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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the Year Ended December 31, 1996.
COMMISSION FILE NO. 1-2714
ATLAS CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-5503312
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
370 Seventeenth Street, Suite 3050, Denver, CO 80202 303-629-2440
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(Address of principal executive offices) (Zip Code) (Registrant's telephone
number)
(including area code)
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $1 per share New York Stock Exchange
Option Warrants to Purchase Common Stock American Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the 19,287,431 shares of Common Stock held by non-
affiliates of the Registrant as of April 9, 1997 was $12,054,644.
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As of April 9, 1997 Registrant had outstanding 24,219,963 shares of Common
Stock, $1.00 Par Value, its only class of voting stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
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PART I
Item 1. BUSINESS
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GENERAL
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Atlas Corporation ("Atlas" or "the Company") is a New York Stock Exchange listed
mining company (AZ:NYSE) which is principally engaged in the exploration,
development and exploitation of mineral resource properties. Atlas was
incorporated under the laws of the State of Delaware on October 31, 1936. The
principal office of Atlas is located at Republic Plaza, 370 Seventeenth Street,
Suite 3050, Denver, Colorado, 80202 USA. Atlas has five subsidiaries: (i) Atlas
Precious Metals Inc. ("APMI"), incorporated under the laws of the State of
Nevada, which holds the Grassy Mountain property and the exploration portion of
the Gold Bar claim block, (ii) Atlas Gold Mining Inc. ("AGMI"), incorporated
under the laws of the State of Nevada, which holds the mineral reserves and
other assets and infrastructure at the Gold Bar mine, (iii) 50% ownership in
Arisur Inc., ("Arisur"), a Grand Cayman corporation, which owns and operates
mines in Bolivia, South America through a Bolivian branch (iv) Suramco Metals,
Inc. ("Suramco"), a Nevada Corporation which holds the remaining 50% interest in
Arisur amd (v) Cornerstone Industrial Minerals Corporation ("Cornerstone")
(formerly known as Phoenix Financial Holdings,Inc.). Atlas intends to wind up
the businesses of APMI, AGMI, and Suramco, as soon as practicable, as a means to
cut its General and Administrative costs. In December 1996 Atlas completed the
sale of its wholly-owned subsidiary, Atlas Perlite, Inc., to Cornerstone. See
"Item 1 Business - Tucker Hill". As a result of the sale, Atlas will ultimately
hold a 65% interest in Cornerstone. In addition the Company holds a 9.6%
interest in Vista Gold Corp. (successor of Granges Inc. and Da Capo Resources
Ltd. amalgamation in October 1996 "Vista") See "Item. 1 Business - Investments".
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ARISUR INC.
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On October 8, 1996 the Company acquired Arisur which owns and operates the
Andacaba and Don Francisco underground lead, zinc and silver mines located in
southern Bolivia. The Company acquired a 50% interest in Arisur from Arimetco
International Inc., a Canadian corporation, for $3 million in cash and purchased
100% of Suramco, which owns the remaining 50% interest in Arisur, for four
million shares of the Company's common stock. In addition, in November 1996
Arisur acquired the Koyamayu mine and the Comali mill.
EMPLOYEES AND OFFICES
Arisur's corporate offices are located in La Paz and staffed by seven persons.
Operations are conducted out of Arisur's office in Potosi which is staffed by
eleven persons. Additionally, there are 160 miners and 38 mill workers who are
directly involved in operations at Andacaba, Don Francisco and Koyamayu.
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ANDACABA MINE
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LOCATION
The property is located in the south central altiplano region of Bolivia near
the city of Potosi, a historic mining community, at an altitude of approximately
4,500 meters (14,800 feet). The Andacaba property is accessible by traveling
south/southeast 37 kilometers (23 miles) via an all weather gravel road from the
city of Potosi.
PROPERTY
The Andacaba mine and facilities are situated on 19 concessions controlled 100%
by Arisur comprising 3,000 hectares (7,400 acres).
OPERATIONS
The Andacaba lead, zinc and silver mine has been in operation since the early
1900s. The mining operations take place year round on the basis of 28 days per
month for a total of 330 work days per year. The two operating mills on site
are the Don Roy mill which processes Andacaba ore and the Don Max mill which
processes other ores and performs custom milling. The concentrates are shipped
by truck to Potosi and then by rail to warehouses the Chilean seaports
(Antofagasta for the zinc-silver concentrates and Arica for the lead-silver
concentrates), prior to shipment to smelters in various markets.
CONDITION
Service facilities at the mine site are basic and require upgrading as part of
the mine and mill expansion underway. Don Roy mill capacity is being upgraded
and expanded to 600 tonnes per day (662 short tons). Surplus equipment from the
Don Roy mill will be used to upgrade the Don Max mill to a rate of 200 tonnes
(221 short tons) per day. Power is currently supplied by a 1,500 kilowatt
substation. An electrification program is underway to upgrade power for the
mine and mill expansion. Water for the mills is supplied by mine drainage.
Ample water and power for the current mill size are available at the site. The
city of Potosi provides a source of supplies and labor.
GEOLOGY/MINERALOGY
The mineralized veins at Andacaba are enclosed in tertiary porphyritic quartz
latite or rhyodacite volcanic rocks. The volcanics are part of an igneous
complex that includes an elliptical-shaped pluton of biotite granodiorite that
crops out south of the mine area. The pluton is believed to be 40 kilometers
(25 miles) long and 14 kilometers (9 miles) wide. Volcanic breccias can be
observed in the mine area. Clasts in the breccias consist of sediments and
volcanics that range from one to 15 centimeters (0.4 to 6 inches) across. The
matrix is fine, pulverized material cemented by quartz. Paleozoic sediments
outcrop west of
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the mine and lead, zinc and silver veins are known to occur in the sediments
beyond the property boundary. The thickness of the volcanic package is not known
and at deeper levels in the mine the host volcanics may change to either
Paleozoic sediments or possibly granodiorite. On the surface the veins are
oxidized to a depth of about 20 meters (66 feet). Minerals in the oxidized zone
include limonite, hematite, goethite, quartz and clay. In the sulfide zone the
primary minerals are marmatite, galena, jamesonite, boulangerite, sphalerite,
tetrahedrite, stephanite, quartz, pyrite, pyrrhotite, chalcopyrite,
arsenopyrite, siderite, and others. Wall rocks show very little alteration.
There is possibly some silicification of the rhyodacite.
RESERVES
The following table delineates reserves as prepared by MINTEC, Mineria Tecnica
Consultores Asociados:
PROVEN AND PROBABLE RESERVES
SEPTEMBER 1996
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TONNES %ZINC %LEAD SILVER GRAMS/TONNE
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547,000 8.26 2.36 284
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SHORT TONS SILVER OUNCES/
SHORT TON
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603,000 8.26 2.36 8.3
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Prospective resources of 7 million tonnes (7.7 million short tons) are
inferred based on geological projections.
DON FRANCISCO MINE
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LOCATION
The property is accessible via an all weather road 77 kilometers (48 miles) in a
southerly direction from Potosi or 64 kilometers (40 miles) from the Andacaba
mine. The Don Francisco mine is at an altitude of 3,000 meters (9,800 feet).
PROPERTY
Arisur owns four concessions covering 350 hectares (approximately 865 acres).
OPERATIONS
The Don Francisco mine, which is presently undergoing an underground development
program, is producing approximately 80 tonnes (88 short tons) per day.
Production is scheduled to increase to 100 tonnes (110 short tons) per day in
1997 and 200 tonnes (221 short tons) per day in 1998. There is no mill onsite
and ore is trucked to Andacaba for processing at the Don Max mill.
Alternatively, the ore may be trucked to the recently acquired Comali
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mill, as described below, located near the town of Toropalca to the south. The
Company intends to use the Comali mill as a regional mill and may utilize it to
toll ore for third parties.
CONDITIONS
Sufficient water is available to conduct the mining operations. Electrical
power is presently supplied by generator but the construction of a power line to
the project is planned for late 1997 or early 1998. A camp is situated on the
property for the mine workers and a radio communication system is in place
between the Don Francisco and the Andacaba mines.
GEOLOGY
The structural setting is similar to Andacaba in that there is one main
structure - the Veta Principal south of the river which flows across the
property, and the Veta Cumbre north of the river with secondary splits off the
footwall of the main vein. Host rocks are Ordovician calcareous shales,
siltstones and sandstones. The sequence has been folded into a series of
synclines and anticlines. The Veta Principal occupies both flanks and the axial
portion (for a short distance) of a major anticline. Igneous dikes are also
present in the stratigraphic section.
RESERVES
The following table delineates reserves as prepared by MINTEC, Mineria Tecnica
Consultores Asociados:
PROVEN AND PROBABLE RESERVES
SEPTEMBER 1996
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TONNES %ZINC %LEAD SILVER GRAMS/TONNE
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33,000* 14.11 0.68 44
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SHORT TONS SILVER OUNCES/SHORT TON
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36,400 14.11 0.68 1.3
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*Geologic projection along the principal vein structure infers a prospective
resource of 240,000 tonnes (265,000 short tons).
KOYAMAYU MINE
In January 1997 the Company acquired the Koyamayu lead, zinc and silver
property, located in southern Bolivia, for $100,000. The Company is currently
developing a mine plan to confirm mineralization and expects to place the
property into production during the second half of 1997. The ore mined at
Koyamayu will be processed at the Andacaba mine or alternatively at the Comali
mill.
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COMALI MILL
The Comali mill was acquired in late 1996 by Arisur for $140,000. Its current
operational capacity is 120 tonnes (130 short tons) per day. Its circuits
recover lead, zinc and silver. The Comali mill is situated near the community
of Toropalca, 30 kilometers (19 miles) south of Don Francisco.
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In Bolivia, the Company's near-term focus will be on expansion of existing
operations, the evaluation of additional lead, zinc and silver mining
opportunities and evaluation of precious metal opportunities.
CORNERSTONE INDUSTRIAL MINERALS CORPORATION
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On November 30, 1995, the Company purchased from a group of individual investors
12.2 million shares of Phoenix Financial Holdings Inc., representing
approximately 51% of total shares outstanding for an aggregate purchase price of
C$1,781,200. On September 3, 1996 the shareholders approved a name change from
Phoenix Financial Holdings Inc. to Cornerstone Industrial Minerals Corporation
("Cornerstone"). On December 13, 1996 Cornerstone executed a Stock Purchase
Agreement providing for the purchase by Cornerstone of all of the issued and
outstanding shares of Atlas Perlite, Inc., owner of the Tucker Hill perlite
Project (Tucker Hill) and a wholly-owned subsidiary of Atlas. Subsequently,
Cornerstone changed the name of Atlas Perlite, Inc. to Cornerstone Industrial
Minerals Corporation, USA. The Stock Purchase Agreement calls for payment to
Atlas of $1 million in cash, the issuance of 9,647,986 shares of common stock of
Cornerstone, valued at $1 million, the reimbursement of Atlas's Tucker Hill
development costs of $2,945,282, and the retention by Atlas of a 2% gross
proceeds royalty generated from the sale of perlite from Tucker Hill. The
purchase price is payable in three stages as follows: $125,000 and 1,205,998
shares due at closing, $500,000 and 4,823,993 shares of common stock upon
obtaining all operating permits and $375,000 and 3,077,994 shares of common
stock related to Atlas assisting the Company in meeting three other milestones
which include obtaining base load perlite contracts for a specified amount of
revenues per year, obtaining permanent project financing and achieving
commercial production. The additional shares will result in Atlas's equity
position in Cornerstone increasing from approximately 51% to 65%. The
transaction was approved by a committtee of independent board members of
Cornerstone and also was approved by a majority of the minority shareholders of
Cornerstone at its annual general meeting held on September 3, 1996.
TUCKER HILL OPERATIONS
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Cornerstone will produce and process perlite for sale to end users. Operations
are directed through Cornerstone's Lakeview, Oregon office which will be staffed
by fifteen persons. Cornerstone's Corporate offices are located in Denver,
Colorado.
Perlite is a naturally-occurring volcanic glass which is environmentally
friendly and chemically inert. Expanded, perlite's heat resistance,
extraordinary insulating characteristics and low bulk
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density suit it ideally for wide application in construction, horticulture and
industry. Other uses for expanded perlite include filter media for
pharmaceuticals, food products and chemicals. Natural perlite, when subjected to
heat, physically expands to up to twenty times its original volume. This
expansion is due to the change in the state of water (2% to 5%) entrapped within
the glass structure. As this interstitial water turns to vapor, the internal
pressures increase and the perlite expands into larger, less dense particles.
Cornerstone mines, crushes, sizes, and delivers finished perlite meeting various
quality specifications to end users (expansion plants).
In 1997 demand for finished perlite in the United States is expected to exceed
700,000 tons. Demand growth averaged 6% per year from 1985 to 1994 and was 9% in
1995. Cornerstone expects to take advantage of its regional location for sales,
including sales to customers in Canada and Pacific rim countries.
Location
The Tucker Hill project is comprised of a quarry, a processing facility and a
transloading facility, all located in south-central Oregon. The quarry is
accessed by traveling 35 miles northwest of the community of Lakeview, in Lake
County, Oregon on US Highway 395 and State Highway 31, and then three and a half
miles south on an improved haulroad. The processing facility is located in an
industrial park in Lakeview. The transloading facility, comprised of silos for
product storage and load-out access to a rail spur, is located 90 miles west of
Lakeview in Henley, Oregon.
Property
The Tucker Hill property encompasses approximately 900 acres and is comprised of
45 unpatented lode mining claims. The millsite property, comprised of 25 acres
of fee land, was purchased by Cornerstone from Lake County. Finally, the
transloading facility located in Henley is situated upon property held under a
long term lease from the Burlington Northern Santa Fe Railway, owner and
operator of the rail spur adjacent to this facility.
Geology
Tucker Hill is a low hill with about 500 feet of relief within the Chewaucan
Valley. The perlite deposit occurs in the northeastern portion of the Devils
Garden lava field. The lava field is five to ten million years old and is thus
classified as late Miocene to early Pliocene and is composed largely of olivine
basalt flows, minor andesite flows, and related rhyolitic domes and pyroclastic
rocks. Tucker Hill is one of the late miocene composite rhyolitic lava domes
within the field. The Tucker Hill rhyolitic dome complex is a package of
cooling units that originated from a single eruptive center along a linear vent
system. Two major cooling units are recognized: the outer chill margin and
inner rhyolitic core. The chill margin consists of an outer glass envelope and
contains various sub-units of perlite. Erosion of the Tucker Hill lava dome has
removed a significant portion of the outer glass envelope, exposing the
rhyolitic core. Extensive areas of perlite remain.
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History
A small portion of the Tucker Hill perlite deposit was discovered by local
Oregon prospectors in 1949. Bulk samples taken by these prospectors were
collected and crudely expanded by the US Bureau of Mines in Tucson, Arizona.
Expansion results were favorable and the property underwent a brief period of
surface mining.
In 1980, Houston International Minerals Corporation, later acquired by Tenneco
Inc. acquired the property through location of mining claims and confirmed the
presence of a significant resource of commercial grade perlite. In July 1987
Atlas acquired an option to purchase this property from Tenneco Inc., which was
exercised in 1988.
Extensive evaluation work was carried out by Tenneco Inc. consisting of
geological mapping, rock chip sampling and analysis, diamond core drilling and
bulk sampling. Atlas continued this effort and, to date, 42 holes have been
drilled and numerous surface bulk samples collected. Testing of the perlite
included expansion tests, measurements of expanded and compacted density,
sinkers (percentage of non-expandables) and brightness. Full scale testing of
bulk samples was performed at the facilities of two end users. The results of
this test work indicated that Tucker Hill perlite exceeded established standards
for expansion and yield.
In 1995, Atlas made the decision to develop Tucker Hill and has subsequently
acquired the necessary operating permits. Construction of the processing
facility will be completed in 1997, making the facility operational on a
commercial basis. A significant contract for over 40,000 tons per year has been
executed with Armstrong World Industries, Inc. ("Armstrong") and Cornerstone
continues its efforts to contract with other purchasers for finished perlite.
Reserves
Proven and probable reserves at Tucker Hill of 4.9 million tons of perlite were,
reported by Micon International Limited in its "Review of The Tucker Hill
Perlite Deposit" completed on April 26, 1996. The report was prepared at the
direction of a special independent committee of the Cornerstone Board of
Directors, in support of Cornerstone's purchase of Atlas Perlite, Inc.
The 4.9 million tons is based on 42 core and reverse circulation drill holes and
13 bulk samples. Samples were analyzed for chemical, physical, an optical
characteristics as well as expandability performance. Test results demonstrate
that the perlite is a universal variety suitable for a wide array of expanded
products.
The reserves are restricted to an area delimited by the ten year mining plan as
permitted with the Bureau of Land Management. Geologic resources have been
estimated in excess of 50 million tons.
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Operations
Mining
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Cornerstone conducts mining utilizing conventional quarrying methods. Topsoil
and organic matter are stripped from the surface with a dozer to expose the
perlite. This material is stockpiled for later use as growth media during
reclamation. The perlite is then ripped and cross-ripped with the dozer to a
depth of about two feet. This procedure provides the quality control necessary
for production of perlite containing minimal contaminants such as obsidian or
clay.
The perlite loosened by ripping is gathered into a pile with the dozer and
loaded into trucks with a loader. A contract trucking company then hauls the
perlite to the processing facility in Lakeview where it is dumped onto the run-
of-mine stockpile. Internal waste, which is minimal (approximately five
percent), will be hauled to a gravel pit at the base of Tucker Hill for
disposal.
Processing
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Finished perlite is produced from the processing facility, a crushing, drying
and sizing operation, in four product streams. Run of mine perlite is reclaimed
from the mill stockpile with a loader and is then dumped into a pocket feeding a
primary jaw crusher. This jaw crusher reduces the size of the perlite to about
two inches. This crushed perlite reports to a crushed ore stockpile for
delivery to a secondary impact crusher where it is further reduced in size to
1/2 inch and is then dried in a rotary drier. The purpose of drying is to
deliver a product to end users which has less than 0.5 percent free moisture, a
requirement for most end users.
After drying, the product reports to a primary screen where horticultural grade
perlite is separated. Undersize perlite which passes the primary screen reports
to the secondary screens, with oversize being crushed by a tertiary impact
crusher, in closed circuit with the secondary screens. Filler/insulation grade
perlite is obtained from the secondary screen undersize. An extensive dust
collection system recovers fines from all transfer points downstream from the
dryer. These fines are classified by cyclones thereby creating two additional
finished fine perlite grades.
Finally, the sized perlite is stored at this facility in silos with the finished
product being delivered to customers via rail or by truck. The Lakeview plant
site is situated on a rail line which is serviced by the Union Pacific Railroad.
Transloading Facility
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In order to ensure rail access and to gain a competitive advantage for rail
transportation rates, Cornerstone has constructed a transloading facility at
Henley which is serviced by the Burlington Northern Santa Fe Railway. Finished
perlite from the Lakeview plant will be hauled by a trucking contractor to
Henley and off-loaded into silos for transloading into rail cars.
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Environmental Permitting
Cornerstone acquired the key regulatory permits for its quarry operations
through the Bureau of Land Management and Oregon Department of Geology and
Mineral Industries. Operation of the Lakeview plant is permitted under a
conditional use permit granted by Lake County and a permit granted from the
Oregon Department of Environmental Quality.
Project Status
Initial mining operations commenced at the quarry in December 1996. As detailed
above, Cornerstone mines the quarry and a contractor is used for hauling perlite
to the Lakeview plant. The same contractor will haul finished perlite from the
Lakeview plant to the transloading facility at Henley. Testing of the processing
facility began in February 1997 at the Lakeview plant which is operated by
Cornerstone. Initial shipments of finished perlite have been made to Armstrong
which has reported that the perlite is satisfactory for its operations. The
facility is currently undergoing modifications identified in the testing phase.
Contract deliveries to Armstrong are expected to begin in the summer of 1997.
Cornerstone has a contract with Armstrong to supply Armstrong's St. Helens,
Oregon facility with all of its perlite requirements, currently estimated to be
approximately 55,000 tons per year. The initial term of the contract is for
three years and provides for a two year extension if rates are agreed.
Cornerstone is seeking to put in place additional contracts for the sale of
finished perlite. It is expected that sales in 1997 will achieve a rate of 5,000
tons per month. The Lakeview plant has a permitted capacity of 100,000 tons per
year. Prices are negotiated with end users and are partially a function of
transportation costs.
GRASSY MOUNTAIN PROPERTY
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LOCATION
The Grassy Mountain project is located in northern Malheur County, Oregon,
approximately 22 miles southwest of Vale, Oregon. The property is accessed by
traveling four miles west from Vale on US Highway 20, then south on the Twin
Springs County Road for 23 miles, or by driving south from Nyssa on US Highway
95 to Owyhee and then west to Rock Springs Canyon and by gravel road for 14
miles. The project elevation ranges from 3,300 to 4,300 feet.
PROPERTY
The Grassy Mountain property encompasses approximately 23 square miles. Atlas
owns 611 unpatented lode claims. An additional 119 unpatented lode and placer
claims are controlled under five separate mineral lease or lease/option to
purchase agreements. Approximately 1,000 acres of fee surface, 240 acres of fee
surface and minerals, and 80 acres of fee minerals are held by two lease/option
agreements. Atlas holds one state prospecting permit covering 1,280 acres.
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Geology
The rocks exposed at Grassy Mountain are part of a late to middle-Miocene Grassy
Mountain Formation, a sequence of volcanic and volcanisclastic rocks made up of
primarily olivine-rich basalt and intercalated tufaceous siltstones, sandstones,
and conglomerates. The rocks have been dated through mammalian fossils and
Potassium Argon chronology to be approximately 10 million years old. The
sediments are primarily flat-lying with a slight regional dip to the east. The
structural trend of the area is N10W to N30E. These features were probably cut
by later post-mineralization east-west faulting.
Mineralization is associated with a low grade gold siliceous hot springs system
with enrichment along multi-stage quartz-adularia veins and favorable
lithologies. Explosive brecciation and overpressuring of the rock, common in
these systems, was minimized due to the un-lithified nature of the sediments.
The mineralized rock is highly silicified and locally brecciated in the vicinity
of the feeder structures. As silicification decreases so does grade. Away from
the feeder zones lithology also plays an important role in gold deposition. The
finer grained siltstones contain the bulk of the lower grade material. The
higher grades are found in the coarser arkosic sandstones. The feeder or vein
zones contain grades as high as 20 ounces of gold/ton ("oz. Au/t").
HISTORY
There was no significant mining or major mineral occurrence known in the area
prior to the Company's acquisition of the Grassy Mountain deposit in 1986.
Detailed mapping and sampling were completed in 1986 and several drill targets
were defined. Hole 26-9 is considered the discovery hole with 145 feet of
mineralization averaging 0.075 oz. Au/t. The claim block was expanded at this
time and exploration work continued through 1991. The Company completed 388
drill holes for a total of approximately 221,500 feet on the property.
Newmont Grassy Mountain Corporation, a wholly owned subsidiary of Newmont
Exploration Company ("Newmont"), acquired the property from the Company in
September, 1992 and continued property evaluation through August, 1994
completing an additional 13 core and reverse circulation holes.
In September 1996 the Company executed an agreement with Newmont, (the
"Agreement"), which provided for the reconveyance of the Grassy Mountain
property to the Company. Pursuant to the Agreement, Atlas paid an amount of
$206,000 to Newmont, issued a $500,000 unsecured, non-interest bearing
promissory note due September 18, 1997 and assumed bonding requirements for
exploration reclamation of $146,000.
RESERVES
As part of a detailed feasibility study conducted by Kilborn SNC-Lavin, Inc.
("Kilborn") in 1990, an open pit mine model was developed by Pincock, Allen &
Holt, Inc. The feasibility study resulted in the definition of a mineable
reserve of 996,000 ounces at a $350 gold price from
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16 million tons at grades 0.062 oz. Au/t of mill and heap leach ores. Neither
the recovered silver nor low grade leach ores were considered. The contained
silver is approximately 2,467,000 ounces.
A feasibility study was completed in 1990 by Pincock, Allen & Holt, Inc. The
database utilized for this study consisted of 180 drill holes in the main
deposit area. The drilling is predominantly vertical and angle reverse
circulation rotary drill holes with some core holes. Using a 0.02 oz. Au/t
cutoff, Pincock, Allen & Holt, Inc. calculated a geologic resource of 17,217,000
tons at a grade of 0.061 oz. Au/t for a total of 1,051,500 ounces and 2,610,000
ounces of contained silver.
UNDERGROUND STUDY
Two underground feasibility studies were commissioned to evaluate 200 tons per
day ("tpd") and 1,000 tpd production options by Kilborn and Dynatec Mining
Corporation, respectively. The 200 tpd study indicated diluted mineable
reserves of 131,000 tons at a grade of 1.132 oz. Au/t for 149,000 contained
ounces. The second, larger scale underground study at 1,000 tpd used an 0.08
oz. Au/t cutoff and identifies diluted mineable reserves as 1.9 million tons at
a grade of 0.262 oz. Au/t for 497,000 contained ounces.
EXPLORATION
An additional resource was drilled out approximately 1 mile west of the main
deposit. The Crabgrass target contains a near surface geologic resource at a
0.02 oz. Au/t cutoff of 24,000 ounces contained in 600,000 tons grading 0.038
oz. Au/t. Several drilled and undrilled areas within the Grassy Mountain claim
block have potential for additional resources.
PROJECT STATUS
Based on pre-feasibility studies completed for underground development, the
Company believes that Grassy Mountain has the potential to be a low cost
producer. Atlas plans to evaluate permitting and development of Grassy Mountain
with a joint venture partner.
GOLD BAR MINE
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LOCATION
The Gold Bar Resource Area is located in and adjacent to the Roberts Mountains
in Eureka County, Nevada, at elevations ranging from 6,400 to 8,800 feet above
sea level. The area is reached by traveling 22 miles west of Eureka, Nevada, on
US Highway No. 50 and 17 miles northeast along the Three Bars Road.
PROPERTY
The Gold Bar Project area encompasses approximately 100 square miles. There are
3,204 unpatented lode mining claims of which 3,025 are owned by Atlas and 179
are held through lease and option to purchase agreements. Atlas also owns 182
unpatented millsite claims, 6
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patented lode claims and 8 patented millsite claims. Additionally, Atlas holds
under lease another 2,000 fee acres of surface with varying percentages of the
underlying minerals.
GEOLOGY
All of the mineralization found occurs as sediment-hosted, "Carlin-type"
deposits. These deposits are hosted by carbonate-rich sedimentary rocks and are
characterized by micron size gold and a distinct hydrothermal alteration suite.
Gold mineralization and alteration are characteristically enriched in the trace
elements silver, antimony, arsenic, mercury, and thallium.
HISTORY
Regional reconnaissance exploration led the Company to the Battle Mountain Trend
area in the summer of 1983. Focused reconnaissance along the southern Roberts
Mountains identified widespread hydrothermal alteration with anomalous gold
geochemistry along the western range front. Detailed exploration in the area
subsequently led to acquisition of land, target development, and drilling.
Since then, the Company has discovered five gold deposits: Gold Bar, Goldstone,
Gold Ridge, Gold Pick, and Gold Canyon. From inception through cessation of
operations in 1994, 485,200 ounces of gold were recovered from 7,514,600 tons of
ore grading .074 oz. Au/t milled.
Mill construction occurred during 1986 with the first gold poured in January,
1987. The mill was originally designed and constructed for 1,500 throughput.
An expansion in 1989 increased throughput to the current 3,200 tpd rate.
RESERVES
Following suspension of mining operations at Gold Canyon, which occurred in
February of 1994, Atlas delayed plans for further mining of the Gold Pick and
Gold Ridge deposits pending additional drilling and further study of cost
cutting measures. This confirmatory program included the drilling of 303
surface and 55 underground holes.
The mine plan for the Gold Pick and Gold Ridge deposits established proven and
probable mineable reserves which were independently audited by Mine Reserve
Associates of Denver, Colorado in December 1994. Pincock, Allen & Holt, Inc. of
Denver, Colorado as part of its independent review of the Gold Bar Resource
Area, dated December 13, 1995, confirmed the following at a gold price of $400:
14
<PAGE>
PROVEN AND PROBABLE RESERVES
DECEMBER 1996
- --------------------------------------------------------------------------------
GRADE (OUNCES CONTAINED
ORE TONS OF GOLD PER TON) OUNCES*
- --------------------------------------------------------------------------------
Gold Pick East 1,278,000 0.073 93,939
- --------------------------------------------------------------------------------
Gold Pick West 1,009,000 0.069 69,909
- --------------------------------------------------------------------------------
Gold Ridge 391,000 0.059 23,077
- --------------------------------------------------------------------------------
Total 2,678,000 0.070 186,925
- --------------------------------------------------------------------------------
* Estimated recoverable ounces of 157,000 based upon an overall 84% recovery
rate.
MEASURED & INDICATED
MINERALIZED MATERIAL *
- --------------------------------------------------------------------------------
GRADE CONTAINED
TONS (OUNCES OF OUNCES
(000) GOLD PER TON) (000)
- --------------------------------------------------------------------------------
Advanced Prospects** 3,369 0.031 104
- --------------------------------------------------------------------------------
* "Mineralized Material" is precious metal bearing rock that has been
physically delineated by one or more of a number of methods including drilling,
underground sampling and surface trenching and sampling. This material has been
found to contain a sufficient amount of mineralization of an average grade of
metals to have economic potential that warrants further exploration and
evaluation. Estimates of tonnage and grade are made on the continuity, size and
shape of the mineralization and have taken into account effects of waste mining
and dilution.
** Advanced Prospects include Cabin Creek, Hunter, Gold Canyon and Pot Canyon.
JOINT VENTURES
As a result of the strategic decision to accelerate development of the entire
Gold Bar claim block, Atlas entered into joint venture arrangements with four
separate gold producing companies, Rayrock Yellowknife Resources, Inc.,
Homestake Mining Company, Hemlo Gold Mines (USA.), Inc. and Vista between July
of 1994 and September of 1995. Active exploration programs conducted by these
companies on their respective areas of interest during 1994, 1995 and 1996 were
comprised of mapping, sampling and geophysical work as well as exploration
drilling. Much information was gained concerning the exploration potential of
the Gold Bar Resource Area. The four joint venture agreements were terminated
in 1996 and 1997. As a result Atlas regained a 100% interest in the entirety of
the Gold Bar claim block, which contains the Company's Gold Bar mill.
In addition to existing reserves, Atlas has identified and partially defined
eleven high quality exploration targets, some with ore grade drill intercepts.
The Gold Pick and Gold Ridge deposits are unencumbered by royalties and are
controlled by unpatented mining claims for which first-half final certificates
have been issued by the Bureau of Land Management. These are believed to
exempt the claims from federal royalties on production. Atlas currently holds
the
15
<PAGE>
requisite environmental permits, licenses and waivers required by state and
federal authorities to operate the Gold Bar mine and mill. There are no
requirements associated with the current permits that would prohibit the
restarting of mining operations.
Currently, the Company has decided not to pursue alternatives for self
development of the property. However, various scenarios are being considered for
continued development including a joint venture for outright sale.
DOBY GEORGE PROPERTY
- --------------------
On October 25, 1995 Atlas purchased the Doby George property from Independence
Mining Company, Inc. ("Independence") for $400,000 in cash plus 1.4 million
common shares of Atlas.
LOCATION
Doby George is situated in northern Elko County, Nevada, approximately 60 air
miles north of the community of Elko. The property is accessed by traveling
north of Elko on US Highway 225 for approximately 70 miles, then southwest on
Maggie Creek Summit Road another 12 miles.
PROPERTY
The Doby Project area encompasses approximately nine square miles in Elko
County, Nevada. Atlas owns 601 acres of fee land plus 240 unpatented lode mining
claims. An additional 104 lode claims are held under three separate lease
agreements.
GEOLOGY
Rock types at Doby George are dominated by Mississipian Schoonover Formation
siliceous and limy siltstones, sandstones, cherts and quartzites, which host all
significant mineralization on the property. Mineralization is generally
controlled by structure and stratigraphy. High angle structures appear to be
related to the more significant mineralization with mineralization increasing in
both grade and thickness toward major structures. Gold is fine grained and
commonly occurs within quartz veins and silicified zones.
16
<PAGE>
HISTORY
The property was first identified by Felmont Oil Company, an affiliate of
Homestake Mining Company, in 1983. Homestake conducted exploration drilling on
the property through 1991 when the property was sold to Independence. A total
of 727 holes have been drilled at Doby on five separate deposits, and
metallurgical testwork has confirmed that the mineralization is generally not
refractory and is amenable to heap leach processing. The drilling and mapping
to date have confirmed that a significant portion of the mineralization is
shallow, varying in thickness from 15 feet to 225 feet, and may be mined by open
pit methods. The identified mineralized zones have been estimated by Behre
Dolbear & Company of Denver, Colorado, in an independent evaluation concluded in
July 1994, to contain 3.6 million tons of mineralized material at a grade of
0.06 oz. Au/t.
PROJECT STATUS
Atlas completed a $600,000 work program of additional drilling, metallurgical,
engineering and environmental studies on the previously identified West Ridge
and Red Tail deposits in order to confirm reserves. The Company is currently
evaluating either joint venture exploration and development or a sale of the
property.
MUSGROVE CREEK PROPERTY
- -----------------------
The Musgrove Creek property is located in Lemhi County, Idaho, 25 miles
southwest of the town of Salmon. In November 22, 1996 the Company signed an
option with Meridian Gold Company ("Meridian") for the purchase of the Musgrove
Creek property and on February 28, 1997 Meridian exercised its option. The
closing occurred on March 21, 1997. For the property, Atlas received total
remuneration of $125,000 plus $27,000 as reimbursement of land holding costs.
Additionally, Meridian has agreed to assume a reclamation obligation of $55,000,
to convey to Atlas a 1% NSR on claims owned by Atlas and in the event Meridian
places minerals at Musgrove Creek into production, Atlas will receive an
additional $100,000.
INVESTMENTS
- -----------
VISTA GOLD CORP.
- ----------------
On August 15, 1994, the Company completed the purchase of 12,694,200 common
shares of Vista which represented 37.2% of the issued and outstanding shares of
Vista. The purchase price was C$4.00 per share (US $2.80), or an aggregate
purchase price of C$50.8 million (US $35.8 million). Vista is a Canadian-based
precious metals mining company with shares traded on The Toronto Stock Exchange
and the American Stock Exchange. Effective May 1, 1995, Vista amalgamated with
its subsidiary, Hycroft Resources and Development Corporation, reducing Atlas's
interest in the amalgamated entity to 27.5%. On May 25, 1995, the Company
purchased 20,700 common shares of Vista which increased the Company's interest
to a total of 12,714,900.
On October 16, 1996 the Company sold 4,240,324 common shares of Vista for $1.32
per share. The Company continues to hold 8,474,576 Vista common shares, which
have been
17
<PAGE>
pledged as security for the Company's $9.81 million Exchangeable Debentures due
October 25, 2000. On October 22, 1996 an amalgamation between Granges Inc. and
Da Capo Resources Ltd. was approved by their respective shareholders to form
Vista, further reducing the Company's interest in the combined company to 9.6%
Operations at Vista's Hycroft mine, located near Winnemucca, Nevada have
consistently produced between 80,000 to 100,000 ounces of gold annually since
1989. Given its identified reserves and current level of production, Vista has
stated that production is scheduled to continue through the year 2001.
The Company reported the results of Vista's operations using the equity method,
from August 15, 1994, when its share position in Vista's predecessor was
acquired, until the fourth quarter of 1996, during which quarter the Company's
equity was reduced to 9.6% as a consequence of the sale of the shares. As a
result, beginning with the 4th quarter and in accordance with Generally Accepted
Accounting Principles, the Company changed its method of accounting whereby it
records marketable securities at fair market value. For the fiscal periods
ended December 31, 1996 and 1995 and June 30, 1995, Atlas recorded equity losses
of $2.72 million, $1.7 million and $1.36 million, respectively, attributable to
the operations of Vista. These amounts include Atlas's proportional share of
Vista operating results, and an additional charge of approximately $34 per ounce
of Vista production as an amortization of Atlas's excess carrying cost above
Vista book value.
DISCONTINUED OPERATIONS
- -----------------------
Uranium Mill Site, Moab, Utah
- -----------------------------
Atlas's Moab mill site (the "Site") is located in Grand County, Utah. The Site
is located on the northwest shore of the Colorado River, 3 miles northwest of
the center of Moab and can be accessed from US Highway 191 north of Moab. The
Site encompasses 437 acres on the outside bend of the Colorado River, at the
southern terminus of the Moab Canyon, approximately 4,000 feet above mean sea
level.
Of the 437 acres owned by Atlas, the plant site and tailings pond combined cover
approximately 200 acres. Before decommissioning, the plant site was composed of
a main processing plant, a 130-acre tailings pond, storage yards, ore receiving
facilities, various process-related structures, and an office complex.
The Uranium Reduction Company ("URC") built and began operations at the Moab
Mill (the "Mill") in October 1956. Atlas acquired URC in 1962 and operated the
Mill until 1984 when it was placed on stand-by status. Atlas holds US Nuclear
Regulatory Commission ("NRC") Source Material License SUA-917 for the Mill,
which was changed to a possession only status on December 18, 1992.
The Mill was authorized to extract uranium oxide by both the acid and alkaline
leach processes and was licensed for production at 850 metric tons (1,870,000
pounds) of yellowcake annually. During the life of the Mill, only one tailings
pond was used.
18
<PAGE>
The majority of the ore for the Mill came from the Big Indian Uranium District
approximately 80 miles to the southeast. The ore was primarily a sandstone with
minor amounts of carbonate. Ore was trucked to the Mill and ground to a
sufficiently fine consistency to allow maximum efficient chemical reactions to
occur. It was then processed through either the acid-leach circuit or the
alkaline-leach circuit, both of which were used in the Mill. After milling, the
combined waste slurry from both circuits was pumped to the tailings impoundment.
The approximate wet weight of the tailings contained within the tailings pile
was determined to be 10.5 million tons, with a volume of 7.5 million cubic
yards. The tailings pile is composed of fine tailings (slimes), coarse tailings
(sand), and ore which was placed there at the end of the operation of the Mill
as part of an interim cover.
A decommissioning plan for the Mill was approved on November 28, 1988.
Decommissioning of the Mill began in 1988, and interim cover placement over the
tailings disposal area began in 1989 and was completed in 1995.
A reclamation plan for the tailings pile was prepared by Atlas in 1981 and
approved by the NRC in 1982. The plan was based on the projected life of
facility tailings capacity requirements; the disposal pile was designed for an
ultimate crest elevation of 4,076 feet. The maximum crest elevation constructed
before the Mill ceased operation was 4,058 feet, resulting in the necessity to
revise the reclamation plan. Atlas, by letter dated August 2, 1988, submitted a
revised reclamation plan for NRC review and approval. In 1990, the NRC changed
its technical criteria which resulted in requests for additional information,
reevaluation, and redesign. As a result, Atlas submitted a revised reclamation
plan in 1992. On July 20, 1993, NRC gave notice in the Federal Register of its
intent to approve the reclamation plan and made available for public comment an
environmental assessment of the effects of the proposed action, which addressed
only the environmental effects of changes to the plan approved in 1982. The
comments received prompted NRC to withdraw, by Federal Register notice dated
October 8, 1993, its previously noticed intent to approve the revised
reclamation plan. On March 30, 1994, NRC announced its intent to prepare an
Environmental Impact Statement ("EIS") to evaluate potential impact to the
environment of the proposed plan and certain alternative proposals.
Atlas's proposed reclamation plan (the "Plan") would allow the Company to (1)
reclaim the tailings pile for permanent disposal and long-term custodial care by
a government agency in its current location on the Site, (2) prepare the Site
for closure, and (3) relinquish responsibility of the Site after having its NRC
license terminated. Closing the pile consists of recontouring the tailings pile
to allow for the natural drainage of precipitation and covering with earthen
material and rock to control radon emanations and prevent erosion.
19
<PAGE>
The Company has nearly completed the regulatory process for approval of the
Plan. On March 7, 1997 the NRC issued its Technical Evaluation Report ("TER")
which acknowledges that the Plan is in compliance with the technical
requirements for capping the tailings facility onsite. The TER is used to
evaluate compliance with regulatory and safety criteria. While NRC's issuance
of the TER is a favorable development, the regulatory approval process is not
complete until the NRC issues the final EIS which is anticipated in mid to late
1997. In the draft EIS issued in January, 1996 the NRC staff concluded that
Atlas's proposal to reclaim the pile in place is acceptable and less costly than
the alternative. The TER concludes that the proposed reclamation plan satisfies
the regulatory requirements. Construction is planned to commence in early 1998.
For further information on the Moab site reclamation, see "Management's
Discussion and Analysis of Financial Position and Operating Results -
Environmental Matters".
When reclaimed, approximately 250 acres, which encompass the capped tailings and
reconfigured Moab Wash, will be deeded to the federal or state government. The
remaining acreage, approximately 187 acres, would be released to Atlas for
unrestricted use. A substantial portion of the remaining land would be
available for commercial use with an estimated value at current market prices in
excess of $1.5 million.
Asbestos Mine Site, Coalinga, California
- ----------------------------------------
Remedial construction activities at the Company's former asbestos mine and mill
site located near Coalinga, California, which began in October 1994, are
complete. Atlas, which operated the mine for a five year period in the 1960s
was notified by the Environmental Protection Agency in fiscal 1988 that the
Bureau of Land Management, and several other subsequent owners were potentially
responsible parties under the Comprehensive Environmental Response, Compensation
and Liability Act for cleanup costs at the mine site. The Environmental
Protection Agency issued its "Approval of Construction Completion" November 14,
1996 two years after the remedial action plan was approved. For further
information on the Coalinga reclamation, see "Management's Discussion and
Analysis of Financial Position and Operating Results - Environmental Matters".
RISK FACTORS
- ------------
The Company's profitability has been significantly affected by metal prices.
These prices may fluctuate widely and are affected by numerous factors beyond
the Company's control, including global and regional demand, production costs,
transportation and smelting charges, political and economic conditions, strength
of the United States dollar and exchange rates.
Gold, lead, zinc and silver are products which can be easily sold on numerous
markets throughout the world. It is not difficult to ascertain the market price
for these metals at any particular time, and these metals can be sold to a large
number of refiners or metals dealers on a competitive basis. The Company
normally sells its metals production through major dealers, in some cases may
use hedging programs, and is free to sell uncommitted metals to others.
Sales of finished perlite are individually negotiated with end users. There are
no guarantees that the Company will be able to obtain sales commitments in
quantities or at prices sufficient to make a profit.
20
<PAGE>
The Company is required to comply with various federal, state and local
regulations and requirements relating to environmental matters at its mining
properties. The Company is required to obtain permits from various governmental
agencies in order to mine and mill. The Company has obtained all of the
necessary permits relating to its on-going operations. The Company cannot
anticipate whether increasing costs of environmental compliance for its mining
operations will have a material adverse impact on planned operations or
competitive position.
The Company competes with substantially larger companies in the production and
sale of industrial minerals. The Company does not believe that it or any other
competitor is a material factor in these markets, and the price it receives for
its production depends almost entirely upon market conditions over which it has
no control. The Company believes that it can promptly sell at current market
prices all of the metals that it can produce.
With respect to the acquisition of mineral interests and exploration activities,
the Company competes with numerous persons and companies, many of which are
substantially larger and have considerably greater resources than the Company.
Item 2. PROPERTIES
----------
The Company's materially important properties consist of the Andacaba, Don
Francisco and Koyamayu mines which produce lead, zinc and silver in Bolivia,
Tucker Hill which produces perlite, Gold Bar which contains gold resources, and
to the Doby George and Grassy Mountain gold properties, described under "Item 1
Business".
- --------
Item 3. LEGAL PROCEEDINGS
-----------------
The information called for by this Item is set forth in Note 14 to the Financial
Statements and is incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of the security holders during the quarter
ended December 31, 1996.
21
<PAGE>
Executive Officers of the Company
- ---------------------------------
Set forth below is the age and certain other information regarding each person
currently serving as an executive officer of the Company.
Richard E. Blubaugh, age 49, has served as Vice President of Environmental and
Governmental Affairs since October 1, 1990, and has been with Atlas for over 15
years. He has been involved in the environmental, health and safety field for
over 23 years, has managed environmental and regulatory functions for mining
firms in seven western states, and also has experience as a regulator and a
consultant.
Gregg B. Shafter, age 41, has served as Vice President of Project Development
since August 1, 1995. Since joining the Company in August 1991, Mr. Shafter has
also served in the capacities of Manager Business Development and Land Manager.
Prior thereto Mr. Shafter was the Land Manager for Western Gold Exploration and
Mining Company, Limited Partnership.
James R. Jensen, age 37, has served as Treasurer and Secretary since February
1997. Mr. Jensen joined the Company in August of 1989, as Accounting Manager
and was promoted to Controller in September 1993. Prior to his employment with
the Company, Mr. Jensen was a manager with the accounting firm of KPMG Peat
Marwick.
22
<PAGE>
PART II
Item 5. Market for the Company's Common Stock
--------------------------------------
and Related Stockholder Matters
-------------------------------
Atlas's Common Stock is listed on the New York Stock Exchange under the symbol
AZ. The High and Low sales prices for the Common Stock for each quarterly
period as reported by the New York Stock Exchange are as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, June 30,
1996 1995 1995
------------------------------------------------------------------
Quarter Ended High Low High Low High Low
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31 $ 1 7/8 $ 1 3/8 N/A N/A $ 2 1/2 $ 1 1/4
June 30 1 1/2 1 N/A N/A 2 1/8 1 3/8
September 30 1 1/8 11/16 $ 2 $ 1 5/8 6 1/4 4 1/2
December 31 1 1/8 5/8 1 3/4 1 1/8 5 2
</TABLE>
No dividends were declared in the year ended December 31, 1996, in the six
months ended December 31, 1995, or in the year ended June 30, 1995. At April 9,
1997, there were approximately 16,331 holders of record of the Company's Common
Stock.
Item 6. Selected Financial Data
-----------------------
The following table is derived in part from the audited consolidated financial
statements of the Company. The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States. In all material respects, they conform with principles generally
accepted in Canada (except as described in note 19 to the Company's consolidated
financial statements). This information should be read in conjunction with the
audited consolidated financial statements and the notes thereto.
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months
Year Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, -------------------------------------------
1996 1995 1995 1994 1993 1992
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Mining revenue $ 578 $ - $ 2,328 $ 19,478 $ 19,280 $ 29,624
Loss from continuing operations (10,385) (4,266) (20,397) (12,040) (28,066) (7,177)
Income (loss) from discontinued operations - - 621 2,175 (875) (76)
Net loss (10,385) (4,266) (19,776) (9,865) (29,909) (7,253)
PER SHARE OF COMMON STOCK:
Loss from continuing operations (0.49) (0.22) (1.23) (1.45) (4.43) (1.17)
Income (loss) from discontinued operations - - 0.04 0.26 (0.14) (0.01)
Net loss (0.49) (0.22) (1.19) (1.19) (4.72) (1.18)
Cash dividends per share - - - - - -
BALANCE SHEET DATE:
Cash and cash equivalents 1,099 1,607 4,453 3,767 1,734 552
Total assets 41,681 53,040 43,497 19,847 19,549 59,212
Long-term obligations 22,815 23,684 15,160 15,767 14,807 13,726
Working capital (deficit) (2,528) 9,655 5,611 (239) (2,816) (14,344)
Total stockholders' equity (deficit) 12,372 22,143 24,833 (2,475) (4,407) 25,502
Book value per share 0.51 1.16 1.34 (0.26) (0.70) 4.02
</TABLE>
23
<PAGE>
Item 7. Condition and Results of Operations
-----------------------------------
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and accompanying notes.
During 1995, the Board of Directors authorized a change in Atlas's fiscal year-
end to December 31. This change was implemented during 1995, and resulted in
financial information being reported for the six month period ended December
31, 1995.
WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES
- ------------------------------------------------
Between the summer of 1994 (briefly before the suspension of milling operations
at the Company's Gold Bar mine in September 1994) and early 1996, the Company
completed several financings, the proceeds of which were used to complete
acquisitions and to raise working capital. During the summer of 1994, the
Company raised $50 million through private placement of 9,090,909 Units for a
purchase price of $5.50 per Unit, each Unit consisting of one share of Atlas
Common Stock and one-half of one warrant (exercisable for five years) to
purchase one share of Atlas Common Stock at an exercise price of $7.00 per
share. The financing closed in escrow in August 1994. Of $50 million raised,
$35.5 million was released from escrow on August 15, 1994, allowing Atlas to
complete the acquisition of 12,694,200 common shares (37.2% of the outstanding
shares) of Vista (see Item 1. "Investments - Vista Gold Corp."). The remaining
$14.5 million was released on December 15, 1994, following shareholder approval
of a proposal to increase the number of Atlas Common Shares authorized for
issuance. Of this amount, $3.2 million was ultimately used in March 1995 to
acquire 2.4 million shares (or 9% of the outstanding shares) of Dakota Mining
Corporation ("Dakota"). In November 1995, the Company completed a private
placement of $10 million 7% Exchangeable Debentures ("Debentures") due October
25, 2000. The debentures were secured by the pledge of 8,474,576 of the Vista
shares. The debentures are exchangeable at the option of the holder into shares
of Vista at the rate of 42.5 shares per $100 of debentures held. See Item 8.
"Financial Statements and Supplementary Data."
In March 1996, the Company sold its 2,419,000 common shares of Dakota for $4.5
million and in October 1996, it sold the 4,240,324 shares of Vista not pledged
for net proceeds of $5.5 million.
The above transactions, in addition to financing the acquisitions noted above,
have allowed the Company to acquire its interest in Arisur (see Item 1. "ARISUR
INC.") and to develop its Tucker Hill perlite project (see Item 1. "TUCKER
HILL"). These expenditures, combined with a lack of operating revenues during
this time period, have resulted in large swings in the Company's working capital
position.
Working capital decreased by $12.2 million during 1996. This was a result of
acquisition costs of Arisur of approximately $3.7 million, construction and
development costs at Tucker Hill and Andacaba of $4.1 million, ongoing
exploration, standby and administrative costs totaling $7.1 million and net
uranium reclamation costs of $1.8 million, partially offset by the sale of
Vista shares noted above.
During the year ended December 31, 1995, working capital increased by $1.4
million to $9.7 million at December 31, 1995. The increase reflects the $10
million proceeds from the issuance
24
<PAGE>
of Exchangeable Debentures, less $2.4 million net asbestos and uranium
reclamation costs, $1.7 million in project development expenditures, and $4.4
million in general and administrative costs and other working capital changes.
Working capital was $5.6 million at June 30, 1995, which compares to a working
capital deficit of $200,000 at June 30, 1994. The positive change in working
capital reflects the funds received from the issuance of units of common stock
warrants described above, which were partially applied to the purchase of Vista
shares. The remaining proceeds were in part used to repay a short term loan, to
pay fees related to the private placement of the units, to acquire 2.4 million
shares of Dakota Mining Corporation for $3 million and for continuing
exploration and administration expenses.
