<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________
FORM 10-Q
__________
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period ended June 30, 1999
or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________.
Commission file number 0-21708
GOLDEN STAR RESOURCES LTD.
(Exact Name of Registrant as Specified in Its Charter)
Canada 98-0101955
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1660 Lincoln Street,
Suite 3000, Denver, Colorado 80264
(Address of Principal Executive Office) (Zip Code)
(303) 830-9000
(Registrant's telephone number, including area code)
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 ___
---
Number of Common Shares outstanding as of August 12, 1999: 29,638,231.
<PAGE>
GOLDEN STAR RESOURCES LTD.
INDEX
<TABLE>
<S> <C>
Part I - Financial Information
Item 1. Financial Statements................................ 1
Item 2. Management's Discussion and Analysis of Financial
Condition, Results of Operations and Recent
Developments........................................ 13
Part II - Other Information
Item 1. Legal Proceedings................................... 17
Item 4. Submission of Matters to a Vote of the Security
Holders............................................. 17
Item 6. Exhibits and Reports on Form 8-K.................... 18
Signatures.............................................................. 19
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this report constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of the company to be materially different from any
future results, performance, or achievements express or implied by such forward-
looking statements. Such factors include, among others, gold and diamond
exploration and development costs and results, fluctuation of gold prices,
foreign operations and foreign government regulation, competition, uninsured
risks, the establishment and the recovery of reserves, capitalization and
commercial viability and requirements for obtaining permits and licenses.
i
<PAGE>
Part I - Financial Information
ITEM 1. FINANCIAL STATEMENTS
--------------------
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED BALANCE SHEETS
(Stated in thousands of United States Dollars except share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
As of June 30, As of December 31,
ASSETS 1999 1998
-------------- ------------------
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 942 $ 7,350
Accounts receivable 394 511
Inventories 163 181
Other assets 88 174
--------- --------
Total Current Assets 1,587 8,216
RESTRICTED CASH 2,200 -
DEFERRED EXPLORATION 57,420 58,203
INVESTMENT IN OMAI GOLD MINES LIMITED 904 1,337
DEFERRED ACQUISITION COSTS 1,085 -
FIXED ASSETS 481 685
OTHER ASSETS 93 156
--------- --------
Total Assets $ 63,770 $ 68,597
========= ========
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 989 $ 921
Accrued wages and payroll taxes 631 779
--------- --------
Total Current Liabilities $ 1,620 $ 1,700
LONG-TERM DEBT 1,993 2,948
OTHER LIABILITIES 32 56
--------- --------
Total Liabilities 3,645 4,704
--------- --------
MINORITY INTEREST 5,200 5,422
--------- --------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY
SHARE CAPITAL 155,872 159,163
(Common shares, without par value, unlimited shares
authorized. Shares issued and outstanding: June 30, 1999 -
29,638,231; December 31, 1998 - 30,292,249)
Stock option loans - (4,012)
DEFICIT (100,947) (96,680)
--------- --------
Total Shareholders' Equity 54,925 58,471
--------- --------
Total Liabilities and Shareholders' Equity $ 63,770 $ 68,597
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
1
<PAGE>
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of United States Dollars except per share amounts)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------------------------- -----------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE
Precious metals sales $ - $ - $ - $ -
Interest and other 56 156 222 417
----------- ----------- ------------- ------------
56 156 222 417
COSTS AND EXPENSES
Depreciation 28 61 82 120
General and administrative 1,164 1,927 1,862 3,456
Exploration expense 5 83 52 241
Abandonment and impairment of mineral properties 3,263 - 3,263 -
Loss (gain) on sale of assets (8) - (8) -
Interest and bank charges 6 4 12 15
Foreign exchange loss (gain) (9) 22 (31) (82)
----------- ----------- ------------- ------------
4,449 2,097 5,232 3,750
LOSS BEFORE THE UNDERNOTED (4,393) (1,941) (5,010) (3,333)
Equity in earnings of Omai Gold Mines Limited - 170 - 170
Omai Preferred Share Redemptions 297 268 522 829
----------- ----------- ------------- ------------
Net loss before minority interest (4,096) (1,503) (4,488) (2,334)
Minority interest loss 103 260 222 469
----------- ----------- ------------- ------------
NET LOSS $ (3,993) $ (1,243) $ (4,266) $ (1,865)
=========== =========== ============= ============
BASIC AND DILUTED LOSS PER SHARE $ (0.13) $ (0.04) $ (0.14) $ (0.06)
=========== =========== ============= ============
Weighted Average Shares Outstanding
(Millions of shares) 30.0 30.0 30.0 30.0
=========== =========== ============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
2
<PAGE>
GOLDEN STAR RESOURCES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of United States Dollars)
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
---------------- ----------------
<S> <C> <C>
Operating Activities:
Net loss $(4,266) $(1,865)
Reconciliation of net loss to net cash used in operations:
Depreciation 82 120
Premium on Omai Preferred Share Redemptions (522) (829)
Abandonment and write-down of mineral properties 3,263 -
Equity in earnings of Omai Gold Mines Limited - (170)
Gain on sale of assets (70) -
Minority interest loss (222) (469)
Changes in non-cash operating working capital 141 (1,155)
------- -------
Net Cash Used in Operating Activities (1,594) (3,430)
------- -------
Investing Activities:
Expenditures on mineral properties, net of joint venture
recoveries (2,480) (6,050)
Depreciation charged to projects 103 184
Equipment purchases (5) (22)
Proceeds from sale of equipment 94 -
Increase in deferred acquisition costs (1,085) -
Omai Preferred Share Redemptions 956 1,517
Other assets 62 38
------- -------
Net Cash Used in Investing Activities (2,355) (4,333)
------- -------
Financing Activities:
Restricted cash (2,200) 250
Loss on settlement of stock option loans 62 -
Repayment of stock option loans 638 -
Issuance of share capital 22 923
Repayment of long term debt (956) -
Issuance of share capital under options - 205
Change in other liabilities (25) 39
------- -------
Net Cash Provided by Financing Activities (2,459) 1,417
------- -------
Decrease in cash (6,408) (6,346)
Cash and short-term investments, beginning of period 7,350 17,399
------- -------
Cash and short-term investments, end of period $ 942 $11,053
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
3
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------
(Unaudited)
(All tabular amounts in thousands of United States Dollars)
The statements of cash flows include the following non-cash items:
During the six months ended June 30, 1999, 679,012 shares were canceled that
were previously issued for options granted under the Company's Stock Option
Plan. The related stock option loans, principally to one former officer,
amounting to $3.3 million and secured only by the shares were also canceled.
These financial statements and notes thereto should be read in conjunction with
the financial statements and related notes included in the annual report on Form
10-K for Golden Star Resources Ltd. (the "Company" or "Golden Star") for the
fiscal year ended December 31, 1998, on file with the Securities and Exchange
Commission and the Ontario Securities Commission (hereinafter referred to as
"the Company's 1998 10-K"). All amounts are in United States dollars unless
otherwise stated.
The unaudited financial statements as of June 30, 1999, and for the six months
ended June 30, 1999 and 1998, reflect all adjustments, consisting solely of
normal recurring items, which are necessary for a fair presentation of financial
position, results of operations, and cash flows on a basis consistent with that
of the prior audited consolidated financial statements.
(1) INVENTORIES
-----------
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Materials and Supplies $ 163 $ 181
------- -------
$ 163 $ 181
======= =======
</TABLE>
(2) FIXED ASSETS
------------
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Machinery & Equipment $ 2,951 $ 2,851
Accumulated Depreciation (2,470) (2,166)
------- -------
$ 481 $ 685
======= =======
</TABLE>
4
<PAGE>
(3) DEFERRED EXPLORATION
--------------------
<TABLE>
<CAPTION>
Deferred
Exploration Property Deferred Exploration
Expenditures Capitalized Capitalized Joint Impairments & Expenditures
as at Exploration Acquisition Venture Abandonments as at
Dec. 31, 1998 Expenditures Expenditures Recoveries June 30, 1999
==========================================================================================
<S> <C> <C> <C> <C> <C> <C>
GUYANA
Eagle Mountain $ 1,364 $ - $ - $ - $ - $ 1,364
Quartz Hill 1,347 - - - - 1,347
Five Stars Gold (Makapa) 819 - - - - 819
Other 57 332 - - - 389
------------------------------------------------------------------------------------------
Sub-total 3,587 332 - - - 3,919
------------------------------------------------------------------------------------------
SURINAME
Benzdorp / Lawa 3,352 - - - - 3,352
Gross Rosebel 14,543 343 - (213) - 14,673
Headley's Right of Exploration 313 1 - - - 314
Thunder Mountain 456 1 - - - 457
Saramacca 1,973 2 - (6) - 1,969
Sara Kreek 588 - - - - 588
Tempati Reconnaissance 347 1 - - - 348
Tapanahony Reconnaissance 234 - - - - 234
Kleine Saramacca 107 - - - - 107
Lawa Antino 2,109 23 - - - 2,132
Ulemari Reconnaissance 237 - - - - 237
Other 283 108 - - - 391
------------------------------------------------------------------------------------------
Sub-total 24,542 479 - (219) - 24,802
------------------------------------------------------------------------------------------
FRENCH GUIANA
(Guyanor Ressources S.A.)
Dorlin 2,363 506 - (251) - 2,618
St-Elie 2,377 170 - - - 2,547
Yaou 7,486 261 - (119) - 7,628
Paul Isnard / Eau Blanche 4,650 476 - - - 5,126
Paul Isnard Alluvials 1,987 - - - - 1,987
Other - 23 - - - 23
Dachine 1,481 137 - - - 1,618
------------------------------------------------------------------------------------------
Sub-total 20,344 1,573 - (370) - 21,547
------------------------------------------------------------------------------------------
AFRICA (Pan African Resources Corporation)
Ivory Coast / Comoe 4,304 147 - - - 4,451
Kenya / Ndori 2,565 48 - - - 2,613
------------------------------------------------------------------------------------------
Sub-total 6,869 195 - - - 7,064
LATIN AMERICA (Southern Star Resources
Ltd.)
Brazil / Abacaxis 2,498 400 - - (2,898) -
Brazil / Other 275 90 - - (365) -
------------------------------------------------------------------------------------------
Sub-total 2,773 490 - - (3,263) -
------------------------------------------------------------------------------------------
OTHER 88 - - - - 88
------------------------------------------------------------------------------------------
TOTAL $58,203 $3,069 $ - $ (589) $ (3,263) $ 57,420
==========================================================================================
</TABLE>
The recoverability of amounts shown for deferred exploration is dependent upon
the sale or discovery of economically recoverable reserves, the ability of the
Company to obtain necessary financing to complete the development, and upon
future profitable production or proceeds from the disposition thereof. The
amounts deferred represent costs to be charged to operations in the future and
do not necessarily reflect the present or future values of the properties.
