the Exchange Act, as the case may be, and, at the respective
times they were filed, none of the Amax SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of Amax
included in the Amax SEC Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto as of their
9
<PAGE>
respective dates of filing, were prepared in accordance with United States
generally accepted accounting principles (except, in the case of the unaudited
statements, as permitted by Regulation S-X of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto) and fairly presented the consolidated financial position of Amax
and its consolidated subsidiaries as of the respective dates thereof and the
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to the absence of footnote disclosure and to normal year-
end audit adjustments and to any other adjustments described therein). Except as
disclosed in the Amax SEC Documents or as required by generally accepted
accounting principles, Amax has not, since September 30, 1997, made any change
in the accounting practices or policies applied in the preparation of its
financial statements.
Section 2.04 Title and Condition of Assets.
Except as set forth in Section 2.04 of the Amax Disclosure Letter, to the
knowledge of Amax, each Amax Group Member has sufficient title (subject, in the
case of unpatented mining claims located in the United States, to the paramount
title of the United States of America, and including, in the case of mining
concessions, licenses or other governmental permits granting mining rights on
lands in countries other than the United States, the performance of all material
acts and the making of all required payments necessary to obtain and maintain
such concessions, licenses or permits), applying customary standards in the
mining industry, to its operating properties and properties with proven and
probable ore reserves (other than property as to which it is a lessee, in which
case it has a valid leasehold interest), except for such defects in title known
to Amax that, individually or in the aggregate, would not be reasonably likely
to have a Material Adverse Effect on Amax. Notwithstanding the foregoing, no
representation or warranty is made as to a discovery of valuable minerals for
any unpatented mining claim located in the United States. All tangible personal
property of each Amax Group Member is in generally good repair and is
operational and usable in the operation of Amax, subject to normal wear and tear
and technical obsolescence, repair or replacement, except for such property
whose failure to be in such condition would not be reasonably likely to have a
Material Adverse Effect on Amax.
Section 2.05 Insurance.
The Amax Group Members have their respective assets insured against loss or
damage with coverage of a type and in an amount consistent with the types and
amounts of insurance maintained by corporations of a size and carrying on
businesses of the type carried on by Amax and the other Amax Group Members; it
being acknowledged and agreed that such insurance, insofar as it is provided
under policies obtained by the Significant Shareholder, will be terminated as of
the Effective Time.
Section 2.06 Litigation and Compliance.
(a) Except as to the matters described in Section 2.06(a) of the Amax
Disclosure Letter and except for actions, suits, claims and
proceedings which are not reasonably likely to have a Material
Adverse Effect on Amax or where insurance proceeds will be
available to pay in full (subject to any applicable deductible)
any damages awarded as a consequence of any such action, suit,
claim, or proceeding:
(i) as of the date of this Agreement, there are no actions,
suits, claims or proceedings, whether in equity or at law
or, to the knowledge of Amax, any Governmental
investigations pending or threatened against any Amax
Group Member or with respect to any asset or property
owned, leased or used by any Amax Group Member; and
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<PAGE>
(ii) as of the date of this Agreement, there are no actions,
suits, claims or proceedings, whether in equity or at law
or, to the knowledge of Amax, any Governmental
investigations pending or threatened which question or
challenge the validity of this Agreement or any action
taken or to be taken pursuant to this Agreement.
(b) Each Amax Group Member is in compliance with, and is not in
default or violation under, and has not received notice asserting
the existence of any default or violation under, any Law
applicable to the businesses or operations of the Amax Group,
including without limitation all Laws relating to occupational
health or safety (but excluding any Environmental Law), except
for noncompliance, defaults, and violations which would not, in
the aggregate, have a Material Adverse Effect on Amax.
(c) Except as described in Section 2.06(c) of the Amax Disclosure
Letter, no Amax Group Member, or material assets of any Amax
Group Member, is subject to any judgment, order or decree entered
in any lawsuit or proceeding which has had, or which is
reasonably likely to have, a Material Adverse Effect on Amax or
which is reasonably likely to prevent Amax from performing its
obligations under this Agreement.
(d) Except as described in Section 2.06(d) of the Amax Disclosure
Letter, and except as may be required under any Environmental
Law, each Amax Group Member has duly filed all reports and
returns required to be filed by it with any Government and
obtained all Governmental permits and licenses and other
Governmental consents which are required in connection with the
business and operations of the Amax Group, except for such
reports, returns, permits, licenses and consents which if not
obtained or made would not have a Material Adverse Effect on
Amax.
Section 2.07 Taxes.
Except as described in Section 2.07 of the Amax Disclosure Letter:
(a) Amax and each Amax Group Member has timely filed, or has caused
to be timely filed on its behalf, all Tax Returns required to be
filed by it, and all such Tax Returns are true, complete and
accurate, except to the extent any failure to file or any
inaccuracies in any filed Tax Returns would not, individually or
in the aggregate, have a Material Adverse Effect on Amax. All
Taxes shown to be due on such Tax Returns, or otherwise owed,
have been timely paid, except to the extent that any failure to
pay would not, individually or in the aggregate, have a Material
Adverse Effect on Amax. Amax's most recent financial statements
contained in the Amax SEC Documents reflect a reserve in
accordance with U.S. GAAP for all Taxes payable by Amax and the
Amax Group Members for all taxable periods and portions thereof
through the date of such financial statements. No deficiency with
respect to any Taxes has been proposed, asserted or assessed in
writing against Amax or any Amax Group Member, and no written
requests for waivers of the time to assess any such Taxes are
pending, except to the extent any such deficiency or request for
waiver would not, individually or in the aggregate, have a
Material Adverse Effect on Amax.
(b) The United States federal income tax returns of Amax and each
Amax Group Member consolidated in such returns either have been
examined by and settled with the United States Internal Revenue
Service or the applicable statutes of limitations have expired
for
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all years through 1993. All material assessments for Taxes due
with respect to such completed and settled examinations or any
concluded litigation have been fully paid. There are no material
liens for Taxes (other than for current Taxes not yet due and
payable or liens for Taxes being contested in good faith by
appropriate proceedings for which reserves have been established
in accordance with U.S. GAAP) on the assets of Amax or any Amax
Group Member. Neither Amax nor any Amax Group Member is bound by
any material agreement with respect to Taxes.
(c) Amax has no reason to believe that any conditions exist that
could reasonably be expected to either:
(i) prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Tax Code; or
(ii) cause the Eligible Amax Shareholders to recognize a
taxable gain in the Merger under Section 367(a) of the
Tax Code.
Section 2.08 Pension and Other Employee Plans and Agreements.
(a) Section 2.08 of the Amax Disclosure Letter sets forth all
Employee Plans maintained or contributed to by each Amax Group
Member ("Amax Group Employee Plan"), and Amax has furnished or
made available or will furnish and make available to Kinross and
Merger Corp. true and complete copies of all such Amax Group
Employee Plans as amended and in effect on the date hereof with
copies of all related trust agreements, annuity contracts,
insurance contracts or other funding instruments, actuarial
reports (for the past three years), financial statements (for the
past three years), and plan summaries, booklets and personnel
manuals.
(b) To the knowledge of Amax, except to the extent any of the
following would, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect on the Amax Group:
(i) the execution and delivery of this Agreement by Amax and
the consummation of the transactions contemplated hereby
do not constitute and will not result in any "prohibited
transaction" within the meaning of Section 406 of ERISA
or Section 4975 of the Tax Code;
(ii) each Amax Group Employee Plan is duly established and,
where applicable, qualified in accordance with all
applicable Laws and no fact or circumstance, where
applicable, exists which is likely to adversely affect
the qualified status of any Employee Plan which is
permitted or required to be qualified;
(iii) each Amax Group Employee Plan and any related trust or
other funding agreements are currently, and have been in
the past, in compliance in all material respects with the
requirements of applicable Laws and applicable collective
bargaining agreements as to the form, operation, and
administration of such plans;
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(iv) all returns, reports, notices, and applications relating
to each Amax Group Employee Plan required by any
Governmental agency have been in all material respects
timely filed;
(v) all contributions or premiums required to be made on or
before the date hereof to or in respect of each Amax
Group Employee Plan under the terms of such plan, ERISA,
the Tax Code or other applicable Law and applicable
collective bargaining agreements have been in all
material respects timely made and no Taxes, penalties or
fees are owing or payable under or in respect of any such
plan;
(vi) no Amax Group Member or any ERISA Affiliate of any such
Amax Group Member has incurred any Liability (except for
premiums) to the Pension Benefit Guaranty Corporation
which has not been discharged and will not incur any such
Liability as a result of the Merger;
(vii) there exists no Liability of the Amax Group in connection
with any former Employee Plan of the Amax Group or former
Amax ERISA Affiliate Plan that has terminated and all
procedures for termination of each such former plans have
been properly followed in accordance with the terms of
such former Amax Group Employee Plan or any former Amax
ERISA Affiliate Plan and applicable Law;
(viii) except as described in Section 2.08(b) of the Amax
Disclosure Letter, no event has occurred respecting any
of the Amax Group Employee Plans which would entitle the
Pension Benefit Guaranty Corporation to wind-up or
terminate any such Amax Group Employee Plan, in whole or
in part;
(ix) there are no merger or asset transfer applications
pending with any Governmental agency with respect to any
Amax Group Employee Plan;
(x) none of the Amax Group Employee Plans requires or permits
a retroactive increase in premiums or payments and no
improvements to any such plan have been promised to any
person;
(xi) none of the Amax Group Employee Plans is a "multiemployer
plan" (as such term is defined in Section 3(37) of
ERISA);
(c) Except as set forth in Section 2.08(b) of the Amax Disclosure
Letter, neither the execution of this Agreement nor any agreement
referred to or contemplated herein, nor the consummation of the
Merger or the other transactions contemplated by this Agreement,
will: (A) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute or
otherwise) becoming due under any Amax Group Employee Plan; (B)
increase any benefits otherwise payable under any Amax Group
Employee Plan; or (C) result in the acceleration of the time of
payment or vesting of any such benefits.
(d) The most recent actuarial valuation reports prepared in
connection with each of the Amax Group Employee Plans in respect
of which an actuarial valuation report is required to be prepared
have been provided to Kinross. The information provided by
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Amax Group Members to the author of each such report for the
purpose of assisting the author in preparing each such actuarial
valuation report was, at the time it was so provided, and
remains, true, accurate and complete in all material respects,
and each such actuarial valuation report is in final form and
remains unamended. There has been no material adverse change to
the funded status of any of the foregoing Amax Group Employee
Plans since the date of the foregoing actuarial valuation reports
which would increase the annual funding liability for such plan
by more than $100,000.
(e) Except to the extent any of the following would, individually or
in the aggregate, not be reasonably likely to have a Material
Adverse Effect on the Amax Group, there are no actions, suits,
claims or proceedings, whether in equity or at law, or
Governmental examinations or investigations pending or, to the
knowledge of Amax or the Significant Shareholder, threatened
against or with respect to any Amax Group Employee Plan or any
assets of any such Amax Group Employee Plan.
(f) Each Foreign Plan of the Amax Group has been maintained in
compliance with its material terms and with the requirements of
any and all applicable Law and has been maintained, where
required, in good standing with applicable regulatory
authorities; no Amax Group Member has incurred any obligations
which remain unpaid in connection with the termination of or
withdrawal from any Foreign Plan of the Amax Group; the present
value of the accrued benefit liabilities (whether or not vested)
under each Foreign Plan of the Amax Group that is a pension or
retirement plan, determined as of the end of the most recently
ended fiscal year of the applicable Amax Group Member on the
basis of actuarial assumptions, each of which is reasonable, did
not exceed the current value of the assets of such Foreign Plan
of the Amax Group allocable to such benefit liabilities; except
in any such case where the failure to be so maintained, or the
incurring of such obligation or the amount of such excess accrued
benefit liabilities would not, individually or in the aggregate,
be reasonably likely to: (x) have a Material Adverse Effect on
Amax; or (y) materially prejudice the ability of Amax to perform
its obligations under this Agreement.
Section 2.09 Labor Relations.
(a) Except as described in Section 2.09 of the Amax Disclosure
Letter, as of the date hereof, no employees of any Amax Group
Member are covered by any collective bargaining agreement.
(b) Except as described in Section 2.09 of the Amax Disclosure
Letter:
(i) there are no representation questions, arbitration
proceedings, labour strikes, slow-downs or stoppages,
material grievances, or other labour troubles pending or,
to the knowledge of Amax, threatened as of the date
hereof with respect to the employees of any Amax Group
Member which would have a Material Adverse Effect on
Amax; and
(ii) to the best of Amax's knowledge, as of the date hereof,
there are no present or pending applications for
certification (or the equivalent procedure under any
applicable Law) of any union as the exclusive bargaining
agent for any employees of any Amax Group Member.
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Section 2.10 Contracts, Etc.
(a) The Amax SEC Documents contain an accurate and complete listing
of all material Contracts, whether written or oral, required to
be described therein or filed as exhibits thereto pursuant to the
Exchange Act and the applicable rules and regulations thereunder.
Except as set forth in Section 2.10 of the Amax Disclosure
Letter, each of such Contracts is in full force and effect and:
(i) none of the Amax Group Members or, to Amax's best
knowledge, any other party thereto, has breached or is in
default thereunder;
(ii) no event has occurred which, with the passage of time or
the giving of notice would constitute such a breach or
default;
(iii) no claim of material default thereunder has, to Amax's
best knowledge, been asserted or threatened; and
(iv) none of the Amax Group Members or, to Amax's best
knowledge, any other party thereto is seeking the
renegotiation thereof or substitute performance
thereunder,
except where such breach or default, or attempted
renegotiation or substitute performance, individually or
in the aggregate, does not have and would not be
reasonably expected to have a Material Adverse Effect on
Amax.
(b) Except for the contracts, agreements, leases and commitments
listed in Section 2.10 of the Amax Disclosure Letter as of the
date hereof, neither Amax nor any Amax Group Member is a party to
or bound by:
(i) any material Contract, whether written or oral, which was
not entered into or made in the ordinary course of its
business;
(ii) any contract which imposes material geographic or
territorial limitations on the conduct of business by
Amax or any Amax Group Member (excluding customary area
of interest provisions relating to specific properties
and similar restrictions entered into in the ordinary
course of business and which do not have a significant
impact on their ability to conduct business generally in
that geographic area); or
(iii) any joint venture or partnership agreement respecting its
or properties with proven and probable ore reserves with
a fair market value of more than $1,000,000.
(c) As of the date hereof, the net hedge and future position of Amax
is not materially different from that existing on December 31,
1997.
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Section 2.11 Absence of Certain Changes, Etc.
As of the date of this Agreement, and except as described in Section 2.11 of the
Amax Disclosure Letter and except for any actions required to be performed by
Amax or otherwise permitted pursuant to this Agreement or the Shareholders
Agreements, since September 30, 1997:
(a) there has been no Material Adverse Change in the Amax Group;
(b) no Amax Group Member has:
(i) sold, transferred, distributed or otherwise disposed of
or acquired a material amount of its assets, or agreed to
do any of the foregoing, except in the ordinary course of
business;
(ii) prior to the date hereof, made or agreed to make any
material capital expenditure or commitment for additions
to property, plant, or equipment not reflected in the
Interim Amax Financial Statements or in the capital
budget for the 1998 fiscal year approved by Amax, a copy
of which has been provided to Kinross;
(iii) made or agreed to make any material increase in the
compensation payable to any employee or director except
for increases made in the ordinary course of business and
consistent with presently existing policies or agreements
or past practice;
(iv) conducted its operations otherwise than in all material
respects in the normal course of business;
(v) entered into any material transaction or material
Contract, or amended or terminated any material
transaction or material Contract, except transactions or
Contracts entered into in the ordinary course of
business;
(vi) effected any material change in the practices followed by
the Amax Group in calculating bad debts, contingencies,
or other reserves from that reflected in the Interim Amax
Financial Statements; or
(vii) agreed or committed to do any of the foregoing.
(c) there has not been any declaration, setting aside or payment of
any dividend or other distribution with respect to Amax's capital
stock other than the payment of dividends in accordance with the
terms of the Amax Preferred Shares.
Section 2.12 Subsidiaries.
(a) Section 2.01 of the Amax Disclosure Letter sets forth with
respect to each Amax Group Member:
(i) its jurisdiction of incorporation; and
(ii) the percentage of each class of its equity securities
owned, directly or indirectly, by Amax.
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(b) Except as set forth in Section 2.01 of the Amax Disclosure
Letter, all of the outstanding shares of capital stock of each
Amax Group Member (other than Amax) owned of record and
beneficially by Amax are so owned free and clear of all Liens.
Except with respect to the subsidiaries listed in Exhibit 2.01,
Amax does not own, directly or indirectly, any material equity
interest of or in any entity or enterprise organized under the
Laws of the United States, any state thereof, the District of
Columbia, Canada, any province thereof, or any other domestic or
foreign jurisdiction.
(c) All outstanding shares of the capital stock of or other equity
interests in each Amax Group Member (other than Amax) have been
duly authorized and are validly issued, fully paid and non-
assessable.
(d) Except as described in Section 2.01 of the Amax Disclosure
Letter, there are no authorized, outstanding or existing:
(i) proxies, voting trusts, or other agreements or
understandings with respect to the voting of any capital
stock of any Amax Group Member (other than Amax) to which
any Amax Group Member is party;
(ii) securities issued by any Amax Group Members that are
convertible into or exchangeable for any capital stock of
any Amax Group Member (other than Amax);
(iii) options, warrants, or other rights to purchase or
subscribe for any capital stock of, or securities
convertible into or exchangeable for any capital stock
of, any Amax Group Member (other than Amax) in each case
granted, extended or entered into by any Amax Group
Member;
(iv) agreements of any kind to which any Amax Group Member is
party relating to the issuance of any capital stock of
any Amax Group Member (other than Amax), any securities,
options, warrants, or rights convertible into or
exchangeable for, Amax Shares;
(v) agreements of any kind to which any Amax Group Member is
party which may obligate any Amax Group Member (other
than Amax) to issue or purchase any of its securities; or
(vi) agreements to which any Amax Group Member is party
containing any right of first negotiation or refusal with
respect to the equity securities of any Amax Group Member
(other than Amax).
Section 2.13 Capitalization.
(a) At the date hereof the authorized capital stock of Amax consists
of 200,000,000 Amax Shares, of which 114,873,878 Amax Shares were
outstanding as of February 6, 1998; 10,000,000 preferred shares,
of which 2,000,000 shares have been designated as $2.25 Series A
Convertible Preferred Stock, none of which are outstanding, and
1,840,000 of which have been designated as $3.75 Series B
Convertible Preferred Stock, of which 1,840,000 were outstanding
as of the date hereof. At the date of this Agreement, of the
authorized but unissued Amax Shares, 12,099,213 shares were
reserved for issuance
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upon conversion of the Series A Convertible Preferred Stock and
11,152,240 shares were reserved for issuance upon conversion of
the Series B Convertible Preferred Stock. Section 2.13 of the
Amax Disclosure Letter sets forth the number of Amax Shares
reserved for issuance pursuant to the terms of outstanding
employee and director stock options and the number of Amax Shares
reserved for issuance pursuant to options and other stock awards
which may be granted in the future pursuant to existing Amax
Employee Plans, in each case as of the date hereof.
(b) Except as set forth above or in Section 2.13(b) of the Amax
Disclosure Letter, no shares of capital stock or other voting
securities of Amax are issued, reserved for issuance or
outstanding.
(c) All the outstanding Amax Shares and Amax Preferred Shares have
been duly authorized and are validly issued, fully paid and non-
assessable, free of pre-emptive rights.
(d) Except as described above or in Section 2.13(d) of the Amax
Disclosure Letter, there are no authorized, outstanding or
existing:
(i) voting trusts or other agreements or understandings with
respect to the voting of any Amax Shares to which any
Amax Group Member is a party;
(ii) securities issued by any Amax Group Member that are
convertible into or exchangeable for any capital stock of
Amax;
(iii) options, warrants, or other rights to purchase or
subscribe for any capital stock of Amax or securities
convertible into or exchangeable for any capital stock of
Amax, in each case granted, extended or entered into by
any Amax Group Member;
(iv) agreements of any kind to which any Amax Group Member is
party relating to the issuance of any capital stock of
Amax, any such convertible or exchangeable securities, or
any such options, warrants, or rights, or requiring Amax
to register under the Securities Act any of its presently
outstanding securities; or
(v) agreements of any kind which may obligate Amax to issue
or purchase any of its securities.
Section 2.14 Environmental Matters.
Except as to the matters described in Section 2.14 of the Amax Disclosure
Letter, there exists no Environmental Condition which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on Amax.
Section 2.15 Brokers.
Except as set forth in Section 2.15 of the Amax Disclosure Letter, the Amax
Group, their Affiliates, and their respective Advisers have not retained any
broker or finder in connection with the Merger, nor have any of the foregoing
incurred any Liability to any broker or finder by reason of the Merger.
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Section 2.16 Intercorporate Indebtedness.
As at the date of this Agreement, the total principal amount of indebtedness for
borrowed money owing by the Amax Group to the Significant Shareholder is as set
forth in Section 2.16 of the Amax Disclosure Letter and no amount of past due
interest was owing in respect thereof.
Section 2.17 Reserve Reports and Reserve Estimates.
The reports of proven and probable reserves of Amax summarized in its Annual
Report on Form 10-K for the year ended December 31, 1996 were prepared in all
material respects in accordance with accepted engineering practices and such
reports were, as of their respective dates, in all material respects in
compliance with the requirements applicable to the presentation of such reserves
in documents filed with the SEC.
Section 2.18 Fairness Opinions.
The Special Committee of the Board of Directors of Amax has received an opinion
from SBC Warburg Dillon Read and the Board of Directors of Amax has received an
opinion from Salomon Smith Barney as to the matters set forth therein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF KINROSS AND MERGER CORP.
Except as set forth in the Kinross Securities Documents, each of Kinross
and Merger Corp. hereby represent and warrant as follows to and in favour of
Amax:
Section 3.01 Organization and Good Standing.
(a) Except as set forth in Section 3.01 of the Kinross Disclosure
Letter, Kinross and each Kinross Group Member is a corporation
duly organized, validly existing and in good standing under the
Laws of its jurisdiction of incorporation and is qualified to
transact business and is in good standing as a foreign
corporation in the jurisdictions (which are listed in Section
3.01 of the Kinross Disclosure Letter) where it is required to
qualify in order to conduct its business as presently conducted,
except where the failure to be so qualified would not have a
Material Adverse Effect on Kinross. Except as listed in Section
3.01 of the Kinross Disclosure Letter, there are no subsidiaries
of Kinross and none of Kinross's subsidiaries has any
subsidiaries.
(b) Each Kinross Group Member has the corporate power and authority
to own, lease, or operate its properties and to carry on its
business as now conducted.
(c) Kinross has heretofore delivered or made available to Amax
complete and correct copies of Kinross's Certificate and Articles
of Incorporation and By-laws, as each has been amended and is in
effect on the date hereof.
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Section 3.02 Consents, Authorizations, and Binding Effect.
(a) Kinross and Merger Corp. may execute, deliver, and perform this
Agreement without the necessity of Kinross or any Kinross Group
Member obtaining any consent, approval, authorization or waiver,
or giving any notice or otherwise, except:
(i) those disclosed in Section 3.02 of the Kinross
Disclosure Letter;
(ii) those, with respect to consents, approvals,
authorizations and waivers, which have been obtained,
are unconditional and are in full force and effect and,
with respect to notices, which have been given on a
timely basis;
(iii) the approval of the issuance of the Kinross Shares
pursuant to the Merger and the transactions contemplated
hereby and by the Related Agreements by the holders of a
majority of the outstanding Kinross Shares present at a
meeting of the Kinross shareholders duly called and held
in accordance with the rules of the TSE and NYSE and
applicable law;
(iv) the filing with the SEC of:
(A) the Registration Statement;
(B) the Joint Proxy Statement; and
(C) such reports and information under the Exchange Act
and the rules and regulations promulgated by the
SEC thereunder, as may be required in connection
with this Agreement and the transactions
contemplated hereby;
(v) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware;
(vi) such as may be required by state takeover laws;
(vii) such as may be necessary under the HSR Act;
(viii) such as may be required under the Investment Canada Act
and under the Competition Act (Canada); or
(ix) those which, if not obtained or made, would not prevent
or delay the consummation of the Merger or otherwise
prevent Kinross or Merger Corp. from performing its
obligations under this Agreement and would not be
reasonably likely to have a Material Adverse Effect on
Kinross or Merger Corp.
(b) Each of Kinross and Merger Corp. has the full corporate power and
authority to execute this Agreement and to issue the Kinross
Shares contemplated hereby and by the Related Agreements and to
deliver this Agreement, and subject to the approval of a majority
of the holders of the Kinross Shares at the Kinross Shareholders'
Meeting, to perform its obligations hereunder and under the
Related Agreements. Neither Kinross nor any direct or indirect
subsidiary of Kinross beneficially owns (other than pursuant to
this Agreement and the Related Agreements) any Amax Shares or
Amax Preferred Shares.
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(c) The Board of Directors of Kinross (at a meeting duly called and
held) has by the requisite vote of directors: (i) approved the
Merger, this Agreement, the Related Agreements and the issuance
of Kinross Shares and the Warrant pursuant thereto; and (ii)
directed that the issuance of Kinross Shares and the Warrant
pursuant to this Agreement and the Stockholder Agreement be
submitted for consideration by the holders of Kinross Shares at
the Kinross Shareholders' Meeting and recommended approval of
such issuances.
(d) This Agreement and the Merger have been duly authorized by the
Board of Directors and shareholders of Merger Corp. This
Agreement has been duly executed and delivered by Kinross and
Merger Corp. and constitutes the legal, valid, and binding
obligation of Kinross and Merger Corp., enforceable against each
in accordance with its terms, except:
(i) as may be limited by bankruptcy, reorganization,
insolvency and similar Laws of general application
relating to or affecting the enforcement of creditors'
rights or the relief of debtors; and
(ii) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to
equitable defences and to the discretion of the court
before which any proceeding therefore may be brought.
(e) Except as disclosed in Section 3.02 of the Kinross Disclosure
Letter or referenced in clauses (i) through (ix) of Section
3.02(a) hereof, the execution, delivery, and performance of this
Agreement by Kinross and Merger Corp. will not:
(i) constitute a violation of their respective Certificates
or Articles of Incorporation (or like charter documents)
or By-Laws, each as amended, of any Kinross Group
Member;
(ii) with respect to the Kinross Group, conflict with, result
in the breach of or constitute a default or give to
others a right of termination, cancellation or
acceleration of any obligation under, or the loss of any
material benefit under, any Contract to which any
Kinross Group Member is a party or as to which any of
their respective property is subject which would have a
Material Adverse Effect on Kinross;
(iii) constitute a violation of any Law applicable or relating
to any Kinross Group Member or the businesses of the
Kinross Group except for such violations as would not
have a Material Adverse Effect on Kinross; or
(iv) with respect to the Kinross Group result in the creation
of any Lien upon any of the assets of any Kinross Group
Member, other than such Liens as would not have a
Material Adverse Effect on Kinross.