During 1997, the Company will focus its efforts on the continuing development of
its Bolivian operations, both through expansion of its current mine and mill
operations as well as through the identification and acquisition of other
promising properties in the area. In addition, Cornerstone will complete
construction at Tucker Hill, which will transition from the development stage to
commercial during 1997. The Company will also evaluate development options for
Grassy Mountain that, in the near term, will be dependent upon the Company's
ability to obtain sufficient financing.
In February 1997, Arisur signed a financing agreement with the Corporacion
Andina de Fomento ("CAF") for US$3 million dollars. CAF is a multilateral
financial institution that supports sustainable development and integration
efforts within the Andean region of South America. The proceeds of the loan
will pay for certain equipment and expansion programs of the Bolivian operations
and will reimburse Atlas in excess of $500,000 of funds previously advanced for
said purposes. The proceeds of the loan are expected to be released when
certain guarantees and property liens have been completed.
Pending the commencement of significant cash flows from Cornerstone and the
Company's Bolivian properties, the Company is actively considering a number of
sources for short-term working capital. In particular, the Company is actively
evaluating several possible transactions involving the joint venture, option or
sale of its gold properties at Gold Bar, Doby George and Grassy Mountain. The
Company also continues aggressively to pursue other sources of funding,
including potential mergers with companies holding sufficient cash reserves.
The Company is also evaluating the leveraging of its unencumbered properties and
of its restricted cash and Title X receivable (See Item 7. "ENVIRONMENTAL
MATTERS") in order to secure short or long-term funding as appropriate.
Management believes that the above actions, along with the continued cooperation
of the Company's creditors and stringent management of cash resources, will
enable the Company to meet its short term cash requirements.
25
<PAGE>
The Company believes that its mining operations will generate positive
cash flows beginning in 1998, and will allow the Company to be less dependent on
the debt and equity markets for its working capital needs in the future.
In order to meet its estimated long term reclamation obligations the Company
will utilize its restricted cash and securities, which supports the bonding of
such obligations, and reimbursements due under the Title X reimbursement
program. See Item 7. "ENVIRONMENTAL MATTERS."
During the year ended December 31, 1996, the Company's capital expenditures were
$4.4 million, compared with $1.7 for the comparable 12 month period in 1995. In
1996, development and construction costs incurred at Tucker Hill were
approximately $3 million, mine and mill expansion costs at Andacaba were $1.1
million, and acquisition costs of Grassy Mountain were $.2 million. For the
year ended December 31, 1995, $500,000 was spent on the development of Tucker
Hill, and a total of $1 million was incurred on the Commonwealth and Doby George
properties. The remainder of expenditures were primarily related to the Gold
Bar property.
The Company's capital expenditures in the six months ended December 31, 1995
were $1.4 million, compared to $.3 million for the comparable period in 1994.
During the six months ended December 31, 1995, development costs of $365,000,
$353,000 and $643,000 were incurred on the Tucker Hill, Commonwealth, and Doby
George properties, respectively. Substantially all of the capital expenditures
incurred during the six month period ended December 31, 1994 related to Tucker
Hill development costs.
The Company's capital expenditures incurred during the fiscal year ended June
30, 1995 were $.6 million, compared to $5.2 million during the fiscal year ended
June 30, 1994. In fiscal 1995, the majority of the funds were spent on the
development of Tucker Hill with the remainder being spent on the Gold Bar
property. In fiscal 1994, substantially all of the capital expenditures were
for the development of the Gold Bar property.
See also "ENVIRONMENTAL MATTERS" below.
RESULTS OF OPERATIONS
- ---------------------
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995:
- -------------------------------------------------------------------------
Revenues
As a result of the acquisition of Arisur in October, the Company had mining
revenues of $578,000 in 1996 relating to sales of lead, zinc and silver
concentrates from the Andacaba mine. This compares with no mining revenues for
the year ended December 31, 1995 due to the suspension of milling operations at
Gold Bar in 1994.
26
<PAGE>
Operating/Production Costs
Operating costs in 1996 reflect production costs of $441,000 and depreciation,
depletion and amortization costs of $324,000 incurred in Bolivia as a result of
the Arisur acquisition and shutdown and standby costs of $1,232,000. During the
same period in 1995, the Company incurred shutdown and standby costs of
$882,000. The standby and shutdown costs were lower in 1995 due to a $1,275,000
accrual for future costs at September 30, 1994, resulting in a reduction of
costs charged in 1995.
Exploration
The Company had exploration costs of $1,264,000 for the year ended December 31,
1996 as compared to $1,113,000 for the year ended December 31, 1995. Costs
incurred in 1996 primarily reflect work performed on the Commonwealth property
whereas 1995 costs reflect exploration and holding costs on the Gold Bar claim
block.
General and Administrative
General and administrative expenses incurred in 1996 were $4,658,000, an
increase of $1,490,000 from 1995 costs of $3,168,000. This increase is largely
attributable to the addition of Cornerstone general and administrative costs of
$547,000, severance costs of $830,000 related to the resignations of David J.
Birkenshaw as Chairman and CEO of the Company and Gerald E. Davis as President
of the Company, and approximately $300,000 reflecting costs associated with
unsuccessful merger discussions with MSV Resources Inc.
Other
In March 1996, the Company sold its interest in Dakota Mining Corporation for
approximately $4.5 million, resulting in a gain of $1.3 million. In October
1996, the Company sold 4.2 million shares of Vista for total proceeds of $5.6
million that resulted in a loss of $1.5 million.
Six Months Ended December 31, 1995 Compared to Six Months Ended December 31,
- ----------------------------------------------------------------------------
1994:
- ----
Revenues
Due to the suspension of milling operations at the Gold Bar Project in September
1994, the Company had no mining revenues for the six months ended December 31,
1995. This compares to mining revenue of $2,328,000 and gold production of
6,021 ounces generated from Gold Bar during the six months ended December 31,
1994.
Operating/Production Costs
The Company had no operating costs in the six months ended December 31, 1995.
Operating costs for the six month period ended December 31, 1994, which was
marked by the suspension of milling activities at Gold Bar on September 19,
1994, included production costs of $2,683,000, depreciation, depletion and
amortization of $348,000 and the accrual of shutdown and standby costs of
$1,275,000. Production costs at the Gold Bar property increased to $446 per
ounce, or
27
<PAGE>
115% of revenue, due to the processing of low grade ore from depleting
stockpiles. The $1,275,000 accrual for shutdown and standby costs recorded in
September 1994 reflected the projected shutdown and standby costs to be incurred
through the remainder of fiscal 1995.
Exploration
The Company incurred exploration costs of $307,000 during the six months ended
December 31, 1995 for continued exploration efforts on the Gold Bar property, as
compared to $1,105,000 for the six months ended December 31, 1994. This
decrease reflects the cost savings associated with entering into the joint
venture agreements covering approximately 80% of the Gold Bar claim block as
compared to the underground exploration conducted at Gold Bar during the six
months ended December 31, 1994.
General and Administrative
General and administrative expenses for the six months ended December 31, 1995
were $1,798,000 compared to $1,372,000 for the six months ended December 31,
1994. This increase was primarily a result of an intensified property
acquisition program and relocation expenses.
Year Ended June 30, 1995 Compared to Year Ended June 30, 1994:
- -------------------------------------------------------------
In January 1994, production from the Gold Bar property was halted after a
confirmatory drill program indicated that mining to the originally designed Gold
Canyon pit bottom would have been uneconomical due to the occurrence of more
refractory material than had been previously forecast. Management initiated the
processing of low grade stockpiled ores in an effort to avoid the suspension of
milling operations. Engineering and metallurgical studies focusing on the
development of short-term reserves were accelerated. On September 16, 1994,
stockpiled ores were depleted and the Company was forced to suspend milling
operations and to temporarily place the Gold Bar property on standby. As a
result, the fiscal year ended June 30, 1995 reflects only three months of
operations.
Revenues
Revenues for the years ended June 30, 1995 and 1994 were $2,328,000 and
$19,478,000, respectively. Gold production decreased to 6,021 ounces in fiscal
1995 from 51,700 ounces in fiscal 1994. The decreases in revenue and gold
production in fiscal 1995 reflect the suspension of operations at the Gold Bar
property after only three months of production. The average price per ounce of
gold realized in fiscal 1995 was $387 versus $377 in fiscal 1994.
Operating/Production Costs
Production costs for fiscal 1995 and 1994 were $2,683,000 and $16,526,000,
respectively. Production costs per ounce in fiscal 1995 and 1994 were $446 and
$319, respectively. The decreases in production costs are a result of the
suspension of operations at the Gold Bar property after three months of
production in fiscal 1995. The higher production costs per ounce reflect the
lower grades of ore run subsequent to the suspension of mining operations.
28
<PAGE>
The Company incurred $1,485,000 in shutdown and standby costs during the last
three quarters of fiscal 1995. Such costs included severance payments,
continuing onsite security and maintenance as well as general and administrative
expenditures.
During the fourth quarter of fiscal 1994, the Company and an independent
consultant began evaluating the Gold Bar mine plan and remaining known ore
reserves. As a result, the Company determined that its remaining unamortized
costs could not be recovered from undiscounted cash flows over the remaining
mine life and the Company recognized an impairment to adjust the carrying value
of its assets with the property being written down to estimated salvage value.
This adjustment resulted in a charge to operations of $5,355,000 in the fourth
quarter of fiscal 1994.
Depreciation, depletion and amortization charges of $348,000 in fiscal 1995
represent the flow through of non-cash costs contained in stockpiled ore
inventory at the end of fiscal 1994 and the write-off of capital expenditures
incurred during the three months of operations in fiscal 1995.
Exploration Costs
Exploration costs of $1,911,000 were incurred in fiscal 1995, a decrease of
approximately $400,000 from fiscal 1994. The decrease is attributable to the
reduction of land holding costs, as joint venture partners (see below) were
responsible for land royalties and lease payments, and to a reduction of
personnel. Exploration costs in fiscal 1994 increased $430,000 from fiscal 1993
as a result of an underground drilling program commenced in the fourth quarter
of fiscal 1994 and ended during the first quarter of fiscal 1995.
General and Administrative
General and administrative expenses decreased by $326,000 from $3,068,000 in
fiscal 1994 to $2,742,000 in fiscal 1995, or 11%. The primary reason for the
decrease was a $400,000 reduction in salaries and severance costs.
Other
During the first quarter of the fiscal year ended June 30, 1995, the Company
acquired a 37.2% interest in Vista, and recorded an equity loss of $1,361,000
during the remainder of the year. Following the merger of Vista with its 50.5%
subsidiary, Hycroft Resources and Development Corporation, Atlas re-evaluated
its investment in Vista relative to the fair values implied in the amalgamation
and to the known reserves at the Crofoot/Lewis mine. As a result, the Company
recorded an $11,419,000 impairment of its investment in Vista as of June 30,
1995.
During October 1994, Atlas recorded a $1,144,000 loss related to the forfeiture
of a non-refundable deposit on the purchase of securities in Dakota. Atlas's
decision to forfeit the deposit was based on its review of the relative market
and purchase prices. In March 1995, Atlas entered into an agreement to purchase
approximately 2.4 million common shares of Dakota for $3,000,000, whereby each
company released the other from any liability arising out of the previous
agreement.
Notes 13 and 14 to the Financial Statements provide details and a discussion of
discontinued operations for the past three fiscal years.
29
<PAGE>
ENVIRONMENTAL MATTERS
- ---------------------
The Company is subject to extensive federal, state and local environmental laws
and regulations. These laws, which are constantly changing, regulate the
discharge of materials into the environment and may require the Company to
mitigate any environmental effects caused by its operations. The Company
believes that it is currently in substantial compliance with all federal, state
and local environmental regulations applicable to its current and discontinued
operations.
The Company is obligated to decommission and reclaim its uranium mill site
located near Moab, Utah. When the Company discontinued its uranium operations
in 1987, estimated shut-down and reclamation expenses of $17,406,000 were
accrued. Reclamation and decommissioning costs (net of reimbursements, see
below) of $1,808,000, $1,189,000, $1,497,000 and $1,159,000 have been charged
against this accrual for the year ended December 31, 1996, six months ended
December 31, 1995, and the fiscal years ended June 30, 1995 and 1994. The
balance of this accrual at December 31, 1996 was $2,705,000 and the reclamation
plan as proposed by the Company extends over the next three to six years. Title
X of "The Comprehensive National Energy Policy Act" ("Title X"), which was
enacted in October 1992, provides for reimbursement by the federal government of
past and future reclamation expenses in proportion to the extent that the site's
tailings were generated by Atomic Energy Commission (AEC) contracts. With
respect to the Company's discontinued uranium operations, 56% of the tailings
were generated by AEC contracts. Requests for reimbursement under Title X must
be submitted annually to the Department of Energy ("DOE") and are subject to
review and audit. The timing on the repayment of costs approved for
reimbursement is a function of Congressional appropriation.
In July 1994, the Company submitted the first of three claims under Title X of
the 1992 Energy Act for reimbursement of compliance and reclamation costs. The
claims cover costs incurred from fiscal 1980 through March 1996. The amount
reimbursable under the three claims is $6,817,000. As of March 30, 1997, the
Company had received $3,345,000 in reimbursements under Title X. The $3,472,000
not yet reimbursed has been charged against the Company's reclamation accrual.
In addition to this amount, $500,000 has not yet been approved pending further
review.
On January 30, 1996, the Nuclear Regulatory Commission ("NRC") released a draft
Environmental Impact Statement ("EIS") and a draft Technical Evaluation Report
("TER") regarding the Company's reclamation proposal. Atlas's 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 to
prevent erosion and minimize radon emanation. The current EIS process is being
used by the NRC to evaluate the environmental impact of the Company's proposed
plan and an alternative proposal. In the draft EIS, the NRC staff preliminarily
concluded that Atlas's proposal to reclaim the pile in place was acceptable and
less costly than the proposed alternative. The final TER, dated March 7, 1997,
concluded that the Atlas reclamation plan was in compliance with the technical
requirements for capping the tailings facility on-site.
30
<PAGE>
The Company is confident that the ultimate result of the EIS review process, in
conjunction with the supportive conclusion of the TER will be the approval of
its reclamation plan, and that its remaining accrual, when combined with
anticipated reimbursements of reclamation costs under the Title X program and
restricted cash used for surety collateral, is sufficient to cover future
reclamation costs.
Estimated reclamation costs relating to the Gold Bar Resource Area are recorded
based on the units of production method. Total reclamation costs expensed in
the twelve month periods ended December 31, 1996, the six month period ended
December 31, 1995 and the fiscal years ended June 30, 1995 and 1994 were $0, $0,
$0 and $732,000, respectively. As part of the impairment recorded during the
fourth quarter of fiscal year 1994 (see results of operations, above), the
Company increased its accrued expense by an additional $1,244,000. No charges
were recorded in 1996 since analysis indicated the $3,118,000 accrued for
reclamation costs at the Gold Bar Resource Area is adequate.
The Company believes it can meet the estimated closing and reclamation costs of
its uranium and gold mining operations from internally generated funds, from the
$6,266,000 in restricted cash which serves as collateral for letters of credit
and reclamation bonds relating to these costs, and from reimbursements under
Title X, without a significant impact on its working capital position. It is
presently anticipated that these obligations will be satisfied over the next
three to six years.
During fiscal 1988, the United States Environmental Protection Agency notified
the Company that it was one of several potentially responsible parties ("PRPs")
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") for cleanup costs at the Company's former asbestos mine and mill site
near Coalinga, California and in the City of Coalinga. In fiscal 1993 and 1991,
the Company established a reserve of, and recorded as an expense, $600,000 and
$3,000,000, respectively, to cover the Company's share of costs to be incurred
in connection with this matter. This accrual reflects participation by the BLM,
which was also named as a PRP. The Company instituted legal action against 13
insurance carriers which had issued insurance policies over a period of more
than 25 years with respect to these sites. During fiscal 1994, the Company
reached settlement with a number of these carriers and recorded a gain from
discontinued operations of $2,175,000.
In October 1994, the Environmental Protection Agency approved a remedial action
plan for the sites. Due to unusually heavy rains experienced at the site during
the spring and early summer of 1995, the Company experienced delays and cost
overruns. As a result, the Company recorded an additional loss from
discontinued operations of $225,000 in the fourth quarter of fiscal 1995. The
Environmental Protection Agency issued its "Approval of Construction Completion"
on November 14, 1996.
The Company is required to obtain permits from various governmental agencies in
order to mine and mill ores. The Company has obtained all of the necessary
permits relating to its planned operations. The Company cannot anticipate
whether the increasing costs of environmental compliance for its operations will
have a material adverse impact on its future operations or competitive position.
31
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
<TABLE>
<CAPTION>
Index to Financial Statements Page
<S> <C>
Consolidated Statements of Operations for the Year Ended December 31, 1996,
the Six Months Ended December 31, 1995 and for the Years Ended
June 30, 1995 and 1994 33
Consolidated Balance Sheets as of December 31, 1996 and 1995,
and June 30, 1995 34
Consolidated Statement of Stockholders' Equity (Deficit) for the Year Ended
December 31, 1996, the Six Months Ended December 31, 1995
and for the Years Ended June 30, 1995 and 1994 35
Consolidated Statements of Cash Flows for the Year Ended December 31, 1996,
the Six Months Ended December 31, 1995, and for the Years Ended
June 30, 1995 and 1994 36
Notes to Consolidated Financial Statements 37 - 61
Report of Independent Auditors 62
</TABLE>
32
<PAGE>
Atlas Corporation
Consolidated Statements of Operations
(In thousands, except earnings per share)
<TABLE>
<CAPTION>
Six Months
Year Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, ---------------------------
1996 1995 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C>
Mining revenue $ 578 $ - $ 2,328 $ 19,478
- -----------------------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Production costs 441 - 2,683 16,526
Depreciation, depletion and amortization 324 - 348 4,479
Impairment of mineral properties (Note 6) - - - 5,355
Shutdown and standby costs (Note 6) 1,232 671 1,485 -
General and administrative expenses 4,658 1,798 2,742 3,068
Exploration and prospecting costs 1,264 307 1,911 2,315
- -----------------------------------------------------------------------------------------------------------------------------------
Gross operating loss (7,341) (2,779) (6,841) (12,265)
- -----------------------------------------------------------------------------------------------------------------------------------
Other (income) and expense:
Equity in loss of Vista Gold Corp. (Note 9) 2,721 1,703 1,361 -
Impairment of investment in Vista Gold Corp. (Note 9) - - 11,419 -
Forfeiture of deposit on stock purchase agreement (Note 4) - - 1,144 -
Interest (income) expense, net 684 70 (327) 205
Other income, net (Notes 4 and 9) (88) (258) (41) (430)
- -----------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations before income taxes
and minority interest (10,658) (4,291) (20,397) (12,040)
Provision for income taxes (Note 17) - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations before minority interest (10,658) (4,291) (20,397) (12,040)
Minority interest in net loss of subsidiary (Note 1) 273 25 - -
- -----------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (10,385) (4,266) (20,397) (12,040)
Income from discontinued operations (Note 13) - - 621 2,175
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss $ (10,385) $ (4,266) $ (19,776) $ (9,865)
===================================================================================================================================
Loss per share of common stock:
Loss from continuing operations $ (0.49) $ (0.22) $ (1.23) $ (1.45)
Income from discontinued operations - - 0.04 0.26
- -----------------------------------------------------------------------------------------------------------------------------------
Net loss $ (0.49) $ (0.22) $ (1.19) $ (1.19)
===================================================================================================================================
Weighted average of common shares outstanding 21,015 19,148 16,549 8,264
===================================================================================================================================
</TABLE>
See accompanying notes
33
<PAGE>
Atlas Corporation
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------- June 30,
1996 1995 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,099 $ 1,607 $ 4,453
Cash held in escrow (Note 10) - 10,000 -
Accounts receivable - Trade 270 - -
Accounts receivable - Other 469 365 131
Inventories (Note 3) 1,248 250 250
Investments in marketable equity securities (Note 4) 3,629 4,083
Prepaid expenses and other current assets 195 199 198
- ----------------------------------------------------------------------------------------------------------------------------
Total current assets 3,281 16,050 9,115
Property, plant and equipment (Note 6) 63,766 50,765 47,686
Less: Accumulated depreciation, depletion and amortization
and impairment (44,779) (44,406) (44,661)
- ----------------------------------------------------------------------------------------------------------------------------
18,987 6,359 3,025
Investment in Vista Gold Corp. (Notes 4, 9 and 10) 11,542 23,756 25,452
Restricted cash and securities (Note 11) 6,266 5,367 5,659
Other assets (Note 11) 1,605 1,508 246
- ----------------------------------------------------------------------------------------------------------------------------
$ 41,681 $ 53,040 $ 43,497
============================================================================================================================
Liabilities
Current liabilities:
Trade accounts payable $ 1,544 $ 1,597 $ 601
Other accrued liabilities (Note 11) 2,136 1,998 2,103
Short-term debt (Note 10) 2,129 2,000
Current portion of estimated uranium reclamation costs (Note 14) 800 800
- ----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 5,809 6,395 3,504
Long-term debt (Notes 10 and 20) 13,310 13,500 3,500
Other liabilities, long-term (Note 11) 9,505 10,184 11,660
Commitments and contingencies (Note 14)
Minority Interest 685 818 -
Stockholders' equity (Notes 7, 8 and 20)
Common stock, par value $1 per share; authorized
50,000,000, 50,000,000 and 25,000,000; issued and
outstanding, 24,180,264, 20,034,743 and 18,577,500
at December 31, 1996 and 1995 and June 30, 1995, respectively 24,180 20,035 18,578
Capital in excess of par value 68,514 69,248 68,678
Deficit (77,867) (67,482) (63,216)
Unrealized gain (loss) on investment in equity securities (Note 4) (2,322) 442 896
Currency translation adjustment (133) (100) (103)
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 12,372 22,143 24,833
- ----------------------------------------------------------------------------------------------------------------------------
$ 41,681 $ 53,040 $ 43,497
============================================================================================================================
</TABLE>
See accompanying notes
34
<PAGE>
Atlas Corporation
Consolidated Statements of Stockholders' Equity
(Deficit)
(In thousands)
<TABLE>
<CAPTION>
Capital in
Common Common Excess of
Shares Stock Par Value Deficit Other Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1993 6,336 $ 6,336 $22,832 $(33,575) $ - $(4,407)
Issuance of Common stock (Note 20) 3,000 3,000 8,362 - - 11,362
Exercise of Warrants 13 13 33 - - 46
Interest on Debenture (Note 10) 61 61 328 - - 389
Current year loss - - - (9,865) - (9,865)
- -------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1994 9,410 9,410 31,555 (43,440) - (2,475)
Issuance of Common stock (Note 20) 9,091 9,091 36,965 - - 46,056
Exercise of Warrants 15 15 39 - - 54
Interest on Debenture (Note 10) 40 40 50 - - 90
Shares issued to 401(k) plan 22 22 69 - - 91
Unrealized gain on investment (Note 4) - - - - 896 896
Currency translation adjustment - - - - (103) (103)
Current year loss - - - (19,776) - (19,776)
- -------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1995 18,578 18,578 68,678 (63,216) 793 24,833
Issuance of Common stock for purchase of
property (Note 6) 1,400 1,400 525 - - 1,925
Shares issued to 401(k) plan 18 18 16 - - 34
Interest on Debenture (Note 10) 39 39 29 - - 68
Unrealized loss on investment (Note 4) - - - - (454) (454)
Currency translation adjustment - - - - 3 3
Current year loss - - - (4,266) - (4,266)
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 20,035 20,035 69,248 (67,482) 342 22,143
Issuance of Common stock for purchase of
Arisur Inc. (Note 9) 4,000 4,000 (750) - - 3,250
Shares issued to 401(k) plan 66 66 3 - - 69
Interest on Debenture (Note 10) 79 79 13 - - 92
Unrealized loss on investment (Note 4) - - - - (2,764) (2,764)
Currency translation adjustment - - - - (33) (33)
Current year loss - - - (10,385) - (10,385)
- -------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 24,180 $24,180 $68,514 $(77,867) $(2,455) $12,372
===================================================================================================================
</TABLE>
See accompanying notes
35
<PAGE>
Atlas Corporation
Consolidated Statements of Cash Flow
(In thousands)
<TABLE>
<CAPTION>
Six Months
Year Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, ---------------------
1996 1995 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities:
Net loss $ (10,385) $ (4,266) $ (19,776) $ (9,865)
Income from discontinued operations - - (621) (2,175)
From continuing operations:
Adjustments to reconcile loss to net cash used
in operations (Note 12) 3,087 1,795 14,198 9,902
Changes in operating assets and liabilities (Note 12) (1,626) 1,099 (62) (2,217)
- -----------------------------------------------------------------------------------------------------------------------
(8,924) (1,372) (6,261) (4,355)
- -----------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Operating income (net of tax) - - 621 2,175
Adjustments to reconcile income to net cash provided
by (used in) operations:
Decrease (increase) in accounts receivable - - 875 (875)
Increase in accrued liabilities - - 123 -
Increase (decrease) in other liabilities, long-term - - 102 (101)
Net decrease in estimated reclamation costs (1,808) (1,190) (1,497) (1,079)
- -----------------------------------------------------------------------------------------------------------------------
(1,808) (1,190) 224 120
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in operations (10,732) (2,562) (6,037) (4,235)
- -----------------------------------------------------------------------------------------------------------------------
Investing activities:
Net cash acquired (expended) in purchase of subsidiary (3,676) 220 - -
Purchase of stock in Vista Gold Corp. - - (36,492) -
Investment in equity securities - (180) (3,007) -
Cash released from (placed in) escrow 10,000 (10,000) - -
Additions to property, plant and equipment (4,428) (1,422) (625) (5,263)
Proceeds from sale of Vista Gold Corp. 5,527 - - -
Proceeds from sale of Dakota Mining Corporation 4,520 - - -
Proceeds from sale of equipment and reduction in other assets 43 - 491 434
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 11,986 (11,382) (39,633) (4,829)
- -----------------------------------------------------------------------------------------------------------------------
Financing activities:
Proceeds from borrowings on short-term debt and line of credit 238 - 3,550 -
Repayment of short-term debt (2,000) - (3,550) (3,524)
Proceeds from the issuance of common stock - - 50,054 12,421
Proceeds from the issuance of long-term debt - 10,000 - 3,500
Proceeds from the issuance of short-term notes - 2,000 - -
Cost of issuance of long-term debt and common stock - (902) (3,698) (1,300)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (1,762) 11,098 46,356 11,097
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (508) (2,846) 686 2,033
Cash and cash equivalents at beginning of period 1,607 4,453 3,767 1,734
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,099 $ 1,607 $ 4,453 $ 3,767
=======================================================================================================================
</TABLE>
Supplemental disclosures of non-cash activities:
The Company assumed a $500,000 note payable and a $201,000 reclamation
liability in the purchase of the Grassy Mountain Property.
See accompanying notes
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. ACCOUNTING POLICIES
Basis of Presentation -- The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. The
Company has incurred operating losses of $10,358,000, $4,266,000, $20,397,000
and $12,040,000 for the year ended December 31, 1996, the six months ended
December 31, 1995 and the fiscal years ended June 30, 1995 and 1994,
respectively and has a working capital deficit of $2,528,000 at December 31,
1996. These considerations raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
Management's plans to alleviate the substantial doubt include the following:
In February 1997, Arisur signed a financing agreement with the Corporacion
Andina de Fomento ("CAF") for US$3 million dollars. CAF is a multilateral
financial institution that supports sustainable development and integration
efforts within the Andean region of South America. The proceeds of the loan
will pay for certain equipment and expansion programs of the Bolivian operations
and will reimburse Atlas in excess of $500,000 of funds previously advanced for
said purposes. The proceeds of the loan are expected to be released when
certain guarantees and property liens have been completed.
Pending the commencement of significant cash flows from Cornerstone and the
Company's Bolivian properties, the Company is actively considering a number of
sources for short-term working capital. In particular, the Company is actively
evaluating several possible transactions involving the joint venture, option or
sale of its gold properties at Gold Bar, Doby George and Grassy Mountain. The
Company also continues aggressively to pursue other sources of funding,
including potential mergers with companies holding sufficient cash reserves.
The Company is also evaluating the leveraging of its unencumbered properties and
of its restricted cash and Title X receivable (note 14) in order to secure short
or long-term funding as appropriate. Management believes that the above actions,
along with the continued cooperation of the Company's creditors and stringent
management of cash resources, will enable the Company to meet its short term
cash requirements.
Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of the Company and all majority-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated. Minority interest represents the share of Cornerstone Industrial
Minerals Corporation not owned by the Company.
37
<PAGE>
Change in Fiscal Year -- The Company changed its fiscal year from June 30 to
December 31 effective December 31, 1995.
Inventories -- Inventories other than finished gold are recorded at the lower
of average cost or net realizable value. Finished gold inventory is carried at
realizable value.
Mining Costs -- During production periods, costs attributable to waste are
charged to operations based on the average ratio of waste tonnage to ore
tonnage.
Property, Plant and Equipment -- Property, plant and equipment is stated at the
lower of cost, or estimated net realizable value. Depreciation of milling
facilities and depletion of mining properties is determined by the units of
production method. The Company regularly assesses its ability to recover the
carrying value of its assets and recognizes an impairment when it is determined
that unamortized costs cannot be recovered from undiscounted cash flows over the
remaining project life. Leasehold improvements are amortized on a straight-line
basis over the terms of related leases or, if shorter, estimated useful life.
Expenditures for maintenance and repairs are charged to operations as incurred.
Expenditures for additions and major renewals are added to the property, plant
and equipment accounts. Interest expense allocable to the acquisition or
construction of capital assets and deferred mine development is capitalized
until operations commence.
Investments -- The Company uses the equity method to account for investments in
common stock of companies 20% to 50% owned. Marketable equity securities
available for sale are recorded at fair value with unrealized gains and losses
reported as a separate component of stockholders' equity.
Effective June 30, 1995, the Company changed its method of recognizing the
equity in earnings of companies accounted for under the equity method from
reporting the results of operations on a three month lag period to reporting the
results of operations on a current basis.
Excess of Cost over Net Assets Acquired -- The excess cost of acquisition over
net assets acquired from Cornerstone Industrial Minerals Corporation is being
amortized on a straight-line basis over five years. Amortization expense for
the year ended December 31, 1996 and the six month period ended December 31,
1995 was $90,000 and $7,000, respectively.
Foreign Currencies -- All assets and liabilities of foreign subsidiaries are
translated into U.S. dollars using the exchange rate prevailing at the balance
sheet date, while income and expense items are translated at the weighted
average exchange rate prevailing during the period. Unrealized exchange gains
and losses are deferred and shown as a currency translation adjustment in
shareholders' equity.
Exploration and Mine Development -- Exploration costs are expensed as incurred.
When it is determined that a property has development potential, the subsequent
costs of exploration and development are capitalized. Upon commencement of
production the capitalized costs are amortized using the units of production
method.
Mining Revenue -- Gold revenues are recorded when the finished product is
available for shipment. Revenues on base metals are recorded at the time of
shipment.
38
<PAGE>
Reclamation -- Estimated reclamation, site restoration and closure costs for
each mine are charged to operations over the expected life of the mine using the
units of production method.
Income Taxes -- The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers
all expected future events other than enactments of changes in the tax law or
rates. Income tax accounting information is disclosed in Note 17 to the
consolidated financial statements.
Cash Equivalents -- The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents.
Earnings per Share -- Earnings per share have been calculated based on the
weighted average number of common shares outstanding during the year. Shares
issuable under options and warrants are excluded from the computation when they
are not dilutive.
Long-Lived Assets -- In March 1995, the FASB issued Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be disposed of", which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present. The
Company adopted Statement No. 121 in the first quarter of 1996. The effect of
adoption was not material.
Accounting Estimates in the Preparation of Financial Statements -- The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications -- Certain of the comparative figures have been reclassified
to conform with the current year's presentation.
39
<PAGE>
2. RESULTS FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE SIX MONTHS ENDED
DECEMBER 31, 1994
The following financial information for the year ended December 31, 1995 and the
six months ended December 31, 1994 is unaudited and is being presented for
comparative purposes:
<TABLE>
<CAPTION>
Year Ended Dec. 31,
-----------------------------------
1995
(In thousands) 1996 (Unaudited)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Mining Revenue $ 578 $ -
Gross Operating Loss (7,341) (5,165)
Loss from continuing operations before
income taxes and minority interest (10,658) (18,884)
Provision for income taxes - -
Minority interest in net loss of subsidiary 273 25
Loss from continuing operations (10,385) (18,859)
Loss from discontinued operations - (225)
Net loss $ (10,385) $ (19,084)
==================================
Net loss per common share $ 0.49 $ (1.01)
==================================
<CAPTION>
Six Months Ended Dec. 31,
-----------------------------------
1994
(In thousands) 1995 (Unaudited)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Mining Revenue $ - $ 2,328
Gross Operating Loss (2,776) (4,455)
Loss from continuing operations before
income taxes and minority interest (4,291) (5,804)
Provision for income taxes - -
Minority interest in net loss of subsidiary 25 -
Loss from continuing operations (4,266) (5,804)
Income from discontinued operations - 846
Net loss $ (4,266) $ (4,958)
===================================
Net loss per common share $ (0.22) $ (0.34)
===================================
</TABLE>
3. INVENTORIES
The following is a summary of inventories:
<TABLE>
<CAPTION>
December 31,
-------------------------- June 30,
(In thousands) 1996 1995 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Zinc and lead concentrates $ 439 $ - $ -
Stockpiled ore 278 - -
Materials and supplies 531 250 250
-----------------------------------------
$ 1,248 $ 250 $ 250
=========================================
</TABLE>
40
<PAGE>
4. INVESTMENTS IN MARKETABLE EQUITY SECURITIES
On May 31, 1994, the Company, Dakota Mining Corporation ("Dakota") and
VenturesTrident, L.P. and VenturesTrident II, L.P. entered into an agreement in
principle providing for (i) the purchase of 1,500,000 common shares of Dakota
from the VenturesTrident Partnerships, for $4.00 per share, and, subject to the
completion of the purchase of the VenturesTrident Shares, (ii) the subscription
by Atlas to 3,100,000 newly-to-be issued convertible preferred shares of Dakota.
On October 28, 1994, the Company determined that, based upon the prevailing
market conditions, it was in the best interests of its shareholders not to
proceed with the Dakota acquisition and forfeited $1,000,000 in nonrefundable
deposits to the VenturesTrident Partnerships. Costs of $144,000 incurred in
conjunction with the Dakota transaction were also expensed.
On March 9, 1995 Atlas and Dakota entered into a Subscription Agreement, under
which Atlas purchased 2,419,355 Special Warrants of Dakota at a price of $1.24
per Special Warrant which were subsequently converted into 2,419,355 Common
Shares of Dakota. As a result of such purchase, the Company owned over 9% of
the outstanding Common Shares of Dakota. In connection with the purchase by the
Company of Special Warrants, the Company and Dakota executed a mutual limited
release, whereby each party released the other from any liability arising out of
the May 31, 1994 agreement.
On March 9, 1996 the Company sold its 2,419,355 common shares of Dakota Mining
Corporation for U.S. $1.87 per share, or U.S. $4,519,000. The Company
recognized a gain in 1996 on this sale of $1,332,000.
As further described in note 9, the Company's investment in Vista Gold Corp.
fell below 20% in the fourth quarter of 1996. Accordingly, the investment is
treated as a marketable equity security at December 31, 1996.
The following is a summary of investments in equity securities:
<TABLE>
<CAPTION>
December 31,
---------------------- June 30,
(In thousands) 1996 1995 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dakota Mining Corporation Common Shares
Cost $ - $ 3,187 $ 3,187
Gross Unrealized Gains - 442 896
-------------------------------------
Estimated Fair Value $ - $ 3,629 $ 4,083
=====================================
Vista Gold Corp. Common Shares:
Cost $ 13,864 $ - $ -
Gross Unrealized Gains (2,322) - -
------------------------------------
Estimated Fair Value $ 11,542 $ - $
====================================
</TABLE>
41
<PAGE>
5. FINANCIAL INSTRUMENTS
Financial instruments consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------- June 30,
1996 1995 1995
---------------------------------------------------------
Carrying Fair Carrying Fair Carrying Fair
(In thousands) Value Value Value Value Value Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Short-term assets $1,838 $1,838 $11,972 $11,972 $4,584 $4,584
Long-term equity securities 11,542 11,542 23,756 20,662 25,452 22,251
Liabilities
Short-term liabilities 5,809 5,809 5,595 5,595 2,704 2,704
Long-term debt 13,310 11,455 13,500 10,795 3,500 2,531
</TABLE>
Short-Term Assets and Liabilities: The fair value of cash and cash equivalents,
marketable equity securities, accounts receivable, accounts payable, other
accrued liabilities and short-term debt approximates their carrying value due to
the short-term nature of these instruments. Marketable equity securities are
available for-sale equity securities with a cost of $0 at December 31, 1996 and
$3,187,000 at December 31, 1995 and June 30, 1995. The unrealized gain is
included as a separate component of shareholders' equity.
Long-Term Equity Securities: Equity securities which are classified as long-term
are included as Investment in Vista Gold Corp. in the consolidated balance
sheets. These equity securities were accounted for on the equity method in the
fiscal period ended December 31, 1995 and June 30, 1995 and consequently are
carried at cost basis as adjusted for Atlas's share of Vista's gain or loss and
amortization of the excess cost over the basis in Vista's net assets in the
balance sheets for those years. At December 31, 1996, these securities are
available-for-sale equity securities with a basis of $13,864,000 and are stated
at fair value based upon quoted market prices. The unrealized gain is included
as a separate component of shareholders' equity.
Long-Term Debt: The fair value of long-term debt is based primarily on the
company's current established refinancing rates of 12%.
6. PROPERTY, PLANT AND EQUIPMENT.
The following is a summary of property, plant and equipment:
<TABLE>
<CAPTION>
Accumulated
Depreciation,
Depletion
Acquisition Amortization & Net Book
December 31, 1996 (In thousands) Costs Impairment Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property and leaseholds $ 6,169 $ 2,262 $ 3,907
Land improvements 5,734 5,734 -
Deferred exploration and development costs
Producing 5,371 3,358 2,013
Nonproducing 3,930 - 3,930
Buildings and equipment 42,562 33,425 9,137
--------------------------------------------
Total $ 63,766 $ 44,779 $ 18,987
============================================
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Accumulated
Depreciation,
Depletion
Acquisition Amortization & Net Book
December 31, 1995 (In thousands) Costs Impairment Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property and leaseholds $ 5,167 $ 2,262 $ 2,905
Land improvements 5,734 5,734 -
Deferred exploration and development costs
Producing 3,313 3,313 -
Nonproducing 1,070 - 1,070
Buildings and equipment 35,481 33,097 2,384
---------------------------------------------
Total $ 50,765 $ 44,406 $ 6,359
=============================================
<CAPTION>
Accumulated
Depreciation,
Depletion
Acquisition Amortization & Net Book
June 30, 1995 (In thousands) Costs Impairment Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Property and leaseholds $ 2,256 $ 2,256 $ -
Land improvements 5,734 5,734 -
Deferred exploration and development costs
Producing 3,470 3,470 -
Nonproducing 750 - 750
Buildings and equipment 35,476 33,201 2,275
----------------------------------------------
Total $ 47,686 $ 44,661 $ 3,025
==============================================
</TABLE>
In September 1996 the Company reacquired the Grassy Mountain property from
Newmont Grassy Mountain Corporation for $206,000, a $500,000 note due September
1997 (Note 10) and assumption of a reclamation liability estimated at $201,000.
On October 25, 1995 Atlas purchased the Doby George property from Independence
Mining Company Inc. for the sum of $400,000 in cash plus 1.4 million shares of
the Company's common stock.
During September 1994 the Company placed the Gold Bar mine on standby and
recorded an expense of $1,275,000 for estimated shutdown and standby costs
through the end of the fiscal year. During the fourth quarter of the fiscal year
ended June 30, 1995 the Company recorded $210,000 of additional shutdown and
standby costs. During the year ended December 31, 1996 and the six months ended
December 31, 1995 the Company recorded $1,232,000 and $671,000, respectively, of
additional shutdown and standby costs.
During the fourth quarter of fiscal year 1994, the Company reviewed its mine
plan and feasibility studies at certain Gold Bar properties. It was determined
that the Company's unamortized investment could not be recovered from
undiscounted cash flows over the remaining mine life, accordingly, the Company
recorded an impairment of $5,355,000 in carrying value of its producing
properties.
43
<PAGE>
7. STOCKHOLDERS' EQUITY
At a Special Meeting of Stockholders held on December 15, 1994, an amendment was
approved to the Company's Certificate of Incorporation increasing the number of
authorized shares of common stock from 25 million to 50 million. The Company is
also authorized to issue 1,000,000 shares of preferred stock, par value $1 per
share. The preferred stock is issuable in series, with designations, rights and
preferences to be fixed by the Board of Directors. The Board of Directors has
established a series of 200,000 shares of Series Preferred Stock designated
Series A Junior Participating Preferred Stock ("Series A Preferred Stock"), no
shares of which have been issued.
At December 31, 1996 there were 875,000 shares of Common Stock reserved for the
conversion of an outstanding convertible Debenture and 2,032,111 shares of
Common Stock reserved for Option Warrants traded on the American Stock Exchange
which are exercisable at a price of $15.625 per share and have no expiration
date ("Perpetual Warrants"). Since June 30, 1993, no Perpetual Warrants have
been issued or exercised. Also at December 31, 1996 there were 4,545,455 shares
of Common Stock reserved for Option Warrants issued in connection with the
private placements discussed in Note 20, with the following terms and activity:
<TABLE>
<CAPTION>
Shares Exercised
--------------------------
Year
Ended Six Mo. Year
June Ended Ended Outstanding
Date of Exercise Shares 30, Dec. 31, Dec. 31 Dec. 31,
Issuance Price Expiration Date Issued 1995 1995 1996 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aug. 15, 1994 $7.00 Aug. 15, 1999 3,243,405 - - - 3,243,405
Dec. 15, 1994 $7.00 Dec. 15, 1999 1,302,050 - - - 1,302,050
</TABLE>
The Company has an Amended and Restated Rights Agreement under which a holder of
Preferred Stock Purchase Rights ("Rights") is entitled to purchase from the
Company 1/200th of a share of Series A Preferred Stock at a price of $45 per
1/200th of a share. Subject to action by the Board of Directors, the Rights
become exercisable upon the occurrence of certain events, including acquisition
by a person or group of 15% or more of the outstanding Common Stock of the
Company. Upon any such acquisition, the amended Plan provides that upon
exercise of Rights and payment of the purchase price, the exercising Rights
holder is entitled to receive, in lieu of Series A Preferred Stock, shares of
Common Stock having a market value equal to twice the purchase price. The
Amended and Restated Rights Agreement was amended as of September 13, 1993 and
August 15, 1994 to provide that the transactions with Phoenix Financial Holdings
Inc., M.I.M. Holdings Limited and Mackenzie Financial Corporation would not
cause the Rights to become exercisable (Note 20).
8. EMPLOYEE INCENTIVE PLANS
The Company's Long Term Incentive Plan (the "LTIP") provides that key employees
may be granted options to purchase Common Stock at the fair value of the shares
on the date of grant. At a February 17, 1995 Meeting of Stockholders, the
shareholders approved an amendment to the LTIP (i) to increase by 850,000 to
1,745,000 the number of shares authorized for issuance under the LTIP, (ii) to
provide for the automatic grant to non-employee directors of the Company of
awards of stock options under the LTIP and (iii) to reduce the minimum period
prior to which an option may be exercised for all options granted after January
6, 1995 from one year to six months. Options are exercisable for a maximum of
ten years from the date of grant and no options may be granted after July 31,
1999.
44
<PAGE>
<TABLE>
<CAPTION>
Date Granted Exercise Price Shares
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Granted October 1, 1986 $ 6.750 6,000
Granted January 6, 1988 16.125 6,000
Granted August 2, 1989 16.750 10,000
Granted November 13, 1989 17.250 2,000
Granted April 14, 1990 14.625 21,500
Granted July 23, 1990 12.125 8,000
Granted September 12, 1990 13.125 47,000
Granted March 6, 1991 7.375 6,450
Granted January 6, 1993 5.125 43,500
Granted March 11, 1993 2.750 30,000
Granted November 15, 1993 4.250 815,000
Granted December 1, 1993 5.250 10,000
Granted May 2, 1994 8.000 5,000
Exercised (30,000)
Canceled (185,950)
- -----------------------------------------------------------------------------------------------------------
Balance outstanding as of June 30, 1994 794,500
Granted August 10, 1994 4.750 122,500
Granted January 6, 1995 2.125 80,000
Granted January 6, 1995 4.500 450,000
Granted January 6, 1995 3.000 83,000
Granted January 6, 1995 4.000 83,000
Granted January 6, 1995 5.000 84,000
Granted May 19, 1995 2.000 235,000
Canceled (815,000)
- -----------------------------------------------------------------------------------------------------------
Balance outstanding as of June 30, 1995 1,117,000
Granted July 12, 1995 1.875 40,000
Granted August 10, 1995 2.000 225,500
Granted December 13, 1995 1.500 20,000
Granted December 15, 1995 2.000 7,800
Canceled (347,000)
- -----------------------------------------------------------------------------------------------------------
Balance outstanding as of December 31, 1995 1,063,300
Granted June 21, 1996 1.500 200,000
Granted November 1, 1996 1.000 601,000
Granted November 5, 1996 1.000 100,000
Canceled (692,500)
- -----------------------------------------------------------------------------------------------------------
Balance outstanding as of December 31, 1996 1,271,800
=========
</TABLE>
45
<PAGE>
Summary of options outstanding as of December 31, 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Date Exercise Price Shares
- --------------------------------------------------------------------------------------
<S> <C> <C>
January 6, 1995 $ 2.125 60,000
May 19, 1995 2.000 60,000
July 12, 1995 1.875 20,000
August 10, 1995 2.000 203,000
December 13, 1995 1.500 20,000
December 15, 1995 2.000 7,800
June 21, 1996 1.500 200,000
November 1, 1996 1.000 601,000
November 5, 1996 1.000 100,000
- --------------------------------------------------------------------------------------
1,271,800
==========
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
During 1996 the Company authorized the grant of options to key personnel for up
to 901,000 shares of the Company's common stock. Of these, 200,000 were granted
with a two year term, expiring June 21, 1998 and fully vested and exercisable at
time of grant. Also, there were 100,000 options granted with a two year
term expiring November 5, 1998 and fully vested and exercisable at time of
grant. All remaining options granted have 10 year terms expiring November 1,
2006 and vest and become fully exercisable at the end of six months of continued
employment. In 1995 the Company granted a total of 763,300 options to key
personnel.
Pro forma information regarding net income and earnings per share as required by
Statement 123, has been determined as if the Company had accounted for its
employee stock options under fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the Black-
Scholes option pricing model with the following weighted-average assumptions for
1995 and 1996: risk-free interest rate of 5.09%; dividend yields of 0.0%;
volatility factors of the expected market price of the Company's common stock of
.462; and a weighted-average expected life of the option of 4 years.
The Black-Scholes option valuation model was developed for the use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option pricing models require the input of
highly subjective assumptions, including expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. The Company's pro
forma information for the years ended December 31, is as follows (in thousands
except for earnings per share)
46
<PAGE>
<TABLE>
<CAPTION>
1995
1996 (unaudited)
---------------------------------
<S> <C> <C> <C>
Pro forma net loss $(10,533) $(19,299)
Pro forma earnings per share
Primary $ (.50) $ (1.02)
Fully diluted $ (.50) $ (1.02)
</TABLE>
A summary of the Company's stock option activity, and related information for
the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------------------
Weighted-Average Weighted-Average
(in thousands) Options Exercise Price Options Exercise Price
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding-beginning of year 1,063 $ 3.45 300 $ 4.25
Granted 901 1.11 763 3.14
Exercised - - - -
Forfeited 692 4.23 - -
Outstanding-end of year 1,272 1.37 1,063 3.45
Exerciseable at end of year 521 1.62 400 3.69
Weighted-average fair value of
options granted during year $ 0.31 $ - $ 0.55 $ -
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged from
$1.00 to $2.125. The weighted-average remaining contractual life of those
options is 8.11 years.
9. INVESTMENTS
Investment in Vista Gold Corp.
On August 15, 1994, the Company completed the purchase from M.I.M. (Canada) Inc.
("M.I.M.") of 12,694,200 common shares of Granges Inc. (subsequently changed to
Vista Gold Corp., hereinafter referred to as "Vista" see below) which
represented 37.2% of the issued and outstanding shares of Vista. 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).
Vista is a Canadian-based precious metals mining company the shares of which are
traded on the Toronto Stock Exchange and the American Stock Exchange. Effective
May 1, 1995 Vista amalgamated with Hycroft Resources and Development Corporation
("Hycroft"), which operates the Crofoot/Lewis mine located in Nevada. Prior to
the amalgamation, Vista had a 50.5% ownership position in Hycroft. The terms of
the amalgamation called for each common share of Hycroft to be exchanged for
0.88 of a common share of Vista and for each common share of Vista outstanding
prior to the amalgamation, to be exchanged for one common share of Vista. After
the amalgamation, Atlas continued to hold 12,694,200 shares of Vista,
representing 27.5% of the outstanding common shares. On May 25, 1995 the
Company purchased 20,700 common shares of Vista which increased the Company's
interest to a total of 12,714,900 common shares.
47
<PAGE>
On October 16, 1996 the Company sold 4,240,324 Vista Common shares at $1.32 per
share resulting in a net loss of $1.5 million. The Company continues to hold
8,393,826 Vista common shares, which have been pledged as security for the
Company's $9.81 million Exchangeable Debentures due October 25, 2000 (Note 10).
In October, Vista, known at the time as Granges Inc., amalgamated with Da Capo
Resources Ltd. to form Vista, further reducing the Company's ownership interest
in Vista to 9.6%.
The Company reported the results of Vista's operations on the equity method from
the acquisition date of August 15, 1994 until September 30, 1996. On October 1,
1996 as a consequence of the sale of the Vista common shares and the
amalgamation with De Capo Resources Ltd., noted above, the Company changed its
method of accounting for the Vista investment to the lower of cost or market
basis.
Summarized Statements of Operations and Balance Sheets of Vista are presented
below.
<TABLE>
<CAPTION>
Nine Mo. Ended Six Mo. Ended Year Ended
September 30, December 31, June 30,
STATEMENT OF OPERATIONS 1996 1995 1995
(U.S. GAAP, U.S. Dollars, in thousands) (unaudited) (unaudited) (unaudited)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 26,062 $ 19,459 $ 42,833
Cost of sales 21,851 16,544 34,179
Depreciation, depletion & amortization 8,247 4,446 4,773
-----------------------------------------------------
Income (loss) from mining operations (4,036) (1,531) 3,881
-----------------------------------------------------
Net Loss $ (8,482) $ (1,303) $ (1,405)
=====================================================
</TABLE>
<TABLE>
<CAPTION>
June 30,
BALANCE SHEET December 31, 1995
(U.S. GAAP, U.S. Dollars, in thousands) 1995 (unaudited)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets $ 27,911 $ 34,109
Non-current assets $ 36,305 $ 53,136
Current liabilities $ 6,239 $ 5,346
Non-current liabilities $ 3,409 $ 3,206
Net equity $ 54,568 $ 78,693
</TABLE>
Under the equity method, the Company recorded a loss of $2,721,000, $1,703,000
and $1,361,000 for the nine months ended September 30, 1996 the six months ended
December 31, 1995 and for the period from August 15, 1994 (date of acquisition)
to June 30, 1995 respectively.
