<PAGE>
PROSPECTUS FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION STATEMENT NO. 33-65165
PROSPECTUS
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ATLAS CORPORATION
U.S.$10 MILLION PRINCIPAL AMOUNT OF 7% EXCHANGEABLE DEBENTURES
DUE OCTOBER 25, 2000
(EXCHANGEABLE FOR 4,250,000 COMMON SHARES OF GRANGES INC.,
SUBJECT TO ANTI-DILUTION PROVISIONS)
This Prospectus relates to the sale from time to time (by the holders
listed in the section entitled "Selling Debentureholders" and not by the
Company) of U.S.$10,000,000 principal amount of 7% Exchangeable Debentures due
October 25, 2000 (the "Debentures") of Atlas Corporation ("Atlas" or the
"Company") exchangeable for 4,250,000 common shares, no par value, owned by
Atlas (the "Granges Common Shares"), of Granges Inc. ("Granges") at an exchange
rate (the "Exchange Rate") of 42.50 Granges Common Shares for each U.S.$100
principal amount of Debentures. The Exchange Rate is subject to adjustment,
pursuant to the anti-dilution provisions contained in the indenture relating to
the Debentures (the "Indenture"), upon certain events affecting Granges. The
Debentures will be subject to redemption on or after October 25, 1998, so long
as (i) the Average Market Price (as hereinafter defined) of Granges Common
Shares is at least U.S.$2.94 per share, and (ii) the holder of the Debentures
does not exercise its right to exchange the Debentures at any time prior to
redemption, any such redemption to be made at a redemption price equal to 100%
of the outstanding principal payable in cash or (at the option of Atlas), in
whole or in part, in Granges Common Shares valued at the Exchange Rate. At
maturity (including upon acceleration), the Debentures are repayable in cash or,
in whole or (at the option of Atlas) in part, in shares of Granges Common Shares
valued at 95% of their Average Market Price. "Average Market Price" means the
average closing trading price of Granges Common Shares on the American Stock
Exchange for a 20-day period ending one trading day prior to maturity or
redemption, as the case may be.
The Debentures are secured by a pledge of 8,474,576 Granges Common Shares.
The pledged Granges Common Shares will be released from the pledge for delivery
to Debenture holders (each a "Holder") for exchange or for payments on
redemption or maturity and, net of such delivery or payment, will be released to
Atlas in proportion to the amount of any exchanges by Holders. If Atlas elects
to repay the principal amount of the Debentures in Granges Common Shares or if
the anti-dilution provisions of the Indenture are triggered, the number of
Granges Common Shares delivered could be higher than the number that would be
delivered at the initial Exchange Rate. The number of Granges Common Shares
deliverable could exceed the 8,474,576 Granges Common Shares held in escrow
pursuant to the Indenture and the Escrow and Pledge Agreement.
The Debentures may be sold hereunder from time to time by the holders
listed in the section entitled "Selling Debentureholders" and not by the
Company. The Company will not receive any proceeds from the sale of the
Debentures by the Selling Debentureholders. See "Use of Proceeds".
It is anticipated that the Debentures offered hereby will be sold from time
to time through customary brokerage channels, either through broker-dealers
acting as agents or brokers for the Selling Debentureholders or through broker-
dealers acting as principals, who may then resell such Debentures on an exchange
or otherwise, or through privately negotiated sales, in each case at prevailing
market or other negotiated prices, or by a combination of such methods. There is
no underwriting agreement with respect to the Debentures offered hereby. The
Selling Debentureholders may pay commissions to designated broker-dealers for
assisting in the sale of the Debentures. Any such commissions will be subject to
negotiation. See "Plan of Distribution."
The Company has agreed to bear all of the expenses incurred by it in
connection with the registration of the Debentures offered hereby. Each of the
Selling Debentureholders will be responsible for the payment of expenses,
including brokerage fees or commissions and any transfer taxes, relating to the
offer and sale of the Debentures. See "Plan of Distribution."
There is currently no public market for the Debentures. The Debentures have
been accepted for listing, when issued, on the Vancouver Stock Exchange.
Granges Common Shares are listed on the Toronto Stock Exchange and on the
American Stock Exchange. The closing price of Granges Common Shares on January
29, 1996, as reported on the American Stock Exchange was $2.3125 per share.
PROSPECTIVE INVESTORS ARE ADVISED TO CAREFULLY CONSIDER THE DISCUSSION OF
CERTAIN FACTORS UNDER THE HEADING "RISK FACTORS" BEGINNING ON THE FOLLOWING PAGE
IN EVALUATING AN INVESTMENT IN THE DEBENTURES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is February 21, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Northeast Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048; and Midwest Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained by mail from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Company's Common Stock is listed on the New York Stock Exchange and
such reports, proxy statements and other information can also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. Certain warrants of the Company are listed on the American Stock Exchange
and such reports, proxy statements and other information can also be inspected
at the offices of the American Stock Exchange, 86 Trinity Place, New York, New
York 10006.
This Prospectus does not contain all of the information set forth in the
Registration Statement on Form S-3, of which this Prospectus is a part, nor does
it contain the exhibits relating thereto which Atlas has filed with such
Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended June 30, 1995,
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995 and
Current Reports on Form 8-K filed on October 4, 1995, November 21, 1995,
December 5, 1995, January 22, 1996 and on January 21, 1996 filed with the
Commission (File No. 1-2714) are incorporated by reference in this Prospectus.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debentures shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein or contained in this Prospectus shall be
deemed to be modified or superseded for purposes of the Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The information relating to the Company contained in this Prospectus does
not purport to be comprehensive and is based upon information contained in the
documents incorporated above. Accordingly, the information contained herein
should be read together with the information contained in such documents.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated in
this Prospectus by reference, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference therein). Requests for such
copies should be directed to the Secretary of Atlas Corporation, 370 Seventeenth
Street, Suite 3150, Denver, Colorado 80202 (telephone: (303) 825-1200).
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, THE
FOLLOWING FACTORS BEFORE PURCHASING THE DEBENTURES OFFERED HEREBY.
RECOMMENCEMENT OF OPERATIONS AT GOLD BAR
During October 1995, Atlas reached an agreement in principle with Brown &
Root, Inc. for contract mining services and a U.S.$5 million loan guarantee to
be supplied by Brown & Root for use in financing the resumption of mining
operations at its Gold Bar mine. Should continued negotiations fail to result in
the execution of a definitive agreement, or should Atlas not close on the
placement of the Debentures (see "Description of Debentures"), there can be no
assurance that Atlas would be able to replace this required financial guarantee
and that operations at Gold Bar could restart as currently anticipated.
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<PAGE>
LIMITED FINANCIAL RESOURCES OF ATLAS - NO REVENUES FROM MINING OPERATIONS; NO
OBLIGATION ON THE PART OF GRANGES WITH RESPECT TO THE DEBENTURES
Atlas currently has very limited working capital and, pending
recommencement of its operations at its Gold Bar mine and commencement of mining
at its other properties, is not generating revenues from operations. In order to
fund working capital, interest and repayment obligations under the Debentures,
and ongoing capital projects, Atlas anticipates it will need to raise additional
funds. Any failure to raise additional funds on terms favorable to Atlas will
adversely affect the business prospects and financial condition of Atlas. See
the discussion under the caption "RECENT EVENTS" beginning on page -9-.
Although Atlas' indebtedness with respect to the Debentures is secured by a
pledge of 8,474,576 Granges Common Shares, there can be no assurance that the
value realizable in respect of such shares in the event of any default on the
Debentures will be sufficient to repay the principal and unpaid interest on the
Debentures. Granges has no obligation with respect to the Debentures or amounts
to be paid to Holders, nor any obligation to take into consideration for any
reason the needs of Atlas or the Holders. Granges will not receive any of the
proceeds from the offering of the Debentures and is not responsible for the
determination of the time of, prices for or quantities of the Debentures to be
issued or the redemption of the Debentures.
COMPARISON TO OTHER DEBT SECURITIES; RELATIONSHIP TO GRANGES COMMON SHARES
The terms of the Debentures differ from those of ordinary debt securities
in that the value that a Holder will receive upon the optional exchange of the
Debentures is not fixed, but is based on the price from time to time of the
Granges Common Shares received by the Holder.
The opportunity for equity appreciation afforded by an investment in the
Debentures is less than the opportunity for equity appreciation afforded by an
investment in Granges Common Shares because the amount receivable by Holders
upon exchange will only exceed the principal amount of such Debentures if the
price of Granges Common Shares exceeds U.S.$2.35 per share. Because the price of
Granges Common Shares is subject to market fluctuations, the exchange of the
Debentures into Granges Common Shares may never be in the economic best interest
of Holders.
It is impossible to predict whether the price of Granges Common Shares will
rise or fall. Trading prices of Granges Common Shares will be influenced by
Granges' operational results and by complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the Toronto Stock Exchange and the American Stock Exchange (on which
the Granges Common Shares are traded) and the market segment of which Granges is
a part.
ABSENCE OF COVENANT PROTECTION
The Indenture does not limit the Company's ability to incur additional
indebtedness, or to grant liens on its assets to secure indebtedness, to pay
dividends or to repurchase shares of its capital stock. The Indenture does not
contain any provisions specifically intended to protect Holders in the event of
a future highly leveraged transaction involving the Company except for the grant
of a first priority security interest in all of the Company's right, title and
interest in 8,474,576 Granges Common Shares and in all distributions on such
shares triggering the anti-dilution provisions of the Indenture. The Debentures
will therefore be senior to all other debt of the Company with respect to the
pledged Granges Common Shares (and applicable distributions thereon) and will
rank below the claims of secured debtholders with respect to other assets of the
Company securing such debt. The Debentures will be of equal rank with other debt
of the Company with respect to other unsecured assets of the Company and, along
with other debt of the Company, will be senior to the claims of stockholders. As
of September 30, 1995, the Company has secured obligations of $8,764,000 and
unsecured obligations of $9,599,000.