Section 3.03 Securities Documents; Financial Statements.
Kinross has filed all required documents with the SEC since January 1, 1996 (the
"Kinross SEC Documents" and, together with the documents filed pursuant to the
Canadian Securities Laws, the "Kinross Securities Documents"). As of their
respective dates, the Kinross SEC Documents complied in all material respects
with the then applicable requirements of the Securities Act or the Exchange Act,
as
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the case may be, and, at the respective times they were filed, none of the
Kinross Securities Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Kinross is a reporting issuer under the Canadian
Securities Laws of each of the Provinces of Canada and is not in default of any
requirement of such Canadian Securities Laws. The consolidated financial
statements (including, in each case, any notes thereto) of Kinross included in
the Kinross SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto as of their respective dates of filing, were
prepared in accordance with Canadian GAAP applied on a consistent basis during
the period involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of Kinross and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to the absence of footnote disclosure and to normal year-
end audit adjustments and to any other adjustments described therein). Except as
disclosed in the Kinross Securities Documents or as required by Canadian GAAP,
Kinross has not, since September 30, 1997, made any change in the accounting
practices or policies applied in the preparation of its financial statements.
Section 3.04 Title and Condition of Assets.
Except as set forth in Section 3.04 of the Kinross Disclosure Letter, to the
knowledge of Kinross, each Kinross Group Member has sufficient title (subject,
in the case of unpatented mining claims located in the United States, to the
paramount title of the United States of America, and including, in the case of
mining concessions, licenses or other governmental permits granting mining
rights on lands in countries other than the United States, the performance of
all material acts and the making of all required payments necessary to obtain
and maintain such concessions, licenses or permits), applying customary
standards in the mining industry, to its operating properties and properties
with proven and probable ore reserves (other than property as to which it is a
lessee, in which case it has a valid leasehold interest), except for such
defects in title known to Kinross that, individually or in the aggregate, would
not be reasonably likely to have a Material Adverse Effect on Kinross.
Notwithstanding the foregoing, no representation or warranty is made as to a
discovery of valuable minerals for any unpatented mining claim located in the
United States. All real and tangible personal property of each Kinross Group
Member is in generally good repair and is operational and usable in the
operation of Kinross, subject to normal wear and tear and technical
obsolescence, repair or replacement, except for such property whose failure to
be in such condition would not be reasonably likely to have a Material Adverse
Effect on Kinross.
Section 3.05 Insurance.
The Kinross Group Members have their respective assets insured against loss or
damage with coverage of a type and in an amount that is consistent with the
types and amounts of insurance maintained by corporations of a size and carrying
on businesses of the type carried on by Kinross and the other Kinross Group
Members.
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Section 3.06 Litigation and Compliance.
(a) Except as to the matters described in Section 3.06(a) of the
Kinross Disclosure Letter, and except for actions, suits, claims,
and proceedings which are not reasonably likely to have a
Material Adverse Effect on Kinross or where insurance proceeds
will be available to pay in full (subject to any applicable
deductible) any damages awarded as a consequence of any such
action, suit, claim or proceeding:
(i) as of the date of this Agreement, there are no actions,
suits, claims or proceedings, whether in equity or at
law or, to the knowledge of Kinross, any Governmental
investigations pending or threatened against any Kinross
Group Member or with respect to any asset or property
owned, leased or used by any Kinross Group Member; and
(ii) as of the date of this Agreement, there are no actions,
suits, claims or proceedings, whether in equity or at
law or, to the knowledge of Kinross, any Governmental
investigations pending or threatened which question or
challenge the validity of this Agreement or any action
taken or to be taken pursuant to this Agreement.
(b) Each Kinross Group Member is in compliance with and is not in
default or violation under, and has not received notice asserting
the existence of any default or violation under, any Law
applicable to the businesses or operations of the Kinross Group,
including without limitation all Laws relating to occupational
safety or health (but excluding any Environmental Law), except
for noncompliance, defaults, and violations which would not, in
the aggregate, have a Material Adverse Effect on Kinross.
(c) Except as described in Section 3.06(c) of the Kinross Disclosure
Letter, no Kinross Group Member, or material assets of any
Kinross Group Member is subject to any judgment, order or decree
entered in any lawsuit or proceeding which has had, or which is
reasonably likely to have, a Material Adverse Effect on Kinross
or which is reasonably likely to prevent Kinross or Merger Corp.
from performing its obligations under this Agreement.
(d) Except as described in Section 3.06(d) of the Kinross Disclosure
Letter, and except as may be required under any Environmental
Law, each Kinross Group Member has duly filed all reports and
returns required to be filed by it with any Government and
obtained all Governmental permits and licenses and other
Governmental consents which are required in connection with the
business and operations of the Kinross Group, except for such
reports, returns, permits, licenses and consents which if not
obtained or made would not have a Material Adverse Effect on
Kinross.
Section 3.07 Taxes.
Except as described in Section 3.07 of the Kinross Disclosure Letter:
(a) Kinross and each Kinross Group Member has timely filed, or has
caused to be timely filed on its behalf, all Tax Returns required
to be filed by it, and all such Tax Returns are true, complete
and accurate, except to the extent any failure to file or any
inaccuracies in any filed Tax Returns would not, individually or
in the aggregate, have a Material
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Adverse Effect on Kinross. All Taxes shown to be due on such Tax
Returns, or otherwise owed, have been timely paid, except to the
extent that any failure to pay would not, individually or in the
aggregate, have a Material Adverse Effect on Kinross. Kinross's
most recent financial statements contained in the Kinross
Securities Documents reflect a reserve in accordance with
Canadian GAAP for all Taxes payable by Kinross and the Kinross
Group Members for all taxable periods and portions thereof
through the date of such financial statements. No deficiency with
respect to any Taxes has been proposed, asserted or assessed in
writing against Kinross or any Kinross Group Member, and no
written requests for waivers of the time to assess any such Taxes
are pending, except to the extent any such deficiency or request
for waiver would not, individually or in the aggregate, have a
Material Adverse Effect on Kinross.
(b) There are no assessments or reassessments of Taxes paid by
Kinross that have been issued and are outstanding other than in
the ordinary course of business. No Governmental authority has
challenged or disputed the Taxes paid or payable by Kinross or
any returns, filings or other reports filed under any statute
providing for Taxes which would have a Material Adverse Effect on
Kinross. Kinross has not received any indication from any
Governmental authority that an assessment or reassessment for
additional amounts of Taxes is proposed which would have a
Material Adverse Effect on Kinross. Kinross has not executed or
filed any agreement extending the period for assessment,
reassessment or collection of Taxes which would have a Material
Adverse Effect on Kinross.
Section 3.08 Pension and Other Employee Plans and Agreements.
(a) Section 3.08 of the Kinross Disclosure Letter sets forth all
Employee Plans maintained or contributed to by each Kinross Group
Member, and Kinross has furnished or made available to Amax true
and complete copies of all such Employee Plans as amended and in
effect on the date of this Agreement with copies of all related
trust agreements, annuity contracts, insurance contracts or other
funding instruments, actuarial reports (for the past three
years), financial statements and plan summaries, booklets and
personnel manuals.
(b) To the knowledge of Kinross, except to the extent any of the
following would, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect on the Kinross Group:
(i) the execution and delivery of this Agreement by Kinross
and the consummation of the transactions contemplated
hereby do not constitute and will not result in any
"prohibited transaction" within the meaning of Section
4.06 of ERISA or Section 4975 of the Tax Code;
(ii) each Kinross Group Employee Plan is duly established
and, where applicable, qualified in accordance with all
applicable Laws and no fact or circumstance, where
applicable, exists which is likely to adversely affect
the qualified status of any Employee Plan which is
permitted or required to be qualified;
(iii) each Kinross Group Employee Plan and any related trust
agreements are currently, and have been in the past, in
compliance in all material respects with
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the requirements of applicable Laws and applicable
collective bargaining agreements as to the form,
operation, and administration of such plans;
(iv) all returns, reports, notices, and applications relating
to each Kinross Group Employment Plan required by any
Governmental agency have been in all material respects
timely filed;
(v) all contributions or premiums required to be made on or
before the date hereof to or in respect of each Kinross
Group Employee Plan under the terms of such plan or
applicable Law and applicable collective bargaining
agreements have been in all material respects timely
made and no Taxes, penalties or fees are owing or
payable under or in respect of any such plan;
(vi) no Kinross Group Member nor any ERISA Affiliate of any
such Kinross Group Member has incurred any Liability
(except for premiums) to the Pension Benefit Guaranty
Corporation which has not been discharged and will not
incur any such Liability in respect of the Merger;
(vii) there exists no Liability of the Kinross Group in
connection with any former Employee Plan of the Kinross
Group or former Kinross ERISA Affiliate Plan that has
terminated and all procedures for termination of each
such former plan have been properly followed in
accordance with the terms of such former Kinross Group
Employee Plan or any former Kinross ERISA Affiliate Plan
and applicable Law;
(viii) no event has occurred respecting any of the Kinross
Group Employee Plans which would entitle the Pension
Benefit Guaranty Corporation (without the consent of any
Kinross Group Member) to wind-up or terminate any such
Kinross Group Employee Plan, in whole or in part;
(ix) there are no merger or asset transfer applications
pending with any Governmental agency with respect to any
Kinross Group Employee Plan;
(x) none of the Kinross Group Employee Plans requires or
permits a retroactive increase in premiums or payments
and no improvements to any such plan have been promised
to any person;
(xi) none of the Kinross Group Employee Plans is a
"multiemployer plan" (as such term is defined in Section
3(37) of ERISA);
(c) Except as set forth in Section 3.08(c) of the Kinross Disclosure
Letter, neither the execution of this Agreement nor any agreement
referred to or contemplated herein, nor the consummation of the
Merger or the other transactions contemplated by this Agreement,
will: (A) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute or
otherwise) becoming due under any Kinross Group Employee Plan,
(B) increase any benefits otherwise payable under any Kinross
Group Employee Plan, or (C) result in the acceleration of the
time of payment or vesting of any such benefits; and
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(d) The most recent actuarial valuation reports prepared in
connection with each of the Employee Plans of the Kinross Group
in respect of which an actuarial valuation report is required to
be prepared have been provided to Amax. The information provided
by members of the Kinross Group to the author of each such
report for the purpose of assisting the author in preparing each
such actuarial valuation report was, at the time it was so
provided, and remains, true, accurate and complete in all
material respects, and each such actuarial valuation report is
in final form and remains unamended. There has been no material
adverse change to the funded status of any of the foregoing
Kinross Group Employee Plans since the date of the foregoing
actuarial valuation reports which would increase the annual
funding liability for such plan by more than $100,000;
(e) Except to the extent any of the following would, individually or
in the aggregate, not be reasonably likely to have a Material
Adverse Effect on the Kinross Group there are no actions, suits,
claims or proceedings, whether in equity or at law, or
Governmental investigations pending or, to the knowledge of
Kinross or Merger Corp., threatened against or with respect to
any Employee Plan of the Kinross Group or any assets of any such
Employee Plan.
(f) Each Foreign Plan of the Kinross Group has been maintained in
compliance with its material terms and with the requirements of
any and all applicable Law and has been maintained, where
required, in good standing with applicable regulatory
authorities; no Kinross Group Member has incurred any
obligations which remain unpaid in connection with the
termination of or withdrawal from any Foreign Plan of the
Kinross Group; the present value of the accrued benefit
liabilities (whether or not vested) under each Foreign Plan of
the Kinross Group that is a pension or retirement plan,
determined as of the end of the most recently ended fiscal year
of the applicable Kinross Group Member on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the
current value of the assets of such Foreign Plan of the Kinross
Group allocable to such benefit liabilities; except in any such
case where the failure to be so maintained, or the incurring of
such obligation or the amount of such excess accrued benefit
liabilities would not, individually or in the aggregate, be
reasonably likely to: (x) have a Material Adverse Effect on
Kinross Group; or (y) materially prejudice the ability of
Kinross to perform its obligations under this Agreement.
Section 3.09 Labor Relations.
(a) Except as described in Section 3.09 of the Kinross Disclosure
Letter, as of the date hereof no employees of any Kinross Group
Member are covered by any collective bargaining agreement.
(b) Except as described in Section 3.09 of the Kinross Disclosure
Letter:
(i) there are no representation questions, arbitration
proceedings, labour strikes, slow-downs or stoppages,
material grievances, or other labour troubles pending
or, to the knowledge of Kinross or Merger Corp.,
threatened as of the date hereof with respect to the
employees of any Kinross Group Member which would have a
Material Adverse Effect on Kinross; and
(ii) to the best of Kinross's knowledge, as of the date
hereof, there are no present or pending applications for
certification (or the equivalent procedure under any
26
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applicable Law) of any union as the exclusive bargaining
agent for any employees of any Kinross Group Member.
Section 3.10 Contracts, Etc.
Except as set forth in Section 3.10 of the Kinross Disclosure Letter, all
material Contracts, whether oral or written, to which any Kinross Group Member
is a party or by which any Kinross Group Member is bound are in full force and
effect and:
(a) None of the Kinross Group Members or, to Kinross's best
knowledge, any other party thereto, has breached or is in
default thereunder.
(b) No event has occurred which, with the passage of time or the
giving of notice would constitute such a breach or default.
(c) No claim of material default thereunder has, to Kinross's best
knowledge, been asserted or threatened.
(d) None of the Kinross Group Members or, to Kinross's best
knowledge, any other party thereto is seeking the renegotiation
thereof or substitute performance thereunder, except where such
breach or default, or attempted renegotiation or substitute
performance, individually or in the aggregate, does not have and
would not be reasonably expected to have a Material Adverse
Effect on Kinross.
(e) Except for the contracts, agreements, leases and commitments
listed in Section 3.10 of the Kinross Disclosure Letter, as of
the date hereof, neither Kinross nor any Kinross Group Member is
a party to or bound by:
(i) any material Contract, whether written or oral, which
was not entered into or made in the ordinary course of
its business;
(ii) any contract which imposes material geographic or
territorial limitations on the conduct of business by
Kinross or any Kinross Group Member (excluding customary
area of interest provisions relating to specific
properties and similar restrictions entered into in the
ordinary course of business and which do not have a
significant impact on their ability to conduct business
generally in that geographic area); or
(iii) any joint venture or partnership agreement respecting
its operating properties or properties with proven and
probable ore reserves with a fair market value of more
than $1,000,000.
(f) As of the date hereof, the net hedge and future position of
Kinross is not materially different from that existing on
December 31, 1997.
Section 3.11 Absence of Certain Changes, Etc.
As of the date of this Agreement, and except as described in Section 3.11 of the
Kinross Disclosure Letter and except for any actions required to be performed by
Kinross or Merger Corp. or otherwise permitted pursuant to this Agreement or the
Shareholders Agreements, since September 30, 1997:
27
<PAGE>
(a) there has been no Material Adverse Change in the Kinross Group;
(b) no Kinross Group Member has:
(i) sold, transferred, distributed, or otherwise disposed of
or acquired a material amount of its assets, or agreed
to do any of the foregoing, except in the ordinary
course of business;
(ii) prior to the date hereof, made or agreed to make any
material capital expenditure or commitment for additions
to property, plant, or equipment not reflected in the
Interim Kinross Financial Statements or in the capital
budget for the 1998 fiscal year approved by Kinross, a
copy of which has been provided to Amax;
(iii) made or agreed to make any material increase in the
compensation payable to any employee or director, except
for increases made in the ordinary course of business
and consistent with presently existing policies or
agreements or past practice;
(iv) conducted its operations otherwise than in all material
respects in the normal course of business;
(v) entered into any material transaction or material
Contract, or amended or terminated any material
transaction or material Contract, except transactions or
Contracts entered into in the ordinary course of
business;
(vi) effected any material change in the practices followed
by the Kinross Group in calculating bad debts,
contingencies, or other reserves from that reflected in
the Interim Kinross Financial Statements; or
(vii) agreed or committed to do any of the foregoing.
(c) There has not been any declaration, setting aside or payment of
any dividend or other distribution with respect to Kinross'
capital stock other than the payment of dividends in accordance
with the terms of the Kinross Preferred Shares.
Section 3.12 Subsidiaries.
(a) Section 3.01 of the Kinross Disclosure Letter sets forth with
respect to each Kinross Group Member:
(i) its jurisdiction of incorporation or organization; and
(ii) the percentage of each class of its equity securities
owned, directly or indirectly, by Kinross.
(b) Except as set forth in Section 3.01 of the Kinross Disclosure
Letter, all of the outstanding shares of capital stock of each
Kinross Group Member (other than Kinross) owned of record and
beneficially by Kinross are so owned free and clear of all
Liens. Except with respect to the subsidiaries listed in Exhibit
3.01, Kinross does not own, directly or indirectly, any material
equity interest of or in any entity or enterprise
28
<PAGE>
organized under the Laws of the United States, any state
thereof, the District of Columbia, Canada, any province thereof,
or any other domestic or foreign jurisdiction.
(c) All outstanding shares of the capital stock of or other equity
interests in each Kinross Group Member (other than Kinross) have
been duly authorized and are validly issued, fully paid and non-
assessable.
(d) Except as described in Section 3.01 of the Kinross Disclosure
Letter, there are no authorized, outstanding or existing:
(i) proxies, voting trusts or other agreements or
understandings with respect to the voting of any capital
stock of any Kinross Group Member (other than Kinross)
to which any Kinross Group Member is party;
(ii) securities issued by any Kinross Group Members that are
convertible into or exchangeable for any capital stock
of any Kinross Group Member (other than Kinross);
(iii) options, warrants, or other rights to purchase or
subscribe for any capital stock of, or securities
convertible into or exchangeable for any capital stock
of, any Kinross Group Member (other than Kinross) in
each case granted, extended or entered into by any
Kinross Group Member;
(iv) agreements of any kind to which any Kinross Group Member
is party relating to the issuance of any capital stock
of any Kinross Group Member (other than Kinross), any
securities, options, warrants, or rights convertible
into or exchangeable for, Kinross Shares;
(v) agreements of any kind to which any Kinross Group Member
is party which may obligate any Kinross Group Member
(other than Kinross) to issue or purchase any of its
securities; or
(vi) agreements to which any Kinross Group Member is party
containing any right of first negotiation or refusal
with respect to the equity securities of any Kinross
Group Member (other than Kinross).
Section 3.13 Capitalization.
(a) At the date hereof, the authorized capital stock of Kinross
consists of an unlimited number of Kinross Shares, of which
126,854,092 Kinross Shares were outstanding as of February 6,
1998 and 384,613 Kinross Preferred Shares, of which 384,613
Kinross Preferred Shares were outstanding as of February 6,
1998. As at the date of this Agreement, 14,668,464 Kinross
Shares are reserved for issuance upon the conversion of
outstanding convertible debentures and 3,175,170 Kinross Shares
are reserved for issuance upon the conversion of the Kinross
Preferred Shares. Section 3.13 of the Kinross Disclosure Letter
sets forth the number of Kinross Shares reserved for issuance
pursuant to the terms of outstanding stock options on the date
hereof.
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<PAGE>
(b) Except as set forth above, or in Section 3.13(b) of the Kinross
Disclosure Letter no shares of capital stock or other voting
securities of Kinross are issued, reserved for issuance or
outstanding.
(c) All outstanding Kinross Shares have been duly authorized and are
validly issued and fully paid and non-assessable, free of pre-
emptive rights.
(d) Except as described above or in Section 3.13(d) of the Kinross
Disclosure Letter, there are no authorized, outstanding, or
existing:
(i) voting trusts or other agreements or understandings with
respect to the voting of any Kinross Shares to which any
Kinross Group Member is a party;
(ii) securities issued by any Kinross Group Member that are
convertible into or exchangeable for any capital stock
of Kinross;
(iii) options, warrants or other rights to purchase or
subscribe for any capital stock of Kinross or securities
convertible into or exchangeable for any capital stock
of Kinross in each case granted, extended or entered
into by any Kinross Group Member;
(iv) agreements of any kind to which any Kinross Group Member
is party relating to the issuance of any capital stock
of Kinross, any such convertible or exchangeable
securities, or any such options, warrants, or rights or
requiring Kinross to register under the Securities Act
any of its presently outstanding securities; or
(v) agreements of any kind which may obligate Kinross to
issue or purchase any of its securities.
Section 3.14 Environmental Matters.
Except as to the matters described in Section 3.14 of the Kinross Disclosure
Letter, there exists no Environmental Condition which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on Kinross.
Section 3.15 Brokers.
Except as set forth in Section 3.15 of the Kinross Disclosure Letter, the
Kinross Group, their affiliates and their respective Advisors have not retained
any broker or finder in connection with the Merger, nor have any of the
foregoing incurred any Liability to any broker or finder by reason of the
Merger.
Section 3.16 Valid Issuance of Kinross Shares.
Upon consummation of the Merger, the Kinross Shares issued hereunder will be
duly and validly authorized and, when issued and delivered in accordance with
the terms and provisions of this Agreement and the Certificate of Merger as
provided for in Article I, will be fully paid and non-assessable. At the
Closing, Kinross will have the power to issue the Kinross Shares hereunder free
and clear of all liens, encumbrances, security agreements, equities, options,
claims, charges, and restrictions, except for generally applicable restrictions
imposed under applicable securities laws.
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Section 3.17 Reserve Reports and Reserve Estimates.
The reports of proven and probable reserves of Kinross summarized in its Annual
Information Form for the year ended December 31, 1996 were prepared in all
material respects in accordance with accepted engineering practices and such
reports were, as of their respective dates, in all material respects in
compliance with the requirements applicable to the presentation of such reserves
in documents filed with the OSC.
Section 3.18 Ownership of Merger Corp.; No Prior Activities; Assets of Merger
Corp.
(a) Merger Corp. was formed by Kinross solely for the purpose of
engaging in the transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, except as
contemplated hereby, the capital stock of Merger Corp. is and
will be owned 100% by Kinross directly. Further, except as
contemplated hereby, there are not as of the date hereof and
there will not be at the Effective Time any outstanding or
authorized options, warrants, calls, rights, commitments or any
other agreements of any character which Merger Corp. is a party
to, or may be bound by, requiring it to issue, transfer, sell,
purchase, redeem or acquire any shares of capital stock or any
securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for or acquire, any shares of
stock of Merger Corp.
(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated
thereby and hereby, Merger Corp. has not and will not have
incurred, directly or indirectly through any Subsidiary or
affiliate, any obligations or liabilities or engaged in any
business or activities of any type or kind whatsoever or entered
into any arrangements or arrangements with any Person.
(d) Kinross will take all action necessary to ensure that Merger
Corp. at no time prior to the Effective Time owns any asset
other than an amount of cash necessary to incorporate Merger
Corp. and to pay the expenses of the Merger attributable to
Merger Corp. if the Merger is consummated.
Section 3.19 Cash on Hand.
Without giving effect to the Equity Offering, Kinross has and will at the
Effective Time have readily available to it at least $100,000,000 in cash on
hand or readily marketable securities for application in the manner contemplated
by the Stockholder Agreement.
Section 3.20 Opinions.
The Board of Directors of Kinross has received an opinion from CIBC Wood Gundy
Inc. and an opinion from Merrill Lynch as to the matters respectively set forth
therein.
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ARTICLE IV
COVENANTS OF AMAX
From and after the date hereof and until the Closing Date (except as
hereinafter otherwise provided), unless Kinross and Merger Corp. shall otherwise
agree in writing:
Section 4.01 Access.
Amax shall permit, and shall use all reasonable efforts to cause each Amax Group
Member, except to the extent such Amax Group Member is subject to contractual
restrictions or restrictions set forth in the organizational documents of such
Amax Group Member which would limit or otherwise restrict its ability to do so,
to permit:
(a) Kinross, Merger Corp. and their Advisers to have reasonable
access at reasonable times to all properties, books, accounts,
records, Contracts, files, correspondence, tax records, and
documents of or relating to the Amax Group including independent
auditors work papers and to discuss such matters with the
executive officers of the Amax Group; Amax shall make available
to Kinross, Merger Corp. and their Advisers a copy of each
report or other document filed with the SEC or pursuant to
Canadian Securities Laws and all other information concerning
its business and properties as Kinross may reasonably request;
and
(b) Kinross and Merger Corp., to conduct, or cause its agents to
conduct, such reasonable reviews, inspections, surveys, tests,
and investigations of the assets of the Amax Group as Kinross or
Merger Corp. deems necessary or advisable, provided such reviews
are conducted at reasonable times and in a reasonable manner.
Section 4.02 Ordinary Course.