In connection with the May 1, 1995 amalgamation of Vista and Hycroft Resources
and Development Corporation, the Company re-evaluated its investment in Vista
relative to the fair values implied in the amalgamation and to known reserves at
the Crofoot/Lewis mine. As a result, the Company recorded an $11,419,000
impairment of its investment in Vista as of June 30, 1995. The impairment
reduced the excess cost of the investment over the net assets attributable to
Atlas's interest in Vista from approximately $20.5 million on August 15, 1994
(date of acquisition) to approximately $9 million at June 30, 1995. The Company
amortized the excess cost of the
48
<PAGE>
investment related to producing properties on a unit of production (gold ounces)
basis which is included in the reported loss discussed above.
Effective September 29, 1995 the Company entered into an exploration joint
venture agreement ("the Agreement") with Vista with respect to approximately 34
square miles of the Company's Gold Bar claim block. In order to earn a 50%
undivided interest in not more than 15 square miles within the area of interest,
the terms of the Agreement required Vista to spend U.S. $2.25 million on
exploration and development within three years on 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, and to complete an
independent reserve report recommending development of a deposit containing a
mineable reserve in excess of 300,000 ounces of gold. Upon execution of the
Agreement, Vista paid the Company $359,000 for reimbursement of past exploration
expenses. On January 8, 1997 the Company entered into an agreement with Vista
to terminate the Agreement ("the Termination Agreement") covering the Gold Bar
claim for a total cost of $450,000. As a result of the Termination Agreement,
Atlas has regained a 100% interest in this portion of the claim block, which
contains the identified Mill Site deposit and the Company's Gold Bar mill, a
3,000 ton per day carbon-in-leach facility located centrally in this portion of
the block.
Investment in Cornerstone Industrial Minerals Corporation.
On November 30, 1995 Atlas purchased 12.2 million (51%) of the outstanding
common shares of Phoenix Financial Holdings Inc. (Phoenix) for an aggregate
purchase price of Cdn. $1,781,200 at which time, Atlas assumed control of the
Phoenix Board of Directors. At a meeting of the shareholders on September 3,
1996 the shareholders of Phoenix approved a name change to Cornerstone
Industrial Minerals Corporation ("Cornerstone").
On December 13, 1996 Atlas and Cornerstone executed an agreement ("the "Purchase
Agreement") providing for the purchase by Cornerstone of all the issued and
outstanding shares of Atlas Perlite, Inc., Atlas's wholly owned subsidiary the
major asset of which is the Tucker Hill perlite project. The Purchase Agreement
calls for payment to Atlas of $1 million in cash, 9,647,986 Cornerstone common
shares, the reimbursement of Atlas's Tucker Hill development costs of $2,945,282
and the retention by the Company of a royalty equivalent of 2% of the gross
proceeds generated from the sale of minerals from Tucker Hill. The purchase
price is payable in three stages as follows: $125,000 and 1,205,998 shares due
at closing, $500,000 and 4,823,993 shares of common stock upon obtaining all
operating permits and $375,000 and 3,077,994 shares of common stock related to
Atlas assisting the Company in meeting three other milestones which include
obtaining base load perlite contracts for a specified amount of revenues per
year, obtaining permanent project financing and achieving commercial production.
As of December 31, 1996, the Company has met the first two of these stages
resulting in the Company increasing its ownership percentage to 61%. Upon
completion of the transaction, the Company will have a 65% equity position in
Cornerstone.
Investment in Arisur Inc.
On October 8, 1996 the Company acquired Arisur Inc., a Grand Cayman corporation
("Arisur") which owns and operates the Andacaba and the Don Francisco lead, zinc
and silver mines located in southern Bolivia, South America. The Company
acquired a 50% interest in Arisur from Arimetco International Inc., a Canadian
corporation for $3 million in cash and purchased 100% of Suramco for four
million shares (valued at $3,250,000) of the Company's common stock. Suramco
owns the remaining 50% interest in Arisur.
49
<PAGE>
The acquisition was accounted for as a purchase under generally accepted
accounting principles. Costs of acquisition in excess of Arisur's book value
have been allocated to the mine and mill equipment, the known reserves of Arisur
and the future exploration potential. The amortization of these costs will be
over the estimated lives of the respective assets, and on the units of
production method for the known reserves. Exploration potential will be
amortized as reserves are delineated. The functional currency of Arisur is the
U.S. dollar.
The following are pro forma results of operations as though Arisur had been
acquired as of January 1, 1996 and as of January 1, 1995.
<TABLE>
<CAPTION>
1996 1995
(unaudited) (unaudited)
---------------------------
<S> <C> <C>
Mining Revenue $ 3,469 $ 4,030
Production costs (2,919) (2,983)
Depreciation, depletion and amortization (1,259) (1,394)
Other costs (10,198) (19,044)
---------------------------
Net loss $ (10,907) $ (19,391)
---------------------------
Earnings per share $ (0.45) $ (0.85)
===========================
</TABLE>
The results of operations of Cornerstone and Arisur (from the respective dates
of acquisition to December 31, 1996) are consolidated into the Company's
financial statements using the principles of consolidation discussed in Note 1.
10. CURRENT AND LONG-TERM DEBT
Long-term debt (in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------- June 30,
1996 1995 1995
------------------------------------------
<S> <C> <C> <C>
Redeemable Convertible Debenture, Due
September 20, 1998, bearing interest at 9% (1) $ 3,500 $ 3,500 $ 3,500
Exchangeable Debentures, due October 25, 2000
bearing interest at 7% (2) 9,810 10,000 -
------------------------------------------
Total long-term debt $ 13,310 $ 13,500 $ 3,500
==========================================
</TABLE>
(1) The Convertible Debenture is convertible as to principal at the option of
the holder into shares of the Company's common stock at the rate of $4.00 per
share. Interest on the Convertible Debenture is also payable either in cash or
in common stock at the rate of $4.00 per share.
(2) The Exchangeable Debentures are exchangeable, at the Debentureholder's
option, into common shares of Vista Gold Corp. ("Vista Shares") at the rate of
42.5 Vista Shares for each $100 of principal amount of Exchangeable Debentures
surrendered. The Company may also redeem the Exchangeable Debentures on or
after October 25, 1998 if the average market price of the Vista Shares is at
least $2.94 per share at the rate of 42.5 Vista Shares per $100 of Exchangeable
Debentures held. The Company may also pay the Exchangeable Debentures at
maturity in either cash or Vista shares (at the Company's option) at a price per
share equal to 95% of the average market price of the Vista shares on the date
of maturity.
50
<PAGE>
The proceeds from the Exchangeable Debentures were placed in escrow on November
10, 1995 pending completion of certain registration and qualification
requirements. On February 8, 1996 the Company met the registration and
qualification requirements, releasing the escrowed funds.
Short-term debt (In thousands)
<TABLE>
<CAPTION>
December 31,
-------------------------- June 30,
1996 1995 1995
--------------------------------------
<S> <C> <C> <C>
Short term note (1) $ - $ 2,000 $ -
Bank debt (2) 606 - -
Advances on sales of concentrates (3) 523 - -
Short term loan (4) 500 - -
Note payable - Grassy Mountain (5) 500 - -
--------------------------------------
$ 2,129 $ 2,000 $ -
======================================
</TABLE>
(1) On November 29, 1995 the Company entered into a $2,000,000 short term loan
facility with First Marathon Inc. The Company pledged as security approximately
2.4 million common shares in Dakota Mining Corporation and 4.2 million common
shares of Vista. On February 8, 1996 the Company met the registration and
qualification requirements related to the Exchangeable Debentures, using the
released escrow funds to repay the loan facility.
(2) Represents the remaining balance of a note payable by Arisur to BHN
Multibanca S.A., a local Bolivian bank. The original note, entered into in June
1995 was for $2.3 million, bears interest at 12% per annum, and is payable in
varying monthly installments of principal and interest of approximately
$100,000. The balance is due on June 30, 1997.
(3) Under the terms of its agreement with Glencore International AG for the
sale of zinc/silver and lead/silver concentrates, the Company may take advances
of up to 80% of the estimated value of the concentrates available for shipment
via rail from the Company's warehouse in Potosi, Bolivia, and an additional 10%
of this amount may be advanced once the concentrate is ready for shipment from
either Antofagasta, Chile (zinc/silver) or Arica, Chile (lead/silver). Interest
is payable on the advances at the "New York" prime rate plus 1.5%.
(4) In June 1996 Arisur entered into an additional agreement with Glencore for
a prepayment to be applied against 1997 production in the amount of $500,000.
Interest is payable on the outstanding balance at the three month LIBOR rate
plus 1%.
(5) Note payable to Newmont (note 6). The Note is non-interest bearing and is
due on September 18, 1997.
11. DETAILS OF CERTAIN BALANCE SHEET CAPTIONS
A summary of restricted cash and securities is as follows:
<TABLE>
<CAPTION>
December 31,
------------------------ June 30,
(In thousands) 1996 1995 1995
-------------------------------------
<S> <C> <C> <C>
Collateral for a $5,461,000 letter of credit (a)(c) $ 5,492 $ 4,602 $ 4,869
Other restricted cash Collateral for a $1,500,000
Reclamation bond (b) 774 765 790
-------------------------------------
$ 6,266 $ 5,367 $ 5,659
=====================================
</TABLE>
(a) Securing $6,500,000 performance bonds related to the Company's uranium
reclamation obligation.
(b) Securing $1,500,000 performance bonds related to the Company's Gold Bar
reclamation obligation.
(c) Securing $1,901,000 performance bonds related primarily to the Company's
Gold Bar reclamation obligation.
51
<PAGE>
A summary of other assets is as follows:
<TABLE>
<CAPTION>
December 31,
------------------- June 30,
(In thousands) 1996 1995 1995
-----------------------------
<S> <C> <C> <C>
Debt issuance costs $ 1,027 $ 902 $ -
Excess of cost over net assets of Cornerstone (Note 9) 492 442 -
Other 86 164 246
-----------------------------
$ 1,605 $ 1,508 $ 246
=============================
</TABLE>
A summary of other accrued liabilities is as follows:
<TABLE>
<CAPTION>
December 31,
------------------- June 30,
(In thousands) 1996 1995 1995
-----------------------------
<S> <C> <C> <C>
Accrued compensation $ 485 $ 246 $ 230
Mine reclamation accrual 300 300 300
Accrued asbestos reclamation
costs (Notes 13 and 14) 126 393 566
Other 1,225 1,059 1,007
-----------------------------
$ 2,136 $ 1,998 $ 2,103
=============================
</TABLE>
A summary of other liabilities, long-term is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------- June 30,
(In thousands) 1996 1995 1995
--------------------------------
<S> <C> <C> <C>
Long-term uranium reclamation cost (Notes 13 and 14) $ 2,705 $ 3,713 $ 4,902
Pension and deferred compensation obligations 1,243 1,441 1,405
Mine reclamation accrual 3,018 2,812 3,042
Accrued postretirement benefit obligation (Note 16) 1,200 1,222 1,232
Other 1,339 996 1,079
--------------------------------
$ 9,505 $ 10,184 $ 11,660
================================
</TABLE>
52
<PAGE>
12. DETAILS OF CERTAIN STATEMENTS OF CASH FLOW CAPTIONS
The components of the adjustment to reconcile loss to net cash used in
operations as reflected in the Consolidated Statements of Cash Flows are as
follows:
<TABLE>
<CAPTION>
Six
Year Months
Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, ------------------------
(In thousands) 1996 1995 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Depreciation, depletion and amortization $ 372 $ 15 $ 395 $ 4,547
Equity loss in Vista 2,721 1,703 1,361 -
Minority interest in net loss of subsidiary (273) (25) - -
Forfeiture of deposit on stock purchase agreement - - 525 -
Write-down of investment in Vista - - 11,419 -
Loss on sale of Vista shares 1,439 - - -
Gain on sale of Dakota shares (1,333) - - -
Write-down of mineral properties - - - 5,355
Other adjustments 161 102 498 -
----------------------------------------------
$ 3,087 $ 1,795 $ 14,198 $ 9,902
==============================================
The components of net changes in operating assets and liabilities
are as follows:
Decrease (increase) in trade/other accounts receivable $ 326 $ (114) $ (36) $ -
Decrease (increase) in inventories (263) - 843 1,024
Decrease (increase) in prepaid expense and other current assets 8 273 (69) (57)
Decrease (increase) in other assets and restricted cash and securities (843) 407 2,419 (2,565)
Decrease (increase) in trade accounts receivable (298) 924 (1,500) 860
Decrease in other accrued liabilities (507) (104) (1,784) (182)
Increase (decrease) in income taxes payable - - - (477)
Increase (decrease) in other liabilities, long-term (49) (287) 65 (820)
----------------------------------------------
$ (1,626) $ 1,099 $ (62) $ (2,217)
==============================================
</TABLE>
Net cash required for operating activities reflects cash payments for interest
and income taxes as follows:
<TABLE>
<CAPTION>
Six
Months
Year Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, ------------------------
(In thousands) 1996 1995 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest (net of amount capitalized) $ 793 $ 20 $ 99 $ 562
Income taxes - - - -
</TABLE>
13. DISCONTINUED OPERATIONS
During fiscal year 1995 the Company recognized income of $621,000 from
discontinued operations, this included a gain of $846,000 recorded upon the
receipt of a payment from the Department of Energy under Title X of the Energy
Policy Act (Note 14) in connection with the reclamation of the
53
<PAGE>
Company's uranium mine and mill site in Moab, Utah. The gain was partially
offset by a loss of $225,000 due to cost overruns at the Company's Coalinga,
California asbestos mine and mill reclamation project (Note 14).
During fiscal year 1994, the Company recognized income of $2,175,000 from
discontinued operations primarily due to the recovery from insurance carriers of
cleanup costs at the Coalinga reclamation project.
The items above are included in the consolidated statements of operations under
the heading "Income from discontinued operations". The following table
summarizes the operating income (loss) of the discontinued businesses:
<TABLE>
<CAPTION>
Building
Asbestos Products &
Mining & Ready-Mix Service &
Period ended (In thousands) Milling Concrete Other Total
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1996 $ - $ - $ - $ -
December 31, 1995 $ - $ - $ - $ -
June 30, 1995 $ (225) $ - $ 846 $ 621
June 30, 1994 $ 1,997 $ 136 $ (42) $ 2,175
</TABLE>
14. COMMITMENTS AND CONTINGENCIES
The Company is obligated to decommission and reclaim its uranium mill site
located near Moab, Utah. The Company discontinued its uranium operations and
permanently shut down its uranium mill and mines in 1987, estimated shut-down
expenses and reclamation costs of $17,406,000 were accrued. The balance in this
accrual at December 31, 1996 was $2,705,000. Title X of "The Comprehensive
National Energy Policy Act" ("Title X"), enacted in October 1992, provides for
the reimbursement of past and future reclamation expenses related to uranium
sites operated under Atomic Energy Commission contracts. The Company's uranium
reclamation costs are reduced by this Government cost sharing program since 56%
of its tailings were generated under government contracts. The Company believes
the accrual, when combined with anticipated reimbursements under the Title X
program and the restricted cash used as collateral for the surety, is sufficient
to cover future reclamation costs.
In July 1994, the Company submitted a claim to the Department of Energy (the
"DOE") under Title X for approximately $5 million of reclamation costs incurred
from fiscal year 1986 through fiscal year 1994. The DOE has given approval on
approximately $4.5 million of the claim and $2.5 million in reimbursement,
disallowing $500,000 pending further substantiation of the claim for
reimbursement. On December 29, 1994, the Company received $846,000 as a partial
payment of the approved reimbursement which was recorded as income from
discontinued operations. In June 1995 the Company submitted a second claim to
the DOE under Title X for approximately $3.6 million which included reclamation
costs incurred from fiscal year 1980 through fiscal year 1985, from June 1994
through May 1995 and reclamation costs previously disallowed. In May 1996 the
Company submitted a third claim for approximately $4,000,000 of costs incurred
from June 1995 through March 1996. In September 1996 and 1995 the Company
received $816,000 and $1,032,000 as partial payments against the three claims.
These amounts have been added to the
54
<PAGE>
Company's reclamation accrual. Timing of the remaining payments for approved
reimbursements is a function of Congressional appropriation of Title X funding.
During fiscal year 1988, the United States Environmental Protection Agency
notified the Company that it was one of several potentially responsible parties
for cleanup costs at the Company's former asbestos mine and mill site near
Coalinga, California and in the City of Coalinga. A prolonged period of inquiry
and administrative process concerning this matter followed.
In fiscal years 1995, 1993 and 1991, the Company established a reserve, and
recorded as an expense, $225,000, $600,000 and $3,000,000, respectively, to
cover the Company's share of cleanup costs. In fiscal year 1992, the Company
began legal action against thirteen insurance carriers which had issued
insurance policies with respect to the site. During fiscal year 1994, the
Company reached settlement with a number of the carriers and recorded a gain
from discontinued operations of $2,175,000. All claims with remaining carriers
were settled in fiscal year 1995. The remedial action plan commenced October
1994 and was completed in 1996. The Company received EPA's "Approval of
Construction Completion" on November 14, 1996.
Minimum future rental commitments under the Company's non-cancelable operating
leases having a remaining term in excess of one year at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Year ended December 31, (In thousands)
- --------------------------------------------------------------------------
<S> <C>
1997 $ 205
1998 205
1999 182
2000 109
Later years 64
-------
Total minimum payments required $ 765
=======
</TABLE>
Amounts charged to rent expense in the year ended December 31, 1996, the six
months ended December 31, 1995 and the fiscal years ended June 30, 1995 and 1994
were $201,000, $81,200, $550,000 and $670,000 respectively.
15. EMPLOYEE RETIREMENT PLANS
The Company has a trusteed and insured retirement plan covering substantially
all salaried employees. The plan provides pension benefits that are based on
final average compensation minus certain adjustments for primary social security
benefits. The Company's funding policy for the plan is to make at least the
minimum annual contributions required by applicable government regulations.
Plan assets are invested primarily in equity securities, corporate and
government bonds and money market funds.
55
<PAGE>
<TABLE>
<CAPTION>
Six
Year Months
Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, ---------------------
(In thousands) 1996 1995 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service costs-benefits earned during the year $ 71 $ 27 $ 83 $ 123
Interest cost on projected benefit obligation 451 242 432 441
Actual return on plan assets (700) (290) (218) (90)
Net amortization and deferral 318 80 (223) (399)
----------------------------------------------
Net periodic pension cost for the year $ 140 $ 59 $ 74 $ 75
==============================================
Assumed long-term rate of return on plan assets 8.5% 8.5% 8.5% 8.5%
</TABLE>
The following table sets forth the funded status of the plan and amounts
recognized in the Company's financial statements at December 31, 1996 and 1995,
and June 30, 1995:
<TABLE>
<CAPTION>
December 31,
----------------------- June 30,
(In thousands) 1996 1995 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated benefit obligation based on salaries to date
including vested benefit obligation of $6,296,435,
$6,370,000 and $5,449,000, for December 31, 1996,
December 31, 1995 and June 30, 1995, respectively $ (6,342) $ (6,381) $ (5,344)
Additional benefit obligation based on estimated future
salary levels (163) (146) (145)
------------------------------------
Projected benefit obligation (6,505) (6,527) (5,489)
Fair value of plan assets 5,122 4,952 4,971
------------------------------------
Funded status (1,383) (1,575) (518)
Unrecognized net obligation at July 1, 1989 and 1988 being
recognized over approximately 15.88 years 38 51 58
Unrecognized net loss (gain) 931 963 (42)
------------------------------------
Accured pension cost $ (414) $ (561) $ (502)
====================================
Assumed discount rate 7.25% 7.25% 8.25%
Assumed rate of increase in future compensation 5.0% 5.0% 5.0%
</TABLE>
Effective March 1, 1997, the Company elected to freeze future benefit accurals
under the plan. Past benefits earned will not be effected by this freeze.
The Company has an Investment and Savings Plan to assist eligible employees in
providing for retirement or other future financial needs. Employee contributions
(up to 10% of their earnings) are matched in Company stock by the Company at a
rate of 100% up to a maximum of 6% of the employee's earnings. In addition, the
Company provides a 4% contribution for all eligible employees compensated on an
hourly scale. The Company's contributions to this Plan in the year ended
56
<PAGE>
December 31, 1996 the six months ended December 31, 1995 and the fiscal years
ended June 30, 1995 and 1994 were $69,000, $34,000, $91,000 and $179,000,
respectively.
16. OTHER POSTRETIREMENT BENEFIT PLANS
In addition to the Company's defined benefit pension plan the Company has two
defined benefit postretirement plans covering most salaried employees. One plan
provides medical benefits and the other provides life insurance benefits. The
postretirement health care plans are contributory, with retiree contributions
adjusted annually, and contain other cost-sharing features such as deductibles
and coinsurance. The accounting for the health care plans anticipates future
cost-sharing changes to the written plan that are consistent with the Company's
expressed intent to increase the retiree contribution rate annually for the
expected general inflation rate for that year. The life insurance plan is non-
contributory. The Company's policy is to fund the cost of the postretirement
health care benefits in amounts determined at the discretion of management and
to make annual contributions to the life insurance plan in level amounts over
the plan participant's expected service period.
The following table shows the plan's combined funded status reconciled with the
amounts recognized in the Company's financial statements:
<TABLE>
<CAPTION>
December 31,
--------------------------------- June 30,
(In thousands) 1996 1995 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $ (690) $ (674) $ (686)
Fully eligible active plan participants (45) - -
Other active participants (114) (208) (190)
-------------------------------------------------
Accrued postretirement benefit cost (849) (882) (876)
Unrecognized prior service cost (109) (118) (123)
Unrecognized net gain (242) (222) (233)
-------------------------------------------------
Accrued postretirement benefit cost $ (1,200) $ (1,222) $ (1,232)
=================================================
<CAPTION>
Six Months
Year Ended Ended Year Ended
(In thousands) Dec. 31, 1996 Dec. 31, 1995 June 30, 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Components of net periodic postretirement benefit cost:
Service cost $ 22 $ 11 $ 49
Interest cost 61 31 75
Net amortization and deferral (32) (16) (22)
-------------------------------------------------
Net periodic postretirement benefit cost $ 51 $ 26 $ 102
=================================================
</TABLE>
The weighted-average annual assumed rate of increase in per capita cost of
covered benefits (i.e. health care cost trend rate) for the plan is 10% for
fiscal year 1997 and is assumed to decrease gradually to 5% in 2002 and remain
at that level thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation for the medical plans as of December 31, 1996,
December 31, 1995 and June 30, 1995 by $29,000, $32,000 and $32,000
57
<PAGE>
respectively, and the aggregate of the service cost and interest cost components
of net periodic postretirement benefit cost for December 31, 1996 by $7,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.25%, 7.25% and 7.5% at December 31,
1996, December 31, 1995 and June 30, 1995 respectively.
17. INCOME TAXES
The Company's provision for income tax from continuing operations consists of
the following:
<TABLE>
<CAPTION>
Six
Months
Year Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, -------------------
(In thousands) 1996 1995 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deferred $ - $ - $ - $ -
Current - - - -
---------------------------------------------
Income tax expense (benefit) $ - $ - $ - $ -
=============================================
</TABLE>
Deferred income taxes result from temporary differences in the timing of income
and expenses for financial and income tax reporting purposes. The primary
components of deferred income taxes result from exploration and development
costs; depreciation, depletion, and amortization expenses; impairments; and
reclamation accruals.
The net deferred tax balances in the accompanying December 31, 1996, December
31, 1995 and June 30, 1995 balance sheets include the following components:
<TABLE>
<CAPTION>
December 31,
--------------------- June 30,
(In thousands) 1996 1995 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss ("NOL") carryovers $ 5,577 $ 34,892 $ 33,711
Tax credit carryovers - 572 756
Impairment of mineral properties 12,359 12,359 12,359
Depreciation, depletion and amortization - 747 882
Reclamation accruals 1,303 1,472 3,399
Postretirement benefit accrual 477 502 431
Impairment of investment in Vista 2,638 3,997 3,997
Equity in Vista 1,367 1,106 512
-----------------------------------
Total deferred tax assets 23,721 55,647 56,047
Deferred tax asset valuation allowance (20,745) (52,031) (51,664)
-----------------------------------
Net deferred tax assets 2,976 3,616 4,383
-----------------------------------
Deferred tax liabilities:
Depreciation, depletion, and amortization 3,789 3,461 4,069
Unrealized gain on investment of equity securities (813) 155 314
Total deferred tax liabilities 2,976 3,616 4,383
-----------------------------------
Net deferred tax balances $ - $ - $ -
===================================
</TABLE>
58
<PAGE>
The change in the Company's valuation allowance is summarized as follows:
<TABLE>
<CAPTION>
Six Months
Year Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, ------------------------
(In thousands) 1996 1995 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Valuation allowance, beginning of period $ 52,031 $ 51,664 $ 45,020 $ 41,567
Continuing Operations 3,730 1,502 7,139 4,214
Discontinued Operations - - 217 (761)
Restriction of carryforwards (34,950) - - -
Other (66) (1,135) (278) -
-------------------------------------------------------
$ 20,745 $ 52,031 $ 51,664 $ 45,020
=======================================================
</TABLE>
A reconciliation of expected federal income taxes on income from continuing
operations at statutory rates with the expense/(benefit) for income taxes is as
follows:
<TABLE>
<CAPTION>
Six Months
Year Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, -------------------------
(In thousands) 1996 1995 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income tax at statutory rates $ (3,730) $ (1,502) $ (7,139) $ (4,214)
Increase in deferred tax asset valuation
allowance 3,730 1,502 7,139 4,214
--------------------------------------------------------
Income tax expense $ - $ - $ - $ -
========================================================
</TABLE>
At December 31, 1996 the Company has unused NOL carryovers of $114,508,000 which
commence expiring in 1998 and investment tax credit (ITC) carryovers of $449,000
which commence expiring in 1997. The Company also has alternative minimum tax
credit (AMT) carryovers of $127,000 which can be carried forward indefinitely.
These carryovers are subject to restriction due to a change of ownership, as
defined by U.S. tax laws, occurring on October 8, 1996 when the company issued
stock for the acquisition of Arisur (Note 9). Due to the change of ownership,
utilization of the Company's NOL, ITC and AMT credit carryovers existing as of
October 8, 1996, is limited to offset approximately $930,000 of taxable income
per year.
59
<PAGE>
18. GEOGRAPHIC SEGMENTS
Financial information regarding geographic segments is set out below:
<TABLE>
<CAPTION>
Six Month
Year Ended Ended Year Ended June 30,
Dec. 31, Dec. 31, ----------------------
1996 1995 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue
United States $ - $ - $ 2,328 $ 19,478
Bolivia 578 - - -
Loss before income taxes
United States (10,390) (4,291) (20,397) (12,040)
Bolivia (268) - - -
Provision for income tax - - - -
------------------------------------------------------------
Loss from continuing operations before
minority interest (10,658) (4,291) (20,397) (12,040)
Minority interest in net loss of subsidiary 273 25 - -
------------------------------------------------------------
Loss from continuing operations (10,385) (4,266) (20,397) (12,040)
Income from discontinued operations - - 621 2,175
------------------------------------------------------------
Net Loss $ (10,385) $ (4,266) $ (19,776) $ (9,865)
============================================================
<CAPTION>
Balance Sheet Dec. 31, Dec. 31, June 30,
1996 1995 1995
---------------------------------------------
<S> <C> <C> <C>
Assets:
United States $ 30,969 $ 53,040 $ 43,497
Bolivia 10,713 - -
</TABLE>
19. DIFFERENCES BETWEEN U.S. AND CANADIAN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)
The Company prepares its consolidated financial statements in accordance with
accounting principles generally accepted in the United States. These differ in
some respects from those in Canada, as described below.
In accordance with U.S. GAAP, equity securities available for sale are recorded
at fair value with unrealized gains and losses reported as a separate component
of stockholders' equity. Accordingly, unrealized gains and losses in investments
in marketable equitable securities at December 31, 1996 and 1995 have been
recorded as a component of stockholders' equity. Under Canadian GAAP, such
investments would be recorded at the lower of cost or market. Therefore, in
conformity with Canadian GAAP, the investments in marketable equity securities
and total stockholders' equity would approximate $13,864,000, $14,694,000,
$3,187,000 and $21,701,000 at December 31, 1996 and December 31, 1995
respectively.
60
<PAGE>
20. PRIVATE PLACEMENTS
The Company conducted a private placement of 9,090,909 Units of Atlas securities
during the summer of 1994 for a purchase price of $5.50 per Unit, each Unit
consisting of one share of the Company's Common Stock and one-half of a warrant
(exercisable for five years) to purchase a share of the Company's Common Stock
at an exercise price of $7.00 per share in order to finance the acquisition of
12,694,200 common shares of Vista (Note 9) and 1,500,000 Common Shares and
3,100,000 Preferred Shares of Dakota Mining Corporation ("Dakota"). The first
portion of such private placement, consisting of the sale of 6,486,809 Units for
an aggregate purchase price of $35,677,450, was completed on August 15, 1994,
and the proceeds thereof were applied primarily to the cost of the Vista shares.
On October 29, 1994, the Company determined not to proceed with acquisition of
the Dakota shares (see Note 4). The second portion of the private placement,
the sale of an additional 2,604,100 Units for an aggregate purchase price of
$14,322,550, was completed on December 15, 1994 following the shareholder
approval of an increase in the authorized share capital of the Company. Upon
closing the second portion of the private placement, the Company used a portion
of the proceeds to repay the balance of $800,000 due on a short-term secured
loan.
Of the Units sold in the private placement, Mackenzie Financial Corporation
("Mackenzie Financial") acquired 1,820,000 Units, consisting of 1,820,000 shares
of Common Stock and 910,000 warrants to purchase shares of Common Stock, and
M.I.M. Holdings Limited ("M.I.M.") acquired 2,000,000 Units, consisting of
2,000,000 shares of Common Stock and 1,000,000 warrants to purchase shares of
Common Stock.
On January 18, 1994, the Company sold for $7,500,000 in gross proceeds,
1,500,000 shares of Common Stock for $5.00 per share in a private placement.
The shares were placed outside the United States with a number of gold funds in
Canada and European institutional investors.
On September 20, 1993, the Company sold to Phoenix Financial Holdings Inc. for
an aggregate of $8,375,000 (i) 1,500,000 shares of the Company's Common Stock,
(ii) a Redeemable Convertible Debenture due 1998 in the principal amount of
$3,500,000, which is convertible as to principal into Common Stock at the rate
of $4.00 per share and bears interest at the rate of 9% per annum payable in
cash or Common Stock at the rate of $4.00 per share, and (iii) Warrants to
purchase for three years 2,000,000 shares of Common Stock at $3.625 per share.
Of such securities, the 1,500,000 shares of the Company's Common Stock and
750,000 of the Warrants to Purchase Common Stock were sold to various investors
in a private placement.
61
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF ATLAS CORPORATION
We have audited the accompanying consolidated balance sheets of Atlas
Corporation and subsidiaries as of December 31, 1996 and 1995 and June 30,
1995, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the year ended December 31, 1996, the six
months ended December 31, 1995 and the years ended June 30, 1995 and 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Arisur Inc., a wholly
owned subsidiary, which statements reflect total assets of $7,523,785 as of
December 31, 1996 and total revenues of $578,000 for the year then ended.
Those statements were audited by other auditors whose report has been furnished
to us, and our opinion, insofar as it relates to data included for Arisur Inc.
is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Atlas Corporation and subsidiaries at
December 31, 1996 and 1995 and June 30, 1995, and the consolidated results of
their operations and their cash flows for the year ended December 31, 1996,
the six months ended December 31, 1995 and the years ended June 30, 1995 and
1994, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that Atlas Corporation will continue as a going concern. As more fully described
in note 1, the Company has incurred recurring operating losses and has a working
capital deficiency. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters, which include short-term financing, the sale/joint venture of certain
assets and the start up of Tucker Hill operations are also described in note 1.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amount
and classification of liabilities that may result from the outcome of this
uncertainty.
/s/ Ernst & Young LLP
Denver, Colorado
February 28, 1997
except for Note 1, as to which the date is
April 14, 1997
62
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
Not Applicable
63
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
-----------------------------------------------
DIRECTORS
The Company's directors are divided into three classes and hold office for a
term of three years ending with the annual meeting of stockholders held in the
year ended December 31, 1997 in the case of Class III, in the year ended
December 31, 1998 in the case of Class I and in the year ended December 31, 1999
in the case of Class II. There are currently six directors.
Information Concerning Directors
The following table sets forth certain information concerning each director.
<TABLE>
<CAPTION>
Principal Occupation, Past Five Year's
Business
Director Experience
Name Since and Other Directorships Held Age
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS III
(TERM OF OFFICE EXPIRES AT THE ANNUAL MEETING OF STOCKHOLDERS
HELD IN THE YEAR ENDED DECEMBER 31, 1997)
Douglas R. Cook 1988 President of Cook Ventures Inc., a geological 71
consulting firm; Director, Pegasus Gold
Corporation; Director, Archangel Diamond Corp.
Mr. Cook's business address is 2485 Greensboro
Drive, Reno, Nevada 89509.
Mario Caron 1996 President, Chief Executive Officer and director of 43
Eden Roc Mineral Corp. from February 1997 to the
present. Chief Executive Officer of Atlas
Corporation from September 1996 to January 1997
From 1993 to 1996, President and Chief Executive
Officer of MSV Resources Inc. and from 1987 to
1993 President of Corpomin Management Inc. Mr.
Caron is director of three junior Canadian
exploration companies. His current business
address is 141 Adelaide St. West, Toronto, Ontario,
Canada M5H 3L5
</TABLE>
(Mr. Caron, pursuant to taking his new position as President and Chief Executive
Officer of Eden Roc Mineral Corp., has advised the Company's Board of Director
that he does not intend to stand for re-election at the next Annual Meeting of
Stockholders.)
64
<PAGE>
<TABLE>
<CAPTION>
CLASS I
(TERM OF OFFICE EXPIRES AT THE ANNUAL MEETING OF STOCKHOLDERS HELD IN THE YEAR ENDED
DECEMBER 31, 1998)
<S> <C> <C> <C>
David P. Hall 1993 President and Chief Executive Officer of Aurizon Mines Ltd., a mineral exploration and 50
development company and management firm; formerly President of CanGold Resources (to
January 1995) and formerly President of Hughes Lang Corporation (to January 1994).
Mr. Hall's business address is 1414-700 West Georgia St., Vancouver, BC V7Y 1A3.
H.R. Shipes 1996 President, Chairman of the Board and Chief Executive Officer of Arimetco International Inc., 5
a Canadian mining company, from November 1988 to the present. Director, since 1996, of
Cornerstone Industrial Minerals Corporation, a 65% subsidiary of the Company. Mr. Shipes'
business address is 335 North Wilmot Road, Suite 410, Tucson, AZ 85711
CLASS II
(TERM OF OFFICE EXPIRES AT THE ANNUAL MEETING OF STOCKHOLDERS HELD IN THE YEAR ENDED
DECEMBER 31, 1999)
James H. Dunnett 1995 Principal of Endeavour Financial Corp., a private Canadian company specializing in arranging 47
project financing, mergers and acquisitions for the mining industry. Mr. Dunnett serves as
a director of Cornerstone Industrial Minerals Corporation, a majority owned subsidiary of
the Company, and serves as a director of Vista Gold Corp., in which the Company holds a 9.6%
interest. Mr. Dunnett's business address is 1111 West Georgia St., Suite 404, Vancouver,
BC, Canada V6E 4M3.
C. Thomas Ogryzlo 1993 Chairman of Kilborn SNC-Lavalin Inc.; formerly a principal of Wright Engineers Limited, an 57
engineering firm; director of Carib Gold Resources Inc., Rio Amarillo Mining Limited,
Cornerstone Industrial Minerals Corporation and Vista Gold Corp., in which Atlas holds a
9.6% interest. Mr. Ogryzlo's business address is 2200 Lake Shore Boulevard West, Toronto,
Ontario, Canada M8V 1A4.
</TABLE>
65
<PAGE>
BOARD AND COMMITTEE MEETINGS
The Company has an Audit Committee, Compensation Committee, and
Executive Committee, of which all members are appointed by the Board of
Directors. The Compensation Committee currently consists of Messrs. Ogryzlo,
Dunnett and Shipes, and during the fiscal year ended December 31, 1996 consisted
of Messrs. Ogryzlo and Cook. Due to his appointment as Chairman, Mr. Cook
resigned from the Compensation Committee on December 13, 1996. At this time,
Mr. Shipes was appointed to replace Mr. Cook on the Compensation Committee and
early in 1997, Mr. Dunnett was also appointed to the Compensation Committee.
The Audit Committee currently consists of Messrs. Dunnett, Hall and Ogryzlo, and
during the year ended December 31, 1996 consisted of, Messrs. Dunnett, Hall and
Cook. Mr. Cook also resigned from the Audit Committee on December 13, 1996, at
which time Mr. Ogryzlo was appointed to replace Mr. Cook on the Audit Committee.
The Executive Committee currently consists of Messrs. Cook, Dunnett and Ogryzlo.
The principal functions of the Audit Committee are to recommend the selection of
the Company's auditors, review with the auditors the scope and anticipated cost
of their audit and receive and consider a report from the auditors concerning
their conduct of the audit. The principal functions of the Compensation
Committee are to administer the Company's 1979 Key Employee Stock Incentive
Plan, Long Term Incentive Plan, Annual Incentive Plan and Retirement Plan for
Outside Directors, to recommend changes in compensation plans and the adoption
of new compensation plans and to recommend compensation for senior officers of
the Company. The principal functions of the Executive Committee are to oversee
the succession of officers and directors, Company finances and the Operating
Committee which consists of three executive officers of the Company. During the
year ended December 31, 1996, the Audit Committee held three meetings and the
Compensation Committee held two meetings. The Executive Committee did not hold
any meetings during 1996, since it was formed in January 1997.
During the year ended December 31, 1996, the Board met sixteen times.
Each director attended 75% or more of the aggregate of the total number of Board
meetings and meetings of Board committees on which that director served during
the year ended December 31, 1996.
OFFICER CONTRACTS
Richard E. Blubaugh has served as Vice President of Environmental and
Governmental Affairs since October 1, 1990. Mr. Blubaugh has an employment
agreement providing for his employment as an officer of the Company, at a
minimum annual salary of $91,690, until the termination of his employment by Mr.
Blubaugh or the Company or his normal retirement in accordance with the
Company's retirement programs in place at the time. Mr. Blubaugh is entitled,
upon termination of his employment by the Company without "Cause", by him with
"Good Reason" or either within three months prior to a change of control or
within two years after a "Change of Control" (as such terms are defined in the
employment agreement), to a severance payment equal to one year's salary,
amounts accrued but unpaid under his employment agreement and amounts payable
under existing employee benefits plans.
66
<PAGE>
Gregg B. Shafter has served as Vice President of Project Development
since August 1, 1995. Mr. Shafter has an employment agreement providing for his
employment as an officer of the Company, at a minimum annual salary of $85,000,
until the termination of his employment by Mr. Shafter or the Company or his
normal retirement in accordance with the Company retirement programs in place at
the time. Mr. Shafter is entitled, upon termination of his employment by the
Company without "Cause", by him with "Good Reason" or either within three months
prior to a change of control or within two years after a "Change of Control" (as
such terms are defined in the employment agreement), to a severance payment
equal to one-twelfth of his annual salary multiplied by the number of full years
of employment by the Company, provided that in no event shall such amount be
less than one-half of his annual salary, amounts accrued but unpaid under this
employment contract and amounts payable under existing employee benefit plans.
COMPENSATION OF DIRECTORS
Prior to November 1, 1996, fees paid to non-employee directors
consisted of a $7,500 annual fee, a $1,000 fee for each Board of Directors
meeting attended in person, a $500 fee for each Board of Directors meeting
attended by telephone and a $500 fee for each committee meeting attended.
Effective November 1, 1996, in lieu of the annual fee noted above, all
non-employee directors on such date who are directors and those thereafter
joining the Board, will be awarded a one time grant of 50,000 options under the
Long Term Incentive Plan ("LTIP"), vesting six months from the grant date, at an
exercise price equal to the market price on the grant date or $1.00 per share,
whichever is higher. Additionally, effective November 1, 1996, the Chairman
will be awarded options to purchase 25,000 shares of Atlas Common Stock, as
granted under the LTIP, vesting six months from the grant date at an exercise
price equal to the closing market price on the grant date or $1.00 per share,
whichever is higher.
EXECUTIVE OFFICERS
The information concerning the Company's executive officers required
by this Item is included in Part I, Item 4, under the caption "EXECUTIVE
OFFICERS OF THE COMPANY."
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
Under Section 16 of the Exchange Act, the Company's directors and
executive officers and persons holding more than 10% of the Company's Common
Stock are required to report their initial ownership of Common Stock and
subsequent changes to that ownership to the Securities and Exchange Commission
and the New York Stock Exchange by specified due dates. To the Company's
knowledge all of these filing requirements were satisfied with respect to
transactions during the year ended December 31, 1996.
67
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the Company,
for the year ended December 31, 1996, the six months ended December 31, 1995 and
for each of the fiscal years ended June 30, 1995 and 1994, to Messrs. Gerald E.
Davis, Richard E. Blubaugh and David J. Birkenshaw. Except for such persons, no
person who was serving as an executive officer of the Company during the year
ended December 31, 1996 had total cash and cash-equivalent remuneration which
exceeded $100,000 during the year. Messrs. Birkenshaw and Davis terminated
their employment with the Company on, respectively, June 21, 1996 and November
5, 1996. See Notes (5) and (7) under SUMMARY COMPENSATION TABLE.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compen-
Annual Compensation sation
---------------------------------------------- ---------
Other Annual All Other
Year or Period Compen- Stock Compen-
Name and Principal Position Ended Salary Bonus sation Options sation
- ------------------------------------------------------------------------------ ------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Blubaubagh, VP Dec. 31, 1996 $ 91,676 $ 13,754 $ 10,214(2) 127,500 $5,750(3)
Dec. 31, 1995(1) $ 46,575 - $ 5,956(2) 52,000 $2,794(3)
June 30, 1995 $ 86,500 $ 3,500 $ 6,481(2) 10,000 $5,400(3)
June 30, 1994 $ 84,852 $ 2,000 $ 18,036(2)(4) 25,000 $5,211(3)
David J. Birkenshaw, CEO(5) Dec. 31, 1996 $173,485 $150,000 $406,675(2) 200,000
Dec. 31, 1995(1) $ 87,500 - $ 84,462(2)(6) -
June 30, 1995 $154,167 - - 350,000
June 30, 1994 $ 75,000 - - 300,000
June 30, 1993 - - - -
Gerald E. Davis, President(7) Dec. 31, 1996 $151,587 $ 35,000 $ 11,870(2) 200,000 $5,750(3)
Dec. 31, 1995(1) $ 76,078 - $ 6,312(2) 40,000 $1,875(3)
June 30, 1995 $134,561 $ 3,500 $ 6,813(2) 75,000 $7,560(3)
June 30, 1994 $120,000 - $ 45,436(2)(4) 25,000 $1,800(3)
</TABLE>
(1) Represents the six month period ended December 31, 1995.
(2) Includes certain perquisites, such as car allowances and life insurance
premiums paid by the Company.
(3) Includes contributions by the Company to the Investment Savings Plan for
Employees of Atlas.
(4) Amount includes payments by the Company to Messrs. Davis and Blubaugh of
$35,625 and $11,875, respectively, in respect of options to purchase 15,000 and
5,000 shares of Common Stock by Messrs. Davis and Blubaugh following the change
in control of September 20, 1993, representing the difference between the option
price and the market price of such shares.
(5) Upon the resignation of David J. Birkenshaw on June 21, 1996, the Company
agreed to pay the following payments and benefits to Mr. Birkenshaw: 1) a single
lump payment of $337,500 and six monthly installments of $18,500 less any
amounts due the Company from the employee; 2) an award of an option to purchase
an aggregate of 200,000 shares of the Company's Common Stock at an exercise
price of $1.50 per share, which option shall become exercisable in whole or in
part at any time prior to June 20, 1997; 3) the forgiveness of the $60,000
unsecured housing loan and any accrued interest on such loan; and pursuant to
the Amendment to Resignation Agreement and General Release dated October 11,
1996, upon satisfaction of item 1) above, the Company paid to Mr. Birkenshaw an
amount of $54,000.
(6) Amount includes $75,000 relocation expenses paid by the Company.
(7) Upon the resignation of Gerald E. Davis, on November 5, 1996, the Company
agreed to pay Mr. Davis the following payments and benefits: 1) a total payment
of $325,657; payable as $25,657
68
<PAGE>
immediately after execution of the Resignation Agreement and six monthly
installments of $50,000 each commencing on January 13, 1997; 2) at any time
prior to November 5, 1997, Mr. Davis may exercise the options granted to him on
May 19, 1995 and August 10, 1995 under the Long Term Incentive Plan to purchase
100,000 shares of stock at an exercise price of $2.00, which options shall
expire by November 5, 1997. At any time prior to November 5, 1998, Mr. Davis may
exercise additional options granted to him on November 5, 1996 to purchase
100,000 shares of stock at an exercise price of $1.00 per share, which options
shall expire by November 5, 1998.
See also, with respect to Messrs. Davis, Blubaugh and Birkenshaw, the section
entitled "Options" below.
PERFORMANCE GRAPH
The following graph shows changes over the past five years in the value of
$100 invested in: (1) Atlas Corporation Common Stock, (2) the Dow Jones Equity
Market Index and (3) the Dow Jones Precious Metals Index. The year-end values
of each investment are based on the share price appreciation plus the monthly
reinvestment of dividends, if any.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ATLAS CORPORATION, THE DOW JONES EQUITY MARKET INDEX AND THE DOW JONES
PRECIOUS METALS INDEX*
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG ATLAS CORPORATION, DOW JONES EQUITY MARKET INDEX AND
DOW JONES PRECIOUS METALS INDEX.
<TABLE>
<CAPTION>
Dow Jones Dow Jones
Measurement period Atlas Equity Market Precious Metals
(Fiscal Year Covered) Corporation Index Index
- --------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
Measurement PT -
12/31/91 $ 100.00 $ 100.00 $ 100.00
FYE 12/31/92 $ 85.71 $ 108.61 $ 86.45
FYE 12/31/93 $ 71.43 $ 119.41 $ 139.07
FYE 12/31/94 $ 34.69 $ 120.33 $ 116.28
FYE 12/31/95 $ 22.45 $ 166.31 $ 122.95
FYE 12/31/96 $ 11.27 $ 205.57 $ 125.24
</TABLE>
* $100 INVESTED ON 12/31/91 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
69
<PAGE>
INVESTMENT AND SAVINGS PLAN. The Atlas Company Investment and Savings
Plan (the "Plan") benefits employees of the Company and its subsidiaries who
have completed six months of service. Each participant under the Plan must be at
least 21 years of age. Under the Plan, an employee may elect to contribute,
pursuant to a salary reduction election, not less than 1 percent and not more
than 10 percent of the employee's annual compensation. The Company makes a
matching contribution of 100 percent of the amount contributed by the employee,
but not more than 6 percent of the employee's annual compensation. In addition,
the Company may make special contributions to the Plan, but these special
contributions may not exceed the maximum amount deductible under Section
404(a)(3)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
Employee contributions may be invested in a number of investment options, but
not Common Stock of the Company. All matching and special contributions to the
Plan are invested in shares of Common Stock of the Company.
1978 RETIREMENT PLAN. Eligible employees, including officers,
participate in the Atlas Company 1978 Retirement Plan (the "1978 Retirement
Plan"), a noncontributory defined benefit pension Plan. Benefits under the 1978
Retirement Plan are based on years of service and the participant's compensation
during the participant's three consecutive highest compensated years out of the
participant's final five years as a participant. Benefits under the 1978
Retirement Plan are payable upon disability, death or retirement at age 55 or
later and may be distributed in the form of a lump sum, a single-life annuity, a
joint and survivor annuity covering the participant and a beneficiary or
installments over a term of years. Participants retiring before the age of 55
are entitled to a lump sum distribution. Effective March 1, 1997, the Company
froze all future accrual of benefits under the 1978 Retirement Plan. The
benefits earned by each participant as of February 28, 1997 shall be preserved
and no benefit of any participant shall be decreased or reduced. At the
Company's option the freeze can be lifted at any time in the future.
The following table shows the estimated annual benefits payable upon
retirement in the form of a single-life annuity under the 1978 Retirement Plan
to persons in the specified compensation and years-of-service classifications:
70
<PAGE>
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Average
Annual
Compensation
on which
Retirement
Benefits are Estimated Annual Retirement Benefits at Age
Based 65 for Indicated Years of Credited Services
- ------------- -------------------------------------------
(10) (15) (20) (25) (30)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$50,000....... $ 8,621 $12,932 $17,242 $21,553 $25,864
$100,000...... $18,621 $27,932 $37,242 $46,553 $55,864
$150,000...... $28,621 $42,932 $57,242 $71,553 $85,864
$200,000...... $28,621 $42,932 $57,242 $71,553 $85,864
$250,000...... $28,621 $42,932 $57,242 $71,553 $85,864
$300,000...... $28,621 $42,932 $57,242 $71,553 $85,864
</TABLE>
Retirement benefits under the 1978 Retirement Plan are based on salaries
and additional compensation such as awards under the Annual Incentive Plan.
These benefits are not affected by directors' fees.
Benefits listed in the table are net of an offset for part of the
participant's Social Security benefits. There is no other offset. Years of
service credited through December 31, 1996 under the 1978 Retirement Plan for
the officers listed in the SUMMARY COMPENSATION TABLE are 6 years for Mr. Davis
and 14 years for Mr. Blubaugh.
The Code sets limits on a participant's annual benefits on retirement
under the 1978 Retirement Plan. To assure that participants' retirement benefits
are not reduced in the future because of the Code limits, the Board of Directors
adopted a supplemental Executive Retirement Plan, which provides retirement
benefits on an unfunded basis to selected participants whose benefits under the
1978 Retirement Plan would be limited by the Code in an amount equal to the
difference between the annual retirement benefit permitted under the 1978
Retirement Plan by the Code and the amount that would have been paid but for the
limitation imposed by the Code.
ANNUAL INCENTIVE PLAN. Under the Company's Annual Incentive Plan,
incentive compensation may be paid to key employees selected by the Compensation
Committee based on the achievement by the Company and the selected employees of
performance goals established for each fiscal year by the Compensation
Committee. In addition to target awards, which recognize achievement of the
predetermined goals, the Compensation Committee may establish threshold and
maximum awards to recognize performance which has only been minimally acceptable
and performance which has been significantly above target. Target, threshold and
maximum awards are expressed as a percentage of selected employees' base salary
for the pertinent fiscal year. The Compensation Committee may consider the
adverse impact of external circumstances on the Company's performance in
evaluating the achievement of individual employee goals and in determining
whether to exercise its authority in such
71
<PAGE>
circumstances to make alternative or supplemental awards. Since July 1, 1993, no
awards were made under the Annual Incentive Plan.