NO PRIOR PUBLIC MARKET
There is currently no public market for the Debentures. The Debentures have
been acceepted for listing, when issued, on the Vancouver Stock Exchange. There
can be no assurance as to the liquidity of the market that may develop for the
Debentures, the ability of Holders to sell their Debentures or the prices at
which Holders would be able to sell their Debentures. The Debentures could trade
at prices that are higher or lower than the prices at which they were purchased
depending on many factors, including prevailing interest rates, the Company's
and Granges' operating results and the markets for similar securities.
NATURE OF MINERAL EXPLORATION AND PRODUCTION
Atlas and Granges (the "Companies") are each involved in the exploration
for and mining of gold. Exploration for and, if warranted, mining of minerals
such as gold are highly speculative and involve greater risks than many other
businesses. The business requires very large capital expenditures in advance of
anticipated revenues from operations. There is no assurance that the Companies
will always be able to obtain all of the financing that they require on
acceptable terms and conditions in order to exploit available opportunities.
Many exploration programs do not result in the discovery of mineralization and
any mineralization discovered may not be of sufficient quantity or quality to be
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<PAGE>
profitably mined. The grade of ore mined may differ from that indicated by
drilling results. Such a variation can have an adverse impact on production
results. The reliability of estimates of future production is also affected by
such factors as weather, strikes, environmental factors and the risks arising
from political or social forces. Uncertainties as to the metallurgical
amenability of any minerals discovered may not warrant the mining of these
minerals on the basis of available technology. Mining operations are also
subject to a number of other hazards and risks such as encountering unusual or
unexpected formations, environmental pollution, industrial accidents, rock
movements and folding, many of which cannot be insured against.
Some of the mines in which the Companies own an interest are operated
through joint ventures with other mining companies. Any failure of such other
companies to meet their obligations to the Companies with respect to such joint
ventures or to third parties could have a material adverse effect on the joint
ventures.
RESERVES
The reserves included in the Companies' public filings are primarily
estimates prepared by management. No assurance can be given that all available
reserves will be recovered by mining and not all of the gold contained in
minable reserves will be recovered in the course of mining. A significant
downward movement in the price of gold may render deposits containing relatively
lower grades of gold mineralization uneconomic. Moreover, short-term factors
relating to the ore reserves, such as the need for orderly development of ore
bodies or the processing of new or different grades, may impair the
profitability of a mine in any particular accounting period.
EXPLORATION AND ACQUISITION PROGRAM
The Companies continually expand their reserves through exploration and
through acquisition of properties which are in production or have mineral
potential. The Company continues to examine a number of business combination
strategies with other mining companies and the acquisition of equity interests
in companies owning properties in production or with mineral potential. There
are a number of risks inherent in any exploration program, relating to the
discovery and location of economic orebodies, the development of appropriate
metallurgical processes, the receipt of necessary governmental permits and the
construction of mining and milling facilities. In addition, few properties which
are explored are developed into producing mines and those which are developed
require at least two to five years from the initial phases of drilling until
commercial production is achieved.
FLUCTUATION IN THE PRICE OF GOLD
Because the Companies' revenues are derived primarily from the sale of
gold, earnings are directly related to gold prices. Gold prices fluctuate widely
and are affected by numerous factors beyond the Companies' control, including
expectations for inflation, the relative exchange rate of the dollar, global and
regional demand, political and economic conditions, expectations for inflation
and production costs in major gold producing regions including South Africa and
Russia. In addition, gold prices have on occasion been subject to very rapid
short-term changes due to speculative activities of investors. Gold prices are
also affected by worldwide production levels, which have increased in recent
years. Market price fluctuations of gold may render uneconomic the mining of
mineral deposits containing relatively lower grades of mineralization.
UNCERTAINTY OF TITLE
Certain of the Companies' mining properties are unpatented mining claims,
and the Companies have only possessory title with respect to such properties.
The validity of unpatented mining claims is often uncertain and may be
contested. Although the Companies have attempted to acquire satisfactory title
to their respective properties, the Companies, in accordance with mining
industry practices, in certain cases have not obtained title opinions and title
insurance with respect to unpatented claims, with the attendant risk that title,
particularly on undeveloped properties, may be defective.
COMPETITIVE CONDITIONS
The acquisition of precious metals mining projects is subject to intense
competition. The Companies compete with other companies in connection with the
acquisition, exploration and development of the mining properties that comprise
their various projects. Companies with greater financial resources, larger staff
and labor forces, more equipment for exploration and development and greater
experience may be in a better position than the Companies to compete for such
mineral properties.
The Companies compete with substantially larger companies in the production
and sale of gold and other minerals. No single competitor is a material factor
in these markets, however. Prices depend almost entirely upon market conditions
over which the Companies have no control. The Companies believe that they can
promptly sell at market prices all the gold they can produce for either present
or future delivery.
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<PAGE>
GOVERNMENT REGULATION
The Companies' mining operations are subject to various laws and
regulations concerning prospecting, development, production, exports, taxes,
labor standards, occupational health, waste disposal, toxic substances,
environmental protection, mine safety and other matters in both the United
States and Canada. Instances of noncompliance or the enactment of new laws or
regulations governing the operations and activities of mining companies could
have a material adverse impact on the Companies. The Company believes that it is
in compliance with all such laws and regulations.
Legislation and other proposals have been introduced in the U.S. Congress
that would alter the provisions of the Mining Law of 1872. If enacted, such
legislation could increase the cost of holding unpatented mining claims and
could materially impair the abilities of companies to develop mineral reserves
on unpatented mining claims. Under the terms of certain Federal budget proposals
and proposed legislation, the ability of mining companies to obtain a patent on
unpatented claims would be nullified or substantially impaired. Moreover,
certain forms of such proposals contain provisions for the payment of royalties
to the federal government in respect of production from unpatented mining
claims, which could materially and adversely affect the potential for
development of such claims and the economics of operating existing mines on
federal unpatented mining claims. Such proposed royalties are, however, expected
to affect neither the existing reserves at Gold Bar, which under current
legislative proposals would be grandfathered due to earlier filed patent
applications, nor the Commonwealth property in central Arizona optioned from
Harvest Gold Corporation, which is comprised of patented claims.
ENVIRONMENTAL MATTERS
Both existing environmental laws and regulations and environmental laws and
regulations enacted and adopted in the future may have a significant impact upon
the Companies' future operations. The Companies cannot now accurately predict or
estimate the impact of any such existing or future laws or regulations on their
operations. In connection with their mining and processing activities, the
Companies are required to comply with various U.S. and Canadian federal,
provincial, state and local laws and regulations pertaining to the discharge of
materials into the environment or otherwise relating to the protection of the
environment. Instances of noncompliance or the enactment of new laws or
regulations could have a material adverse impact on the Companies. The Company
believes that it is in compliance with all such current laws and regulations.
DEPENDENCE ON KEY PERSONNEL; POTENTIAL CONFLICTS OF INTEREST
A number of the executive officers and personnel of the Companies have
considerable expertise in the mining business. The loss of the services of any
one or more of these executive officers and personnel could have an adverse
effect upon the Companies. For Atlas, these executive officers and personnel are
David J. Birkenshaw, Chairman and Chief Executive Officer, Gerald E. Davis,
President and Richard E. Blubaugh, Vice President -Environmental and
Governmental Affairs. For Granges, these executive officers and personnel are
Michael B. Richings, President and Chief Executive Officer, Paul N. Wright, Vice
President, Mining and Project Development and A.J. Ali, Vice President, Finance
and Chief Financial Officer.
Certain of the directors and officers of each of the Companies are also
directors and officers of other natural resource companies. Conflicts may arise
between the obligations of these directors and officers to the Companies and
such other natural resource companies, and between the obligations of such
directors and officers toward the Company and Granges where such individuals are
officers and/or directors of both of the Companies. David J. Birkenshaw,
Chairman and Chief Executive Officer of the Company is a director of Granges and
is chairman of Phoenix Financial Holdings Inc. ("Phoenix"). Gerald E. Davis,
President of Atlas, is Vice Chairman and Chief Executive Officer of Phoenix. In
addition to Mr. Birkenshaw and Mr. Davis, the remaining officers of Atlas also
serve as officers of Phoenix. Michael B. Richings, President and Chief Executive
Officer of Granges, is a director of Atlas. See the discussions under
"RELATIONSHIP BETWEEN THE COMPANY AND GRANGES" beginning on page -8-, and under
"RECENT EVENTS" beginning on page -9-.
CONTINUING OPERATING LOSSES
While certain of the Companies' mining properties may be operated at a
profit during a given fiscal period, the Companies' operations as a whole may be
unprofitable due to exploration, development, and operating costs on other
properties. Other items that may adversely affect profitability include selling
expenses, general and administrative costs, allowances for depreciation,
depletion and amortization of assets, and interest expense. The Company reported
net losses of $19,776,000 and $1,743,000 for the year ended June 30, 1995 and
the three month period ended September 30, 1995, respectively. The Company
reported a deficit of $63,216,000 and $64,959,000 as of June 30, 1995 and
September 30, 1995, respectively.
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<PAGE>
NO DIVIDENDS
For the foreseeable future, it is anticipated that each of the Companies
will use earnings, if any, to finance their respective growth and that dividends
will not be paid to shareholders.
CERTAIN TAX MATTERS
In the event that a U.S. Holder exchanges his Debenture for Granges Common
Shares, such Holder should recognize gain or loss equal to the difference
between the fair market value of the Granges Common Shares received and such
Holder's adjusted tax basis in the Debenture. Such gain or loss should generally
be long-term capital gain or loss if the Holder holds the Debenture as a capital
asset and the Holder's holding period for the Debenture exceeds one year. The
Holder's tax basis in the Granges Common Shares received in the exchange should
be equal to the fair market value of such shares. The Holder's holding period
for such Granges Common Shares would begin on the date of the exchange.