Except: (i) as set forth in Section 4.02 of the Amax Disclosure Letter; (ii) to
the extent such an Amax Group Member is subject to contractual restrictions or
restrictions set forth in the organizational documents of such Amax Group Member
which would limit or otherwise restrict its ability to do so; and (iii) for any
actions required to be performed by Amax or otherwise contemplated by this
Agreement or the Stockholder Agreement or approved in advance by Kinross, Amax
shall (and shall cause each Amax Group Member to) conduct its business only in
the ordinary and usual course in all material respects and use all reasonable
efforts to preserve its business organizations intact and its existing relations
with customers, suppliers, employees, and business associates, and Amax shall
not (and shall cause each Amax Group Member not to) do any of the following:
(a) sell or pledge or agree to sell or pledge any capital stock
owned by it in any of its subsidiaries;
(b) amend its Articles or Certificate of Incorporation (or like
charter documents) or By-laws;
(c) subdivide, split, combine, consolidate, or reclassify any of its
outstanding shares of capital stock;
(d) other than in accordance with the terms of the Amax Preferred
Shares, declare, set aside or pay any dividend or make any other
distribution payable in cash, shares, stock,
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securities or property with respect to any of its shares of
capital stock other than consistent with past practice, and
other than dividends or distributions declared, set aside, paid
or payable by any Amax Group Member (other than Amax) or a
subsidiary of Amax;
(e) repurchase, redeem, or otherwise acquire, directly or
indirectly, any of its capital stock or any securities
convertible into or exchangeable or exercisable into any of its
capital stock other than upon conversion of the Amax Preferred
Shares;
(f) incur, guarantee, assume or modify any additional indebtedness
for borrowed money in an aggregate amount in excess of
$30,000,000 other than in the ordinary course of business or
pursuant to credit facilities and arrangements with the
Significant Shareholder provided, however that any new credit
-------- -------
facility not provided by the Significant Shareholder or any of
its Affiliates shall be provided by a financial institution and
advances thereunder shall not be applied to the reduction of
debt owing to the Significant Shareholder pursuant to the
existing demand loan facility;
(g) enter into any material transaction not in the ordinary course
of its business consistent with past practice;
(h) issue, sell, pledge, dispose of or encumber, or authorize or
propose the issuance, sale, pledge, disposition, or encumbrance
of, any of its capital stock, or any securities convertible into
or exchangeable or exercisable for, or options, puts, warrants,
calls, commitments or rights of any kind to acquire, any of its
shares of capital stock other than:
(i) Amax Shares issued pursuant to the exercise or
conversion of outstanding securities of Amax convertible
into Amax Shares or pursuant to the exercise or
conversion of options outstanding pursuant to Amax's
stock option plans; or
(ii) Amax Shares issued as or with respect to contributions
to or fund transfers within the Amax's 401(k) Plan in
effect on the date hereof;
(i) transfer, lease, license, sell, mortgage, pledge, encumber, or
dispose of any material property or assets other than in the
ordinary and usual course of business consistent with past
practice;
(j) make, whether by merger, consolidation or purchase, any material
acquisition of, or investment in, assets, shares, capital stock
or other securities of any other person or entity other than its
wholly-owned subsidiaries or in the ordinary and usual course of
business consistent with past practice;
(k) except as may be required to satisfy contractual obligations
existing as of the date hereof and the requirements of
applicable Law, establish, adopt, enter into, make, amend in any
material respect, or make any material elections under any
collective bargaining agreement or Employee Plan or enter into
any new or amend in any material respect any existing
employment, consulting or other agreement providing compensation
or benefits to any executive employee or director except for
employment agreements with new employees (other than Amax
corporate staff), entered into in the ordinary course of
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business which agreements do not provide for the payment of
"golden parachutes" or other amounts in respect of severance
which are triggered by the Merger;
(l) except as may be required to satisfy contractual obligations or
Amax Group Employee Plan obligations existing as of the date
hereof and the requirements of applicable Law: (i) amend any
Amax Group Employee Plan where such amendment would increase any
Amax Group Member's annual or aggregate liability or funding
obligations in connection with such Amax Group Employee Plan by
more than five percent, (ii) terminate or merge any Employee
Plan(s), (iii) transfer assets from any Amax Group Employee
Plan, (iv) extend membership, benefits or coverage under any
Amax Group Employee Plan to any employee who is not currently
eligible to receive such membership, benefits or coverage, (v)
incorporate any "change in control" provision into any Amax
Group Employee Plan, or modify any "change in control" provision
presently contained in any Amax Group Employee Plan [except for
certain clarification amendments to the Amax 1992 Stock Option
Plan, Performance Share Plan and the Key Employees Separation
Plan], (vi) transfer any employee from any Amax Group Member to
any other Amax Group Member in circumstances where such transfer
would increase the Amax Group Members' collective expenses in
connection with the employment of such employee;
(m) implement any change in its accounting principles, practices, or
methods, other than as may be required by generally accepted
accounting principles;
(n) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure
or ownership of Amax or any Amax Group Member;
(o) withdraw, permit or consent to the removal of any assets of any
of the Employee Plans maintained by any Amax Group Member other
than for the purpose of paying benefits in the ordinary course
and payment of expenses in accordance with past practice and
under the terms of such plan;
(p) take any action that would either:
(i) prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Tax Code; or
(ii) cause the Eligible Amax Shareholders to recognize a
taxable gain in the Merger under Section 367(a) of the
Tax Code;
(q) take any action that would prevent the Merger from being
characterized as a "pooling of interests" for the purposes of
Canadian GAAP;
(r) authorize or enter into any agreement or understanding of any
type whatsoever, whether written or oral to take any of the
actions referred to in this Section.
Section 4.03 Insurance.
Amax shall use all reasonable efforts to continue to insure the Amax Group and
all property, real and personal, owned or leased by any Amax Group Member is
insured substantially in the manner and to the extent set forth in Section 2.05;
it being acknowledged and agreed that insofar as such insurance is
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provided under policies obtained by the Significant Shareholder, such insurance
will be terminated as of the Effective Time.
Section 4.04 Closing Conditions.
Amax shall use all reasonable efforts to cause all of the conditions to the
obligations of Kinross and Merger Corp. under this Agreement to be satisfied on
or prior to the Closing Date (to the extent the satisfaction of such conditions
is within the control of the Amax Group).
Section 4.05 Amax Stockholders' Approval.
Amax shall use all reasonable efforts to obtain its stockholders' approval of
the Merger and, without limitation, its Board of Directors shall specifically
recommend that its stockholders approve the Merger. The Board of Directors of
Amax shall call a stockholders' meeting ("Amax Stockholders' Meeting") to be
held at the earliest practicable date following mailing of the Joint Proxy
Statement to the Amax stockholders for the purpose of voting on the adoption of
the Merger, this Agreement and each of the other transactions contemplated by
this Agreement and the Related Agreements as required by the GCL, the NYSE and
the TSE.
In addition, Amax agrees with, and covenants to Kinross and Merger Corp. that
Amax shall use all reasonable efforts to permit Amax shareholders to effect
Approval by Consent to adopt and approve for purposes of Section 251 of the GCL,
the Merger, this Agreement and each of the other transactions contemplated by
this Agreement and the Stockholder Agreement and to comply with and satisfy as
promptly as practicable any legal, regulatory or stock exchange requirements
that apply to approving this Agreement, the Merger and the other transactions
contemplated by this Agreement by way of Approval by Consent. The Board of
Directors of Amax has resolved that for purposes of an Approval by Consent or
action at a stockholders' meeting, this Agreement is fair to and in the best
interests of Amax and its stockholders and that this Agreement be approved and
adopted and that the Board of Directors of Amax recommends the Merger to the
stockholders of Amax.
Kinross, Merger Corp. and Amax agree that if Amax stockholder adoption and
approval is obtained by Approval by Consent, Amax shall not be obligated to call
the Amax Stockholders' Meeting and all references to the preparation, filing and
mailing of the Joint Proxy Statement shall, unless the context otherwise
requires, be deemed appropriately modified so as to reflect such method of
stockholder adoption and approval.
Section 4.06 Rule 145 Affiliates.
Prior to the Effective Time, Amax shall cause to be delivered to Kinross a list
identifying all persons who were, at the time of the Amax Stockholders' Meeting,
deemed to be a Securities Act Affiliate of Amax. Amax shall use its reasonable
efforts to cause each person who is identified as a possible Securities Act
Affiliate to enter into, prior to the Effective Time, an agreement in the form
attached hereto as Exhibit 4.06 pursuant to which each such Person acknowledges
its responsibilities as such a Securities Act Affiliate.
Section 4.07 No Shop.
(a) From and after the date hereof until the Closing Date, Amax shall
not, and it shall use its best efforts to ensure that no other Amax
Group Member or their respective directors do
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not, and shall not permit the respective officers, employees,
representatives, and other Advisors of the Amax Group to, directly or
indirectly,
(i) solicit, initiate, or engage in discussions or negotiations with
any person, encourage submission of any inquiries, proposals, or
offers by, or take any other action intended or designed to
facilitate the efforts of any person, other than Kinross,
relating to:
(A) the possible acquisition of, or business combination with,
Amax or any of its material subsidiaries (whether by way of
merger, consolidation, take-over bid, tender offer, purchase
of shares, purchase of assets, or otherwise);
(B) the possible acquisition of any material portion of its or
their shares of capital stock or assets;
(C) any tender offer or exchange offer or other secondary
purchase that, if consummated, would result in any person
(other than the Significant Shareholder) beneficially owning
more than 20% or more of any class of equity securities of
Amax; or
(D) any other transaction, the consummation of which would
reasonably be expected to prevent or materially impede,
interfere with or delay the consummation of the Merger;
(any of the foregoing, a "Competing Proposal"); or
(ii) provide non-public information with respect to Amax or any
Amax Group Member, or afford any access to the properties, books,
or records of the same, to any Person, other than Kinross, that
may wish to propose or pursue a Competing Proposal.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any officer, director
or employee or other Advisor or representative of Amax or any of its
subsidiaries shall be deemed to be a breach of this paragraph by Amax.
Amax shall, and shall direct its subsidiaries, directors, officers,
employees, representatives, and other Advisors to, immediately cease any
and all activities, discussions, or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(b) Neither the Board of Directors of Amax nor any committee thereof shall:
(i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Kinross or Merger Corp., the approval or recommendation
by such Board of Directors or any such committee of the Merger or
this Agreement;
(ii) approve or recommend, or propose to approve or recommend, any
Competing Proposal; or
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(iii) cause or permit Amax or any of its subsidiaries to enter into
any agreement, including an agreement in principle or letter of
intent (any such agreement, a "Transaction Agreement") to
effect a Competing Proposal.
(c) Amax shall promptly advise Kinross orally and in writing of:
(i) any request for information which may relate to a Competing
Proposal,
(ii) any Competing Proposal, or
(iii) any inquiry with respect to or that could lead to any Competing
Proposal.
(d) Nothing contained in this Section 4.07 shall prohibit Amax from taking
and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any legally
required disclosure to the stockholders of Amax provided, however,
that neither Amax nor the Board of Directors of Amax shall withdraw or
modify, or propose to withdraw or modify, its position with respect to
this Agreement or the Merger or approve or recommend, or propose to
approve or recommend, a Competing Proposal (it being understood that
an affirmation of the recommendation will satisfy this proviso).
Section 4.08 Information in Joint Proxy Statement and Canadian Prospectus
None of the information to be supplied by Amax for inclusion or incorporation by
reference in the Registration Statement, Joint Proxy Statement and Canadian
Prospectus will:
(a) in the case of the Registration Statement, at the time it becomes
effective and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading;
(b) in the case of the Joint Proxy Statement, at the time of the mailing
of the Joint Proxy Statement and at the time of each meeting, and
(c) in the case of the Canadian Prospectus, at the time of the filing of
the preliminary prospectus and the final prospectus in respect of the
Equity Offering;
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect
to Amax, its officers and directors or any Amax Group Member shall occur that is
required to be described in the Joint Proxy Statement, Amax shall give prompt
notice to Kinross of such event. The Joint Proxy Statement will comply (with
respect to Amax) as to form in all material respects with the provisions of the
Exchange Act.
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ARTICLE V
KINROSS AND MERGER CORP.'S COVENANTS
From and after the date hereof and until the Closing Date (except as
hereinafter otherwise provided), unless Amax shall otherwise agree in writing:
Section 5.01 Access.
Kinross and Merger Corp. shall permit, and shall use all reasonable efforts to
cause each Kinross Group Member, except to the extent such Kinross Group Member
is subject to contractual restrictions or restrictions set forth in the
organizational documents of such Kinross Group Member which would limit or
otherwise restrict its ability to do so, to permit:
(a) Amax and its Advisers to have reasonable access at reasonable times
to all properties books, accounts, records, Contracts, files,
correspondence, tax records, and documents of or relating to the
Kinross Group including independent auditor's work papers and to
discuss such matters with the executive officers of the Kinross
Group; Kinross shall make available to Amax and its Advisers a copy
of each report or other document filed with the SEC or pursuant to
Canadian Securities Laws and all other information concerning its
business and properties as Amax may reasonably request; and
(b) Amax to conduct, or cause its agents to conduct, such reasonable
reviews, inspections, surveys, tests, and investigations of the
assets of the Kinross Group as Amax deems necessary or advisable
provided such reviews are conducted at reasonable times and in a
reasonable manner.
Section 5.02 Ordinary Course.
Except: (i) as set forth in Section 5.02 of the Kinross Disclosure Letter; (ii)
to the extent such Kinross Group Member is subject to contractual restrictions
or restrictions set forth in the organizational documents of such Kinross Group
Member which would limit or otherwise restrict its ability to do so; and (iii)
for any actions required to be performed by Kinross or Merger Corp. or otherwise
contemplated by this Agreement or the Stockholder Agreement or approved in
advance by Amax, Kinross shall (and shall cause each Kinross Group Member to)
conduct its business only in the ordinary and usual course in all material
respects and use all reasonable efforts to preserve its business organizations
intact and its existing relations with customers, suppliers, employees, and
business associates, and Kinross shall not (and shall cause each Kinross Group
Member not to) do any of the following:
(a) sell or pledge or agree to sell or pledge any capital stock owned by
it in any of its subsidiaries;
(b) amend its Articles or Certificate of Incorporation (or like charter
documents) or By-laws;
(c) subdivide, split, combine, consolidate, or reclassify any of its
outstanding shares of capital stock;
(d) other than in accordance with the Kinross Preferred Shares, declare,
set aside or pay any dividend or make any other distribution payable
in cash, shares, stock, securities or property with respect to any
of its shares of capital stock other than consistent with past
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practice, and other than dividends or distributions declared, set aside
paid or payable by any Kinross Group Member (other than Kinross) or a
subsidiary of Kinross;
(e) repurchase, redeem, or otherwise acquire, directly or indirectly, any of
its capital stock or any securities convertible into or exchangeable or
exercisable into any of its capital stock except pursuant to the terms of
any securities outstanding as of the date hereof and which are set forth in
Section 5.02 of the Kinross Disclosure Letter which require such
repurchase, redemption, acquisition, or exchange;
(f) enter into any material transaction not in the ordinary course of its
business consistent with past practice;
(g) issue, sell, pledge, dispose of or encumber, or authorize or propose the
issuance, sale, pledge, disposition, or encumbrance of, any of its capital
stock, or any securities convertible into or exchangeable or exercisable
for, or options, puts, warrants, calls, commitments or rights of any kind
to acquire, any of its shares of capital stock other than Kinross Shares or
securities directly or indirectly convertible into or exchangeable or
exercisable for Kinross Shares in connection with the Merger, the Equity
Offering, the issued and outstanding convertible shares and debentures of
Kinross, pursuant to Section 5.02(j) and pursuant to the exercise of
options outstanding under Kinross's stock option plan;
(h) transfer, lease, license, sell, mortgage, pledge, encumber, or dispose of
any property or assets other than in the ordinary course of business
consistent with past practice;
(i) incur, guarantee, assume, or modify any indebtedness or other liability in
an aggregate amount in excess of $15,000,000 other than in the ordinary and
usual course of business consistent with past practice;
(j) make, whether by merger, consolidation or purchase, any material
acquisition of, or investment in, assets, shares, capital stock or other
securities of any other person or entity other than its wholly-owned
subsidiaries provided, however, that Kinross may acquire minority or
-------- -------
majority equity interests in natural resource companies through the
purchase of their issued and outstanding capital stock or acquire interests
in prospective mineral prospects, in either case in consideration of the
issue of Kinross Shares, so long as such transaction will not delay or
prevent the consummation of the transactions contemplated by this Agreement
and the Related Agreements or require an amendment or supplement to the
Registration Statement after the same is declared effective and the
aggregate number of Kinross Shares issued in respect of all such
acquisitions does not exceed 2% of the number of Kinross Shares issued and
outstanding on the date of this Agreement;
(k) except as may be required to satisfy contractual obligations existing as of
the date hereof and the requirements of applicable Law, establish, adopt,
enter into, make, amend in any material respect, or make any material
elections under any collective bargaining agreement or Employee Plan or
enter into any new or amend in any material respect any existing
employment, consulting or other agreement providing compensation or
benefits of any executive employee or director except for employment
agreements with new employees (other than Kinross corporate staff) entered
into in the ordinary course of
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business, which agreements do not provide for the payment of "golden
parachutes" or other amounts in respect of severance which are
triggered by the Merger;
(l) except as may be required to satisfy contractual obligations or Kinross
Group Employee Plan obligations existing as of the date hereof and the
requirements of applicable Law: (i) amend any Kinross Group Employee
Plan where such amendment would increase any Kinross Group Member's
annual or aggregate liability or funding obligations in connection with
such Kinross Group Employee Plan by more than five percent, (ii)
terminate or merge any Employee Plan(s), (iii) transfer assets from any
Kinross Group Employee Plan, (iv) extend membership, benefits or
coverage under any Kinross Group Employee Plan to any employee who is
not currently eligible to receive such membership, benefits or
coverage, (v) incorporate any "change in control" provision into any
Kinross Group Employee Plan, or modify any "change in control"
provision presently contained in any Kinross Group Employee Plan, (vi)
transfer any employee from any Kinross Group Member to any other
Kinross Group Member in circumstances where such transfer would
increase the Kinross Group Members' collective expenses in connection
with the employment of such employee;
(m) implement any change in its accounting principles, practices, or
methods, other than as may be required by generally accepted accounting
principles;
(n) alter (through merger, liquidation, reorganization, restructuring or in
any other fashion) the corporate structure or ownership of Kinross or
any Kinross Group Member;
(o) withdraw, permit or consent to the removal of any assets of any of the
Employee Plans maintained by any Kinross Group Member other than for
the purpose of paying benefits in the ordinary course and the payment
of expenses in accordance with past practice and under the terms of
such plan;
(p) take any action that would either:
(i) prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Tax Code; or
(ii) cause the Eligible Amax Shareholders to recognize a taxable gain in
the Merger under Section 367(a) of the Tax Code;
(q) take any action that would prevent the Merger from being characterized
as a "pooling of interests" for the purposes of Canadian GAAP; or
(r) authorize or enter into any agreement or understanding of any type
whatsoever, whether written or oral to take any of the actions referred
to in this Section.
Section 5.03 Insurance.
Kinross shall use all reasonable efforts to continue to insure the Kinross Group
and all property, real and personal, owned or leased by any Kinross Group Member
is insured substantially in the manner and to the extent set forth in Section
3.05.
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Section 5.04 Closing Conditions.
Kinross and Merger Corp. shall use all reasonable efforts to cause all of the
conditions to the obligations of Amax under this Agreement to be satisfied on or
prior to the Closing Date (to the extent the satisfaction of such conditions is
within the control of the Kinross Group). Without limiting the foregoing,
Kinross shall use all commercially reasonable efforts to consummate the Equity
Offering and shall provide Amax and the Significant Shareholder with a
reasonable opportunity to comment on any material in any prospectuses, offering,
circulars or other disclosure documents utilized in connection with the Equity
Offering which relates to Amax or any Amax Group Member, the Significant
Shareholder, the Merger or the transactions contemplated by the Related
Agreements and shall not file any such prospectus or offering document or any
amendment or supplement thereto with any securities regulatory authority or
stock exchange or distribute or use the same prior to obtaining the consent of
Amax, which consent may not be unreasonably withheld or delayed.
Section 5.05 Kinross Shareholders' Approval.
The Board of Directors of Kinross shall call a shareholders' meeting ("Kinross
Shareholders' Meeting") to be held at the earliest practicable date following
mailing of the Joint Proxy Statement to the Kinross shareholders for the purpose
of approving the issue of Kinross Shares pursuant to the Merger and the
Stockholder Agreement, and, if required, to approve the Merger. Kinross shall
use its best efforts to obtain its shareholders' approval of the foregoing and,
without limitation, its Board of Directors shall specifically recommend that its
shareholders vote to approve the foregoing, subject only to Section 5.07 hereof.
Section 5.06 Stock Exchange Listing.
Kinross shall use all reasonable efforts to cause the Kinross Shares to be
issued in connection with the Merger, including Kinross Shares issuable upon
exercise of the Substitute Options and upon conversion of the Amax Preferred
Shares and exercise of the Warrant, to be listed on the TSE and the NYSE.
Section 5.07 No Shop.
(a) From and after the date hereof until the Closing Date, Kinross
shall not, and it shall use its best efforts to ensure that no
other Kinross Group Member or their respective directors do not,
and shall not permit the respective officers, employees,
representatives, and other Advisors of the Kinross Group to,
directly or indirectly,
(i) solicit, initiate, or engage in discussions or negotiations
with any person, encourage submission of any inquiries,
proposals, or offers by, or take any other action intended or
designed to facilitate the efforts of any person, other than
Amax, relating to:
(A) the possible acquisition of, or business combination with,
Kinross or any of its material subsidiaries (whether by
way of merger, amalgamation, arrangement, consolidation,
take-over bid, tender offer, purchase of shares, purchase
of assets, or otherwise);
(B) the possible acquisition of any material portion of its or
their shares of capital stock or assets;
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(C) any take over bid, tender offer or exchange offer or other
secondary purchase that, if consummated, would result in any
person beneficially owning more than 20% or more of any class
of equity securities of Kinross; or
(D) any other transaction, the consummation of which would
reasonably be expected to prevent or materially impede,
interfere with or delay the consummation of the Merger;
(any of the foregoing, a " Kinross Competing Proposal"); or
(ii) provide non-public information with respect to Kinross or any
Kinross Group Member, or afford any access to the properties,
books, or records of the same, to any Person, other than Amax,
that may wish to propose or pursue a Kinross Competing Proposal,
provided, however, that prior to the Kinross Shareholders'
Meeting (as defined in Section 5.05), in response to an
unsolicited bona fide Kinross Competing Proposal that in the good
faith opinion of the Board of Directors of Kinross, based on the
advice of an independent nationally recognized financial advisor
would reasonably be expected to result in a Kinross Superior
Proposal (as defined below), Kinross may: (A) furnish such
information or access with respect to Kinross to the person
making such Kinross Competing Proposal pursuant to a customary
confidentiality agreement with such person, or (B) participate in
negotiations regarding such Kinross Competing Proposal, but in
each case only if (x) the Board of Directors of Kinross
determines in good faith, based on the advice of outside legal
counsel, that such action is necessary in order for such Board to
act in a manner consistent with its fiduciary duties under
applicable law, and (y) Kinross complies with Section 5.07(c)
with respect to such proposal.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any officer, director
or employee or other Advisor or representative of Kinross or any of its
subsidiaries shall be deemed to be a breach of this paragraph by Kinross.
Kinross shall and shall direct its subsidiaries and their respective
directors, officers, employees, representatives, and other Advisors to,
immediately cease any and all activities, discussions, or negotiations with
any parties conducted heretofore with respect to any of the foregoing.
(b) Except as set forth in this Section 5.07(b), neither the Board of
Directors of Kinross nor any committee thereof shall:
(i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Amax, the approval by such Board of Directors or any
such committee of the Merger or this Agreement or the
transactions contemplated hereby;
(ii) approve or recommend, or propose to approve or recommend, any
Kinross Competing Proposal; or
(iii) cause or permit Kinross or any of its subsidiaries to enter into
any agreement, including an agreement in principle or letter of
intent (any such agreement a "Kinross Transaction Agreement") to
effect a Kinross Competing Proposal.
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Notwithstanding the foregoing, prior to the Kinross Shareholders'
Meeting if Kinross has received a Kinross Superior Proposal, the Board
of Directors of Kinross may (subject to the other terms of this
Section 5.07(b)): (A) withdraw or modify its recommendation of the
Merger or this Agreement; (B) approve or recommend a Kinross Superior
Proposal; or (C) cause Kinross or any of its subsidiaries to enter
into a Kinross Transaction Agreement to effect a Kinross Superior
Proposal, but in each case only if: (x) the Board of Directors of
Kinross determines in good faith, based on the advice of outside legal
counsel, that such action is necessary in order for such Board to act
in a manner consistent with its fiduciary duties under applicable law,
and (y) Kinross shall have furnished Amax with written notice at least
four business days prior to the date any such actions are proposed to
be taken specifying which actions are proposed to be taken and after
taking into account modifications to this Agreement proposed by Amax
during such four business day period, such Kinross Competing Proposal
would still constitute a Kinross Superior Proposal. In addition, if
Kinross or the Board of Directors of Kinross takes any of the actions
permitted by the preceding sentence with respect to any Kinross
Competing Proposal, then Kinross must, prior to the taking of such
action, pay, or cause to be paid, to Amax the Amax Expenses (as
defined in Section 10.04) and the Amax Termination Fee (as defined in
Section 10.04). The term "Kinross Superior Proposal" shall mean any
bona fide written Kinross Competing Proposal that has the following
characteristics: (1) it is a definitive proposal to acquire, directly
or indirectly, for consideration consisting of cash and/or readily
marketable securities (x) Kinross Shares representing 100% of the
voting power of the outstanding Kinross Shares, or (y) all or
substantially all of the assets and liabilities of Kinross; (2) the
terms of such proposal in the good faith judgement of the Board of
Directors of Kinross (based on the written opinion of an independent
nationally recognized financial advisor) provide consideration
imputing aggregate post-transaction value to Kinross's shareholders
that is superior to the consideration provided by the Merger (after
taking into account any modifications to this Agreement proposed by
Amax), and (3) the transactions envisioned by such proposal, in the
good faith judgement of the Board of Directors of Kinross, based on
the advice of an independent nationally recognized financial advisor,
are readily financeable, are reasonably likely to be approved by the
shareholders of Kinross in accordance with applicable Law and are
reasonably likely to be consummated without unreasonable delay
compared to the transactions contemplated by this Agreement.
(c) Kinross shall promptly advise Amax orally and in writing of:
(i) any request for information which may relate to a Kinross
Competing Proposal,
(ii) any Kinross Competing Proposal,
(iii) any inquiry with respect to or that could lead to any Kinross
Competing Proposal, or
(iv) any action taken in accordance with clauses (A) or (B) of the
proviso to Section 5.07(a)(ii), including in each case the
material terms and conditions of such request, Kinross Competing
Proposal, inquiry or action, the identity of the person making
any such request, Kinross Competing Proposal or inquiry or with
respect to which such action is taken and whether or not Kinross
believes any
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Kinross Competing Proposal so reported is or could result in a
Kinross Superior Proposal. Kinross will keep Amax fully and
timely informed of the status and details (including amendments
or proposed amendments) of any such request, Kinross Competing
Proposal, inquiry or action and any restrictions relating
thereto.
(d) Nothing contained in this Section 5.07 shall prohibit the Board of
Directors of Kinross from distributing a director's circular in
response to a take over bid in accordance with Section 99 of the
Securities Act (Ontario) and the equivalent provisions of other
Canadian Securities Laws provided, however, that neither Kinross
nor the Board of Directors of Kinross shall, except as permitted by
Section 5.07(b), withdraw or modify, or propose to withdraw or
modify, its position with respect to this Agreement or the Merger
or approve or recommend, or propose to approve or recommend, a
Kinross Competing Proposal (it being understood that an affirmation
of the recommendation will satisfy this proviso).
Section 5.08 Information in Registration Statement and Joint Proxy Statement.
Kinross covenants that none of the information to be supplied by Kinross for
inclusion or incorporation by reference in the Registration Statement or the
Joint Proxy Statement will: (a) in the case of the Registration Statement, at
the time it becomes effective and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading; or (b) in the case of the Joint Proxy Statement, at the time of the
mailing of the Joint Proxy Statement and at the time of each meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with respect
to Kinross, its officers and directors or any Kinross Group Member shall occur
that is required to be described in the Joint Proxy Statement, Kinross shall
give prompt notice to Amax of such event. The Joint Proxy Statement will comply
(with respect to Kinross) as to form in all material respects with the
provisions of the Exchange Act.