OPTIONS
OPTION GRANTS IN THE LAST FISCAL YEAR. The following table sets forth
information relating to stock options granted during the year ended December 31,
1996 to Messrs. Davis, Blublaugh and Birkenshaw.
<TABLE>
<CAPTION>
% of Total
Number of Options Exercise Grant Date
Options Granted to Price (1) Present
Name Granted Employees per share Expiration Date Value (2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gerald E. Davis 100,000(3) 11% $ 1.00 Nov. 05, 1998 $ 27,000
Richard E. Blubaugh 75,000(3) 8.32% $ 1.00 Oct. 31, 2006 $ 23,250
David J. Birkenshaw 200,000(4) 2.22% $ 1.50 Jun. 29, 1999 $ 68,000
650,000(5) 72.1%
</TABLE>
(1) Exercise price is equal to or greater than the market value at date of
grant.
(2) Calculated as of the end of the applicable fiscal year using the Black-
Scholes option pricing model, with reference to the most recent 24-month period
for determining price volatility. The actual value, if any, that an executive
may realize from the options will be the excess of the market price of the
Common Stock on the day of exercising the options over the exercise price of the
options.
(3) Options granted on November 1, 1996 which vest in six months from the
date of grant.
(4) Pursuant to the terms of Mr. Birkenshaw's resignation agreement dated
June 21, 1996, he was provided the option to purchase 200,000 shares of the
Corporation's Common Stock at an exercise price of $1.50 per share, which option
shall be exercisable at any time prior to June 20, 1999.
(5) Options subsequently canceled on June 21, 1996.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION.
The following table provides information relating to the number and value of
stock options exercised in the year ended December 31, 1996 and the number of
exercisable and unexercisable stock options held by executive officers at
December 31, 1996:
<TABLE>
<CAPTION>
Number of Unexercised Options
at December 31, 1996
Shares Acquired -----------------------------
Name on Exercise Value Realized Exercisable Unexercisable
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gerald E. Davis - - 200,000 -
Richard E. Blubaugh - - 25,250 101,250
David J. Birkenshaw - - 200,000 -
</TABLE>
There were no unexercised, in-the-money options at December 31, 1996.
72
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1996 are identified above
under the heading BOARD AND COMMITTEE MEETINGS. No member of the Compensation
Committee is or has been at any time an officer of the Company or any of its
subsidiaries (except for Mr. Cook who served as a non-executive Chairman of the
Company during 1996). During 1996, no executive officer of the Company served
as a director or as member of the Compensation Committee of another entity whose
executive officers served as a director or as a member of the Compensation
Committee of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 9, 1997
regarding the beneficial ownership, including shares of Atlas Common Stock which
may be acquired upon the exercise of stock options or warrants, or the
conversion of any securities, within 60 days of April 9, 1997, of the Company's
Common Stock by (i) persons known to the Company to own more than 5 percent of
the Company's Common Stock, (ii) each director of the Company, (iii) each
executive officer named in the Summary Compensation Table set forth above, and
(iv) all directors and executive officers as a group:
73
<PAGE>
<TABLE>
<CAPTION>
SECURITY OWNERSHIP TABLE
Name Number of Shares Percent of Class
and Nature of
Beneficial
Ownership
(1)
<S> <C> <C>
M.I.M. Holdings Limited 3,000,000(2) 11.90%(2)
M.I.M. Plaza, 410 Anne St.
Brisbane, Queensland, 4000
Australia
H. R. Shipes 2,167,646(3) 8.93%(3)
335 North Wilmot Road, Suite 400
Tucson, AZ 85711
Independence Mining Company 1,400,000(4) 5.78%(4)
5251 DTC Parkway, Suite 700
Englewood, CO 80111
Douglas R. Cook 90,334(5) *
Mario Caron -- *
James H. Dunnett 208,334(6) *
David P. Hall 63,334(7) *
C. Thomas Ogryzlo 63,334(7) *
Richard E. Blubaugh 116,860(8) *
Gerald E. Davis 200,000 *
David Birkenshaw 200,000 *
All current executive officers and directors 3,282,714(9) 13.0%(9)
as a group (11 persons)
</TABLE>
(1) Does not include shares issuable on the exercise of options which
have not vested and will not vest within sixty days of this report.
(2) M.I.M. Holdings Limited, to the best of the Company's knowledge,
is the direct beneficial owner of (i) 2,000,000 shares of Common Stock and (ii)
warrants issued by the Company which are exercisable into 1,000,000 shares of
Common Stock at an exercise price of $7.00 per share.
(3) On October 28, 1996, a Schedule 13D was filed with the Securities
and Exchange Commission by H.R. Shipes reflecting beneficial ownership of
2,117,646 shares of Common Stock of which 156,863 are held by Mr. Shipes for the
benefit of his minor child under the
74
<PAGE>
Uniform Gift to Minor's Act. Also included are 50,000 options granted to Mr.
Shipes as a director of Atlas which are exercisable on May 1, 1997.
(4) On November 3, 1995, Atlas received a copy of Schedule 13D filed
by Independence Mining Company Inc. reflecting direct ownership of 1,400,000
shares of Common Stock.
(5) Includes 2,000 shares of Common Stock directly owned and 88,334
shares obtainable upon exercise of options granted to Mr. Cook under the Long
Term Incentive Plan.
(6) James H. Dunnett may be deemed, by virtue of his 25 percent
interest in Acorn Capital Financial Corporation which is the direct beneficial
owner of (i) 100,000 shares of Common Stock and (ii) warrants issued by the
Company which are exercisable into 45,000 shares of Common Stock at an exercise
price of $7.00 per share, to be the indirect beneficial owner of securities
owned by Acorn Capital Financial Corporation. Mr. Dunnett's holdings also
include 63,334 shares obtainable upon exercise of options granted to him under
the Long Term Incentive Plan.
(7) Includes 63,334 shares obtainable upon exercise of options
granted under the Long Term Incentive Plan.
(8) Includes (i) 101,250 shares obtainable upon the exercise of
options granted under the Long Term Incentive Plan, (ii) 14,610 shares held in
Mr. Blubaugh's account under the Company's 401(k) Plan and (iii) 1,000 shares
held directly.
(9) Includes (i) 982,086 shares obtainable upon exercise of options
granted under the Long Term Incentive Plan, (ii) warrants issued by the Company
which are exercisable into 45,000 shares of Common Stock at an exercise of $7.00
per share (iii) 33,982 shares of Common Stock held beneficially under the
Company's 401(k) Plan, and (iv) direct ownership of 2,221,646 shares of Common
Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Dunnett is a principal of the investment banking firm of Endeavour Financial
Corporation, ("Endeavour") which acts as a financial advisor to the Company.
Mr. Dunnett served, from April 1, 1995 until September 30, 1995 as an Atlas
nominee on the Board of Directors of Vista Gold Corp. and also serves on the
Board of Directors of Cornerstone Industrial Minerals Corporation
("Cornerstone"), a majority owned subsidiary of the Company. During the year
ended December 31, 1996, the Company paid Endeavour $170,000 in advisory fees.
Mr. Birkenshaw, Chairman and Chief Executive Officer of the Company until his
resignation on June 21, 1996, served as the Vice Chairman of Vista Gold Corp.,
in which the Company currently retains a 9.6% interest and served until February
16, 1996 as a director of Dakota Mining Corporation ("Dakota"). The Company,
which acquired an approximate 9% interest in Dakota in March 1995, sold its
holdings in Dakota on March 9, 1996.
75
<PAGE>
Mr. Birkenshaw served as Chairman of Cornerstone from June 1991 through March
1995, and was reappointed Chairman of Cornerstone upon Atlas's acquisition of
51% of Cornerstone on November 29, 1995, serving until June 21,1996. Prior to
Atlas's acquisition of the 51% interest in Cornerstone, Mr. Birkenshaw purchased
1,150,000 warrants to purchase Common Shares of the Company from Cornerstone,
which were exercisable at $3.625 per share and expired on September 20, 1996.
Mr. Birkenshaw received a non-interest bearing unsecured loan from Cornerstone
in the amount of C$25,000 payable upon demand, the proceeds of which were used
to purchase the Atlas warrants. Mr. Birkenshaw repaid the Cornerstone loan in
March 1996.
Mr. Birkenshaw serves as Chairman of Birkenshaw & Company, Ltd., a merchant
bank. During the year ended December 31, 1996, the six months ended December
31, 1995 and the year ended June 30, 1995, the Company paid Birkenshaw & Company
$0, $43,000 and $174,000, respectively, for reimbursement of expenses incurred
on behalf of the Company.
Mr. Birkenshaw received from Atlas a $60,000 unsecured housing loan, bearing an
8% interest rate, in connection with his relocation to Denver, Colorado. This
loan was forgiven as part of his resignation agreement. Mr. Birkenshaw received
from the Company and its subsidiaries unsecured noninterest bearing employee
advances of approximately $99,000. Such advances have subsequently been repaid.
Mr. Shipes is the President, Chief Executive Officer and Chairman of
Arimetco International Inc. ("Arimetco"), a Canadian mining company. The
Company purchased 50% of Arisur Inc., a Grand Cayman corporation, which owns and
operates mining operations in Bolivia, from Arimetco for $3.3 million in cash.
The Company acquired the remaining 50% of Arisur Inc. from Suramco Metals, Inc.,
a Nevada corporation, of which Mr. Shipes is a major shareholder, for four
million shares of the Company's common stock. As part of the transaction, Mr.
Shipes became a member of the Company's Board of Directors.
76
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a) (1) Financial Statements:
See Index to Financial Statements and Schedules on page 80.
(2) Financial Statement Schedules:
See Index to Financial Statements and Schedules on page 80.
(3) Exhibits:
Exhibit
Number Exhibits
----------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization between the Company and
the shareholders of Suramco Metals, Inc. dated October 7,
1996.
2.2 Stock Purchase Agreement between the Company and Arimetco
International Inc. dated October 7, 1996.
2.3 Stock Purchase Agreement between the Company and Cornerstone
Industrial Minerals Corporation dated December 13, 1996.
3.1 Restated Certificate of Incorporation of the Company, dated
January 3, 1990 (filed as Exhibit 3.2 to the Company's
quarterly report on Form 10-Q for the quarter ended December
31, 1989, and incorporated herein by reference).
3.2 By-Laws of the Company, as amended on July 12, 1995. (filed
as an Exhibit 3.3 to the Company's annual report on Form 10-
K for the year ended June 30, 1995 and incorporated herein
by reference).
4.1 Term Loan Agreement dated August 15, 1994 between the
Company and Gerald Metals, Inc.(filed as an Exhibit 10.22 to
the Company's annual report on Form 10-K for the year ended
June 30, 1994 and incorporated herein by reference).
4.2 Security Agreement dated August 15, 1994 between the Company
and Gerald Metals, Inc.(filed as an Exhibit 10.23 to the
Company's
77
<PAGE>
annual report on Form 10-K for the year ended June 30, 1994 and
incorporated herein by reference).
4.3 Pledge Agreement dated August 15, 1995 between the Company and Gerald
Metals, Inc. (filed as an Exhibit 10.24 to the Company's annual report
on Form 10-K for the year ended June 30, 1994 and incorporated herein
by reference).
4.4 Indenture dated as of November 10, 1995 between the Company and
Chemical Bank as Trustee (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (33-65165) as filed with the
Commission on December 19, 1995 under the Securities Act of 1933 and
incorporated herein by reference).
4.5 Escrow and Pledge Agreement dated as of November 10, 1995 between the
Company and Chemical Bank as Trustee and Chemical Bank as Escrow Agent
(filed as Exhibit 4.2 to the Company's Registration Statement on Form
S-3 (33-65165) as filed with the Commission on December 19, 1995 and
incorporated herein by reference).
4.6 Special Warrant Indenture dated November 9, 1995 between the Company
and The Montreal Trust Company of Canada containing terms and
conditions governing the issue and exercise of special Debenture
warrants exercisable for 7% Exchangeable Debentures due October 25,
2000 of the Company (filed as Exhibit 99.2 to the Company's
Registration Statement on Form S-3 (33-65165) as filed with the
Commission on December 19, 1995 and incorporated herein by reference).
10.1 Atlas Corporation Management Incentive Compensation Plan (filed as
Exhibit 10.2 to the Company's annual report on Form 10-K (file no. 1-
2714) for the fiscal year ended June 30, 1981 and incorporated herein
by reference).
10.2 Form of Indemnity Agreement entered into between the Company and
certain of its directors (filed as Exhibit 10.14 to the Company's
annual report on Form 10-K for the fiscal year ended June 30, 1987 and
incorporated herein by reference).
10.3 Amended and Restated Rights Agreement dated as of August 2, 1989
between the Company and Manufacturers Hanover Trust Company (filed as
Exhibit 1 to the Company's current report on Form 8-K dated August 2,
1989 and incorporated herein by reference).
10.4 Long Term Incentive Plan of the Company dated November 1, 1989 (filed
as Exhibit 10.28 to the Company's annual report on
78
<PAGE>
Form 10-K for the fiscal year ended June 30, 1989 and incorporated
herein by reference).
10.5 Atlas Corporation Supplemental Executive Retirement Plan dated as of
January 3, 1990 (filed as Exhibit 10.2 to the Company's quarterly
report on Form 10-Q for the quarter ended March 31, 1990 and
incorporated herein by reference).
10.6 Atlas Corporation Retirement Plan for Outside Directors dated April 4,
1990 (filed as Exhibit 10.3 to the Company's quarterly report on Form
10-Q for the quarter ended March 31, 1990 and incorporated herein by
reference).
10.7 Restated Employment Agreement dated as of September 12, 1990 between
the Company and Richard R. Weaver (filed as Exhibit 10.22 to the
annual report on Form 10-K for the fiscal year ended June 30, 1990 and
incorporated herein by reference).
10.8 Amendment No. 1, dated as of March 6, 1991, to the Amended and
Restated Employment Agreement, dated as of September 12, 1990, between
the Company and Richard R. Weaver (filed as Exhibit 10.1 to the
Company's quarterly report on Form 10-Q for the quarter ended March
31, 1991 and incorporated herein by reference).
10.9 Atlas Corporation Annual Incentive Plan adopted by the Board of
Directors of the Company on March 6, 1991 (filed as Exhibit 10.20 to
the Company's annual report on Form 10-K for the year ended June 30,
1991 and incorporated herein by reference).
10.10 Securities Purchase Agreement dated September 3, 1993 between the
Company and Phoenix Financial Holdings Inc. (filed as Exhibit 2 to the
Company's Report on Form 8-K filed on September 9, 1993 and
incorporated herein by reference).
10.11 Amendment dated as of September 15, 1993 to the Amended and Restated
Rights Agreement dated as of August 2, 1989 between the Company and
Chemical Bank, as successor by merger with Manufacturers Trust Company
(filed as Exhibit 10.25 to the Company's annual report on Form 10-K
for the year ended June 30, 1993 and incorporated herein by
reference).
10.12 Employment agreement made as of September 22, 1993, between the
Company and David J. Birkenshaw (filed as Exhibit 10.1 to the
Company's quarterly report on Form 10-Q for the quarter ended March
31, 1994 and incorporated herein by reference).
79
<PAGE>
10.13 Amendment dated as of August 28, 1995 to the employment
agreement made as of September 22, 1993, between the Company
and David J. Birkenshaw (filed as exhibit 10.15 to the
Company's annual report on Form 10-K for the year ended June
30, 1995 and incorporated herein by reference).
10.14 Share Purchase Agreement dated April 28, 1994 between the
Company and M.I.M. (Canada) Inc. (filed as an Exhibit 10.18
to the Company's annual report on Form 10-K for the year
ended June 30, 1994 and incorporated herein by reference).
10.15 Agreement dated May 10, 1994 between the Company and Granges
Inc. (filed as an Exhibit 10.19 to the Company's annual
report on Form 10-K for the year ended June 30, 1994 and
incorporated herein by reference)
10.16 Registration Rights Agreement dated August 15, 1994, between
the Company and First Marathon Securities Limited (filed as
Exhibit 10.20 to the Company's annual report on Form 10-K
for the year ended June 30, 1994 and incorporated herein by
reference).
10.17 Indemnity Agreement dated August 15, 1995 between the
Company and M.I.M. Holdings Limited (filed as an Exhibit
10.21 to the Company's annual report on Form 10-K for the
year ended June 30, 1994 and incorporated herein by
reference).
10.18 Second Amendment dated as of August 15, 1994 to the Amended
and Restated Rights Agreement dated August 2, 1989 between
the Company and Chemical Bank, as successor by merger with
Manufacturers Hanover Trust Company (filed as Exhibit 10.1
to the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1995 and incorporated herein by
reference).
10.19 The Company's Long Term Incentive Plan, as amended dated
February 17, 1995 (filed as Exhibit 10.2 to the Company's
quarterly report on Form 10-Q for the quarter ended March
31, 1995 and incorporated herein by reference).
10.20 Employment Agreement made as of January 16, 1995 between the
Company and Michael B. Richings (filed as Exhibit 10.3 to
the Company's quarterly report on Form 10-Q for the quarter
ended March 31, 1995 and incorporated herein by reference).
80
<PAGE>
10.23 Atlas Subscription Agreement dated March 9, 1995 between the Company
and Dakota Mining Corporation. (filed as exhibit 10.26 to the
Company's annual report on Form 10-K for the year ended June 30, 1995
and incorporated herein by reference).
10.24 Amendment dated September 15, 1995 to the employment agreement made as
of February 17, 1995 between the Company and Richard E. Blubaugh.
(filed as exhibit 10.27 to the Company's annual report on Form 10-K
for the year ended June 30, 1995 and incorporated herein by
reference).
10.25 Employment Agreement dated June 1, 1995 between the Company and Gerald
E. Davis (filed as exhibit 10.28 to the Company's annual report on
Form 10-K for the year ended June 30, 1995 and incorporated herein by
reference).
10.26 Amendment dated September 20, 1995 to the employment agreement dated
June 1, 1995 between the Company and Gerald E. Davis (filed as exhibit
10.29 to the Company's annual report on Form 10-K for the year ended
June 30, 1995 and incorporated herein by reference).
10.27 Underwriting Agreement dated as of October 25, 1995 by and among the
Company, Yorkton Securities Inc. and First Marathon Securities Ltd.
regarding the distribution of special Debenture warrants exercisable
for 7% Exchangeable Debentures due October 25, 2000 of the Company
(filed as Exhibit 99.1 to the Company's Registration Statement on Form
S-3 (33-65165) as filed with the Commission on December 19, 1995 and
incorporated herein by reference).
10.28 Granges Registration Agreement dated as of November 10, 1995 between
the Company and Granges Inc. (filed as Exhibit 99.3 to the Company's
Registration Statement on Form S-3 (33-65165) as filed with the
Commission on December 19, 1995 and incorporated herein by reference).
10.29 Indemnification Agreement dated as of November 15, 1995 between the
Company and Granges Inc. (filed as Exhibit 99.4 to the Company's
Registration Statement on Form S-3 (33-65165) as
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<PAGE>
filed with the Commission on December 19, 1995 and incorporated herein
by reference).
10.30 Option Agreement between the Company and Harvest Gold Corporation
signed September 13, 1995 (filed as Exhibit 99.7 to the Company's
Registration Statement on Form S-3 (33-65165) as filed with the
Commission on December 19, 1995 and incorporated herein by reference).
10.31 Purchase and Sale Agreement dated October 25, 1995 between the Company
and Independence Mining Company Inc. (filed as Exhibit 99.8 to the
Company's Registration Statement on Form S-3 (33-65165) as filed with
the Commission on December 19, 1995 and incorporated herein by
reference).
10.32 Registration Rights Agreement dated October 25, 1995 between the
Company and Independence Mining Company Inc. (filed as Exhibit 99.9 to
the Company's Registration Statement on Form S-3 (33-65165) as filed
with the Commission on December 19, 1995 and incorporated herein by
reference).
10.33 Agreement between the Company and Brown & Root, Inc. dated October 23,
1995 (filed as Exhibit 99.10 to the Company's Registration Statement
on Form S-3 (33-65165) as filed with the Commission on December 19,
1995 and incorporated herein by reference).
10.34 Mining Venture Agreement with Granges (US), Inc. dated September 29,
1995 (filed as Exhibit 10.37 to the Company's annual report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference).
10.35 Business combination agreement with MSV Resources Inc. dated March 5,
1996 (filed as Exhibit 10.38 to the Company's annual report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference).
10.36 Resignation Agreement and General Release dated June 21, 1996 between
the Company and David J. Birkenshaw.
10.37 Support Letter dated August 16, 1996 to the Company from Granges Inc.
and Da Capo Resources Ltd.
10.38 Amendment to Resignation Agreement and General Release dated October
1996 between the Company and David J. Birkenshaw.
10.39 Resignation Agreement and General Release dated November 5, 1996
between the Company and Gerald E. Davis.
10.40 Amendment to Resignation Agreement and General Release dated
January 14, 1997 between the Company and Gerald E. Davis.
82
<PAGE>
10.41 Employment Agreement dated December 1, 1996 between the
Company and Gregg B. Shafter.
10.42 Letter Agreement dated January 6, 1997 regarding the
withdrawal from the Gold Bar mining venture agreement between
the Company and Granges (US), Inc.
21 Subsidiaries of the Company
23 Consent of Independent Auditors
(b) The Registrant filed or amended reports on Form 8-K during the fourth
quarter of 1996 as follows:
(i) Report on Form 8-K dated October 12, 1996 containing the
Company's news release with respect to completing the
acquisition of Arisur and operating mines in Bolivia.
(ii) Report on Form 8-K dated October 18, 1996 containing the
Company's press release with respect to electing a Chairman
and funding expansion programs of the Company's Bolivia
operations.
For purposes of complying with the amendments to the rules governing Form S-8
(effective July 13, 1990) under the Securities Act of 1933, the undersigned
hereby undertakes as follows, which undertaking shall be incorporated by
reference into the Company's Registration Statement on Form S-8 No. 33-18316
(filed on November 3, 1987, as amended by Post Effective Amendment No. 1 filed
on December 15, 1987):
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by the director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such
83
<PAGE>
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
_____________________________
Note concerning Exhibits: The Company will furnish copies of Exhibits to
security holders of the Company upon request. The Company may charge a fee in
connection with such a request, which will be limited to the Company's
reasonable expenses in furnishing any such Exhibit.
84
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ATLAS CORPORATION
By: /s/ Richard E. Blubaugh
Name: Richard B. Blubaugh
Title: Vice President
Date: April 15, 1997
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
/s/ James R. Jensen Treasurer, Controller and Sec.
- ------------------- (Principal Accounting Officer April 15, 1997
James R. Jensen and Principal Financial Officer)
- --------------
/s/ Douglas R. Cook Director April 15, 1997
- ------------------- --------------
Douglas R. Cook
/s/ James H. Dunnett Director April 15, 1997
- -------------------- --------------
James H. Dunnett
/s/ David P. Hall Director April 15, 1997
- ----------------- --------------
David P. Hall
/s/ C. Thomas Ogryzlo Director April 15, 1997
- --------------------- --------------
C. Thomas Ogryzlo
/s/ H.R. Shipes Director April 15, 1997
- ---------------- --------------
H.R. Shipes
/s/ Mario Caron Director April 15, 1997
- --------------- --------------
Mario Caron
85
<PAGE>
ATLAS CORPORATION AND ITS SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
DECEMBER 31, 1996, DECEMBER 31, 1995, JUNE 30, 1995 AND 1994
<TABLE>
<S> <C>
Page
----
FINANCIAL STATEMENTS OF ATLAS CORPORATION
Consolidated Statements of Operations for the
Year Ended December 31, 1996, the Six Months Ended
December 31, 1995 and for the Years Ended June 30, 1995 and 1994. 33
Consolidated Balance Sheets as of December 31, 1996 and 1995, and June 34
30, 1995.
Consolidated Statements of Stockholder's Equity
(Deficit) for the Year Ended December 31, 1996, the Six Months Ended
December 31, 1995 and for the Years Ended June 30, 1995 and 1994. 35
Consolidated Statements of Cash Flow for the
Year Ended December 31, 1996, the Six Months Ended December 31, 1995
and for the Years Ended June 30, 1995 and 1994. 36
Notes to Consolidated Financial Statements 37 - 61
Report of the Independent Auditors 62
SCHEDULES FOR THE YEAR ENDED DECEMBER 31, 1996, THE SIX MONTHS ENDED
DECEMBER 31, 1995 AND FOR THE YEARS ENDED JUNE 30, 1995 AND 1994:
VIII Valuation and Qualifying Accounts and Reserves 87
</TABLE>
86
<PAGE>
ATLAS CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES
For the Year Ended December 31, 1996, the Six Months Ended
December 31, 1995 and the Years Ended June 30, 1995, and 1994
(In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Additions
--------------------------
Balance at Charged to Charge to Balance of
Beginning Costs and Other (2) End of
Classification Period Expenses Accounts Deductions Period
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Provisions for loss from
disposal of discontinued
operations $ 5,608 $ -- $ 816(3) $ 2,913 $ 3,511
SIX MONTHS ENDED DECEMBER 31, 1995
Provisions for loss from
disposal of discontinued
operations 7,050 -- 1,032(3) (2,474) 5,608
YEAR ENDED JUNE 30, 1995
Provision for loss from
disposal of discontinued
operations 9,327 225 -- (2,502) 7,050
YEAR ENDED JUNE 30, 1994
Provision for loss from
disposal of discontinued
operations 11,689 -- 102(1) (2,464) 9,327
</TABLE>
- ---------------------
(1) Represents net proceeds from the disposition of assets.
(2) Represents costs incurred.
(3) Represents reimbursement of costs from the US Department of Energy
under Title X.
87
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit
Number Exhibits
----------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization between the Company and
the shareholders of Suramco Metals, Inc. dated October 7,
1996.
2.2 Stock Purchase Agreement between the Company and Arimetco
International Inc. dated October 7, 1996.
2.3 Stock Purchase Agreement between the Company and Cornerstone
Industrial Minerals Corporation dated December 13, 1996.
3.1 Restated Certificate of Incorporation of the Company, dated
January 3, 1990 (filed as Exhibit 3.2 to the Company's
quarterly report on Form 10-Q for the quarter ended December
31, 1989, and incorporated herein by reference).
3.2 By-Laws of the Company, as amended on July 12, 1995. (filed
as an Exhibit 3.3 to the Company's annual report on Form 10-K
for the year ended June 30, 1995 and incorporated herein by
reference).
4.1 Term Loan Agreement dated August 15, 1994 between the Company
and Gerald Metals, Inc.(filed as an Exhibit 10.22 to the
Company's annual report on Form 10-K for the year ended June
30, 1994 and incorporated herein by reference).
4.2 Security Agreement dated August 15, 1994 between the Company
and Gerald Metals, Inc.(filed as an Exhibit 10.23 to the
Company's annual report on Form 10-K for the year ended June
30, 1994 and incorporated herein by reference).
4.3 Pledge Agreement dated August 15, 1995 between the Company
and Gerald Metals, Inc. (filed as an Exhibit 10.24 to the
Company's annual report on Form 10-K for the year ended June
30, 1994 and incorporated herein by reference).
4.4 Indenture dated as of November 10, 1995 between the Company
and Chemical Bank as Trustee (filed as Exhibit 4.1 to the
Company's Registration Statement on Form S-3 (33-65165) as
filed with the Commission on December 19, 1995 under the
Securities Act of 1933 and incorporated herein by reference).
88
<PAGE>
4.5 Escrow and Pledge Agreement dated as of November 10, 1995
between the Company and Chemical Bank as Trustee and Chemical
Bank as Escrow Agent (filed as Exhibit 4.2 to the Company's
Registration Statement on Form S-3 (33-65165) as filed with
the Commission on December 19, 1995 and incorporated herein
by reference).
4.6 Special Warrant Indenture dated November 9, 1995 between the
Company and The Montreal Trust Company of Canada containing
terms and conditions governing the issue and exercise of
special Debenture warrants exercisable for 7% Exchangeable
Debentures due October 25, 2000 of the Company (filed as
Exhibit 99.2 to the Company's Registration Statement on Form
S-3 (33-65165) as filed with the Commission on December 19,
1995 and incorporated herein by reference).
10.1 Atlas Corporation Management Incentive Compensation Plan
(filed as Exhibit 10.2 to the Company's annual report on Form
10-K (file no. 1-2714) for the fiscal year ended June 30,
1981 and incorporated herein by reference).
10.2 Form of Indemnity Agreement entered into between the Company
and certain of its directors (filed as Exhibit 10.14 to the
Company's annual report on Form 10-K for the fiscal year
ended June 30, 1987 and incorporated herein by reference).
10.3 Amended and Restated Rights Agreement dated as of August 2,
1989 between the Company and Manufacturers Hanover Trust
Company (filed as Exhibit 1 to the Company's current report
on Form 8-K dated August 2, 1989 and incorporated herein by
reference).
10.4 Long Term Incentive Plan of the Company dated November 1,
1989 (filed as Exhibit 10.28 to the Company's annual report
on Form 10-K for the fiscal year ended June 30, 1989 and
incorporated herein by reference).
10.5 Atlas Corporation Supplemental Executive Retirement Plan
dated as of January 3, 1990 (filed as Exhibit 10.2 to the
Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1990 and incorporated herein by reference).
10.6 Atlas Corporation Retirement Plan for Outside Directors dated
April 4, 1990 (filed as Exhibit 10.3 to the Company's
quarterly report on Form 10-Q for the quarter ended March 31,
1990 and incorporated herein by reference).
89
<PAGE>
10.7 Restated Employment Agreement dated as of September 12, 1990
between the Company and Richard R. Weaver (filed as Exhibit
10.22 to the annual report on Form 10-K for the fiscal year
ended June 30, 1990 and incorporated herein by reference).
10.8 Amendment No. 1, dated as of March 6, 1991, to the Amended
and Restated Employment Agreement, dated as of September 12,
1990, between the Company and Richard R. Weaver (filed as
Exhibit 10.1 to the Company's quarterly report on Form 10-Q
for the quarter ended March 31, 1991 and incorporated herein
by reference).
10.9 Atlas Corporation Annual Incentive Plan adopted by the Board
of Directors of the Company on March 6, 1991(filed as
Exhibit 10.20 to the Company's annual report on Form 10-K
for the year ended June 30, 1991 and incorporated herein by
reference).
10.10 Securities Purchase Agreement dated September 3, 1993
between the Company and Phoenix Financial Holdings Inc.
(filed as Exhibit 2 to the Company's Report on Form 8-K
filed on September 9, 1993 and incorporated herein by
reference).
10.11 Amendment dated as of September 15, 1993 to the Amended and
Restated Rights Agreement dated as of August 2, 1989 between
the Company and Chemical Bank, as successor by merger with
Manufacturers Trust Company (filed as Exhibit 10.25 to the
Company's annual report on Form 10-K for the year ended June
30, 1993 and incorporated herein by reference).
10.12 Employment agreement made as of September 22, 1993, between
the Company and David J. Birkenshaw (filed as Exhibit 10.1
to the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1994 and incorporated herein by
reference).
10.13 Amendment dated as of August 28, 1995 to the employment
agreement made as of September 22, 1993, between the Company
and David J. Birkenshaw (filed as exhibit 10.15 to the
Company's annual report on Form 10-K for the year ended June
30, 1995 and incorporated herein by reference).
10.14 Share Purchase Agreement dated April 28, 1994 between the
Company and M.I.M. (Canada) Inc. (filed as an Exhibit 10.18
to the Company's annual report on Form 10-K for the year
ended June 30, 1994 and incorporated herein by reference).
90
<PAGE>
10.15 Agreement dated May 10, 1994 between the Company and Granges
Inc. (filed as an Exhibit 10.19 to the Company's annual
report on Form 10-K for the year ended June 30, 1994 and
incorporated herein by reference)
10.16 Registration Rights Agreement dated August 15, 1994, between
the Company and First Marathon Securities Limited (filed as
Exhibit 10.20 to the Company's annual report on Form 10-K
for the year ended June 30, 1994 and incorporated herein by
reference).
10.17 Indemnity Agreement dated August 15, 1995 between the
Company and M.I.M. Holdings Limited (filed as an Exhibit
10.21 to the Company's annual report on Form 10-K for the
year ended June 30, 1994 and incorporated herein by
reference).
10.18 Second Amendment dated as of August 15, 1994 to the Amended
and Restated Rights Agreement dated August 2, 1989 between
the Company and Chemical Bank, as successor by merger with
Manufacturers Hanover Trust Company (filed as Exhibit 10.1
to the Company's quarterly report on Form 10-Q for the
quarter ended March 31, 1995 and incorporated herein by
reference).
10.19 The Company's Long Term Incentive Plan, as amended dated
February 17, 1995 (filed as Exhibit 10.2 to the Company's
quarterly report on Form 10-Q for the quarter ended March
31, 1995 and incorporated herein by reference).
10.20 Employment Agreement made as of January 16, 1995 between the
Company and Michael B. Richings (filed as Exhibit 10.3 to
the Company's quarterly report on Form 10-Q for the quarter
ended March 31, 1995 and incorporated herein by reference).
10.23 Atlas Subscription Agreement dated March 9, 1995 between the
Company and Dakota Mining Corporation. (filed as exhibit
10.26 to
91
<PAGE>
the Company's annual report on Form 10-K for the year ended
June 30, 1995 and incorporated herein by reference).
10.24 Amendment dated September 15, 1995 to the employment
agreement made as of February 17, 1995 between the Company
and Richard E. Blubaugh. (filed as exhibit 10.27 to the
Company's annual report on Form 10-K for the year ended June
30, 1995 and incorporated herein by reference).
10.25 Employment Agreement dated June 1, 1995 between the Company
and Gerald E. Davis (filed as exhibit 10.28 to the Company's
annual report on Form 10-K for the year ended June 30, 1995
and incorporated herein by reference).
10.26 Amendment dated September 20, 1995 to the employment
agreement dated June 1, 1995 between the Company and Gerald
E. Davis (filed as exhibit 10.29 to the Company's annual
report on Form 10-K for the year ended June 30, 1995 and
incorporated herein by reference).
10.27 Underwriting Agreement dated as of October 25, 1995 by and
among the Company, Yorkton Securities Inc. and First Marathon
Securities Ltd. regarding the distribution of special
Debenture warrants exercisable for 7% Exchangeable Debentures
due October 25, 2000 of the Company (filed as Exhibit 99.1 to
the Company's Registration Statement on Form S-3 (33-65165)
as filed with the Commission on December 19, 1995 and
incorporated herein by reference).
10.28 Granges Registration Agreement dated as of November 10, 1995
between the Company and Granges Inc. (filed as Exhibit 99.3
to the Company's Registration Statement on Form S-3 (33-
65165) as filed with the Commission on December 19, 1995 and
incorporated herein by reference).
10.29 Indemnification Agreement dated as of November 15, 1995
between the Company and Granges Inc. (filed as Exhibit 99.4
to the Company's Registration Statement on Form S-3 (33-
65165) as filed with the Commission on December 19, 1995 and
incorporated herein by reference).
10.30 Option Agreement between the Company and Harvest Gold
Corporation signed September 13, 1995 (filed as Exhibit 99.7
to the Company's Registration Statement on Form S-3 (33-
65165) as filed with the Commission on December 19, 1995 and
incorporated
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<PAGE>
herein by reference).
10.31 Purchase and Sale Agreement dated October 25, 1995 between
the Company and Independence Mining Company Inc. (filed as
Exhibit 99.8 to the Company's Registration Statement on Form
S-3 (33-65165) as filed with the Commission on December 19,
1995 and incorporated herein by reference).
10.32 Registration Rights Agreement dated October 25, 1995 between
the Company and Independence Mining Company Inc. (filed as
Exhibit 99.9 to the Company's Registration Statement on Form
S-3 (33-65165) as filed with the Commission on December 19,
1995 and incorporated herein by reference).
10.33 Agreement between the Company and Brown & Root, Inc. dated
October 23, 1995 (filed as Exhibit 99.10 to the Company's
Registration Statement on Form S-3 (33-65165) as filed with
the Commission on December 19, 1995 and incorporated herein
by reference).
10.34 Mining Venture Agreement with Granges (US), Inc. dated
September 29, 1995 (filed as Exhibit 10.37 to the Company's
annual report on Form 10-K for the year ended December 31,
1995 and incorporated herein by reference).
10.35 Business combination agreement with MSV Resources Inc. dated
March 5, 1996 (filed as Exhibit 10.38 to the Company's annual
report on Form 10-K for the year ended December 31, 1995 and
incorporated herein by reference).
10.36 Resignation Agreement and General Release dated June 21, 1996
between the Company and David J. Birkenshaw.
10.37 Support Letter dated August 16, 1996 to the Company from
Granges Inc. and Da Capo Resources Ltd.
10.38 Amendment to Resignation Agreement and General Release dated
October 1996 between the Company and David J. Birkenshaw.
10.39 Resignation Agreement and General Release dated November 5,
1996 between the Company and Gerald E. Davis.
10.40 Amendment to Resignation Agreement and General Release dated
January 14, 1997 between the Company and Gerald E. Davis.
10.41 Employment Agreement dated December 1, 1996 between the
Company and Gregg B. Shafter.
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<PAGE>
10.42 Letter Agreement dated January 6, 1997 regarding the
withdrawal from the Gold Bar mining venture agreement between
the Company and Granges (US), Inc.
21 Subsidiaries of the Company
23 Consent of Independent Auditors
94
<PAGE>
Exhibit 2.1
ATLAS
EXECUTED COPY
CORP
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ATLAS CORPORATION
AND THE
SELLERS NAMED HEREIN
DATED AS OF OCTOBER 7, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I Plan of Reorganization................................ 3
Section 1.1 Adoption of Plan...................................... 3
Section 1.2 Purchase and Sale..................................... 3
Section 1.3 Purchase Consideration................................ 3
Section 1.4 Other Deliveries...................................... 3
Section 1.5 Forgiveness of Indebtedness........................... 5
ARTICLE II Representations and Warranties of Sellers............. 5
Section 2.1 Execution of the Agreement; Binding Obligations....... 5
Section 2.2 Ownership of the Suramco Shares....................... 6
Section 2.3 Consents and Approvals; No Violations................. 6
Section 2.4 Ownership of the Arisur Shares and the Minera
Andacaba Shares....................................... 7
Section 2.5 Accredited Investor Status............................ 8
Section 2.6 Arisur and Minera Andacaba Organization............... 9
Section 2.7 Financial Information................................. 9
Section 2.8 Absence of Undisclosed Liabilities.................... 10
Section 2.9 Absence of Adverse Changes............................ 10
Section 2.10 Taxes................................................. 11
Section 2.11 Title to Properties................................... 12
Section 2.12 Personal and Real Properties.......................... 12
Section 2.13 Environmental Matters................................. 13
Section 2.14 Notes, Accounts Receivable............................ 14
Section 2.15 Contracts, Etc........................................ 14
Section 2.16 Employees and Organizational Chart.................... 15
Section 2.17 Litigation............................................ 15
Section 2.18 Business Permits...................................... 16
Section 2.19 Insurance............................................. 16
Section 2.20 Compliance with Applicable Law........................ 17
Section 2.21 Bank Accounts; Powers of Attorney..................... 17
Section 2.22 Minute Books, etc..................................... 17
Section 2.23 Disclosure............................................ 18
Section 2.24 Brokers............................................... 18
ARTICLE III Representations and Warranties of Buyer............... 19
Section 3.1 Authorization; Binding Obligation..................... 19
Section 3.2 Ownership of the Atlas Shares......................... 19
Section 3.3 No Conflicts.......................................... 20
Section 3.4 SEC Reports and Financial Statements.................. 21
Section 3.5 Absence of Adverse Changes............................ 22
Section 3.6 Litigation............................................ 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.7 Investment; Experience................................ 23
Section 3.8 Brokers............................................... 23
ARTICLE IV Covenants............................................. 24
Section 4.1 Directorship.......................................... 24
Section 4.2 Covenant Not to Compete............................... 24
Section 4.3 Transfer Taxes........................................ 25
Section 4.4 Best Efforts.......................................... 25
Section 4.5 Further Assurances.................................... 26
ARTICLE V Indemnification and Related Matters................... 26
Section 5.1 Indemnification by Sellers............................ 26
Section 5.2 Indemnification by Buyer.............................. 27
Section 5.3 Procedure............................................. 28
Section 5.4 Related Matters....................................... 30
ARTICLE VI Miscellaneous......................................... 30
Section 6.1 Headings.............................................. 30
Section 6.2 Amendment............................................. 30
Section 6.3 Notices............................................... 30
Section 6.4 Successors............................................ 32
Section 6.5 Entire Agreement...................................... 32
Section 6.6 Severability.......................................... 32
Section 6.7 Third Parties......................................... 32
Section 6.8 Counterparts.......................................... 33
Section 6.9 Governing Law......................................... 33
</TABLE>
SCHEDULES
Schedule A Shareholders of Suramco Metals, Inc.
Schedule 2.8 Disclosed Liabilities
Schedule 2.9 Certain Adverse Changes
Schedule 2.10 Taxes
Schedule 2.11 Title to Properties
Schedule 2.12(i) Personal Property
Schedule 2.12(ii) Real Property
Schedule 2.15 Contracts, Etc.
Schedule 2.16 Employees and Organizational Chart
Schedule 2.18 Business Permits
Schedule 2.19 Insurance
Schedule 2.21 Bank Accounts; Powers of Attorney
Schedule 3.5 Certain Adverse Changes
Schedule 3.6 Litigation
Schedule 4.2 Permitted Competition
<PAGE>
EXHIBITS
Exhibit A Registration Rights Agreement
Exhibit B Executive Consulting Agreement
Exhibit C Report of Verna & Associates
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of the
seventh day of October, 1996, by and among Atlas Corporation, a Delaware
corporation ("Buyer"), and the individuals listed in Schedule A hereto (each, a
"Seller" and collectively, the "Sellers").
W I T N E S S E T H:
-------------------
WHEREAS, Sellers are the record and beneficial owners of 5,100,000 common
shares of Suramco Metals, Inc., a Nevada corporation ("Suramco"), constituting
one hundred percent (100%) of the issued and outstanding shares of capital stock
of Suramco (the "Suramco Shares"); and
WHEREAS, Suramco is the record and beneficial owner of 500 ordinary shares,
nominal value US$1.00 per share of Arisur, Inc., a Cayman Islands company
registered and qualified to do business in the Republic of Bolivia ("Arisur"),
constituting fifty percent (50%) of the issued and outstanding shares of Arisur
(the "Arisur Shares"); and
WHEREAS, Suramco is also the record and beneficial owner of 4,224 ordinary
shares, nominal value 1 Boliviano per share, of Compania Minera Andacaba S.A., a
Bolivian corporation ("Minera Andacaba"), constituting forty-eight (48%) percent
of the issued and outstanding shares of Minera Andacaba (the "Minera Andacaba
Shares"); and
<PAGE>
WHEREAS, Arisur and Arimetco International Inc., a Canadian corporation
("Arimetco"), respectively, are the record and beneficial owners of 4,488 and 88
ordinary shares, nominal value 1 Boliviano per share, of Minera Andacaba,
constituting, respectively, fifty-one percent (51%) and one percent (1%) of the
issued and outstanding shares of Minera Andacaba; and
WHEREAS, pursuant to an agreement of even date herewith, Buyer is
purchasing, and Arimetco is selling, (i) the remaining fifty percent (50%) of
the issued and outstanding shares of Arisur, which are owned by Arimetco and
(ii) the one percent (1%) of the issued and outstanding shares of Minera
Andacaba; and
WHEREAS, the parties hereto desire to enter into a plan qualifying as a
tax-deferred reorganization under Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended (the "Code"), pursuant to which Sellers shall sell and
transfer the Suramco Shares to Buyer and Buyer, solely in exchange for voting
common stock of Buyer, shall purchase and acquire the Suramco Shares from
Sellers, all upon the terms hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
2
<PAGE>
ARTICLE I
Plan of Reorganization
----------------------
Section 1.1 Adoption of Plan. Buyer and Sellers hereby adopt a plan of
reorganization in accordance with the provisions of Section 368(a)(1)(B) of the
Code. The terms and conditions governing this Agreement are set forth below .
Section 1.2 Purchase and Sale. On the terms and conditions set forth
herein, Buyer hereby purchases from Sellers, and Sellers hereby sell, transfer
and deliver to Buyer, all right, title and interest in, free of all Liens (as
hereinafter defined), the Suramco Shares, for the purchase consideration set
forth in Section 1.3 hereof.
Section 1.3 Purchase Consideration. In consideration for the sale and
transfer of the Suramco Shares, Buyer hereby issues to each Seller the number of
shares of common stock listed opposite such Seller's name on Schedule A hereto,
the aggregate amount of such shares being issued to Sellers being 4,000,000
common voting shares of Buyer (the "Atlas Shares"), receipt of which shares by
Sellers is hereby acknowledged.
Section 1.4 Other Deliveries. Simultaneously with the transfer of the
Suramco Shares, the parties acknowledge that the following actions have been
taken :
(a) Registration Rights Agreement. Sellers and Buyer have entered into a
Registration Rights Agreement substantially in the form of Exhibit A
hereto;
(b) Executive Consulting Agreement. Suramco Holdings, Inc. and Buyer have
executed and delivered an Executive Consulting Agreement,
substantially in the form set forth in Exhibit B hereto, pursuant to
which Suramco Holdings, Inc.
3
<PAGE>
shall provide certain consultancy services to Buyer and its
subsidiaries and affiliates;
(c) Resignations. All members of the Board of Directors of Suramco, all
members of the Boards of Directors of Arisur and Minera Andacaba and
all officers of Suramco, Arisur and Minera Andacaba have delivered
their resignations dated the date hereof;
(d) Good Standing. (i) Sellers have delivered to Buyer certificates of
good standing (or, in the case of Minera Andacaba, a copy of its
certificate of incorporation and by-laws, together with all amendments
thereto, registered with the appropriate Registry of Commerce) in
respect of Suramco and Arisur, including copies of their respective
articles of incorporation certified by a notary public in Nevada and
the Cayman Islands (as the case may be) as being a true and correct
copy thereof and (ii) Buyer has delivered to Seller a certificate of
good standing in respect of Buyer, including a copy of the certificate
of incorporation of Buyer certified by the Secretary of State of
Delaware;
(e) Share Certificates and Stock Transfers. Each Seller has delivered to
Buyer its respective certificate or certificates representing the
Suramco Shares owned by such Seller, in each case together with stock
transfers duly and validly endorsed for transfer on behalf of such
Seller; and
(f) Title and Geological Data. Sellers have delivered (or caused to be
delivered) to Buyer originals of all title, geological, geochemical,
geophysical and engineering data in the possession of Sellers,
Suramco, Arisur or Minera Andacaba or under
4
<PAGE>
their control, in respect of all properties owned, controlled or
evaluated by Suramco, Arisur (including any branch thereof) and Minera
Andacaba.
Section 1.5 Forgiveness of Indebtedness. Pursuant to the purchase by Buyer
of the Suramco Shares hereunder, that certain loan dated August 26, 1996
extended by Buyer to Suramco in the principal amount of US$200,000 shall hereby
be deemed to constitute a capital contribution by Buyer to Suramco, and the
pledge by Suramco to Buyer of the Arisur Shares as security for such loan is
hereby deemed released and discharged.
ARTICLE II
Representations and Warranties of Sellers
-----------------------------------------
Sellers jointly and severally make each of the representations and
warranties set forth in this Article II below. For purposes of this Article II,
all representations and warranties with respect to Arisur shall be deemed to
apply with equal force to each branch of Arisur wherever established.
Section 2.1 Execution of the Agreement; Binding Obligations. The execution
and delivery by Sellers of this Agreement and any agreements related thereto and
performance by Sellers of their obligations hereunder and thereunder have been
duly and validly authorized. This Agreement and all such related agreements are
the valid and binding obligations of, enforceable in accordance with their
respective terms against, Sellers, except as enforcement thereof may be limited
by bankruptcy, insolvency, conservatorship, receivership, liquidation,
reorganization, moratorium or similar laws or general equitable principles.
5
<PAGE>
Section 2.2 Ownership of the Suramco Shares. The Suramco Shares constitute
one hundred percent (100%) of the issued and outstanding share capital of
Suramco. Each Seller is the record and beneficial owner of the number of Suramco
Shares listed opposite such Seller's name listed on Schedule A hereto, and each
Seller owns such shares free and clear of all liens, mortgages, charges,
security interests, defects in title, adverse claims, encumbrances, conflicting
claims to ownership, any options, rights of first refusal or similar rights, or
any restrictions or limitations on, or conflicting claims with respect to, the
use, voting, transfer, receipt of income or other exercise of any attributes of
ownership (collectively, "Liens"); as a result of the transfer of the Suramco
Shares pursuant to this Agreement, Buyer has acquired good and marketable title
to the Suramco Shares free and clear of all Liens; other than this Agreement,
there are no agreements, arrangements or understandings relating to issuance,
ownership, transfer or other rights with respect to the Suramco Shares; the
Suramco Shares are duly and validly issued and outstanding, fully paid and non-
assessable and have not been issued in violation of any preemptive or similar
rights of stockholders; and there is no option, warrant, subscription, or other
agreement to issue any security or other instrument convertible into or
exchangeable for, or any other right, commitment, understanding or arrangement
calling for the issuance of any additional shares of capital stock by Suramco.
Suramco does not own any shares or other equity in any other corporation or
entity other than the Arisur Shares and the Minera Andacaba Shares.
Section 2.3 Consents and Approvals; No Violations. The execution and
delivery of this Agreement and any agreement contemplated herein and the
consummation of the transactions contemplated hereby and thereby will not:
violate or conflict with any provision of the respective certificates of
incorporation, by-laws or other constitutional documents of Suramco,
6
<PAGE>
Arisur or Minera Andacaba; breach, violate or constitute an event of default (or
an event which with the lapse of time or the giving of notice or both would
constitute an event of default) under, give rise to any right of termination,
cancellation, modification or acceleration under, or require any consent or the
giving of any notice under, any note, bond, indenture, mortgage, security
agreement, lease, license, franchise, permit, agreement or other instrument or
obligation to which any Seller, Suramco, Arisur or Minera Andacaba is a party,
or by which any Seller, Suramco, Arisur, Minera Andacaba or any of their
respective properties or assets may be bound, or result in the creation of any
Lien or other right of any third party of any kind whatsoever upon such
properties or assets pursuant to the terms of any such instrument or obligation;
violate or conflict with any law, statute, ordinance, code, rule, regulation,
judgment, order, writ, injunction, decree or other instrument applicable to any
Seller, Suramco, Arisur or Minera Andacaba or by which their respective
properties or assets may be bound or require, on the part of said persons and
entities, any filing with, or permit, license, exemption, consent, authorization
or approval of, or the giving of any notice to, any governmental or regulatory
agency other than such as has been obtained.
Section 2.4 Ownership of the Arisur Shares and the Minera Andacaba Shares.