Subject to the discussion below regarding the Foreign Investment in Real
Property Tax Act of 1980 ("FIRPTA"), a Non-U.S. Holder of a Debenture should
generally not be subject to U.S. Federal income tax on any gain realized in
connection with the exchange of his Debenture for Granges Common Shares unless
(i) the gain is effectively connected with a trade or business of the Non-U.S.
Holder in the U.S. or (ii) in the case of a Non-U.S. Holder who is a nonresident
alien individual as to the U.S. and holds the Debenture as a capital asset, such
Non-U.S. Holder is present in the U.S. for 183 days or more in the taxable year
of the exchange and either (a) such Non-U.S. Holder's "tax home" for U.S.
Federal income tax purposes is in the U.S. or (b) the gain is attributable to an
office or other fixed place of business maintained in the U.S. by such Non-U.S.
Holder. However, a Non-U.S. Holder who is an individual and who is present in
the U.S. for 183 days or more in a taxable year should, in most circumstances,
be treated as a resident alien and, if so treated, should be subject to U.S.
Federal income tax on his worldwide income without regard to the previous
sentence.
Notwithstanding the discussion above, if a Non-U.S. Holder's gain or loss
upon the exchange of a Debenture for Granges Common Shares were subject to
FIRPTA, such gain or loss would be treated as effectively connected with a U.S.
trade or business engaged in by such Non-U.S. Holder and thus would be subject
to U.S. Federal income tax accordingly (including, generally, a 10% withholding
tax on the proceeds of the exchange). Assuming that Atlas's Common Stock, in
addition to being listed on the New York Stock Exchange, is "regularly traded"
on such Exchange within the meaning of the FIRPTA regulations, then, in general,
a Non-U.S. Holder should not be subject to FIRPTA with respect to an exchange of
Debentures for Granges Common Stock so long as (i) on the last date Debentures
were acquired by such Non-U.S. Holder, all Debentures held by such Non-U.S.
Holder did not have a fair market value greater than the fair market value on
that date of 5% of Atlas's Common Stock and (ii) such Non-U.S. Holder does not
beneficially own more than 5% of the total fair market value of the Debentures
during certain relevant periods. Otherwise, the potential application of FIRPTA
to a Non-U.S. Holder's gain or loss on an exchange of a Debenture for Granges
Common Shares is uncertain in a number of respects and is dependent, in part, on
the Non-U.S. Holder's particular circumstances.
On December 7, 1995 the Clinton Administration proposed a package of
amendments to the Internal Revenue Code of 1986, as amended (the "Code"), one of
which (the "Proposal") appears to be directed at the U.S. Federal income tax
treatment of certain purported debt instruments payable in stock of the issuer
or certain "related parties," as specifically defined in the Proposal. However,
given Atlas' less-than-fifty percent ownership interest in Granges (see
"Relationship Between the Company and Granges"), the Proposal should not affect
the U.S. Federal income tax treatment of the Debentures, since Granges should
not be considered a "related party" with respect to Atlas for purposes of the
Proposal. In the event that the Proposal was enacted into law and was amended to
apply to instruments payable in stock of unrelated parties (such as the
Debentures), Atlas would not be allowed any deduction for any interest paid or
accrued with respect to the Debentures. Such a disallowance of the deduction for
interest expense with respect to the Debentures likely would increase the
taxable income (and tax expense) of Atlas, but should not affect the U.S.
Federal income tax treatment of a holder of Debentures.
PROSPECTIVE INVESTORS IN ALL JURISDICTIONS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP, EXCHANGE AND OTHER DISPOSITION (AS APPLICABLE) OF THE DEBENTURES AND
THE GRANGES COMMON SHARES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL AND OTHER UNITED STATES OR FOREIGN TAX LAWS.
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<PAGE>
THE COMPANY
Atlas is a mining company which is principally engaged in the business of
exploring for, producing and selling gold. The Company is a Delaware corporation
with its principal offices located at 370 Seventeenth Street, Suite 3150,
Denver, Colorado 80202 (telephone number (303) 825-1200). Incorporated in 1923,
the Company first traded on the New York Stock Exchange in 1937. The Company's
primary mining asset is the Gold Bar mine, located near Eureka, Nevada.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges is computed as follows
(all amounts in U.S. dollars):
<TABLE>
<CAPTION>
fiscal year ended:
-----------------------------------------------------------------
Three Three 1995 1994 1993 1992 1991
months months
ended ended
9/30/95 9/30/94
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges
. Interest expenses 94,000 116,000 316,000 562,000 79,000 331,000 214,000
. Interest capitalized
during period 0 0 0 0 428,000 1,415,000 1,763,000
. Portion of rent expense
representative of interest 20,222 53,146 159,713 180,195 297,081 222,967 193,401
-------------------------------------------------------------------------------------------
114,222 169,146 475,713 742,195 804,081 1,968,967 2,170,401
Earnings
. Income (Loss) from
continuing operations
before income taxes (1,743,000) (3,757,000) (20,397,000) (12,040,000) (27,589,000) (7,177,000) (2,483,000)
. Fixed charges per above 114,222 169,146 475,713 742,195 804,081 1,968,967 2,170,401
. Less interest capitalized
during period 0 0 0 0 (428,000) (1,415,000) (1,763,000)
. Current period amortization
of interest capitalized
in prior periods 0 0 0 0 336,000 681,000 736,000
-------------------------------------------------------------------------------------------
(1,628,778) (3,587,854) (19,921,287) (11,297,805) (26,876,919) (5,942,033) (1,339,599)
Earnings are inadequate to
cover fixed charges. The
amount of the coverage
deficiency is: 1,743,000 3,757,000 20,397,000 12,040,000 27,681,000 7,911,000 3,510,000
</TABLE>
GRANGES
Granges is a mining company engaged in the exploration for and the
acquisition, development and operation of mineral properties in North America,
Central America and South America. Granges is incorporated under the laws of the
Province of British Columbia, Canada and its common shares are listed on The
Toronto Stock Exchange and the American Stock Exchange. Granges' principal
mining asset and source of cash flow and earnings is the Crofoot/Lewis mine in
Nevada, which produces gold and by-product silver. Granges also owns 41% of the
issued common shares of Zamora Gold Corp., a Canadian company engaged in mineral
exploration in Ecuador.
The authorized capital of Granges consists of 1,500,000,000 shares divided
into 750,000,000 Common shares ("Granges Common Shares") without par value and
750,000,000 Preferred shares ("Preferred Shares") without par value.
Each holder of record of Granges Common Shares is entitled to one vote for
each Granges Common Share held on all matters requiring a vote of shareholders,
including the election of directors. There are no preferences, conversion
rights, pre-emptive rights or subscription rights attached to the Granges Common
Shares. In the event of the liquidation, dissolution, or winding up of Granges,
the holders of Granges Common Shares are entitled to participate pro rata in the
assets of Granges available for distribution after satisfaction of the claims of
creditors. Shares ranking in priority to the Granges Common Shares, other than
the Preferred Shares, with respect to such matters as redemption, return of
capital, dividends or voting may be created by a special resolution passed by
not less than three quarters of the votes cast at a meeting of the shareholders
of Granges.
The Preferred Shares are issuable from time to time in one or more series,
and the directors of Granges may by resolution fix the number of Preferred
Shares in, and determine the designation of, each series and the special rights
and restrictions attached to each series subject to the special rights and the
restrictions attached to the Preferred Shares as a class as set forth in the
memorandum of Granges. The Preferred Shares as a class are entitled to
preference over the Granges Common Shares with respect to the payment of
dividends and the distribution of assets of Granges in the event of the
liquidation, dissolution or winding up of Granges or in the event of any other
distribution of assets of Granges among its shareholders for the purpose of
winding up its affairs, and the Preferred Shares of each series may be given
such other preference, not inconsistent therewith, over the Granges Common
Shares determined in the case of each series authorized to be issued by the
directors. To date, no
-7-
<PAGE>
series of the Preferred Shares have been created by the directors of Granges
and no Preferred Shares are issued or outstanding.
Investors should carefully examine the discussion of possible resale
restrictions under the caption "Granges Common Shares" beginning on page -18-.
RELATIONSHIP BETWEEN THE COMPANY AND GRANGES
In August of 1994 Atlas completed the purchase of 12,694,200 shares of
Granges Inc. On such date, such shares represented 37.2 percent of the issued
and outstanding shares of Granges. The purchase price was Cdn. $4.00 per share
(U.S.$2.80) or an aggregate purchase price of Cdn. $50.8 million (U.S.$35.8
million). As a result of the subsequent amalgamation on May 1, 1995 of Granges
and its 50.5 percent owned subsidiary, Hycroft Resources & Development
Corporation ("Hycroft"), Atlas' interest in the amalgamated entity was reduced
to its present level of 27.7 percent.
If all of the Debentures were to be exchanged for Granges Common Shares at
the Exchange Rate, Atlas' interest in Granges (assuming the total number of
outstanding shares of Granges Common Shares remained constant) would be reduced
to 18.4 percent.
Pursuant to an agreement dated May 13, 1994 as amended by a subsequent
agreement dated February 24, 1995, Atlas agreed that, following the amalgamation
of Granges with Hycroft, which Atlas agreed to support, (i) Atlas would vote its
common shares of Granges in favor of a slate of eleven directors who would
constitute the first Board of Granges from and after its amalgamation with
Hycroft, (ii) that the number of directors would be reduced to an agreed slate
of nine from and after October 1, 1995, (iii) that Atlas would vote its Granges
Common Shares in favor of such nine directors at the first post-amalgamation
annual general meeting of Granges in 1996, and (iv) Michael B. Richings, then
President of Atlas, would become President and Chief Executive Officer of
Granges, subject to approval of the Granges Board, on October 1, 1995. The
agreement also provides for Atlas and Granges to establish a special committee
of the Granges Board of Directors to review and advise the Board on joint
exploration ventures, the development of a South American program and the
exchange of technical information. The agreement entitles Atlas to
representation on the Board of Granges proportionate with Atlas' percentage
shareholding of Granges.