5
<PAGE>
(4) INVESTMENT IN OMAI GOLD MINES LIMITED
-------------------------------------
Details regarding the Company's investment in the common and preferred share
equity of Omai Gold Mines Ltd. ("OGML") and its share of equity losses not
recorded for the year ended December 31, 1998 and the six months ended June 30,
1999, are as follows:
<TABLE>
<CAPTION>
Common Shares Preferred Shares
------------- ----------------
<S> <C> <C>
December 31, 1998 $ - $1,337
---- ------
Less: Preferred Share Redemption - (956)
Add: Premium on Preferred Share Redemption - 523
---- ------
June 30, 1999 $ $ 904
==== ======
</TABLE>
The Company's share of Accumulated Losses at:
<TABLE>
<S> <C>
December 31, 1998 $(628)
=====
June 30, 1999 $(751)
=====
</TABLE>
The approximate $1.0 million of preferred shares redeemed during the six months
ended June 30, 1999 were used to reduce the outstanding loan balance to OGML to
$2.0 million.
(5) CHANGES TO SHARE CAPITAL
------------------------
During the six months ended June 30, 1999, 24,994 shares were issued under the
Company's Employees' Stock Bonus Plan. Also during the six months ended June 30,
1999, 679,012 shares were canceled that were previously issued for options
granted under the Company's Stock Option Plan. The related stock option loans,
principally to one former officer, amounting to $3.3 million and secured only by
the shares were also canceled. During the quarter, the Company negotiated a
repayment of one former officer's stock option loan in the amount of $0.6
million which was paid in full in May 1999. [See also Note 9]
(6) ACQUISITION OF BOGOSO GOLD LIMITED
----------------------------------
On June 1, 1999, the Company and Anvil Mining NL ("Anvil") reached agreement
with a consortium of banks represented by International Financie Corportation
and Deutsche Investitions und Entwicklungsgesellschaft mbH of Germany pursuant
to which they agreed to purchase 90% of the shares and 100% of the bank debt of
Bogoso Gold Limited ("BGL") for a total purchase price of $17 million, $12
million of which was to be payable on closing and $5 million on the first
anniversary of the commencement of commercial mining as part of a new sulphide
project. Following the completion of the purchase, the Company and Anvil will
hold equity interests of 70% and 20%, respectively, in BGL with the Government
of Ghana retaining its 10% equity interest. In addition to acquiring 90% of the
shares in BGL, the purchase includes the acquisition of existing bank debt of
approximately $34 million owed by BGL to the consortium of banks selling BGL.
The Company and Anvil will acquire 77.8% and 22.2% of this debt, respectively,
and as a result, BGL will have no external bank debt other than the debt
acquired by the Company and Anvil. The acquisition of the shares and debt of BGL
is subject to approvals of the Government and Bank of Ghana.
6
<PAGE>
A standby credit facility for up to $12 million has been arranged by the Company
to effect, if required, the purchase. As part of the agreement with the bank
vendors, the Company has arranged a $2.0 million letter of credit in favor of
the vendors, which is non-refundable if the Company fails to meet its
obligations under the purchase agreement. In connection with the credit
facility, the Company issued 1.5 million common share purchase warrants to the
lender, each of which entitle it to purchase one of our common shares at an
exercise price of $0.7063. The lender's right to exercise these warrants will
expire on June 9, 2002. We have also agreed that we will issue a further number
of warrants, at the time any amounts under the credit facility are advanced,
equal to 3.0 million multiplied by the ratio of (a) the amount of the credit
facility divided by (b) $12 million, less 1.5 million. Accordingly, if we borrow
less than $6.0 million, we will not issue any additional warrants to the lender.
[See also Note 9]
(7) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA AND
------------------------------------------------------
THE UNITED STATES
-----------------
The financial statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada which differ in certain
respects from those principles that the Company would have followed had its
financial statements been prepared in accordance with GAAP in the United States.
Differences which materially affect these consolidated financial statements are:
(a) For United States GAAP ("U.S. GAAP"), exploration and general and
administrative costs related to projects are normally charged to expense as
incurred. As such, the majority of costs charged to abandonment and
impairment of mineral properties under Canadian GAAP would have been
charged to earnings in prior periods under U.S. GAAP. Property acquisition
costs are capitalized for both Canadian and U.S. GAAP.
(b) For periods prior to May 15, 1992 (the "Amalgamation"), the Company's
reporting currency was the Canadian dollar. Subsequent to the Company's
Amalgamation and relocation of its corporate headquarters to the United
States, the reporting currency was changed to the U.S. dollar. As such, for
the financial statements for periods prior to May 15, 1992, the Company's
financial statements were translated into U.S. dollars using a translation
of convenience. U.S. GAAP requires translation in accordance with the
current rate method.
(c) Under U.S. GAAP, the investment in Omai Gold Mines Limited would have been
written off in prior years and, therefore, the entire Omai Preferred Share
Redemption would have been included in income. Under Canadian GAAP, a
portion of the Omai Preferred Share Redemption is included in income with
the remainder reducing the carrying value of the Company's preferred stock
investment.
(d) Canadian GAAP allows classification of investments which are capable of
reasonably prompt liquidation as current assets. As such, all of the
Company's investments are included under the caption "short-term
investments" on the balance sheet under current assets. U.S. GAAP requires
classification as current or long term assets based upon the anticipated
maturity date of such instruments. Under U.S. GAAP, cash (and cash
equivalents) includes bank deposits, money market instruments, and
commercial paper with original maturities of three months or less. Canadian
GAAP permits the inclusion of temporary investments with maturities greater
than 90 days in cash.
7
<PAGE>
(e) The Company eliminated its accumulated deficit through the Amalgamation
(defined as a quasi-reorganization under U.S. GAAP) effective May 15, 1992.
Under U.S. GAAP, the cumulative deficit was greater than the deficit under
Canadian GAAP due to the write-off of certain deferred exploration costs
described in (a) above.
(f) Under U.S. GAAP, available-for-sale securities are recorded at fair value
and unrealized gains and losses are recorded as a separate component of
shareholders' equity. Fair value is determined by quoted market prices.
(The Company has available-for-sale securities as of June 30, 1999.)
(g) Under U.S. GAAP, items such as foreign exchange gains and losses are
required to be shown separately in derivation of Comprehensive Income.
8
<PAGE>
Had the Company followed U.S. GAAP, certain items on the statements of
operations and balance sheets would have been reported as follows:
<TABLE>
<CAPTION>
For the six months ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Net loss under Canadian GAAP $(4,266) $(1,865)
Net effect of the deferred exploration expenditure on loss
for the period (a) 429 (5,850)
Effect of Omai preferred share redemption (c) 433 688
Foreign exchange loss (gain) (g) (31) (82)
-------- --------
Loss under U.S. GAAP before minority interest (3,435) (7,109)
Adjustment to minority interest 515 361
-------- --------
Loss under the U.S. GAAP (2,920) (6,748)
Other comprehensive income foreign exchange loss 31 82
-------- --------
Comprehensive income (g) (2,889) (6,666)
======== ========
Loss per share under U.S. GAAP $ (0.10) $ (0.22)
======== ========
</TABLE>
The effect of the differences in accounting under Canadian GAAP and U.S. GAAP on
the balance sheets and statements of cash flows are as follows:
Balance Sheet
<TABLE>
<CAPTION>
As of June 30, 1999 As of December 31, 1998
------------------- -----------------------
Canadian GAAP U.S. GAAP Canadian GAAP U.S. GAAP
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Cash (d) $ 942 $ 763 $ 7,350 $ 3,145
Short-term investments (d) - - - 1,590
Other current assets 645 645 866 866
Restricted cash 2,200 2,200 - -
Deferred exploration (a) 57,420 17,830 58,203 18,183
Investment in Omai Gold 904 - 1,337 -
Mines Limited (c)
Deferred acquisition costs 1,085 1,085 - -
Long-term investments (d) (f) - 179 - 2,615
Other assets 574 574 841 841
--------- --------- -------- ---------
Total Assets $ 63,770 $ 23,276 $ 68,597 $ 27,240
========= ========= ======== =========
Liabilities 3,645 3,645 4,704 4,704
Minority interest (a) 5,200 4,898 5,422 5,637
Share capital, net of stock option 155,872 153,083 155,151 152,360
loans (e)
Cumulative translation - 1,595 - 1,595
adjustments (b)
Accumulated comprehensive - (562) - (593)
Income (g)
Deficit (a) (c) (100,947) (139,383) (96,680) (136,463)
--------- --------- -------- ---------
Total Liabilities and $ 63,770 $ 23,276 $ 68,597 $ 27,240
Shareholders' Equity ========= ========= ======== =========
</TABLE>
9
<PAGE>
Statements of Cash Flows
<TABLE>
<CAPTION>
Operating Investing Financing
Net cash provided by (used in): Activities Activities Activities
---------- ---------- ----------
Canadian U.S. Canadian U.S. Canadian U.S.
GAAP GAAP GAAP GAAP GAAP GAAP
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
For the six months ended
June 30, 1999 $ (1,594) $(3,120) $(2,355) $ 3,196 $(2,459) $(2,459)
For the six months ended
June 30, 1998 $ (3,430) $(7,534) $(4,333) $(2,680) $ 1,417 $ 1,378
</TABLE>
The statements of cash flows reflect the impact of the previously discussed
adjustments (a) (c) (d) (e) (g) and the following non-cash items:
During the six months ended June 30, 1999, 679,012 shares were canceled that
were previously issued for options granted under the Company's Stock Option
Plan. The related stock option loans, principally to one former officer,
amounting to $3.3 million and secured only by the shares were also canceled.
Operations by Geographic Area under U.S. GAAP
<TABLE>
<CAPTION>
Operating Revenues Net Loss Identifiable Assets
For the six months ended June
30, 1999
<S> <C> <C> <C>
South America $ 9 $ (2,654) $17,863
Africa - (195) 1,015
Corporate 213 (71) 4,398
---- ------- -------
$222 $(2,920) $23,276
==== ======= =======
For the six months ended June
30, 1998
South America $ - $(3,901) $21,653
Africa 3 (2,299) 1,189
Corporate 414 (548) 11,884
---- ------- -------
$417 $(6,748) $34,726
==== ======= =======
</TABLE>
(8) COMMITMENTS AND CONTINGENCIES
-----------------------------
Potential Litigation
On December 17, 1998, Societe des Mines de St. Elie ("SMSE") notified Texmine
of its intention to terminate the Dieu-Merci option agreement. After several
attempts to substantially reduce or eliminate the minimum commitments and
property payments specified in the agreement failed, SMSE decided to withdraw
from the option agreement. Following the termination of the option agreement,
the owner of the Dieu-Merci project demanded from SMSE the sum of FF 2,000,0000
(approximately $350,000), which according to Texmine is owed to it in spite of
the termination of the option agreement. SMSE does not believe that such sum is
owed. A judgment was received on June 30, 1999 by a judge of the Tribunal of
Grande Instance of Cayenne. The judge concluded that he did not have the
authority to hear this case. There can be no assurance that SMSE will not appeal
this decision or bring this litigation to arbitration. SMSE intends to defend
itself vigorously against any other legal action that Texmine may take to obtain
payment.
10
<PAGE>
Letters of Credit and Guarantee
On April 30, 1999, the Company restricted and transferred $2.2 million as a
deposit for the $2.0 million letter of credit issued in connection with the
acquisition of BGL. This letter of credit was arranged in favor of the vendors
of BGL and is non-refundable if the Company fails to meet its obligations under
the purchase agreement. This letter of credit will be used to satisfy a portion
of the acquisition cost.