The Arisur Shares constitute fifty percent (50%) the issued and outstanding
share capital of Arisur and the Minera Andacaba Shares constitute forty-eight
(48%) of the issued and outstanding share capital of Minera Andacaba; Suramco is
the sole record and beneficial owner of the Arisur Shares and the Minera
Andacaba Shares, in each case free and clear of all Liens; as a result of the
transfer of the Arisur Shares and the Minera Andacaba Shares pursuant to this
Agreement, Buyer has acquired good and marketable title to the Arisur Shares and
the Minera Andacaba
7
<PAGE>
Shares, in each case free and clear of all Liens; other than this Agreement,
there are no agreements arrangements or understandings relating to issuance,
ownership, transfer or other rights with respect to the Arisur Shares and the
Minera Andacaba Shares; the Arisur Shares and the Minera Andacaba Shares are
duly and validly issued and outstanding, fully paid and non-assessable and have
not been issued in violation of any preemptive or similar rights of stock-
holders; and there is no option, warrant, subscription or other agreement to
issue, or any security or other instrument convertible into or exchangeable for,
or any other right, commitment, understanding or arrangement calling for the
issuance of, any additional shares of capital stock by Arisur or Minera
Andacaba. Except for Arisur's 51% ownership interest in Minera Andacaba, neither
Arisur nor Minera Andacaba owns any shares or other equity interest in any other
corporation or entity.
Section 2.5 Accredited Investor. Status. Each Seller hereby represents
and warrants as of the date hereof that (i) it is an "Accredited Investor" or it
is represented by a "Purchaser Representative" (as such terms are defined in
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act")), and either alone or together with its Purchaser
Representative, has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of an investment
in the Atlas Shares being acquired by such Seller hereunder; (ii) it understands
that the Atlas Shares being acquired by Sellers hereunder have not been
registered under the Securities Act or the securities laws of any state, that
therefore such Shares cannot be resold unless registered under the Securities
Act or exempt from such registration, and that (other than as expressly
contemplated by the Registration Rights Agreement) Buyer has not made any
representations, warranties or covenants to it regarding the
8
<PAGE>
registration of said shares or compliance with any exemption under the
Securities Act or the securities laws of any state and that said shares have not
been approved or disapproved by the Securities and Exchange Commission ("SEC")
or any other federal or state agency; and (iii) it is acquiring the Atlas Shares
for its own account, for investment purposes only and not with a view to the
sale or distribution thereof.
Section 2.6 Arisur and Minera Andacaba Organization. Arisur and Minera
Andacaba are companies duly organized, validly existing and in good standing
under the laws of the Cayman Islands and Bolivia, respectively, have all
requisite power and authority to own, lease and operate the properties currently
(or contemplated to be) owned, leased or operated by Arisur and Minera Andacaba
(as the case may be) and to conduct their respective businesses as presently (or
as contemplated to be) conducted.
Section 2.7 Financial Information. Sellers have delivered to Buyer on or
prior to the date of this Agreement (i) the audited consolidated balance sheets
of each of Arisur and Minera Andacaba as at September 30, 1995, 1994 and 1993
and their respective audited statements of income and cash flow for the fiscal
years then ended, including the notes thereto (collectively, the "Financial
Statements"), in each case accompanied by the qualified reports of Verna &
Associates in the form attached as Exhibit C hereto, and (ii) the unaudited
balance sheet of Suramco as at August 30, 1996 and unaudited statements of
income for the period then ended, and the unaudited balance sheets of Arisur and
Minera Andacaba as at June 30, 1996 and the related unaudited statements of
operations for the nine months then ended (the "Interim Financial Statements").
The Financial Statements and the Interim Financial Statements (x) have been
prepared from the books and records of Suramco, Arisur and Minera Andacaba, (y)
have been
9
<PAGE>
prepared in accordance with generally accepted accounting principles
consistently applied during such periods and (z) present fairly the respective
financial conditions, results of operations and cash flows of said entities as
at the dates, and for the periods, stated therein, subject, in the case of the
Interim Financial Statements, to normal and customary year-end adjustments.
Section 2.8 Absence of Undisclosed Liabilities. None of Suramco, Arisur or
Minera Andacaba has liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, except (i) as set forth in Schedule 2.8 and
as set forth or reserved against in the Interim Financial Statements, (ii)
liabilities or obligations incurred since June 30, 1996 in the ordinary course
of business and consistent with past practice and which individually and in the
aggregate are not material to Suramco, Arisur or Minera Andacaba.
Section 2.9 Absence of Adverse Changes. Since September 30, 1995 Suramco,
Arisur and Minera Andacaba each have carried on their respective businesses in
the ordinary course and consistent with past practice. Except as set forth in
Schedule 2.9 hereto, since September 30, 1995 there has not been: (i) any
material adverse change in the respective conditions (financial or otherwise),
assets, liabilities, operations, businesses or prospects of Suramco, Arisur or
Minera Andacaba; (ii) any material damage, destruction or loss, whether or not
covered by insurance, adversely affecting the respective assets or operations of
Suramco, Arisur or Minera Andacaba; (iii) any sale, transfer, lease or other
disposition of any of the respective material properties or assets of Suramco,
Arisur or Minera Andacaba, other than sales from inventory in the ordinary
course of business; (iv) any increase in the compensation payable or to become
payable by Suramco, Arisur or Minera Andacaba to any of their respective
officers, or any material increase in such compensation payable or to become
payable to employees or agents,
10
<PAGE>
or any bonus payment or arrangement made to, or to be made to or with, any
thereof; (v) any labor trouble or any event or condition of any character
materially and adversely affecting the respective operations, prospects or
businesses of Suramco, Arisur or Minera Andacaba; (vi) any discharge or
satisfaction of any Lien, or payment of any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, other than
current liabilities shown on the Interim Financial Statements; (vii) any Lien on
any of the respective properties or assets, tangible or intangible, of Suramco,
Arisur or Minera Andacaba; or (viii) paid or declared any dividend or
distribution in respect of shares of the respective capital stocks of Suramco,
Arisur and Minera Andacaba or any repurchase or agreement to repurchase any
such shares.
Section 2.10 Taxes. Except as set forth in Schedule 2.10 hereto, Suramco,
Arisur and Minera Andacaba have duly filed all tax returns required to be filed
and have paid in full all taxes, interest, penalties, assessments and
deficiencies due or claimed to be due from all taxing authorities having
jurisdiction over such entities (including taxes on properties, income,
franchises, licenses, sales, payrolls and social security). The provisions for
income and other taxes payable reflected in the respective consolidated balance
sheets of said entities as of the respective Financial Statements and in their
respective Interim Financial Statements make adequate provision for all accrued
and unpaid taxes of Suramco, Arisur and Minera Andacaba as at said dates,
whether or not disputed, and said entities have made adequate provision for such
taxes on their respective books and records. There are no tax liens (other than
liens for taxes which are not yet due and payable) on any of the respective
properties of Suramco, Arisur or Minera Andacaba, no tax claims asserted, no
basis for any such claim and no agreements with
11
<PAGE>
or received from any governmental or regulatory agency pertaining to the tax
treatment of Suramco, Arisur or Minera Andacaba or any of their interests in any
of their respective properties.
Section 2.11 Title to Properties. All of the properties and assets of every
kind and description which are reflected on the consolidated balance sheets of
Suramco at August 30, 1996 and, in respect of Arisur and Minera Andacaba, as at
June 30, 1996 (other than inventory transferred by Suramco, Arisur or Minera
Andacaba in the ordinary course of business), is either (i) owned absolutely by
Suramco, Arisur or Minera Andacaba, as the case may be, free and clear of Liens,
except as set forth in Schedule 2.11 hereto, or (ii) leased or otherwise used or
exploited under concessions or similar rights by Suramco, Arisur or Minera
Andacaba, pursuant to leases, concessions or similar rights listed in Schedule
2.11 hereto. All leases, concessions or rights set forth in Schedule 2.11 are
valid, binding and in full force and effect. None of Suramco, Arisur or Minera
Andacaba nor, to the best knowledge of Sellers, any other party thereto, is in
default thereunder, and no event has occurred which, with notice and/or lapse of
time, would constitute a default by Suramco, Arisur or Minera Andacaba, or to
the best knowledge of Sellers, any other party thereto. Suramco, Arisur and
Minera Andacaba have all easements and rights, including easements for power
lines, water lines, roadways and other access, necessary to conduct their
respective businesses as currently conducted.
Section 2.12 Personal and Real Properties. (i) Schedule 2.12(i) hereto
correctly sets forth an accurate list of all tangible personal property which
was owned of record or beneficially by each of Suramco, Arisur and Minera
Andacaba as at September 30, 1996, together with any material changes since such
date, including, without limitation, all vehicles (motor or other) and
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all machinery and equipment; all such vehicles, machinery and equipment and
other personal property are in good operating condition and repair, reasonable
wear and tear excepted, and, to the best of Sellers' knowledge after reasonable
inquiry, the operation thereof conforms with all applicable regulations and
other laws. All such personal property is owned by Suramco, Arisur or Minera
Andacaba, as the case may be, free and clear of any Lien, except as set forth in
Schedule 2.12(i) hereto.
(ii) Schedule 2.12(ii) hereto correctly sets forth an accurate list and
summary description of all real property which was owned of record or
beneficially by each of Suramco, Arisur and Minera Andacaba as of the date
hereof, all installations, sites and places of business located thereon are, in
all material respects, in good operating condition and repair, reasonable wear
and tear excepted, and, to the knowledge of Sellers' after reasonable inquiry,
conform with all applicable ordinances and existing and proposed regulations and
building, zoning and other laws.
Section 2.13 Environmental Matters. There are no conditions, occurrences or
activities at or on any of the properties described in Schedule 2.12(ii) hereto,
or any other real property in which Suramco, Arisur or Minera Andacaba holds any
interest, which constitute a violation of, or give rise to liability under, any
applicable laws, regulations, ordinances or orders providing for health and
safety or protection of the environment, or that may give rise to an obligation
to contribute to the remediation of any contamination of air, water or land
(collectively, "Environmental Laws"). Such properties have not in the past, and
to the knowledge of Sellers, are not now subject to any investigation,
assessment, or study by any person or governmental or regulatory agency related
to potential or actual violations or
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enforcement of any Environmental Law. Suramco, Arisur and Minera Andacaba are in
compliance with all notification and reporting requirements of any Environmental
Laws applicable to their respective properties and operations.
Section 2.14 Notes, Accounts Receivable. All receivables of Suramco,
Arisur and Minera Andacaba (including accounts receivable, loans receivable,
notes and advances) have arisen from bona fide transactions in the ordinary
course of business and consistent with past practice; are owned by said entities
free and clear of any Lien and are accurately reflected on the Interim Financial
Statements or with respect to receivables created after June 30, 1996, are
accurately and fairly reflected in the respective books and records of Suramco,
Arisur and Minera Andacaba and, except for any reserve set forth in the Interim
Financial Statements (or with respect to receivables created after June 30, 1996
in the books and records of Arisur and Minera Andacaba), are fully collectible.
Section 2.15 Contracts, Etc. Schedule 2.15 hereto correctly sets forth all
requirements, arrangements or understandings, whether written or oral, in
respect of any indebtedness between Suramco, Arisur or Minera Andacaba and any
of their respective Affiliates (as such term is defined in Rule 405 of the
Securities Act) and all such indebtedness has been paid in full or otherwise
cancelled and all such arrangements, understandings or agreements have been
terminated as of the date hereof. All material contracts and commitments of
Suramco, Arisur and Minera Andacaba as of the date hereof are valid and in full
force and effect. None of said parties nor, to the best knowledge of Sellers,
any other party thereto, is in default thereunder, and no event has occurred
which, with notice and/or lapse of time, would constitute a default by Suramco,
Arisur or Minera Andacaba, or to the best knowledge of Sellers, any other party
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thereto. Schedule 2.15 hereto lists (except to the extent listed in other
schedules to this Agreement) all such contracts and commitments as of June 30,
1996, and there have been no material changes thereto since such date.
Section 2.16 Employees and Organizational Chart. Schedule 2.16 hereto
contains a true and complete list as of June 30, 1996 of (i) all of the
employees of each of Suramco, Arisur and Minera Andacaba, whether full-time or
part-time and consultants engaged by such entities and the compensation or other
benefits payable to each, together with an organizational chart, as of such
date, indicating names, titles and responsibilities of their respective
management and supervisory personnel, and (ii) all employment or collective
bargaining or consulting agreements in respect of employees of Suramco, Arisur
and Minera Andacaba, and there has been no material change in the information
set forth in such Schedule through the date of this Agreement. There are no
disputes currently subject to any grievance procedure, arbitration or
litigation, and none of Suramco, Arisur or Minera Andacaba, nor, to the best
knowledge of Sellers, any other party thereto, is in default thereunder, and no
event has occurred which with notice and/or lapse of time, would constitute a
default by Sellers, or, to the best knowledge of Sellers, any other party
thereto. There are no strikes, lockouts, work stoppage, slowdowns,
jurisdictional disputes occurring or, to Sellers' knowledge after due inquiry,
threatened in connection with the properties or operations of Suramco, Arisur or
Minera Andacaba.
Section 2.17 Litigation. There is no Litigation (as hereinafter defined)
(i) by or before any court, governmental body or other regulatory or
administrative agency or commission, domestic or foreign, or any arbitration
pending, or, to the knowledge of Sellers after due inquiry, threatened, to which
Sellers, Suramco, Arisur or Minera Andacaba is a party or by
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which any of their respective assets or properties may be bound or affected,
which, if adversely decided would have a material adverse effect on Suramco,
Arisur or Minera Andacaba; and (ii) by or before any court, governmental or
regulatory agency, or arbitrator, in each case pending or, to the knowledge of
Sellers, threatened, which seeks to restrain, enjoin, prevent the consummation
of, or otherwise challenge this Agreement or any of the transactions
contemplated hereby. For purposes of this Agreement, "Litigation" shall mean any
action, suit, claim, proceeding, investigation or written governmental inquiry.
Section 2.18 Business Permits. Suramco, Arisur and Minera Andacaba have,
to the best of Sellers' knowledge after due inquiry, secured all permits,
licenses or other authorizations necessary from all relevant governmental or
regulatory agencies to operate their respective businesses as presently
conducted or as presently proposed to be conducted. All such permits, licenses
or other authorizations are listed in Schedule 2.18 hereto. Sellers shall
cooperate with Buyer (at no cost to Buyer) to obtain any additional, or to
modify any existing, permits or authorizations necessary in connection with the
transactions contemplated hereby.
Section 2.19 Insurance. Suramco, Arisur and Minera Andacaba each are
adequately insured with reputable insurers in respect of their respective
businesses, operations and the properties and assets related thereto, against
risk normally insured against by companies in similar lines of business.
Schedule 2.19 hereto lists all fire, theft, casualty, liability, business
disruption, products liability and other insurance policies insuring such
businesses, operations and the properties and assets related thereto, specifying
with respect to each such policy the name of the insurer, the risk insured
against, the limits of coverage, the deductible amount (if
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any), the premium rate and the date through which coverage will continue by
virtue of premiums already paid.
Section 2.20 Compliance with Applicable Law. Suramco, Arisur and Minera
Andacaba have, to the best of Sellers' knowledge after due inquiry, complied
with all applicable laws and regulations of domestic and foreign governments and
all agencies thereof which affect the respective businesses of Suramco, Arisur
and Minera Andacaba or any owned, used or leased properties employed in such
businesses and to which Suramco, Arisur or Minera Andacaba may be subject,
including, without limitation, safety, health and environmental laws and
regulations, and no claims have been filed against any of said entities alleging
a violation of any such laws or regulations.
Section 2.21 Bank Accounts; Powers of Attorney. Schedule 2.21 hereto sets
forth a complete and correct list of showing (i) all bank accounts of each of
Suramco, Arisur and Minera Andacaba, together with, in respect of each such
account, the account number, the names of all signatories thereof and the
authorized powers of each such signatory; and (ii) the names of all persons
holding powers of attorney from Suramco, Arisur and Minera Andacaba and a
summary statement of the terms thereof.
Section 2.22 Minute Books, etc. The respective minute books, stock
certificates and stock ledgers of Suramco, Arisur and Minera Andacaba are
complete and correct in all material respects and fairly reflect the conduct of
said entities' respective businesses. The minute books of Suramco, Arisur and
Minera Andacaba contain accurate and complete records of all meetings or written
consents to action of the respective Boards of Directors and stockholders of
Suramco,
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Arisur and Minera Andacaba and accurately reflect all corporate actions of said
entities which are required by law to be passed upon by said Boards of Directors
or stockholders.
Section 2.23 Disclosure. No representation or warranty by Sellers (or any
of them severally) contained in this Agreement and no statement contained in any
Schedule, certificate or other document or instrument delivered by Sellers or to
be delivered pursuant to this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make the statements contained therein not misleading. The foregoing
representations and warranties are made by Sellers with the knowledge and
expectation that Buyer is placing complete reliance thereon in entering into,
and performing its obligations under, this Agreement, and the same shall not be
affected in any respect whatsoever by any investigation heretofore or hereafter
conducted by or on behalf of Buyer, whether in contemplation of or pursuant to
this Agreement or otherwise. For the avoidance of confusion, it is hereby
stipulated that with respect to any oral agreement or commitment disclosed in
any Schedule, only those terms of such oral agreement expressly set forth in
such Schedule shall be deemed to have been disclosed.
Section 2.24 Brokers. No broker or finder has acted on behalf of Seller in
connection with this Agreement or any transactions provided for hereby and
Sellers agree to indemnify Buyer for any broker's or finder's fees that may be
payable in connection with any action taken by any or all Sellers.
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ARTICLE III
Representations and Warranties of Buyer
---------------------------------------
Buyer represents and warrants to Sellers as follows:
Section 3.1 Authorization; Binding Obligation. Buyer is a company
duly organized, validly existing and in good standing under the laws of the
State of Delaware; it has all requisite corporate power and authority to own,
operate and lease the properties and assets it now owns, operates and leases and
to carry on its business as presently (or as contemplated to be) conducted; it
has the requisite power to execute, deliver and perform this Agreement and any
documents contemplated herein to which it is or will be a party and to
consummate the transactions contemplated hereby and thereby; all action on its
part necessary to approve or to authorize the execution, delivery and
performance of this Agreement and any such documents to which it is party and
the consummation of the transactions contemplated hereby and thereby has been
duly taken; this Agreement is the valid and binding obligation of, enforceable
in accordance with its terms against, Buyer, except as enforcement thereof may
be limited by bankruptcy, insolvency, conservatorship, receivership,
liquidation, reorganization, moratorium or similar laws or general equitable
principles; and any related document thereto is, or upon execution and delivery
thereof will be, a valid and binding obligation of, enforceable in accordance
with its terms against, it, except as enforcement thereof may be limited by
bankruptcy, insolvency, conservatorship, receivership, liquidation,
reorganization, moratorium or similar laws or general equitable principles.
Section 3.2 Ownership of the Atlas Shares. The authorized capital
stock of Buyer consists of 50,000,000 shares of common stock, of which
20,092,270 are issued and outstanding
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on the date hereof, and 1,000,000 shares of preferred stock, par value US$1.00
per share, of which no shares are outstanding on the date hereof. The Atlas
Shares are duly authorized, validly issued, fully paid and non-assessable. There
are no agreements or commitments to which Buyer is a party or by which it is
bound for the redemption or repurchase of any shares of its capital stock.
Except as identified in the Exchange Act Filings (as hereinafter defined) or in
Schedule 3.2, there are no outstanding options, warrants, subscription or other
rights to purchase, or securities convertible into or exchangeable for, shares
of capital stock of Buyer and (except as otherwise contemplated by this
Agreement, the parties hereto or as set forth in the Exchange Act Filings) there
are no agreements or commitments to which Buyer is a party or by which it is
bound pursuant to which Buyer is or may be bound to issue additional shares of
its capital stock.
Section 3.3 No Conflicts. Neither the execution, delivery or
performance by Buyer of this Agreement and any related agreement, nor the
consummation by it of the transactions contemplated hereby or thereby, will: (a)
constitute an event of default under, permit the termination of, give rise to a
right to accelerate any indebtedness under, any contract, lease, or governmental
permit to which Buyer is a party, is maker or guarantor, or by which it is
bound; (b) violate any order, writ, injunction, decree, judgment, ruling or law
applicable to Buyer or by which Buyer or any of its properties is bound; or (c)
require any consent, approval or authorization of any governmental or regulatory
agency; other than for such of the foregoing matters which, or the absence of
which, would not, individually or when taken together with all other such
related matters, have a material adverse effect on Buyer.
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Section 3.4 SEC Reports and Financial Statements. Buyer has heretofore
delivered to Sellers complete and correct copies of all reports and other
filings filed by Buyer with the SEC pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "Exchange Act")
since January 1, 1995 (such reports and other filings collectively referred to
herein as the "Exchange Act Filings"). As of their respective dates, the
Exchange Act Filings did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements of Buyer
included in the Exchange Act Filings (i) were prepared from the books and
records of Buyer and its consolidated subsidiaries, (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes or schedules thereto)
and (iii) present fairly the financial position of Buyer and its consolidated
subsidiaries as at the dates thereof and the results of their operations and
cash flows (or changes in financial positions, for the fiscal year ended
December 31, 1995 and earlier years) for the periods then ended. The unaudited
financial statements included in the Exchange Act Filings (the "Buyer Interim
Financial Statements") comply in all material respects with the published rules
and regulations of the SEC with respect thereto; and such unaudited financial
statements (i) were prepared from the books and records of Buyer and its
consolidated subsidiaries, (ii) were prepared in accordance with generally
accepted accounting principles, except as otherwise permitted under the Exchange
Act and the rules and regulations thereunder, on a consistent basis (except as
may be indicated therein or in the notes or schedules thereto) and (iii) present
fairly the financial position of Buyer and its
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consolidated subsidiaries as at the dates thereof and the results of their
operations and cash flows (or changes in financial condition) for the periods
then ended, subject to normal year-end adjustments and any other adjustments
described therein or in the notes or schedules thereto.
Section 3.5 Absence of Adverse Changes. Since December 31, 1995 Buyer
has carried on its business in the ordinary course and consistent with past
practice. Except as set forth in Schedule 3.5 hereto, since December 31, 1995
there has not been: (i) any material adverse change in the condition (financial
or otherwise), assets, liabilities, operations, business or prospects of Buyer;
(ii) any material damage, destruction or loss, whether or not covered by
insurance, adversely affecting the assets or operations of Buyer; (iii) any
sale, transfer, lease or other disposition of any of the properties or assets of
Buyer, other than sales from inventory in the ordinary course of business; (iv)
any increase in the compensation payable or to become payable by Buyer to any of
its officers or any material increase in such compensation payable or to become
payable to employees or agents, or any bonus payment or arrangement made to, or
to be made to or with, any thereof; (v) any labor trouble or any event or
condition of any character materially and adversely affecting the operations,
prospects or business of Buyer; (vi) any discharge or satisfaction of any Lien,
or payment of any obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current liabilities shown on
the Buyer Interim Financial Statements; (vii) any Lien on any of its properties
or assets, tangible or intangible; or (viii) paid or declared any dividend or
distribution in respect of shares of its capital stock or any repurchase or
agreement to repurchase any such shares.
Section 3.6 Litigation. Except as set forth in Schedule 3.6 hereto and
in the Exchange Act Filings, there is no Litigation (as hereinafter defined) (i)
by or before any court,
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governmental body or other regulatory or administrative agency or commission,
domestic or foreign, or any arbitration pending, or, to the knowledge of Buyer
after due inquiry, threatened, to which Buyer is a party or by which any of its
assets or properties may be bound or affected, which, if adversely decided would
have a material adverse effect on Buyer; and (ii) by or before any court,
governmental or regulatory agency, or arbitrator, in each case pending or, to
the knowledge of Buyer, threatened, which seeks to restrain, enjoin, prevent the
consummation of, or otherwise challenge this Agreement or any of the
transactions contemplated hereby. For purposes of this Agreement, "Litigation"
shall mean any action, suit, claim, proceeding, investigation or written
governmental inquiry.
Section 3.7 Investment; Experience. Buyer is purchasing the Suramco Shares
for investment only and not with a view to resale or distribution thereof. Buyer
is experienced in the acquisition and management of businesses similar to those
of Suramco, Arisur and Minera Andacaba.
Section 3.8 Brokers. No broker or finder has been employed which is
entitled to a fee by reason of the transactions contemplated hereby other than
Endeavour Financial Inc., whose fees shall be borne in their entity by Buyer.
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ARTICLE IV
Covenants
----------
Section 4.1 Directorship. Buyer agrees to use its best efforts to cause its
Board of Directors, promptly following and effective as of the date of this
Agreement, to increase the Board of Directors from seven to eight members and,
to fill the vacancy created by such increase, to elect H.R. Shipes as a Class I
Director. Through the date of Buyer's next Annual Meeting of Stockholders at
which Class I Directors are elected, in the event that Mr. Shipes is unable to
attend any meeting or meetings of Buyer's Board of Directors, the Board of
Directors agrees to invite J.A. McKinney to attend such meeting on Mr. Shipes'
behalf.
Section 4.2 Covenant Not to Compete. Except as specifically contemplated
and referred to in Schedule 4.2 hereto or the consulting agreement referred to
in Section 1.4(b) hereof, each Seller and each affiliate of said Seller (as such
term is defined in Rule 405 of the Securities Act) agrees that, for a period of
three (3) years after the date of this Agreement, Sellers and each such
affiliate of Sellers shall not, directly or indirectly, own (other than not more
than 2% of the issued and outstanding capital stock of any company whose shares
are traded on a national stock exchange or quoted on NASDAQ in the United States
or which are traded on the facilities of a Designated Offshore Securities Market
(as defined in Rule 902 under the Securities Act)), manage, operate, work for,
consult with or otherwise provide services to, or otherwise be affiliated with,
any corporation, person or entity engaged in the mining and/or milling or other
processing of base or precious metals in Bolivia. Buyer acknowledges and agrees
that this prohibition shall not apply to any direct or indirect ownership,
operation or other
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affiliation that Sellers may now or hereafter have with the San Jose mine
located in the Province of Cercado, Department of Oruro, Bolivia.
Section 4.3 Transfer Taxes. Sellers shall be responsible for, and agree to
pay promptly when and if due, all transfer, stamp, use or any other similar
taxes payable in any jurisdiction in connection with or arising from the sale
and transfer of the Suramco Shares to Buyer hereunder.
Section 4.4 Best Efforts.
------------
(a) Upon the terms hereof, each of the parties hereto agrees to take or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement and any related documents thereto.
(b) Except as otherwise expressly provided for in this Agreement, Buyer and
Sellers shall use their best efforts to obtain at the earliest practicable date
all consents required for the consummation of the transactions contemplated by
this Agreement and any related documents thereto, including without limitation
all consents, permissions and approvals required by the relevant authorities in
the State of Nevada, the Cayman Islands and Bolivia.
(c) Buyer and Sellers shall provide such information and cooperate fully
with each other hereto in making such applications, filings and other
submissions which may be required or reasonably necessary in order to obtain all
approvals, consents, authorizations and waivers as may be required from any
governmental or regulatory agency and others in connection with the transactions
contemplated by this Agreement and any related documents thereto.
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(d) Except as otherwise expressly provided for in this Agreement, Buyer and
Sellers shall promptly take all actions necessary to make each filing,
including, without limitation, any supplemental filing, which any of them may be
required to make with any governmental or regulatory agency as a condition to or
consequence of the consummation of the transactions contemplated by this
Agreement or any related document thereto.
Section 4.5 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the date of this Agreement any further action is
necessary or desirable to carry out the purposes hereof, Sellers and the proper
officers of Buyer, Suramco, Arisur and Minera Andacaba shall take all such
action.
ARTICLE V
Indemnification and Related Matters
-----------------------------------
Section 5.1 Indemnification by Sellers. Sellers jointly and severally agree
to indemnify and hold harmless Buyer and its directors, officers and employees
against and in respect of any and all loss, liability, obligation, damage,
deficiency or expense resulting from (a) any misrepresentation, breach of any
warranty or non-fulfillment of any agreement of Sellers under the terms of this
Agreement or in any agreement or certification furnished pursuant hereto; (b)
any claim that Suramco has not fully paid all consideration payable in
connection with its acquisition of the Arisur Shares and the Minera Andacaba
Shares, or that further consideration
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is payable by Suramco in respect of such Shares; or that Suramco is not the sole
record and beneficial owner of such Shares, in each case free and clear of all
Liens, or that as a result of the transfer of the Arisur Shares and the Minera
Andacaba Shares pursuant to this Agreement, Buyer has not acquired good and
marketable title to such Shares free and clear of all Liens; and (c) any
actions, suits, proceedings, demands, judgments, costs and reasonable legal,
investigatory and other expenses incident to any of the foregoing (regardless of
whether, in the case of third party actions, suits or proceedings, Sellers may
have a meritorious defense). For the avoidance of confusion, it is hereby
stipulated that any information provided by Sellers to Buyer in connection with
the circumstances surrounding the acquisition of the Arisur Shares from Curt and
Ana Maria Goldschmidt shall not relieve Sellers of their obligation under this
Section 5 to indemnify Buyer in full in respect of any and all loss, liability,
obligation, damage, deficiency or expense in respect of any claim that Suramco
has not fully paid all consideration payable in connection with its acquisition
of the Arisur Shares, or that further consideration is payable by Suramco in
respect of such Shares.
Section 5.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
harmless Sellers against and in respect of any and all loss, liability,
obligation, damage, deficiency or expense resulting from (a) any
misrepresentation, breach of any warranty or non-fulfillment of any agreement of
Buyer under the terms of this Agreement or in any statement or certification
furnished pursuant hereto; and (b) any actions, suits, proceedings, demands,
judgments, costs and reasonable legal, investigatory and other expenses incident
to any of the foregoing (regardless of whether, in the case of third party
actions, suits or proceedings, Buyer may have a meritorious defense).
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Section 5.3 Procedure. Promptly after receipt by any person or persons (as
the case may be) that is or are entitled to indemnification under this Section 5
(each, an "Indemnified Party") of notice of the commencement of any action in
respect of which the Indemnified Party will seek indemnification hereunder, the
Indemnified Party shall notify the person obligated to provide such
indemnification (the "Indemnifying Party") thereof in writing, but any failure
to so notify the Indemnifying Party shall not relieve the Indemnifying Party
from any liability that it may have to the Indemnified Party under this Section
5, except to the extent that the Indemnifying Party is prejudiced by the failure
to give such notice. The Indemnifying Party shall be entitled to participate in
the defense of such action and to assume control of such defense with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that:
(a) the Indemnified Party shall be entitled to participate in the
defense of such claim and to employ counsel at its own expense to assist in
the handling of such claim;
(b) the Indemnifying Party shall obtain the prior written approval of
the Indemnified Party before entering into any settlement of such claim or
ceasing to defend against such claim, if pursuant to or as a result of such
settlement or cessation, injunctive or other equitable relief would be
imposed against the Indemnified Party or the Indemnified Party would be
adversely affected thereby;
(c) the Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to the
Indemnified Party of a release from all liability in respect of such claim;
and
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(d) the Indemnifying Party shall not be entitled to control the
defense of any claim unless within 15 days after receipt of such written
notice from the Indemnified Party the Indemnifying Party confirms in
writing its responsibility for such defense and reasonably demonstrates
that it will be able to pay the full amount of the reasonably expected
liability in connection with any such claim.
After written notice by the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of any such action in accordance with
the foregoing, (i) the Indemnifying Party shall not be liable to such
Indemnified Party hereunder for any expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof, and (ii) as long as
the Indemnifying Party is reasonably contesting such action in good faith, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge the claim underlying such action without the
Indemnifying Party's prior written consent. If the Indemnifying Party elects to
so participate in or assume the defense of any such action, the Indemnified
Party shall cooperate with the Indemnifying Party in connection with the
defense. If the Indemnifying Party does not assume control of the defense of
such claim as provided in this Section 5, the Indemnified Party shall have the
right to defend and/or settle such claim in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor in
accordance with this Section 5. The reimbursement of fees, costs and expenses
required by this Section 5 shall be made by periodic payments during the course
of the investigation or defense, as and when bills are received or expenses
incurred.
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Section 5.4 Related Matters. (a) Without prejudice to any remedies
available to it by law or otherwise, Buyer shall have the right to offset
against any payments or other consideration payable by it to any Seller or
Sellers after the date of this Agreement pursuant to the terms hereof any claims
that Buyer may have against such Seller or Sellers, for any breach of any
representations, warranties or undertakings.
(b) In the event that an Indemnifying Party shall be obligated to indemnify
the Indemnified Party pursuant to this Section 5, an Indemnifying Party shall,
upon payment of such indemnity in full, be subrogated to all rights of the
Indemnified Party with respect to the claims to which such indemnification
relates. In the event that an Indemnified Party becomes entitled to any
indemnification from an Indemnifying Party, such indemnification shall be made
in cash upon demand. Sellers shall not be entitled to any contribution or
reimbursement from Suramco, Arisur or Minera Andacaba with respect to payments
made by Sellers under this Section 5.
ARTICLE VI
Miscellaneous
-------------
Section 6.1 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
Section 6.2 Amendment. No modification or amendment of this Agreement shall
be effective for any purpose unless in writing and signed by the parties hereto.
Section 6.3 Notices. Any notices other communications required or permitted
hereunder shall be given in writing and shall be delivered or sent by facsimile,
next day delivery
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service, personal delivery or certified or registered mail, postage prepaid,
addressed as follows:
If to Buyer, to:
Atlas Corporation
370 17th Street
Suite 3050
Denver, Colorado 80202
Attn: President
Fax: (303) 629-2445
Copy to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Attn: Jeffrey E. Cohen, Esq.
Fax: (212) 626-4120
If to Sellers to:
c/o Mr. H.R. Shipes
335 North Wilmot Road, Suite 400
Tucson, AZ 85711
Fax: (520) 748-2494
Copy to:
Hecker, Phillips & Zeeb
405 West Franklin Street
Tucson, AZ 85701
Attn: Steven W. Phillips, Esq.
Fax: (520) 620-0405
or to such other address or telefax number as shall be furnished in writing by
such party, and any such notice or communication shall be effective and be
deemed to have been given as of the date so dispatched, delivered or mailed;
provided, that, any notice or communications changing any of the addresses set
forth above shall be effective and deemed giving only upon its receipt.
31
<PAGE>
Section 6.4 Successors. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other party.
Section 6.5 Entire Agreement. Exhibits and Schedules referred to herein,
whether or not attached hereto, are hereby incorporated in and made a part of
this Agreement as if set forth in full herein. This Agreement constitutes the
sole and entire agreement among the parties hereto with respect to the subject
matter hereof and supersedes all prior arrangements or understandings with
respect thereto; and there are no express or implied restrictions, agreements,
promises, representations, warranties, covenants or undertakings other than
those expressly set forth herein.
Section 6.6 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 6.7 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give any entity, other than the parties hereto and their
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.
32
<PAGE>
Section 6.8 Counterparts. This Agreement may be executed in two or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
Section 6.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law thereunder.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the day and year first above written.
H.R AND EILEEN A. SHIPES ATLAS CORPORATION
/s/ H.R. Shipes By: /s/ Gerald E. Davis
- ----------------------------------- ---------------------------------
H.R. Shipes Name: Gerald E. Davis
Title: President
/s/ Eileen A. Shipes
- -----------------------------------
Eileen A. Shipes
JOHN A. AND LYNETTE R. McKINNEY
/s/ John A. McKinney
- -----------------------------------
John A. McKinney
/s/ Lynette R. McKinney
- -----------------------------------
Lynette R. McKinney
33
<PAGE>
RAYMOND S. AND ROCHELLE M. BIRCH
/s/ Raymond S. Birch
- --------------------------------------------
Raymond S. Birch
/s/ Rochelle M. Birch
- --------------------------------------------
Rochelle M. Birch
HERBERT E. DUNHAM AND ANA M. DUNHAM
/s/ Herbert E. Dunham
- --------------------------------------------
Herbert E. Dunham
/s/ Ana M. Dunham
- --------------------------------------------
Ana M. Dunham
H.R. SHIPES AS CUSTODIAN FOR
DANIELLE N. SHIPES UNDER THE ARIZONA
UNIFORM TRANSFERS TO MINORS ACT
/s/ H.R. Shipes
- --------------------------------------------
Danielle N. Shipes
JOHN A. McKINNEY AS CUSTODIAN FOR
ALEXANDRIA MCKINNEY UNDER THE ARIZONA
UNIFORM TRANSFERS TO MINORS ACT
/s/ John A. McKinney
- --------------------------------------------
Alexandria McKinney
34
<PAGE>
RAYMOND S. BIRCH AS CUSTODIAN FOR
JUSTIN S. BIRCH UNDER THE ARIZONA
UNIFORM TRANSFERS TO MINORS ACT
/s/ Raymond S. Birch
- --------------------------------------------
JOHN A. McKINNEY AS CUSTODIAN FOR
ASHLEY McKINNEY UNDER THE ARIZONA
UNIFORM TRANSFERS TO MINORS ACT
/s/ John A. McKinney
- --------------------------------------------
Ashley McKinney
RAYMOND S. BIRCH AS CUSTODIAN FOR
TYLER BIRCH UNDER THE ARIZONA
UNIFORM TRANSFERS TO MINORS ACT
/s/ Raymond S. Birch
- --------------------------------------------
H. EDWARD DUNHAM
/s/ H. Edward Dunham
- --------------------------------------------
P. BRIAN DUNHAM
/s/ P. Brian Dunham
- --------------------------------------------
RACHEL A. DUNHAM
/s/ Rachel A. Dunham
- --------------------------------------------
ELIZABETH M. DUNHAM
/s/ Elizabeth M. Dunham
- --------------------------------------------
35
<PAGE>
Exhibit 2.2
ATLAS
EXECUTION COPY
CORP
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
ATLAS CORPORATION
AND
ARIMETCO INTERNATIONAL INC.
DATED AS OF OCTOBER 7, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I Purchase and Sale of Shares............................. 2
Section 1.1 Purchase and Sale.................................. 2
Section 1.2 Purchase Consideration............................. 2
Section 1.3 Other Deliveries................................... 3
ARTICLE II Representations and Warranties of Seller................ 5
Section 2.1 Authorization; Binding Obligation.................. 5
Section 2.2 Ownership of the Arisur Shares..................... 5
Section 2.3 Ownership of the Minera Andacaba Shares............ 6
Section 2.4 Consents and Approvals; No Violations.............. 7
Section 2.5 Arisur and Minera Andacaba Organization............ 8
Section 2.6 Financial Information.............................. 8
Section 2.7 Absence of Undisclosed Liabilities................. 9
Section 2.8 Absence of Adverse Changes......................... 9
Section 2.9 Taxes.............................................. 10
Section 2.10 Title to Properties................................ 10
Section 2.11 Personal and Real Properties....................... 11
Section 2.12 Environmental Matters.............................. 12
Section 2.13 Notes, Accounts Receivable......................... 12
Section 2.14 Contracts, Etc..................................... 13
Section 2.15 Employees and Organizational Chart................. 13
Section 2.16 Litigation......................................... 14
Section 2.17 Business Permits................................... 14
Section 2.18 Insurance.......................................... 15
Section 2.20 Bank Accounts; Powers of Attorney.................. 15
Section 2.21 Minute Books, etc.................................. 16
Section 2.22 Disclosure......................................... 16
Section 2.23 Brokers............................................ 16
ARTICLE III Representations and Warranties of Buyer................. 17
Section 3.1 Authorization; Binding Obligation.................. 17
Section 3.2 No Conflicts....................................... 18
Section 3.3 Investment; Experience............................. 18
Section 3.4 Brokers............................................ 18
ARTICLE IV Covenants.......................................... 19
Section 4.1 Covenant Not to Compete............................ 19
Section 4.2 Transfer Taxes..................................... 19
Section 4.3 Best Efforts....................................... 19
Section 4.4 Further Assurances................................. 20
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE V Indemnification and Related Matters...................... 21
Section 5.1 Indemnification by Seller......................... 21
Section 5.2 Indemnification by Buyer.......................... 21
Section 5.3 Procedure......................................... 21
Section 5.4 Related Matters................................... 23
ARTICLE VI Miscellaneous..................................... 24
Section 6.1 Headings.......................................... 24
Section 6.2 Amendment......................................... 24
Section 6.3 Notices........................................... 24
Section 6.4 Successors........................................ 25
Section 6.5 Entire Agreement.................................. 26
Section 6.6 Severability...................................... 26
Section 6.7 Third Parties..................................... 26
Section 6.8 Counterparts...................................... 26
Section 6.9 Governing Law..................................... 26
</TABLE>
SCHEDULES
Schedule 2.7 Disclosed Liabilities
Schedule 2.8 Certain Adverse Changes
Schedule 2.9 Taxes
Schedule 2.10 Title to Properties
Schedule 2.11(i) Personal Properties
Schedule 2.11(ii) Real Properties
Schedule 2.14 Contracts, Etc.
Schedule 2.15 Employees and Organizational Chart
Schedule 2.17 Business Permits
Schedule 2.18 Insurance
Schedule 2.20 Bank Accounts; Powers of Attorney
Schedule 4.1 Permitted Competition
EXHIBITS
Exhibit A Note
Exhibit B Report of Verna & Associates
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT ("Agreement") is made as of the seventh
day of October, 1996, by and between Atlas Corporation, a Delaware corporation
("Buyer") and Arimetco International Inc., Canadian corporation ("Seller").
W I T N E S S E T H:
-------------------
WHEREAS, Seller is the record and beneficial owner of 500 ordinary
shares, nominal value US$1.00 per share of Arisur, Inc. a Cayman Islands company
("Arisur"), constituting fifty percent (50%) of the issued and outstanding
shares of Arisur (the "Arisur Shares"); and
WHEREAS, Seller is also the record and beneficial owner of 88 ordinary
shares, nominal value 1 Boliviano per share, of Compania Minera Andacaba S.A., a
Bolivian corporation ("Minera Andacaba"), constituting one percent (1%) of the
issued and outstanding shares of Minera Andacaba (the "Minera Andacaba Shares");
and
WHEREAS, pursuant to an agreement of even date herewith, Buyer is
purchasing all of the issued and outstanding shares of Suramco Metals, Inc., a
Nevada corporation ("Suramco"), which is the record and beneficial owner of the
remaining fifty percent (50%) of the issued and outstanding shares of Arisur;
and
WHEREAS, Arisur and Suramco, respectively, are the record and
beneficial owners of 4,488 and 4,224 ordinary shares, nominal value 1 Boliviano
per share, of Minera Andacaba,
<PAGE>
constituting, respectively, fifty-one percent (51%) and forty-eight percent
(48%) of the issued and outstanding shares of Minera Andacaba; and
WHEREAS, pursuant to this Agreement, Seller desires to sell and
transfer the Arisur Shares and the Minera Andacaba Shares to Buyer and Buyer
desires to purchase and acquire the Arisur Shares and the Minera Andacaba Shares
from Seller, all upon the terms hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
ARTICLE I
Purchase and Sale of Shares
---------------------------
Section 1.1 Purchase and Sale. On the terms set forth herein, Buyer
hereby purchases from Seller, and Seller hereby sells, transfers and delivers to
Buyer, all right, title and interest in, free of all Liens (as hereinafter
defined), (i) the Arisur Shares (which are hereby deemed released from the
pledge dated August 1, 1996 in favor of Buyer) and (ii) the Minera Andacaba
Shares, for the purchase consideration set forth in Section 1.2 hereof.
Section 1.2 Purchase Consideration. The purchase consideration (the
"Purchase Consideration") for the Arisur Shares and the Minera Andacaba Shares
shall consist of the sum of the following:
(a) Buyer hereby confirms receipt of all accrued and unpaid interest
due and payable under that certain Loan Agreement, dated as of
August 1, 1996, by and between Buyer and Seller, and hereby
releases and discharges Seller from its obligation to repay Buyer
the aggregate principal amount of US$1,800,000 under such Loan
2
<PAGE>
Agreement, and further releases all security and guaranties supporting
such principal amount;
(b) Buyer has hereby paid to Seller US$300,000, receipt of which by Seller
is hereby acknowledged; and
(c) On October 31, 1996, (i) Seller shall cancel and return to Buyer the
note referred to in Section 1.3(f) below and (ii) Buyer shall pay to
Seller the US$900,000 principal amount of such note in immediately
available funds by wire transfer to a bank account specified by
Seller.
Section 1.3 Other Deliveries. Simultaneously with the transfer of the
Arisur Shares and the Minera Andacaba Shares, the parties acknowledge that the
following actions have been taken:
(a) Resignations. All members of the Board of Directors of Arisur and all
officers of Arisur have delivered their resignations dated the date
hereof;
(b) Board Resolutions. Seller has delivered to Buyer a certificate of the
Secretary of Seller certifying the resolutions of the Board of
Directors of Seller approving the execution and performance of this
Agreement and the transactions contemplated hereby;
(c) Good Standing. Seller has delivered to Buyer a certificate of good
standing (or, in the case of Minera Andacaba, a copy of its
certificate of incorporation and by-laws, together with all amendments
thereto, registered with the appropriate Registry of Commerce) in
respect of Arisur, including a copy of its articles of
3
<PAGE>
incorporation certified by a notary public in the Cayman Islands as
being a true and correct copy thereof;
(d) Title and Geological Data. Seller has delivered, or caused to be
delivered, to Buyer copies of all title, geological, geochemical,
geophysical and engineering data in the possession of Seller, Arisur
or Minera Andacaba or under their control, in respect of all
properties owned, controlled or evaluated by Arisur (including any
branch thereof) and Minera Andacaba;
(e) Share Certificates and Stock Transfers. Seller has delivered to Buyer
the certificates representing the Arisur Shares and the Minera
Andacaba Shares, in each case together with stock transfers duly and
validly endorsed for transfer on behalf of Seller; and
(f) Note. Buyer has delivered to Seller a note, in the form annexed as
Exhibit A hereto, representing the obligation of Buyer to pay on
October 31, 1996 Seller (without interest thereon other than in the
case of default, in which case the rate shall be the rate stipulated
for defaults under that certain Loan Agreement, dated as of August 1,
1996, by and between Buyer and Seller), the amount referred to in
Section 1.2(c) above.
4
<PAGE>
ARTICLE II
Representations and Warranties of Seller
----------------------------------------
Seller represents and warrants to Buyer as follows (all representations and
warranties with respect to Arisur being deemed to apply with equal force to each
branch of Arisur established in Bolivia or elsewhere):
Section 2.1 Authorization; Binding Obligation. Seller is a company duly
organized, validly existing and in good standing under the laws of Canada; it
has all requisite corporate power and authority to own, operate and lease the
properties and assets it now owns, operates and leases and to carry on its
businesses as presently (or as contemplated to be) conducted; it has the
requisite power and authority to execute, deliver and perform this Agreement and
any agreements contemplated herein to which it is or will be party and to
consummate the transactions contemplated hereby and thereby; all action on its
part necessary to approve or to authorize the execution, delivery and
performance of this Agreement and any such documents to which it is party and
the consummation of the transactions contemplated hereby and thereby has been
duly taken; and this Agreement is the valid and binding obligation of,
enforceable in accordance with its terms against, it, except as enforcement
thereof may be limited by bankruptcy, insolvency, conservatorship, receivership,
liquidation, reorganization, moratorium or similar laws or general equitable
principles.
Section 2.2 Ownership of the Arisur Shares. The Arisur Shares constitute
fifty percent (50%) the issued and outstanding share capital of Arisur; Seller
is the sole record and beneficial owner of the Arisur Shares, free and clear of
all liens, mortgages, charges, security interests, defects in title, adverse
claims, encumbrances, conflicting claims to ownership, any options,
5
<PAGE>
rights of first refusal or similar rights, or any restrictions or limitations
on, or conflicting claims with respect to, the use, voting, transfer, receipt of
income or other exercise of any attributes of ownership (collectively, "Liens");
as a result of the transfer of the Arisur Shares pursuant to this Agreement,
Buyer has acquired good and marketable title to the Arisur Shares free and clear
of all Liens; other than this Agreement, there are no agreements arrangements or
understandings relating to issuance, ownership, transfer or other rights with
respect to the Arisur Shares; the Arisur Shares are duly and validly issued and
outstanding, fully paid and non-assessable and have not been issued in violation
of any preemptive or similar rights of stockholders; and there is no option,
warrant, subscription, or other agreement to issue any security or other
instrument convertible into or exchangeable for, or any other right, commitment,
understanding or arrangement calling for the issuance of any additional shares
of capital stock by Arisur. Arisur does not own any shares or other equity in
any other corporation or entity other than Minera Andacaba.
Section 2.3 Ownership of the Minera Andacaba Shares. The Minera Andacaba
Shares constitute one percent (1%) the issued and outstanding share capital of
Minera Andacaba; Seller is the sole record and beneficial owner of the Minera
Andacaba Shares, free and clear of all Liens; as a result of the transfer of the
Minera Andacaba Shares pursuant to this Agreement, Buyer has acquired good and
marketable title to the Minera Andacaba Shares free and clear of all Liens;
other than this Agreement, there are no agreements arrangements or
understandings relating to issuance, ownership, transfer or other rights with
respect to the Minera Andacaba Shares; the Minera Andacaba Shares are duly and
validly issued and outstanding, fully paid and non-assessable and have not been
issued in violation of any preemptive or similar rights of
6
<PAGE>
stockholders; and there is no option, warrant, subscription, or other agreement
to issue, or any security or other instrument convertible into or exchangeable
for, or any other right, commitment, understanding or arrangement calling for
the issuance of, any additional shares of capital stock by Minera Andacaba.
Minera Andacaba does not own any shares or other equity in any other corporation
or entity.
Section 2.4 Consents and Approvals; No Violations. The execution and
delivery of this Agreement and any agreement contemplated herein and the
consummation of the transactions contemplated hereby and thereby will not:
violate or conflict with any provision of the respective certificates of
incorporation, by-laws or other constitutional documents of Seller, Arisur or
Minera Andacaba; breach, violate or constitute an event of default (or an event
which with the lapse of time or the giving of notice or both would constitute an
event of default) under, give rise to any right of termination, cancellation,
modification or acceleration under, or require any consent or the giving of any
notice under, any note, bond, indenture, mortgage, security agreement, lease,
license, franchise, permit, agreement or other instrument or obligation to which
Seller, Arisur or Minera Andacaba is a party, or by which Seller, Arisur or
Minera Andacaba or any of their respective properties or assets may be bound, or
result in the creation of any Lien or other right of any third party of any kind
whatsoever upon such properties or assets pursuant to the terms of any such
instrument or obligation; violate or conflict with any law, statute, ordinance,
code, rule, regulation, judgment, order, writ, injunction, decree or other
instrument applicable to Seller, Arisur or Minera Andacaba or by which their
respective properties or assets may be bound or require, on the part of said
entities, any filing with, or
7
<PAGE>
permit, license, exemption, consent, authorization or approval of, or the giving
of any notice to, any governmental or regulatory agency other than such as has
been obtained.
Section 2.5 Arisur and Minera Andacaba Organization. Arisur and Minera
Andacaba are companies duly organized, validly existing and in good standing
under the laws of the Cayman Islands and Bolivia, respectively, have all
requisite power and authority to own, lease and operate the properties currently
(or contemplated to be) owned, leased or operated by Arisur and Minera Andacaba
(as the case may be) and to conduct their respective businesses as presently (or
contemplated to be) conducted.