Mr. Richings became President and Chief Executive Officer of Granges
effective June 1, 1995, and in connection therewith resigned his position as
President of Atlas, although he remains on the board of directors of Atlas. Both
Mr. Richings and David J. Birkenshaw, Chairman and Chief Executive Officer of
Atlas, serve on both the Board of Atlas and the Board of Granges.
GRANGES REGISTRATION STATEMENT
Pursuant to an agreement dated November 10, 1995 (the "Granges Registration
Agreement"), Granges has agreed to register for resale under the Securities Act
the Granges Common Shares to be delivered upon exchange of the Debentures or (at
the option of Atlas) upon redemption or maturity (including acceleration) of the
Debentures (the "Underlying Shares"). The Granges Registration Agreement
provides that, as soon as reasonably practicable, Granges will file a
registration statement under the Securities Act registering the Underlying
Shares for resale and will also file all required state securities filings so
that the registration statement becomes effective on or before February 9, 1996.
If that deadline is not met, Granges is required to use its best efforts to do
so after February 9, 1996. The Granges Registration Agreement also provides that
Granges will maintain the registration statement for three years after the
latest date on which Underlying Shares are acquired by holders of Debentures
("Holders"), or such earlier time when all of the Underlying Shares have been
sold under the registration statement, provided that Granges may, upon notice,
temporarily suspend sales under the registration statement during any reasonable
period in which its board of directors determines, in good faith, that because
of material corporate changes, it would not be feasible to maintain a current
prospectus during such period. In such an event, Granges is obligated, at the
earliest possible time, to take all necessary steps to update the prospectus
disclosure and notify Holders that exercise of the exchange right under the
registration statement may resume. Granges has filed the registration statement
on Form S-3 (33-80511) and it is expected to go effective simultaneously with
this registration statement. The Granges Registration Agreement requires the
Company to pay Granges the reasonable expenses of Granges in connection with
preparing, filing and keeping effective the registration statement and otherwise
in connection with the offering.
In a separate indemnification agreement the Company has agreed to indemnify
and hold harmless Granges and its officers and directors and each other person,
if any, who controls Granges within the meaning of Section 15 of the 1933 Act
against any and all losses, claims, damages, liabilities and expenses (including
any reasonable investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or
any claim asserted), to which it or they may become subject under the Ontario or
British Columbia Securities Acts, the Securities Act, the United States
Securities Exchange Act of 1934, as amended, or any other federal, provincial or
state statutory law or regulation, or at common law or otherwise in Canada or
the United States insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any misrepresentation or untrue
statement or alleged untrue statement of a material fact contained in (a) any
private placement offering memorandum in connection with the Special Warrants
(as hereinafter defined), (b) any preliminary or final prospectus filed with the
securities commissions
-8-
<PAGE>
of Ontario or British Columbia in connection with the Offering or (c) any
registration statement filed with the Securities and Exchange Commission of the
United States and with any state securities or "blue sky" administrators in any
states thereof by the Company or Granges in connection with offers, sales and
resales of the Granges Shares under any such offering memorandum, prospectus or
registration statement, or the omission or alleged omission to state in any such
offering memorandum, prospectus or registration statement a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made by Granges or made therein in reliance upon
and in conformity with written information furnished by Granges to the Company
specifically for use in connection with the preparation thereof, or in reliance
upon and in conformity with (whether by incorporation by reference or otherwise)
information contained in Granges' filings under Canadian or United States
federal, provincial or state securities laws or regulations.
RECENT EVENTS
The Company currently anticipates capital requirements of $10,000,000 to
resume mining operations at the Gold Bar Property. With a current gold reserve
of 2.7 million tons at an average grade of 0.07 ounces of gold per ton,
containing approximately 187,000 ounces, average annual gold production is
estimated at 52,000 ounces over a three-year period. There can be no assurance
that such estimates can be obtained. See the discussion under the caption
"Reserves" on page -4-. On October 24, 1995, the Company signed a letter of
intent with Brown & Root Inc., a contract mining company, establishing terms for
a contract mining services agreement. In addition to contract mining services,
the letter of intent provides for a $5,000,000 guarantee of project financing in
return for a 20 percent nonoperating net profits interest in the project subject
to a minimum payment of $500,000 and a maximum payment of $1,500,000. Contingent
upon the successful conclusion of such negotiations and closing on the sale of
the Debentures, the Company anticipates resuming mining operations at Gold Bar
in early 1996. In addition to the project financing provided for in the letter
of intent, the Company intends to use approximately $5,000,000 of the proceeds
of the sale of the Special Warrants (as hereinafter defined) to fund the initial
capital, mining and startup costs incurred during the first six months of
operations. The Company anticipates the resumption of milling operations and the
recognition of mining revenue during the seventh month following the resumption
of mining operations. The Company intends to use the remaining proceeds from the
sale of the Special Warrants to repay its $2,000,000 loan from First Marathon
Inc. (see "Description of Debentures"), for exploration and development of its
other properties (approximately $1,200,000) and for working capital and
transaction fees (the remaining amount of approximately $1,800,000).
On December 19, 1995, the Company executed an exploration joint venture
agreement with Granges, effective as of September 29, 1995, with respect to
approximately thirty four square miles of the Company's Gold Bar claim block
located near Eureka, Nevada. The terms of the agreement will call for Granges to
spend U.S.$2.25 million on exploration and development within three years on the
approximately 1,190 claims included in the area of interest at the rate of
U.S.$625,000 in each of the first two years and U.S.$1 million in the third
year. Granges will be able to terminate the agreement prior to the end of any
year. In addition, to earn a 50% undivided interest in not more than fifteen
square miles within the area of interest, Granges must complete an independent
reserve report recommending development of a deposit containing a mineable
reserve in excess of 300,000 ounces of gold. If a reserve study has not been
completed within the first three years, Granges has an option to earn a 50%
interest in a reduced three square mile area by spending an additional U.S.$1
million in each of the next succeeding two years and completing a reserve study.
Atlas has retained a two percent net smelter royalty on all claims not currently
carrying third party royalties. Atlas has agreed to make available to the
venture, at the time of Granges' earn in, milling throughput rights of not less
than 50% of the capacity of Atlas' existing Gold Bar mill.
On November 29, 1995, the Company purchased approximately 12.2 million of
the outstanding common shares of Phoenix Financial Holdings Inc. ("Phoenix",
ticker symbol CDN:PGML.A,PGML.B), comprising 51% of the total issued shares of
Phoenix, for U.S.$1.3 million. With the purchase, the Company assumed board
control of Phoenix with David J. Birkenshaw, Chairman and Chief Executive
Officer of Atlas, appointed Chairman of Phoenix, Gerald E. Davis, Atlas'
President, being appointed Vice Chairman and Chief Executive Officer of Phoenix,
and for the remaining officers of Atlas to serve as officers of Phoenix. See
discussion under "Dependence on Key Personnel; Potential Conflicts of Interest"
on page 5. Mr. Birkenshaw had previously been Chairman of Phoenix from June 1991
until his resignation in March, 1995. On January 16, 1996 the Company and
Phoenix executed a letter agreement providing for the purchase by Phoenix of all
the issued and outstanding shares of Atlas Perlite, Inc. ("API"), a wholly owned
subsidiary of Atlas. The only asset of API is the Tucker Hill Perlite Project,
located in Lake County, Oregon. Tucker Hill is one of the largest domestic
deposits of perlite, an industrial mineral used in building products, filter
materials and as a soil additive. The letter agreement calls for the payment to
Atlas of U.S.$1,000,000 cash, the equivalent of U.S.$1,000,000 in Phoenix common
shares and the retention by Atlas of a royalty equivalent to 2 percent of the
gross proceeds generated from the sale of minerals from Tucker Hill.
Because the letter agreement is between related parties, its consummation
is subject to regulatory approval, the approval of a special committee of
independent board members of Phoenix, and approval of a majority of the minority
shareholders of Phoenix at an upcoming Annual and Extraordinary Meeting of the
shareholders. An independent technical report on Tucker Hill assets as well as
an independent valuation of the Tucker Hill Project and the Phoenix shares have
been initiated to verify the fairness of the transaction. Although the Company
expects that the agreement will be consummated, there can be no assurance that
all required approvals will be obtained. With the
-9-
<PAGE>
issuance of the additional Phoenix shares to Atlas, the Company's ownership
position in Phoenix would increase to approximately 68 percent.
On January 30, 1996, the Nuclear Regulatory Agency ("NRC") released the
draft Environmental Impact Statement ("EIS") and draft Technical Evaluation
Report ("TER") regarding the Company's reclamation proposal for its former
uranium mill site located near Moab, Utah. Atlas' proposed reclamation plan
consists of contouring the tailings pile to allow for the natural drainage of
precipitation and the addition of an earth and rock cover. The current EIS
process is being used by the NRC to evaluate the impact to the environment of
the proposed plan and of the alternative proposal. The TER is being used to
evaluate compliance with NRC's technical and safety criteria. In the draft EIS,
the NRC staff's preliminary conclusion is that Atlas' proposal to reclaim the
pile in place is acceptable and less costly than the alternative. TER has
identified 20 items which need to be addressed prior to final plan approval. The
requisite studies necessary to address the majority of these items, especially
those of a technical nature, have recently been completed and are supportive of
the proposed plan. The public comment period on both documents will be sixty
days from January 30, 1996. Prior to the completion of the comment period, there
can be no assurance that the NRC's preliminary conclusions set forth in the
draft text of such documents will not be modified in the final versions thereof.
USE OF PROCEEDS
All of the Debentures offered hereby are to be issued for no additional
consideration to holders of currently outstanding Special Warrants (as
hereinafter defined). The Debentures will be sold by the Selling
Debentureholders for their own accounts and no proceeds from the sale of the
Debentures will be received by the Company.