Section 5.09 Compliance with Canadian Securities Laws.
Kinross covenants that the preliminary and final short form prospectuses
relating to the Equity Offering (the "Canadian Prospectus") will be filed with
the securities regulatory authorities in each of the Provinces of Canada and
will comply as to form in all material respects with applicable Canadian
Securities Laws and, as at the date of each Canadian Prospectus, will contain
full, true and plain disclosure of all material facts relating to the securities
issued thereunder. Kinross represents and warrants that the Equity Offering
will be effected in such a manner that no offering materials will be required to
be filed with the SEC in respect thereof.
ARTICLE VI
OTHER COVENANTS OF THE PARTIES
Section 6.01 Consents and Notices.
Promptly after the date hereof and, if necessary, for a reasonable time after
the Closing Date:
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(a) The Parties shall use all reasonable efforts, and the Parties shall
cooperate with each other to obtain, all consents, waivers, approvals,
and authorizations, in addition to those set forth in clause (b) below
which may be necessary to effect the Merger and the transactions
contemplated by the Stockholder Agreement, including, without
limitation, obtaining those consents, waivers, approvals, and
authorizations described in Section 8.04 of the Amax Disclosure Letter
and Section 7.04 of the Kinross Disclosure Letter;
(b) Each of Amax and Kinross will promptly execute and file, or join in the
execution and filing of, any application or other document that may be
necessary in order to obtain the authorization, approval or consent of
any Governmental Entity which may be reasonably required, or which the
other party may reasonably request in connection with the consummation
of the transactions contemplated by this Agreement. Each of Amax and
Kinross will use reasonable efforts to obtain promptly all such
authorizations, approvals and consents. Without limiting the generality
of the foregoing, as promptly as practicable after the execution of
this Agreement, each of Amax and Kinross shall file with the Federal
Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "DOJ"), a pre-merger notification report
under the HSR Act and shall make such filings as are necessary under
the Investment Canada Act and the Competition Act (Canada).
Section 6.02 Joint Proxy Statement and Registration Statement; Equity Offering.
(a) Amax and Kinross shall promptly prepare and file with the SEC a joint
proxy statement/prospectus and information circular (together with any
amendments or supplements thereto, the "Joint Proxy Statement") and
Kinross shall prepare and file with the SEC a registration statement on
Form F-4 (the "Registration Statement"), of which the Joint Proxy
Statement will form a part. Each of Kinross and Amax shall use all
reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after
such filing. As promptly as practicable after the Registration
Statement shall have become effective, each of Kinross and Amax shall
mail the Joint Proxy Statement to its respective stockholders or
shareholders. Kinross shall also take any action (other than qualifying
to do business in any jurisdiction in which it is currently not so
qualified) required to be taken under any applicable state securities
laws in connection with the issuance of Kinross Shares in the Merger
and the issuance of the Warrant Shares and shall take all action
required under Canadian Securities Laws in order for the issuance of
Kinross Shares pursuant to the Merger (including the Kinross Shares
issuable upon exercise of the Substitute Options, upon conversion of
the Amax Preferred Shares and upon exercise of the Warrant) to be
exempt from the prospectus delivery requirements and resale
restrictions of applicable Canadian Securities Laws, and Amax shall
furnish all information concerning Amax and the holders of Amax Shares
as may be reasonably requested in connection with any such action.
(b) Kinross covenants to Amax, and Amax covenants to Kinross and Merger
Corp., that all filings and applications for exemptions required by
Canadian Securities Laws to be made by Kinross or Amax, as applicable,
in the various jurisdictions in Canada shall be made in connection with
the Joint Proxy Statement and the Registration Statement.
(c) Amax shall use all reasonable efforts to cause "comfort" letters of
Price Waterhouse LLP or other nationally recognized certified public
accounting firm to be delivered to
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Kinross, dated the date of the Joint Proxy Statement and addressed
to Kinross and Merger Corp., in form and substance reasonably
satisfactory to Kinross and reasonably customary in scope and
substance for letters delivered by independent public accountants
in connection with transactions such as those contemplated by this
Agreement.
(d) Kinross shall use all reasonable efforts to cause "comfort"
letters of Deloitte & Touche or other nationally recognized
certified public accounting firm to be delivered to Amax dated the
date of the Joint Proxy Statement, and addressed to Amax in form
and substance reasonably satisfactory to Amax and reasonably
customary in scope and substance for letters delivered by
independent public accountants in connection with transactions
such as those contemplated by this Agreement.
Section 6.03 Press Releases.
Before issuing any press release or otherwise making any public statements with
respect to the Merger and the transactions contemplated by the Related
Agreements, Kinross, Merger Corp. and Amax shall consult with each other and
shall undertake reasonable efforts to agree upon the terms of such press
release, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
Law or by obligations pursuant to any listing agreement with any stock exchange
or national securities exchange.
Section 6.04 Tax Representation Letters.
For purposes of the tax opinions described in Section 7.05 and Section 8.05 of
this Agreement, each of Amax and Kinross shall provide, representation letters
reasonably customary in scope and substance, each dated as of the date that is
two business days prior to the date the Joint Proxy/Registration Statement is
mailed to shareholders of Amax and reissued as of the Closing Date.
Section 6.05 Transfer Taxes.
Kinross and Amax shall cooperate in the preparation, execution and filing of all
returns, applications or other documents regarding any real property transfer,
stamp, recording, documentary or other taxes (including, without limitation, any
New York State Real Estate Transfer Tax) and any other fees and similar taxes
which become payable in connection with the Merger (collectively, "Transfer
--------
Taxes"). From and after the Effective Time, Amax shall pay or cause to be paid,
- -----
without deduction or withholding from any amounts payable to the holders of Amax
Shares, all Transfer Taxes.
Section 6.06 Indemnification of Directors and Officers.
(a) From and after the Effective Time, Kinross shall, and shall cause
the Surviving Corporation to, indemnify, defend and hold harmless
the present and former officers, directors and employees of Amax
and any of its subsidiaries, whether any such Person is or was an
officer, director or employee of Amax or any of its subsidiaries,
or is or was serving at the request of Amax as an officer, director
or employee or agent of another Person, against all losses,
expenses, claims, damages or liabilities arising out of actions or
omissions occurring on or prior to the Effective Time (including,
without limitation, the transactions contemplated by this
Agreement) to the full extent permitted or required under
applicable law (and shall also advance expenses as incurred to the
fullest extent permitted under applicable law, provided that the
Person to whom expenses are
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advanced provides an undertaking to repay such advances if it is
ultimately determined that such Person is not entitled to
indemnification). Kinross and Merger Corp. agree that all rights to
indemnification, including provisions relating to advances of expenses
incurred in defense of any action, suit or proceeding, whether civil,
criminal, administrative or investigative (each, a "Claim"), existing
in favour of the present or former directors, officers, employees,
fiduciaries and agents of Amax or any of its subsidiaries, whether any
such Person is or was an officer, director or employee of Amax or any
of its subsidiaries, or is or was serving at the request of Amax as an
officer, director or employee or agent of another Person
(collectively, the "Indemnified Parties") as provided in Amax's
Certificate of Incorporation or By-Laws or pursuant to other
agreements, or certificates of incorporation or By-Laws or similar
documents of any of Amax's subsidiaries, as in effect as of the date
hereof, with respect to matters occurring through the Effective Time,
shall survive the Merger and shall continue in full force and effect
for a period of not less than six years from the Effective Time;
provided, however, that all rights to indemnification in respect of
any Claim asserted, made or commenced within such period shall
continue until the final disposition of such Claim. Kinross shall
cause to be maintained in effect for not less than six years after the
Effective Time the current policies of directors' and officers'
liability insurance maintained by Amax and Amax's subsidiaries with
respect to matters occurring on or prior to the Effective Time,
provided, however, that (i) Kinross may substitute therefor policies
of at least the same coverage with insurers of comparable credit
quality containing terms and conditions which are no less advantageous
to the Indemnified Parties and (ii) Kinross shall not be required to
pay an annual premium for such insurance in excess of two times the
last annual premium paid prior to the date hereof, but in such case
shall purchase as much coverage as possible for such amount.
(b) This Section 6.06 is intended to benefit and be enforceable by the
Indemnified Parties and shall be binding on all successors and assigns
of Kinross, Merger Corp., and Amax and the Surviving Corporation.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF KINROSS AND MERGER CORP.
The obligations of Kinross and Merger Corp. to consummate the Merger
are subject to the satisfaction of the following conditions on or prior to the
Closing Date, each of which may be waived by Kinross and Merger Corp.:
Section 7.01 Representations and Warranties.
The representations and warranties of Amax set forth in Article II qualified as
to materiality shall be true and correct, and the representations and warranties
not so qualified shall be true and correct in all material respects as of the
date of this Agreement and on the Closing Date as if made on the Closing Date,
except for such representations and warranties made expressly as of a specified
date, which shall be true and correct in all material respects as of such date;
and Kinross and Merger Corp. shall have received a certificate signed on behalf
of Amax by an executive officer thereof to such effect dated as of the Closing
Date.
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Section 7.02 Compliance with Covenants.
Amax shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by Amax prior to or on the Closing Date and shall have received
certificates signed on behalf of Amax by an executive officer thereof to such
effect. Amax and the Significant Shareholder shall have performed and complied
in all material respects with all covenants and agreements required by the
Related Agreements to be performed or complied with by Amax or the Significant
Shareholder, as the case may be, on or prior to the Closing Date.
Section 7.03 No Material Adverse Change.
There shall not have occurred any Material Adverse Change in the Amax Group
since the date of this Agreement.
Section 7.04 Consents.
The consents, waivers, approvals, and authorizations expressly designated in
Section 7.04 of the Kinross Disclosure Letter as required to be obtained as a
condition to Closing shall have been obtained.
Section 7.05 Tax Opinion.
Kinross shall have received an opinion of counsel to Kinross, dated the Closing
Date, to the effect that the Merger will be treated for United States Federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Tax Code, that each of Kinross, Merger Corp. and Amax will be a party to
that reorganization within the meaning of Section 368(b) of the Tax Code and
that the Eligible Kinross Shareholders will not recognize a taxable gain under
Section 367(a) of the Tax Code; it being understood that in rendering such
opinion, such tax counsel shall be entitled to rely upon representations
provided by the parties hereto and certain shareholders of Kinross in the
representation letters referred to in Section 6.04.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF AMAX
The obligation of Amax to consummate the Merger is subject to the
satisfaction of the following conditions on or prior to the Closing Date, each
of which may be waived by Amax:
Section 8.01 Representations and Warranties.
The representations and warranties of Kinross and Merger Corp. set forth in
Article III qualified as to materiality shall be true and correct, and the
representations and warrantees not so qualified shall be true and correct in all
material respects as of the date hereof and on the Closing Date as if made on
the Closing Date, except for such representations and warranties made expressly
as of a specified date which shall be true and correct in all material respects
as of such date, and Amax shall have received a certificate signed on behalf of
Kinross by an executive officer thereof to such effect dated as of the Closing
Date.
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Section 8.02 Compliance with Covenants.
Kinross and Merger Corp. shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by Kinross or Merger Corp. prior to or on the Closing
Date and shall have received certificates signed on behalf of Kinross and
Merger Corp. by an executive officer thereof in the case of Kinross and by the
President of Merger Corp. to such effect. Kinross and the Significant
Shareholder shall have performed and complied in all material respects with all
covenants and agreements required by the Related Agreements to be performed or
complied with by Kinross and the Significant Shareholder, as the case may be,
prior to the Closing Date.
Section 8.03 No Material Adverse Change.
There shall not have occurred any Material Adverse Change in the Kinross Group
since the date of this Agreement.
Section 8.04 Consents.
The consents, waivers, approvals, and authorizations expressly designated in
Section 8.04 of the Amax Disclosure Letter as required to be obtained as a
condition to Closing shall have been obtained.
Section 8.05 Tax Opinion.
Amax shall have received an opinion of counsel to Amax, dated the Closing Date,
to the effect that the Merger will be treated for United States Federal income
tax purposes as a reorganization within the meaning of Section 368(a) of the Tax
Code, that each of Kinross, Merger Corp. and Amax will be a party to that
reorganization within the meaning of Section 368(b) of the Tax Code and that the
Eligible Amax Shareholders will not recognize a taxable gain under Section
367(a) of the Tax Code; it being understood that in rendering such opinion, such
tax counsel shall be entitled to rely upon representations provided by the
parties hereto and certain stockholders of Amax in the representation letters
referred to in Section 6.04.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF AMAX AND KINROSS
The obligations of Amax and Kinross to consummate the Merger are subject to
the satisfaction of the following conditions on or prior to the Closing Date,
each of which may be waived only with the consent in writing of Amax and
Kinross:
Section 9.01 Equity Offering.
The Equity Offering shall have been completed in accordance with the terms of
the letter from CIBC Wood Gundy Inc. to Kinross dated the date of this
Agreement, a copy of which has been delivered to Amax concurrent with the
execution and delivery hereof, and Kinross shall be entitled to receive at the
Effective Time from escrow, aggregate gross proceeds of at least (Canadian)
$140,000,000 (prior to giving effect to the underwriters' over-allotment option)
at a discount to market and with underwriting fees payable which are not, in
either case, in excess of those set forth in the said letter.
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Section 9.02 No Injunctions.
No temporary restraining order, preliminary injunction, permanent injunction or
other order preventing the consummation of the Merger shall have been issued by
any federal, state, or provincial court (whether domestic or foreign) having
jurisdiction and remain in effect.
Section 9.03 Stock Exchange Approval - Kinross.
There shall have been authorized for listing on the NYSE and TSE, subject to
official notice of issuance and other normal conditions, the Kinross Shares
issuable pursuant to the Merger and the Stockholder Agreement, upon conversion
of the Amax Preferred Shares, exercise of the Warrants and exercise of the
Substitute Options and Kinross shall have obtained the approval of the holders
of a majority of the Kinross Shares present in person or by proxy at the Kinross
Shareholders' Meeting to approve such issuances of Kinross Shares.
Section 9.04 Shareholder Approval - Amax.
This Agreement and the Merger shall have been adopted and/or approved by the
stockholders of Amax in accordance with the GCL, the policies of the NYSE, the
TSE, Amax's Certificate of Incorporation and By-Laws and applicable Law.
Section 9.05 Securities Filings.
Prior to the first date upon which the Joint Proxy Statement is mailed to the
Amax stockholders and the Kinross shareholders, the SEC shall have declared the
Registration Statement effective, and any required approvals or exemption orders
of state or provincial securities administrators shall have been obtained and
appropriate filings made. On the Closing Date, no stop order, cease trade order
or similar restraining order that has been entered by the SEC, the OSC or any
other state or provincial securities administrator in relation to the Kinross
Shares or the Amax Shares shall still be in effect.
Section 9.06 No Litigation.
There shall not be pending or threatened any suit, action or proceeding by any
Governmental entity, before any court or governmental authority, agency or
tribunal, domestic or foreign, that has a significant likelihood of success,
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement or seeking to obtain from
Kinross or Merger Corp. any damages that are material in relation to Kinross,
Amax and their subsidiaries taken as a whole.
Section 9.07 Completion of Transactions.
The transactions contemplated by the Stockholder Agreement to occur on or prior
to the Effective Time shall have been consummated or shall be completed
simultaneously with the completion of the Merger except to the extent any such
failure results from a breach by the party purporting to rely on this condition.
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ARTICLE X
CLOSING AND TERMINATION
Section 10.01 Closing.
The Closing shall take place at such place and on such date as Amax and Kinross
may agree, which date, subject to fulfilment or waiver of the conditions set
forth in Articles VII, VIII and IX (other than such conditions as can only be
fulfilled at the Closing) shall be no later than the second business day
following the day on which the last of the conditions set forth in Articles VII,
VIII and IX (other than such conditions as can only be fulfilled at the Closing)
shall have been fulfilled or waived, or at such other time and place as Kinross
and Amax shall agree.
Section 10.02 Termination of this Agreement.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of any matters presented in connection with the
Merger by the shareholders of Amax or Kinross:
(a) By mutual written consent of Kinross and Amax.
(b) By either Kinross or Amax if there has been a breach of any of the
representations, warranties, covenants and agreements on the part of the
other (the "Breaching Party") set forth in this Agreement, which breach
has or is likely to result in the failure of the conditions set forth in
Section 7.01, 7.02, 8.01 or 8.02 as the case may be to be satisfied and
in each case has not been cured within fifteen business days following
receipt by the Breaching Party of notice of such breach from the non-
breaching party (the "Non-Breaching Party").
(c) By either Kinross or Amax if any permanent order, decree, ruling or
other action of a court or other competent authority restraining,
enjoining or otherwise preventing the consummation of the Merger shall
have become final and non-appealable.
(d) By either Kinross or Amax if the Merger shall not have been completed by
August 31, 1998 (the "Termination Date").
(e) By Kinross if:
(i) the Board of Directors of Amax, or any committee thereof,
withdraws or modifies in a manner adverse to Kinross or Merger
Corp. its approval or recommendation of this Agreement or the
Merger or approves or recommends a Competing Proposal or resolves
to do any of the foregoing, or
(ii) Amax shall have entered into a Transaction Agreement to effect a
Competing Transaction, or
(iii) unless prior approval is given by way of Approval by Consent, (A)
the Amax Stockholders' Meeting or any other meeting of the Amax
stockholders called for the purpose of voting on the Merger or the
transactions contemplated hereby shall have been convened, (B)
Kinross shall have voted all Amax Shares over
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which it has voting power to approve the Merger and such
transactions, and (C) the Amax stockholders shall have failed to
approve the Merger and such transactions for purposes of GCL Section
251, or
(iv) Amax wilfully fails to take any action within its power required by
the terms of, or wilfully takes any action prohibited by the terms
of, Section 4.05 or Section 4.07(b); provided, however, that a right
of termination pursuant to this clause (iv) shall only arise if
within five Business Days of written notice of the asserted breach to
Amax, Amax has not cured or taken substantial steps to cure such
breach, or
(v) Amax is unable to comply with Section 4.05 or Section 4.07(b) hereof
but Kinross is not entitled to terminate this Agreement pursuant to
Section 10.02(e)(iv);
it being understood that the foregoing shall in no way limit the obligations of
Amax under Section 4.05 or Section 4.07 hereof or, subject to the proviso to the
final sentence of Section 10.03, Kinross's right to relief for breaches of
Section 4.05 or Section 4.07.
(f) By Amax if:
(i) the Board of Directors of Kinross or any committee thereof withdraws
or modifies in a manner adverse to Amax its approval of this
Agreement or the Merger or approves or recommends a Kinross Competing
Proposal or resolves to do any of the foregoing;
(ii) Kinross shall have entered into a Kinross Transaction Agreement to
effect a Kinross Competing Proposal; or
(iii) the Kinross shareholders do not approve the issuance of Kinross
Shares contemplated by Section 9.03 of this Agreement and the
Stockholder Agreement at the Kinross Shareholders' Meeting or any
other meeting of the Kinross Shareholders called for the purpose of
voting on the issuance of Kinross Shares pursuant to the Merger and
the Stockholder Agreement.
(g) By Kinross if:
(i) Kinross enters into a Kinross Transaction Agreement in a manner
permitted by Section 5.07(b); and
(ii) Kinross has previously paid or simultaneously with terminating pays
Amax all Amax Expenses and the Amax Termination Fee in cash and
otherwise complies with the provisions of Section 5.07(b).
(h) By Amax or Kinross at any time on or after June, 30, 1998 if:
(i) Kinross has not at the time of termination received and retained
proceeds of at least Canadian $140,000,000 and otherwise consummated
the transactions contemplated by the Equity Offering in accordance
with the terms thereof; or
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(ii) the application of the net proceeds of the Equity Offering at
the Effective Time in the manner contemplated by the Canadian
Prospectus shall have become incapable of completion.
Subject to Section 10.03 and Section 10.04 hereof, in the event of termination
of this Agreement and abandonment of the Merger pursuant to this Article X, no
party hereto (or any of its directors or officers) shall have any liability or
other obligation to any other party to this Agreement, except that nothing
herein will relieve any party from liability for any breach by such party prior
to termination of any covenant or agreement set forth in this Agreement.
Section 10.03 Termination Fee and Expenses Kinross.
In the event:
(a) Kinross terminates this Agreement pursuant to Section 10.02(e)(i),
Section 10.02(e)(ii) or Section 10.02(e)(iv); or
(b) Kinross terminates this Agreement pursuant to Section 10.02(e)(iii),
such right to terminate arose due to a willful breach within the
Stockholders' (as defined in the Stockholder Agreement) power of the
Stockholder Agreement by the Stockholders resulting in the failure or
inability of the Stockholders or the inability of Kinross to vote
sufficient Amax Shares to approve the Merger and the transactions
contemplated by this Agreement for purposes of GCL Section 251 and
within 12 months of termination of this Agreement any Amax Group
Member or the Significant Shareholder enters into an agreement to
effect an Alternative Transaction or an Alternative Transaction is
consummated; or
(c) Kinross terminates this Agreement pursuant to Section 10.02(e)(iii)
(other than in the circumstances to which clause (b) of this Section
10.03 applies) or 10.02(e)(v) and within 12 months of termination of
this Agreement any Amax Group Member or the Significant Shareholder
enters into an agreement to effect an Alternative Transaction or an
Alternative Transaction is consummated;
then, unless theretofore paid, Amax shall promptly (but not later than the First
Business Day following termination or, in the case of clause (b), the date of
entry into or consummation of the applicable Alternative Transaction) pay to
Kinross (by wire transfer of immediately available funds) a fee (the "Kinross
Termination Fee") of US$16,000,000 and shall reimburse Kinross as promptly as
practicable after such amount becomes payable (which, in the case of clause (b)
or (c), shall be at the time of the entry into or consummation of the applicable
Alternative Transaction) for all out-of-pocket costs up to a maximum of
US$8,000,000 (the "Kinross Expenses") incurred by Kinross in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
preparations to complete the Merger including, without limitation, any
commission payable to CIBC Wood Gundy in respect of the Equity Offering and the
fees and expenses of Kinross's Advisors provided, however, that in the event of
a payment pursuant to clause (c) of this Section 10.03, instead of payment of
the Kinross Termination Fee and the Kinross Expenses, Kinross shall only be
entitled to reimbursement of the Kinross Expenses up to a maximum of
US$8,000,000. The amount of Kinross Expenses payable in accordance with this
Section 10.03 shall be the amount set forth in an estimate delivered by Kinross
at the time Kinross Expenses become payable subject to upward or downward
adjustment as provided in the next sentence. In the event that Kinross's actual
out-of-pocket costs exceed such estimate, the amount of any such excess shall be
payable upon demand, and in the event that Kinross's actual costs are less than
the
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amount of such estimate, Kinross shall promptly refund such lesser amount. If
Amax certifies to Kinross that Amax reasonably believes that within two days the
Kinross Expenses will become payable hereunder, then Kinross shall immediately
provide Amax with its best estimate of the Kinross Expenses.
For purposes of the foregoing, "Alternative Transaction" means (i) the sale,
assignment, lease, conveyance, disposition or transfer, directly or indirectly,
in any transaction or series of related transactions of all or substantially all
the assets of Amax or (ii) any transaction or series of transactions that
results in any person or group (other than the Significant Shareholder or any of
its Affiliates) obtaining beneficial ownership (as such term is used in Exchange
Act Rule 13d-3, except that (A) a person will be deemed to have "beneficial
ownership" of all Amax Shares that such person has the right to acquire, whether
such right to acquire is exercisable immediately or only after the passage of
time and (B) any determination of beneficial ownership shall treat as
outstanding all Amax Shares issuable in respect of indebtedness outstanding
under the Credit Agreement dated as of March 19, 1996, by and between Amax and
the Significant Shareholder), of greater than 50% of the Amax Shares; it being
understood that if an Alternative Transaction is consummated, or any agreement
is entered into to effect an Alternative Transaction, through a series of
related transactions, an Alternative Transaction shall be deemed to have
occurred on the earlier of the date of the first of such transactions or the
entering into of such agreement.
Any obligation to pay a Termination Fee and reimburse expenses is not intended
by any Party as a penalty nor is it intended to limit Kinross's right to such
recovery of other damages it may sustain as a result of any breach by Amax of
this Agreement; provided, however, that with respect to clause (c) of this
-------- -------
Section 10.03 only, Amax's obligation to reimburse the Kinross Expenses is in
lieu of any damages or any other payment which Amax might otherwise be obliged
to pay Kinross as a result of the events contemplated by such clause (c).
Section 10.04 Termination Fee and Expenses - Amax.
In the event :
(a) this Agreement is terminated by Amax pursuant to Section
10.02(f)(iii); or;
(b) Amax terminates this Agreement in accordance with Section
10.02(f)(i) or Section 10.02(f)(ii); or
(c) Kinross terminates this Agreement in accordance with Section
10.02(g);
then Kinross shall promptly (but not later than the First Business Day following
termination) pay to Amax (by wire transfer of immediately available funds) a fee
(the "Amax Termination Fee") of US$16,000.000 in the aggregate and shall
reimburse as promptly as practicable Amax for all out-of-pocket costs up to a
maximum of US$8,000,000 (the "Amax Expenses") incurred by Amax in connection
with the negotiation, preparation, execution and delivery of this Agreement and
the preparations to complete the Merger including, without limitation, the fees
and expenses of Amax's Advisors.
The amount of Amax Expenses payable in accordance with this Section 10.04 shall
be the amount set forth in an estimate delivered by Amax at the time Amax
Expenses become payable subject to upward or downward adjustment as provided in
the next sentence. In the event that Amax's actual out-of-pocket costs exceed
such estimate, the amount of any such excess shall be payable upon demand, and
in the event that Amax's actual costs are less than the amount of such estimate,
Amax shall promptly refund such lesser amount. If Amax certifies to Kinross
that Amax reasonably believes that within two days the
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Amax Expenses will become payable hereunder, then Amax shall immediately provide
Kinross with its best estimate of the Amax Expenses.
Any obligation to pay a Termination Fee and reimburse expenses is not intended
by any Party as a penalty nor is it intended to limit Amax's right to such
recovery of other damages it may sustain as a result of any breach by Kinross of
this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Further Actions.
From time to time, as and when requested by any Party, the other Parties shall
execute and deliver, and use all reasonable efforts to cause to be executed and
delivered, such documents and instruments and shall take, or cause to be taken,
such further or other actions as may reasonably requested in order to:
(a) carry out the intent and purposes of this Agreement;
(b) effect the Merger (or to evidence the foregoing); and
(c) consummate and give effect to the other transactions, covenants, and
agreements contemplated by this Agreement.