Section 2.6 Financial Information. Seller has delivered to Buyer on or
prior to the date of this Agreement (i) the audited consolidated balance sheets
of each of Arisur and Minera Andacaba as at September 30, 1995, 1994 and 1993
and their respective audited statements of income and cash flow for the fiscal
years then ended, including the notes thereto (collectively, the "Financial
Statements"), in each case accompanied by the qualified report of Verna &
Associates in the form attached as Exhibit B hereto, and (ii) the unaudited
balance sheets of Arisur and Minera Andacaba as at June 30, 1996 and the related
unaudited statements of operations for the nine months then ended (the "Interim
Financial Statements"). The Financial Statements and the Interim Financial
Statements (x) have been prepared from the books and records of Arisur and
Minera Andacaba, (y) have been prepared in accordance with generally accepted
accounting principles consistently applied during such periods and (z) present
fairly the respective financial conditions, results of operations and cash flows
of Arisur and Minera Andacaba as at the dates, and for the periods, stated
therein, subject, in the case of the Interim Financial Statements, to normal and
customary year-end adjustments.
8
<PAGE>
Section 2.7 Absence of Undisclosed Liabilities. Neither Arisur nor Minera
Andacaba has any liabilities or obligations of any nature, whether accrued,
absolute, contingent or otherwise, except (i) as set forth in Schedule 2.7 and
as set forth or reserved against in the Interim Financial Statements, (ii)
liabilities or obligations incurred since June 30, 1996 in the ordinary course
of business and consistent with past practice and which individually and in the
aggregate are not material to Arisur or Minera Andacaba.
Section 2.8 Absence of Adverse Changes. Since September 30, 1995, Arisur
and Minera Andacaba have carried on their respective businesses in the ordinary
course and consistent with past practice. Except as set forth in Schedule 2.8
hereto, since September 30, 1995 there has not been: (i) any material adverse
change in the respective conditions (financial or otherwise), assets,
liabilities, operations, businesses or prospects of Arisur or Minera Andacaba;
(ii) any material damage, destruction or loss, whether or not covered by
insurance, adversely affecting the respective assets or operations of Arisur or
Minera Andacaba; (iii) any sale, transfer, lease or other disposition of any of
the respective material properties or assets of Arisur or Minera Andacaba, other
than sales from inventory in the ordinary course of business; (iv) any increase
in the compensation payable or to become payable by Arisur or Minera Andacaba to
any of their respective officers, or any increase in such compensation payable
or to become payable to employees or agents, or any bonus payment or arrangement
made to, or to be made to or with, any thereof; (v) any labor trouble or any
event or condition of any character materially and adversely affecting the
operations, prospects or businesses of Arisur or Minera Andacaba; (vi) any
discharge or satisfaction of any Lien, or payment of any obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to become
due, other
9
<PAGE>
than current liabilities shown on the Interim Financial Statements; (vii) any
Lien imposed on any of the respective properties or assets, tangible or
intangible, of Arisur or Minera Andacaba; or (viii) paid or declared any
dividend or distribution in respect of shares of the respective capital stocks
of Arisur and Minera Andacaba or any repurchase or agreement to repurchase any
such shares.
Section 2.9 Taxes. Except as set forth in Schedule 2.9 hereto, Arisur and
Minera Andacaba have duly filed all tax returns required to be filed and have
paid in full all taxes, interest, penalties, assessments and deficiencies due or
claimed to be due from all taxing authorities having jurisdiction over Arisur
and Minera Andacaba (including taxes on properties, income, franchises,
licenses, sales, payrolls and social security). The provisions for income and
other taxes payable reflected in the respective consolidated balance sheets of
Arisur and Minera Andacaba as of the respective Financial Statements and in the
Interim Financial Statements make adequate provision for all accrued and unpaid
taxes of Arisur and Minera Andacaba as at said dates, whether or not disputed,
and Arisur and Minera Andacaba have made adequate provision for such taxes on
their respective books and records. There are no tax liens (other than liens for
taxes which are not yet due and payable) on any of the respective properties of
Arisur or Minera Andacaba, no tax claims asserted, no basis for any such claim
and no agreements with or received from any governmental or regulatory agency
pertaining to the tax treatment of Arisur or Minera Andacaba or any of their
interests in any of their respective properties.
Section 2.10 Title to Properties. All of the property and assets of every
kind and description which are reflected on the consolidated balance sheets of
Arisur and Minera Andacaba as at June 30, 1996 (other than inventory transferred
by Arisur or Minera Andacaba
10
<PAGE>
in the ordinary course of business), is either (i) owned absolutely by Arisur or
Minera Andacaba, as the case may be, free and clear of Liens, except as set
forth in Schedule 2.10 hereto, or (ii) leased or otherwise used or exploited
under concessions or similar rights by Arisur or Minera Andacaba, pursuant to
leases, concessions or similar rights listed in Schedule 2.10 hereto. All
leases, concessions or rights set forth in Schedule 2.10 are valid, binding and
in full force and effect. Neither Arisur or Minera Andacaba nor, to the best
knowledge of Seller, any other party thereto, is in default thereunder, and no
event has occurred which, with notice and/or lapse of time, would constitute a
default by Arisur or Minera Andacaba, or to the best knowledge of Seller, any
other party thereto. Arisur and Minera Andacaba have all easements and rights,
including easements for power lines, water lines, roadways and other access,
necessary to conduct their respective businesses as currently conducted.
Section 2.11 Personal and Real Properties. (i) Schedule 2.11(i) hereto
correctly sets forth an accurate list of all tangible personal property which
was owned of record or beneficially by Arisur and Minera Andacaba as at
September 30, 1996, together with any material changes since such date,
including, without limitation, all vehicles (motor or other) and all machinery
and equipment; all such vehicles, machinery and equipment and other personal
property are in good operating condition and repair, reasonable wear and tear
excepted, and, to the best of Seller's knowledge after reasonable inquiry, the
operation thereof conforms with all applicable regulations and other laws. All
such personal property is owned by Arisur or Minera Andacaba, as the case may
be, free and clear of any Lien, except as set forth in Schedule 2.11(i) hereto.
(ii) Schedule 2.11(ii) hereto correctly sets forth an accurate list and
summary description of all real property which was owned of record or
beneficially by Arisur and Minera
11
<PAGE>
Andacaba as of the date hereof; all installations, sites and places of business
located thereon are, in all material respects, in good operating condition and
repair, reasonable wear and tear excepted, and, to the knowledge of Seller after
reasonable inquiry, conform with all applicable ordinances and existing and
proposed regulations and building, zoning and other laws.
Section 2.12 Environmental Matters: There are no conditions, occurrences or
activities at or on any of the properties described in Schedule 2.11(ii) hereto,
or any other real property in which either Arisur or Minera Andacaba holds any
interest, which constitute a violation of, or give rise to liability under, any
applicable laws, regulations, ordinances or orders providing for health and
safety or protection of the environment, or that may give rise to an obligation
to contribute to the remediation of any contamination of air, water or land
(collectively, "Environmental Laws"). Such properties have not in the past, and
to the knowledge of Seller after due inquiry as of the date hereof, are not now
subject to any investigation, assessment, or study by any person or governmental
or regulatory agency related to potential or actual violation or enforcement of
any Environmental Law. Arisur and Minera Andacaba are in compliance with all
notification and reporting requirements of any Environmental Laws applicable to
their respective operations and properties.
Section 2.13 Notes, Accounts Receivable. All receivables of Arisur and
Minera Andacaba (including accounts receivable, loans receivable, notes and
advances) have arisen from bona fide transactions in the ordinary course of
business and consistent with past practice; are owned by Arisur and Minera
Andacaba free and clear of any Liens and are accurately reflected on the Interim
Financial Statements or with respect to receivables created after June 30, 1996,
are accurately and fairly reflected in the books and records of Arisur and
Minera Andacaba and,
12
<PAGE>
except for any reserve set forth in the Interim Financial Statements (or with
respect to receivables created after June 30, 1996 in the books and records of
Arisur and Minera Andacaba), are fully collectible.
Section 2.14 Contracts, Etc. Schedule 2.14 hereto correctly sets forth all
agreements, arrangements or understandings, whether written or oral, in respect
of any indebtedness between Arisur or Minera Andacaba and any of their
respective Affiliates (as such term is defined in Rule 405 of the Securities Act
of 1933, as amended (the "Securities Act")) and all such indebtedness has been
paid in full or otherwise cancelled and all such arrangements, understandings or
agreements have been terminated as of the date hereof. All material contracts
and commitments of Arisur and Minera Andacaba, as of the date hereof, are valid
and in full force and effect. Neither Arisur nor Minera Andacaba nor, to the
best knowledge of Seller, any other party thereto, is in default thereunder, and
no event has occurred which, with notice and/or lapse of time, would constitute
a default by Arisur or Minera Andacaba, or to the best knowledge of Seller, any
other party thereto. Schedule 2.14 hereto lists (except to the extent listed in
other schedules to this Agreement) all such contracts and commitments as of June
30, 1996, and there have been no material changes thereto since such date.
Section 2.15 Employees and Organizational Chart. Schedule 2.15 hereto
contains a true and complete list as of June 30, 1996 of (i) all of the
employees of Arisur and Minera Andacaba, whether full-time or part-time and
consultants engaged by such entities and the compensation or other benefits
payable to each, together with an organizational chart, as of such date,
indicating names, titles and responsibilities of their respective management and
supervisory personnel, and (ii) all employment or collective bargaining or
consulting agreements in respect
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of employees of Arisur and Minera Andacaba, and there has been no material
change in the information set forth in such Schedule through the date of this
Agreement. There are no disputes currently subject to any grievance procedure,
arbitration or litigation, and neither Arisur or Minera Andacaba, nor, to the
best knowledge of Seller, any other party thereto, is in default thereunder, and
no event has occurred which with notice and/or lapse of time, would constitute a
default by Seller, or, to the best knowledge of Seller, any other party thereto.
There are no strikes, lockouts, work stoppages, slowdowns, jurisdictional
disputes occurring or, to Seller's knowledge after due inquiry, threatened in
connection with the properties or operations of Arisur or Minera Andacaba.
Section 2.16 Litigation. There is no Litigation (as hereinafter defined)
(i) by or before any court, governmental body or other regulatory or
administrative agency or commission, domestic or foreign, or any arbitration
pending, or, to the knowledge of Seller after due inquiry, threatened, to which
Seller, Arisur or Minera Andacaba is a party or by which any of their respective
assets or properties may be bound or affected, which, if adversely decided would
have a material adverse effect on Arisur or Minera Andacaba; and (ii) by or
before any court, governmental agency, or arbitrator, in each case pending or,
to the knowledge of Seller after due inquiry, threatened, which seeks to
restrain, enjoin, prevent the consummation of, or otherwise challenge this
Agreement or any of the transactions contemplated hereby. For purposes of this
Agreement, "Litigation" shall mean any action, suit, claim, proceeding,
investigation or written governmental inquiry.
Section 2.17 Business Permits. Arisur and Minera Andacaba have, to the best
of Seller's knowledge after due inquiry, secured all permits, licenses or other
authorizations necessary from
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all relevant governmental or regulatory agencies to operate their respective
businesses as presently conducted or as presently proposed to be conducted. All
such permits, licenses or other authorizations are listed in Schedule 2.17
hereto. Seller shall cooperate with Buyer (at no cost to Buyer) to obtain any
additional, or to modify any existing, permits or authorizations necessary in
connection with the transactions contemplated hereby.
Section 2.18 Insurance. Arisur and Minera Andacaba are adequately insured
with reputable insurers in respect of their respective businesses, operations
and the properties and assets related thereto, against risk normally insured
against by companies in similar lines of business. Schedule 2.18 hereto lists
all fire, theft, casualty, liability, business disruption, products liability
and other insurance policies insuring such businesses, operations, properties
and assets, specifying with respect to each such policy the name of the insurer,
the risk insured against, the limits of coverage, the deductible amount (if
any), the premium rate and the date through which coverage will continue by
virtue of premiums already paid.
Section 2.19 Compliance with Applicable Law. Arisur and Minera Andacaba
have, to the knowledge of Seller after due inquiry, complied with all applicable
laws and regulations of domestic and foreign governments and all agencies
thereof which affect the respective businesses of Arisur and Minera Andacaba or
any owned, used or leased properties employed in such businesses and to which
said entities may be subject, including, without limitation, safety, health and
environmental laws and regulations, and no claims have been filed against Arisur
or Minera Andacaba alleging a violation of any such laws or regulations.
Section 2.20 Bank Accounts; Powers of Attorney. Schedule 2.20 hereto sets
forth a complete and correct list of showing (i) all bank accounts of Arisur and
Minera Andacaba,
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together with, in respect of each such account, the account number, the names of
all signatories thereof and the authorized powers of each such signatory; and
(ii) the names of all persons holding powers of attorney from Arisur and Minera
Andacaba and a summary statement of the terms thereof.
Section 2.21 Minute Books, etc. The respective minute books, stock
certificates and stock ledgers of Arisur and Minera Andacaba have been delivered
to Buyer and are complete and correct in all material respects and fairly
reflect the conduct of the respective businesses of Arisur and Minera Andacaba.
The minute books of Arisur and Minera Andacaba contain accurate and complete
records of all meetings or written consents to action of their respective Boards
of Directors and stockholders and accurately reflect all corporate actions of
Arisur and Minera Andacaba which are required by law to be passed upon by such
Boards of Directors or stockholders.
Section 2.22 Disclosure. No representation or warranty by Seller contained
in this Agreement and no statement contained in any Schedule, certificate or
other document or instrument delivered or to be delivered by Seller pursuant to
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary to make the
statements contained therein not misleading. For the avoidance of confusion, it
is hereby stipulated that with respect to any oral agreement or commitment
disclosed in any Schedule, only those terms of such oral agreement expressly set
forth in such Schedule shall be deemed to have been disclosed.
Section 2.23 Brokers. No broker or finder has acted on behalf of Seller in
connection with this Agreement or any transactions provided for hereby and
Seller agrees to indemnify
16
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Buyer for any broker's or finder's fees that may be payable in connection with
any action taken by Seller.
ARTICLE III
Representations and Warranties of Buyer
---------------------------------------
Buyer represents and warrants to Seller as follows:
Section 3.1 Authorization; Binding Obligation. Buyer is a company duly
organized, validly existing and in good standing under the laws of the State of
Delaware; it has all requisite corporate power and authority to own, operate and
lease the properties and assets it now owns, operates and leases and to carry on
its business as presently (or as contemplated to be) conducted; it has the
requisite power to execute, deliver and perform this Agreement and any documents
contemplated herein to which it is or will be a party and to consummate the
transactions contemplated hereby and thereby; all action on its part necessary
to approve or to authorize the execution, delivery and performance of this
Agreement and any such documents to which it is party and the consummation of
the transactions contemplated hereby and thereby has been duly taken; this
Agreement is the valid and binding obligation of, enforceable in accordance with
its terms against, Buyer, except as enforcement thereof may be limited by
bankruptcy, insolvency, conservatorship, receivership, liquidation,
reorganization, moratorium or similar laws or general equitable principles; and
any related document thereto is, or upon execution and delivery thereof will be,
a valid and binding obligation of, enforceable in accordance with its terms
against, it, except as enforcement thereof may be limited by
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bankruptcy, insolvency, conservatorship, receivership, liquidation,
reorganization, moratorium or similar laws or general equitable principles.
Section 3.2 No Conflicts. Neither the execution, delivery or performance
by Buyer of this Agreement and any agreement contemplated herein, nor the
consummation by it of the transactions contemplated hereby or thereby, will: (a)
constitute an event of default under, permit the termination of, give rise to a
right to accelerate any indebtedness under any contract, lease, or governmental
permit to which Buyer is a party, is maker or guarantor, or by which it is
bound; (b) violate any order, writ, injunction, decree, judgment, ruling or law
applicable to Buyer or by which Buyer or any of its properties is bound; or (c)
require any consent, approval or authorization of any governmental or regulatory
agency; other than for such of the foregoing matters which, or the absence of
which, would not, individually or when taken together with all other such
related matters, have a material adverse effect on Buyer.
Section 3.2 Investment; Experience. Buyer is purchasing the Arisur Shares
and the Minera Andacaba Shares for investment only and not with a view to resale
or distribution thereof. Buyer is experienced in the acquisition and management
of businesses similar to those of Arisur and Minera Andacaba.
Section 3.3 Brokers. No broker or finder has been employed which is
entitled to a fee by reason of the transactions contemplated hereby other than
Endeavour Financial Inc., whose fees shall be borne in their entity by Buyer.
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ARTICLE IV
Covenants
---------
Section 4.1 Covenant Not to Compete. Except as specifically contemplated
and referred to in Schedule 4.1 hereto or that certain consulting agreement of
even date herewith between Buyer and Suramco Holdings, Inc., each of Seller and
each affiliate of Seller (as such term is defined in Rule 405 of the Securities
Act) agrees that, for a period of three (3) years after the date of this
Agreement, Seller and each such affiliate of Seller shall not, directly or
indirectly, own (other than not more than 2% of the issued and outstanding
capital stock of any company whose shares are traded on a national stock
exchange or quoted on NASDAQ in the United States or which are traded on the
facilities of a Designated Offshore Securities Market (as defined in Rule 902
under the Securities Act)), manage, operate, work for, consult with or otherwise
provide services to, or otherwise be affiliated with, any corporation, person or
entity engaged in the mining and/or milling or other processing of base or
precious metals in Bolivia.
Section 4.2 Transfer Taxes. Seller shall be responsible for, and agrees
to pay promptly when and if due, all transfer, stamp, use or any other similar
taxes payable in any jurisdiction in connection with or arising from the sale
and transfer of the Arisur Shares and the Minera Andacaba Shares to Buyer
hereunder.
Section 4.3 Best Efforts.
(a) Upon the terms hereof, each of the parties hereto agrees to take or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement and any related documents thereto.
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(b) Except as otherwise expressly provided for in this Agreement, Buyer
and Seller shall use their best efforts to obtain at the earliest practicable
date all consents required for the consummation of the transactions contemplated
by this Agreement and any related documents thereto, including without
limitation, all consents, permissions and approvals required by the relevant
authorities in the Cayman Islands and Bolivia.
(c) Buyer and Seller shall provide such information and cooperate fully
with each other in making such applications, filings and other submissions which
may be required or reasonably necessary in order to obtain all approvals,
consents, authorizations and waivers as may be required from any governmental or
regulatory agency and others in connection with the transactions contemplated by
this Agreement and any documents related thereto.
(d) Except as otherwise expressly provided for in this Agreement, Buyer
and Seller shall promptly take all actions necessary to make each filing,
including without limitation, any supplemental filing, which either of them may
be required to make with any governmental or regulatory agency as a condition to
or consequence of the consummation of the transactions contemplated by this
Agreement or any document related thereto.
Section 4.4 Further Assurances. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the date of this Agreement any further action is
necessary or desirable to carry out the purposes hereof, the proper officers of
Buyer, Seller, Arisur and Minera Andacaba shall take all such action.
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ARTICLE V
Indemnification and Related Matters
-----------------------------------
Section 5.1 Indemnification by Seller. Seller agrees to indemnify and
hold harmless Buyer and its directors, officers and employees against and in
respect of any and all loss, liability, obligation, damage, deficiency or
expense resulting from (a) any misrepresentation, breach of any warranty or non-
fulfillment of any agreement of Seller under the terms of this Agreement or in
any agreement or certification furnished pursuant hereto and (b) any actions,
suits, proceedings, demands, judgments, costs and reasonable legal,
investigatory and other expenses incident to any of the foregoing (regardless of
whether, in the case of third party actions, suits or proceedings, Seller may
have a meritorious defense).
Section 5.2 Indemnification by Buyer. Buyer agrees to indemnify and hold
harmless Seller and its directors, officers and employees against and in respect
of any and all loss, liability, obligation, damage, deficiency or expense
resulting from (a) any misrepresentation, breach of any warranty or non-
fulfillment of any agreement of Buyer under the terms of this Agreement or in
any statement or certification furnished pursuant hereto; and (b) any actions,
suits, proceedings, demands, judgments, costs and reasonable legal,
investigatory and other expenses incident to any of the foregoing (regardless of
whether, in the case of third party actions, suits or proceedings, Buyer may
have a meritorious defense).
Section 5.3 Procedure. Promptly after receipt by any person that is
entitled to indemnification under this Section 5 (the "Indemnified Party") of
notice of the commencement of any action in respect of which the Indemnified
Party will seek indemnification hereunder, the Indemnified Party shall notify
the person obligated to provide such indemnification (the
21
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"Indemnifying Party") thereof in writing, but any failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party from any liability
that it may have to the Indemnified Party under this Section 5, except to the
extent that the Indemnifying Party is prejudiced by the failure to give such
notice. The Indemnifying Party shall be entitled to participate in the defense
of such action and to assume control of such defense with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that:
(a) the Indemnified Party shall be entitled to participate in the
defense of such claim and to employ counsel at its own expense to assist in
the handling of such claim;
(b) the Indemnifying Party shall obtain the prior written approval of
the Indemnified Party before entering into any settlement of such claim or
ceasing to defend against such claim, if pursuant to or as a result of such
settlement or cessation, injunctive or other equitable relief would be
imposed against the Indemnified Party or the Indemnified Party would be
adversely affected thereby;
(c) the Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to the
Indemnified Party of a release from all liability in respect of such claim;
and
(d) the Indemnifying Party shall not be entitled to control the
defense of any claim unless within 15 days after receipt of such written
notice from the Indemnified Party the Indemnifying Party confirms in
writing its responsibility for such defense and reasonably demonstrates
that it will be able to pay the full amount of the reasonably expected
liability in connection with any such claim.
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After written notice by the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of any such action in accordance with
the foregoing, (i) the Indemnifying Party shall not be liable to such
Indemnified Party hereunder for any expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof, and (ii) as long as
the Indemnifying Party is reasonably contesting such action in good faith, the
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge the claim underlying such action without the
Indemnifying Party's prior written consent. If the Indemnifying Party elects to
so participate in or assume the defense of any such action, the Indemnified
Party shall cooperate with the Indemnifying Party in connection with the
defense. If the Indemnifying Party does not assume control of the defense of
such claim as provided in this Section 5, the Indemnified Party shall have the
right to defend and/or settle such claim in such manner as it may deem
appropriate at the cost and expense of the Indemnifying Party, and the
Indemnifying Party will promptly reimburse the Indemnified Party therefor in
accordance with this Section 5. The reimbursement of fees, costs and expenses
required by this Section 5 shall be made by periodic payments during the course
of the investigation or defense, as and when bills are received or expenses
incurred.
Section 5.4 Related Matters. (a) Without prejudice to any remedies
available to it by law or otherwise, Buyer shall have the right to offset
against any payments or other consideration payable by it to Seller after the
date of this Agreement pursuant to the terms hereof any claims that Buyer may
have against Seller for any breach of any representations, warranties or
undertakings.
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(b) In the event that an Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Section 5, an Indemnifying
Party shall, upon payment of such indemnity in full, be subrogated to all rights
of the Indemnified Party with respect to the claims to which such
indemnification relates. In the event that an Indemnified Party becomes
entitled to any indemnification from an Indemnifying Party, such indemnification
shall be made in cash upon demand. Seller shall not be entitled to any
contribution or reimbursement from Arisur or Minera Andacaba with respect to
payments made by Seller under this Section 5.
ARTICLE VI
Miscellaneous
-------------
Section 6.1 Headings. The descriptive headings of the several Articles
and Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
Section 6.2 Amendment. No modification or amendment of this Agreement
shall be effective for any purpose unless in writing and signed by the parties
hereto.
Section 6.3 Notices. Any notices other communications required or
permitted hereunder shall be given in writing and shall be delivered or sent by
facsimile, next day delivery service, personal delivery or certified or
registered mail, postage prepaid, addressed as follows:
If to Buyer, to:
Atlas Corporation
370 17th Street
Suite 3050
Denver, Colorado 80202
Attn: President
Fax: (303) 629-2445
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Copy to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Attn: Jeffrey E. Cohen, Esq.
Fax: (212) 626-4120
If to Seller, to:
Arimetco International, Inc.
335 North Wilmot Road, Suite 410
Tucson, AZ 85711
Attn: Roy Shipes
Fax: (520) 748-2626
Copy to:
Cassels Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Canada M5H 3C2
Attn: Lori A. McBurney, Esq.
Fax: (416) 360-8877
or to such other address or telefax number as shall be furnished in writing by
such party, and any such notice or communication shall be effective and be
deemed to have been given as of the date so dispatched, delivered or mailed;
provided, that, any notice or communications changing any of the addresses set
forth above shall be effective and deemed giving only upon its receipt.
Section 6.4 Successors. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other party.
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<PAGE>
Section 6.5 Entire Agreement. The Exhibits and Schedules referred to
herein, whether or not attached hereto, are hereby incorporated in and made a
part of this Agreement as if set forth in full herein. This Agreement
constitutes the sole and entire agreement among the parties hereto with respect
to the subject matter hereof and supersedes all prior arrangements or
understandings with respect thereto; and there are no express or implied
restrictions, agreements, promises, representations, warranties, covenants or
undertakings other than those expressly set forth herein.
Section 6.6 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 6.7 Third Parties. Except as specifically set forth or referred
to herein, nothing herein expressed or implied is intended or shall be construed
to confer upon or give any entity, other than the parties hereto and their
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.
Section 6.8 Counterparts. This Agreement may be executed in two or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
Section 6.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law thereunder.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed as of the day and year first above written.
ARIMETCO INTERNATIONAL INC.
By: /s/ John A. McKinney
------------------------------------
Name: John A. McKinney
Title: Senior Vice President
ATLAS CORPORATION
By: /s/ Gerald E. Davis
------------------------------------
Name: Gerald E. Davis
Title: President
27
<PAGE>
Exhibit 2.3
STOCK PURCHASE AGREEMENT
BETWEEN
ATLAS CORPORATION
AND
CORNERSTONE INDUSTRIAL MINERALS CORPORATION
December 13, 1996
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is entered into on the 13th day of December, 1996, by and
between Atlas Corporation, a Delaware corporation (the "Seller"), and
Cornerstone Industrial Minerals Corporation (formerly Phoenix Financial Holdings
Inc.), an Ontario corporation (the "Buyer"). The Buyer and the Seller are
referred to collectively herein as the "Parties".
The Seller owns all of the outstanding capital stock of Atlas Perlite, Inc.
("API"), an Oregon corporation. The Buyer and the Seller are parties to a letter
agreement, dated July 3, 1996 (the "Letter Agreement"), which contemplates a
transaction in which the Buyer will purchase from the Seller, and the Seller
will sell to the Buyer, all of the issued and outstanding shares of common stock
of API (being all of the issued and outstanding shares) (the "API Shares") in
return for cash, Common Shares and the Royalty. The Letter Agreement provides
that the Buyer and the Seller will enter into this Agreement in order to set
forth the definitive terms and conditions of the transaction.
NOW THEREFORE, in consideration of the foregoing premises and the promises
and covenants herein made, together with other good and valuable consideration
the receipt and sufficiency of which is hereby acknowledged, the Parties agree
as follows:
1. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"API" has the meaning set forth in the preface above.
"API Financial Statements" means the unaudited financial statements of API
as at and for the year ended December 31, 1995 and the unaudited interim
financial statements of API as at and for the nine months ended September
30, 1996;
"API Shares" has the meaning set forth in the preface above.
"Approval" means approval given at the Meeting by the minority shareholders
of the Buyer of the purchase and sale of the API Shares contemplated hereby
in accordance with Policy Statement No. 9.1 of the Ontario Securities
Commission.
"Automatic Termination Date" means December 31, 1996.
"Base Load Contracts" means agreements for the supply of perlite mined from
the Project to customers which set forth: (i) a minimum of a three year
delivery schedule; (ii) price per ton and tonnage which result in a price
per ton times annual tonnage of at least $1,350,000; and (iii) specified
dates for initial delivery.
<PAGE>
2
"Buyer" has the meaning set forth in the preface above.
"Buyer Financial Statements" means the published audited financial
statements of the Buyer as at and for the year ended December 31, 1995 and
the published unaudited financial statements of the Buyer as at and for the
six months ended June 30, 1996.
"Closing" has the meaning set forth in paragraph 2(c) below.
"Closing Date" has the meaning set forth in paragraph 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Production" means the initial delivery of perlite under the
Base Load Contracts.
"Common Shares" means the common shares without par value in the capital of
the Buyer after giving effect to the Reorganization.
"Confidential Information" has the meaning set forth in paragraph 12 below.
"Definitive Project Financing" means financing for the Project on
reasonable commercial terms in an amount not less than $2,000,000 plus the
amount by which costs and expenses incurred on the Project by the Seller
and API after November 30, 1995 and prior to the commencement of Commercial
Production exceeds $1,746,000.
"Environmental Costs" means any clean-up costs, remediation, removal, or
other response costs, legal expenses (including reasonable attorneys'
fees), investigation costs (including reasonable fees of consultants,
counsel and other experts in connection with any environmental
investigation or testing), losses, liabilities, obligations, payments,
fines, penalties (civil and criminal) and damages.
"Environmental Law" means any federal, state, provincial, regional,
territorial, municipal, local or foreign statute code, ordinance, rule,
regulation, policy, guideline, permit, consent, approval, license,
judgment, order, writ, decree, injunction or other authorization, relating
to:
(a) emissions, discharges, releases or threatened releases of Hazardous
Substances into the natural or human environment, including, without
limitation, air, soil, sediments, land surface or subsurface, surface
water, ground water, buildings or facilities, treatment works,
drainage systems or septic systems; or
(b) the generation, treatment, storage, disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Substances; or
<PAGE>
3
(c) mining or mined land reclamation; or
(d) otherwise relating to the pollution or protection of health or safety
or the environment, solid waste handling, treatment or disposal or
operation or reclamation of mines.
"Hazardous Substances" means (i) hazardous materials, pollutants,
contaminants, constituents, toxic substances, hazardous wastes and
hazardous substances as those terms are defined in the following statutes
and their implementing regulations: the Hazardous Materials Transportation
Act, 49 U.S.C. (S) 1801 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. (S) 6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act 42 U.S.C. (S) 1906 et seq., the Clean Water Act,33
U.S.C. (S) 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. (S)
2601 et seq., and the Clean Air Act, 42 U.S.C. (S) 7401 et seq., (ii)
petroleum, including crude oil and any fractions thereof, (iii) natural
gas, synthetic gas and any mixtures thereof, (iv) asbestos and/or asbestos-
containing materials, (v) PCBs, or PCB-containing materials or fluids, (vi)
any other substance with respect to which any federal, state or local
agency or other governmental entity may require either an environmental
investigation or an environmental remediation, and (vii) any other
hazardous or noxious substance, material, pollutant or solid or liquid
waste that is required by, or forms the basis of liability under, any
environmental law.
"Internal Financial Statements" means unaudited statements of income and
cash flows of the Buyer to be prepared by management of the Buyer in
accordance with generally accepted accounting principles.
"Meeting" means the annual and special meeting of shareholders of the Buyer
held on September 3, 1996 to consider, among other things, the purchase and
sale of the API Shares contemplated hereby and the Reorganization.
"Mineral Leases" means 66.5 acres of state mineral leases owned by the
Seller that comprise part of the Tucker Hill Property.
"Operating Permits" means all permits necessary for commencement of mining
operations for the Project.
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or
political subdivision thereof).
"Process Plant Land" means the land described in Schedule "A" covering
approximately 26 acres in the northern outskirts of Lakeview, Oregon which
includes approximately 700
<PAGE>
4
feet of dedicated rail siding upon which construction is underway for a
process plant capable of processing the raw perlite mined from the Tucker
Hill Property.
"Project" means, collectively, the Process Plant Land and the Tucker Hill
Property.
"Reorganization" means the amendment to the articles of the Buyer approved
at the Meeting and made effective September 3, 1996 pursuant to which the
articles were amended to, among other things: (i) create an unlimited
number of Common Shares; (ii) change each of the issued and outstanding
Class A Subordinate Voting Shares and Class B Multiple Voting Shares of the
Buyer into one Common Share; and (iii) cancel all remaining unissued Class
A Subordinate Voting Shares and Class B Multiple Voting Shares of the
Buyer.
"Representatives" means the officers, directors, employees and agents,
including legal counsel and outside accountants, of a Party.
"Royalty" means a 2% gross proceeds royalty on sales from the Tucker Hill
Property calculated as set forth in the Royalty Deed annexed hereto as
Schedule "C".
"Securities Act" means the United States Securities Act of 1933, as
amended;
"Seller" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a
majority of the directors.
"Tucker Hill Property" means the land described in Schedule "B" consisting
of 45 unpatented lode mining claims and the Mineral Leases located in Lake
County, Oregon.
2. Purchase and Sale of API Shares.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase from the Seller, and the
Seller agrees to sell to the Buyer, all of the API Shares for
aggregate consideration of $2,000,000 plus the Royalty, such
$2,000,000 to be paid in the manner specified below:
(i) At the Closing, the Buyer shall pay to the Seller $125,000 and
shall issue to the Seller 1,205,998 Common Shares;
(ii) On the later of: (A) the Closing; or (B) two business days
following delivery by the Seller to the Buyer of evidence
satisfactory to the Buyer, acting reasonably, of the issuance of
the Operating Permits and the successful resolution of any
related appeals, the Buyer shall pay the Seller $500,000 and
shall issue to the Seller 4,823,993 Common Shares;
<PAGE>
5
(iii) On the later of: (A) the Closing; or (B) two business days
following delivery by the Seller to the Buyer of evidence
satisfactory to the Buyer, acting reasonably, of the execution
by API of Base Load Contracts the Buyer shall pay the Seller
$125,000 and shall issue to the Seller 1,205,998 Common Shares;
(iv) On the later of: (A) the Closing; or (B) two business days
following delivery by the Seller to the Buyer of evidence
satisfactory to the Buyer, acting reasonably, of the execution
of an agreement for Definitive Project Financing, the Buyer
shall pay the Seller $125,000 and shall issue to Seller
1,205,998 Common Shares; and
(v) On the later of: (A) the Closing; or (B) two business days
following delivery by the Seller to the Buyer of evidence
satisfactory to the Buyer, acting reasonably, of the
commencement of Commercial Production, the Buyer shall pay the
Seller $125,000 and shall issue to the Seller 1,205,999 Common
Shares.
For the purposes of this Agreement, the Common Shares shall have an
ascribed value of $0.1036 (C $0.1415) per share.
It is acknowledged and agreed that the payments set forth above are to
be made sequentially, in the order set forth above, as each condition
precedent to payment is satisfied. As an example and for greater
certainty, the payment referred to in subparagraph (iii) is not to be
made until the conditions set forth in subparagraph (i) and (ii) have
been satisfied and the payments called for therein have been made.
(b) In addition to the consideration to be paid by the Buyer as set forth
in subparagraph 2(a), the Buyer shall also reimburse the Seller
concurrently with the payment provided for in subparagraph 2(a)(v) for
all expenditures incurred by the Seller on or for the benefit of the
Project from December 1, 1995 to the date of Commencement of
Commercial Production. Such costs will be accounted for in a separate
accrual account by API and will include the payment by the Seller of
any API accounts payable in addition to those shown on the balance
sheet of API as at November 30, 1995, being in the aggregate amount of
$36,422. The Seller represents and warrants to the Buyer that as to
the date hereof the total of such expenditures is approximately $1.7
million.
(c) In the event the Buyer is unable to make the cash payments provided
for in subparagraphs 2(a) and 2(b) or is unable to pay for development
capital expenditures for the Project as and when required, the Seller
will defer such cash payments or will advance the funds required for
such expenditures, as the case may be on such terms as may be agreed
upon by the Buyer and the Seller. All
<PAGE>
6
amounts deferred or advanced by the Seller pursuant to this
subparagraph 2(c) and not otherwise repaid to the Seller shall be
repaid at the option of the Seller from either the Definitive Project
Financing or income from the Project.
(d) The Closing. The transfer of the API Shares by the Seller to the
Buyer (the "Closing") shall take place at the offices of the Buyer and
the Seller in Denver, Colorado, commencing at 11:00 a.m. local time on
December 16, 1996 or at such other place or time on such other date as
the Buyer and the Seller may mutually determine (the "Closing Date");
provided, however, that in no event shall the Closing Date be later
than the Automatic Termination Date. The Buyer acknowledges and agrees
that, except as otherwise specifically provided herein to the
contrary, upon its acquisition of the API Shares, API and its assets
will be subject to all of the liabilities of API, known or unknown,
and whether now in existence or hereafter arising.
(e) Deliveries at the Closing. At the Closing, (i) the Seller will deliver
to the Buyer: (A) the various certificates, instruments, and documents
referred to in subparagraph 8(a) below; (B) stock certificates
representing all of the API Shares, endorsed in blank or accompanied
by duly executed assignment documents, and (C) a declaration that the
Seller holds the Mining Leases in trust for API; and (ii) the Buyer
will deliver to the Seller: (A) the various certificates, instruments,
and documents referred to in subparagraph 8(b) below; (B) the cash and
share consideration specified in subparagraph 2(a) (as applicable)
above, including, without limitation, share certificates representing
the requisite number of Common Shares; and (C) the Royalty Deed.
(f) Deliveries after Closing. On the dates specified in subparagraphs
2(a)(ii)-(v) and 2(b), the Buyer shall deliver to the Seller the cash
and share consideration specified in such subparagraphs, including,
without limitation, certificates representing the requisite number of
Common Shares.
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Seller. The Seller represents
and warrants to the Buyer that the statements contained in this
subparagraph 3(a) are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this subparagraph 3(a)):
(i) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Delaware.
(ii) Authorization of Transaction. The Seller has full corporate
power and authority to execute and deliver this Agreement and to
perform its
<PAGE>
7
obligations hereunder. This Agreement has been duly
authorized, executed and delivered by the Seller and
constitutes the valid and legally binding obligation of the
Seller, enforceable in accordance with its terms and
conditions, subject to: (A) bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or
affecting creditors' rights generally; (B) the qualification
that equitable remedies, including without limitation, specific
performance and injunction, may be granted only in the
discretion of a court of competent jurisdiction; and (C) the
qualification that rights to indemnity may be limited by
applicable law.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will violate (A) any provision of the
Articles of Incorporation or Bylaws of the Seller; (B) any
provision of law; (C) any order of any court or other agency of
government; (D) any provision of any indenture, agreement or
other instrument to which Seller or API is a party or by which
the Project is bound; or (E) be in conflict with, result in a
breach of or constitute (with due notice and lapse of time) a
default under any such indenture, agreement or other
instrument. To the knowledge of the Seller, there is no law,
rule or regulation, nor is there any judgment, decree or order
of any court or governmental authority binding on Seller or API
which would be contravened by the execution, delivery,
performance or enforcement of this Agreement or any instrument
or agreement required hereunder.
(iv) Brokers' Fees. The Seller has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement
for which the Buyer could become liable or obligated.
(v) Investment. The Seller understands that the shares of the
Buyer to be issued hereunder have not been and will not be
registered under the Securities Act or under any state
securities laws. The Seller is a sophisticated investor with
knowledge and experience in business and is not acquiring such
shares with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
(vi) API Shares. The Seller holds of record and owns beneficially
all of the API Shares, free and clear of any restrictions on
transfer (other than restrictions under applicable securities
laws), taxes, security interests, options, warrants, purchase
rights, contracts, commitments, equities, claims or demands and
no voting trust, proxy, or other agreement or understanding
exists with respect to the voting of the API Shares.
<PAGE>
8
(vii) Consents, Approvals. No consent, approval, licence, order,
authorization, regulation or declaration of, or filing with,
any governmental authority or other Person is required by the
Seller or API, in connection with (a) the Closing or (b) the
execution and delivery by the Seller of this Agreement or the
other documents to be delivered by the Seller to the Buyer
hereunder or (c) the observance and performance by the Seller
of its obligations under this Agreement or such other
documents.
(viii) Title to Mineral Leases. Except as disclosed in the title
report prepared by Morrison and Foerster LLP and the documents
referred to therein, (collectively the "Title Report"), a copy
of which has been provided to the Buyer by the Seller, to the
Seller's knowledge:
(A) the Seller is the registered owner of the Mineral Leases
and the Mineral Leases are free and clear of all liens,
encumbrances or other burdens on production or claims of
third parties other than API;
(B) the Seller holds the Mineral Leases in trust exclusively
for API and API is the sole beneficial owner of the
Mineral Leases;
(C) the Mineral Leases are in good standing under all
applicable laws; and
(D) there are no actions or administrative or other
proceedings pending or threatened against or affecting the
Mineral Leases
(b) Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller that the statements contained in this paragraph
3(b) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of
this Agreement throughout this paragraph 3(b)) and will remain correct
and complete until such time as the Seller has received all of the
consideration to which it is entitled hereunder as set forth in
paragraph 2:
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws
of the Province of Ontario.
(ii) Authorization of Transaction. The Buyer has full corporate power
and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by the Buyer and constitutes
the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions, subject
to: (A) bankruptcy, insolvency, reorganization,
<PAGE>
9
moratorium and other laws relating to or affecting creditors'
rights generally (B) the qualification that equitable remedies,
including, without limitation, specific performance and
injunction, may be granted only in the discretion of a court of
competent jurisdiction; and (C) the qualification that rights
to indemnity may be limited by applicable law.
(iii) Shareholder Approval. The Buyer has received the Approval.
(iv) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions
contemplated hereby, will violate (A) the charter or bylaws of
the Buyer; (B) any provision of law; (C) any order of any court
or other agency of government; (D) any provision of any
indenture, agreement or other instrument to which Buyer is a
party or by which its properties or assets are bound; or (E) be
in conflict with, result in a breach of or constitute (with due
notice and lapse of time) a default under any such indenture,
agreement or other instrument. To the knowledge of the Buyer,
there is no law, rule or regulation, nor is there any judgment,
decree or order of any court or governmental authority binding
on the Buyer which would be contravened by the execution,
delivery, performance or enforcement of this Agreement or any
instrument or agreement required hereunder.
(v) Brokers' Fees. The Buyer has no liability or obligation to pay
any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for
which the Seller could become liable or obligated.
(vi) Investment. The Buyer understands that the API Shares have not
been and will not be registered under the Securities Act or
under any state securities laws. The Buyer is a sophisticated
investor with knowledge and experience in business and is not
acquiring the API Shares with a view to or for sale in
connection with any distribution thereof within the meaning of
the Securities Act.
(vii) The Common Shares. The Reorganization was approved by the
shareholders of the Buyer at the Meeting and on the date of
this Agreement, the authorized capital of the Buyer consists of
an unlimited number of Common Shares of which 23,997,938 have
been validly issued and are outstanding. All of the Common
Shares to be issued to the Seller hereunder have been duly
authorized for issuance and allotted to the Seller and, when
issued in accordance with the terms hereof, all such shares
shall be validly issued as fully paid and nonassessable, free
and clear of all liens, charges and encumbrances. There does
not exist any pre-emptive right in favour of any person with
respect to any of such shares. No Person has any agreement or
any option, right or privilege capable of becoming
<PAGE>
10
an agreement, for the purchase, subscription or issuance of any
unissued shares of the Buyer, other than as set forth in the
Financial Statements, or otherwise publicly disclosed or as
contemplated hereby.
(viii) Financial Statements and Reports. The Buyer Financial Statements and
the notes thereto were prepared in accordance with the books and
records of the Buyer and fairly present the financial condition and
results of the operations of the Buyer at the date and for the
periods covered thereby all in accordance with Canadian generally
accepted accounting principles consistently applied. None of the
Buyer Financial Statements contained, as of its date, any untrue
statement of a material fact or any omission to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Each of the balance sheets included in
the Buyer Financial Statements (including any related notes)
presents fairly in all material respects the financial position of
the Buyer as of its date and the Buyer Financial Statements
(including any related notes) present fairly in all material
respects the results of operations, changes in financial position,
cash flows and changes in stockholders' equity, as the case may be,
of Buyer for the periods therein set forth, subject, in the case of
unaudited financial statements, to normal year-end audit
adjustments, in each case in accordance with generally accepted
accounting principles consistently applied during the periods
involved (except as otherwise stated therein).
(ix) No Material Changes. Since June 30, 1996, there has not been, except
as publicly disclosed or as contemplated hereby,
(A) any material adverse change, however caused, in the business,
assets, liabilities (actual or contingent), results of
operations, prospects, financial or other condition or
operations of Buyer;
(B) any change in Buyer's authorized or actual equity
capitalization;
(C) any damage, destruction or casualty loss, materially and
adversely affecting the business, assets, liabilities (actual
or contingent), results of operations, prospects, or financial
or other condition or operations of Buyer, whether or not
insured;
(D) any incurrence by the Buyer of long-term debt or any other
material liability or obligation, actual or contingent, other
than current liabilities incurred in the ordinary and usual
course of business consistent with past practices;
<PAGE>
11
(E) entry into, or agreement or commitment to enter into, any
agreement, commitment or transaction by the Buyer (including,
without limitation, any borrowing, capital expenditure or
financing or any amendment, modification or termination of any
existing agreement, commitment or transaction) other than in the
ordinary and usual course of business consistent with past
practices;
(F) acquisition or disposition of, or entry into any agreement by the
Buyer with respect to the acquisition or disposition of a
significant amount of assets; or
(G) any agreement with respect to any of the foregoing.
4. Representations and Warranties Concerning API. The Seller represents and
warrants to the Buyer that the statements contained in this paragraph 4 are
correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout
this paragraph 4):
(a) Organization, Qualification, and Corporate Power. API is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of Oregon. API is duly authorized to conduct business and
is in good standing under the laws of the State of Oregon. API has the
corporate power and authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used by it. No
proceedings have been taken or authorized by API or, to the best of
the Seller's knowledge, any other Person, with respect to the
bankruptcy, insolvency, liquidation, dissolution or winding up of API
or with respect to any amalgamation, merger, consolidation,
arrangement or reorganization relating to API.
(b) Capitalization. The API Shares are the only issued and outstanding
equity securities of API and the API Shares have been duly authorized,
are validly issued, fully paid, and nonassessable. No Person has any
agreement or any option, right or privilege capable of becoming an
agreement for the purchase, subscription or issuance of any securities
of API or any securities convertible into or exchangeable for
securities of API.
(c) Brokers' Fees. API does not have any liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.
(d) Employees. API has no employees.
(e) Subsidiaries. API has no Subsidiaries.
<PAGE>
12
(f) Royalties. Except as set forth in Schedule 4(f), to Seller's knowledge
there are no royalties or other burdens on production affecting the
Tucker Hill Property.
(g) Permits and Licenses. A list of all currently active material permits,
licenses, consents, approvals, authorizations, and qualifications
obtained by API in connection with its operations on the Tucker Hill
Property as of the date of this Agreement, true and correct copies of
each of which have been made available to Buyer, is set forth on
Schedule 4(g)(i); the only other permits, licenses, consents,
approvals, authorizations and qualifications required in order to
operate the Project in the normal course of business are set forth in
Schedule 4(g)(ii). To Seller's knowledge, API's ownership and
operation of the Tucker Hill Property is not in violation of and has
resulted in no liability (other than liability for compliance with
existing permits and laws, including but not limited to performance of
reclamation) under any statute, rule or regulation of any governmental
authority applicable to the Tucker Hill Property, other than
violations or liability, if any, which have not resulted and would not
be reasonably expected to result in any material loss or liability.
(h) Title to Claims. Except as disclosed in the Title Report, to Seller's
knowledge, as to the unpatented mining claims comprising the Tucker
Hill Property (the "Claims") subject to the paramount title of the
United States:
(A) API is in exclusive possession thereof; free and clear of all
liens, encumbrances or other burdens on production or claims of
third parties arising by, through or under API;
(B) since API acquired the Claims, assessment work, intended in good
faith to satisfy the requirements of state and federal laws and
regulations and generally regarded in the mining industry as
sufficient, for all assessment years up to and including the
assessment year ending September 1, 1992, was timely performed on
or for the benefit of the Claims and affidavits evidencing such
work were timely recorded;
(C) since API acquired the Claims, claim rental and maintenance fees
required to be paid under federal law in lieu of the performance
of assessment work, in order to maintain the Claims commencing
with the assessment year ending on September 1, 1993 and through
the assessment year ending on September 1, 1996, have been timely
and properly paid, and affidavits or other notices evidencing such
payments and required under federal or state laws or regulations
have been timely and properly filed or recorded;
(D) since API acquired the Claims, all filings with the Bureau of Land
Management with respect to the Claims which are required under the
<PAGE>
13
Federal Land Policy and Management Act of 1976 have been timely
and properly made, and
(E) there are no actions or administrative or other proceedings
pending or threatened against or affecting the Claims. Nothing
herein shall be deemed a representation that any of the Claims
contain a discovery of valuable minerals.
(i) Title to Assets. Except as otherwise set forth or contemplated herein,
API has good and marketable title to all of its assets (including,
without limiting the generality of the foregoing, the Process Plant
Land), free and clear of all liens, encumbrances or claims of third
parties.
(j) Environmental Compliance. To the knowledge of Seller, there are no
conditions or activities at or on the Project which would result in a
violation of or liability under applicable Environmental Laws, except
for such matters as would not have a material adverse effect on the
Project taken as a whole. To the knowledge of Seller, there have been
issued under applicable Environmental Laws no notices of violation or
consent orders to which API (with respect to its operations at the
Project) or the Project are subject, except for such matters as would
not have a material adverse effect on the Project taken as a whole.
There are no pending or, to the knowledge of Seller, threatened
proceedings by or before any court or other governmental authority
against API with respect to its operation or ownership of the Project
alleged to be, or have been, in violation of, under, any Environmental
Law, except for such matters as would not have a material adverse
effect on the Project taken as a whole.
(k) Material Contracts and Commitments. A list of all contracts,
agreements, mortgages, indentures and leases (including equipment
leases) to which API is a party (collectively the "Contracts") is set
forth in Schedule 4(k). True and correct copies of all of the
Contracts have been provided by the Seller to the Buyer prior to the
date hereof. To Seller's knowledge, API has performed all material
obligations required to be performed by it under the Contracts and is
not in default, and will not be in default as a result of the
consummation of the transactions contemplated herein, under any
Contract or any license, judgment, injunction, decree, order,
determination, restriction, or other instrument to which it is subject
in connection with the Project, except for such matters as would not
have a material effect on the Project taken as a whole.
(l) Legality. To the knowledge of Seller, API's operations on the Project
have been conducted in material compliance with applicable laws,
rules, ordinances and other governmental regulations, including
without limitation, those relating to zoning, condemnation, mining,
reclamation, environmental matters, equal employment, and federal,
state, or local health and safety laws, rules, and
<PAGE>
14
regulations, except for such violations as would not materially
adversely affect the Project.
(m) Litigation and Claims. To the knowledge of Seller, other than matters
affecting the U.S. mining industry as a whole, there are no actions,
suits or proceedings pending or threatened against or affecting the
Project, including any actions, suits, or proceedings being prosecuted
by any federal, state, or local department, commission, board, bureau,
agency, or instrumentality. To the knowledge of Seller, API is not in
any material default with respect to, or subject to, any order, writ,
injunction, judgment or decree of any court or any federal, state or
local department, commission, board, bureau, agency or instrumentality
which relates to the Project.
(n) Consents. API has obtained all consents, approvals, authorizations,
declarations, or filing required by any federal, state, local, or
other authority, or any lenders, lessors, creditors, and other third
parties in connection with the consummation of the transactions
contemplated hereby.