SELLING DEBENTUREHOLDERS
The Debentures offered hereby consist of U.S.$10,000,000 of Debentures to
be issued on exercise of special warrants originally offered to U.S. investors
under Regulation D of the Act and outside the U.S. under Regulation S of the
Act.
The following table lists the amount of Debentures beneficially owned by
each of the Selling Debentureholders, the amount of Debentures being offered by
each hereunder and the amount of Debentures to be owned by each after this
offering. None of the Selling Debentureholders has had any position, office or
other material relationship with the Company or any of its predecessors or
affiliates within the past three years.
y<TABLE>
<CAPTION>
Amount Amount Amount
Prior to Offering to be Offered After Offering
----------------- -------------- --------------
<S> <C> <C> <C>
James Capel Channel Islands Nominees Ltd. U.S.$100,000 U.S.$100,000 0
Robert Fleming & Co. Ltd. U.S.$400,000 U.S.$400,000 0
BPI Capital Management Corp. U.S.$1,500,000 U.S.$1,500,000 0
Gabelli Gold Fund Inc. U.S.$200,000 U.S.$200,000 0
Calabria Trust U.S.$10,000 U.S.$10,000 0
Rita L. Agnese, Living Trust U.S.$10,000 U.S.$10,000 0
Pietro Agnese Trust U.S.$30,000 U.S.$30,000 0
Pamela Hallisey U.S.$112,000 U.S.$112,000 0
Richard Hallisey U.S.$112,000 U.S.$112,000 0
Continental Casualty Company U.S.$2,000,000 U.S.$2,000,000 0
International Maongozi U.S.$500,000 U.S.$500,000 0
Dynamic Precious Metals Fund U.S.$1,000,000 U.S.$1,000,000 0
Altamira Management Ltd. U.S.$1,000,000 U.S.$1,000,000 0
Karglia Investments Inc. U.S.$100,000 U.S.$100,000 0
Silverton International Fund Limited U.S.$400,000 U.S.$400,000 0
CPP (Canada) LP U.S.$1,000,000 U.S.$1,000,000 0
AFM (Canada) LP U.S.$200,000 U.S.$200,000 0
North Pole Capital Investments Ltd. U.S.$400,000 U.S.$400,000 0
Indian Investment Limited U.S.$112,000 U.S.$112,000 0
795229 Ontario Inc. U.S.$244,200 U.S.$244,200 0
Euroswiss Securities Limited U.S.$379,800 U.S.$379,800 0
Hemery Nominees Limited U.S.$190,000 U.S.$190,000 0
</TABLE>
All of the aforesaid Debentures are included in the offering to which this
Prospectus relates. Each Selling Debentureholder will determine individually the
timing and amount of any sale or sales of Debentures covered by this prospectus
which are held by such Selling Debentureholder.
PLAN OF DISTRIBUTION
The Company will make application to list the Debentures on the Vancouver
Stock Exchange. The Company has been advised that the Debentures offered hereby
by the Selling Debentureholders will be sold from time to time by such Selling
Debentureholders, at the discretion of each Selling Debentureholder, through
customary brokerage channels, either through broker-dealers acting as agents or
brokers
-10-
<PAGE>
for the Selling Debentureholders or through broker-dealers acting as principals
who may then resell such Debentures on an exchange or otherwise, or through
privately negotiated sales, in each case at prevailing marketing or other
negotiated prices, or by a combination of such methods. There is no underwriting
agreement with respect to the Debentures offered by the Selling
Debentureholders. The Selling Debentureholders may pay commissions to designated
broker-dealers for assisting in the sale of the Debentures. Any such commissions
will be subject to negotiation. The Selling Debentureholders and any broker-
dealers acting as principals who may purchase shares from the Selling
Debentureholders and then resell such Debentures, on an exchange or otherwise,
may be deemed to be statutory "underwriters" within the meaning of the
Securities Act.
DESCRIPTION OF DEBENTURES
Pursuant to the provisions of a certain underwriting agreement dated as of
October 25, 1995 by and among the Company, Yorkton Securities Inc. and First
Marathon Securities Ltd. (the "Underwriting Agreement"), the Company, on
November 10, 1995, issued U.S.$10 million of special warrants (the "Special
Warrants") exercisable for a like principal amount of Debentures on or before
the earlier of: (i) the first business day which is twelve months after November
10, 1995, or (ii) the fifth business day following the date upon which the
Company files (or causes to be filed): (a) a preliminary prospectus and (final)
prospectus in the Provinces of Ontario and British Columbia qualifying the
distribution of the Debentures upon exercise of the Special Warrants and causes
receipts to be issued therefor; (b) a registration statement or registration
statements under the Securities Act registering for resale the Debentures and
the Granges Shares and makes them effective, and files (or causes to be filed)
all required filings with state securities or "blue sky" administrators in the
states where the holders of such securities propose to offer and sell the
Debentures or Granges Shares and makes them effective; and (c) a registration
statement under the 1934 Act registering the class of Debentures under Section
12(b) of the 1934 Act and makes it effective (the requirements of clauses (a)
through (c) being collectively the "Qualification and Registration
Requirements"). All Special Warrants not exercised prior to that date will be
deemed to be exercised on such date without further action or notice on the part
of the holders thereof.
Pursuant to the Underwriting Agreement, the proceeds of the sale of the
Special Warrants are being held in escrow until the exercise or deemed exercise
of the Special Warrants. Should the Qualification and Registration Requirements
not be met on or before February 9, 1996, holders of Special Warrants may, until
5 p.m. on February 19, 1996 (or, if that is not a business day, the next
succeeding business day), tender their Special Warrants to the trustee for the
Special Warrants for retraction and cancellation at a cash price of $105 per
$100 face amount of Special Warrant, such price to be paid from the escrowed
proceeds. The Company must provide additional funds for retraction and
cancellation payments, should the escrowed proceeds be insufficient. Each
Special Warrant not so tendered and outstanding thereafter will entitle the
holder to receive, upon exercise or deemed exercise, $110 principal amount of
Debentures, without the payment of any additional consideration.
The Company has entered into a loan agreement with First Marathon Inc. with
respect to obtaining a short-term secured loan of U.S.$2,000,000 at an interest
rate of 1.25% per month, such loan to be repayable by the earlier of February
15, 1996 or the fifth business day following the completion of the requirements
set forth in the first paragraph under "Listings and Registrations" below. In
consideration of entering into the loan agreement, the Company paid First
Marathon Inc. commitment and out of pocket fees totaling U.S.$120,000. The
Company has pledged as security approximately 2.4 million common shares of
Dakota Mining Corporation, approximately 4.2 million shares of Granges Inc. and
up to fifty percent of the Granges Shares currently held in escrow as security
for the Debentures should they be released from escrow before repayment of the
loan. The Company intends to repay the First Marathon Loan with a portion of the
net proceeds from the Debentures.
Pursuant to the Underwriting Agreement, the Debentures will be issued, upon
exercise or deemed exercise of the Special Warrants, under an indenture with
Chemical Bank as trustee (the "Indenture"). Capitalized terms used in this
DESCRIPTION OF DEBENTURES and not otherwise defined shall have the meaning
specified in the Indenture. With respect to each Debenture:
PRINCIPAL AND INTEREST
The Company will pay to the Holder, the principal sum stated on the
Debenture certificate in United States Dollars plus accrued and unpaid interest
in cash (or at the Company's option, evidenced by an Officers' Certificate (as
hereinafter defined) of the Company received by the Trustee not less than two
Business Days prior to October 25, 2000, the principal may be repaid, in whole
or in part, but in any case on a pro-rata basis to all holders of outstanding
Debentures under the Indenture, in shares of Granges Common Shares valued at
ninety five percent of the then per share market price of Granges Common Shares,
such market price to be calculated by the Company as the average closing trade
price of Granges Common Shares on the American Stock Exchange, or, if Granges
Common Shares are not then listed on the American Stock Exchange, the stock
exchange or over-the-counter market upon which the Granges Common Shares are
traded which, in aggregate, has the highest dollar trading volume, during the
twenty consecutive trading days ending on the last trading day prior to October
25, 2000, or, should Granges Common Shares not be traded on any stock exchange
or over-the-counter market, then ninety five percent of the per share fair value
of Granges Common Shares over such twenty-day period as determined in good
-11-
<PAGE>
faith by an investment banking firm retained in good faith by the Company and
which is a member of the New York Stock Exchange or the Toronto Stock Exchange
and as set forth in an Officers' Certificate of the Company received by the
Trustee promptly after October 25, 2000) on October 25, 2000 (or, in the case of
any payment, in whole or in part, in Granges Common Shares, such cash and stock
shall be paid on or within five Business Days of October 25, 2000, payment by
such time to be deemed made on October 25, 2000, or, in the case of acceleration
of maturity on the date delivery of Granges Common Shares is made) and to pay
interest in cash on the principal thereof, retroactively from October 25, 1995,
or from the most recent Interest Payment Date (as defined below) to which
interest has been paid or duly provided for, semi-annually in arrears on May 1
and November 1 in each year (an "Interest Payment Date"), commencing May 1,
1996, at the rate of 7% per annum, until October 25, 2000, and at the rate of 7%
per annum on any overdue principal and, to the extent permitted by law, on any
overdue interest. The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid to
the Person in whose name the Debenture (or one or more Predecessor Debentures)
is registered at the close of business on the Regular Record Date for such
interest, which shall be the April 15 or October 15 (whether or not a Business
Day) next preceding such Interest Payment Date. Except as otherwise provided in
the Indenture, any such interest not so punctually paid or duly provided for
will forthwith cease to be payable to the Holder in whose name the Debenture (or
one or more Predecessor Debentures) is registered on such Regular Record Date
and may either be paid to the Person in whose name the Debenture (or one or more
Predecessor Debentures) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Company, notice whereof shall be given to Holders not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. Payments of principal
shall be made upon the surrender of the Debenture at the option of the Holder at
the Corporate Trust Office of the Trustee, or at such other office or agency of
the Company as may be designated by it for such purpose, in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts by United States Dollar
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register maintained by the Trustee, or, upon written
application by the Holder to the Security Registrar (currently the Trustee)
setting forth wire instructions not later than fifteen days prior to the
relevant payment date, by transfer to a United States Dollar account (such
transfer to be made only to a Holder of an aggregate principal amount of
Debentures in excess of U.S.$500,000) maintained by the payee with a bank in The
City of New York (or in whole or in part by shares of Granges Common Shares as
applicable). Payment of interest on the Debenture may be made by United States
Dollar check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register, or, upon written application by
the Holder to the Security Registrar setting forth wire instructions not later
than the relevant Record Date, by transfer to a United States Dollar account
(such transfer to be made only to a Holder of an aggregate principal amount of
Debentures in excess of U.S.$500,000) maintained by the payee with a bank in The
City of New York.