(9) SUBSEQUENT EVENTS
-----------------
On August 5, 1999, the Company announced results of a recent, independently
conducted scoping study for the Gross Rosebel project in Suriname, 50% held by
the Company and 50% by Cambior Inc. ("Cambior"). The study is part of the
Company's ongoing efforts to evaluate possible development options for the
Company's most advanced assets under the current, low gold price environment.
The Gross Rosebel scoping study was evaluated under a $250/ounce gold price
scenario. Following favorable results from metallurgical studies that indicated
excellent heap leach recovery characteristics for Gross Rosebel soft rock ores,
the existing block model prepared by Cambior was updated to reflect a $200 and
$250 gold price and appropriate heap leach operating costs and cutoff grades.
The resulting estimate of mineralized material (equivalent to measured and
indicated resources under Canadian and Australian definitions) calculated at a
$200 gold price is approximately 9.8 million tonnes at a grade of 2.4 g Au/t,
including 10% mining dilution, with a stripping ratio of 1.4 tonnes of waste per
tonne of ore. Using a $250 gold price, the resulting estimate of mineralized
material is approximately 26.8 million tonnes at a grade of 1.7g Au/t, including
10% mining dilution, with a stripping ratio of 1.6 tonnes of waste per tonne of
ore. In both cases, over 97% of the revised mineralized material represents
soft rock material.
The scoping study indicates the potential for commercial development of Gross
Rosebel as a smaller, relatively high grade heap leach operation, even at
current gold prices. However, it is a preliminary study with more work required
before a final feasibility study can be commenced, including further
agglomeration test work, load permeability tests and further heap design, water
balance, and solution management studies. Cambior, manager and operator of
Gross Rosebel under the existing agreement with the Company, has been briefed on
the study and its results. Discussions are underway between the Company and
Cambior regarding the best approach to advance the project in light of the
scoping study. Grassalco, the Surinamese state mining company, has an option to
acquire a 20% interest in Gross Rosebel and will be briefed on the study and any
further evaluation work.
11
<PAGE>
On August 10, 1999, the Company and Anvil announced that they had renegotiated
the terms of their offer with the consortium of banks, as discussed in Note 6.
Subject to the approval of the Board of Directors of the sellers, the sellers
agreed to reduce the initial up-front payment of $12 million to $6.5 million. As
originally agreed, Golden Star and Anvil must still pay $5 million to the
sellers upon the first anniversary of the commencement of commercial mining of
sulphide ore at Bogoso. In consideration of the reduction of the initial
payment, Golden Star and Anvil will make future additional payments to the
sellers, related to changes in the gold price and the potential acquisition of
ore from Ghana outside of the Bogoso concessions for processing at the Bogoso
mill. These additional payments are capped at $10 million and are expected to be
funded from Bogoso's cash flow. The gold price related payments are due as to
50% one year after closing and 50% at the earlier of production ceasing or the
second anniversary after closing. These payments are equal to $183,333
multiplied by the amount, if any, that the average daily gold price (on the
London Bullion Market) over the period from closing to the payment dates exceeds
$255 per ounce. For instance, if the gold price averages $285 per ounce over the
next two years, Golden Star and Anvil will pay the sellers an extra $5.5 million
as a purchase price adjustment. The payment made on the first anniversary of the
acquisition will be non refundable and credited against any payment due on the
second anniversary. The resource acquisition linked payment will be triggered if
minable reserves equivalent to 50,000 ounces of gold are acquired elsewhere in
Ghana for processing at the Bogoso mill, Golden Star and Anvil will make an
additional payment to the sellers on the second anniversary of $2.0 million,
irrespective of the gold price, but subject to the $10 million cap. These
amounts will be amortized over the remaining life of the mine.
The Company will still be required to pay the sellers an additional $5.0 million
on the first anniversary of commencement of sulphide production at BGL. Due to
the uncertain nature of this contingent consideration, no liability has been
recorded as part of the purchase price allocation. This payment, if made, will
be amortized over the remaining life of the mine.
On August 17, 1999, the Company announced that it had entered into an agency
agreement in connection with a United States offering, on a best efforts basis
of up to $8,487,500 comprised of: (a) up to $5,250,000 of 7.5% Subordinated
Convertible Debentures due 2004 (the "Debentures") at par, together with 200
common share purchase warrants for each $1000 face value of Debentures issued
(each warrant, a "Debenture Warrant", to purchase one common share of the
Company for a four-year term after the closing of the offering at $1.50 during
the first two year of the term and at $1.75 during the balance of the term after
the closing of the offering; and (b) up to 6,475,000 units at $0.50 per unit,
each unit consisting of one Common Share and one-half of a common share purchase
warrant (each whole warrant, a "Unit Warrant", to purchase one additional common
share at $0.70 for a period of 18 months).
Assuming the completion of the total offering, and without giving effect to the
exercise of the warrants, the Company expects to receive net proceeds, after
deducting
12
<PAGE>
approximately $1.3 million for agency fees and offering expenses, of
approximately $7.2 million, $4.5 million of which will be used to fund the
purchase price payment of an interest in BGL and the balance of the net proceeds
of the offering will be used for expenses of the offering and working capital
and general corporate purposes. The closing of the offering is scheduled to take
place on or about August 19, 1999. The offering is subject to regulatory
approvals. Pursuant to the agency agreement, 50% of the gross proceeds of the
offering will be held in escrow until the closing of the acquisition of BGL. The
Company currently anticipates that the acquisition of BGL will close in
September. There can be no assurance that the offering and the acquisition of
BGL will close.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS OF
-----------------------------------------------------------------------
OPERATIONS AND RECENT DEVELOPMENTS
----------------------------------
The following discussion should be read in conjunction with the accompanying
consolidated financial statements and related notes. The financial statements
have been prepared in accordance with Canadian generally accepted accounting
principles ("GAAP"). For U.S. GAAP reconciliation see attached financial
statement Note 7.
Cautionary Statement for the Purposes of the Reform Act
The following contains certain forward-looking statements within the meaning of
the Reform Act. Actual results, performance or achievements of the Company
could differ materially from those projected in the forward-looking statements
due to a number of factors, including those set forth under "Risk Factors" in
the Company's Annual Report on Form 10-K. Readers are cautioned not to put
undue reliance on forward-looking statements. The Company disclaims any intent
or obligation to update publicly these forward-looking statements, whether as a
result of new information, future events or otherwise.
Results of Operations
Six Months Ended June 30, 1999 Compared to the Six Months Ended June 30, 1998
- -----------------------------------------------------------------------------
During the second quarter of 1999, the Company recognized a net loss of $4.0
million or $0.13 per share as compared to a net loss of $1.2 million or $0.04
per share for the second quarter of 1998. During the second quarter of 1999,
the Company recorded $3.3 million in property abandonment charges and write-
downs compared to nil million for the similar period in 1998.
For the six months ended June 30, 1999, the Company recognized a net loss of
$4.3 million or $0.14 per share, compared to a loss of $1.9 million or $0.06 per
share for the similar period in 1998. The increased loss in the 1999 period is
primarily attributable to increased property write-downs in 1999 ($3.3 million)
and ongoing cost reductions coupled with lower revenues in 1999.
Total revenues of $0.1 million during the second quarter of 1999 (as compared to
$0.2 million for the second quarter of 1998) decreased due to reduced cash
balances.
General and administrative expenditures decreased to $1.2 million during the
second quarter of 1999 as compared to $1.9 million during the second quarter of
1998. For the six months ended June 30, 1999, general and administrative
expenditures decreased to $1.9 million as compared to $3.5 million for the
similar period last year. These decreases were due to the Company's ongoing
cost reduction efforts.
13
<PAGE>
Omai Gold Mines Limited ("OGML"), in which the Company maintains a 30% common
share equity interest, reported net loss of $0.4 million for the second quarter
of 1999 and $0.1 million for the six months ended June 30, 1999, compared to a
net income of $2.0 million in the second quarter of 1998 and a net income of
$5.9 million for the six months ended June 30, 1998. During the six months
ended June 30, 1999, OGML produced 152,559 ounces of gold, compared to 163,363
ounces during the first six months of 1998. The Company recorded Class "I"
preferred share redemptions from OGML of $1.0 million for the six months ended
June 30, 1999, as compared to $1.5 million in the same period in 1998.
Liquidity and Capital Resources
As of June 30, 1999, the Company held cash and short term investments of $0.9
million ($11.1 million as of June 30, 1998) and working capital of approximately
$0.1 million ($11.2 million as of June 30, 1998). The decrease in cash
resources and working capital resulted from the expenditures on the Company's
exploration and acquisition activities during the second half of 1998 and the
first six months of 1999. The decrease is also attributed to a transfer of $2.2
million to restricted cash due to the pending BGL acquisition.
The Company must rely primarily on the capital markets to fund its
operations and exploration activities until it can achieve sustained
positive cash flow from mining operations. The Company's ability to
continue as a going concern is dependent upon its ability to raise
additional capital to fund its exploration and development efforts. The
current market for gold shares is weak and equity capital is difficult to
obtain. The Company anticipates that additional capital will be required in
1999 in order to fund operations and exploration activities. The Company is
exploring various transactions which would enable it to have sufficient
capital to continue its operations. Various transactions being considered
include mergers with other companies, acquisitions, and the issuance of new
equity and debt securities. Other sources for such capital may include, among
other things, the establishment of joint ventures and sale of property
interests.
If the current depressed market for gold prices and gold shares continues
into 1999, it may be necessary for the Company to modify its 1999 budget to
achieve further reductions in activity and general and administrative
expenses. Capital is allocated to those projects which in the opinion of
Management, offer the greatest potential to generate additional reserves and
mineralized material. A significant portion of the exploration and
development expenditures for the Company and its subsidiaries represent
discretionary spending and can be adjusted to reflect, among other things,
results of exploration and development activities and the Company's capital
resources. In 1999, the Company is required to make property rental
payments and minimum exploration expenditures totaling $0.6 million in order
to maintain its current property interests per existing mineral agreements.
The Company is negotiating the reduction or deferral of these payments where
possible.
Whether and to what extent alternative financing options are completed by
the Company or its subsidiaries will depend on a number of factors
including, among others, the successful acquisition of additional properties
or projects, the price of gold and Management's assessment of the capital
markets. The low gold price adversely affects our ability to obtain
financing and therefore our abilities to develop our current portfolio of
properties. We cannot assure you that additional funding will be available
in 1999. This situation affects our flexibility to invest funds in
exploration and development. We may, in the future, be unable to continue
our exploration and development programs and fulfill our obligations under
our agreements with our partners or under or permits and licenses. Although
we have been successful in the past in obtaining financing though
partnership arrangements and sale of equity securities, we cannot assure you
that we will be able to obtain adequate financing on acceptable terms. If
we are unable to obtain such additional financing, we may need to delay or
indefinitely postpone further exploration and development of our properties.
As a result we may lose our interest in some of our properties and may be
obliged to sell some of our properties.
The Company anticipates that its current cash balances, together with
proceeds from the redemption of preferred shares of OGML, proceeds from the
exercise of warrants, financing provided by joint venture partners, the sale
of property interests or assets and the sale of common shares and debt
securities including the completion of a proposed sale of convertible
debentures and equity units (refer to Note 9) combined with operating cash
flows from the Bogoso acquisition will be sufficient to fund anticipated
operating and exploration expenditures for 1999 and 2000.