(o) Taxes. API, so long as it has been in possession of the Project, has
duly and timely filed, in correct form, all federal, state and local
income, excise, property and other tax returns, reports or statements
required to be filed by it with respect to the Project and has fully
paid all taxes, fees, assessments, penalties, and interest due in
respect of any such returns, reports, or statements, except for such
matters as would not have a material adverse effect on the Project
taken as a whole.
(p) API Financial Statements. The API Financial Statements:
(A) have been prepared in accordance with generally accepted
accounting principles, applied on a basis consistent with that of
the preceding periods;
(B) are complete and accurate in all material respects;
(C) accurately disclose the assets, liabilities (whether accrued,
absolute, contingent or otherwise) and financial condition of API
and the results of the operations of API, as at the dates thereof
and for the periods covered thereby;
(D) reflect all proper accruals as at the dates thereof and for the
periods covered thereby of all amounts which, though not payable
until a time after the end of the relevant period, are
attributable to activities undertaken during that period; and
(E) contain or reflect adequate reserves for all liabilities and
obligations of API of any nature, whether absolute, contingent or
otherwise, matured or unmatured, as at the date thereof.
<PAGE>
15
No information has become available to API that would render the API
Financial Statements incomplete or inaccurate. There have been no
significant changes in API's financial condition since September 30,
1996 as reflected in the API Financial Statements.
(q) Undisclosed Liabilities. API has no liabilities (whether accrued,
absolute, contingent or otherwise, matured or unmatured) of any kind
except:
(A) liabilities disclosed or provided for in the API Financial
Statements; and
(B) liabilities incurred in the ordinary course of business since
September 30, 1996, which are consistent with past practice, are
not, in the aggregate, material and adverse to API, the API
Shares or the Project and do not violate any covenant contained
in this Agreement or constitute a breach of any representation or
warranty made in or pursuant to this Agreement.
(r) Absence of Changes. Since September 30, 1996:
(A) API has conducted its business in the ordinary course, has not
incurred any debt, obligation or liability out of the ordinary
course of business or of an unusual or extraordinary nature and
has used its best efforts to preserve its business and assets;
(B) there has not been any change in the condition of API's business
or assets other than changes in the ordinary course of business,
and such changes have not, either individually or in the
aggregate, been materially adverse and have not had nor may they
be reasonably expected to have, either before or after the
closing time, a material adverse effect on the condition of API's
business or assets;
(C) to the Seller's knowledge, there has not been any change in, or
creation of, any applicable law, any termination, amendment or
revocation of any license or any damage, destruction, loss,
labour dispute or other event, development or condition of any
character (whether or not covered by insurance) which has had, or
could have, a material adverse affect on API's business or
assets; and
(D) there has not been any change in the accounting principles,
policies, practices or procedures of API or their application to
API.
(s) Absence of Unusual Transactions. Since September 30, 1996 API has not:
(A) transferred, assigned, sold or otherwise disposed of any of its
assets or cancelled any debts or claims;
<PAGE>
16
(B) incurred or assumed any obligation or liability (fixed or contingent) other
than obligations or liabilities included in the API Financial Statements
and obligations and liabilities incurred since September 30, 1996 in the
ordinary course of business;
(C) settled any liability, claim, dispute, proceedings, suit or appeal pending
against it or against any of its assets;
(D) discharged or satisfied any lien or encumbrance, or paid any obligation or
liability (fixed or contingent) other than liabilities included in the API
Financial Statements and liabilities incurred since September 30, 1996;
(E) made any material change with respect to any method of management operation
or accounting in respect of its business;
(F) waived or omitted to take any action in respect of any rights of
substantial value or entered into any commitment or transaction if such
loss, rights, commitment or transaction is or would be material in relation
to its assets or business;
(G) created any encumbrance on any of its assets or suffered or permitted any
such encumbrance that has arisen on its assets since that date to remain;
(H) modified, amended or terminated any contract, agreement or arrangement to
which it is or was a party, or waived or released any right which it has or
had, other than in the ordinary course of its business;
(I) incurred any debt, liability or obligation for borrowed money, or incurred
any other debt, liability or obligation except in the ordinary course of
its business;
(J) issued or sold any securities or issued, granted or delivered any right,
option or other commitment for the issuance of any securities;
(K) declared or paid any dividend or other distribution in respect of any
shares in its capital or purchased or redeemed any such shares;
(L) modified, amended or terminated any contract, agreement or arrangement to
which it is or was a party, or waived or released any right which it has or
had, other than in the ordinary course of its business; or
(M) authorized or agreed or otherwise become committed to do any of the
foregoing.
<PAGE>
17
(t) Absence of Guarantees. API has not given nor agreed to give, and is not a
party to or bound by, any guarantee of indebtedness or other obligations of
third parties nor any other commitment by which API is, or is contingently,
responsible for such indebtedness or other obligations.
(u) Restrictions on Business. API is not a party to any agreement, lease,
mortgage, security document, obligation or instrument, or subject to any
restriction in its articles, by-laws or its directors' or shareholders'
resolutions or subject to any restriction imposed by any governmental
authority or subject to any applicable law or order which could materially
restrict or interfere with the conduct of its business or its use of assets
or which could materially limit or restrict or otherwise adversely affect
the shares or the assets or business of API, other than statutory
provisions and restrictions of general application to its business.
(v) Conditions of Assets. All material tangible assets of API are in good
working condition and good repair and comply with all standards and
requirements of all applicable governmental authorities.
(w) Insurance. API is insured by reputable insurers against liability, loss and
damage in such amounts and against such risks as are customarily carried
and insured against by owners of comparable businesses, properties and
assets, and such insurance coverage will be continued in full force and
effect to and including the Closing Date. True and complete copies of all
of the most recent inspection reports, if any, received from insurance
underwriters as to the condition of the assets and the business have been
delivered to the Buyer. API is not in default will respect to any of the
provisions contained in any such insurance policy and there are no current
claims that have not been settled or finally determined. All such policies
of insurance are in full force and effect and API is not in default,
whether as to the payment of premium or otherwise, under the terms of any
such policy.
(x) No Expropriation. API has not received any notice of expropriation of all
or any of its assets and API is not aware of any expropriation proceeding
pending or threatened against or affecting its assets nor of any
discussions or negotiations which could lead to any such expropriation.
(y) Government Grants. There are no contracts or agreements relating to grants
or other forms of assistance, including loans with interest at below market
rates, received by API from any governmental authority.
(z) Restrictive Covenants. API is not a party to or bound or affected by any
commitment, agreement or document which limits the freedom of API to
compete in any line of business, transfer or move any of its assets or
operations or which does or could adversely affect the business practices,
operations or conditions of API after the Closing.
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18
(aa) Books and Records. The Seller has made available to the Buyer all books
and records of or relating to API. Such books and records fairly and
correctly set out and disclose in all respects the financial position of
API in accordance with good business practice and all financial
transactions relating to API have been accurately recorded in such books
and records. The books and records,
(A) accurately reflect the basis for the financial condition of API shown
in the API Financial Statements; and
(B) together with all disclosures made in this Agreement or in the
schedules hereto, present fairly the financial condition of API as of
and to the date hereof.
No information, records or systems pertaining to the operation or administration
of API are in the possession of, recorded, stored, maintained by or otherwise
dependent on any other person. The Seller has disclosed the existence of and
made available for review by the Buyer all the books and records.
(bb) No Joint Venture Interests. API has not nor has it agreed to become, a
partner, member, owner, proprietor or equity investor of or in any
partnership, joint venture co-tenancy or other similar jointly-owned
business undertakings or to acquire or lease any other business operation
and does not have any other significant investment interests in any
similar business owned or controlled by any third party.
(cc) Bank Accounts. The name of each bank or other depository in which API
maintains any bank account, trust account or safety deposit box is set
forth in Schedule 4(cc), along with the names of all persons authorized to
draw thereon or who have access thereto.
(dd) Disclosure. No representation or warranty in this agreement contains any
untrue statement of a material fact and the representations and warranties
contained in this Agreement do not omit to state any material fact
necessary to make any of the representations or warranties contained
herein not misleading to a prospective purchaser of the API Shares seeking
full information as to the API Shares, API and API's business and assets.
Without limiting the scope of the foregoing, the Seller is not aware of
any change, event or occurrence that has taken place or is pending that
has, or in the future could have, a material adverse effect on the value
or ownership of the API Shares, API or API's business and its assets, or
the ability of the Buyer to operate API's business subsequent to the
Closing in the manner in which it has been operated by API prior to the
Closing or which could materially increase the costs incurred by the Buyer
in operating API's business subsequent to the Closing, including any
pending or present change in any
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19
applicable law or other requirement, including the obtaining or
maintenance of licenses or approvals.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in paragraph 8 below).
(b) Notices and Consents. Each of the Parties will (and the Seller will
cause API to) give any notices to, make any filings with, and use its
reasonable best efforts to obtain any required authorizations,
consents, and approvals of governments and governmental agencies in
connection with the transactions contemplated by this Agreement.
(c) Operation of Business. The Seller will not cause or permit API to
engage in any practice, take any action, or enter into any transaction
outside the ordinary course of business of API consistent with the
past practice and custom of API.
(d) For so long as the Seller is holding the Mineral Leases in trust for
API and until such time as API becomes the registered owner of the
Mineral Leases, the Seller will not sell, transfer or encumber the
Mineral Leases.
(e) Full Access for Due Diligence. The Seller will cause API to permit the
Buyer and its Representatives to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of API, to all premises, properties, personnel, books,
records (including tax records), contracts, and documents of or
pertaining to API, which may relate, in the good faith judgment of the
Buyer, to the titles held by API and to its properties, to the
financial condition of API, to environmental matters related to API
and its properties, and to the ore reserve calculations of API. The
Buyer and Seller hereby acknowledge and agree that the Seller makes no
representation or warranty as to the reliability, accuracy or
completeness of any of the information or date referred to in this
paragraph 5(d). The Buyer (and its Representatives) will treat and
hold as Confidential Information any and all information received from
the Seller, API and their Representatives in the course of the review
contemplated by this paragraph 5(d).
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20
(f) Exclusivity. Unless and until this Agreement is terminated prior to
Closing pursuant to paragraph 10 hereof, the Seller will not (and will
not cause or permit API to) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the
acquisition of all or substantially all of the capital stock or assets
of API (including any acquisition structured as a merger,
consolidation or share exchange), unless such proposal or offer
pertains to the Seller as a whole and is made subject to this
Agreement.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, each of the
parties will take such further actions (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to
indemnification hereunder).
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any third party action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving API, the other Party shall cooperate with it and its counsel
in the defense or contest, make available its personnel, and provide
such testimony and access to its books, records and properties as
shall be necessary in connection with the defense or contest, all at
the sole cost and expense of the contesting or defending Party (unless
the contesting or defending Party is entitled to indemnification
therefor hereunder).
(c) Transition. The Seller will not take any action that is designed or
intended to have the effect of discouraging any material lessor,
licensor, customer, supplier, or other business associate of API from
maintaining substantially the same business relationships with API
after the Closing as it maintained with API prior to the Closing.
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21
(d) Tax Treatment.
(i) Post-Closing Taxes. It is understood by the Parties that the
Buyer shall pay, or cause to be paid, and the Buyer and API shall
jointly and severally indemnify the Seller and its Affiliates
against and hold them harmless from any liability of API for
taxes, additions to tax, interest, penalties or other tax
detriment (which shall include, but not be limited to, the
utilization of any tax credits or other tax attributes) for
periods after the Closing Date or arising from any action or
failure to act by the Buyer or any Affiliate of the Buyer
(including API) from and after the Closing, including without
limitation, any sale or other disposition of assets by the API.
(ii) Prior Tax Agreements. As of the Closing, API will not be a party
to, bound by, or subject to any obligation under any tax sharing
or similar agreement.
(e) Bonding. For a period not to exceed 90 days (the "Bond Period")
following the Closing, the Seller shall maintain full force and effect
all reclamation and other bonds presently maintained by or for the
benefit of API. The Buyer's pro rata share (not to exceed 3/12) of all
actual costs and expenses incurred by the Seller in maintaining such
bonds shall be included in the amounts to be reimbursed to the Seller
pursuant to subparagraph 2(b) hereof. As soon as possible following
the Closing, and in any event within the Bond Period, the Buyer shall
replace all such outstanding bonds with substitute bonds, letters of
credit or other financial assurances acceptable to the Bureau of Land
Management or the other authorities which require or have jurisdiction
over such bonds.
(f) Corporate Records. As soon as practicable after the Closing Date the
Seller shall deliver to the Buyer all corporate records of API which
are maintained by the Seller or its agents or Affiliates provided that
the Buyer and the Seller shall coordinate and agree upon a mutually
acceptable schedule for the assembly and delivery of such documents.
Following the Closing the Buyer shall afford the Seller reasonable
access to such documents upon reasonable notice and during regular
business hours.
(g) Internal Financial Statements. The Buyer will prepare Internal
Financial Statements in respect of each calendar month until such time
as the Seller has received all of the consideration to which it may
become entitled hereunder and the Buyer will deliver to the Seller
within 15 days of the end of each calendar month a copy of the
Internal Financial Statements for the previous month.
<PAGE>
22
7. Indemnity.
(a) Environmental Indemnity to Buyer. The Seller shall indemnify, defend
and hold harmless the Buyer and its Affiliates (collectively the
"Buyer Indemnitees") from any and all Environmental Costs
(collectively "Losses") sought or claimed by any Person, including any
governmental agency, which are based upon the violation or alleged
violation by Seller or API of, or liability imposed on Seller or API
by, any Environmental Law, or relating to the use, treatment,
handling, storage, disposal or release of Hazardous Substances on or
in connection with the Project, with respect to all such Losses which
arise as the result of or in connection with acts, omissions or
conditions occurring or arising from and after October 24, 1988 (with
respect to the Tucker Hill Property) and from and after May 1, 1996
(with respect to the Process Plant Land), up to and including the
Closing Date, and regardless of whether such Losses arise as a result
of or on connection with acts, omissions, conditions or occurrences
which are known to either of the Parties upon the date of this
Agreement or on the Closing Date. The indemnity for Environmental
Costs provided for by this subparagraph (7)a constitutes a principal
element of the consideration for the transactions contemplated by this
Agreement, and the maximum amount of the Seller's liability under this
indemnity may exceed the purchase price paid by the buyer for the API
Shares.
(b) Environmental Indemnity to Seller. The Buyer shall indemnify, defend
and hold harmless the Seller and its Affiliates (collectively the
"Seller Indemnitees") from any and all Environmental Costs
(collectively "Losses") sought or claimed by any Person, including any
governmental agency, which are based upon the violation or alleged
violation of, or liability imposed by, any Environmental Law, or
relating to the use, treatment, handling, storage, disposal or release
of Hazardous Substances on or in connection with any properties or
assets of API, with respect to all such Losses which arise as the
result of or in connection with acts, omissions or conditions
occurring or arising from and after the Closing Date, and regardless
of whether such Losses arise as a result of or in connection with
acts, omissions, conditions or occurrences which are known to either
of the Parties upon the date of this Agreement or on the Closing Date.
The indemnity for Environmental Costs provided for by this
subparagraph 7(b) constitutes a principal element of the consideration
for the transactions contemplated by this Agreement, and the maximum
amount of the Buyer's liability under this indemnity may exceed the
purchase price paid by the buyer for the API Shares.
(c) Additional Indemnification of Buyer. Seller hereby indemnifies and
agrees to hold Buyer, its successors and assigns, harmless from and
against any and all liabilities, claims, damages, losses, or expenses,
including interest and penalties, reasonable attorneys' fees, and
other reasonable expenses of defending any actions relating thereto
(collectively "Losses"), incurred or sustained by Buyer in or as a
result of or arising out of or attributable to any breach of the
specific
<PAGE>
23
representations and warranties made by Seller herein, or the breach of
any of the agreements, covenants, conditions, and obligations of
Seller contained in this Agreement.
(d) Additional Indemnification of Seller. Buyer hereby indemnifies and
agrees to hold Seller, its successors and assigns, harmless from and
against any and all liabilities, claims, damages, losses, or expenses,
including interest and penalties, reasonable attorneys' fees and
other reasonable expenses of defending any actions relating thereto,
(collectively "Losses"), incurred or sustained by Seller in or as a
result of or arising out of or attributable to any breach of the
specific representations and warranties made by Buyer herein, or the
breach by Buyer of any of the agreements, covenants, conditions, and
obligations of Buyer contained in this Agreement.
(e) Indemnification Procedure. In the case of any claim for
indemnification brought under this paragraph 7, the Buyer Indemnitee
or the Seller Indemnitee, (an "Indemnitee") , as the case may be,
shall give the Buyer or Seller (the "Indemnitor"), as the case may be,
reasonably prompt notice of the Losses which give rise to such claim;
provided, however, that the failure to so notify the Indemnitor shall
not affect the obligation of the Indemnitor to indemnify the
Indemnitee hereunder unless the Indemnitor shall have been materially
prejudiced by such failure to so notify. The Indemnitor shall, at its
option, be entitled to assume the defense of any action, suit or
proceeding ("Action") related to such claim at its sole cost and
expense and with counsel reasonably satisfactory to the Indemnitee;
provided, however, that the Indemnitee shall have the right to
participate in such defense at its own expense. If the Indemnitor
fails to defend any Action, any defense by the Indemnitee thereof
shall be at the sole cost and expense of the Indemnitor. The party
defending an Action shall control the conduct thereof. The Parties
agree to make available to each other, their counsel and accountants,
any information and documents reasonably available to them which
relate to such Action and their employees, and the Parties hereto
agree to render to each other such assistance as they may reasonably
require of each other in order to insure the proper and adequate
defense of any Action.
8. Conditions of Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the buyer to
consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in paragraph 3(a)
and paragraph 4 hereof shall be true and correct in all
material respects at and as of the Closing Date;
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24
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in
paragraph 8(a)(i)-(iii) is satisfied in all respects;
(v) the Seller shall have delivered to the Buyer a copy of the
resolutions of the Board of Directors of the Seller authorizing
the execution, delivery and performance of this Agreement by
the Seller, certified by the corporate secretary of the Seller;
and
(vi) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this paragraph 8(a) (other than
those referred to in paragraph (iii)) by notice in writing given at or prior to
the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in paragraph 3(b)
above shall be true and correct in all material respects at and
as of the Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) the Buyer shall have delivered to the Seller a certificate to
the effect that each of the conditions specified above in
paragraph 8(b)(i)-(iii) is satisfied in all respects;
(v) the Buyer shall have delivered to the Seller a copy of the
resolutions of the Board of Directors of the Buyer authorizing
the execution, delivery and
<PAGE>
25
performance of this Agreement by the Buyer, certified by the
corporate secretary of the Buyer; and
(vi) all actions to be taken by the buyer in connection with consummation
of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to the Seller.
The Seller may waive any condition specified in this paragraph 8(b) (other than
that referred to in paragraph (iii) by notice in writing given at or prior to
the Closing.
9. Survival of Representations and Warranties. Except as set forth in
subparagraph 3(b), the representations and warranties of the Buyer and the
Seller contained herein shall survive the Closing for a period of one year
thereafter with the exception of the representations and warranties of the
Seller set forth in subparagraphs 3(a)(viii), 4(b) and 4(i), which shall survive
for a period of two years from the Closing Date, and the representations and
warranties of the Buyer set forth in subparagraph 3(b)(vii), which shall survive
for a period of one year following the last issuance of Common Shares to the
Seller pursuant to paragraph 2.
10. Termination.
(a) Termination of Agreement by the Parties. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing; or
(ii) the Buyer may terminate this Agreement by giving written notice
to the Seller at any time prior to the Closing in the event the
Seller has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect,
the Buyer has notified the Seller of the breach, and the Seller
has not disputed the existence or nature of such breach or such
breach has not been cured by the Automatic Termination Date; or
(iii) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing in the
event the Buyer has breached any material representation,
warranty, or convenant contained in this Agreement in any
material respect, the Seller has notified the Buyer of the
breach, and the Buyer has not disputed the existence or nature
of such breach or such breach has not been cured by the
Automatic Termination Date.
(b) Automatic Termination. This Agreement shall automatically terminate,
without further action on the part of either Party in the event that
the Closing has not
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26
occurred, for any reason, before the close of business on the
Automatic Termination Date.
(c) Effect of Termination. If either Party terminates this
Agreement (or if it terminates automatically) pursuant to this
paragraph 10 all rights and obligations of the Parties
hereunder shall terminate without any liability of either Party
to the other Party except for any liability of any Party then
in breach; provided, however, that the confidentiality
provisions of paragraph 12 shall survive termination.
11. Rescission of Transaction. In the event the Closing occurs prior to
the Automatic Termination Date but API has not received the Operating
Permits on or before the Automatic Termination Date, the Buyer may elect to
rescind its purchase of the API Shares by giving written notice to the
Seller at any time from the Automatic Termination Date until 5:00 p.m.
(Denver time) on January 15, 1997. In the event of such rescission: (i) the
Buyer will forthwith transfer the API Shares to the Seller; and (ii) the
Seller will forthwith (a) return to the Buyer for cancellation any Common
Shares issued to the Seller hereunder and (b) pay the Buyer an amount equal
to the aggregate of all cash payments theretofore made to the Seller
hereunder, together with simple interest calculated at the rate of 10% per
annum. Subject to the foregoing, all rights and obligations of the Parties
hereunder shall terminate upon such rescission without any liability of
either Party to the other Party except for any liability of any Party then
in breach; provided, however, that confidentiality provisions of paragraph
12 shall survive such rescission on the same basis as would apply if this
Agreement had been terminated prior to the Closing.
12. Confidentiality. The Buyer acknowledges that any and all information
concerning the businesses, properties and affairs of API which is disclosed
to the Buyer or its Representatives by the Seller or its Representatives or
by API or its Representatives, or which is discovered by the Buyer or its
Representatives in the course of the due diligence contemplated by
paragraph 5(d) hereof constitutes the unique, proprietary and confidential
information of the Seller (collectively "Confidential Information").
Notwithstanding the foregoing, however, "Confidential Information" shall
not include any information or data which is in, or becomes a part of, the
public domain by any means other than the breach by the Buyer or its
Representatives of the obligations hereunder. Until the earlier to occur of
the Closing or the second anniversary of the termination of this Agreement
pursuant to paragraph 10 hereof the Buyer shall maintain all Confidential
Information disclosed to or received by it pursuant to this Agreement in
confidence and shall not disclose the same to any third party unless
required to do so by court order or by law, in which case the Buyer shall
notify the Seller, in writing, prior to making such disclosure and shall
cooperate with the Seller to preserve and protect the confidentiality of
the Confidential Information to the fullest extent possible. Additionally,
except as specifically contemplated by this Agreement, the Buyer shall not
utilize any Confidential Information for its own benefit or for the benefit
of any other party until the earlier to occur of the Closing or the second
anniversary of the termination of this Agreement in accordance with the
provisions of paragraph 10 hereof. If this Agreement is terminated, for any
reason whatsoever, the Buyer and its Representatives will return to the
Seller all tangible embodiments (and all copies) of the Confidential
Information which are in their possession.
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27
13. Miscellaneous.
(a) Report of Micon International Limited. The Buyer acknowledges receipt
from the Seller of a report prepared by Micon International Limited
which states that the Tucker Hill Property has proven reserves to
provide a mine life of at least three years.
(b) Disclosure of Information Concerning API. The Seller has instructed
its Representatives, and the Representatives of API to answer
questions concerning the businesses, affairs, operations and
properties of API which are addressed to them by the Buyer and its
Representatives during the course of the due diligence conducted by
the Buyer pursuant to paragraph 5(d) hereof. Additionally, the Seller
has instructed its Representatives and the Representatives of API to
provide to the Buyer and its Representatives copies of documents
requested by the Buyer and its Representatives in the course of the
due diligence conducted by the Buyer pursuant to paragraph 5(d) hereof
and to otherwise cooperate with and assist the Buyer and its
Representatives in such due diligence efforts. The Parties acknowledge
and agree that all such information and documents are Confidential
Information.
(c) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior
written approval of the Buyer and the Seller; provided, however, that
any Party may make any public disclosure it believes in good faith is
required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the
disclosing Party will use its best efforts to advise the other Party
prior to making the disclosure).
(d) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(e) Entire Agreement. This Agreement (including the Exhibits referred to
herein) constitutes the entire agreement among the Parties and their
Affiliates in regard to the subject matter hereof and supersedes any
prior understandings, agreements, or representations (specifically
including the Letter Agreement) by or among the Parties or their
Affiliates, written or oral, to the extent they relate in any way to
the subject matter hereof.
(f) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Seller;
provided, however, that the Seller may (i) assign any or all of its
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28
rights and interests hereunder to one or more of its Affiliates and
(ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which case the Seller
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(h) Headings. The paragraph headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(i) Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if sent by prepaid overnight courier or transmitted by
telecopier addressed to the intended recipient as set forth below:
If to the Seller:
Atlas Corporation
Suite 3050
Republic Plaza
370 17th Street
Denver, Colorado
80202
Attention: Jerome C. Cain, Secretary-Treasurer
Telecopier No.: (303) 629-2445
If to the Buyer:
Cornerstone Industrial Minerals Corporation
Suite 3050
Republic Plaza
370 17th Street
Denver, Colorado
80202
Attention: John Leahy, President
Telecopier No.: (303) 629-2445
Any notice, request, demand, claim, or other communication hereunder sent to the
intended recipient at the address set forth above shall be deemed to have been
duly given on the business day following the day upon which it is given to the
courier or on the day (or the next business day is such day is not a business
day) upon which it is telecopied. Any Party may change the
<PAGE>
29
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in the manner
herein set forth.
(j) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Oregon without
giving effect to any choice or conflict of law provision or rule
(whether of the State of Oregon or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
State of Oregon.
(k) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and
signed by the Buyer and the Seller. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(l) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
(m) Expenses. Each of the Buyer and the Seller will bear its own costs and
expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
(n) Currency. All dollar amounts contained herein are expressed in lawful
currency of the United States of America.
(o) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement in the event an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favouring or disfavouring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference
to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The word "including" shall mean
including without limitation.
(p) Incorporation of Schedules. The Schedules identified in this Agreement
are incorporated herein by reference and made a part hereof.
(q) Arbitration of Disputes.
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30
(i) Unresolved Disputes. Any disagreement or dispute arising out of or
relating to this Agreement, its existence, interpretation,
performance or enforcement (including but not limited to the
existence of a default) not resolved by the Parties within fifty
(50) days after the date on which one party notifies the other of
any such disagreement or dispute shall be settled by arbitration in
accordance with this paragraph 13(q).
(ii) Rules. Matters subject to arbitration shall be settled by
arbitration before a panel of three arbitrators in Denver, Colorado,
in accordance with the commercial arbitration rules of the American
Arbitration Association in effect at the time of arbitration. In the
event of a conflict between those commercial arbitration rules and
this paragraph 13(p), this paragraph 13(p) shall control. The
judgment of the arbitrators as to such matters shall be binding upon
the parties to this Agreement, and judgment upon any award rendered
by the arbitrators may be entered in any court having jurisdiction
under the provision of the Colorado Revised Statutes pertaining to
arbitration and award as they may be amended from time to time.
(iii) Demand. To demand arbitration any party (the "demanding party")
shall give written notice to the other party (the "responding
party"). Such notice shall specify the nature of the issues in
dispute, the amount involved, and the remedy requested. Within
twenty (20) days of the receipt of the notice, the responding party
shall answer the demand in writing, specifying the issues that party
disputes. The parties shall thereupon each select one arbitrator,
who shall be qualified by skill and experience in the subject matter
under dispute. Within fifteen (15) days thereafter, the two
appointed arbitrators shall jointly select a third arbitrator
similarly qualified.
(iv) Proceedings. Within twenty (20) days after the third arbitrator has
been selected or appointed, each party to the dispute shall submit
to the arbitrators a written statement of its position as to the
matter being arbitrated, including its position on the necessity for
discovery or a formal hearing. The arbitrators shall, within fifteen
(15) days after submission of statements, establish a schedule for
the arbitration proceedings and issues orders relating to the
conduct of such proceedings, governing, among other matters, the
extent and nature of any discovery to be allowed and the necessity
of a formal hearing. If a hearing is held, the arbitrators shall
issue a decision as to the resolution of the dispute within fifteen
(15) days after the hearing. A majority ruling by the arbitrators
shall be binding on the parties. All costs, expenses and fees, plus
reasonable attorneys' fees, shall be recoverable by or paid to the
substantially prevailing party in any dispute resolved by
arbitration.
<PAGE>
31
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives upon the date first herein
written.
BUYER:
CORNERSTONE INDUSTRIAL MINERALS
CORPORATION
By: /s/ John R. Leahy
---------------------------
John R. Leahy, President
SELLER:
ATLAS CORPORATION
By: /s/ Jerome C. Cain
---------------------------
Name: Jerome C. Cain
Title: V.P. - Finance, Treasurer &
Secretary
<PAGE>
Exhibit 10.36
RESIGNATION AGREEMENT AND GENERAL RELEASE
THIS RESIGNATION AGREEMENT AND GENERAL RELEASE, made and entered into as of
this 21st day of June, 1996, by and between DAVID J. BIRKENSHAW (hereinafter
referred to as the "Employee") and ATLAS CORPORATION, a corporation organized
under the laws of Delaware (hereinafter referred to as the "Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Employee has been employed by the Company as its Chairman and
Chief Executive Officer, pursuant to the provisions of an employment agreement
between the Company and the Employee dated September 22, 1993 as the same has
been amended from time to time (the "Employment Agreement"); and
WHEREAS, the Employee and the Company deem it to be in their mutual
interest that Employee's employment with the Company shall terminate; and
WHEREAS, the Employee and the Company desire to settle fully and finally
all outstanding matters between them, including, but in no way limited to, any
outstanding matters that might arise out of the Employment Agreement, Employee's
employment with the Company and the termination thereof;
NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained, it is agreed as follows:
1. Termination Date. The parties agree that the Employee's employment by
the Company shall terminate effective as of June 21, 1996 (the "Termination
Date"). Employee understands and agrees that, effective as of the Termination
Date, he is no longer authorized to incur any expenses, obligations or
liabilities on behalf of the Company. Employee acknowledges that he has
submitted, and has been paid in full, for all outstanding expenses incurred or
claimed by him through such date.
2. Resignation. The execution of this Agreement shall serve as the
resignation by the Employee as an officer, director and employee of the Company
and of each "Affiliate" of the Company (as that term is defined by Paragraph
15(c) of this Agreement) and as a trustee, fiduciary or administrator of any
employee benefit plan of the Company or an Affiliate, effective as of the
Termination Date.
3. Terms of Separation. In consideration of the agreements by Employee
provided herein, including without limitation the release by the Employee in
Paragraph 4 hereof, the Company agrees to provide the following payments and
benefits to the Employee [as soon as
<PAGE>
-2-
practicable after this Agreement becomes irrevocable pursuant to the provisions
of Section 10 hereof:]
(a) The Company shall pay to the Employee in full satisfaction of any
claims by him against the Company or any Affiliate for salary, bonus, vacation,
holiday, [expense or similar reimbursement,] pension or profit sharing benefits,
separation or severance pay and any other claim for compensation or benefits of
any kind whatsoever under the Employment Agreement or otherwise, (i) a single
lump sum payment of $337,500 (less applicable withholding for payroll and other
taxes), which amount shall be applied in payment of those expenses, advances,
loans, other amounts owed to the Company and its Affiliates and other items
listed in Exhibit D hereto which are presently known to the Company, and (ii) an
additional payment totaling $112,500 to be paid in six equal monthly
installments of $18,750 (less applicable withholdings for payroll and other
taxes), which amount shall be reduced by the amount of any expenses, advances,
loans, other amounts owed to the Company and its Affiliates or similar items
which the Company or its Affiliates may become obligated to pay after the date
hereof but which are not presently known to the Company and its Affiliates. Such
payments shall be made by depositing such amount to the Employee's checking
account or such other account, or by check, as Employee may authorize in
writing.
(b) The Company and the Employee agree that any stock options and
restricted stock or other awards which may have been granted to Employee under
the Company's Long Term Incentive Plan are hereby canceled and the Employee
hereby waives any claims to or in respect of such stock options or stock awards.
Immediately following the Termination Date, the Company agrees that it shall
award to Employee an option to purchase an aggregate of 200,000 shares of the
Company's common stock at an exercise price of $1.50 per share, which option
shall be exercisable in whole or in part at any time prior to June 20, 1999. If
not exercised by June 20, 1999, such stock option shall expire. The terms and
conditions of such stock option award shall reflected in a written option
agreement between the Company and the Employee in the form attached hereto as
Exhibit C.
(c) The Employee shall be placed on an unpaid personal leave of
absence as an employee through December 18, 1996. During such leave of
absence, Employee shall not have any duties or responsibilities, shall not have
the authority to bind the Company in any way or to incur any liabilities on
behalf of the Company or to hold himself out as acting for or on behalf of the
Company in any way.
(d) The Company shall make available to the Employee through June 20,
1997 coverage under the Company's medical benefits plan for himself and his
dependents under the same terms and conditions, including required
contributions, as apply to active employees. Thereafter, the Employee may
purchase, if eligible, continuation medical benefits coverage to the extent and
for the period provided by federal law.
<PAGE>
-3-
(e) Distributions or payments to Employee shall be made under any
tax-qualified employee benefit plans of the Company in which the Employee
participated prior to the Termination Date, to the extent provided by such
plans.
(f) Subject to Employee providing the Company with documentation and
records satisfactory to the Company, the Company agrees to treat certain
Canadian securities trades undertaken by Employee in the name of the Company in
securities of Kyrgoil Corp. as for the account of the Employee individually. At
such time as the Company shall receive the proceeds of any such trades, it shall
remit to Employee the net amount received by the Company less all taxes,
expenses, fees and similar charges of any kind which may be incurred by the
Company. Employee represents that such securities trades were undertaken for his
own account and without any prior knowledge by any officer or director of the
Company.
(g) In exchange for the release of any and all claims by Employee for
personal and business moving, relocation or similar expenses, and for the other
agreements of the Employee hereunder, the Company agrees to forgive the
repayment of the $60,000 unsecured housing loan, and any accrued but unpaid
interest thereon, which the Company made to the Employee in connection with his
relocation to Denver, Colorado.
4. Release by Employee. In consideration for the promises contained
herein, Employee hereby irrevocably and unconditionally releases, acquits and
forever discharges for himself and his heirs, executors, administrators,
successors and assigns, the Company and each of the Company's parent companies,
stockholders, predecessors, successors, assigns, agents, directors, officers,
employees, representatives, attorneys, divisions, subsidiaries, Affiliates (and
stockholders, agents, directors, officers, employees, representatives and
attorneys of such, parent companies, divisions, subsidiaries and Affiliates),
and all persons acting by, through, under or in concert with any of them
(collectively, the "Company Releasees"), or any of them, from any and all
charges, complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including attorneys' fees and costs actually
incurred) of any nature whatsoever, known or unknown, suspected or unsuspected,
including, but not limited to, claims arising directly or indirectly out of the
Employee's employment by the Company, and the termination of the Employee's
employment, claims under the Employment Agreement, claims under the Long Term
Incentive Plan, claims for compensation of any kind, claims for workers'
compensation, claims in equity or law for wrongful discharge, claims arising in
tort, personal injury, defamation, mental anguish, emotional distress, injury to
health and reputation, claims under federal, state or local laws prohibiting
discrimination on account of age, national origin, race, sex, handicap, religion
and similar classifications, claims under the Civil Rights Acts of 1866 and
1871, as amended; the Civil Rights Act of 1964, Title VII, as amended; the Civil
Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as
amended; the Employee Retirement Income Security Act of 1974, as amended; the
Americans with Disabilities Act of 1990; similar Colorado laws, including
Colorado Rev. Stat. (S) 24-34-402(1)(a), (S) 24-34-301(1)(1994), and similar
claims under the laws of Canada and any province or political
<PAGE>
-4-
subdivision thereof ("Claim" or "Claims"), which Employee now has, or ever
claimed to have, or could claim against each or any of the Company Releasees.
Employee hereby agrees to forego any right to file any charges or complaints
with any governmental agencies or a lawsuit against the Company Releasees under
any of the laws referenced in this paragraph or with respect to any matters
covered by the release in this paragraph. Notwithstanding the foregoing, the
release by the Employee in this paragraph shall not limit the right of the
Employee to seek to enforce the provisions of this Agreement.
5. Confidentiality and Non-Disclosure Agreements. (a) Employee
acknowledges that any confidentiality, proprietary rights or nondisclosure
agreement(s) in favor of the Company or the Company Releasees, including without
limitation, those agreements contained in Paragraph 7 of the Employment
Agreement, which he may have entered into in connection with his employment
("Nondisclosure Agreement(s)") with the Company, is understood to survive, and
does survive, any termination of such employment, and accordingly nothing in
this Agreement shall be construed as terminating, limiting or otherwise
affecting any such Nondisclosure Agreement(s) or Employee's obligations
thereunder. Without limiting the generality of the foregoing, no time period set
forth in this Agreement shall be construed as shortening or limiting the term of
any such Nondisclosure Agreement(s), which term shall continue as set forth
therein.
(b) Employee agrees that, except to the extent compelled by law or legal
process, he (i) will not hereafter disclose or communicate confidential
information of the Company, its Affiliates or their customers to any third party
(including as a third party for this purpose, employees and former employees of
the Company, its Affiliates and governmental agencies), (ii) will not make use
of confidential information of the Company, its Affiliates or their customersfor
his own behalf, or on behalf of any third party, and (iii) will not facilitate,
assist, persuade or attempt to facilitate, assist or persuade any third party to
commence or prosecute any legal proceedings against the Company, its Affiliates
and their customers and any Company Releasee. In the event Employee receives, is
notified of or is served with a subpoena, summons, complaint, order, notice,
notice of deposition or any other legal process or documents (collectively,
"Legal Process") in connection with any legal or quasi-legal proceeding,
including but not limited to any action at law or equity, arbitral,
administrative proceeding or governmental investigation (collectively,
"Litigation"), relating to the performance of his services as an employee,
officer or director of the Company or its Affiliates or which, if complied with
by Employee, might compel or lead to the disclosure by Employee of confidential
information of the Company, its Affiliates or their customers, the Employee
shall promptly, but in no event later than 2 business days after receipt unless
2 business days is not reasonable under the circumstances, provide the Company
with a copy of the same, and shall in no event and under no circumstances
disclose any such information prior to the last date specified in the Legal
Process for making such disclosure. If the Company wishes Employee to contest
such Legal Process or to be represented by counsel selected by it, the Company
shall as soon as possible, but in no event later than 1 day prior to the date
specified in such Legal Process for complying with the same, (i) notify Employee
in writing that it wishes Employee to contest such Legal
<PAGE>
-5-
Process and agree to pay Employee the costs and expenses of attorneys' fees
incurred by the Employee in connection with contesting such Legal Process, not
to exceed $5,000, or (ii) notify Employee that counsel selected by the Company
shall, at the sole expense of the Company, participate in or control the
response of the Employee to such Legal Process insofar as such response relates
to the Employee's performance of services for the Company or the possible
disclosure of confidential information of the Company, its Affiliates or their
customers. Employee agrees to take such lawful action in connection with
contesting any such Legal Process as the Company shall reasonably request from
time to time. Employee agrees to promptly notify the Company of any action taken
or proposed to be taken from time to time in connection with any Legal Process
or Litigation which might lead to the disclosure of the confidential information
of the Company, its Affiliates or their customers, and to make available to the
Company any Legal Process of documents related thereto. The Employee further
agrees to cooperate with the Company by providing a reasonable amount of
testimony relating to any Litigation, to the extent requested by the Company.
6. Company Property and Information. Employee has returned or will
immediately return to the Company all Company Information and related reports,
customer lists, trade secrets notes, maps, files, blueprints, drawings,
memoranda, manuals, and records; credit cards, cardkey passes; door and file
keys; automobiles, computer access codes, computer discs, magnetic media or
business information in any form; software; other business information of the
Company Releasees; and other physical or personal property which Employee
received or prepared or helped prepare in connection with his employment; and
Employee has not retained and will not retain any copies, duplicates,
reproductions, or excerpts thereof in any form. The term "Company Information"
as used in this Agreement includes, without limitation, information received
from third parties, other confidential business or financial information, and
other materials and information described in this paragraph.
7. Confidentiality of this Agreement. Employee represents and agrees that
he will keep the terms and fact of this Resignation Agreement and General
Release completely confidential, and that he will not hereafter disclose any
information concerning this Resignation Agreement and General Release to anyone,
except to his immediate family and his legal and tax advisors; provided that
such persons agree to keep such information confidential and not disclose it to
others.
8. Consideration. Employee acknowledges that the Company is not otherwise
required to enter into this Agreement, that the payments and agreements in this
Agreement are in addition to anything of value to which he is already entitled,
that the consideration to be received by him under this Agreement is adequate,
and that such promises and agreements are made by the Company because of his
agreement to provide the releases in Paragraph 4 hereof.
9. Receipt of Agreement. Employee acknowledges receiving this Agreement on
June 21, 1996 and that he has twenty-one (21) days from that date to consider
the terms of this Agreement.
<PAGE>
-6-
10. REVOCABILITY. This Agreement is revocable by Employee for seven (7)
days after it is signed by him. This Agreement shall not be effective or
enforceable until the period for revocation has expired.
11. ARBITRATION. In the event there shall arise any question or dispute
between the parties with respect to the provisions of this Resignation Agreement
and General Release or its interpretation, such dispute shall be settled
exclusively by arbitration in Denver, Colorado in accordance with the commercial
rules then in effect of the American Arbitration Association. Judgment upon an
award rendered by the arbitrator(s) may be entered in any court of competent
jurisdiction, including courts in the state of Colorado. Any award so rendered
shall be final and binding upon the parties hereto. All costs and expenses of
the arbitrator(s) and all costs and expenses of experts, attorneys, witnesses
and other persons retained by the parties shall be borne by them respectively.
In the event that injunctive relief shall become necessary under this Agreement,
either of the parties shall have the right to seek provisional remedies prior to
an ultimate resolution by arbitration.
12. NO ADMISSION. This Resignation Agreement and General Release shall
not in any way be construed as an admission by the Company that it has acted
wrongfully with respect to the Employee in connection with his employment by the
Company or the termination thereof. Except with respect to the compensation
payable to Employee under Paragraph 3 hereof, the Company specifically disclaims
any liability to the Employee, and wrongful acts against Employee, on the part
of itself, and the Company Releasees.
13. VOLUNTARY AGREEMENT. Employee represents and agrees that he fully
understands his right to discuss all aspects of this Resignation Agreement and
General Release with his private attorney, that he has availed himself of this
right, that he has carefully read and fully understands all of the provisions of
this Resignation Agreement and General Release, and that he is voluntarily
entering into this Resignation Agreement and General Release.
14. PRESS RELEASE. The termination of the Employee's employment with the
Company shall be announced in a notice to employees of the Company and a press
release in the form annexed to this Agreement as Attachments A and B,
respectively. Except as set forth in Attachment A, or as required by law or
legal process, neither the Company nor the Employee shall issue any press
release, or make any statements to or grant any interview to any press or media
representative relating to the termination of the Employee's employment with the
Company or any matter referred to in this Agreement. Without limitation of the
foregoing, the Employee further agrees that he will not make any statements to
any party that could reasonably be construed as damaging to the business, image
or reputation of the Company, its Affiliates or their respective management.
15. GENERAL. (a) Employee represents and acknowledges that in executing
this Resignation Agreement and General Release, he does not rely and has not
relied upon any representation, inducement agreement or statement not set forth
herein made by any of the
<PAGE>
-7-
Company Releasees or by any of the Company Releasees' agents, representatives,
or attorneys with regard to the subject matter, basis or effect of this
Resignation Agreement and General Release or otherwise.
(b) The provisions of this Resignation Agreement and General Release
are severable, and if any part of it is found to be unenforceable, the other
paragraphs shall remain fully valid and enforceable. This Resignation Agreement
and General Release shall survive the termination of any arrangements contained
herein.
(c) As used herein, the term "Affiliate" shall mean any corporation
or business entity controlling, controlled by or under common control with the
Company, including as an Affiliate, Granges Inc., Phoenix Financial Holdings
Inc. and Zamora Gold Corporation and the affiliates of each of such companies.
(d) The Employee represents that he has not assigned or transferred
or purported to assign or transfer any claim or matter released herein.
(e) This Resignation Agreement and General Release sets forth the
entire agreement between the parties hereto, and fully supersedes any and all
prior agreements or understandings between the parties hereto pertaining to the
subject matter hereof.
(f) The effect, intent and construction of this Agreement shall be
governed by the laws of Colorado, without giving effect to the conflict of laws
rules thereof.
IN WITNESS WHEREOF, the parties have duly executed this Resignation
Agreement and General Release as of the date first set forth above.
/s/ David J. Birkenshaw
------------------------------------
DAVID J. BIRKENSHAW
ATLAS CORPORATION
By: /s/ J.H. Dunnett
------------------------------------
Name: James H. Dunnett
Title: Director
<PAGE>
EXHIBIT A
EMPLOYEE ANNOUNCEMENT
June 21, 1996
TO: All Employees
FROM: Gary E. Davis
Today David Birkenshaw resigned as CEO and Chairman of the Company. As
further discussed in the attached press release which was just released, David
has decided to leave the Company so he can dedicate more time to the pursuit of
other business interests.
Since David's association with Atlas in 1993, the Company has significantly
strengthened its balance sheet and made several notable acquisitions, including
the Granges control block, the Doby George gold property and the Phoenix public
shell through which we intend to pursue development of industrial minerals.
Given the ongoing efforts to restart Gold Bar, pending the signing of an
appropriate gold hedging program, and the resulting commitment of both monies
and manpower to this, it was David's opinion that this new direction was
better left to others for implementation.
I am sure you will join me in thanking David and in wishing him the best in
his new endeavors.
<PAGE>
Exhibit 10.37
STRICTLY PRIVATE & CONFIDENTIAL
-------------------------------
August 16, 1996
SUPPORT LETTER
--------------
TO: ATLAS CORPORATION (the "Shareholder")
Granges Inc. ("Granges") and Da Capo Resources Ltd. ("Da Capo")
propose to enter into an agreement (the "Definitive Agreement") providing for
the amalgamation (the "Amalgamation") of Granges and Da Capo to become effective
under the provisions of the British Columbia Company Act (the "Act").
Under the Amalgamation, each issued and outstanding common share of
Granges will be exchanged for one common share in the capital of the amalgamated
company ("Amalco") and each issued and outstanding common share of Da Capo will
be exchanged for two common shares in the capital of Amalco.
This letter is intended to set out the terms and conditions of the
agreement of Atlas Corporation (the "Shareholder"): (i) to support the
Amalgamation, including any Alternative Transaction (as defined in section 1.3);
(ii) to vote its common shares (the "Shares") in Granges as set out opposite its
name in Schedule "A" in favour of the Amalgamation and any Alternative
Transaction; and (iii) to abide by the restrictions and covenants set forth
herein.
1. Shareholder Commitments to the Amalgamation
1.1 Commitment, Non-Solicitation. Subject to the covenants of Granges
herein, the Shareholder covenants that until the date upon which the certificate
is issued under the Act giving effect to the Amalgamation (the "Effective
Date"):
<PAGE>
(a) except to the extent permitted hereunder, the Shareholder will not take
any steps, directly or indirectly, which may in any way adversely
affect the transactions contemplated hereby and to be contemplated in
the Definitive Agreement;
(b) the Shareholder will not solicit, initiate or encourage submissions,
proposals or offers from any other person, entity or group relating to,
or facilitate or encourage any effort or attempt with respect to, the
acquisition or disposition of all or any substantial part of the issued
or unissued shares of Granges or Da Capo or their respective
subsidiaries, or any arrangement, amalgamation, merger, sale of all or
any substantial part of their respective assets, take-over bid,
reorganization recapitalization, liquidation or winding-up of, or other
business combination or similar transaction involving Granges or Da
Capo or any of their respective subsidiaries and any other party (each
an "Extraordinary Business Combination"). The Shareholder will not
participate in any discussions or negotiations regarding, or (except as
required by law) furnish to any other person, entity or group, any
information with respect to, or otherwise cooperate in any way with, or
assist or participate in, any Extraordinary Business Combination. If
the Shareholder receives any such inquiry, submission, proposal or
offer, the Shareholder will promptly notify Granges and Da Capo in
writing of all relevant details relating thereto; and
(c) the Shareholder will use all reasonable efforts to assist Granges and
Da Capo to complete the Amalgamation or an Alternative Transaction as
the case may be.
1.2 Voting. The Shareholder covenants that it will vote its Shares in
favour of the Amalgamation at each meeting or adjournment or adjournments
thereof (the "Meeting") of holders of shares of Granges to be held to consider
the Amalgamation.
-2-
<PAGE>
1.3 Change In Nature of Transaction. The Shareholder agrees that if
Granges and Da Capo mutually agree that it is necessary or desirable to proceed
with another form of transaction (an "Alternative Transaction") whereby either
Granges or Da Capo or any of their respective affiliates is effectively to
acquire 100% of the Common Shares of the other and merge such entities on
economic terms (including tax treatment) which, in relation to the Shareholder,
are substantially equivalent to or better than those contemplated by the
Agreement, and provided that the consideration paid to shareholders of either
continues to be satisfied in common shares of the other, the Shareholder will
support the completion of such Alternative Transaction in the same manner as the
Amalgamation.
1.4 Meeting of Shareholders. If the Alternative Transaction involves a
meeting or meetings of holders of shares of Granges, the Shareholder agrees to
vote in favour of any matters necessary or ancillary to the completion of the
transactions contemplated by the Alternative Transaction.
1.5 Change of References. In the event of any proposed Alternative
Transaction, the references in this agreement to "Amalgamation" shall be changed
to "Alternative Transaction" and all terms covenants, representations and
warranties of this agreement shall be and shall be deemed to have been made in
the context of the Alternative Transaction. All references to the "Effective
Date" herein shall also refer to the date of closing of the transactions
contemplated by the Alternative Transaction.
1.6 No Dissent. The Shareholder covenants that it will not exercise any
rights of dissent provided under sections 231 and 273 of the Act with respect to
the Amalgamation or any Alternative Transaction.
2. GENERAL
2.1 Personal Warranties. By executing this Agreement, the Shareholder
represents and warrants to Granges and Da Capo that the Shareholder has the sole
right to vote its Shares at the Meeting.
-3-
<PAGE>
2.2 Transfer of Shares. The Shareholder agrees with Granges and Da Capo
that it will not during the term of this Agreement transfer or assign or agree
to transfer or assign any of the Shares without the prior consent of Granges and
Da Capo, which consent shall not be unreasonably withheld if it is sought for
bona fide tax, planning purposes which does not prejudice, directly or
indirectly, Granges or Da Capo; provided however that such consent is not
necessary if the transfer is (i) to a holding company beneficially owned by the
Shareholder; or (ii) a transfer by the Shareholder, which is a holding company,
to a shareholder who controls the holding company, where such holding company or
shareholder of such holding company, as the case may be, executes this
Agreement.