In any case where the due date for the payment of the principal or interest
on the Debenture or the last day on which the Holder of the Debenture has a
right to exchange the Debenture shall not be a Business Day, then payment of
principal or interest or delivery for exchange of the Debenture need not be made
on or by such date at such place but may be made on or by the next succeeding
Business Day with the same force and effect as if made on the date for such
payment or the date fixed for redemption, or by such last day for exchange, and
no interest shall accrue for the period after such date.
The Debentures are issuable in denominations of U.S.$100 and integral
multiples of U.S.$100 in excess thereof. As provided in the Indenture and
subject to certain limitations therein set forth, Debentures are exchangeable
for a like aggregate principal amount of Debentures of any authorized
denominations as requested by the Holder surrendering the same upon surrender of
the Debenture or Debentures to be exchanged, (a) at the Corporate Trust Office
of the Trustee or at such other office or agency of the Company as may be
designated by it for such purpose or (b) at such other offices or agencies as
the Company may designate (each a "Transfer Agent"). The Transfer Agent will
then forward such surrendered Debentures (together with any payment surrendered
therewith) to the Trustee who in turn will issue the new Debentures.
EXCHANGE
Subject to and upon compliance with the provisions of the Indenture,
the Holder is entitled, upon provision, if applicable, of certification
regarding compliance with applicable securities laws, at his option evidenced by
written notice to the Trustee received not less than seven days prior to the
date of exercise (except that such seven-day notice shall be waived in case
such notice is provided within seven days of a Redemption Date), at any time
after November 10, 1995 and on or before the close of business on October 25,
2000, or in case the Debenture is called for redemp tion until and including,
but (unless the Company defaults in making the payment due upon redemption) not
after, the close of business on the Redemption Date, to exchange the Debenture
(or any portion of the principal amount thereof) into fully paid and
nonassessable shares of Granges Common Shares at an initial Exchange Rate of
42.50 shares of Granges Common Shares per U.S.$100 principal amount of
Debentures (or at the current adjusted Exchange Rate if an adjustment has been
made as provided in the Indenture) by surrender of the Debenture, duly endorsed
or assigned to the Company or in blank together with the exchange notice
thereon, duly executed, to the Company at the Corporate Trust Office of the
Trustee or at such other office or
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agency of the Company as may be designated by it for such purpose (each an
"Escrow Agent"). The Company shall thereafter deliver to the Holder (together
with the cash payment of any accrued and unpaid interest or any cash adjustment,
as provided in the Indenture) the fixed number of shares of Granges Common
Shares into which the Debenture is exchangeable and such delivery will be deemed
to satisfy the Company's obligation to pay the principal amount of the
Debenture. No fractions of shares or scrip representing fractions of shares will
be issued on exchange, redemption or maturity but instead of any fractional
interest (calculated to the nearest 1/100th of a share) the Company shall pay a
cash adjustment as provided in the Indenture.
In the event of redemption or exchange in part only, a new Debenture or
Debentures for the unredeemed or unexchanged portion will be issued in the name
of the Holder.
REDEMPTION
The Debentures are subject to redemption, in whole or in part, at the
option of the Company on or after October 25, 1998 so long as the Average Market
Price of Granges Common Shares is at least U.S.$2.94 per share, upon not more
than 60 nor less than 30 days' notice to the Holders prior to the Redemption
Date, at a Redemption Price equal to 100% of the principal amount plus accrued
and unpaid interest to the Redemption Date, such payment to be made in cash or,
at the Company's option, upon not less than 20 days notice to the Holders prior
to the Redemption Date, the principal payable on such redemption may be paid in
whole or in part, but in any case on a pro-rata basis to all Holders of
outstanding Debentures under the Indenture being redeemed, in Granges Common
Shares (such cash and stock to be delivered to Holders on or before five
Business Days after the Redemption Date, payment by such time to be deemed made
on the Redemption Date) valued at the Exchange Rate, initially set at 42.50
shares of Granges Common Shares per U.S.$100 principal amount of Debentures (but
subject to adjustment as provided in the Indenture), provided, however, that
interest installments on Debentures whose Stated Maturity is on or prior to such
Redemption Date will be payable in cash to the Holders of such Debentures, or
one or more Predecessor Debentures, of record at the close of business on the
relevant Record Dates, all as provided in the Indenture; and provided further
that payments of principal and accrued and unpaid interest, if any, upon
redemption or exchange of any Debenture shall be made only upon delivery to the
Company of such certifications as the Company may reasonably require to comply
with any applicable laws or regulations. The term "Average Market Price" means
the average closing trading price of Granges Common Shares on the American Stock
Exchange (or, if Granges Common Shares are not then listed on the American Stock
Exchange, the stock exchange or over-the-counter market upon which the Granges
Common Shares are traded which, in aggregate, has the highest dollar trading
volume) during a 20 consecutive trading day period ending on the last trading
day prior to the date upon which the Company gives notice, pursuant to Section
1104 of the Indenture, of its option to redeem. Should Granges Common Shares not
be traded on any stock exchange or over-the-counter market, then the Debentures
shall not be subject to redemption until so traded.
Notice of redemption will be given by mail to Holders at least once not
more than 60 nor less than 30 days prior to the Redemption Date as provided in
the Indenture.
SECURITY INTEREST
No sinking fund is provided for the Debentures. The Company's obligations
under the Debentures and the Indenture are secured, pursuant to the Indenture
and an escrow and pledge agreement (the "Escrow and Pledge Agreement") with
Chemical Bank as Trustee and with Chemical Bank as escrow agent (the "Escrow
Agent"), by a pledge of Granges Common Shares owned by the Company (the
"Exchange Property") in the amount of 1 Granges Common Share for each U.S.$1.18
of principal amount of Special Warrants issued pursuant to the Underwriting
Agreement, or a maximum of 8,474,576 shares. In the event of any reduction of
the principal amount of Debentures outstanding, as evidenced by the delivery to
the Trustee by the Company of Debentures for cancellation, the Exchange Property
held by the Escrow Agent shall be reduced in the same proportion as the
principal amount of the Debentures was so reduced, provided, that the Escrow
Agent shall retain a sufficient amount of Exchange Property to exchange all
Debentures then outstanding on the basis of the then applicable Exchange Rate
and the other terms and provisions of the Indenture, and the Company shall, upon
Company Request, be entitled to any excess Exchange Property created by such
reduction net of any Exchange Property delivered in connection with any
reduction caused by an exchange for Granges Common Shares.
If Atlas elects to redeem or repay the principal amount of the Debentures
in Granges Common Shares or if the anti-dilution provisions of the Indenture are
triggered, the number of Granges Common Shares delivered could be higher than
the number that would be delivered at the initial Exchange Rate. The number of
Granges Common Shares deliverable could exceed the 8,474,576 Granges Common
Shares held in escrow pursuant to the Indenture and the Escrow and Pledge
Agreement.
ANTI-DILUTION PROVISIONS
The Exchange Rate is subject to adjustment upon certain events affecting
the capital structure of Granges as provided in Section 1204 of the Indenture.
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In case Granges, at any time or from time to time after November 10, 1995,
shall declare, order, pay or make a dividend or other distribution (including,
without limitation, any distribution of other or additional stock or other
securities or property or options by way of dividend or spinoff,
reclassification, recapitalization, merger or consolidation in which Granges is
the continuing or resulting corporation, or similar corporate rearrangement) on
the Granges Common Shares, other than a regular periodic cash dividend declared
out of accumulated earnings of Granges or enter into any agreement for the
issuance of Granges Common Shares (or securities convertible into or
exchangeable for Granges Common Shares) at a cash price per share (or having a
conversion or exchange price per share) less than the Average Market Price (the
date upon which the Company announces its intention to make such issuance being
the relevant record date), then, and in each such case, the Exchange Rate in
effect immediately prior to the close of business on the record date fixed for
the determination of the persons entitled to receive such dividend or
distribution shall be adjusted, effective as of the close of business on such
record date, by multiplying such Exchange Rate by the quotient obtained by
dividing (all amounts being calculated to the nearest cent or 1/100 of a share,
as the case may be) the Average Market Price in effect on such record date, by
such Average Market Price less the amount of such dividend or distribution (as
determined in good faith by the Board of Directors of the Company) applicable to
one Granges Common Share.
As used in the preceding paragraph, the term "Average Market Price" means
the average closing trading price of Granges Common Shares on the American Stock
Exchange (or, if Granges Common Shares are not then listed on the American Stock
Exchange, the stock exchange or over-the-counter market upon which the Granges
Common Shares are traded which, in aggregate, has the highest dollar trading
volume) during a 20 consecutive trading day period ending one day prior to the
record date fixed for the determination of the persons entitled to receive such
dividend or distribution. Should Granges Common Shares not be traded on any
stock exchange or over-the-counter market, then "Average Market Price" shall
mean the fair value of Granges Common Shares over such twenty-day period as
determined in good faith by an investment banking firm retained in good faith by
the Company and which is a member of the New York Stock Exchange or the Toronto
Stock Exchange.