Cash used in investing activities of $2.4 million for the six months ended June
30, 1999 (as compared to $4.3 million for the six months ended June 30, 1998)
decreased primarily due to $1.1 million spent for deferred acquisition costs
offset by the reduction in expenditures on exploration projects.
Cash used in financing activities of $2.5 million for the six months ended June
30, 1999 (as compared to $1.4 million provided by financing activities for the
six months ended June 30, 1998). The increase results from the repayment
received on stock option loans, the $1.0 million repayment of long term debt,
the increase in restricted cash of the $2.2 million non-refundable deposit
relating to the pending BGL acquisition and a decrease in the proceeds from
issuance of share capital of $0.9 million. Share capital increased by
approximately $0.1 million for the six months ended June 30, 1999, compared with
an increase of $1.1 million during the six months ended June 30, 1998, due to
the bonus shares issued.
Golden Star continues to closely monitor exploration progress at each of its
prioritized projects to ensure work programs and capital are allocated to those
projects that offer the greatest potential to generate additional reserves and
resources. Comprehensive cost reduction efforts continue at all operating
divisions and at the corporate headquarters to conserve cash resources. Most of
the exploration and development spending for the Company and its subsidiaries
represent discretionary spending and can be adjusted to reflect, among other
things, results of exploration and development activities, the successful
acquisition of additional properties or projects, the price of gold and
Management's assessment of capital markets.
The Company has been and is subject to a further listing review after the filing
of the third quarter 10-Q by the American Stock Exchange and there can be no
assurance that continued listing will be granted.
14
<PAGE>
Africa (Pan African Resources Corporation)
- ------------------------------------------
Total exploration and acquisition expenditures in Africa for the second quarter
of 1999 amounted to $0.1 million (compared to $2.1 million during the second
quarter of 1998) and $0.2 million for the first six months of 1999 (compared to
$2.4 million for the first six months of 1998). Expenditures in 1999 primarily
reflect exploration activities in the Ivory Coast and Kenya.
French Guiana (Guyanor Ressources S.A.)
- ---------------------------------------
Total exploration expenditures by Guyanor for the second quarter amounted to
$0.8 million, offset by joint venture recoveries of $0.2 million (compared to
expenditures of $0.9 million and joint venture recoveries of $0.1 million in the
second quarter of 1998). Activities in French Guiana focused primarily on
further work at Yaou and Dorlin, St-Elie and Paul Isnard. General and
administrative expenditures for Guyanor which were not reimbursed by joint
venture partners amounted to $0.4 million for the quarter ended June 30, 1999
(compared to $0.6 million in the second quarter of 1998).
Guyana
- ------
Exploration and acquisition expenditures in the second quarter of 1999 in Guyana
amounted to $0.3 million (compared to $0.1 million during the second quarter of
1998). Activities in Guyana focused primarily on the restructuring of the
Guyana exploration activities and the recovery of cash from property bonds on
projects abandoned.
Suriname
- --------
Exploration expenditures in Suriname during the second quarter of 1999 focused
primarily on the Gross Rosebel project. Total spending in Suriname in the period
of $0.5 million was offset by joint venture recoveries of $0.2 million (as
compared to expenditures of $0.4 million and recoveries of $0.1 million during
the second quarter of 1998). The reduction is primarily a result of the
placement of the Gross Rosebel project on care and maintenance pending improved
gold prices and resolution of certain development issues. The new scoping study
results announced August 5, 1999, may result in renewed pre-development
activities at Gross Rosebel. [See Note 9]
Southern Star Resources Ltd.
- ----------------------------
Exploration expenditures for the second quarter of 1999 of $0.2 million as
compared to $0.8 during the second quarter of 1998 by Southern Star decreased
due to a reduction in exploration activities. The Company recorded $3.3 million
in property write-downs during the quarter and six months ended June 30, 1999
compared with no write-downs during the similar period of 1998. The write-downs
were a result of poor results of the exploration and the Company's continuing
reductions in expenditures based on priorities.
Year 2000 Compliance
The Company recognizes the importance of ensuring that its business operations
are not disrupted as a result of Year 2000 problems. The Company has prepared a
three step plan to identify and resolve Year 2000 issues. First, the Company
has compiled an inventory of its Information Technology ("IT") systems, and non-
IT systems (which are those which typically include "embedded" technology such
as
15
<PAGE>
microprocessors or chips) and is performing a survey of the state of Year 2000
readiness of third party suppliers, venders, joint partners and OGML. Second,
the Company has prioritized the IT and non-IT systems and vendor responses.
Third, the Company has prepared a Year 2000 testing plan to assess the ability
of IT and non-IT systems to handle the Year 2000. Those systems that are not
Year 2000 compliant are being modified or replaced to ensure that they are Year
2000 compliant. These steps are in various stages of completion. The Company
anticipates that all steps will be completed by September 30, 1999. The Company
estimates the internal and external cost of Year 2000 compliance to be
approximately $0.1 million. To date the Company has spent approximately 50% of
this estimated goal.
The Company believes that the greatest risk presented by the Year 2000 problem
is from third parties such as suppliers and financial institutions who may not
have adequately addressed the problem. A failure of any such third party's
computer or other applicable systems in sufficient magnitude could materially
and adversely impact the Company. The Company is not presently able to quantify
this risk but believes that it is minimal based upon the survey responses
received to date from third party suppliers, vendors, joint venture partners and
OGML.
The Company is undertaking a contingency planning effort to identify
alternatives that could be used to mitigate the effects of Year 2000 related
failures. The Company maintains printed back-up of all material transactions
which could facilitate the continuation of business operations and remediation
of data loss in the event of a system failure.
16
<PAGE>
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
-----------------
There are currently no material pending legal proceedings to which the Company
or any of its subsidiaries is a party or to which any of its properties or those
of any of its subsidiaries is subject. The Company and its subsidiaries are,
however, engaged in routine litigation incidental to their business. No
material legal proceedings involving the Company are pending, or, to the
knowledge of the Company, contemplated, by any governmental authority. The
Company is not aware of any material events of noncompliance with environmental
laws and regulations. The exact nature of environmental control problems, if
any, which the Company may encounter in the future cannot be predicted,
primarily because of the changing character of environmental regulations that
may be enacted within foreign jurisdictions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
At the Annual and Special General Meetings of the Shareholders of the Company
held on June 15, 1999, shareholders were asked to (i) elect six directors,
Messrs. James E. Askew, David K. Fagin, Ernest Mercier, Roger Morton, John W.
Sabine and Robert R. Stone (ii) approve the re-appointment of auditor, (iii) to
approve amendments to the Company's Shareholder Rights Agreement (iv) to approve
amendments to stock options granted to the directors and senior officers of the
Company, and (v) to approve in advance the issuance of common shares.
(i) Votes cast in the election of directors were as follows:
<TABLE>
<CAPTION>
Number of Shares
----------------
For Withheld
--- --------
<S> <C> <C>
James E. Askew 8,006,851 1,320
David K. Fagin 8,006,851 1,320
Ernest Mercier 8,006,851 1,320
Roger D. Morton 8,006,851 1,320
John W. Sabine 8,006,851 1,320
Robert R. Stone 8,006,851 1,320
</TABLE>
(ii) Votes cast for the re-appointment of PricewaterhouseCoopers, Chartered
Accountants as auditor of the Company until the next annual general meeting of
shareholders:
<TABLE>
<CAPTION>
For Against Withheld
- --- ------- --------
<S> <C> <C>
7,999,306 -0- 8,865
</TABLE>
(iii) Votes cast on a proposal to amend the Shareholder Rights Agreement dated
April 24, 1999 to extend its application beyond the expiration date of June 30,
1999:
<TABLE>
<CAPTION>
For Against Withheld
- --- ------- --------
<S> <C> <C>
5,527,311 2,337,024 38,765
</TABLE>
(iv) Votes cast on a proposal to amend certain outstanding stock options held by
directors and senior officers of the Company. The amendments provide for a
reduction of the exercise price from its original
17
<PAGE>
price to Cdn $1.80 and a 20% reduction of the number of shares that can be
purchased under each such option:
<TABLE>
<CAPTION>
For Against Withheld
- --- ------- --------
<S> <C> <C>
4,308,071 2,964,138 630,891
</TABLE>
(v) Votes cast on a proposal to obtain advance shareholder approval for the
issuance of up to 20,000,000 common shares by the Company in one or more private
placement transactions during the 12-month period commencing June 15, 1999:
<TABLE>
<CAPTION>
For Against Withheld
- --- ------- --------
<S> <C> <C>
6,398,682 1,446,670 57,748
</TABLE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
10.1 Amendment to Rights Agreement between the Company and CIBC Mellon
Trust Company (formerly, the R-M Trust Company) dated as of June
30, 1999
10.2 Registration Rights Agreement between the Company, Elliott
Associates, L.P. and Westgate International L.P.
10.3 Warrant to purchase common stock granted by the Company to
Elliott Associates, L.P. dated June 9, 1999
10.4 Agreement for the sale and purchase of debt and 90% of the shares
of Bogoso Gold Limited dated as of June 1, 1999
10.5 Credit Facility letter and Option Premium Letter between Elliott
Associates L.P. and the Company entered into on May 5, 1999 in
connection with the purchase of 90% interest in Bogoso Gold Mine
Ltd.
27.1 Financial Data Schedule
(b) On May 20, 1999, the Company filed with the Securities and Exchange
Commission ("SEC") a report on Form 8-K dated May 18, 1999. The report
indicates that the Company and Anvil Mining NL ("Anvil") have been
informed by the International Finance Corporation ("IFC") that their
offer to purchase 90% of the shares of Bogoso Gold Limited ("BGL") from
a consortium of banks led by IFC and Deutsche Investitions und
Entwicklungsgesellschaft mbH ("DEG") of Germany has been accepted,
subject to the approval of the boards of the IFC and DEG. BGL operates
the Bogoso gold mine located on the Ashanti gold belt of Ghana.
Following the completion of the purchase, the Company and Anvil will
hold equity interests of 70% and 20%, respectively, in BGL with the
Government of Ghana retaining its 10% equity interest. Total
consideration for the acquisition of BGL is US $17 million, including
US $12 million on closing and US $5 million on the first anniversary of
the commencement of commercial mining of sulphide ore as part of a new
sulphide project. In addition to acquiring 90% of the shares in BGL,
the purchase includes the acquisition of existing bank debt of
approximately US$34 million owed by BGL to the consortium of banks
selling BGL. The Company and Anvil will acquire 78% and 22% of this
debt, respectively, and as a result, BGL will have no external bank
debt.
(c) The Company filed with the SEC on June 25, 1999, a Form 8-K announcing
the appointment of a new Chairman of the Board and the election of two
new directors.
18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Golden Star Resources Ltd.
By: /s/ James E. Askew
---------------------------------------------
James E. Askew
President and Chief Executive Officer
By: /s/ Gordon J. Bell
---------------------------------------------
Gordon J. Bell
Vice President and Chief Financial Officer
Date: August 18, 1999
19
<PAGE>
Exhibit 10-1
AMENDMENT TO RIGHTS AGREEMENT
THIS AMENDING AGREEMENT dated as of the 30th day of June, 1999
BETWEEN:
GOLDEN STAR RESOURCES LTD., a corporation subsisting under the Canada
--------------------------
Business Corporations Act
(hereinafter called the "Corporation")
OF THE FIRST PART
AND:
CIBC MELLON TRUST COMPANY (formerly, The R-M Trust Company), a trust
-----------------------------------------------------------
company incorporated under the laws of Canada
(hereinafter called the "Rights Agent")
OF THE SECOND PART
WHEREAS:
A. The Corporation and the Rights Agent entered into a rights agreement dated
as of April 24, 1996 (the "Rights Agreement");
B. The Board of Directors of the Corporation and the shareholders of the
Corporation have approved amendments to the Rights Agreement as hereinafter
set out;
C. The Corporation has obtained all necessary regulatory approvals in
connection with such amendments; and
D. The foregoing recitals are made as representations and statements of fact by
the Corporation and not by the Rights Agent.