Section 11.02 Expenses.
Except as otherwise specifically provided herein, Amax, Kinross and Merger Corp.
shall each bear their own legal fees and other costs and expenses with respect
to the negotiation, execution, and the delivery of this Agreement and the
consummation of the Merger.
Section 11.03 Entire Agreement.
This Agreement, which includes the Exhibits hereto and the other documents,
agreements, and instruments executed and delivered pursuant to or in connection
with this Agreement, contains the entire Agreement among the Parties with
respect to the Merger and, except as expressly provided herein, supersedes all
prior arrangements or understandings with respect thereto.
Section 11.04 Descriptive Headings.
The descriptive headings of this Agreement are for convenience only and shall
not control or affect the meaning or construction of any provision of this
Agreement.
Section 11.05 Notices.
All notices or other communications which are required or permitted hereunder
shall be in writing and sufficient if delivered personally or sent by
telecopier, nationally recognized over-night courier, or registered or certified
mail, postage prepaid, addressed as follows:
(a) If to Amax:
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9100 East Mineral Circle
P.O. Box 6940
Englewood, Colorado USA 80155
Attention: President
Telephone: (303) 643-5507
Fax: (303) 643-5500
with a copy to the General Counsel of Amax, at the address set
forth above.
(b) If to Kinross or Merger Corp.:
5700 Scotia Plaza
40 King Street West
Toronto, Ontario M5H 3Y2
Attention: Chairman
Telephone: (416) 365-5123
Fax: (416) 363-6622
with a copy to:
Smith Lyons
5800 Scotia Plaza
40 King Street West
Toronto, Ontario M5H 3Y2
Attention: Cameron Mingay
Telephone: (416) 369-7200
Fax: (416) 369-7250
Any such notices or communications shall be deemed to have been received: (i)
if delivered personally or sent by telecopier (with transmission confirmed) or
nationally recognized overnight courier, on the date of such delivery; or (ii)
if sent by registered or certified mail, on the third Business Day following the
date on which such mailing was postmarked. Any Party may by notice change the
address to which notices or other communications to it are to be delivered or
mailed.
Section 11.06 Governing Law.
(a) This Agreement shall be governed by and construed in accordance
with the Laws of the State of Delaware (other than the choice of
law principles thereof), except that any representations and
warranties with respect to real and tangible property shall be
governed by and construed in accordance with the Laws of the
jurisdiction where such property is situated if other than in the
State of Delaware.
(b) Any action, suit, or other proceeding initiated by Amax, Kinross,
or Merger Corp. against the other under or in connection with
this Agreement may be brought in any
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federal or state court in the State of Delaware, as the Party
bringing such action, suit, or proceeding shall elect, having
jurisdiction over the subject matter thereof, Amax, Kinross, and
Merger Corp. hereby submit themselves to the jurisdiction of any
such court for the purpose of any such action and agree that
service of process on them in any such action, suit, or
proceeding may be effected by the means by which notices are to
be given to it under this Agreement
Section 11.07 Assignability.
This Agreement shall be binding upon and shall enure to the benefit of and be
enforceable by the Parties and their respective successors and assigns, provided
that this Agreement shall not be assignable otherwise than by operation of law
by any Party without the prior written consent of the other Parties, and any
purported assignment by any Parties without the prior written consent of the
other Party shall be void.
Section 11.08 Employee Benefit Plan.
Nothing in this agreement shall be construed so as to limit the right of any
Kinross Group Member, Amax Group Member or the Surviving Corporation to amend,
modify merge, consolidate, terminate or replace the Employee Plans maintained by
any of them, in whole or in part, at any time at or following the Closing Date,
provided that no such amendment, modification, merger, consolidation,
termination or replacement shall operate to reduce the vested benefits under
such plans accrued to the date of such amendment, modification, merger,
consolidation, termination or replacement.
Section 11.09 Remedies.
The Parties acknowledge that the remedy at law for any breach of the obligations
undertaken by the Parties is and shall be insufficient and inadequate and that
the Parties shall be entitled to equitable relief, in addition to remedies at
law. In the event of any action to enforce the provisions of this Agreement,
each of the Parties waive the defense that there is an adequate remedy at law.
The Parties acknowledge that the Amax Shares and Kinross Shares are unique.
Without limiting any remedies any Party may otherwise have, in the event any
other Party refuses to perform its obligations under this Agreement, the Parties
shall have, in addition to any other remedy at law or in equity, the right to
specific performance.
Section 11.10 Waivers and Amendments.
Any waiver of any term or condition of this Agreement, or any amendment or
supplementation of this Agreement, shall be effective only if in writing. A
waiver of any breach or failure to enforce any of the terms or conditions of
this Agreement shall not in any way affect, limit, or waive a Party's rights
hereunder at any time to enforce strict compliance thereafter with every term or
condition of this Agreement. Amax agrees, for the benefit of the Significant
Shareholder, that it will not (i) enter into any amendment to this Agreement
that would alter or change any of the terms and conditions of this Agreement,
(ii) waive any condition set forth in Article VIII or IX of this Agreement, or
(iii) consummate the Merger after a time at which it would be entitled to
terminate this Agreement pursuant to Section 10.02 (without regard to any
amendment of such Section not approved by the Significant Shareholder) without
the consent of the Significant Shareholder.
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Section 11.11 Third-Party Rights.
Other than pursuant to Section 1.10, Section 6.06 and Section 11.10,
notwithstanding any other provision of this Agreement, this Agreement shall not
create benefits on behalf of any stockholder or employee of the Amax Group or
the Kinross Group, any third party or any other Person (including without
limitation any broker or finder, notwithstanding the provisions of Section 2.15
and Section 3.15) and this Agreement shall be effective only as between the
Parties, their successors and permitted assigns.
Section 11.12 Illegalities.
In the event that any provision contained in this Agreement shall be determined
to be invalid, illegal, or unenforceable in any respect for any reason, the
validity, legality, and enforceability of any such provision in every other
respect and the remaining provisions of this Agreement shall not, at the
election of the Party for whose benefit the provision exists, be in any way
impaired.
Section 11.13 Currency.
Except as otherwise set forth herein, all references to amounts of money in this
Agreement are to United States Dollars.
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Section 11.14 Counterparts.
This Agreement may be executed in any number of counterparts, each of which will
be an original as regards any party whose signature appears thereon and all of
which together will constitute one and the same instrument. This Agreement will
become binding when one or more counterparts hereof, individually or taken
together, will bear the signatures of all the parties reflected hereon as
signatories.
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the day and year first above written.
KINROSS GOLD CORPORATION
By: _______________________________________
Name:
Title:
KINROSS MERGER CORPORATION
By: _______________________________________
Name:
Title:
AMAX GOLD INC.
By: _______________________________________
Name:
Title:
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SCHEDULE A
CERTAIN DEFINITIONS
"1996 Amax Financial Statements" shall mean the audited consolidated balance
sheet of Amax and its subsidiaries as of December 31, 1996, with the related
audited consolidated statements of income and retained deficits and of cash
flows for the fiscal year ended as of such date (together with the related notes
and schedules thereto), which financial statements contain a letter from
reporting thereon.
"1996 Kinross Financial Statements" shall mean the audited consolidated
balance sheet of the Kinross Group as of December 31, 1996, with the related
audited consolidated statements of income and retained deficits and of cash
flows for the fiscal year ended as of such date (together with the related notes
and schedules thereto), which financial statements contain a letter from
reporting thereon.
"Advisers" when used with respect to any Person shall mean such Person's
directors, officers, employees, representatives, agents, counsel, accountants,
advisers, engineers, and consultants.
"Affiliate" shall mean as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person and, if such Person is an individual, any member of the immediate family
(including parents, spouse, children and grandchildren) of such individual and
any trust whose principal beneficiary is such individual or one or more members
of such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
the management or policies (whether through the ownership of securities or
partnership or other ownership interests, by contract or otherwise).
"Agreement" shall mean this Merger Agreement, as it may be amended or
supplemented at any time and from time to time after the date hereof.
"Amax Disclosure Letter" means a letter dated the date of this Agreement
and delivered by Amax to Kinross concurrently with the execution of this
Agreement.
"Amax Group" shall mean and include Amax and the other Amax Group Members.
"Amax Group Employee Plan" shall have the meaning ascribed in Section 2.08.
"Amax Group Member" shall mean and include Amax, Omolon Gold Mining Company
and Compania Minera Maricunga and any corporation, partnership, company, joint
venture and other entity in which Amax beneficially owns or controls, directly
or indirectly, more than 50% of the equity, voting rights, profit interests,
capital or other similar interest thereof and that: (a) owns or operates
producing properties or properties with proven and probable ore reserves with a
fair market value of more than $1,000,000; or (b) has cash or other liquid
assets with a fair market value of more than $1,000,000.
"Amax Preferred Shares" means the $3.75 Series B Convertible Preferred Stock,
$1.00 par value per share, of Amax;
"Amax SEC Documents" shall have the meaning ascribed in Section 2.03.
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"Amax Shares" shall have the meaning ascribed in the Recitals.
"Amax Stock Option" means an option granted pursuant to Amax's 1992 Stock
Option Plan or Stock Grant Plan for Non-Employee Directors which is outstanding
as of the Effective Time.
"Amax Stockholders' Meeting" shall have the meaning ascribed in Section 4.05.
"Approval by Consent" shall have the meaning ascribed in Section 2.02.
"Average Closing Price" shall have the meaning ascribed in Section 1.11.
"Breaching Party" shall have the meaning ascribed in Section 10.02.
"Business Day" shall mean any day on which commercial banks are not authorized
or required to close in Toronto, Ontario, Canada and New York, New York, U.S.A.
"Canadian GAAP" shall mean generally accepted accounting principles in Canada,
consistently applied.
"Canadian Prospectus" shall have the meaning ascribed in Section 5.09.
"Canadian Securities Laws" means the Securities Act (or equivalent
legislation) in each of the Provinces of Canada and the respective regulations
under such legislation together with applicable published policy statements,
national instruments and memoranda of understanding of the Canadian Provincial
Securities Administrators and the securities regulatory authorities in such
provinces.
"Certificate" shall have the meaning ascribed in Section 1.13(a).
"Certificate of Merger" shall have the meaning ascribed in Section 1.05.
"Closing" shall mean the consummation of the Merger in accordance with the
provisions of this Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"Competing Proposal" shall have the meaning ascribed in Section 4.07.
"Constituent Corporations" shall have the meaning ascribed in Section 1.02.
"Contract" shall mean any contract, lease, agreement, instrument, license,
commitment, order, or quotation, written or oral.
"Credit Agreement" means the Revolving Credit Agreement dated as of April 15,
1994 made between Amax and the Significant Shareholder as amended by an amending
agreement dated as of March 10, 1995.
"Effective Time" shall have the meaning ascribed in Section 1.05.
"Employee Plans" shall mean all plans, arrangements, agreements, programs,
policies or practices, whether oral or written, formal or informal, funded or
unfunded, maintained for employees, including, without limitation:
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(a) any employee benefit plan (as defined in Section 3(3) of ERISA) or
material fringe benefit plan (as defined in Section 6039D of the Tax
Code);
(b) any retirement savings plan, pension plan or compensation plan, including,
without limitation, any defined benefit pension plan, defined contribution
pension plan, group registered retirement savings plan or supplemental
pension or retirement income plan;
(c) any bonus, profit sharing, deferred compensation, incentive compensation,
stock compensation, stock purchase, hospitalization, health, drug, dental,
legal disability, insurance (including without limitation unemployment
insurance), vacation pay, severance pay or other benefit plan, arrangement
or practice with respect to employees or former employees, individuals
working on contract, or other individuals providing services of a kind
normally provided by employees; and
(d) where applicable, all statutory plans, including, without limitation, the
Canada or Quebec Pension Plans.
"Environmental Condition" shall mean and include the generation,
discharge, emission, or release into the environment (including without
limitation ambient air, surface water, groundwater or land), spill, receiving,
handling, use, storage, containment, treatment, transportation, shipment or
disposition prior to the Closing of any Hazardous Substance by any Person (or
their predecessors) as to which Remedial Action required under any Environmental
Laws or as to which any Liability is currently or in the future imposed on any
Person based on the actions or omissions prior to the Closing of any Person (or
their predecessors) with respect to any Hazardous Substance or reporting with
respect thereto.
"Environmental Laws" shall mean Laws regulating or pertaining to the
generation, discharge, emission or release into the environment (including
without limitation ambient air, surface water, groundwater or land), spill,
receiving, handling, use, storage, containment, treatment, transportation,
shipment, disposition or remediation or clean-up of any Hazardous Substance, as
such Laws are amended and in effect as of the date hereof, including without
limitation the following Laws of the United States: the Clean Air Act; the Clean
Water Act; the Comprehensive Environmental Response, Compensation and Liability
Act of 1980; the Resource Conservation and Recovery Act of 1976; and the Toxic
Substances Control Act.
"Equity Offering" shall mean the offering and sale by Kinross during the
period between the date hereof and the closing of subscription rights in
accordance with the letter from CIBC Wood Gundy Inc. to Kinross dated the date
hereof, a copy of which has been delivered to Amax concurrent with the execution
and delivery of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity shall mean any other entity that, together
with such entity would be treated as a single employer under Section 414(b),
(c), (m) or (o) of the Tax Code.
"ERISA Affiliate Plan" means an Employee Plan, which is (a) a "pension plan"
within the meaning of Section 3(2) of ERISA; and (b) maintained or contributed
to by an ERISA Affiliate of any entity.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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"Exchange Agent" shall have the meaning ascribed in Section 1.13(a).
"Exchange Fund" shall have the meaning ascribed in Section 1.13(a).
"Exchange Ratio" shall have the meaning ascribed in Section 1.06.
"Exploration Joint Venture Agreement" means the Exploration Joint Venture
Agreement effective January 1, 1994 made between Amax and the Significant
Shareholder, as amended by an amending agreement dated December 29, 1995.
"Foreign Plan" shall mean any plan, fund (including, without limitation, any
superannuation fund) or other similar program established or maintained outside
the United States of America primarily for the benefit of employees residing
outside the United States of America, which plan, fund or other similar program:
(a) provides for retirement income or other employee benefits for such employees
or a deferral of income for such employees in contemplation of retirement; and
(b) is not subject to ERISA or the Tax Code where applicable. "Foreign Plans"
shall include, without limitation, the Canada or Quebec Pension Plans.
"GCL" shall mean the General Corporation Law of the State of Delaware.
"Government" shall mean:
(a) the government of the United States, Canada, or any other foreign country;
(b) the government of any state, province, county, municipality, city, town,
or district of the United States, Canada, or any other foreign country;
and any multi-county district; and
(c) any ministry, agency, department, authority, commission, administration,
corporation, bank, court, magistrate, tribunal, arbitrator,
instrumentality, or political subdivision of, or within the geographical
jurisdiction of, any government described in the foregoing clauses (a) and
(b).
"Governmental" shall mean pertaining to any Government.
"Hazardous Substance" shall include petroleum products, hazardous substances,
hazardous waste, or hazardous materials, or pollutants or contaminants, as such
terms are defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980; the Resource Conservation and Recovery Act of 1976; or
any other Environmental Law (including any foreign Environmental Law); all as
amended and in effect as of the date hereof.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Income Tax" shall mean any Tax based on or measured by income (including
without limitation based on net income, gross income, income as specifically
defined, earnings, profits or selected items of income, earnings or profits);
and any interest, Penalties and additions to tax with respect to any such tax
(or any estimate or payment thereof).
"Interim Amax Balance Sheet" shall mean the unaudited consolidated balance
sheet included in the Interim Amax Financial Statements.
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"Interim Amax Financial Statements" shall mean the unaudited financial
statements of Amax dated as of September 30, 1997.
"Interim Kinross Balance Sheet" shall mean the unaudited consolidated balance
sheet included in the Interim Kinross Financial Statements.
"Interim Kinross Financial Statements" shall mean the unaudited financial
statements of Kinross dated as of September 30, 1997.
"Investor Agreement" means the agreement between Kinross and the Significant
Shareholder entered into at the time of execution of this Agreement and dated
the date of this Agreement;
"Joint Proxy Statement" shall have the meaning ascribed in Section 6.02.
"Kinross Competing Proposal" shall have the meaning ascribed in Section 5.07.
"Kinross Disclosure Letter" means the letter dated the date of this agreement
and delivered by Kinross to Amax concurrent with the execution of this
Agreement.
"Kinross Group" shall mean and include Kinross and the other Kinross Group
Members.
"Kinross Group Member" shall mean and include Kinross, Merger Corp., and any
corporation, partnership or company in which Kinross beneficially owns or
controls, directly or indirectly, more than 50% of the equity, voting rights,
profit interest, capital or other similar interest thereof or any joint venture
in which Kinross has an interest and which in each case: (a) owns or operates
producing properties or properties with proven and probable ore reserves with a
fair market value of more than $1,000,000; or (b) has cash or other liquid
assets with a fair market value of more than $1,000,000.
"Kinross Preferred Shares" means the redeemable, retractable preferred shares
of Kinross.
"Kinross SEC Documents" shall have the meaning ascribed in Section 3.03.
"Kinross Securities Documents" shall have the meaning ascribed in Section
3.03.
"Kinross Shareholders' Meeting" shall have the meaning ascribed in Section
5.05.
"Kinross Shares" shall have the meaning ascribed in the Recitals.
"Kinross Transaction Agreement" shall have the meaning ascribed in Section
5.07.
"Law" shall mean any of the following of, or issued by, any Government, in
effect on or prior to the date hereof, including any amendment, modification or
supplementation of any of the following from time to time subsequent to the
original enactment, adoption, issuance, announcement, promulgation or granting
thereof and prior to the date hereof: any statute, law, act, ordinance, code,
rule or regulation of any writ, injunction, award, decree, judgment or order.
"Liability" of any Person shall mean and include:
(a) any right against such Person to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured;
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(b) any right against such Person to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether or
not such right to any equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or
unsecured; and
(c) any obligation of such Person for the performance of any covenant or
agreement (whether for the payment of money or otherwise).
"Liens" shall mean liens, encumbrances, licenses, claims, security interests,
mortgages, pledges, charges, escrows, options or rights of first refusal or
offer.
"Material Adverse Change" or "Material Adverse Effect" shall mean, with
respect to Amax, Kinross, the Amax Group or the Kinross Group a material adverse
change in, or material adverse effect on, the business, properties, assets,
liabilities, results of operations or financial condition of the Amax Group or
Kinross Group (as applicable) taken as a whole. The foregoing shall not include
any change or effect attributable to changes in the economy (of the United
States, Canada, or any other country) generally, changes in the industries in
which the applicable Group engages, changes in metal prices or seasonality of
the businesses of the Group.
"Material Tangible Personal Property" shall mean any item of machinery,
equipment or apparatus which is or may be used in the conduct of exploration or
mining activities which has a book value of at least $250,000.
"Merger" shall have the meaning ascribed in Section 1.02.
"Non-Breaching Party" shall have the meaning ascribed in Section 10.02.
"OSC" means the Ontario Securities Commission.
"Parties" and "Party" means the parties to this Agreement.
"Penalty" shall mean any civil or criminal penalty (including any interest
thereon), fine, levy, lien, assessment, charge, monetary sanction or payment, or
any payment in the nature thereof, of any kind, required to be made to any
Government under any Law.
"Permitted Liens" shall mean Liens arising out of the ordinary course of
business which do not, individually or in the aggregate, materially detract from
the use, value or enjoyment (in the ordinary course of business as presently
conducted) of the assets which are the subject of such Liens.
"Person" shall mean any corporation, partnership, limited liability company or
partnership, joint venture, trust, unincorporated association or organization,
business, enterprise or other entity; any individual; and any Government.
"Registration Statement" shall have the meaning ascribed in Section 6.02.
"Related Agreements" means the Stockholder Agreement and the Investor
Agreement.
"Remedial Action" shall mean any investigation, feasibility study, monitoring,
testing, sampling, removal (including without limitation removal of underground
storage tanks), restoration, clean-up, remediation, collective action, closure,
site restoration, remedial response or remedial work with respect to any
Environmental Condition.
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"SEC" shall mean the Securities and Exchange Commission of the United
States.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Act Affiliate" shall mean any affiliate of a Person for
purposes of Rule 145 of the Securities Act.
"Stockholder Agreement" means the agreement among Kinross, Merger Corp.
the Significant Shareholder , certain of its subsidiaries and Amax entered into
at the time of execution of this Agreement and dated the date of this Agreement.
"Significant Shareholder" means Cyprus Amax Minerals Company.
"subsidiary" shall mean, with respect to a specified corporation, any
corporation of which more than fifty per cent (50%) of the outstanding shares
ordinarily entitled to elect a majority of the Board of Directors thereof
(whether or not shares of any other class or classes shall or might be entitled
to vote upon the happening of any event or contingency) are at the time owned
directly or indirectly by such specified corporation, and shall include any
corporation in like relation to a subsidiary.
"Substitute Option" shall have the meaning ascribed to such term in
Section 1.10.
"Surviving Corporation" shall have the meaning ascribed in Section 1.02.
"Tax" shall mean any tax, levy, charge or assessment imposed by or due
any Government, together with any interest, Penalties, and additions to tax
relating thereto, including without limitation, any of the following:
(a) any Income Tax;
(b) any franchise, sales, use and value added tax or any license or
withholding tax; any payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, alternative or
add-on minimum tax; and any customs duties or other taxes;
(c) any "trust fund" tax under Subtitle C, Chapter 24A of the Tax
Code;
(d) any tax on property (real or personal, tangible or intangible,
based on transfer or gains);
(e) any estimate or payment of any of tax described in the foregoing
clauses (a) through (d); and
(f) any interest, Penalties and additions to tax with respect to any
tax (or any estimate or payment thereof) described in the
foregoing clauses (a) through (e).
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Tax Return" shall mean all returns, amended returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority.
"Termination Date" shall have the meaning ascribed to such term in
Section 10.02(d).
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"Termination Fee" shall have the meaning ascribed in Section 10.03.
"Transaction Agreement" shall have the meaning ascribed in Section 4.07.
"U.S. GAAP" shall mean generally accepted accounting principles in the
United States consistently applied.
"Warrant" means the warrant to purchase Kinross Shares issued by Kinross
to the Significant Shareholder.
"Warrant Shares" means the Kinross Shares to be issued on exercise of
the Warrant.
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Conformed Execution Copy
EXHIBIT 10.26
STOCKHOLDER AGREEMENT dated as of February 9, 1998, among
KINROSS GOLD CORPORATION, a corporation organized under the laws
of Ontario ("Parent"), KINROSS MERGER CORPORATION, a Delaware
------
corporation and a wholly owned subsidiary of Parent ("Sub"),
---
CYPRUS AMAX MINERALS COMPANY, a Delaware corporation ("Cyprus")
------
and each of the other persons identified on Exhibit A hereto (the
"Subsidiary Stockholders" and, together with Cyprus, the
-----------------------
"Stockholders").
------------
The Stockholders desire that Amax Gold Inc., a Delaware corporation
(the "Company"), Parent and Sub enter into an Agreement and Plan of Merger dated
-------
as of the date hereof (as the same may be amended from time to time, the "Merger
------
Agreement"), which provides, among other things, that Sub will merge with and
- ---------
into the Company upon the terms and subject to the conditions set forth in the
Merger Agreement (the "Merger"). In connection with the Merger, subject to
------
certain exceptions, each share of Common Stock, par value $0.01 per share
("Company Common Stock"), of the Company will be converted into the right to
- ----------------------
receive Common Shares, without nominal or par value, of Parent ("Parent Common
-------------
Shares") in the amount set forth in the Merger Agreement.
- ------
The Stockholders are executing this Agreement as an inducement to
Parent and Sub to execute and deliver the Merger Agreement.
Accordingly, in consideration of the execution and delivery by Parent
and Sub of the Merger Agreement and the mutual covenants, conditions and
agreements contained therein and herein, the parties hereto agree as follows:
SECTION 1. Representations and Warranties. Each of Cyprus and the
-------------------------------
Subsidiary Stockholders represents and warrants to Parent and Sub as follows:
(a) Cyprus and its wholly owned subsidiaries are the record and
beneficial owners of 67,507,655 shares of Company Common Stock (together with
any shares of Company Common Stock with respect to which the Stockholder obtains
voting power prior to the Effective Time of the Merger, the "Shares") as set
------
forth on Exhibit A hereto. Except for such 67,507,655 Shares and except for
shares issuable in connection with debt obligations, the Stockholders are not
the record or beneficial owner of any shares of Company Common Stock.
<PAGE>
2
(b) Such Stockholder is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation and
is in good standing as a foreign corporation in each jurisdiction where it is
required to qualify in order to conduct its business as presently conducted,
except where the failure to be in good standing or so qualified would not have a
Material Adverse Effect on Cyprus and its subsidiaries (other than Amax Group
Members) taken as a whole.
(c) Such Stockholder has the corporate power and authority to execute,
deliver and perform this Agreement without the necessity of obtaining any third
party non-governmental consent, approval, authorization, or waiver, or giving of
any notice or otherwise, except for such consents as have been obtained, are
unconditional and are in full force and effect or as set forth on Schedule 8.04
to the Merger Agreement.
(d) The execution, delivery and performance of this Agreement has
been duly authorized by the board of directors of such Stockholder. This
Agreement has been duly executed and delivered by such Stockholder and, assuming
due execution and delivery thereof by Parent, constitutes the legal, valid, and
binding obligation of such Stockholder enforceable against the Stockholder in
accordance with its terms except (i) as may be limited by bankruptcy,
reorganization, insolvency, and similar laws of general application relating to
or affecting the enforcement of creditors' rights or the relief of debtors and
(ii) that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought (the matters set
forth in clause (i) and (ii) being called the "Exceptions").
----------
(e) The execution, delivery, and performance of this Agreement by
such Stockholder will not (i) constitute a violation of its Certificate of
Incorporation or By-laws, each as amended, (ii) result in the breach of or
constitute a default under any Contract which would have a Material Adverse
Effect on Cyprus and its subsidiaries (other than Amax Group Members) taken as a
whole, (iii) constitute a material violation of any Law applicable or relating
to it or its businesses or (iv) result in the creation of any Lien.
(f) Except for this Agreement, there are no voting trusts or other
agreements or understandings,
<PAGE>
3
including, without limitation, any proxies, in effect governing the voting of
the Shares.
(g) Such Stockholder does not hold, and has not issued, any proxies,
or securities convertible into or exchangeable for or any options, warrants, or
other rights to purchase or subscribe for any shares of Company Common Stock
except for this Agreement, debt obligations of the Company and obligations of
other Amax Group Members that are convertible into or exchangeable for shares of
Company Common Stock.