In case Granges, at any time or from time to time after November 10, 1995,
shall effect a subdivision of the outstanding Granges Common Shares into a
greater number of Granges Common Shares (by reclassification or except by
payment of a dividend in Granges Common Shares), then, and in each such case,
the Exchange Rate in effect immediately prior to such subdivision shall,
concurrently with the effectiveness of such subdivision, be proportionately
increased to reflect such transaction, as determined by the Board of Directors
of the Company.
In case the outstanding shares of Granges Common Shares shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of Granges Common Shares, the Exchange Rate in effect immediately prior
to such combination or consolidation shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately decreased to reflect
such transaction, as determined by the Board of Directors of the Company.
All determinations by the Board of Directors of the Company shall be made
in good faith with due regard to the interests of the Holders, and in accordance
with good financial practice.
In case Granges (i) shall consolidate with or merge into any other person
and shall not be the continuing or surviving corporation in such consolidation
or merger, or (ii) shall permit any other person to consolidate with or merge
into Granges and Granges shall be the continuing or surviving person but, in
connection with such consolidation or merger, the Granges Common Shares shall be
changed into or exchanged for stock or other securities of any other person or
cash or any other property, or (iii) shall transfer all or substantially all of
its properties or assets to any other person, or (iv) shall effect a capital
reorganization or reclassification of the Granges Common Shares, then, and in
each such case, the Company shall execute and deliver to the Trustee a
supplemental indenture, and to the Escrow Agent a supplement to the Escrow and
Pledge Agreement, providing that, upon the basis and the terms and in the manner
provided in this paragraph, each Holder, upon the exercise of any exchange
privilege at any time after the consummation of such consolidation, merger,
transfer, reorganization or reclassification, shall be entitled to receive at
the aggregate Exchange Rate in effect at the time of such consummation for all
Granges Common Shares issuable upon such exchange immediately prior to such
consummation, in lieu of the Granges Common Shares issuable upon such exchange
prior to such consummation, the stock and other securities, cash and property to
which such Holder would have been entitled upon such consummation if such Holder
had exercised its exchange privilege hereunder immediately prior thereto,
provided, however, that such Holder (i) is not a Person with which Granges
consolidated or into which Granges merged or which merged into Granges or to
which such conveyance, transfer or lease was made, as the case may be (a
"Constituent Person"), or an Affiliate of a Constituent Person and (ii) failed
to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, transfer or lease (provided that if the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, transfer or lease is not the same for each Granges Common Share held
immediately prior to such consolidation, merger, conveyance, transfer or lease
by other than a Constituent Person or any Affiliate thereof and in respect of
which such rights of election shall not have been exercised ("Non-Electing
Shares"), then for the purpose of this Section the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, transfer or lease by the holders of each Non-Electing Share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
Non-Electing Shares), and in each
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case subject to adjustments (subsequent to such corporate action) as nearly
equivalent as possible to the adjustments provided for herein.
Notice of any such supplemental indenture shall as soon as practicable be
filed with the Escrow Agent and mailed by or on behalf of the Company to the
Holders at their last addresses as they shall appear on the Security Register.
Neither the Trustee nor the Escrow Agent shall be under any responsibility
to determine the correctness of any provisions contained in any such
supplemental indenture relating either to the kind or amount of shares of stock
or securities or property or cash receivable by the Holders upon the exchange of
their Debentures after any such consolidation, merger, sale or transfer or to
any adjustment to be made with respect thereto.
No adjustment in the Exchange Rate shall be required unless such adjustment
would require an increase or decrease of at least one percent in the Exchange
Rate; provided, however, that any such adjustments which are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
In case any event shall occur as to which the provisions of Section 1204 of
the Indenture are not strictly applicable but the failure to make an adjustment
would not fairly protect the exchange rights represented by the Indenture and
the Debentures in accordance with the essential intent and principles of that
Section, then, in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized national standing (which
may be the regular independent auditors of the Company), which shall give their
opinion upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in Section 1204 of the Indenture, necessary to
preserve, without dilution, the exchange rights represented by the Indenture and
the Debentures. Upon receipt of such opinion, the Company will promptly mail a
copy thereof to the Holders and shall make the adjustments described therein.
In the case of any adjustment or readjustment in the Granges Common Shares
issuable upon the exchange of Debentures, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
the Indenture and prepare a report setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based. The Company will forthwith mail a copy of each such report to the Trustee
and to each Holder, and will, upon the written request at any time of such
Holder, furnish to each Holder a like report setting forth the Exchange Rate at
the time in effect and showing how it was calculated. The Company will also keep
copies of all such reports at its principal office and will cause the same to be
available for inspection at such office during normal business hours by each
Holder or any prospective purchaser of Debentures designated by a Holder.
Distributions giving rise to an adjustment to the Exchange Rate shall
become Exchange Property subject to the lien of the Indenture. In the event that
any increase in the Exchange Rate shall cause the aggregate amount of Granges
Common Shares deliverable upon exchange of all outstanding Debentures to exceed
the number of Granges Common Shares constituting Exchange Property, the amount
of any such excess shall be satisfied by apportioning to each Holder, in
proportion to the principal amount of outstanding Debentures held, such Exchange
Property as is not Granges Common Shares.
TAXES
Subject to Section 313(d) of the Indenture, any and all payments shall be
made subject to deduction for any present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto
including (i) United States withholding taxes applicable to the payment of
interest to a Holder (including United States withholding taxes applicable to
payments to a Holder claiming that it is entitled to an exemption or relief from
such withholding taxes if such Holder does not comply with the requirements of
Section 313(d) of the Indenture) and (ii) any tax or charge arising from the
transfer of ownership of Debentures or the registration of Debentures in a name
other than that of the prior Holder (all such expenses being referred to as
"Taxes"). Except as specifically provided in the Indenture, the Company shall
not be required to make any payment with respect to any tax, assessment or other
governmental charge imposed by any government or any political subdivision or
taxing authority thereof or therein.
Section 313(d) of the Indenture provides that the Company shall, until six
months after the applicable statute of limitations with respect to the relevant
Taxes expires, maintain a record of the identity of any Person who held a
beneficial interest in the Debentures. To the extent applicable to such Person,
and to the extent such Person wishes to claim the benefits of Section 313, such
Person shall provide to the Company its name and address and shall certify to
the Company that (i) it is entitled to receive payments of interest subject to
the portfolio interest exemption from United States withholding tax on interest
pursuant to Sections 871(h) and 881(c) of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) it is not a ten percent shareholder of the Company
within the meaning of Section 871(h)(3) of the Code, (iii) it is not a
controlled foreign corporation receiving interest from a related person for
purposes of Section 881(c)(3), (iv) it is not a United States person, citizen or
resident, and (v) it is not licensed to conduct a banking business or to accept
deposits from members of the public and, in fact, does not accept such deposits,
and such Person shall have undertaken to provide to the Company such tax forms,
including a
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Certificate of Foreign Status (Internal Revenue Service Form W-8), as may
reasonably be requested from time to time by the Company to ensure the
availability to such Person of such exemption from United States
withholding tax on interest pursuant to Sections 871(h) and 881(c) of the
Code. In the event that such a Person is unable to provide the
certifications set forth in the previous sentence, it shall provide to the
Company, if applicable, a properly completed U.S. Internal Revenue Service
Form 1001 and shall certify to the Company that it is entitled to receive
interest subject to a reduced U.S. withholding tax rate, or a properly
completed Form 4224 and shall certify to the Company that it is entitled to
receive interest without deduction of U.S. withholding taxes. Such
certification by each such Person on such Form 1001 shall be accompanied by
a copy of a Certificate of Foreign Status (Internal Revenue Service Form W-
8) duly executed by the Person named in such certification or Form. Such
Person shall also provide to the Company from time to time any other
documentation or information required by the Code and the regulations,
rulings and forms pertaining thereto or to any successor provision, or by
any other provision of law, with respect to any such applicable exemption
from United States withholding tax on interest or reduction in the rates
thereof with respect to payments to be made.
If any Taxes are assessed against the Company or the Trustee with
respect to payments previously made hereunder, the Holder of any Debenture
in respect of which such Taxes were assessed shall, and each such Holder,
by his acceptance of the Debenture, agrees to, promptly, upon demand, pay
such Taxes directly to the entity imposing such Taxes or, in case that the
Company or Trustee, as the case may be, shall have already made such
payment, shall repay the full amount of such Taxes so paid, and each such
Holder, by his acceptance of the Debentures further agrees that amounts not
so repaid shall be paid directly to the Company or Trustee, as the case may
be, and not to the Holder out of the amount of any interest or principal
payable to such Holder hereunder as such payments become due or out of the
amount of any Granges Common Shares otherwise deliverable to such Holder
upon exchange at the time such exchange takes place, whether or not such
payments or Granges Common Shares are deliverable in respect of the
Debenture in respect of which Taxes were paid, until such amount shall have
been fully repaid.
LISTINGS AND REGISTRATIONS
As provided in the Indenture, the Company shall, for the benefit
of Holders, as soon as practicable, file (or cause to be filed): (i) a
preliminary prospectus and final prospectus (the "Prospectus") in the
Canadian Provinces of Ontario and British Columbia qualifying the
distribution of the Debentures and (ii) a registration statement or
registration statements (the "1933 Registration Statement") under the
Securities Act of 1933, as amended, registering the Debentures and the
underlying shares of Granges Common Shares for resale, and shall also file
(or cause to be filed) all required filings with state securities or "blue
sky" administrators in the states where the Holders of the Debentures
propose to offer and sell the Debentures and the underlying Granges Common
Shares (the "Blue Sky Filings"). Subject to the following paragraph, the
Company shall use its best efforts to cause receipts to be issued by the
securities commissions in Ontario and British Columbia for the (final)
Prospectus and to cause the 1933 Registration Statement and Blue Sky
Filings to become effective not later than February 9, 1996 (the
"Qualification Deadline") and to cause the 1933 Registration Statement and
the Blue Sky Filings to remain effective and current until the date which
is three years after the latest date on which Granges Common Shares are
acquired pursuant to the Indenture by Holders; provided, however, that the
Company may, upon notice to the Holders temporarily suspend sales under the
1933 Registration Statement during any reasonable period in which its board
of directors determines, in good faith, that because of material corporate
changes, it would not be feasible to maintain a current prospectus during
such period, provided, further, that in such event, the Company will, at
the earliest possible time thereafter, take all necessary steps to update
the prospectus disclosure and notify the Holders that sales under the 1933
Registration Statement may resume. The Company shall further, as soon as
practicable, file (or cause to be filed) with the United States Securities
and Exchange Commission a registration statement (the "1934 Registration
Statement") under the Exchange Act, registering the Debentures under
Section 12(b) of the Exchange Act, and to cause the 1934 Registration
Statement to become effective not later than the Qualification Deadline and
to remain effective throughout the term of the Debentures.