The parties hereto agree as follows:
1. All capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Rights Agreement.
2. The Rights Agreement be amended as follows:
(a) the definition of "Expiration Time" in Section 1.1(25) of the Rights
Agreement shall be deleted and the following be substituted therefor:
"Expiration Time" means the close of business on the date that is the
earlier of: (a) the time at which the right to exercise Rights shall
terminate pursuant to Section 5.1 hereof; and (b) June 30, 2004,
unless extended to June 30, 2009 pursuant to Section 5.2(2) hereof."
<PAGE>
(b) Section 5.2 of the Rights Agreement shall be deleted and the following
be substituted therefor:
"5.2 Expiration and Extension of Expiration Time
-------------------------------------------
(1) No Person has any rights under this Agreement or in respect of
any Right after the Expiration Time, except the Rights Agent as
specified in subsection 4.1(1) of this Agreement.
(2) At the first annual meeting of the shareholders of the
Corporation following June 30, 2003, provided that the
Expiration Time has not occurred prior to such time, the Board
of Directors may submit a resolution to the holders of Voting
Shares of the Corporation, for their consideration, and if
thought advisable, approval, extending the Expiration Time for
the Rights to June 30, 2009. If the majority of votes cast on
such resolution are voted for such extension, then the
Expiration Time shall be the earlier of: (a) the time at which
the right to exercise Rights shall terminate pursuant to Section
5.1 hereof; and (b) June 30, 2009."
(c) In view of the Rights Agreement having been approved by the
shareholders of the Company at the annual general meeting held on June
11, 1996, Section 5.15 of the Rights Agreement shall be amended by
deleting the last sentence thereof, which reads as follows, in its
entirety:
"If this Agreement is not confirmed by a majority of the votes cast by
holders of Voting Shares who vote in respect of confirmation of the
Agreement at such meeting, this Agreement and all outstanding Rights
terminate and become void at the close of business on the date of
termination of such meeting."
3. All other provisions of the Rights Agreement which are not specifically
amended or superseded by the provisions herein shall survive, provided that
in case of any conflict between any of the provisions herein and the Rights
Agreement, then the provisions herein shall, in all events, govern and
prevail.
4. This Amending Agreement is governed by and construed in accordance with the
laws of the Province of British Columbia and any action brought in relation
to this Amending Agreement must be brought in the appropriate court of that
Province.
IN WITNESS WHEREOF the parties hereto have executed this Amending Agreement as
of the date first above written.
GOLDEN STAR RESOURCES LTD.
Per: /s/ James E. Askew
------------------
Authorized Signatory
CIBC MELLON TRUST COMPANY
Per: /s/ Van Bot
-----------
Authorized Signatory
Per: /s/ Doug Allen
--------------
Authorized Signatory
2
<PAGE>
Exhibit 10-2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
June 9, 1999 between GOLDEN STAR RESOURCES LTD., a corporation organized under
the laws of Canada with its principal offices located at 1660 Lincoln Street,
Denver, Colorado 80264 (the "Company"); and ELLIOTT ASSOCIATES, L.P., a Delaware
limited partnership with an address at 712 Fifth Avenue, 36th Floor, New York,
New York 10019 ("Elliott"), and WESTGATE INTERNATIONAL, L.P., an exempted
company organized under the laws of the Cayman Islands with an address at c/o
Midland Bank Trust Corporation (Cayman) Ltd., P.O. Box 1109, Mary Street, Grand
Cayman, Cayman Islands ("Westgate"; Elliott and Westgate are hereinafter
referred to each individually and collectively as "Lender").
W I T N E S S E T H:
- - - - - - - - - --
Whereas, pursuant to that certain letter agreement dated May 5, 1999 from
Elliott to the Company (the "Credit Facility Letter") and a letter agreement
dated May 5, 1999 from the Company to Elliott (the "Premium Letter Agreement,"
and together with the Credit Facility Letter, the "Letters of Intent"), Elliott
committed to lend (together with Westgate) the Company (or its designee) up to
$12 million to finance the acquisition (the "Acquisition") of Bogoso Gold
Limited, a mining company organized under the laws of the Republic of Ghana, by
the Company and Anvil Mining NL, a company organized under the laws of
Australia;
Whereas, any such loan will be documented by a loan agreement ("Loan
Agreement") to be entered into by Lender and the Company (or its designee) and
other documents to be entered into in connection therewith;
Whereas, pursuant to the Letters of Intent, the Company agreed to issue to
Lender warrants ("Warrants") to purchase up to 3,000,000 common shares ("Common
Shares") of the Company's common stock, no par value ("Common Stock"), in
connection with the loan commitment; and
Whereas, pursuant to the terms of, and in partial consideration for,
Lender's agreement to enter into the Letters of Intent and the Loan Agreement,
the Company has agreed to provide the Lender with certain registration rights
with respect to the Common Shares and certain other rights and remedies with
respect to the Warrants and Common Shares as set forth in this Agreement;
Now, Therefore, in consideration of the foregoing premises and the mutual
promises, representations, warranties, covenants and conditions set forth in the
Letters of Intent and this Agreement and which may be entered into in the Loan
Agreement, the Company and Lender agree as follows:
1. Certain Definitions. Capitalized terms used herein and not otherwise
-------------------
defined shall have the meaning ascribed thereto in the Warrants or the Loan
Agreement if entered into. As used in this Agreement, the following terms shall
have the following respective meanings:
<PAGE>
"Abandonment" shall mean the date on which (i) the Company requests the
cancellation of the Letter of Credit or it is otherwise cancelled, or (ii) the
Letter of Credit is otherwise drawn upon or the sellers under the Acquisition
Agreement (as defined in the Credit Facility Letter) are entitled to draw down
upon it.
"Canadian Prospectus" shall have the meaning set forth in Section 2(a)
herein.
"Commission" or "SEC" shall mean the U.S. Securities and Exchange
Commission or any other U.S. federal agency at the time administering the
Securities Act.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended.
"Exercise Price" shall have meaning set forth in the applicable Warrant for
which such term is used.
"Fair Market Value" shall have the meaning set forth in the Warrants.
"Holder" and "Holders" shall include each Lender and any transferee of the
Warrants or Common Shares or Registrable Securities which have not been sold to
the public to whom the registration rights conferred by this Agreement have been
transferred in compliance with this Agreement.
"Letter of Credit" shall mean the $2 million letter of credit required to
be furnished by the Company pursuant to the terms of the Acquisition Agreement
in connection with the Acquisition.
"Note" shall have the meaning set forth in the Loan Agreement, if entered
into.
"OSA" shall mean the Securities Act (Ontario), as amended.
"OSC" shall mean the Ontario Securities Commission or any other agency at
any time administering the OSA.
"Registrable Securities" shall mean: (i) the Common Shares issuable or
issued to each Holder or its permitted transferee or designee upon exercise of
the Warrants, or upon any stock split, stock dividend, recapitalization or
similar event with respect to such Common Shares; (ii) any securities issued or
issuable to each Holder upon the conversion, exercise or exchange of any
Warrants; and (iii) any other security of the Company issued as a dividend or
other distribution with respect to or upon exchange for or in replacement for
Registrable Securities. For clarification purposes, "Registrable Securities"
includes without limitation the Common Shares to be issued upon exercise of the
1,500,000 Warrants issued to Lender on the date hereof and the Common Shares to
be issued upon exercise of the up to 1,500,000 additional Warrants to be issued
upon Closing of the Term Credit Facility under the Loan Agreement.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement, and the qualifying of the Registrable Securities for
distribution under the OSA pursuant to a prospectus filed with the OSC, as the
case may be.
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<PAGE>
"Registration Expenses" shall mean all expenses to be incurred by the
Company in connection with each Holder's registration rights under this
Agreement, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, reasonable fees and disbursements of counsel to Holders
(using one United States counsel and, to the extent necessary, one Canadian
counsel, each selected by a majority in interest of the Holders) for a
reasonable and customary "due diligence" examination of the Company and review
of the Registration Statement and related documents, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Registration Statement" shall have the meaning set forth in Section 2(a)
herein.
"Securities Act" or "Act" shall mean the U.S. Securities Act of 1933, as
amended.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for Holders not included within "Registration
Expenses."
"Term Loan Amount" shall have the meaning ascribed to such term in the Loan
Agreement, if any.
2. Registration Requirements. The Company shall effect the registration of
-------------------------
the Registrable Securities (including without limitation the execution of an
undertaking promptly to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and the
OSA and appropriate compliance with applicable regulations issued under the
Securities Act and the OSA) as would permit or facilitate the sale or
distribution of all the Registrable Securities in the manner (including manner
of sale) and in the province of Ontario and all other provinces and all U.S.
states reasonably requested by the Holder, which registration shall include the
following:
(a) The Company shall, as expeditiously as possible:
(i) But in any event by the date which is the earlier of (i) 90
days after the completion or abandonment of the Acquisition or (ii)
October 31, 1999, use its reasonable best efforts to prepare and file a
registration statement with the Commission pursuant to Rule 415 under
the Securities Act on Form S-3 under the Securities Act (or in the
event that the Company is ineligible to use such form, such other form
as the Company is eligible to use under the Securities Act) covering
the Registrable Securities ("Registration Statement") and prepare and
file any documents necessary to cause the qualification of the
Registrable Securities under the securities laws of the province of
Ontario and such other provinces as may be reasonably requested by
Lender (collectively, "Canadian Securities Law"). If a Canadian
prospectus is not required for resales in Canada, as evidenced by a
written opinion of reputable Canadian counsel reasonably acceptable to
each Holder, no such prospectus need be qualified. Such Registration
Statement shall, in
3
<PAGE>
addition and without limitation, register (pursuant to Rule 416 under
the Securities Act, or otherwise) such additional indeterminate number
of Registrable Securities as shall be necessary to permit the exercise
in full of the Warrants and the issuance of additional shares of Common
Stock to Holders necessitated by the various exercise price adjustment
and reset provisions of the Warrants. Thereafter, the Company shall
cause such Registration Statement and other filings to be declared
effective, and shall obtain a receipt for a final prospectus, if
required (the "Canadian Prospectus"), qualifying the distribution of
the Common Shares in Ontario, each as soon as reasonably possible, and
in any event prior to the date ("Registration Commencement Date") which
is the earlier of (i) the date that the Company registers any of its
Common Stock under the Securities Act by registration on any form other
than Form S-8 and such registration is declared effective, provided
that if such other form is a Form S-4 and the Company files a
Registration Statement covering the Registrable Securities within
fifteen (15) days after filing such Form S-4, then such date under this
clause (i) shall be the earliest possible date that the Company, using
its reasonable best efforts, could reasonably cause such Registration
Statement to become effective after the effectiveness of such Form S-4,
(ii) 180 days following the date of completion or Abandonment of the
Acquisition, or (iii) January 31, 2000. The Company shall provide
Holders and their legal counsel a reasonable opportunity to review any
such Registration Statement or amendment or supplement thereto, and the
Canadian Prospectus and any other filings required in Canada, prior to
filing.
(ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement, and prepare and file with
the OSC such amendments and supplements to the Canadian Prospectus, if
any, as may be necessary to comply with the provisions of the Act and
the OSA with respect to the disposition of all securities covered by
such Registration Statement and, if any, the Canadian Prospectus and
notify the Holders of the filing and effectiveness of such Registration
Statement and any amendments or supplements thereto, and the
qualification of such Canadian Prospectus and any amendments or
supplements thereto.
(iii) Furnish to each Holder such numbers of copies of a current
prospectus conforming with the requirements of the Act and the OSA,
copies of the Registration Statement and, if any, the Canadian
Prospectus, any amendment or supplement thereto and any documents
incorporated by reference therein and such other documents as such
Holder may reasonably require in order to facilitate the disposition of
Registrable Securities owned by such Holder.
(iv) Register and qualify the securities covered by such
Registration Statement under such other securities or "Blue Sky" laws
or
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<PAGE>
Canadian Securities Law of such U.S. and Canadian jurisdictions as
shall be reasonably requested by each Holder; provided that the
--------
Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general
consent to service of process in any such states, provinces or
jurisdictions.
(v) Notify each Holder immediately of the happening of any
event as a result of which the prospectus (including any supplements
thereto or thereof) included in such Registration Statement and any
preliminary prospectus or Canadian Prospectus, as then in effect, includes
an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, and use its
reasonable best efforts to promptly update and/or correct such prospectus.
(vi) Notify each Holder immediately of the issuance by the
Commission or any state securities commission or agency or the OSC of any
stop order suspending the effectiveness of the Registration Statement or
any prospectus or ceasing trading of any securities of the Company or the
initiation of any proceedings for that purpose. The Company shall use its
reasonable best efforts to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest
possible time.
(vii) Permit each Holder's counsel to review the Registration
Statement, the preliminary prospectus filed with the OSC, the Canadian
Prospectus, if any, and all amendments and supplements thereto within a
reasonable period of time prior to each filing, and shall not file any
document in a form to which any such counsel reasonably objects.
(viii) Cause the Registrable Securities covered by such
Registration Statement to be listed on each principal national and
international securities exchange and market on which the Company now lists
or may in the future list its Common Stock, and prepare and file any
required filings with each of such exchanges and markets, for the entire
Registration Period (as defined in Section 5 below). The Company shall
cause the Registrable Securities and the Common Stock to be listed and
remain listed on at least one of AMEX, the New York Stock Exchange or
NASDAQ (NMS or Small-Cap) at all times during the Registration Period.
(ix) Take all steps necessary to enable Holders to avail
themselves of the prospectus delivery mechanism set forth in Rule 153 (or
any successor thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I) events that may
arise that the Lender considers will interfere with the full enjoyment of
their rights under the Warrants, the Loan Agreement (if entered into) and
this Agreement (the "Interfering Events"), and (II) certain remedies
applicable in each of these events.
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<PAGE>
Paragraphs (i) through (iv) of this Section 2(b), together with
paragraph (vii) of this Section 2(b), describe the Interfering Events and
provide a remedy in the form of cash payments to each Holder if an Interfering
Event occurs.
Paragraph (v) provides, inter alia, that if cash payments
required as the remedy in the case of any of the Interfering Events are not paid
when due or if one or more Interfering Events continue in the aggregate for at
least six (6) months, the Company may be required by any Holder to redeem
outstanding Warrants and/or Common Shares at a specified price.
Paragraph (vi) provides, inter alia, that Lender has the right to
specific performance.
The preceding paragraphs in this Section 2(b) are meant to serve
only as an introduction to this Section 2(b), are for convenience only, and are
not to be considered in applying, construing or interpreting this Section 2(b).
(i) Delay in Effectiveness of Registration Statement. The
------------------------------------------------
Company agrees that it shall file the Registration Statement with the
SEC, and the preliminary prospectus (if required) in Ontario, as set
forth in Section 2(a)(i) above, and shall cause such Registration
Statement to become effective as soon as reasonably possible and in
any event by the Registration Commencement Date. The Company agrees to
cause a receipt to be obtained for any such Canadian Prospectus as
soon as reasonably possible after the filing of the preliminary
prospectus and in any event by the Registration Commencement Date. In
the event that such Registration Statement has not been declared
effective by the Registration Commencement Date, or (if applicable)
the receipt for the Canadian Prospectus has not been obtained by the
Registration Commencement Date (each a "Registration Default"), then
the Company shall pay each Holder 3% of the Fair Market Value (as
defined in the Warrant) of the Common Shares to be registered (subject
to reduction under Section 2(b)(vii) below, the "Monthly Default
Payment") for each 30 day period or portion thereof that such
Registration Default is continuing. At the election of each Holder as
made from time to time, the Company shall pay the Monthly Default
Payment (regardless of the subsection of this Section 2(b) under which
such Monthly Default Payment is payable) either (a) in cash or (b) by
adding such amount to the Term Loan Amount due such Holder under the
Loan Agreement (if entered into).
(ii) No Listing of Common Stock. In the event that the Company,
--------------------------
at any time during the Listing Period (as defined below), fails,
refuses or for any reason is unable to cause the Registrable
Securities covered by the Registration Statement to be listed (A) with
at least one of AMEX, the New York Stock Exchange or NASDAQ (NMS or
Small-Cap) and (B) with each principal national and international
securities exchange and market on which the Company then lists its
Common Stock, then the Company shall pay to each Holder a Monthly
Default Payment for each 30-day period (or portion thereof) during the
Listing Period that the Registrable Securities are not so
6
<PAGE>
listed. The "Listing Period" shall mean the period beginning on the
earlier of the effectiveness of the Registration Statement or the
Registration Commencement Date and ending on the date that the
Registration Period ends (as defined in Section 5 below). For
clarification purposes only and without affecting clause (A) above in
any way, clause (B) above does not require the Company to cause the
Registrable Securities to be listed on an exchange or market on which
the Company no longer lists its Common Stock.
(iii) Blackout Periods.
----------------
(A) In the event any Holder's ability to sell Registrable
Securities under the Registration Statement, or
pursuant to the Canadian Prospectus (if any), is
suspended (i) for more than thirty (30) consecutive
days, (ii) for more than sixty (60) days (whether or
not consecutive) in any twelve (12) month period, or
(iii) on more than two (2) occasions in any twelve
(12) month period ("Suspension Grace Period"),
including without limitation by reason of a
suspension of trading of the Common Stock on AMEX or
the TSE, any suspension or stop order with respect to
the Registration Statement or the Canadian
Prospectus, or the fact that an event has occurred as
a result of which the prospectus (including any
supplements thereto) included in such Registration
Statement or the Canadian Prospectus (including any
supplements thereto) then in effect includes an
untrue statement of material fact or omits to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances then
existing, then the Company shall pay to each Holder a
Monthly Default Payment on the Warrants and Common
Shares held by such Holder for each 30-day period (or
portion thereof) from and after the expiration of the
Suspension Grace Period.
(B) If after the Registration Commencement Date any event
shall occur that in the judgment of the Company is
required to be set forth in the Registration
Statement or the prospectus included therein or in
the Canadian Prospectus (if any) (in each case as
then amended or supplemented), or should be set forth
therein in order to make the
7
<PAGE>
statements therein, in the light of the circumstances
under which they were made, not misleading, or if it
is necessary to supplement or amend the Registration
Statement or such prospectus or the Canadian
prospectus or to file under the Exchange Act or
equivalent Canadian Securities Law any document
which, upon filing, will be incorporated by reference
therein in order to comply with the Securities Act,
the Exchange Act or equivalent Canadian Securities
Law or the rules and regulations thereunder, the
Company will (subject to the following sentence)
immediately notify each Holder in writing of such
event or requirement (a "Notice of Amendment") and
within three (3) business days after such event
prepare and file with the SEC and/or OSC, as
applicable, an appropriate supplement or amendment
thereto or document to be incorporated therein by
reference and furnish copies thereof, together with a
written notice of such amendment or supplement or
document to be incorporated therein by reference (a
"Notice of Correction"), to each Holder. If, in the
good faith and reasonable judgment of the Company,
disclosure of any such event would be materially
harmful or unduly burdensome to the Company or its
business, the Company shall furnish to each Holder a
notice of suspension to such effect and shall be
entitled to defer the preparation and delivery of any
such supplement, amendment and/or notice of
correction for a period not to exceed the Suspension
Grace Period (and such deferment shall count towards
the Suspension Grace Period). Nothing contained in
this paragraph 2(b)(iii)(B) shall in any way affect
the Monthly Default Payment due each Holder pursuant
to paragraph 2(b)(iii)(A) above.
(iv) Exercise Deficiency. In the event that the Company does not
-------------------
have a sufficient number of Common Shares available to satisfy the
Company's obligations to any Holder upon receipt of an Exercise Form
(as defined in the Warrant) or is otherwise unable or unwilling to
issue such Common Shares (including without limitation by reason of
any limits promulgated by AMEX, TSE or other exchange or governmental
or regulatory) in accordance with the terms of the Warrants for any
reason after receipt of an Exercise Form ("Exercise Deficiency"), then
the Company shall pay to each Holder a Monthly Default Payment on the
Warrants and
8
<PAGE>
Common Shares held by such Holder for each 30-day period (or portion
thereof) that the Company fails or refuses to issue Common Shares in
accordance with the Warrant terms.
(v) Liquidated Damages; Premium Price Redemption for Payment
--------------------------------------------------------
Defaults.
--------
(A) The Company acknowledges that any failure, refusal or
inability by the Company described in the foregoing
paragraphs (i) through (iv) will cause the Holders to
suffer damages in an amount that will be difficult to
ascertain, including without limitation damages
resulting from the loss of liquidity in the Registrable
Securities and the additional investment risk in
holding the Registrable Securities. Accordingly, the
parties agree that it is appropriate to include in this
Agreement the foregoing provisions for default payments
and the provisions set forth in Section 2(b)(v)(C)
below for mandatory redemption in order to compensate
the Holders for such damages. The parties acknowledge
and agree that the default payments and mandatory
redemption set forth herein represent the parties' good
faith effort to quantify such damages and, as such,
agree that the form and amount of such default payments
and mandatory redemption are reasonable and will not
constitute a penalty.
(B) Each default payment provided for in the foregoing
paragraphs (i) through (iv) shall be in addition to
each other default payment; provided, however, that in
no event shall the Company be obligated to pay to any
Holder default payments in an aggregate amount greater
than the Monthly Default Payment applicable to the
Warrants and Common Shares held by such Holder for any
30-day period (or portion thereof). All default
payments (which payments shall be pro rated on a per
diem basis for any period of less than 30 days)
required to be made in connection with the above
provisions shall be paid in cash, or added to the Term
Loan Amount under the Loan Agreement (if entered into),
at the election of each Holder, at any time upon
demand, and if a demand is not made, by the tenth
(10th) day of each calendar month for each partial or
full
9
<PAGE>
30-day period occurring prior to that date. Until paid
as required in this Agreement, any and all default
payments shall be deemed added to, and made a part of,
the Term Loan Amount under the Loan Agreement (if
entered into), and shall accrue interest at the rate
set forth therein. In the event of any additions
hereunder to the Term Loan Amount, the Company shall
execute any and all documents reasonably requested by
Lender in connection therewith, including without
limitation a replacement Note or additional Note
evidencing such new Term Loan Amount.