2.3 Acquired Shares. The Shareholder agrees that any shares of Granges or
Da Capo purchased or as to which the Shareholder acquires beneficial ownership
after the execution of this Agreement, shall be subject to the terms of this
Agreement to the same extent as if they constituted Shares. The Shareholder
agrees not to purchase or sell any shares of Granges or Da Capo until the
Amalgamation becomes effective or the Definitive Agreement is terminated.
2.4 Standstill. Granges agrees not to purchase or sell any shares of Da
Capo until the Amalgamation becomes effective or the Definitive Agreement is
terminated. Da Capo agrees not to purchase or sell any Shares of Granges until
the Amalgamation becomes effective or the Definitive Agreement is terminated.
2.5 Covenants of Granges. Granges covenants and agrees with the
Shareholder, and Granges' compliance with such covenants shall be a condition to
the Shareholders' obligations hereunder, as follows:
(a) to use all reasonable efforts to assist the Shareholder in reducing
the number of Shares pledged by the Shareholder as security for the 7%
Exchangeable Debentures due October 25, 2000 issued by the
Shareholder;
(b) to negotiate in good faith an amendment to the Gold Bar joint venture
agreement between Granges and the Shareholder consistent with
discussions
-4-
<PAGE>
between Granges and the Shareholder immediately prior to the signing
of this Agreement;
(c) to file and use its best efforts to cause to become effective not
later than November 30, 1996 all registration statements and other
filings (federal, provincial or state) and shall deliver or cause to
be delivered such certificates and opinions as shall be necessary on
the part of Granges to enable the Shareholder to dispose of its Shares
on The Toronto Stock Exchange and American Stock Exchange or otherwise
in Canada or the United States without restriction of any kind
whatsoever under applicable securities laws and to maintain, in the
case of any registration statement filed with the U.S. Securities and
Exchange Commission, the effectiveness of such registration and other
applicable filings until at least December 31, 2000, with the costs
incurred by Granges in connection with the aforesaid matters to be
borne by Granges;
(d) to cause Mike Richings, if and when requested by the Shareholder, to
resign from the Board of Directors of the Shareholder; and
(e) to reimburse promptly all expenses (other than brokerage commissions
or underwriting fees) incurred by the Shareholder in connection with
this Agreement, the Amalgamation or any Alternative Transaction or any
of sub-paragraphs (a) to (d) above including, without limitation, all
reasonable fees of the Shareholder's counsel in connection with any
such matter.
2.6 Disclosure. No disclosure of this Agreement and any resulting
agreement shall be made by Granges, Da Capo or the Shareholder or any
corporation or other entity which is associated with the Shareholder except as
may be required by applicable law or regulatory authorities. The parties shall
coordinate the making and dissemination of any public announcement relating to
the subject matter of this Agreement.
-5-
<PAGE>
2.7 Time of the Essence. Time shall be of the essence of this Agreement.
2.8 Termination Date. It is intended that the Effective Date shall occur
as soon as is practicable following receipt of the appropriate shareholder,
court and regulatory approvals but not later than December 31, 1996 and (except
with the written consent of the Shareholder) if the Effective Date does not
occur by such date, the Agreement shall be of no further force and effect. The
covenants of Granges in section 2.5 will survive any termination of this
Agreement.
2.9 Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
________________________
If the terms and conditions of this letter are acceptable to you
please indicate your acceptance by dating and signing the same as noted above.
Yours very truly,
GRANGES INC.
By: /s/ Michael B. Richings
-------------------------
DA CAPO RESOURCES LTD.
By: /s/ Ross J. Beaty
-----------------
We irrevocably agree with and accept the terms of this letter.
ATLAS CORPORATION
By: /s/ Jerome C. Cain
-------------------
-6-
<PAGE>
SCHEDULE A
----------
DA CAPO SHAREHOLDERS
SHAREHOLDER NUMBER OF DA CAPO COMMON SHARES
- ----------- -------------------------------
Ross Beaty 800,000
416554 B.C. Ltd. 3,497,308
Kestrel Holdings Ltd. 124,000
GRANGES SHAREHOLDERS
SHAREHOLDER NUMBER OF GRANGES COMMON SHARES
- ----------- -------------------------------
Atlas Corporation 12,714,900
-7-
<PAGE>
Exhibit 10.38
AMENDMENT TO RESIGNATION AGREEMENT AND GENERAL RELEASE
This Amendment to Resignation Agreement and General Release (the
"Amendment") is entered into as of this _____ day of October, 1996 by and
between David J. Birkenshaw ("Birkenshaw") and Atlas Corporation, a corporation
organized under the laws of Delaware ("Atlas").
Recitals
--------
A. Birkenshaw and Atlas are parties to the Resignation Agreement
and General Release made and entered into as of June 21, 1996 (the "Agreement").
B. Certain disputes and issues have arisen between Birkenshaw and
Atlas concerning the interpretation of, and performance under, the Agreement.
C. The parties have agreed to compromise their differences and to
settle their disputes by entering into this Amendment.
Agreement
---------
In consideration of the mutual promises contained herein, the parties
incorporate by reference and agree to the accuracy of the above Recitals and
further agree as follows:
<PAGE>
1. Lump Sum Payment. With regard to Paragraph 3(a) of the Agreement,
Birkenshaw and Atlas agree as follows:
(a) In full satisfaction of Atlas's outstanding obligation as of
the date of this Amendment to make monthly installment payments as contemplated
by Paragraph 3(a)(ii) of the Agreement, the parties agree that Atlas shall pay
the amount of $54,000 to Birkenshaw. This amount shall not be reduced by the
amount of any expenses, advances, loans, or other amounts owed to Atlas and its
Affiliates (as that term is defined in the Agreement) which were known to Atlas
as of October 8, 1996. Atlas specifically waives its rights to deduct or
otherwise collect such amounts from Birkenshaw provided, however, that Atlas
specifically reserves and does not waive its right to collect and seek
reimbursement for any such amounts or expenses of which Atlas becomes aware at
any time after October 8, 1996.
(b) Birkenshaw warrants and represents that, as of October 1, 1996,
he is a Canadian citizen and resident for tax purposes, and that he is no longer
a United States citizen or resident for tax purposes. In reliance upon this
warranty and representation, Atlas agrees that it will not withhold payroll or
other taxes from the amount to be paid to Birkenshaw pursuant to subparagraph
(a). In the event that any taxing authority treats or attempts to treat that
payment as payment of wages subject to withholding and/or income taxes,
Birkenshaw agrees to pay his own taxes, attorneys' fees, penalties and interest
associated with or
<PAGE>
arising from any such treatment or attempted treatment. He further agrees to
indemnify and hold Atlas harmless against any and all amounts (including,
without limitation, taxes, attorneys' fees, penalties and interest), which are
or become due from Birkenshaw or from Atlas to any taxing authority as a result
of this Amendment and the payment provided by the preceding subparagraph.
(c) Atlas's payment shall be made, within 5 business days after the
date of this Amendment, by depositing such amount as Birkenshaw may direct.
2. Jones, Gable & Company Limited. With regard to Jones, Gable &
Company Limited ("Jones, Gable"), Birkenshaw and Atlas agree as follows:
(a) Atlas hereby assigns all of its right, title, interest, and
ownership rights to Jones, Gable Account No. 300202-9 to Birkenshaw. Atlas and
Birkenshaw agree that Paragraph 3 (f) of the Agreement is superseded by the
preceding sentence of this subparagraph. Immediately after the transfer of this
account, Birkenshaw shall apply that account toward partial payment of the
invoice referred to in subparagraph (b).
(b) Birkenshaw agrees to assume all responsibility, and to hold
harmless and indemnify Atlas, with regard to the March 27, 1996 Jones, Gable
invoice to Atlas in the
-3-
<PAGE>
amount of US$24,000.00. Birkenshaw agrees to pay the full amount of that invoice
to Jones, Gable within 5 business days after receipt of the payment specified in
subparagraph (c).
(c) Within 5 business days after the date of this Amendment, Atlas
shall pay Birkenshaw the amount of $6,000 in consideration for his promises set
forth in subparagraphs (a) and (b). This amount is in addition to the amount
referred to in Paragraph 1 of this Amendment.
(d) Concurrently with the execution of this Amendment, Atlas and
Birkenshaw shall execute a document, in the form of that attached hereto as
Exhibit A, advising Jones, Gable of their agreement set forth in subparagraphs
(a) and (b). Atlas shall then deliver the original of that document to Jones,
Gable.
3. Medical Benefits. As of the date of this Amendment, Birkenshaw
hereby waives all right, on behalf of himself and his dependents, to be provided
with coverage under Atlas's medical benefits plan pursuant to Paragraph 3(d) of
the Agreement.
4. Status. Birkenshaw and Atlas agree to delete Paragraph 3(c) of the
Agreement, and they further agree that, as of the effective date of this
Amendment, Birkenshaw is not an Atlas employee in any sense or capacity.
-4-
<PAGE>
5. Effect of Agreement. Except to the extent that it has been
specifically modified or amended by this Amendment, the Agreement remains in
full force and effect, and Birkenshaw and Atlas agree that the Agreement and
Amendment, taken together, constitute the entire agreement between the parties
hereto.
/s/ David J. Birkenshaw
-----------------------
David J. Birkenshaw
ATLAS CORPORATION
By: /s/ Gerald E. Davis
--------------------
Name: Gerald E. Davis
Title: President
-5-
<PAGE>
[LETTERHEAD OF ATLAS CORPORATION]
October 11, 1996
Mr. D. M. Ross
Jones, Gable & Company Limited
110 Yonge Street
Toronto, Ontario M5C 1T6
Canada
Dear Mr. Ross:
Atlas Corporation hereby transfers all of its right, title and interest to
Account No. 300202-9 (Account Name: Atlas Corporation) to David J. Birkenshaw.
David J. Birkenshaw simultaneously assumes all responsibility for payment of the
March 27, 1996 invoice to Atlas Corporation in the amount of US$24,000.00.
ATLAS CORPORATION
By: /s/ Jerome C. Cain
--------------------
Jerome C. Cain
Vice President Finance
Agreed to on October 11, 1996
/s/ David J. Birkenshaw
- ---------------------------
David J. Birkenshaw
Jones, Gable & Company Limited hereby agrees to the assignment of all ownership
rights of Atlas' Account #300202-9 to David J. Birkenshaw and further agrees to
release Atlas Corporation from any and all obligations heretofore due Jones &
Gable.
Agreed to on October 15, 1996
/s/ Jones & Gable Company Limited
- ---------------------------------
Jones & Gable
Title: Clerk
--------------------------
<PAGE>
Exhibit 10.39
RESIGNATION AGREEMENT AND GENERAL RELEASE
THIS RESIGNATION AGREEMENT AND GENERAL RELEASE, made and entered into as of
the 5th day of November, 1996, by and between GERALD E. DAVIS (hereinafter
referred to as the "Employee") and ATLAS CORPORATION, a corporation organized
under the laws of Delaware (hereinafter referred to as the "Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Employee has been employed by the Company as its President,
pursuant to the provisions of an employment agreement between the Company and
the Employee dated June 1, 1995, as the same may have been amended from time to
time (the "Employment Agreement"); and
WHEREAS, the Employee and the Company deem it to be in their mutual
interest that Employee's employment with the Company shall terminate; and
WHEREAS, the Employee and the Company desire to settle fully and finally
all outstanding matters between them, including, but in no way limited to, any
outstanding matters that might arise out of the Employment Agreement, Employee's
employment with the Company and the termination thereof; and
WHEREAS, the Company has agreed to grant the Employee, under the terms
of this Agreement, additional compensation in the form of stock options, which
the Company is not otherwise obligated to grant and is in addition to anything
of value to which the Employee is otherwise entitled;
NOW, THEREFORE, in consideration of the premises and mutual promises herein
contained, it is agreed as follows:
1. TERMINATION DATE. The parties agree that the Employee's employment by
the Company shall terminate effective as of November 5, 1996 (the "Termination
Date"). Employee understands and agrees that, effective as of the Termination
Date, he is no longer authorized to incur any expenses, obligations or
liabilities on behalf of the Company. Employee acknowledges that he has
submitted, and has been paid in full, for all outstanding expenses incurred or
claimed by him through such date.
2. RESIGNATION. The execution of this Agreement shall serve as the
resignation by the Employee as an officer, director and employee of the Company
and of any "Affiliate" of the Company (as that term is defined by Paragraph
16(c) of this Agreement), including, without limitation, its Cornerstone
subsidiary, and as a trustee, fiduciary or administrator of any employee benefit
plan of the Company or any Affiliate, effective as of the Termination Date.
<PAGE>
-2-
The Executive shall not, for a period of three (3) years from the Termination
Date, serve as an officer, director or employee of, or consult for or have a
financial interest in (other than an interest of not more than 2% in any entity
whose shares are publicly traded), any Affiliate of the Company, without the
Company's written consent.
3. TERMS OF SEPARATION. In consideration of the agreements by
Employee provided herein, including without limitation the release by the
Employee in Paragraph 4 hereof, the Company agrees to provide the following
payments and benefits to the Employee:
(a) The Company shall pay to the Employee, in full satisfaction
of any claims by him for salary, bonus, vacation, holiday, pension or profit
sharing benefits, separation or severance pay and any other claim for
compensation or benefits of any kind whatsoever under the Employment Agreement
or otherwise, a total payment of $325,656.96 (less applicable withholding for
payroll and other taxes). Such payment shall be made by the Company by mailing
to the Employee, by first class mail, on the date that this Agreement becomes
irrevocable in accordance with Paragraph 11 hereof, a check in the amount of
$25,656.96 (less applicable withholding for payroll and other taxes) and, on
January 2, 1997, a check in the amount of $300,000 (less applicable withholding
for payroll and other taxes).
(b) (i) At any time prior to the first anniversary of the
Termination Date, the Employee may exercise the options granted to him on May
19, 1995 and August 10, 1995 under the Company's Long Term Incentive Plan (the
"Existing Options") to purchase 100,000 shares of stock of the Company at an
exercise price of $2 per share. The Existing Options shall expire if not
exercised by the first anniversary of the Termination Date. The exercise
procedures and other terms of the Existing Options are as provided by the Long
Term Incentive Plan maintained by the Company.
(ii) At any time prior to the second anniversary of the
Termination Date, the Employee may exercise the additional options granted to
him hereunder by the Company (the "Additional Options") to purchase 100,000
shares of stock of the Company at an exercise price of $1 per share. The
Additional Options shall expire if not exercised by the second anniversary of
the Termination Date. The exercise procedures and other terms of the Additional
Options are as provided by the related Stock Option Agreement between the
Employee and the Company.
(c) It is acknowledged that the Company has made available to the
Employee through the Termination Date coverage under the Company's medical
benefits plan for himself and his dependents under the same terms and
conditions, including required contributions, as apply to active employees.
Thereafter, the Employee may purchase, if eligible, continuation medical
benefits coverage to the extent and for the period provided by federal law;
provided that, with respect to the first six months of such continuation medical
benefits coverage, the Company shall pay the premium which would otherwise be
payable by the Employee.
<PAGE>
-3-
(d) Distributions or payments to Employee shall be made under any tax-
qualified employee benefit plans of the Company in which the Employee
participated prior to the Termination Date, to the extent provided by such
plans.
4. RELEASE BY EMPLOYEE. In consideration for the promises contained
herein, Employee hereby irrevocably and unconditionally releases, acquits and
forever discharges for himself and his heirs, executors, administrators,
successors and assigns, the Company and each of the Company's parent companies,
stockholders, predecessors, successors, assigns, agents, directors, officers,
employees, representatives, attorneys, divisions, subsidiaries, Affiliates (and
stockholders, agents, directors, officers, employees, representatives and
attorneys of such, parent companies, divisions, subsidiaries and Affiliates),
and all persons acting by, through, under or in concert with any of them
(collectively, the "Company Releasees"), or any of them, from any and all
charges, complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including attorneys' fees and costs actually
incurred) of any nature whatsoever, known or unknown, suspected or unsuspected,
including, but not limited to, claims arising directly or indirectly out of the
Employee's employment by the Company, and the termination of the Employee's
employment, claims under the Employment Agreement, claims under the Long Term
Incentive Plan, claims for compensation of any kind, claims for workers'
compensation, claims in equity or law for wrongful discharge, claims arising in
tort, personal injury, defamation, mental anguish, emotional distress, injury to
health and reputation, claims under federal, state or local laws prohibiting
discrimination on account of age, national origin, race, sex, handicap, religion
and similar classifications, claims under the Civil Rights Acts of 1866 and
1871, as amended; The Civil Rights Act of 1964, Title VII, as amended; the Civil
Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as
amended; the Employee Retirement Income Security Act of 1974, as amended; the
Americans with Disabilities Act of 1990; Colorado Rev. Stat. (S) 24-34-
402(1)(a), (S) 24-34-301(1)(1994), and similar claims under the laws of Canada
and any province or political subdivision thereof ("Claim" or "Claims"), which
Employee now has, or ever claimed to have, or could claim against each or any of
the Company Releasees. Employee hereby agrees to forego any right to file any
charges or complaints with any governmental agencies or a lawsuit against the
Company Releasees under any of the laws referenced in this paragraph or with
respect to any matters covered by the release in this paragraph. Notwithstanding
the foregoing, the release by the Employee in this paragraph shall not (i) limit
the right of the Employee to seek to enforce the provisions of this Agreement,
(ii) limit the Employee's right to indemnification under and in accordance with
any indemnification provisions applicable to officers and directors of the
Company under the Company's Certificate of Incorporation or by-laws or under the
corporate law of Delaware, to the extent applicable to the Employee or (iii)
limit the Executive's rights under any insurance policy covering officers or
directors of the Company, to the extent applicable to the Employee.
5. RELEASE BY THE COMPANY. In consideration for the promises
contained herein, the Company hereby irrevocably and unconditionally releases,
acquits and forever discharges the Employee from all charges, complaints,
claims, liabilities, obligations, promises,
<PAGE>
-4-
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including attorneys' fees and costs
actually incurred) of any nature whatsoever, known or unknown, suspected or
unsuspected, arising out of the Employee's employment by the Company through the
Termination Date.
6. CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENTS. (a) Employee
acknowledges that any confidentiality, proprietary rights or nondisclosure
agreement(s) in favor of the Company or the Company Releasees, including without
limitation, those agreements contained in Paragraph 7 of the Employment
Agreement, which he may have entered into in connection with his employment
("Nondisclosure Agreement(s)") with the Company, is understood to survive, and
does survive, any termination of such employment, and accordingly nothing in
this Agreement shall be construed as terminating, limiting or otherwise
affecting any such Nondisclosure Agreement(s) or Employee's obligations
thereunder. Without limiting the generality of the foregoing, no time period set
forth in this Agreement shall be construed as shortening or limiting the term of
any such Nondisclosure Agreement(s), which term shall continue as set forth
therein.
(b) Employee agrees that, except to the extent compelled by law or
legal process, he (i) will not hereafter disclose or communicate confidential
information of the Company, its Affiliates or their customers to any third party
(including as a third party for this purpose, employees and former employees of
the Company, its Affiliates and governmental agencies), (ii) will not make use
of confidential information of the Company, its Affiliates or their customers
for his own behalf, or on behalf of any third party, and (iii) will not
facilitate, assist, persuade or attempt to facilitate, assist or persuade any
third party to commence or prosecute any legal proceedings against the Company,
its Affiliates and their customers and any Company Releasee. In the event
Employee receives, is notified of or is served with a subpoena, summons,
complaint, order, notice, notice of deposition or any other legal process or
documents (collectively, "Legal Process") in connection with any legal or quasi-
legal proceeding, including but not limited to any action at law or equity,
arbitral, administrative proceeding or governmental investigation (collectively,
"Litigation"), relating to the performance of his services as an employee of the
Company or which, if complied with by Employee, might compel or lead to the
disclosure by Employee of confidential information of the Company, its
Affiliates or their customers, the Employee shall promptly, but in no event
later than 2 business days after receipt unless 2 business days is not
reasonable under the circumstances, provide the Company with a copy of the same,
and shall in no event and under no circumstances disclose any such information
prior to the last date specified in the Legal Process for making such
disclosure. If the Company wishes Employee to contest such Legal Process or to
be represented by counsel selected by it, the Company shall as soon as possible,
but in no event later than 1 day prior to the date specified in such Legal
Process for complying with the same, (i) notify Employee in writing that it
wishes Employee to contest such Legal Process and agree to pay Employee the
costs and expenses of attorneys' fees incurred by the Employee in connection
with contesting such Legal Process, not to exceed $5,000, or (ii) notify
Employee that counsel selected by the Company shall, at the sole expense of the
Company, participate in or control the response of the
<PAGE>
-5-
Employee to such Legal Process insofar as such response relates to the
Employee's performance of services for the Company or the possible disclosure of
confidential information of the Company, its Affiliates or their customers.
Employee agrees to take such lawful action in connection with contesting any
such Legal Process as the Company shall reasonably request from time to time.
Employee agrees to promptly notify the Company of any action taken or proposed
to be taken from time to time in connection with any Legal Process or Litigation
which might lead to the disclosure of the confidential information of the
Company, its Affiliates or their customers, and to make available to the Company
any Legal Process of documents related thereto. The Employee further agrees to
cooperate with the Company by providing a reasonable amount of testimony
relating to any Litigation, to the extent requested by the Company.
7. COMPANY PROPERTY AND INFORMATION. Employee has returned or will
immediately return to the Company all Company Information and related reports,
customer lists, trade secrets notes, maps, files, blueprints, drawings,
memoranda, manuals, and records; credit cards, cardkey passes; door and file
keys; automobiles, computer access codes, computer discs, magnetic media or
business information in any form; software; other business information of the
Company Releasees; and other physical or personal property which Employee
received or prepared or helped prepare in connection with his employment; and
Employee has not retained and will not retain any copies, duplicates,
reproductions, or excerpts thereof in any form. The term "Company Information"
as used in this Agreement includes, without limitation, information received
from third parties, other confidential business or financial information, and
other materials and information described in this paragraph.
8. CONFIDENTIALITY OF THIS AGREEMENT. Employee represents and agrees that
he will keep the terms and fact, of this Resignation Agreement and General
Release completely confidential, and that he will not hereafter disclose any
information concerning this Resignation Agreement and General Release to anyone,
except to his immediate family and his legal and tax advisors; provided that
such persons agree to keep such information confidential and not disclose it to
others.
9. CONSIDERATION. Employee acknowledges that the Company is not otherwise
required to enter into this Agreement, that the payments and agreements in this
Agreement, including, without limitation, the grant of the Additional Options as
set forth in Paragraph 3(b)(ii), are in addition to anything of value to which
he is already entitled, that the consideration to be received by him under this
Agreement is adequate, and that such promises and agreements are made by the
Company because of his agreement to provide the releases in Paragraph 4 hereof
and the covenant set forth in the second sentence of Paragraph 2 hereof.
10. RECEIPT OF AGREEMENT. Employee acknowledges receiving this Agreement
on December 10, 1996 and that he has twenty-one (21) days from that date to
consider the terms of this Agreement.
<PAGE>
-6-
11. REVOCABILITY. This Agreement is revocable by Employee for seven (7)
days after it is signed by him. This Agreement shall not be effective or
enforceable until the period for revocation has expired.
12. ARBITRATION. In the event there shall arise any question or dispute
between the parties with respect to the provisions of this Resignation Agreement
and General Release or its interpretation, such dispute shall be settled
exclusively by arbitration in Denver, Colorado in accordance with the commercial
rules then in effect of the American Arbitration Association. Judgment upon an
award rendered by the arbitrator(s) may be entered in any court of competent
jurisdiction, including courts in the state of Colorado. Any award so rendered
shall be final and binding upon the parties hereto. All costs and expenses of
the arbitrator(s) and all costs and expenses of experts, attorneys, witnesses
and other persons retained by the parties shall be borne by them respectively.
In the event that injunctive relief shall become necessary under this Agreement,
either of the parties shall have the right to seek provisional remedies prior to
an ultimate resolution by arbitration.
13. NO ADMISSION. This Resignation Agreement and General Release shall
not in any way be construed as an admission by the Company that it has acted
wrongfully with respect to the Employee in connection with his employment by the
Company or the termination thereof. Except with respect to the compensation
payable to Employee under Paragraph 3 hereof, the Company specifically disclaims
any liability to the Employee, and wrongful acts against Employee, on the part
of itself, and the Company Releasees.
14. VOLUNTARY AGREEMENT. Employee represents and agrees that he fully
understands his right to discuss all aspects of this Resignation Agreement and
General Release with his private attorney, that he has availed himself of this
right, that he has carefully read and fully understands all of the provisions of
this Resignation Agreement and General Release, and that he is voluntarily
entering into this Resignation Agreement and General Release.
15. PRESS RELEASE. (a) The Employee shall not issue any press release, or
make any statements to or grant any interview to any press or media
representative relating to the termination of the Employee's employment with the
Company or any matter referred to in this Agreement. Without limitation of the
foregoing, the Employee further agrees that he will not make any statements to
any party that could reasonably be construed as damaging to the business, image
or reputation of the Company, its Affiliates or their respective management.
(b) The Company agrees that it shall not issue any press release, or
make any statements to or grant any interview to any press or media
representative relating to the termination of the Employee's employment with the
Company or any matter referred to in this Agreement without prior notice to and
consultation with the Employee. Without limitation of the foregoing, the Company
further agrees that it will not make any statements to any party that could
reasonably be construed as damaging to the reputation of the Employee.
<PAGE>
-7-
16. GENERAL. (a) Employee represents and acknowledges that in executing
this Resignation Agreement and General Release, he does not rely and has not
relied upon any representation, inducement agreement or statement not set forth
herein made by any of the Company Releasees or by any of the Company Releasees'
agents, representatives, or attorneys with regard to the subject matter, basis
or effect of this Resignation Agreement and General Release or otherwise.
(b) The provisions of this Resignation Agreement and General Release
are severable, and if any part of it is found to be unenforceable, the other
paragraphs shall remain fully valid and enforceable. This Resignation Agreement
and General Release shall survive the termination of any arrangements contained
herein.
(c) As used herein, the term "Affiliate" shall mean any corporation
or business entity controlling, controlled by or under common control with the
Company. Inc.
(d) The Employee represents that he has not assigned or transferred
or purported to assign or transfer any claim or matter released herein.
(e) This Resignation Agreement and General Release sets forth the
entire agreement between the parties hereto, and fully supersedes any and all
prior agreements or understandings between the parties hereto pertaining to the
subject matter hereof.
(f) The effect, intent and construction of this Agreement shall be
governed by the laws of Colorado, without giving effect to the conflict of laws
rules thereof.
IN WITNESS WHEREOF, the parties have duly executed this Resignation
Agreement and General Release as of the date first set forth above.
/s/ Gerald E. Davis 12/10/96
-------------------------------
Gerald E. Davis
ATLAS CORPORATION
By: /s/ Douglas R. Cook 12/12/96
-----------------------------
Douglas R. Cook
Chairman of the Board
<PAGE>
Exhibit 10.40
[LETTERHEAD OF ATLAS CORPORATION APPEARS HERE]
AMENDMENT TO RESIGNATION AGREEMENT AND GENERAL RELEASE
THIS AMENDMENT TO THE RESIGNATION AGREEMENT AND GENERAL RELEASE, made and
entered into as of the 14th day of January, 1997, by and between GERALD E. DAVIS
(the "Employee") and ATLAS CORPORATION, a corporation organized under the laws
of Delaware (the "Company") (the "Amendment").
WITNESSETH
----------
WHEREAS, a Resignation Agreement and General Release was entered into
between the Company and the Employee as of November 5, 1997 (the "Agreement");
WHEREAS, Section 3(a) of the Agreement provided for the payment by the
Company to the Employee of $300,000 in a lump sum payment on January 2, 1997;
WHEREAS, because of cash flow problems, the Company advised the Employee
that it could not pay such amount at this time; and
WHEREAS, the Company and the Employee have agreed that it would be in their
mutual best interest to amend the Agreement to set forth a new payment schedule,
whereby the Employee would receive a portion of the amount due immediately, and
the remainder in a series of payments through June 13, 1997.
NOW, THEREFORE, in consideration of the premises and mutual promises
contained in this Amendment, the parties agree as follows:
1. The provision of Section 3(a) of the Agreement which currently reads
"...on January 2, 1997, a check in the amount of $300,000..." is hereby amended
to read as follows: "... on the date of this Amendment a check in the amount of
$50,000, and on each of February 13, 1997, March 13, 1997, April 14, 1997, May
13, 1997 and June 13, 1997 a check in the amount of $50,000. In addition, the
final payment to be made on June 13, 1997 shall include interest at the rate of
1% per month on the unpaid balance from time to time outstanding from January 2,
1997 through the date of such final payment.
<PAGE>
AMENDMENT TO RESIGNATION AGREEMENT AND GENERAL RELEASE
Page 2 of 2
2. Apart from this Amendment; the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have duly executed this Amendment to the
Agreement as of the date first set forth above.
ATLAS CORPORATION
/s/ Gerald E. Davis /s/ Jerome C. Cain
- ------------------- ------------------
Gerald E. Davis Jerome C. Cain
<PAGE>
Exhibit 10.41
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of December 1, 1996
between ATLAS CORPORATION, a Delaware corporation ("Employer"), and Gregg B.
Shafter of Employer ("Executive").
Employer and Executive agree as follows:
1. EMPLOYMENT. In accordance with the terms and conditions of this
Agreement, Employer agrees to employ Executive as an officer of Employer
commencing June 1, 1995, and continuing until that employment is terminated (a)
by either Employer or Executive or (b) by reason of Executive's normal
retirement in accordance with Employer's retirement programs applicable to
Executive at the time of his retirement ("Executive's Retirement"). Executive
accepts that employment and agrees to perform the duties associated therewith.
Subject to the terms and conditions of this Agreement, Executive's employment by
Employer may be terminated at any time by either Executive or Employer by 10
days prior written notice to that effect.
2. DUTIES. As long as Executive is employed by Employer hereunder,
Executive shall be subject to the direction of and be responsible to the
President of Employer or his designee with respect to the performance of his
duties hereunder, shall report to the President of Employer in that connection
at such times and in such detail as the President of Employer may require and
shall devote his full business time, attention, skill and efforts to the
business and affairs of Employer.
3. SALARY. As compensation for the services to be furnished by Executive
to Employer hereunder, as long as Executive is employed by Employer hereunder,
Employer shall pay Executive a salary at a minimum annual rate of $85,000
payable in accordance with Employer's standard payroll policies applicable to
officers.
4. BASIC EMPLOYEE BENEFIT PLANS AND PROGRAMS. As long as Executive is
employed by employer hereunder, Executive shall be entitled to participate in
all regular and key employee benefit plans and programs which are or may be made
available by Employer for its officers.
5. EXPENSES. Employer shall provide for the payment of, or reimbursement
of Executive for, all travel and other out-of-pocket expenses reasonably
incurred by Executive in the performance of his duties hereunder.
<PAGE>
6. TERMINATION.
6.1 Certain Definitions. As used in this Section 6:
(a) "Board" means the Board of Directors of Employer.
(b) "Cause" means, and is limited to, (i) the conviction of
Executive for a felony or misdemeanor (other than minor motor vehicle and
similar offenses) under the laws of the United States or any state thereof; (ii)
any material breach by Executive of this Agreement or the failure of Executive
to comply with any lawful directive of the Chairman of the Board or to follow
Employer policies; (iii) dishonesty, gross negligence or malfeasance by
Executive in the performance of his duties hereunder (other than the mere
failure to achieve financial results); (iv) Executives habitual insobriety or
substance abuse; (v) unlawful appropriation by Executive of a corporate
opportunity of Employer or any of its affiliates; or (vi) the Executives taking
or omission to take any other action or actions in the performance of his duties
hereunder or the making of any statement which, in the good faith determination
of the Board, is disruptive or damaging to the business, reputation, operations,
prospects or business relations of Employer or its affiliates of which achieves
general notoriety with respect to conduct or alleged conduct by Executive which
is illegal, immoral or scandalous.
(c) "Change of Control Event" means any one of the following:
(i) Continuing Directors no longer constitute at least two thirds of the
Directors constituting the Board; (ii) any person or group (as defined in Rule
13d-5 under the Securities Exchange Act of 1934), together with its affiliates,
other than Mackenzie Financial Corporation, M.I.M. Holdings Limited or H. R.
Shipes (in each case, together with its affiliates), becomes the beneficial
owner, directly or indirectly, of 15% or more of Employer's then outstanding
Common Stock or 15% or more of the voting power of Employer's then outstanding
securities entitled generally to vote for the election of Directors, provided
that the foregoing circumstances shall not constitute a Change of Control Event
if such beneficial owner is Employer, any subsidiary of Employer, any employee
benefit plan or employee stock plan of Employer or of any subsidiary of
Employer; and provided further that, notwithstanding the foregoing, a Change of
Control Event shall be deemed to occur if Mackenzie Financial Corporation, and
its affiliates, M.I.M. Holdings Limited, and its affiliates, or H. R. Shipes and
his affiliates, shall acquire 25% or more of the Employer's then outstanding
Common Stock or the voting power of the Employer's then outstanding securities
entitled generally to vote for the election of Directors; (iii) the approval by
Employer's stockholders of the merger or consolidation of Employer with any
other corporation, the sale of substantially all of Employer's assets or the
liquidation or dissolution of Employer, unless, in the case of a merger or
consolidation, the Continuing Directors in office immediately prior to such
merger or consolidation constitute at least two thirds of the directors
constituting the board of directors of the surviving corporation of such merger
or consolidation and any parent (as such term is defined in Rule 12b-2 under the
Securities Exchange Act of 1934) of such corporation; or (iv) at least two
thirds of the Continuing Directors in office immediately prior to any other
action taken or proposed to be taken by Employer's stockholders or by the Board
determines that such action constitutes, or that such
2
<PAGE>
proposed action, if taken, would constitute, a change of control of Employer
and such action is taken.
(d) "Continuing Director" means any person who (i) is a Director
on the date of this Agreement; (ii) was designated before such person's initial
election as a Director as a Continuing Director by a majority of the Continuing
Directors; or (iii) has been a Director for at least two years after the
occurrence of one or more Change of Control Events.
(e) "Director" means a member of the Board.
(f) "Disability" means, as applied to Executive, that (i) he has
been so incapacitated by bodily injury or disease as to be unable to perform the
duties contemplated to be performed by him hereunder, (ii) the incapacity shall
have continued for a period of three consecutive months and (iii) the incapacity
will, in the opinion of a qualified physician acceptable to Employer, be
permanent and continuous for a period of at least one year.
(g) "Good Reason" means (i) without Executive's written consent
(A) (1) the assignment to Executive of any duties and responsibilities, or any
limitation of Executive's duties and responsibilities, if such assignment or
limitation is materially inconsistent with Executive's positions, duties,
responsibilities and status as an executive of Employer or (2) any removal of
Executive from, or any failure to reelect Executive to, any of Executive's
positions with Employer except for Cause or as a result of the death or
Disability of Executive, and (B) the continuance thereof for a period of 20 days
after written notice thereof to Employer from Executive; (ii) any failure by
Employer to pay, or any reduction by Employer of, the salary payable to
Executive under Section 3 of this Agreement; (iii) any failure by Employer (A)
to continue to provide Executive with the opportunity to participate, on terms
no less favorable than those in effect immediately prior to a Change of Control
Event, in any benefit plan or program in which Executive was participating
immediately prior to the Change of Control Event, or their equivalent, or (B) to
provide Executive with all other fringe benefits, or their equivalent, from time
to time in effect for the benefit of any of Employer's salaried employees; (iv)
the failure by Employer to obtain the specific assumption of this Agreement by a
successor or assign of Employer or by any person acquiring substantially all of
Employer's assets; or (v) any material breach by Employer of any provision of
this Agreement.
6.2 Compensation of Executive in the Event of Termination of
Executive's Employment Hereunder.
(a) In the event of Executive's Disability, Executive's
employment by Employer hereunder may be terminated by Employer upon written
notice from Employer to Executive which shall specify a date not less than 30
days from the date of such notice as the date on which such termination shall
become effective. If Executive's employment by Employer hereunder is terminated
because of Executive's Disability or death, Executive, or his heirs, executors
or administrators if termination is because of Executive's death, shall be
entitled to
3
<PAGE>
receive the salary payable to Executive under Section 3 until the date on which
the termination occurs.
(b) (i) Executive shall be entitled to compensation as specified
in Section 6.2(b)(ii) and (iii) if (A) Employer terminates Executive's
employment hereunder without Cause either prior to 3 months before a Change of
Control Event or more than two years after the last Change of Control Event, or
(B) Executive voluntarily terminates his employment hereunder with Good Reason
either prior to 3 months before a Change of Control Event or more than two years
after the last Change of Control Event. (ii) Prior to the 30th day following the
date of such termination Employer shall pay Executive (A) an amount equal to
one-twelfth of such Executive's annual rate of base salary that is in effect on
the date of termination multiplied by the number of full years of employment by
the Company, provided that in no event shall such amount be less than one-half
of the amount of Executive's annual base salary in effect on the date of
termination, and (B) all amounts which had accrued but were not paid prior to
such termination for personal services actually rendered before the termination.
(iii) As soon as practicable following the date of such termination, or at such
later date as Executive may validly elect, Employer shall pay Executive all
amounts payable under then existing employee benefit plans and programs.
Notwithstanding the foregoing, if the sum of all of the payments to Executive
whether under this Agreement or otherwise (but excluding any payments which need
not be included in determining if a "parachute payment" has been made within the
meaning of Internal Revenue Code (the "Code") (S) 280G(b)(2)) exceeds the
product of multiplying the Base Amount times 2.99, then such payments hereunder
shall be reduced by the amount of such excess. For purposes of this Agreement,
the term Base Amount is defined in Code (S) 280G(b)(3) and the Treasury
Regulations promulgated thereunder, calculated as of the date required under the
Code.
(c) (i) Executive shall be entitled to compensation as specified
in Section 6.2(c)(ii) and (iii) if (A) Employer terminates Executive's
employment hereunder without Cause either (1) within 3 months prior to a Change
of Control Event or (2) upon or after a Change of Control Event but within two
years after the date of that Change of Control Event, or (B) Executive
voluntarily terminates his employment hereunder with Good Reason either (1)
within 3 months prior to a Change of Control Event or (2) upon or after a Change
of Control Event but within two years after the date of that Change of Control
Event. (ii) Prior to the 30th day following the date of such termination
Employer shall pay Executive (A) the amount which equals the Executive's annual
rate of base salary that is in effect on the date of termination, and (B) all
amounts which had accrued but were not paid prior to such termination for
personal services actually rendered before the termination. (iii) As soon as
practicable following the date of such termination, or at such later date as
Executive may validly elect, Employer shall pay Executive all amounts payable
under then existing employee benefit plans and programs. Notwithstanding the
foregoing, if the sum of all of the payments to Executive whether under this
Agreement or otherwise (but excluding any payments which need not be included in
determining if a "parachute payment" has been made within the meaning of Code
(S) 280G(b)(2)) exceeds the Base Amount times 2.99, then such payments hereunder
shall be reduced by the amount of such excess.
4
<PAGE>
(d) If Executive's employment hereunder is terminated by
Employer or by Executive under any circumstances other than as set forth in
Section 6.2(a), 6.2(b), or 6.2(c), all payments required by this Agreement shall
cease and the termination shall relieve Employer of its obligations to make any
further payments under this Agreement except payments under the employee benefit
plans and programs and payments of amounts which had accrued but were not yet
paid prior to the termination.
7. CONFIDENTIAL INFORMATION AND TRADE SECRETS. Executive acknowledges
that all information possessed by him relating to activities of Employer that is
of a secret or confidential nature, including without limitation financial
information, exploration, mining and milling information, lists of customers,
technical and production know-how, developments, inventions, processes and
administrative procedures, is the property of Employer, and as long as Executive
is employed by Employer hereunder, and for a period of two years thereafter,
Executive shall not use any such information for the benefit of anyone other
than Employer or disclose any such information to others except in the course of
Employer's business.
8. PAYMENT TO ESTATE OR BENEFICIARY. If Executive dies before any
payments required to be paid by Employer to Executive hereunder have been paid,
Employer shall make all such payments to the beneficiary or beneficiaries
designated by Executive in a written notice previously delivered by Executive or
Employer or, in the absence of such a notice, to Executive's estate.
9. ARBITRATION. Any and all disputes arising under or relating to this
Agreement shall be subject to mandatory binding arbitration in Denver, Colorado,
before the American Arbitration Association in accordance with its Commercial
Arbitration Rules. Discovery shall be allowed but subject to the limits and
procedures set forth in Rule 26.1 of the Colorado Rules of Civil Procedure. The
prevailing party in any such arbitration proceeding shall be entitled to an
award of his or its reasonable costs and attorney fees.
10. BINDING EFFECT; SUCCESSORS, ASSIGNMENT. Subject to the provisions of
this Section 10, this Agreement shall be binding upon, inure to the benefit of
and be enforceable by Employer and Executive and their respective heirs, legal
representatives, successors and assigns. If Employer shall be merged into or
consolidated with another entity, the provisions of this Agreement shall be
binding upon and inure to the benefit of the entity surviving such merger or
resulting from such consolidation.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to contracts made
and to be performed therein.
5
<PAGE>
12. NOTICE. Any notice required to be given hereunder shall be in writing
and delivered by certified mail, return receipt requested, addressed:
To Employer at:
Republic Plaza
370 Seventeenth Street
Suite 3050
Denver, Colorado 80202
To Executive at:
Republic Plaza
370 Seventeenth Street
Suite 3050
Denver, Colorado 80202
or in either case to such other address as may be specified in a written notice
given as provided above.
13. ENTIRE AGREEMENT; AMENDMENT. This Agreement represents the entire
agreement of Employer and Executive with respect to the subject matter hereof
and shall supersede any and all previous agreements, arrangements and
understandings between Employer and Executive in that regard. This Agreement may
be amended only by the written agreement of Employer and Executive.
ATLAS CORPORATION
By: /s/ Mario Caron
-----------------------
Chief Executive Officer
EXECUTIVE
By: /s/ Gregg B. Shafter
-----------------------
Gregg B. Shafter
6
<PAGE>
[LOGO OF GRANGES INC.] Exhibit 10.42
SUITE 3000
370 SEVENTEENTH STREET
DENVER, CO. U.S.A. 80202
TELEPHONE: (303) 629-2450
FAX: (303) 629-2499
January 6, 1997
PERSONAL DELIVERY
- -----------------
Mr. Gregg B. Shafter
Vice President
Atlas Corporation
370 Seventeenth Street, Suite 3050
Denver, Colorado 80202
Re: Withdrawal from Mining Venture Agreement
Gold Bar Property, Eureka County, Nevada
Dear Gregg:
Subject to the terms and conditions set forth herein, this letter is
written notice of Granges (U.S.), Inc.'s ("Granges") election to withdraw (the
"Election") from that certain Mining Venture Agreement between Granges and Atlas
Corporation, Atlas Precious Metals Inc. and Atlas Gold Mining Inc.
(collectively, "Atlas") dated as of September 29, 1995 (the "Agreement"). This
Election by Granges is made in accordance with Section 12.1.B. of the Agreement,
which sets forth that Granges' "sole liabilities and responsibilities ...
resulting from or surviving such termination, shall be those set forth in
Sections 5.1(C)(2) and (C)(6), Section 5.2 and Section 5.8." For your
information and without having effect to interpretation of the Agreement, the
preceding recitals pertain to the following issues: *
Section 5.1(C)(2):
- -----------------
Granges required to reclaim areas of the Properties disturbed by Granges'
activities, to the extent disturbed by its activities, and shall indemnify Atlas
through completion of reclamation work in accordance with applicable
Environmental Laws for disturbance to the Properties caused by Granges"
Operations under the Agreement.
Section 5.1(C)(6):
- -----------------
After termination of the Agreement, Granges shall have the right of reasonable
access to the Properties in order to complete reclamation of the Properties
disturbed by Granges' Operations.
- ------------------
/*/Unless defined otherwise in this letter, all capitalized terms shall
have the meanings and definitions provided for them in the Agreement.
<PAGE>
Mr. Gregg B. Shafter
January 6, 1997
Page 2
Section 5.2:
- -----------
Granges shall remain responsible for obligations or liabilities to third parties
resulting from its Operations prior to the date of delivery of this letter.
Further, Granges shall reconvey to Atlas its interst in the Assets by a
quitclaim deed, free of all liens, claims or other encumbrances arising by,
through or under Grages. Upon delivery of the quitclaim deed, Granges is
relieved of liability or obligation to complete its Initial Contribution.
Section 5.8:
- -----------
This Section is not applicable since Granges has made this Election prior to
July 31 of 1997.
In consideration of Granges' withdrawal from the Agreement, Atlas hereby
agrees to pay to Granges the sum of $450,000, to be paid as follows: $100,000
due not later than five (5) business days after Atlas receives approval by its
Board of Directors for execution of this letter (however in no event beyond
January 10, 1997) with $350,000 to be paid on May 16, 1997. Simple interest in
the amount of eight percent (8%) will be paid on May 16, 1997, calculated on
$350,000 for 150 days. In the event Atlas sells or otherwise disposes of the
Properties prior to May 16, 1997, the $350,000 plus accrued interest shall be
paid to Granges within five (5) days of such a sale of disposition, with
interest prorated to the date of such payment.
Granges hereby represents to Atlas that Granges' Operations have been
conducted in compliance with the Agreement. Upon Granges' completion of its
reclamation obligations under the Agreement as set forth above, as additional
consideration for the withdrawal of Granges, Atlas hereby agrees to indemnify
and save harmless Granges and its Affiliates from and against all claims,
demands, actions, damages, costs, losses, expenses (including but not limited to
reasonable attorneys' fees) and liabilities which may arise with respect to any
of the Assets or Operations under the Agreement, including but not limited to
those arising under any Environmental Laws in connection with Granges'
Operations under the Agreement, or pertaining to the facilities for processing
of ores at the Atlas Mill Complex, to include the tailings pond associated
therewith; provided, however, that Granges shall indemnify and hold Atlas
harmless from and against any claims, demands, actions, damages, costs, losses,
expenses (including but not limited to reasonable attorneys' fees) and
liabilities that Atlas may incur to third parties as a result of any condition
or event that
<PAGE>
Mr. Gregg B. Shafter
January 6, 1997
Page 3
constitutes a breach by Granges of its representation in the first sentence of
this paragraph, or as a result of Granges' failure to complete its reclamation
obligations under the Agreement. Atlas' right to bring any action against
Granges based upon this indemnification shall terminate on midnight, Mountain
Standard Time, December 31, 1998.
The parties understand and agree that, after this notice, Granges' sole
obligations with respect to the Assets shall be: (i) the indemnification of
Atlas, as set forth in the paragraph above; and (ii) filing and recording of the
Deed, as set forth in the paragraph below.
Upon receipt from you of a fully-executed original of this letter and the
$100,000 payment described above, Granges will immediately proceed to file with
the Nevada State Office of the Bureau of Land Management and to record in Eureka
County, Nevada, with BLM filing fee and county recordation fee to be paid by
Granges, an executed and notarized Deed in the form attached hereto and
incorporated herein by reference, with a proper Exhibit A attached thereto.
Thank you for your cooperation.
Sincerely,
GRANGES (U.S.), INC.
By: /s/ Michael B. Richings
------------------------
Michael B. Richings
President
Agreed to and accepted on this 10th day of January, 1997 by:
/s/ Gregg B. Shafter
- --------------------
Gregg B. Shafter
Vice President
Atlas Corporation
<PAGE>
EXHIBIT A
DEED
----
THIS DEED ("Deed"), dated as of January 8, 1997, is between:
"GRANTOR":
GRANGES (U.S.), INC.
a Nevada corporation
350 South Rock Blvd., #E
Reno, NV 89502
and
"GRANTEE":
ATLAS CORPORATION
a Delaware corporation
370 Seventeenth Street, Suite 3050
Denver, CO 80202
FOR TEN DOLLARS ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged by Grantee, Grantor
conveys and quitclaims to Grantee the "Properties" situated in Eureka County,
Nevada, that are more particularly described in Exhibit A, appended hereto and
by this reference incorporated herein, together with: (i) all of Grantor's
right, title and interest in and to all mineral deposits, mineral rights,
extralateral rights and subsurface rights therein, thereunder and appurtenant
thereto; and (ii) with respect to the Properties described in Parts 2-4 of
Exhibit A, all of Grantor's right, title and interest in and to all buildings,
facilities, improvements, surface rights, water, water rights, mineral
stockpiles, mineral dumps, roads, easements, rights of ingress and egress and
all other appurtenances and hereditaments thereon, therein, thereunder or
appurtenant thereto.
<PAGE>
Grantor warrants that there are no persons or entities lawfully claiming
any interest in the Properties by, through, or under Grantor, subject to the
paramount title of the United States of America.
This Deed is executed and delivered pursuant to and in accordance with that
certain Mining Venture Agreement dated as of September 29, 1995 ("Venture
Agreement") by and between Grantor and Grantee, a Memorandum of which is
recorded in Book 291 at Page 235 of the Official Records of Eureka County,
Nevada, as amended by that certain letter agreement, dated December 27, 1996, in
order to evidence the termination of, and pursuant to and in accordance with,
that Venture Agreement.
IN WITNESS WHEREOF, Grantor has executed this Deed effective as of the date
first above written.
"GRANTOR"
GRANGES (U.S.), INC.
By: /s/ Michael B. Richings
-------------------------
Michael B. Richings
President
STATE OF COLORADO }
} ss.
COUNTY OF DENVER }
Before me personally appeared Michael B. Richings on this 8th day of
January, 1997, and first being duly sworn, executed the above DEED, as President
of GRANGES (U.S.), INC., a Nevada corporation, and acknowledged to me that he
executed the same in that capacity.
Witness my hand and official seal.
/s/ Lori K. Crosby
-----------------------------
(Seal) NOTARY PUBLIC
My commission expires: 3\3\98
<PAGE>
EXHIBIT 21
ATLAS CORPORATION
LIST OF SUBSIDIARIES OF THE REGISTRANT
Atlas Precious Metals Inc. (Incorporated in Nevada)
Atlas Gold Mining Inc. (Incorporated in Nevada), a subsidiary of Atlas Precious
Metals, Inc.
Cornerstone Industrial Minerals Corporation (organized under the laws of
Ontario, Canada)
Arisur Inc. (organized under the laws of Grand Cayman).
Suramco Metals, Inc. (organized under the laws of Nevada).
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the addition of the financial statement schedule, listed in the
accompanying index to the financial statements covered by our report dated
February 28, 1997, except for note 1, as to which the date is April 14, 1997,
included herein.
We also consent to the incorporation by reference in Post Effective Amendment
Number 19 to Registration Statement Number 2-8439 on Form S-3 dated November 10,
1983, Post Effective Amendment Number 1 to Registration Statement Number 33-
18316 on Form S-8 dated December 14, 1987, Registration Statement Number 33-
87992 on Form S-3 dated January 13, 1995 and Post Effective Amendment Number 1
to Registration Statement Number 33-65165 on Form S-3 dated February 2, 1996 and
the Related Prospectuses of our report on the financial statements and schedule
included in this Annual Report on Form 10-K of Atlas Corporation for the year
ended December 31, 1996.
/s/ Ernst & Young LLP
Denver, Colorado
April 14, 1997