The Prospectus, the 1933 Registration Statement, the Blue Sky
Filings and the 1934 Registration Statement shall collectively be referred
to hereinafter as the "Registration Filings". In the event that the
Registration Filings are not made effective (or, in the case of the (final)
Prospectus, the securities commissions in Ontario and British Columbia have
not issued receipts therefor) on or before the Qualification Deadline, the
Company shall, unless all Special Warrants are retracted and cancelled
pursuant to the Underwriting Agreement, be obligated to complete the
Registration Filings and to make such filings effective as soon as
practicable after the Qualification Deadline and cause the 1933
Registration Statement, the Blue Sky Filings and the 1934 Registration
Statement to remain effective for the period set forth herein.
The Company will cause the Debentures to be listed, posted and
called for trading on the Vancouver Stock Exchange (and will use its best
efforts to have the Debentures listed, posted and called for trading on the
New York Stock Exchange or such other U.S. securities exchange as is
acceptable to the Underwriters) not later than the earlier of either (i)
the fifth Business Day following the date upon which the requirements of
the paragraph above have been fulfilled or (ii) the first Business Day
which is twelve months after November 10, 1995. The Company will maintain
such listings throughout the term of the Debentures.
TRANSFER
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As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of Debentures is registrable on the
Security Register upon surrender of a Debenture for registration of
transfer (a) at the Corporate Trust Office of the Trustee or at such other
office or agency of the Company as may be designated by it for such
purpose, or (b) subject to any laws or regulations applicable thereto and
to the right of the Company to terminate the appointment of any Transfer
Agent, at the offices of the Transfer Agents described in the Indenture or
at such other offices or agencies as the Company may designate, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by,
the Holder thereof or its attorney duly authorized in writing, and
thereupon one or more new Debentures, of authorized denominations and for
the same aggregate principal amount, will be issued to the designated
transferee or transferees. No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to recover any tax or other governmental charge payable
in connection therewith.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name a Debenture is registered, as
the owner thereof for all purposes, whether or not the Debenture is
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
EVENTS OF DEFAULT
An "Event of Default" under the Indenture occurs by either: (1)
default in the payment of interest when due and payable, and continuance of
such default for a period of 30 days; or (2) default in the payment of the
principal of any Debenture within the 5-day period of time after maturity
in the case of payments in whole or in part in Granges Common Shares; or
(3) default in the performance or observance, or breach, of any term,
covenant, warranty or agreement of the Company in the Debentures or the
Indenture, and continuance of such default or breach for a period of 60
days after written notice of such failure, requiring the Company to remedy
the same and stating that such notice is a "Notice of Default", shall have
been given to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in aggregate principal amount of the
outstanding Debentures; or (4) (a) failure by the Company to pay when due
an aggregate amount in excess of U.S.$500,000 or the equivalent thereof in
any other currency in respect of any outstanding indebtedness and the
continuance of such failure beyond any applicable grace period provided for
in the terms of such indebtedness, or (b) default by the Company with
respect to outstanding indebtedness, which default results in the
acceleration of indebtedness in an aggregate amount in excess of
U.S.$500,000 or the equivalent thereof in any other currency, without, in
the case of (a) or (b), such indebtedness having been discharged or such
payment default or acceleration, as the case may be, having been cured,
waived, rescinded or annulled within a period of 10 days after written
notice thereof by or on behalf of the holders of such indebtedness;
provided, however, that if, prior to the entry of judgment in favor of any
trustee with respect to any indebtedness or in favor of any holder of any
indebtedness or other representative of the holders thereof, such failure
or default under such indenture or instrument shall be remedied or cured by
the Company, or waived by or on behalf of the holders of such indebtedness,
and such acceleration (if applicable) shall be rescinded, then the Event of
Default shall be deemed likewise to have been remedied, cured or waived; or
(5) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of the Company under Federal bankruptcy law or any other applicable
Federal or State law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or
of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days; or (6) the
commencement by the Company of a voluntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a bankrupt
or insolvent, or the consent by it to the entry of a decree or order for
relief in respect of the Company in an involuntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under Federal bankruptcy law or
any other applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment or taking possession of a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company in
furtherance of any such action.
Upon qualification of the Indenture under the Trust Indenture Act
of 1939, the Company will be required to certify at least annually to the
Trustee as to compliance with all conditions and covenants under the
indenture. Additionally, upon any application or request by the Company to
the Trustee or the Principal Paying Agent to take any action under any
provision of the Indenture, the Company must furnish to the Trustee or the
Principal Paying Agent, as the case may be, a certificate signed by certain
officers of the Company (an "Officers' Certificate") stating that all
conditions precedent, if any, provided for in the Indenture relating to the
proposed action have been complied with and an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any,
have been complied with. The Officers' Certificate must include: (1) a
statement that each individual signing such certificate or opinion has read
such covenant or
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condition and the definitions herein relating thereto; (2) a brief
statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or
opinion are based; and (3) a statement that, in the opinion of such
individual, he has made such examination or investigation as is necessary
to enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with.
MODIFICATIONS
The rights of Holders are subject to modification by supplemental
amendments to the Indenture. Supplemental amendments may be made with or
without the consent of Holders. Modifications may be made by the Company
upon consent of the Trustee without the consent of Holders: (1) to evidence
the succession of another person or entity to the Company's obligations
under the Debentures or the Indenture; (2) to add to the covenants of the
Company for the benefit of Holders; (3) to effectuate certain anti-dilution
provisions regarding the Exchange Rate; (4) to cure any ambiguity or
contradiction in the Debentures or the Indenture; or (5) to comply with
regulatory requirements. Modifications made by the Holders may be made
upon the written consent of a majority in principal amount of outstanding
Debentures or by a vote of 2/3 at a meeting of Holders. Notwithstanding
the foregoing, certain modifications may only be made with the consent of
the Holder of each Debenture so affected. These modifications include
changes to the maturity or interest payment dates, changes in the interest
rate of the Debentures and any waiver of a default in the payment of
interest or principal.
GOVERNING LAW
The Indenture and the Debentures shall be governed by and
construed in accordance with the laws of the State of New York, United
States of America.
GRANGES COMMON SHARES
The Granges Common Shares have no par value. Each holder of
record of Granges Common Shares is entitled to one vote for each Granges
Common Share held on all matters requiring a vote of shareholders,
including the election of directors. There are no preferences, conversion
rights, pre-emptive rights or subscription rights attached to the Granges
Common Shares. In the event of the liquidation, dissolution, or winding up
of Granges, the holders of Granges Common Shares are entitled to
participate pro rata in the assets of Granges available for distribution
after satisfaction of the claims of creditors. Shares ranking in priority
to the Granges Common Shares, other than the Preferred Shares, with respect
to such matters as redemption, return of capital, dividends or voting may
be created by a special resolution passed by not less than three quarters
of the votes cast at a meeting of the shareholders of Granges.
Unless and until any Granges Common Shares (i) shall become
freely transferable as a result of: (1) having been acquired in exchange
for Debentures pursuant to an effective registration statement of Granges,
covering the resale of Granges Common Shares, under the 1933 Act, or (2)
having been acquired in exchange for Debentures by a non-U.S. Person (not
acting on behalf of a U.S. Person) in accordance with the provisions of
Regulation S, provided, that the person acquiring such Granges Common
Shares in exchange for Debentures delivers a certificate to the Trustee,
certifying that the Debentures were not exchanged by or on behalf of a U.S.
Person and certifying that it is not exercising its right to acquire
Granges Common Shares in exchange for Debentures within the United States,
and provided, further, that the address to which the Granges Common Shares
is delivered upon exchange of the Debentures is not within the United
States; or (ii) the Trustee shall have received from the Holder an opinion
of counsel having substantial experience under the 1933 Act and otherwise
reasonably satisfactory to the Company that the legends on the Granges
Common Shares may be removed, such certificate representing Granges Common
Shares delivered pursuant to the Indenture shall bear the following
restrictive legend:
THE SECURITIES COVERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE 1933
ACT UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE OR REGISTRATION
IS OTHERWISE NOT REQUIRED PURSUANT TO REGULATION S, AS EVIDENCED BY AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY.
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TRUSTEE
Chemical Bank (the "Trustee"), a New York banking corporation
with no material relationship with the Company or its affiliates, serves as
trustee under the Indenture.
The Holders of a majority in principal amount of the outstanding
Debentures have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that such
direction is not in conflict with any rule of law or with the Indenture and
could not involve the Trustee in personal liability. The Trustee may take
any other action it deems proper not inconsistent with such direction or
the Indenture. The Trustee is nevertheless under no obligation to exercise
any of the rights or powers vested in it by the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by the Trustee in compliance with
such request or direction, nor is the Trustee required to expend or risk
its own funds or other wise incur any financial liability in the
performance of any of its duties, or in the exercise of any of its rights
or powers, if it has reasonable grounds to believe that repayment or
adequate indemnity against such risk or liability is not reasonably assured
to it.
EXPERTS
The consolidated financial statements of Atlas Corporation
appearing in Atlas Corporation's Annual Report (Form 10-K) for the year
ended June 30, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements
are incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
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