(C) In the event that (i) during any continuous period for
which Monthly Default Payments are accruing, the
Company fails or refuses to pay, on more than one
occasion, any default payment following any applicable
30-day period in the manner elected by any Holder
within five (5) days after the due date or (ii) the
Company becomes obligated to make Monthly Default
Payments (whether or not paid) for a period of at least
six (6) months (whether or not consecutive), then at
such Holder's request and option the Company shall
purchase all or a portion of the Warrants and Common
Shares held by such Holder (with default payments
accruing through the date of such purchase), within
three (3) business days after such request, at a price
in immediately available funds (the "Premium Redemption
Price") equal to (A) as to unexercised Warrants, the
greater of the Exercise Price (as adjusted or reset)
for each Warrant being redeemed or 1.5 times (i.e.,
150% of) the product of (x) the excess of the Fair
Market Value of a share of Common Stock over such
Exercise Price, multiplied by (y) the number of Common
Shares for which the Warrants being redeemed could be
exercised (notwithstanding any Exercise Deficiency),
and (B) as to Common Shares actually held, 1.5 times
the product of (x) the number of Common Shares so to be
redeemed pursuant to this paragraph, and (y) the Fair
Market Value of each such Common Share as of the date
of delivery of the notice of redemption. Payment of
such amount shall be due and payable within three (3)
business days of demand therefor, which demand (for
10
<PAGE>
payment and redemption) shall be revocable by the
Holder at any time after such due date and prior to its
actual receipt of the full Premium Redemption Price.
(vi) Cumulative Remedies. The default payments and mandatory
-------------------
redemption provided for above are in addition to and not in lieu or
limitation of any other rights the Holders may have at law, in equity
or under the terms of the Warrants, the Letters of Intent, the Loan
Agreement, this Agreement or any other documents or instruments
related hereto or thereto, including without limitation the right to
specific performance. Each Holder shall be entitled to specific
performance of any and all obligations of the Company in connection
with the registration rights of the Holders hereunder.
(vii) Monthly Default Payment Reduction. Notwithstanding
---------------------------------
anything contained herein, in the event any Interfering Event results
solely from the Company's failure to cause or maintain the
qualification for distribution of Registrable Securities under the OSA
or from the de-listing of Registrable Securities on the TSE (but not a
failure of registration under U.S. law or a de-listing by AMEX or
other U.S. market), then the Monthly Default Payment amount shall be
computed based upon one percent (1%) of the applicable figure instead
of three percent (3%).
(c) If the Holder(s) intend to distribute the Registrable Securities
by means of an underwriting, the Holder(s) shall so advise the Company. Any such
underwriting may only be administered by investment bankers reasonably
satisfactory to the Company. The Company shall only be obligated to permit one
underwritten offering, which offering shall be determined by a majority-in-
interest of the Holders. The Company shall enter into such customary agreements
for secondary offerings (including a customary underwriting agreement with the
underwriter or underwriters, if any) and take all such other reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities.
(d) The Company shall make available for inspection by the Holders,
representative(s) of all the Holders together, any underwriter participating in
any disposition pursuant to a Registration Statement or the Canadian Prospectus,
and any attorney or accountant retained by any Holder or underwriter, all
financial and other records customary for purposes of the Holders' due diligence
examination of the Company and review of any Registration Statement or any
prospectus filed with the OSC, all SEC Filings (as defined in the Loan
Agreement) and the equivalent filings under the OSA filed subsequent to the
Registration Commencement Date, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration Statement or
prospectus, provided that such parties agree to keep such information
confidential.
(e) Subject to Section 2(b) above, the Company may suspend the use of
any prospectus used in connection with the Registration Statement or the
Canadian Prospectus only in
11
<PAGE>
the event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission or OSC. The Company will use its
reasonable best efforts to cause such suspension to terminate at the earliest
possible date.
(f) The Company shall file a Registration Statement and (if required
by Canadian Securities Law to provide Holders with free tradeability in Canada)
qualify a Canadian Prospectus with respect to any shares newly authorized and/or
reserved for exercise of the Warrants within five (5) business days after any
shareholders or board of directors meeting authorizing same and shall use its
best efforts to cause such Registration Statement to become effective, and
receive a receipt for the Canadian Prospectus (if any), within sixty (60) days
after such shareholders or board of directors meeting. If the Holders become
entitled, pursuant to an event described in clause (iii) of the definition of
Registrable Securities, to receive any securities in respect of Registrable
Securities that were already included in a Registration Statement, subsequent to
the date such Registration Statement is declared effective, and the Company is
unable under the securities laws to add such securities to the then effective
Registration Statement and/or Canadian Prospectus, the Company shall promptly
file, in accordance with the procedures set forth herein, an additional
Registration Statement and/or Canadian Prospectus, as applicable, with respect
to such newly Registrable Securities. The Company shall use its reasonable best
efforts to (i) promptly cause any such additional Registration Statement and/or
Canadian Prospectus, when filed, to become effective, and a receipt to be
obtained from the OSC, respectively, and (ii) keep such additional Registration
Statement and/or Canadian Prospectus, effective during the period described in
Section 5 below. All of the registration rights and remedies under this
Agreement shall apply to the registration and qualification of such newly
reserved shares and such new Registrable Securities, including without
limitation the provisions providing for default payments contained herein.
3. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance with registration
pursuant to this Agreement shall be borne by the Company, and all Selling
Expenses of a Holder shall be borne by such Holder.
4. Registration on Form S-3. The Company shall use its reasonable best
------------------------
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
the Company shall use such form as it is eligible to use under the Securities
Act.
5. Registration Period. In the case of every registration and
-------------------
qualification effected by the Company pursuant to this Agreement, the Company
will keep such registration effective until the earlier of (a) the fourth
anniversary of the issue of the last issuable Warrants under the Letters of
Intent, and (b) the date upon which all Common Shares issuable upon exercise of
all Warrants have been sold ("Registration Period").
6. Indemnification.
---------------
(a) The Company Indemnity. The Company will indemnify each Holder,
each of its officers, directors and partners, and each person controlling each
Holder, within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls, within the meaning of Section 15 of the
12
<PAGE>
Securities Act and the rules and regulations thereunder, any underwriter,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering circular or
other document (including any related registration statement, notification or
the like) incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of the Securities Act or any state
securities law or the OSA or any other Canadian Securities Law, or, in any case,
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and will reimburse each Holder, each
of its officers, directors and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to a Holder to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by such Holder or the underwriter (if any) therefor and
stated to be specifically for use therein. The indemnity agreement contained in
this Section 6(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not jointly, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered thereby, each person who controls the
Company or such underwriter within the meaning of Section 15 of the Securities
Act and the rules and regulations thereunder, each other Holder (if any), and
each of their officers, directors and partners, and each person controlling such
other Holder(s) against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or similar document, or any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statement therein not misleading, and will
reimburse the Company and such other Holder(s) and their directors, officers and
partners, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or similar document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein, and provided that the maximum amount
for which such Holder shall be liable under this indemnity shall not exceed the
net proceeds received by such Holder from the sale of the Registrable
Securities. The indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).
13
<PAGE>
(c) Procedure. Each party entitled to indemnification under this
Article (the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article
except to the extent that the Indemnifying Party is materially and adversely
affected by such failure to provide notice. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting therefrom.
7. Contribution. If the indemnification provided for in Section 6
------------
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 7 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 6(a) or 6(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Holders or the underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraphs. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraphs shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder or underwriter shall
be required to
14
<PAGE>
contribute any amount in excess of the amount by which (i) in the case of any
Holder, the net proceeds received by such Holder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price at which the
Registrable Securities purchased by it and distributed to the public were
offered to the public exceeds, in any such case, the amount of any damages that
such Holder or underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
8. Survival. The indemnity and contribution agreements contained in
--------
Sections 6 and 7 and the representations and warranties of the Company referred
to in Section 2(d)(i) shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement or the Loan Agreement or any
underwriting agreement, (ii) any investigation made by or on behalf of any
Indemnified Party or by or on behalf of the Company, and (iii) the consummation
of the sale or successive resales of the Registrable Securities.
9. Information by Holders. Each Holder shall furnish to the Company such
----------------------
information regarding such Holder and the distribution and/or sale proposed by
such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement. The intended method or methods of
disposition and/or sale (Plan of Distribution) of such securities as so provided
by such Holder shall be included without alteration in the Registration
Statement covering the Registrable Securities and shall not be changed without
written consent of such Holder.
10. Replacement Certificates. The certificate(s) representing the Common
------------------------
Shares held by either Lender (or then Holder) may be exchanged by such Lender
(or such Holder) at any time and from time to time for certificates with
different denominations representing an equal aggregate number of Common Shares,
as reasonably requested by such Lender (or such Holder) upon surrendering the
same. No service charge will be made for such registration or transfer or
exchange.
11. Transfer or Assignment. Except as otherwise provided herein, this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Lender by the
Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Warrants or Common Shares, and all other rights granted to Lender
by the Company hereunder may be transferred or assigned to any transferee or
assignee of any Warrants or Common Shares; provided in each case that the
Company must be given written notice by such Lender at the time of or within a
reasonable time after said transfer or assignment, stating the name and address
of said transferee or assignee and identifying the securities with respect to
which such registration rights are being transferred or assigned.
12. Reports under Securities Exchange Act of 1934. With a view to making
---------------------------------------------
available to the Holders the benefits of Rule 144 promulgated under the
Securities Act ("Rule 144"), the Company agrees to:
15
<PAGE>
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144, at all times;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) Furnish to each Holder so long as such Holder owns, or has the
right to obtain upon exercise of the Warrants, Registrable Securities, promptly
upon request (i) a written statement by the Company that it has complied with
all the reporting requirements of Rule 144, the Securities Act and the Exchange
Act, (ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Holders to sell
such securities without registration.
13. Miscellaneous.
-------------
(a) Remedies. The Company and Lender acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) Jurisdiction. The company and each lender (i) hereby irrevocably
submits to the exclusive jurisdiction of the united states district court, the
new york state courts and other courts of the united states sitting in new york
county, new york for the purposes of any suit, action or proceeding arising out
of or relating to this agreement and (ii) hereby waives, and agrees not to
assert in any such suit action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. the company and each lender consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this
agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. nothing in this paragraph shall affect or
limit any right to serve process in any other manner permitted by law.
(c) Notices. Any notice or other communication required or permitted
to be given hereunder shall be in writing by facsimile, mail or personal
delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Golden Star Resources Ltd.
1660 Lincoln Street
Denver, Colorado 80264
Facsimile: (303) 830-9094
Attention: Louis Peloquin, Esq.
16
<PAGE>
with copies to:
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of Americas
New York, New York 10019
Facsimile: (212) 757-3990
Attention: Edwin S. Maynard, Esq.
and
Koffman Kalef
885 West Georgia Street
Vancouver, British Columbia
Canada V6C 3H4
Facsimile: (604) 891-3788
Attention: Bernard Poznanski
to Lenders:
Elliott Associates, L.P.