(h) The Shares and the certificates representing such Shares are now
and at all times during the term hereof will be held by such Stockholder, or by
a nominee or custodian for the benefit of such Stockholder, free and clear of
all Liens, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever other than as created by this Agreement.
(i) No broker, investment banker, financial adviser or other person
is entitled to any broker's, finder's, financial adviser's or other similar fee
or commission from Parent, Sub or the Company in connection with the
transactions contemplated hereby based upon arrangements made by any of the
Stockholders.
(j) Such Stockholder is not acquiring any Parent Common Shares with a
view to, or for offer or sale in connection with, any distribution thereof
(within the meaning of the Securities Act of 1933, as amended (the "Securities
----------
Act")) that would be in violation of the securities laws of the United States of
- ---
America or any state thereof or the securities laws of Canada or any province or
territory thereof. Such Stockholder acknowledges that it (i) has such knowledge
and experience in business and financial matters and with respect to investments
in securities to enable it to understand and evaluate the risks of an investment
in the Parent Common Shares to be acquired by it and form an investment decision
with respect thereto and is able to bear the risk of such investment for an
indefinite period of time and to afford a complete loss thereof, (ii) is an
"accredited investor" as defined in Rule 501 of Regulation D under the
Securities Act and (iii) is not a resident of Canada or any of the provinces or
territories of Canada for purposes of Canadian securities laws.
(k) Such Stockholder understands and acknowledges that Parent and Sub
are entering into the Merger Agreement
<PAGE>
4
in reliance upon such Stockholder's execution and delivery of this Agreement.
Such Stockholder acknowledges that the irrevocable proxy set forth in Section 7
is granted in consideration of the execution and delivery of the Merger
Agreement by Parent and Sub.
(l) All agreements between any Amax Group Member on the one hand and
Cyprus and its affiliates (other than Amax Group Members) on the other hand
constitute the legal, valid and binding obligations of Cyprus and any of its
affiliates (other than Amax Group Members) party thereto, subject to the
Exceptions and there are no existing material defaults by Cyprus or any of its
affiliates (other than Amax Group Members) or, to Cyprus's knowledge, by any
other party thereunder and no event, act or omission has occurred which (with or
without notice, lapse of time or the happening or occurrence of any other event)
would result in a material default thereunder.
(m) Section 2.16 of the Merger Agreement is true and correct in all
material respects.
(n) There are no undertakings, agreements, arrangements or
understandings of any nature or kind whatsoever in effect between Cyprus, or any
of its subsidiaries or affiliates (other than Amax Group Members) and any person
who has provided credit or financial accommodation to the Company or any Amax
Group Member with respect to any Scheduled Guaranties (as defined below), which
have not been fully and completely disclosed, in writing, or otherwise made
available by Cyprus to Parent.
SECTION 2. Approval Agreements. Each Stockholder agrees with, and
--------------------
covenants to, Parent, Sub and the Company as follows:
(a) At any meeting of stockholders of the Company called to vote upon
the Merger, the Merger Agreement or the other transactions contemplated by the
Merger Agreement or at any adjournment thereof or in any other circumstances
upon which a vote, consent or other approval with respect to the Merger, the
Merger Agreement or the other transactions contemplated by the Merger Agreement
is sought, such Stockholder shall vote (or cause to be voted) or shall
consent, execute a consent or cause to be executed a consent in respect of the
Shares in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval of the terms thereof and each of the other
transactions contemplated by the Merger Agreement.
<PAGE>
5
(b) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which their vote, consent
or other approval is sought, such Stockholder shall vote (or cause to be voted)
the Shares against (i) any Competing Proposal (as defined in the Merger
Agreement) or any action which is a component of any Competing Proposal or would
be a component of a Competing Proposal if it were contained in a proposal, (ii)
any merger agreement or merger (other than the Merger Agreement and the Merger),
reorganization, recapitalization, dissolution, liquidation or winding up of or
by the Company or (iii) any amendment of the Company's Certificate of
Incorporation or By-laws which amendment would in any manner partially or wholly
prevent or materially impede, interfere with or delay the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger Agreement
(each of the foregoing in clause (i), (ii) or (iii) above, a "Competing
---------
Transaction").
- -----------
(c) In furtherance and not in derogation of the foregoing, such
Stockholder agrees with, and covenants to, Parent and Sub that such Stockholder
shall use all reasonable efforts, and shall cooperate in all respects with
Parent, Sub and the Company, (i) to satisfy any legal, regulatory or other stock
exchange requirements that apply to approving the Merger, the Merger Agreement
and the other transactions contemplated by the Merger Agreement by written
consent pursuant to Section 228 of the Delaware General Corporation Law (the
"DGCL") and (ii) subject to satisfaction of the foregoing, to effect a written
- -----
consent satisfying the requirements of Section 228 of the DGCL in favor of the
adoption and approval for purposes of Section 251 of the DGCL of the Merger, the
Merger Agreement and each of the other transactions contemplated by the Merger
Agreement.
(d) It is understood that maintaining the effectiveness of the proxy
granted under Section 7 hereof shall satisfy any voting requirements set forth
in this Section 2 and that in the event such proxy is not timely voted by
consent or otherwise in accordance with Section 7, such Stockholder may vote or
consent in accordance with this Section 2.
SECTION 3. Purchase and Sale.
-----------------
(a) Purchase and Sale of Parent Common Shares and Warrants. Upon the
terms and subject to the conditions of
<PAGE>
6
this Agreement, at a closing which shall occur simultaneously with the Effective
Time (the "Sale Closing"):
------------
(i) Parent shall issue and sell to Cyprus and/or one or more of
its wholly owned direct or indirect subsidiaries 0.2592
Parent Common Shares for each US$1.00 of aggregate
outstanding indebtedness (whether for principal, interest,
fees or otherwise) under the Demand Loan (as defined below)
(such amount the "Demand Loan Amount"), in consideration for
------------------
which Cyprus or such subsidiary shall assign and transfer to
Parent, and Parent shall assume, all rights and obligations
of Cyprus under the Demand Loan, effective as of the Sale
Closing Time (as defined below). "Demand Loan" shall mean
-----------
the outstanding indebtedness (whether for principal,
interest, fees or otherwise) owing by the Company or any
other Amax Group Member to Cyprus under the Credit Agreement
dated as of March 19, 1996, by and between the Company and
Cyprus at the Closing Date. The "Sale Closing Time" shall
-----------------
be the Effective Time.
(ii) Parent shall issue and sell to Cyprus and/or one or more of
its wholly owned direct or indirect subsidiaries, and Cyprus
or such subsidiaries shall purchase from Parent a number of
Parent Common Shares equal to the aggregate of 34,997,247
less the aggregate number of Parent Common Shares issued
pursuant to Section 3(a)(i) and a warrant to purchase a
number of Parent Common Shares equal to U.S.$35,000,000
divided by the Warrant Price (as defined below) (the
---
"Warrants") at a per share price equal to 150% of the
--------
Warrant Price. The total consideration for such Parent
Common Shares and Warrants shall be that amount of cash as
is equal to the excess of US$135,000,000 over the Demand
Loan Amount at the Closing Date (the "Cash Consideration").
------------------
The "Warrant Price" shall mean the average closing sales
-------------
price per Parent Common Share, in each
<PAGE>
7
case converted into U.S. Dollars at the Noon Buying Rate for
Canadian Dollars on such day, over the 20 consecutive
trading-day period immediately ending the tenth trading day
after the Effective Time on The Toronto Stock Exchange or,
if the Parent Common Shares are not then listed on The
Toronto Stock Exchange, on the principal stock exchange or
automated quotation system on which the Parent Common Shares
are listed or quoted, as the case may be.
(b) Warrants. The Warrants shall be represented by a certificate and
shall have the terms set forth in the form of Exhibit B attached hereto and made
a part hereof.
(c) Sale Closing. At the Sale Closing:
(i) Cyprus shall deliver or cause to be delivered to Parent the
Cash Consideration by wire transfer in immediately available
US funds as Parent may direct in a writing delivered to
Cyprus no later than two business days prior to the Closing
Date; and
(ii) Parent shall deliver to Cyprus certificates for the Parent
Common Shares and certificates for the Warrants, in each
case duly registered in the name of Cyprus or as Cyprus may
direct in a writing delivered to Parent no later than two
business days prior to the Closing Date.
(d) Representations and Warranties of Parent. Parent represents and
warrants to the Stockholders as follows:
(i) Parent is a corporation duly organized, validly existing and
in good standing under the laws of Ontario and is in good
standing as a foreign corporation in each jurisdiction where
it is required to qualify in order to conduct its business
as presently conducted, except where the failure to be in
good standing or so qualified would not have a Material
Adverse Effect on Parent.
<PAGE>
8
(ii) Parent has the corporate power and authority to execute,
deliver and perform this Agreement (including the issuance
and sale of the Parent Common Shares and the Warrants)
without the necessity of obtaining any third-party non-
governmental consent, approval, authorization, or waiver, or
giving of any notice or otherwise (including from the
shareholders of Parent other than shareholder approval
contemplated by the Merger Agreement), except for such
consents as have been obtained, are unconditional and are in
full force and effect.
(iii) The execution, delivery and performance of this Agreement
(including the issuance and sale of the Parent Common Shares
and the Warrants) has been duly authorized by the board of
directors of Parent. This Agreement has been duly executed
and delivered by Parent and, assuming due execution and
delivery thereof by the Stockholders, constitutes the legal,
valid, and binding obligation of Parent enforceable against
Parent in accordance with its terms, subject to the
Exceptions.
(iv) The execution, delivery, and performance of this Agreement
by Parent (including
the issuance and sale of the Parent Common Shares and the
Warrants) will not (i) constitute a violation of its
articles of incorporation or by-laws, each as amended, (ii)
result in the breach of or constitute a default under any
Contract which would have a Material Adverse Effect on
Parent, (iii) constitute a material violation of any Law
applicable or relating to it or its businesses or (iv)
result in the creation of any Lien.
(v) The Parent Common Shares which are being issued to Cyprus
and its designees hereunder have been duly and validly
authorized, are free of any preemptive rights and when
issued, sold and
<PAGE>
9
delivered in accordance with the terms hereof for the
consideration expressed herein, will be fully paid and
nonassessable, and based in part on the representations of
Cyprus herein, will be validly issued in compliance with all
applicable United States or Canadian Federal, state or
provincial securities laws and Cyprus or its designees will
have good and valid title thereto, free and clear of any
Liens other than Liens created by Cyprus or such designees.
(vi) The Warrants which are being issued to Cyprus and its
designees hereunder have been duly and validly authorized
and when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, based
in part on the representations of Cyprus herein, will be
validly issued in compliance with all applicable United
States or Canadian Federal, state or provincial securities
laws and Cyprus and its designees will have good and valid
title thereto, free and clear of any Liens other than Liens
created by Cyprus or such designees. The Warrants will be
valid and binding obligations of
Parent enforceable against Parent in accordance with their
terms, subject to the Exceptions.
(e) Conditions to the Obligations of the Stockholders and Parent.
The obligations of the Stockholders and Parent to consummate the Sale Closing
are subject to the satisfaction of the following conditions:
(i) No temporary restraining order, preliminary injunction,
permanent injunction or other order preventing the
consummation of the purchase and sale of the Parent Common
Shares and the Warrants pursuant to Section 3(a) hereof
shall have been issued by any federal, state or provincial
court (whether domestic or foreign) having jurisdiction and
remain in effect, and any applicable "waiting" period or
required governmental authorization, approval or
<PAGE>
10
consent (collectively, "Governmental Consents") shall have
---------------------
expired, been terminated or obtained, as the case may be.
(ii) The Merger and the transactions contemplated by Sections 4
and 5 hereof to have occurred on or prior to the Effective
Time shall have been consummated or be consummated
simultaneously with the Sale Closing.
(f) Conditions to the Obligations of the Stockholders. The
obligations of the Stockholders to consummate the Sale Closing are subject to
the satisfaction of the following conditions:
(i) The Stockholders shall have received a customary opinion
from legal counsel of Parent with respect to the validity of
the Parent Common Shares and the validity and enforceability
of the Warrants to be issued to the Stockholders hereunder
and with respect to the matters set forth in
Sections 3(d)(v) and (vi) hereof, in form and substance
reasonably satisfactory to legal counsel of the
Stockholders.
(ii) Cyprus shall be satisfied that after giving effect to the
application of the cash proceeds pursuant to Section 4(a)
hereof, Cyprus shall have no Liability (as defined below) in
respect of any Guaranty other than the Guaranty relating to
the Finance Agreement, dated as of June 30, 1995, by and
between Omolon Gold Mining Company ("Kubaka"), and Overseas
------
Private Investment Corporation, as amended, and the Loan
Agreement, dated as of June 30, 1995, by and between Omolon
Gold Mining Company, and European Bank for Reconstruction
and Development, as amended (collectively, the "Kubaka
------
Loan") and the Guaranty, dated May 22, 1997 and amended
August 15, 1997, made by Cyprus in support of a letter of
credit pursuant to the Reimbursement Agreement, dated as
<PAGE>
11
of May 1, 1997, between Fairbanks Gold Mining, Inc. and
Union Bank of Switzerland, relating to the Alaska Industrial
Development and Export Authority Exempt Facility Revenue
Bonds (Fairbanks Gold Mining, Inc. Project) Series 1997, in
the aggregate principal amount of $71,000,000 and that such
cash proceeds shall be so applied.
SECTION 4. Covenants of Parent. Parent agrees with, and covenants
--------------------
to, the Stockholders as follows:
(a) Parent shall use all reasonable efforts to cause Cyprus and its
Affiliates to be released and fully discharged from any and all claims,
liabilities, losses, costs, expenses and damages (collectively, "Liabilities")
-----------
in respect of any of the Guaranties (as defined below) set forth in Schedule 1
attached hereto (the "Scheduled Guaranties"). Without limiting the foregoing,
--------------------
Parent shall seek to cause itself and its Affiliates to be substituted in all
respects for Cyprus and its Affiliates (other than Amax Group Members) in
respect of any and all indebtedness or other obligations of Cyprus and its
Affiliates (other than Amax Group Members) under any Scheduled Guaranties that
will remain in effect after the Closing Date and as of the Effective Time shall
apply the proceeds of the Equity Offering (as defined in the Merger Agreement)
and the Cash Consideration and an additional US$100,000,000 to repay the Covered
Obligations (as defined below) in a manner that, based on consultations with
Cyprus, is most likely to result in the maximum reduction in the face value of
the Scheduled Guaranties.
(b) Effective as of the Effective Time, Parent shall on demand
defend, indemnify and hold harmless Cyprus and its Affiliates (other than Amax
Group Members) from and against any and all Liabilities relating to, arising out
of or in connection with any guaranties, letters of credit, pledges,
hypothecations, letters of comfort, bid bonds, performance bonds and other
obligations, credit support or credit enhancement (collectively, the
"Guaranties") incurred or provided by Cyprus (or any of its Affiliates) in
----------
respect of any indebtedness or other obligations of the Company or any other
Amax Group Member (the "Covered Obligations") or otherwise relating to, arising
-------------------
out of or in connection with the Company or any other Amax Group Member,
including without limitation Liabilities relating to, arising out of or in
connection with the Scheduled Guaranties.
<PAGE>
12
(c) Parent will provide Cyprus with regular information regarding the
status of the Kubaka Loan.
(d) Parent shall not subdivide, split, combine, consolidate or
reclassify any of its outstanding shares of capital stock.
(e) As promptly as practicable after the Effective Time, Parent shall
take all action necessary to assure that none of the Company or any other Amax
Group Member shall use the name "Amax" or "Cyprus" or any derivative or similar
name or any corporate logo of any Amax Group Member or of Cyprus or any of its
Affiliates (other than Parent) without the express written consent of Cyprus.
(f) Parent shall use all reasonable efforts to obtain all
Governmental Consents required to consummate the transactions contemplated
hereby.
(g) Parent shall use its proxy in respect of the Shares to vote all
Shares or execute a consent in respect of the Shares in the manner set forth in
Section 2 hereof.
SECTION 5. Covenants of Cyprus and the Company. Each of Cyprus and
------------------------------------
the Company agrees as to itself with, and covenants to, each other, Parent and
Sub as follows:
(a) As of immediately prior to the Effective Time, all net
intercompany payables and loans then existing between any member of the Amax
Group, on the one hand, and Cyprus and its Affiliates, on the other hand, other
than in respect of the Demand Loan, shall be paid in full in cash.
(b) As of the Effective Time, except as set forth in Schedule 2
hereto, in consideration of the transactions contemplated by Section 3 hereof,
all intercompany arrangements, commitments, understandings, contracts and
agreements, whether or not in writing, made between one or more of the Amax
Group Members on the one hand and Cyprus or any of its Affiliates on the other
shall be terminated (including any provisions thereof which otherwise purport by
their terms to survive termination) including without limitation the Credit
Agreement (as defined in the Merger Agreement) and any tax sharing or
indemnification agreement or arrangement, and none of Cyprus or any of its
Affiliates shall have any rights or claims against any Amax Group Member
thereunder and none of the Amax Group Members or Parent or any of its Affiliates
shall have any rights or claims against any of Cyprus of any of its Affiliates
thereunder. The Parent and Cyprus shall negotiate in good
<PAGE>
13
faith to agree on mutually acceptable transitional services at mutually
acceptable terms for a period of not more than 90 days following the Effective
Date.
The foregoing provision shall not (i) release, modify or waive any
rights, remedies, security interests or credit support (including without
limitation any thereof relating to payment, indemnification, contribution,
reimbursement, setoff, recoupment or subrogation) in favor of Cyprus or any of
its Affiliates to the extent such rights, remedies security interests or credit
support are intended to protect, secure, pay or repay Cyprus or any of its
Affiliates in respect of any Liability under any Guaranty (whether or not a
Scheduled Guaranty), all of which rights, remedies, security interests and
credit support shall be maintained and preserved in all respects or
(ii) terminate any agreements made between one or more of the Amax Group Members
on the one hand and Cyprus or any of its Affiliates on the other hand in
connection with any financing arrangements entered into by any such Amax Group
Member with any third parties to the extent such termination would result in
default or event of default under the terms of any such arrangements or
otherwise result in an acceleration of any indebtedness outstanding thereunder.
Prior to the Effective Time, Cyprus and the Company shall enter into
such mutually acceptable additional agreements and instruments as may be
necessary to effect the foregoing and to provide for mutual cooperation in
connection with the change in ownership of the Company's properties, covering
matters such as mutual access, disclosure, confidentiality and similar matters.
In addition, effective as of the Effective Date, the parties will mutually
terminate the Exploration Joint Venture Agreement, dated as of January 1, 1994,
as amended, from time to time, by and among Cyprus, the Company, Cyprus
Exploration and Development Corporation and Amax Gold Exploration, Inc., and
provide for a mutually acceptable equitable allocation of the assets and
liabilities thereof, which may include a purchase of the properties and
assumption of the liabilities of such joint venture by the Company for mutually
acceptable consideration.
(c) Each of Cyprus and the Company agrees to use all reasonable
efforts (i) to effect the foregoing, including, in the case of the Company,
seeking the approval of its stockholders with respect thereto and (ii) to
cooperate in efforts to achieve modifications in the prepayment or other
provisions of the instruments or agreements in respect of Covered Obligations
necessary in
<PAGE>
14
respect of the actions to be taken pursuant to Section 4(a) hereof.
SECTION 6. Covenants of the Stockholder. Each of Cyprus and the
-----------------------------
Subsidiary Stockholders, as applicable, agrees with, and covenants to, Parent
and Sub as follows:
(a) Such Stockholder shall not (i) other than transfers to a wholly
owned subsidiary of such Stockholder that remains a wholly owned subsidiary of
such Stockholder so long as it holds any Shares, transfer (which term shall
include, without limitation, for the purposes of this Agreement, any sale, gift,
pledge, encumbrance (other than an unforeclosed pledge or encumbrance for
financing purposes where the Stockholder retains sole voting power with respect
to all pledged securities), encumbrance or other disposition), or consent to any
transfer of, any or all the Shares or any interest therein, except pursuant to
the Merger and the Merger Agreement, (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all such
Shares or any interest therein, (iii) grant any proxy, power-of-attorney or
other authorization in or with respect to such Shares, except under or in
accordance with this Agreement or (iv) deposit such Shares into a voting trust,
enter into a voting agreement or arrangement with respect to such Shares or
otherwise limit such Stockholder's power to vote its Shares.
(b) At the Effective Time, Cyprus shall provide the undertakings
contemplated by Section 4.06 of the Merger Agreement.
(c) Such Stockholder shall not, nor shall it permit any director,
officer, employee, investment banker, attorney or other adviser or
representative of the Stockholder to, directly or indirectly, (i) solicit or
initiate, or encourage the submission of, any Competing Proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Competing Proposal. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any such director, officer, employee, investment
banker, attorney or other adviser or representative of such Stockholder shall be
deemed to be in violation of this Section 6(c) by the Stockholder.
<PAGE>
15
(d) Such Stockholder believes that the consummation of the Merger is
in the best interest of the Company. Accordingly, such Stockholder hereby
ratifies the decision by the Board of Directors of the Company to agree to
Section 4.07 of the Merger Agreement, and such Stockholder hereby confirms in
writing such ratification.
(e) Cyprus agrees to defend, indemnify and hold harmless Parent and
its subsidiaries and affiliates against one-half of the amount by which any
entity-level value-added tax (including any interest or penalties arising
therefrom) imposed upon or asserted against Kubaka with respect to taxable
periods ending on or before December 31, 1997 (each, a "Pre-1998 VAT Tax
----------------
Period") exceeds US$4,200,000; provided, however, that Cyprus shall not be
- ------ --------
required to make aggregate payments in excess of US$6,000,000 pursuant to this
Section 6(e). Parent and the Company shall provide Cyprus with drafts of any
entity-level value-added tax return, report, declaration or certification (each,
a "VAT Tax Return") reporting, reflecting or relating to Kubaka for any Pre-1998
--------------
VAT Tax Period at least 30 days prior to the date such VAT Tax Return is
required to be filed. Cyprus shall provide comments upon such VAT Tax Returns
within 10 days of the receipt thereof, and Parent and the Company shall consider
in good faith all reasonable comments of Cyprus relating to Kubaka. Within 10
days of receipt of Cyprus' comments, Parent or the Company shall provide Cyprus
a detailed explanation of its reasons for rejecting any such comments. The
failure to timely provide such an explanation shall be deemed an acceptance of
such comments, and Parent and the Company shall be obligated to incorporate such
comments in the VAT Tax Return. In the event that Parent or the Company timely
provides such an explanation and Cyprus disagrees with such explanation, the
matter shall be submitted to a nationally recognized U.S. accounting firm
mutually acceptable to Cyprus, Parent and the Company, which firm shall
conclusively resolve the matter prior to the date on which such VAT Tax Return
is required to be filed. In addition, no amended VAT Tax Return reporting,
reflecting or relating to Kubaka for any Pre-1998 VAT Tax Period shall be filed
without the prior written consent of Cyprus, which consent shall not be
unreasonably withheld or delayed. To the extent permitted by the constitutive
documents of Kubaka as in effect on the date hereof, Cyprus shall control,
manage and be responsible for any audit, contest, litigation, claim, proceeding
or inquiry (each, a "VAT Proceeding") with respect to the entity-level value-
--------------
added taxes arising from or relating to Kubaka for any Pre-1998 VAT Tax Period
and shall have the right to settle or compromise any such VAT Proceeding without
the consent of
<PAGE>
16
Parent or the Company; provided, however, that in the case of any settlement or
-------- -------
compromise resulting in the imposition of more than US$16.2 million in total
entity-level value-added taxes (including any interest or penalties arising
therefrom) on Kubaka for all Pre-1998 VAT Tax Periods, Cyprus shall not settle
or compromise such VAT Proceeding without the consent of Parent and the Company,
which consent shall not be unreasonably withheld or delayed.
(f) Such Stockholder shall use all reasonable efforts to obtain all
Governmental Consents required to consummate the transactions contemplated
hereby.
SECTION 7. Grant of Irrevocable Proxy; Appointment of Proxy. (a)
-------------------------------------------------
Each Stockholder hereby irrevocably grants to, and appoints, Parent and Robert
M. Buchan, Chairman and Chief Executive Officer of Parent and John W. Ivany,
Executive Vice President of Parent, in their respective capacities as officers
of Parent, and any individual who shall hereafter succeed to any such office of
Parent, and each of them individually, such Stockholder's proxy and attorney-in-
fact (with full power of substitution), for and in the name, place and stead of
such Stockholder, to vote all Shares for which it has or shares the power to
vote, or grant a consent or approval in respect of such Shares in any manner
permitted by the DGCL, (i) in favor of the Merger, the execution and delivery of
the Merger Agreement and approval of the terms thereof and each of the other
transactions contemplated by the Merger Agreement and (ii) against any Competing
Transaction. The foregoing proxy shall terminate automatically upon the
termination of this Section under Section 12. It is understood that such
Stockholder retains its voting rights except to the extent specifically set
forth in this Section 7(a) and that such Stockholder may exercise such voting
rights in accordance with Section 2(d) hereof.
(b) Each Stockholder represents and warrants to Parent and Sub that
any proxies heretofore given in respect of the Shares are not irrevocable, and
that any such proxies are hereby revoked.
(c) Each Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 7 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Stockholder under this Agreement. Each Stockholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked. Each Stockholder hereby
<PAGE>
17
ratifies and confirms all that such irrevocable proxy may lawfully do or cause
to be done by virtue hereof. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 212(e) of the DGCL.
SECTION 8. Certain Events. Each Stockholder agrees that this
---------------
Agreement and the obligations hereunder shall attach to the Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including without
limitation such Stockholder's successors. Upon any transfer of shares of
Company Common Stock by such Stockholder (without limiting in any way the terms
of Section 6(a) hereof), such Stockholder shall provide Parent with written
notice within two days of such transfer of the name, address and relationship to
such Stockholder, if any, of such transferee, the number of shares transferred
and the terms governing such transfer. In the event of any stock split, stock
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Company Common Stock, or the
acquisition of additional shares of Company Common Stock or other voting
securities of the Company by such Stockholder, the number of Shares set forth in
Section 1(a) hereof shall be adjusted appropriately and this Agreement and the
obligations hereunder shall attach to any additional shares of Company Common
Stock or other voting securities of the Company issued to or acquired by such
Stockholder.
SECTION 9. Stop Transfer. The Company agrees with, and covenants to,
--------------
Parent and Sub that the Company shall not register the transfer of any
certificate representing the Shares, unless such transfer is made to Parent or
Sub or otherwise in compliance with this Agreement. Each Stockholder agrees
that such Stockholder will tender to the Company, within 15 business days after
the date hereof, any and all certificates representing the Shares and the
Company will inscribe upon such certificates the following legend: "The shares
of Common Stock, par value $.01 per share, of Amax Gold Inc. represented by this
certificate are subject to a Stockholder Agreement dated as of February 9, 1998,
and may not be sold or otherwise transferred, except in accordance therewith.
Copies of such Agreement may be obtained at the principal executive offices of
Amax".
SECTION 10. Stockholder Capacity. No person executing this Agreement
---------------------
who is or becomes or designates or
<PAGE>
18
has the capacity to designate during the term hereof a director of the Company
makes any agreement or understanding herein in his or her capacity as such
director or in behalf of any such designee. Each Stockholder signs solely in
such Stockholder's capacity as the record and beneficial owner of the Shares.
SECTION 11. Further Assurances. Each Stockholder shall, upon request
-------------------
of Parent, execute and deliver any additional documents and take such further
actions as may reasonably be deemed by Parent to be necessary or desirable to
carry out the provisions hereof and prior to the Effective Time to vest the
power to vote the Shares as contemplated by Section 7 in Parent and the other
irrevocable proxies described therein.
SECTION 12. Termination. (a) Except for Sections 2, 4(d), 4(g),
------------
6(a), 6(b), 6(c), 6(d), 6(f), 7, 8 and 9 which shall terminate as of the
Effective Time, all provisions of this Agreement will survive the Effective Time
in accordance with their respective terms; provided, however, that this
-------- -------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate upon the date upon which the Merger Agreement is terminated in
accordance with its terms.
(b) The representations and warranties in Sections 1(l), 1(m) and
1(n) hereof shall terminate at the Effective Time.
SECTION 13. Defined Terms. Capitalized terms used and not otherwise
--------------
defined in this Agreement shall have the respective meanings assigned to them in
the Merger Agreement. For purposes of this Agreement, the following term shall
have the following meaning:
"Amax Group Member" shall mean and include Amax, Omolon Gold Mining
-----------------
Company and Compania Minera Maricunga and any corporation, partnership, company,
joint venture and other entity in which the Company beneficially owns or
controls, directly or indirectly, more than 50% of the equity, voting rights,
profit interests, capital or other similar interest thereof.
SECTION 14. Notices. All notices, requests, claims, demands and
--------
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified
<PAGE>
19
by like notice): (i) if to Parent, Sub or the Company, to the address set forth
in Section 11.05 of the Merger Agreement; and (ii) if to Cyprus or any of the
Subsidiary Stockholders, to Cyprus Amax Minerals Company, 9100 East Mineral
Circle, Englewood, CO 80112-3299; Attention of General Counsel (facsimile: 303-
643-5269).
SECTION 15. Headings. The headings contained in this Agreement are
---------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 16. Counterparts; Effectiveness. This Agreement may be
----------------------------
executed in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each of Parent, Sub, the Company and the Stockholders and
delivered to Parent, Sub, the Company and the Stockholders.
SECTION 17. Entire Agreement. This Agreement (including the
-----------------
documents and instruments referred to herein) constitutes the entire agreement,
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
SECTION 18. Governing Law. This Agreement shall be governed by, and
--------------
construed in accordance with, the laws of the State of Delaware, without regard
to any applicable conflicts of law principles of such State.
SECTION 19. Successors and Assigns. Neither this Agreement nor any
-----------------------
of the rights, interests or obligations under this Agreement shall be assigned,
in whole or in part, by operation of law or otherwise, by any of the parties
without the prior written consent of the other parties, except as expressly
contemplated by Section 6(a); provided, however, that Sub may assign its rights
-------- -------
and obligations to another wholly owned subsidiary of Parent that is the
assignee of Sub's rights under the Merger Agreement. Any assignment in
violation of the foregoing shall be void.
SECTION 20. Enforcement. Each party agrees that irreparable damage
------------
would occur and that the other party hereto would not have any adequate remedy
at law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that each party shall be entitled to an injunction or
injunctions to prevent breaches by the other party hereto of this Agreement
<PAGE>
20
and to enforce specifically the terms and provisions of this Agreement in any
court of the United States located in the State of Delaware or in Delaware State
court, this being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto (i) consents to submit
such party to the personal jurisdiction of any Federal court located in the
State of Delaware or any Delaware State court in the event any dispute arises
out of this Agreement or any of the transactions contemplated hereby, (ii)
agrees that such party will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (iii)
agrees that such party will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a Federal
court sitting in the State of Delaware or a Delaware State court.
SECTION 21. Severability. If any term or provision hereof, or the
-------------
application thereof to any circumstance, shall, to any extent, be held by a
court of competent jurisdiction to be invalid or unenforceable, such term or
provision shall only be invalid or unenforceable with respect to such
jurisdiction, and only to such extent, and the remainder of the terms and
provisions hereof, and the application thereof to any other circumstance, shall
remain in full force and effect, shall not in any way be affected, impaired or
invalidated, and shall be enforced to the fullest extent permitted by law, and
the parties hereto shall reasonably negotiate in good faith a substitute term or
provision that comes as close as possible to the invalidated or unenforceable
term or provision, and that puts each party in a position as nearly comparable
as possible to the position each such party would have been in but for the
finding of invalidity or unenforceability, while remaining valid and
enforceable.
SECTION 22. Amendment; Modification; Waiver. No amendment,
--------------------------------
modification or waiver in respect of this Agreement shall be effective against
any party unless it shall be in writing and signed by such party.
SECTION 23. Expenses. Parent, Sub, the Stockholders and the Company
---------
shall each bear their own legal fees and other costs and expenses with respect
to the negotiation, execution and delivery of this Agreement and consummation of
the transactions contemplated hereby.
<PAGE>
21
IN WITNESS WHEREOF, Parent, Sub and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
KINROSS GOLD CORPORATION,
by
/s/ ROBERT M. BUCHAN
-----------------------------------
Name: Robert M. Buchan
Title: Chairman and Chief
Executive Officer
KINROSS MERGER CORPORATION,
by /s/ JOHN IVANY
-----------------------------------
Name: John Ivany
Title: Director
CYPRUS AMAX MINERALS COMPANY,
by /s/ PHILIP C. WOLF
------------------------------------
Name: Philip C. Wolf
Title: Senior Vice
President
AMAX ENERGY, INC.,
by /s/ PHILIP C. WOLF
------------------------------------
Name: Philip C. Wolf
Title: Senior Vice
President
CYPRUS GOLD COMPANY,
by /s/ PHILIP C. WOLF
-------------------------
Name: Philip C. Wolf
Title: Senior Vice
President
<PAGE>
22
AGREED AND ACCEPTED AS TO
SECTIONS 2, 4, 5, 9 AND 23
AMAX GOLD INC.,
by /s/ SCOTT SHELLHAUS
----------------------
Name: Scott Shellhaus
Title: President
<PAGE>
Exhibit 10.27
[EXECUTION COPY]
RESTRUCTURING AGREEMENT,
dated as of December 18, 1997,
between
COMPANIA MINERA MARICUNGA
as Borrower,
AMAX GOLD REFUGIO, INC.
and
BEMA GOLD (BERMUDA) LTD.,
as Intermediate Owners,
AMAX GOLD INC.
and
BEMA GOLD CORPORATION,
as Guarantors,
THE SUBORDINATED CREDITORS
NAMED HEREIN,
as Subordinated Creditors,
BEMA GOLD (U.S.) INC.,
as a Pledgor,
BARCLAYS BANK PLC
and
AGI CHILE CREDIT CORP., INC.,
as Banks,
and
N M ROTHSCHILD & SONS LIMITED,
as Administrative Agent
-------------------------------
Baker & McKenzie
100 New Bridge Street
London EC4V 6JA
Telephone: 0171 919 1000
Facsimile: 0171 919 1999
Ref: PMG/BES/AW
-------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1. DEFINITIONS; INTERPRETATION.................................... -2-
SECTION 1.1 Defined Terms................................................. -2-
SECTION 1.2 Cross-References.............................................. -4-
SECTION 1.3 Loan Document................................................. -4-
ARTICLE 2. THE EFFECTIVE DATE............................................. -4-
SECTION 2.1 Effectiveness of this Agreement............................... -4-
SECTION 2.2 Conditions Precedent - Barclays............................... -4-
SECTION 2.3 Conditions Precedent - Administrative Agent................... -6-
ARTICLE 3. THE ASSIGNMENT DOCUMENTS ...................................... -7-
SECTION 3.1 Acceptance of the Bank Assignment Agreements.................. -7-
SECTION 3.2 Non-Occurrence of the Effective Date.......................... -7-
ARTICLE 4. TERMINATION AND VARIATION OF DOCUMENTS......................... -7-
SECTION 4.1 Direction by the Required Banks............................... -7-
SECTION 4.2 Modification or Termination of Various Loan Documents......... -7-
SECTION 4.3 Replacement of Technical Agent................................ -9-
SECTION 4.4 The Loan Documents............................................ -9-
SECTION 4.5 Indemnity..................................................... -10-
SECTION 4.6 Conversion of Gold Loans...................................... -10-
SECTION 4.7 Confirmation.................................................. -10-
ARTICLE 5. DEFERRAL OF PAYMENT DUE ON DECEMBER 31, 1997................... -10-
SECTION 5.1 Deferral of Payment........................................... -10-
SECTION 5.2 Savings....................................................... -11-
ARTICLE 6. CERTAIN INTERCREDITOR ISSUES................................... -11-
SECTION 6.1 Operation of Article 6........................................ -11-
SECTION 6.2 Enforcement................................................... -11-
SECTION 6.3 Action upon an Agreed Enforcement Event....................... -12-
SECTION 6.4 Enforcement of Collateral Agreements.......................... -12-
SECTION 6.5 Authority..................................................... -12-
SECTION 6.6 The Bema Gold Guaranty........................................ -12-
SECTION 6.7 Transfers by Banks............................................ -12-
SECTION 6.8 Waiver in Relation to Certain Assignee Banks.................. -13-
SECTION 6.9 Syndication by Barclays....................................... -13-
SECTION 6.10 Bema Bermuda Shareholding..................................... -13-
SECTION 6.11 Purchase Options in favor of AGI Chile and Barclays........... -13-
ARTICLE 7. REPRESENTATIONS AND WARRANTIES................................. -14-
SECTION 7.1 Representations and Warranties................................ -14-
SECTION 7.2 Reception..................................................... -14-
<PAGE>
ARTICLE 8. COSTS AND EXPENSES............................................ -14-
SCHEDULE I Revised Disclosure Schedule
EXHIBIT A Bank Assignment Agreement (Barclays)
EXHIBIT B Bank Assignment Agreement (AGI Chile)
EXHIBIT C Bema Gold Guaranty
EXHIBIT D AGI Guaranty
EXHIBIT E Waiver and Consent Agreement
EXHIBIT F-1 Opinion of Philippe, Yrarrazaval, Pulido, Langlois & Brunner
EXHIBIT F-2 Opinion of Stikemen, Elliott
EXHIBIT F-3 Opinion of Baker & McKenzie, New York
EXHIBIT G Process Agent's Acceptance
EXHIBIT H-1 Chilean Security Assignment (Borrower/Original Lenders)
EXHIBIT H-2 Chilean Security Assignment (Intermediate Owners/Original Lenders)
EXHIBIT H-3 Chilean Security Assignment Termination (Borrower/Intermediate
Owners/Original Lenders)
EXHIBIT H-4 Chilean Security Assignment (Borrower/Intermediate Owners/Bank
Parties)
EXHIBIT I Confirmation Regarding Pledge Agreements (Subordinated Notes)
(ii)
<PAGE>
RESTRUCTURING AGREEMENT
THIS RESTRUCTURING AGREEMENT, dated as of December 18, 1997 (this
"Agreement"), is made between (1) COMPANIA MINERA MARICUNGA, a contractual
---------
mining company (sociedad contractual minera) organized and existing under the
laws of Chile "Borrower"), (2) AMAX GOLD REFUGIO, INC., a Delaware corporation
--------
("AGRI"), and BEMA GOLD (BERMUDA) LTD., a company organized and existing under
----
the laws of Bermuda ("Bema Bermuda"; and, together with AGRI, collectively the
------------
"Intermediate Owners"), (3) AMAX GOLD INC., a Delaware corporation ("AGI"), and
-------------------
BEMA GOLD CORPORATION, a company organized and existing under the laws of the
Province of British Columbia ("Bema Gold"; and, together with AGI, collectively,
---------
the "Guarantors"), (4) AGI CHILE CREDIT CORP, INC., a Delaware corporation
----------
("AGI Chile"), (5) MINERA BEMA GOLD (CHILE) LIMITADA, a limited liability
---------
company organized and existing under the laws of Chile ("Bema Chile"; and,
----------
together with AGI Chile, AGI, Bema Gold, AGRI and Bema Bermuda, collectively the
"Subordinated Creditors"), (6) BEMA GOLD (U.S.) INC., a Nevada corporation
----------------------
("Bema U.S."), as a Pledgor. (7) BARCLAYS BANK PLC, a bank organized under the
---------
laws of England ("Barclays"), and AGI CHILE, as Banks under the Loan Agreement
referred to below, and (8) N M ROTHSCHILD AND & SONS LIMITED, as administrative
agent under the Loan Agreement referred to below (in such capacity, the
"Administrative Agent").
--------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Intermediate Owners, the Guarantors, the
Technical Agent (such and other capitalized terms which are used in this
Agreement have the meanings assigned to such terms in Section 1.1), the
-----------
Administrative Agent, and the Original Banks entered into a Loan Agreement,
dated as of November 23, 1994, which has been amended by letter agreements dated
or dated as of February 7 and 14, 1995, September 30, November 1, and December
19, 1996, and February 21, May 19, and June 30, 1997 (as so amended, the "Loan
----
Agreement"), pursuant to which, among other things, the Original Banks extended
- ---------
their Commitments to make Loans to the Borrower, in a maximum aggregate original
principal amount of US$85,000,000, which Loans have been made in full as
contemplated thereby;
WHEREAS, pursuant to a Waiver and Consent, dated as of December 18,
1997, the parties to the Loan Agreement waived certain requirements of the Loan
Agreement, including certain restrictions set forth in Section 11.11.1 of the
---------------
Loan Agreement relating to the method of assignment and delegation by the
Original Banks of their rights and obligations under the Loan Agreement; and
WHEREAS, pursuant to the Bank Assignment Documents, the Original Banks
have severally agreed, subject to various conditions precedent, to assign their
respective participations in the Commitments and in the Loans made under the
Loan Agreement, as to 50% to Barclays and as to 50% to AGI Chile;
NOW, THEREFORE, for good and valuable consideration the receipt and the
adequacy of which is hereby acknowledged by the parties hereto, the parties to
this Agreement hereby agree as follows:
<PAGE>
ARTICLE 1. DEFINITIONS; INTERPRETATION
--------------------------------------
SECTION 1.1 Defined Terms. Unless otherwise defined herein or the context
otherwise requires, capitalized terms used herein (including in the preamble and
the recitals) have the meanings assigned to those terms in the Loan Agreement.
In addition, the following terms (whether or not underscored) when used in this
Agreement, including its preamble and recitals, shall have the following
meanings:
"AGI Guaranty" means the Guaranty to be executed and delivered by AGI,
------------
relating to the obligations of AGI Chile as a Bank, substantially in the form of
Exhibit D attached hereto.
- ---------
"Agreed Enforcement Event" has the meaning assigned to that term in Section
------------------------ -------
6.2.
- ---
"Agreement" has the meaning assigned to that term in the preamble.
--------- --------
"Bank Assignment Agreement" means (i) an agreement to be entered into
-------------------------
between an Original Bank, as Assignor, and Barclays, as Assignee, substantially
in the form of Exhibit A attached hereto, or (ii) an agreement to be entered
---------
into between an Original Bank, as Assignor, and AGI Chile, as Assignee,
substantially in the form of Exhibit B attached hereto.
---------
"Bank Assignment Documents" means, collectively, each of the Bank
-------------------------
Assignment Agreements, each dated on or prior to (and effective as of) the
Effective Date, entered into between:
(a) Canadian Imperial Bank of Commerce, as Assignor, and Barclays,
as Assignee;
(b) Credit Lyonnais, as Assignor, and AGI Chile, as Assignee;
(c) Credit Lyonnais Canada, as Assignor, and Barclays, as Assignee;
(d) Deutsche Bank AG, as Assignor, and Barclays, as Assignee;
(e) Internationale Nederlanden (U.S.) Capital Corporation, as
Assignor, and AGI Chile, as Assignee; and
(f) N M Rothschild & Sons Limited, as Assignor, and AGI Chile, as
Assignee,
together with the Chilean Security Assignments.
"Barclays" has the meaning assigned to that term in the preamble and, in
-------- --------
Section 4.5 and in Article 6, has the extended meaning set form in Section 6.9.
- ----------- --------- -----------
"Bema Gold Guaranty" means a Guaranty to be made by Bema Gold,
------------------
substantially in the form of Exhibit C attached hereto.
---------
-2-
<PAGE>
"Bridge Credit Agreement" means that certain Bridge Credit Agreement, dated
-----------------------
as of December 18, 1997, between Bema Bermuda as borrower, the banks and other
financial institutions that are or may from time to time become parties thereto
as lenders, and Barclays as Agent.
"Chilean Security" Assignments" means, collectively,
-----------------------------
(i) a duly notarized Assignment of Rights to be entered into
between the Original Banks, Barclays, AGI Chile, and the Borrower,
substantially in the form of Exhibit H-1 attached hereto;
-----------
(ii) a duly notarized Assignment of Rights to be entered into
between the Original Banks, Barclays, AGI Chile, and the Intermediate
Owners, substantially in the form of Exhibit H-2 attached hereto;
-----------
(iii) a duly notarized Termination of Conditional Assignment of
Rights (Foreign Investment Contract) to be entered into between the
Original Banks, the Borrower, and the Intermediate Owners, substantially in
the form of Exhibit H-3 attached hereto; and
-----------
(iv) a duly notarized Assignment of Rights to be entered into
between Barclays, AGI Chile, the Borrower, and the Intermediate Owners,
substantially in the form of Exhibit H-4 attached hereto;
-----------
"Effective Date" means the first Business Day on which each of the
--------------
following has occurred:
(a) each of the Administrative Agent, Barclays, AGI Chile and Bema
Bermuda shall have received (whether physically or in facsimile) one or
more counterparts of this Agreement which (collectively) have been duly
executed and delivered by each party hereto; and
(b) each of the conditions set forth in Sections 2.2, 2.3, 2.4,
------------ --- ---
and 2.5 shall have been satisfied or (with the consent of all parties hereto,
---
waived);
provided that, if the Effective Date has not occurred on or before December 23,
- --------
1997, then the Effective Date shall not thereafter be taken to have occurred.
"Loan Agreement" has the meaning assigned to that term in the first
-------------- -----
recital.
- -------
"Original Banks" means, collectively, Canadian Imperial Bank of Commerce,
--------------
Credit Lyonnais, Credit Lyonnais Canada, Deutsche Bank AG, Internationale
Nederlanden (U.S.) Capital Corporation and N M Rothschild & Sons Limited.
"Powers of Attorney" means duly notarized powers of attorney from each of
------------------
the Original Banks, authorizing a person or persons to execute a Bank Assignment
Agreement and the Chilean Security Assignment on behalf of such Original Bank
and to indorse the Initial Notes
-3-
<PAGE>
on behalf of such Original Bank as contemplated by clause (d) of Section 2.2,
---------- -----------
being in a form which will be admissible in evidence in the courts of Chile.
"Process Agent Acceptance" means a letter from CT Corporation System Inc.
------------------------
to the Borrower, Bema Bermuda, Bema Gold, and AGI substantially in the form of
Exhibit G attached hereto.
- ---------
"Required Party" has the meaning assigned to that term in Section 6.10.
-------------- ------------
"Requiring Party" is defined in Section 6.2.
--------------- -----------
"Revised Disclosure Schedule" means the revised disclosure schedule
---------------------------
attached hereto as Schedule I.
----------
"Subordinated Creditors" has the meaning assigned to that term in the
----------------------
preamble.
- --------
"Waiver and Consent" means the Waiver and Consent, to be entered into by,
------------------
inter alia, each of the parties to the Loan Agreement, in substantially the form
- ----------
of Exhibit E attached hereto.
---------
SECTION 1.2 Cross-References. Unless otherwise specified, references in
this Agreement to any Article or Section are references to such Article or
Section of this Agreement and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.3 Loan Document. This Agreement is a Loan Document and shall in
all respects be construed and interpreted in accordance with the Loan Agreement
(including Sections 1.4, 1.11, 11.9, 11.13 and 11.14 thereof).
------------ ---- ---- ----- -----
ARTICLE 2. THE EFFECTIVE DATE
------------------------------
SECTION 2.1 Effectiveness of this Agreement. Articles 1 to 3 (inclusive)
---------- -
and Articles 7 and 8 of this Agreement shall take effect when the Administrative
---------- -
Agent and Barclays have each received (whether physically or in facsimile) one
or more counterparts of this Agreement, which (collectively) have been duly
executed and delivered by each of the parties hereto. The provisions of Articles
--------
4 to 6 (inclusive) of this Agreement shall become effective as of and on (but
- - -
subject to the occurrence of) the Effective Date. If the Effective Date has not
occurred on or prior to December 23, 1997 then, unless the parties hereto
otherwise agree, the provisions of Articles 4 to 6 (inclusive) shall not apply
---------- -
and shall be, and shall be deemed to have been, of no force or effect
whatsoever, but without affecting the obligations of Bema Gold under Article 8.
---------
SECTION 2.2 Conditions Precedent - Barclays. Barclays shall have
confirmed in writing to the Administrative Agent, Bema Bermuda and AGI Chile,
that is has received, on or before the Effective Date, each of the following,
each in form and substance satisfactory to Barclays, and, as to legal matters,
to its counsel, or waived the requirement for:
-4-
<PAGE>
(a) copies of each of the Loan Documents, certified by an Authorized
Representative of Bema Gold and an Authorized Representative of the Borrower to
be true and correct copies and to include or to be consolidated to reflect
accurately any written amendments or modifications thereto or waivers thereunder
of which Bema Gold or the Borrower is aware;
(b) copies of each of the other Operative Documents (excepting only
the DOCLOC Support Agreement and the DOCLOC Facility Agreement), together with:
(i) a certificate, signed by an Authorized Representative
of Bema Gold and an Authorized Representative of the Borrower,
representing and confirming that such copies are true and complete
copies of all of the Operative Documents (with the exception as
aforesaid) and that such Operative Documents have not been amended,
varied, modified or waived, except pursuant to documents true and
complete copies of which are attached to such certificate, and
(ii) except as Barclays has otherwise agreed, in the case of
any of the Operative Documents referred to above not in the English
language, a translation thereof into English, in each case certified
as aforesaid to be true and correct translations thereof;
(c) the Bank Assignment Documents, duly executed and delivered by
each of the parties thereto;
(d) evidence that
(i) each of the Initial Notes shall have been duly indorsed
by each of the Original Banks to Barclays or AGI Chile, as
appropriate, and shall have been delivered to the custody of the
Custodian Bank, pursuant to the Notes Operating Procedures Agreement;
and
(ii) new Supplemental Notes, payable to the order of
Barclays and AGI Chile respectively, shall have been delivered to the
custody of the Custodian Bank, pursuant to the Notes Operating
Procedures Agreement;
(e) the Bema Gold Guaranty, duly executed and delivered by Bema Gold;
(f) from each Obligor party hereto, and from the Subordinated
Creditors and Bema U.S., a certificate of its Secretary or similar officer as
to:
(i) resolutions of its Board of Directors, Management
Committee or similar body then in force and effect authorizing the
execution, delivery and performance of this Agreement and each other
document to be executed by it in connection with the transactions
contemplated by this Agreement or by any such document;
-5-
<PAGE>
(ii) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement and each other
document executed or to be executed by it; and
(iii) its Organic Documents as then in effect, upon which
certificate Barclays and the Administrative Agent may conclusively
rely until each of them shall have received a further certificate of
the Secretary or similar officer of the relevant Person cancelling or
amending such prior certificate;
(g) opinions addressed to Barclays from:
(i) Philippi, Yrarrazaval, Pulido, Langlois & Brunner, Chilean
counsel to the Borrower, substantially in the form of Exhibit F-1
-----------
attached hereto; and
(ii) Stikeman, Elliot, Canadian counsel to Bema Gold,
substantially in the form of Exhibit F-2 attached hereto;
-----------
(iii) Baker & McKenzie, New York, special New York counsel to
Barclays, substantially in the form of Exhibit F-3 attached hereto;
-----------
and
(iv) Ms. Deborah Friedman, counsel to AGI, relating to the
authorization and execution of the AGI Guaranty, in form and
substance reasonably satisfactory to Barclays;
(h) all amounts payable by Bema Gold to Barclays in respect of
commission, fees and expenses, pursuant to Article 8 or otherwise, to the
---------
extent then due and payable;
(i) the Process Agent Acceptance;
(j) a Confirmation Regarding Pledge Agreement (Subordinated Notes),
substantially in the form of Exhibit I hereto, executed and delivered by
---------
the Persons listed as signatories thereto; and
(k) the written confirmations contemplated by Sections 2.3, 2.4, and
------------ ---
2.5.
---
SECTION 2.3 Conditions Precedent - Administrative Agent. The Administrative
Agent shall have confirmed in writing to Barclays that it has received:
(a) counterparts of the Waiver and Consent duly executed by each of
the parties thereto;
(b) each of the Bank Assignment Agreements, duly executed and
delivered by each of the parties thereto;
(c) the AGI Guaranty, duly executed by AGI;
-6-
<PAGE>
(d) payment from or on behalf of Bema Gold representing the
processing fees referred to in clause (d) of Section 11.11.1 of the
---------- ---------------
Loan Agreement, with respect to each of the assignments contemplated
by the Bank Assignment Agreements;
(e) any other documents and information which the Administrative
Agent has specified to be required by it for the purposes of Section
-------
11.11.1 of the Loan Agreement (as the operation of that Section has
-------
been modified by the Waiver and Consent) to complete the assignments
contemplated by the Bank Assignment Documents; and
(f) notification from the Central Bank of its consent to the
transactions contemplated by the Bank Assignment Documents.
SECTION 2.4 Conditions Precedent - Bema Bermuda. Bema Bermuda shall
have confirmed in writing to Barclays that it has received or waived the
requirement for evidence satisfactory to it that each of the conditions
precedent referred to in Article 5 (other than Section 5.1.3) of the Bridge
--------- -------------
Credit Agreement has been satisfied or waived.
SECTION 2.5 Conditions Precedent - CMM. CMM shall have confirmed in
writing to Barclays that it has received notification from the Central Bank of
its consent to the transactions contemplated by the Bank Assignment Documents.
ARTICLE 3. THE ASSIGNMENT DOCUMENTS
------------------------------------
SECTION 3.1 Acceptance of the Bank Assignment Agreements. The
Administrative Agent undertakes not to accept the Bank Assignment Agreements
pursuant to Section 11.11.1 of the Loan Agreement, unless and until the
---------------
Effective Date has occurred.
SECTION 3.2 Non-Occurrence of the Effective Date. Each of the parties
hereto agrees that, if the Effective Date has not occurred on or prior to
December 23, 1997, the Bank Assignment Documents will be of no force or effect,
and further agrees to destroy all signed originals in its possession of the Bank
Assignment Documents.
ARTICLE 4. TERMINATION AND VARIATION OF DOCUMENTS;
---------------------------------------------------
RELEASES OF LIENS
-----------------
SECTION 4.1 Direction by the Required Banks. AGI Chile and Barclays,
constituting (as at the Effective Date) the Required Banks, hereby direct the
Administrative Agent to agree to the modifications set out in this Article 4, to
---------
which all of the other parties to this Agreement hereby agree.
SECTION 4.2 Modification or Termination of Various Loan Documents.
With effect on and from (but subject to the occurrence of) the Effective Date:
(a) the AGI Support Agreement shall terminate without other or
further action by or on behalf of any Person and
-7-
<PAGE>
(i) AGI shall have no other or further obligations under
the AGI Support Agreement, except for any indemnification obligations
which are expressly stated to survive any such termination,
(ii) the Liens of the Administrative Agent on the "Deposit
Account Collateral", the "Assigned Collateral", and the "Pledged
Collateral" (in each case as therein defined) shall terminate and all
rights to such Collateral shall revert to AGI as provided in Section
-------
11.3 thereof, and
----
(iii) forthwith following the Effective Date, the
Administrative Agent shall comply with its obligations under Section
-------
11.3 thereof;
----
(b) the AGRI Pledge Agreement shall terminate without other or
further action by or on behalf of any Person and
(i) the Liens of the Administrative Agent on the
"Collateral" (as therein defined) shall terminate and all rights to
such Collateral shall revert to AGRI as provided in Section 7.3
-----------
thereof, and
(ii) forthwith following the Effective Date, the
Administrative Agent shall comply with it obligations under Section
-------
7.3 thereof;
---
(c) the AGRI Security Agreement shall terminate without other or
further action by or on behalf of any Person and
(i) the Liens of the Administrative Agent on the
"Collateral" shall terminate and all rights to such Collateral shall
revert to AGRI as provided in Section 7.3 thereof, and
-----------
(ii) forthwith following the Effective Date, the
Administrative Agent shall comply with its obligations under Section
-------
7.3 thereof;
---
(d) the DOCLOC Support Agreement shall terminate without other or
further action by or on behalf of any Person;
(e) the Bema Gold Support Agreement shall be modified in accordance
with the following provisions of this clause (e) without other or further action
----------
by or on behalf of any Person;
(i) Bema Gold shall have no other or further obligations
under Article 2, 3, or 5, or Sections 8.1, 8.2, 8.3, and (soley with
--------- - - ------------ --- ---
respect to the "Deposit Account Collateral" (as therein defined)) 8.4
---
of the Bema Gold Support Agreement, except for any indemnification
obligations which are expressly stated to survive any such
termination,
(ii) the Liens of the Administrative Agent on the "Initial
Cash Collateral" and the "Deposit Account Collateral" (in each case as
therein
-8-
<PAGE>
defined) shall terminate and all rights to such Collateral shall
revert to Bema Gold as provided in Section 11.4 thereof, and
------------
(iii) forthwith following the Effective Date, the
Administrative Agent shall comply with its obligations under
Section 11.4 (as to the "Deposit Account Collateral" (as therein
------------
defined)); and
(f) the Subordination Agreement (Bema Gold/AGI) shall terminate
without other or further action by or on behalf of any Person,
notwithstanding that the "Termination Date" (as therein defined) has not
yet occurred and, as a result of such termination, and notwithstanding the
provisions of Section 8.3(c)(i) of the Bema Gold Support Agreement, Bema
-----------------
Gold shall forthwith repay the Bema Gold/AGI Subordinated Note, together
with all accrued and unpaid interest thereon;
(g) the Subordination Agreement (CMM) Shall, pursuant to Section 5.1
-----------
thereof, be modified so that, for the purposes of that Agreement, the
liabilities of the Borrower to AGI Chile in respect of the Loans assigned
to AGI Chile pursuant to the Bank Assignment Documents and the other
Obligations of the Borrower to AGI Chile in connection therewith under any
of the Loan Documents shall be treated as being "Senior Liabilities" and as
------------------
not being "Junior Liabilities"
------------------
SECTION 4.3 Replacement of Technical Agent. Effective as of and on (but,
subject, however, to the occurrence of) the Effective Date,
(a) consequent upon the resignation of Deutsche Bank AG as Technical
Agent under the Waiver and Consent, the Banks shall be deemed to have
appointed Barclays to act as the successor Technical Agent under and,
pursuant to Section 10.4 of the Loan Agreement, and Barclays shall be
------------
deemed to have accepted such appointment, and
(b) the requirements of Section 10.4 of the Loan Agreement shall be
------------
conclusively deemed to have been satisfied by the provisions of this
Section, without the need for any other or further action by or on behalf
of any Person.
SECTION 4.4 The Loan Documents. Each of the Obligors acknowledges that
Barclays is entering into this Agreement and the Bank Assignment Documents to
which it is expressed to be a party in reliance upon the copies of the Loan
Documents provided to Barclays pursuant to Section 2.2 being true, correct and
-----------
in force in accordance with their terms, and there having been no waivers,
amendments, modifications or alterations thereto or any representations made
or ancillary obligations assumed by any of the Original Banks except as
explicitly disclosed in the copies of the Loan Documents provided to Barclays
on the date hereof or prior to the Effective Date. Accordingly, it is agreed
that, as between each of the parties hereto, to the extent any such waivers,
amendments, modifications or alterations shall have been made or any
representations made or ancillary obligations assumed by any of the Original
Banks, the same shall be hereby discharged, released and deemed to be,
and always to have been, of no force or effect whatsoever. Subject to Sections
--------
4.2 and 4.3, the Loan Documents (other than those to which a Person not party
- --- ---
to this Agreement is party) shall be deemed, in the case of any inconsistency,
to have been amended and restated as of the Effective Date in the form provided
to Barclays pursuant to Section 2.2.
-----------
-9-
<PAGE>
SECTION 4.5 Indemnity. Bema Gold and Bema Bermuda jointly and severally
agree to indemnify Barclays and hold Barclays harmless against any loss or
damage Barclays suffers by reason of:
(a) this Agreement, any of the Loan Documents, or any of the Bank
Assignment Documents not being fully effective and enforceable in
accordance with its terms; or
(b) any provision of any of the Loan Documents having been waived,
amended, modified or altered, or any representation having been made or
obligation assumed by any of the Original Banks, except as explicitly
disclosed in the copies of the Loan Documents provided to Barclays on the
date hereof or prior to the Effective Date.
In this Section, "Barclays" has the extended meaning provided in Section 6.9.
-------- -----------
SECTION 4.6 Conversion of Gold Loans. On the Effective Date, immediately
after the Bank Assignment Documents becoming effective, all of the Gold Loans
then outstanding will, without further action by the Borrower or any other party
(including the delivery of a Continuation/Conversion Notice pursuant to Section
-------
2.3 of the Loan Agreement), be converted into Dollar Loans in a principal amount
- ---
equivalent to the Dollar equivalent of the said Gold Loans as at the Effective
Date.
SECTION 4.7 Confirmation. Except as specifically set forth in this Article
-------
4, the provisions of each Loan Documents are hereby ratified and confirmed in
- -
all respects.
ARTICLE 5. DEFERRAL OF PAYMENT DUE ON DECEMBER 31, 1997
--------------------------------------------------------
SECTION 5.1 Deferral of Payment.
(a) Subject to clause (b), the requirement that the Borrower make the
----------
repayment of the Principal Amount of the Loans which is scheduled to be
made on December 31, 1997, pursuant to clause (b) of Section 3.1 of the
---------- -----------
Loan Agreement, is hereby modified, so that such payment shall instead be
due and payable on March 31, 1998.
(b) The effectiveness of clause (a) is subject to the conditions
----------
subsequent that:
(i) the Borrower shall have, on or before January 9, 1998,
filed an application seeking the approval of the Central Bank for the
deferral contemplated by clause (a) and provided copies of such
----------
application to the legal representatives of Barclays and AGI Chile;
and
(ii) the Central Bank shall have approved the deferral
contemplated by clause (a), and notified such approval to the legal
----------
representatives of Barclays and AGI Chile, on or before January 31,
1998.
If a copy of the application shall not be so received by January 9,
1998, or if such notification shall not have been so received by January
31, 1998, then clause (a)
----------
-10-
<PAGE>
shall be deemed to be, and always to have been, completely and absolutely
ineffective, as if clause (a) had never been included in this Agreement.
----------
SECTION 5.2 Savings. Nothing in Section 5.1 shall be construed as a waiver
-----------
of any other right of the Bank Parties under the Loan Agreement or any other
Loan Document and, without limiting the generality of the foregoing:
(a) interest shall continue to accrue on the Loans pursuant to
Section 3.2 of the Loan Agreement (but, for the avoidance of doubt, the
-----------
payment deferred pursuant to Section 5.1 shall not be treated as having had
-----------
a Maturity of December 31, 1997 for the purposes of Section 3.2.2 of the
-------------
Loan Agreement);
(b) Section 5.1 does not affect the time at which any other payment
-----------
under clause (b) of Section 3.2 of the Loan Agreement shall become due; and
---------- -----------
(c) Section 5.1 shall not be construed as limiting the operation of
-----------
any other provision of the Loan Agreement which might have the effect of
requiring some or all of the Loans to be repaid prior to March 31, 1998.
ARTICLE 6. CERTAIN INTERCREDITOR ISSUES
---------------------------------------
SECTION 6.1 Operation of Article 6. The provisions of this Article 6 shall
---------
operate notwithstanding any inconsistent provisions in the Loan Agreement.
SECTION 6.2 Enforcement. An "Agreed Enforcement Event" shall be
------------------------
conclusively taken to have occurred if an Event of Default has occurred and is
continuing, and either AGI Chile or Barclays (the relevant party being the
"Requiring Party") certifies to the other and the Administrative Agent that, in
---------------
the reasonable, good faith opinion of the Requiring Party, one or more of the
following criteria is satisfied, namely:
(a) the value of the Project is deteriorating, such that the
interests of the Requiring Party is reasonably likely to be materially
adversely affected by a delay in taking enforcement action; or
(b) the interests of the Requiring Party in its capacity as a lender
under the Loan Documents are reasonably likely to be materially adversely
affected by a delay in taking enforcement action; or
(c) the Event of Default is an Event of Default in relation to the
Borrower under Section 9.1.6 of the Loan Agreement;
-------------
provided, however, that an Event of Default arising either out of the inherent
- -------- -------
economic rate of return of the Project being, in the event, lower than
forecasted, or out of economic conditions affecting the gold mining industry
generally, shall not, in and of itself, be treated as an "Agreed Enforcement
------------------
Event" unless the Requiring Party also certifies that in its reasonably good
- -----
faith opinion (which shall be conclusive) the Borrower is or may be insolvent.
-11-
<PAGE>
SECTION 6.3 Action upon an Agreed Enforcement Event. If an Agreed
Enforcement Event has occurred, each of AGI Chile and Barclays, severally and
for itself alone, hereby undertakes and agrees that, if requested to do so by
the Requiring Party, it will join with the Requiring Party in directing the
Administrative Agent, pursuant to Section 9.3 of the Loan Agreement, to declare
-----------
all of the outstanding Loans to be due and payable and all other Obligations to
be due and payable and the Commitments to be terminated; provided, however,
-------- -------
that if, following any such request by the Requesting Party, it fails to join
with the Requiring Party in making any such direction, it shall be deemed to
have done so and the Administrative Agent hereby agrees that for all purposes of
the Loan Agreement and the Loan Documents it shall take instructions from the
Requiring Party as though it constituted the "Required Banks".
--------------
SECTION 6.4 Enforcement of Collateral Agreements. Following a declaration
by the Administrative Agent pursuant to Section 9.3 of the Loan Agreement that
-----------
all or any part of the Loans are due and payable (and regardless of whether or
not the declaration was made pursuant to Section 6.3), each of AGI Chile and
-----------
Barclays will join with the other in giving directions to the Administrative
Agent to enforce the Collateral Documents; provided, however, that if, following
-------- -------
any such request of the other party by the Requiring Party, the other party
fails to join with the Requiring Party in making any such direction, it shall be
deemed to have done so and the Administrative Agent hereby agrees that for all
purposes of the Loan Agreement and the Loan Documents it shall take instructions
from the Requiring Party as though it constituted the "Required Banks".
--------------
SECTION 6.5 Authority.
(a) AGI Chile hereby irrevocably and for valuable consideration
authorizes Barclays to give directions to the Administrative Agent on
behalf of AGI Chile to the extent that AGI Chile has agreed pursuant to
Section 6.3 or 6.4 to give such directions.
----------- ---
(b) Barclays hereby irrevocably and for valuable consideration
authorizes AGI Chile to give directions to the Administrative Agent on
behalf of Barclays to the extent that Barclays has agreed pursuant to
Section 6.3 or 6.4 to give such directions.
----------- ---
SECTION 6.6 The Bema Gold Guaranty. Payments received by Barclays under
or pursuant to the Bema Gold Guaranty shall not be deemed to be a "payment or
recovery" by Barclays for the purposes of Section 5.9 of the Loan Agreement (or
-----------
any other comparable sharing provision of any of the other Loan Documents),
which it is hereby agreed shall not apply in relation to recoveries made under
the Bema Gold Guaranty. No obligation of marshalling shall arise in relation
to the Bema Gold Guaranty which Barclays may enforce, or decline to enforce, in
its absolute discretion.
SECTION 6.7 Transfer by Banks. Each of the parties agrees to waive and
hereby waives any provision of the Loan Agreement which would otherwise
(i) prevent Barclays from, at any time and from time to time after the Effective
Date, entering into an assignment and delegation to Bema Bermuda of any of its
rights or obligations under the Loan Documents, pursuant to Section 11.11.1 of
---------------
the Loan Agreement, or (ii) prevent AGI Chile from, at any time after the
Effective Date at which AGRI is recognized as a foreign "registered financial
institution" by the Central Bank, entering into an assignment and delegation to
AGRI of any of its rights or obligations under the Loan Documents pursuant to
Section 11.11.1 of the Loan
- ---------------
-12-
<PAGE>
Agreement, provided that AGRI has entered into an undertaking in favor of
--------
Barclays (including the Assignee Banks referred to in Section 6.9) to be bound
-----------
by the provisions of Article 6.
---------
SECTION 6.8 Waiver in Relation to Certain Assignee Banks. The role of
AGI Chile, AGRI, or Bema Bermuda as Assignee Banks as contemplated the Bank
Assignment Documents or by Section 6.7 shall not be deemed to give rise to a
-----------
breach of clause (b) of Section 8.2.1 of the Loan Agreement.
---------- -------------
SECTION 6.9 Syndication by Barclays. As at the Effective Date, Barclays
will be entitled to 50% of the Loans. The parties acknowledge that Barclays
may, in its discretion, assign and delegate part or all of its rights under the
Loan Documents pursuant to Section 11.11.1 of the Loan Agreement. Accordingly,
---------------
references in Section 4.5 and in the Article 6 to "Barclays" shall be construed
----------- --------- --------
as extending to any such Assignee Bank, provided that such Person has entered
into an undertaking in favor of AGI Chile to be bound by the provisions of
Article 6. Following any such assignment, a certificate under Section 6.2 may
- --------- -----------
be given on behalf of Barclays and such Assignee Bank by Barclays itself, or by
such other Person as Barclays shall have nominated by notice in writing to AGI
Chile and the Administrative Agent.
SECTION 6.10 Purchase Options in favor of AGI Chile and Barclays. If an
Agreed Enforcement Event shall occur, then the party which is not the Requiring
Party (the "Required Party") may, upon receiving a copy of a certification
--------------
pursuant to Section 6.2, elect to acquire all of the outstanding Loans and
-----------
Commitments of the Requiring Party pursuant to Section 11.11.1 of the Loan
---------------
Agreement, by giving a notice to that effect to the Requiring Party, within 30
days of the date on which the Required Party received a copy of the
certification pursuant to Section 11.11.1, stating that it irrevocably elects to
---------------
exercise its rights under the Section. Such a notice, once given, shall be
irrevocable. On the fifth Business Day following the giving of such notice by
the Required Party:
(a) the Required Party shall pay to the Requiring Party an amount
equal to the Dollar equivalent of all Loans outstanding to the Requiring
Party, together with all accrued interest and fees and other amounts owing
with respect thereto;
(b) against receipt of the payment contemplated by clause (a), the
----------
Requiring Party shall deliver to the Required Party a Bank Assignment
Agreement, naming the Requiring Party as Assignor Bank and the Required
Party as Assignee Bank, in respect of the entire Loans and Commitments of
the Requiring Party, and specifying that all accrued interest, fees, and
other amounts payable by the Borrower shall be payable to the Requiring
Party by the Required Party;
(c) the Required Party shall pay to the Administrative Agent the
processing fees contemplated by Section 11.11.1 of the Loan Agreement; and
---------------
(d) the Administrative Agent shall accept the Bank Assignment
Agreement pursuant to Section 11.11.1 of the Loan Agreement.
---------------
Any assignment made pursuant to this Section shall be deemed to have been made
without any recourse, representation or warranty whatsoever. The Required Party
shall indemnify the Requiring Party and hold the Requiring Party harmless
against any and all liabilities, costs or
-13-
<PAGE>
expenses (including, without limitation, United Kingdom value added tax and
reasonable fees and expenses of counsel on a full indemnity basis) which the
Requiring Party may incur in its capacity as a Bank or Assignor Bank under the
Loan Agreement, or in performing the obligations imposed on it under this
Section.
ARTICLE 7. REPRESENTATIONS AND WARRANTIES
-----------------------------------------
SECTION 7.1 Representations and Warranties. In order to induce each of
Barclays and the Administrative Agent to enter into this Agreement and into the
Bank Assignment Documents to which it is expressed to be a party, each of the
Obligors represents and warrants, individually for itself and with respect to
matters relating to it, unto each of the Administrative Agent and Barclays, as
set forth in Article 7 of the Loan Agreement, subject to the qualifications set
---------
forth in the Revised Disclosure Schedule.
SECTION 7.2 Repetition. The representations and warranties referred to in
Section 7.1 shall be made by each of the Obligors on the date of this Agreement
- -----------
and on the Effective Date.
SECTION 7.3 Bema Gold Debentures. In order to induce Barclays to enter
into this Agreement and the Bank Assignment Documents to which it is expressed
to be a party, Bema Gold represents and warrants to Barclays that (i) the 1990
Secured Debentures have been paid in full and Bema Gold has no further
obligations in respect of the 1990 Secured Debentures, and (ii) the 1994
Convertible Debentures have been paid in full (except in relation to amounts not
exceeding U.S. $15,000 in aggregate owing to holders of certain of the 1994
Convertible Debentures who cannot be traced) and (save as aforesaid) Bema Gold
has no further obligations in respect of the 1994 Convertible Debentures.
ARTICLE 8. COSTS AND EXPENSES
-----------------------------
Bema Gold agrees to pay on demand all expenses (inclusive of United
Kingdom Value Added Tax or any similar tax) of each of Barclays and the
Administrative Agent for the negotiation, preparation, execution and delivery
of this Agreement, the Bank Assignment Documents and each other Loan Document
executed or to be executed in connection herewith, including schedules and
exhibits, and any amendments, waivers, consents, supplements or modifications to
any such document from time to time as may be required (including the reasonable
fees and expenses of counsel to Barclays or to the Administrative Agent on a
full indemnity basis from time to time incurred in connection therewith),
whether or not the transactions contemplated hereby are consummated and whether
or not the Effective Date occurs, and all expenses of Barclays and the
Administrative Agent (including reasonable fees and expenses of counsel to
either of them on a full indemnity basis and any stamp or other taxes (including
stamp tax (impuesto de timbres) payable in connection with the Notes)) incurred
in connection with the preparation and review of the form of any Instrument
relevant to this Agreement or to any other Loan Document, the consideration of
legal questions relating hereto and thereto and the filing, recording,
translation, refiling or re-recording of any Loan Documents and all amendments
or supplements thereto or thereof and any and all other documents or Instruments
of further assurance required to be translated, filed or recorded or refiled or
re-recorded by the terms hereof or of any other Loan Document.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers hereunto duly authorized as of the day and
year first above written.
COMPANIA MINERA MARICUNGA, as
Borrower
By
----------------------------
Title:
---------------------
AMAX GOLD REFUGIO, INC., as an
Intermediate Owner and a
Subordinated Creditor
By
----------------------------
Title:
---------------------
BEMA GOLD (BERMUDA) LTD., as an
Intermediate Owner and a Subordinated
Creditor
By
----------------------------
Title:
---------------------
AMAX GOLD INC., as a Guarantor and a
Subordinated Creditor
By
----------------------------
Title:
---------------------
BEMA GOLD CORPORATION, as a Guarantor
and a Subordinated Creditor
By
----------------------------
Title:
---------------------
-15-
<PAGE>
AGI CHILE CREDIT CORP., INC., as a
Bank and as a Subordinated Creditor
By
---------------------------------
Title:
---------------------------
MINERA BEMA GOLD (CHILE) LIMITADA,
as a Subordinated Creditor
By
---------------------------------
Title:
---------------------------
BEMA GOLD (U.S.) INC.,
as a Pledgor
By
---------------------------------
Title:
---------------------------
BARCLAYS BANK PLC, as a Bank and the
Technical Agent
By
---------------------------------
Title:
---------------------------
N M ROTHSCHILD & SONS LIMITED,
as Administrative Agent
By
---------------------------------
Title:
---------------------------
By
---------------------------------
Title:
---------------------------
-16-
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF AMAX GOLD INC.
(All 100% owned unless otherwise indicated)
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
AGI Chile Credit Corp., Inc. Delaware
AGI Chile Finance Corp. Delaware
Amax Gold de Chile Ltda. Chile
Amax Gold Exploration, Inc. Delaware
Amax Gold Refugio, Inc. Delaware
Amax Precious Metals, Inc. Delaware
Compania Minera Amax Guanaco* Chile
Compania Minera Maricunga** Chile
Cyprus Magadan Gold Corporation Delaware
Omolon Gold Mining Company** Russia
Fairbanks Gold Ltd. British Columbia
Fairbanks Gold Mining, Inc. Delaware
Guanaco Mining Company, Inc. Delaware
Haile Mining Company, Inc. Delaware
Lancaster Mining Company, Inc. Delaware
Lassen Gold Mining, Inc. Delaware
Melba Creek Mining, Inc. Alaska
Nevada Gold Mining, Inc. Delaware
Wind Mountain Mining, Inc. Delaware
- -------------------
* 90% owned.
** 50% owned.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 333-22598,
33-36612 and 33-53963) and in the Registration Statements of Form S-8 (Nos.
33-53665 and 33-54553) of Amax Gold, Inc. of our report dated February 9, 1998
appearing on page 23 of the 1997 Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Denver, Colorado
February 11, 1998
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF MINERAL RESOURCES DEVELOPMENT INC. USA]
February 10, 1998
Amax Gold Inc.
9100 E. Mineral Circle
Englewood, CO 80012
RE: FORT KNOX MINE RESERVE UPDATE
Ladies and Gentlemen:
We hereby authorize the reference to the Fort Knox Mine, Fairbanks, Alaska, 1997
Reserve Update, dated February 1998, prepared for Fairbanks Gold Mining, Inc.,
by Mineral Resources Development Inc., in the Annual Report on Form 10-K of Amax
Gold Inc., to be filed with the United States Securities and Exchange
Commission.
We also confirm that we have read the descriptions of the Fort Knox Mine ore
reserves as contained in the Annual Report on Form 10-K and have no reason to
believe that there is any misrepresentation in the information contained herein
that is derived from our report or known to us as a result of services we
performed in connection with the preparation of such reports.
Sincerely,
MINERAL RESOURCES DEVELOPMENT INC.
/s/ David C. Laing
------------------
By: David C. Laing
Title: President, MRDI USA
<PAGE>
EXHIBIT 23.3
DMBW, INC. . 13949 W. Colfax Ave., Suite 110
DERRY, MICHENER, BOOTH & WAHL . Golden, Colorado 80401
- -------------------------------------------- . Telephone: (303) 233-8786
MINING AND GEOLOGICAL CONSULTANTS . Telecopier: (303) 232-2586
February 9, 1998
Amax Gold Inc.
9100 East Mineral Circle
Englewood, CO 80112
RE: Haile Project Reserve Study
Ladies and Gentlemen:
We hereby authorize the reference to the following described report prepared by
DMBW, Inc. (Derry, Michener, Booth & Wahl) ("DMBW") in an Annual Report on Form
10-K to be filed by Amax Gold Inc. ("AGI") with the United States Securities and
Exchange Commission ("SEC"):
1. Audit of April 1, 1994 Ore Reserves at the Haile Mine, dated April 22, 1994,
prepared for Amax Gold, Inc.
We also confirm that we have read the description of the Haile Project ore
reserves as contained in the Annual Report and have no reason to believe that
there is any misrepresentation in the information contained on Form 10-K, which
is derived from our report, or known to us as a result of services we performed
in connection with the preparation of such report.
Sincerely,
DMBW, Inc.
[Derry, Michener, Booth & Wahl]
/s/ I.S. Parrish
- ------------------------------------
By: I.S. Parrish
Title: President/Economic Geologist
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 19,500
<SECURITIES> 0
<RECEIVABLES> 32,900
<ALLOWANCES> 0
<INVENTORY> 57,100
<CURRENT-ASSETS> 129,700
<PP&E> 1,124,700
<DEPRECIATION> 401,600
<TOTAL-ASSETS> 870,600
<CURRENT-LIABILITIES> 226,000
<BONDS> 345,700
1,800
0
<COMMON> 1,100
<OTHER-SE> 270,900
<TOTAL-LIABILITY-AND-EQUITY> 870,600
<SALES> 259,500
<TOTAL-REVENUES> 259,500
<CGS> 157,300
<TOTAL-COSTS> 257,600
<OTHER-EXPENSES> 3,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,400<F1>
<INCOME-PRETAX> (37,500)
<INCOME-TAX> 400
<INCOME-CONTINUING> (37,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 4,500
<NET-INCOME> (33,400)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
<FN>
<F1> Net of interest income of $1.9 million and capitalized interest of $4.2 million
</FN>
</TABLE>