712 Fifth Avenue
36th Floor
New York, New York 10019
Attn: Sam Perlman
Westgate International, L.P.
c/o Midland Bank Trust Corporation (Cayman) Ltd.
P.O. Box 1109
Mary Street
Grand Cayman, Cayman Islands
Attn: Greg Taylor
with copies to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Facsimile: (212) 986-8866
Attention: Martin D. Sklar, Esq.
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
(d) Indemnity. Each party shall indemnify each other party against
any loss, cost or damages (including reasonable attorney's fees) incurred as a
result of such parties' breach of any representation, warranty, covenant or
agreement in this Agreement.
(e) Waivers. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or
17
<PAGE>
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter. The representations and
warranties and the agreements and covenants of the Company and each Lender
contained herein shall survive the Acquisition, if it occurs, and the Closing
under the Loan Agreement, if it occurs.
(f) Execution; Effectiveness. This Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart. This Agreement shall become effective upon the execution hereof by
the Company and each Lender and shall become enforceable against the Borrower
(to be defined in the Loan Agreement) upon execution hereof by the Borrower.
(g) Entire Agreement. This Agreement, together with the Loan
Agreement, the Warrants and the agreements and documents contemplated hereby and
thereby, contains the entire understanding and agreement of the parties, and may
not be modified or terminated except by a written agreement signed by both
parties.
(h) Governing Law; Consent of Jurisdiction. This agreement and the
validity and performance of the terms hereof shall be governed by and construed
and enforced in accordance with the internal laws of the state of new york
applicable to contracts executed and to be performed entirely in such state.
(i) Severability. The parties acknowledge and agree that the
representations, warranties, covenants and agreements of each Lender hereunder
are several and not joint, that neither Lender shall have any responsibility or
liability for the representations, warrants, agreements, acts or omissions of
the other Lender, and that any rights granted to "Lender" hereunder shall be
enforceable by each Lender hereunder.
(j) Jury Trial. Each party hereto waives the right to a trial by
jury.
(k) Further Assurances. Each of the Company and each Lender shall do
and perform all such further acts and things and execute and deliver all such
other certificates, documents and instruments as the Company or such Lender may,
at any time and from time to time, reasonably request in connection with the
performance of any of the terms of this Agreement.
(l) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
[ Signature page follows ]
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
GOLDEN STAR RESOURCES LTD.
By: /s/ Gordon Bell
---------------
Vice President and Chief Financial Officer
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul E. Singer
------------------
General Partner
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc., as Attorney-in-fact
By: /s/ Paul E. Singer
------------------
President
ACCEPTED AND AGREED TO:
[BORROWER]
By:__________________________
Name:
Title:
19
<PAGE>
Exhibit 10-3
Certificate No. W-1
Number of Shares 750,000
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.
________________________________________
GOLDEN STAR RESOURCES LTD.
WARRANT TO PURCHASE COMMON STOCK
________________________________________
This certifies that, for good and valuable consideration, Golden Star
Resources Ltd., a corporation subsisting under the Canada Business Corporations
Act (the "Company"), grants to Elliott Associates, L.P., or its registered
assigns (the "Warrantholder"), the right to subscribe for and purchase from the
Company 750,000 validly issued, fully paid and nonassessable shares (the
"Warrant Shares") of the Company's common shares (the "Common Stock"), at the
purchase price per share of US$0.7063 (the "Exercise Price"), at any time and
from time to time, prior to 5:00 PM Eastern Time on June 9, 2002 (the
"Expiration Date"), all subject to the terms, conditions and adjustments herein
set forth.
1. Duration and Exercise of Warrant; Limitation
on Exercise; Payment of Taxes.
-----------------------------
1.1 Duration and Exercise of Warrant. Subject to the terms and
--------------------------------
conditions set forth herein, the Warrant may be exercised, in whole or in part,
by the Warrantholder by:
(a) the surrender of this Warrant to the Company, with a
duly executed Exercise Form specifying the number of Warrant Shares to be
purchased, during normal business hours on any Business Day prior to the
Expiration Date; and
(b) the delivery of payment to the Company, for the account
of the Company, by cash or by certified or bank cashier's check, of the Exercise
Price for the number of Warrant Shares specified in the Exercise Form in lawful
money of the United States of America. The Company
<PAGE>
2
agrees that such Warrant Shares shall be deemed to be issued to the
Warrantholder as the record holder of such Warrant Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for the Warrant Shares as aforesaid (or as provided in Section 1.2
below).
1.2 Exercise By Principal Reduction.
-------------------------------
In lieu of the payment of the Exercise Price as provided in
Section 1.1(b), the Warrantholder shall have the right (the "Conversion Right")
(but not the obligation) to exercise this Warrant, in whole or in part, by
delivery of written instructions authorizing a reduction in the outstanding
principal amount of indebtedness due to such Warrantholder under the Credit
Facility referred to in the Credit Facility Letter dated May 5, 1999 (the
"Credit Facility Letter") between the Company and Elliott Associates, L.P. Such
reduction in principal shall be deemed a prepayment under the Credit Facility.
1.3 Warrant Shares Certificate. A stock certificate or
--------------------------
certificates for the Warrant Shares specified in the Exercise Form shall be
delivered to the Warrantholder within three Business Days after receipt
(including facsimile receipt) of the Exercise Form, together with receipt of
payment of the purchase price if the Conversion Right is not exercised. If this
Warrant shall have been exercised only in part, the Company shall, at the time
of delivery of the stock certificate or certificates, deliver to the
Warrantholder a new Warrant evidencing the rights to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be identical with
this Warrant.
1.4 Payment of Taxes. The issuance of certificates for Warrant
----------------
Shares shall be made without charge to the Warrantholder for any stock transfer
or other issuance tax in respect thereto; provided, however, that the
-------- -------
Warrantholder shall be required to pay any and all taxes which may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than that of the then Warrantholder as reflected upon the books
of the Company.
1.5 Divisibility of Warrant; Transfer of Warrant.
--------------------------------------------
(a) Subject to the provisions of this Section 1.5, this
Warrant may be divided into warrants of one thousand shares or multiples thereof
(except for any "stub amount"), upon surrender at the principal office of the
Company, without charge to any Warrantholder. Upon such division, the Warrants
may be transferred of record as the then Warrantholder may specify without
charge to such Warrantholder (other than any applicable transfer taxes). In
addition, subject to the provisions of Section 2, the Warrantholder shall also
have the right to transfer this Warrant in its entirety to any person or entity.
(b) Upon surrender of this Warrant to the Company with a
duly executed Assignment Form and funds sufficient to pay any transfer tax, the
Company shall, without charge, execute and deliver a new Warrant or Warrants of
like tenor in the name of the assignee named in such Assignment Form, and this
Warrant shall promptly be canceled. Each Warrantholder agrees that prior to any
proposed transfer of this Warrant, such Warrantholder shall give written notice
to the Company of such Warrantholder's intention to effect such transfer. Each
such notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail, and, if requested by the Company, shall be accompanied by
a written opinion of legal counsel, which opinion shall be addressed to the
Company and be reasonably satisfactory in form and substance to the Company's
counsel, to the effect that
<PAGE>
3
the proposed transfer of this Warrant may be effected without registration under
the Securities Act. The Warrantholder shall not be entitled to transfer this
Warrant, or any part thereof, if such legal opinion is not reasonably acceptable
to the Company. The term "Warrant" as used in this Agreement shall be deemed to
include any Warrants issued in substitution or exchange for this Warrant.
2. Restrictions on Transfer;
Restrictive Legends.
-------------------
2.1 Restrictive Legends. Except as otherwise permitted by this
-------------------
Section 2.1, each Warrant shall (and each Warrant issued upon direct or indirect
transfer or in substitution for any Warrant pursuant to Section 1.5 or Section 4
shall) be stamped or otherwise imprinted with a legend in substantially the
following form:
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE
SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS.
Except as otherwise permitted by this Section 2.1, each stock certificate for
Warrant Shares issued upon the exercise of any Warrant and each stock
certificate issued upon the direct or indirect transfer of any such Warrant
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND SUCH LAWS. DELIVERY OF THIS
CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF
TRANSACTIONS ON THE AMERICAN STOCK EXCHANGE OR THE TORONTO STOCK
EXCHANGE. A NEW CERTIFICATE, WITHOUT THIS LEGEND, DELIVERY OF WHICH
WILL CONSTITUTE "GOOD DELIVERY," MAY BE OBTAINED FROM THE COMPANY'S
TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED
DECLARATION, IN A FORM REASONABLY SATISFACTORY TO THE COMPANY'S
TRANSFER AGENT AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE
SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
<PAGE>
4
Notwithstanding the foregoing, the Warrantholder may require the
Company to issue a stock certificate for Warrant Shares without a legend, if
either (i) such Warrant Shares have been registered for resale under the
Securities Act and sold pursuant to such registration or (ii) the Warrantholder
has delivered to the Company an opinion of legal counsel, which opinion shall be
addressed to the Company and be reasonably satisfactory in form and substance to
the Company's counsel, to the effect that such registration is not required with
respect to the public offering and sale of such Warrant Shares pursuant to Rule
144(k) or otherwise.
2.2 Restrictions on Transfer; Registration Rights.
---------------------------------------------
(a) No Warrant may be exercised and no Warrant or Warrant
Share may be sold, transferred or otherwise disposed of (any such sale, transfer
or other disposition, a "sale"), except in compliance with this Section 2.
(b) A Warrantholder may exercise this Warrant if it is an
"accredited investor" or a "qualified institutional buyer," as defined in
Regulation D and Rule 144A under the Securities Act, respectively, and a
Warrantholder may sell this Warrant or any Warrant Shares to a transferee that
is an "accredited investor" or a "qualified institutional buyer," as such terms
are defined in such Regulation and such Rule, respectively, provided that each
of the following conditions is satisfied:
(i) with respect to any "accredited investor" that
is not an institution, such transferee provides certification
establishing to the reasonable satisfaction of the Company that it is
an "accredited investor";
(ii) such transferee represents that it is acquiring
the Warrant and/or Warrant Shares for its own account and not with a
view to, or for offer or sale in connection with, any distribution
thereof within the meaning of the Securities Act that would be in
violation of the securities laws of the United States or any
applicable state thereof, but subject, nevertheless, to the
disposition of its property being at all times within its control; and
(iii) such transferee agrees to be bound by the
provisions of this Section 2 with respect to any Warrants and Warrant
Shares held by it.
(c) The provisions of this Section 2.2 shall not apply to
any public sale of Warrant Shares in a transaction that is registered under the
Securities Act or exempt from such registration under Rule 144.
(d) The Warrantholder shall have certain rights pursuant to
a registration rights agreement, dated as of June 9, 1999, between the Company
and the Warrantholder.
3. Issuance and Reservation of Shares; Approval Process.
----------------------------------------------------
3.1 The Company covenants and agrees as follows:
<PAGE>
5
(a) all Warrant Shares which are issued upon the exercise
of this Warrant will, upon issuance, be validly issued, fully paid, and
nonassessable, not subject to any preemptive rights, and free from all taxes,
liens, security interests, charges, and other encumbrances with respect to the
issue thereof, other than taxes with respect to any transfer occurring
contemporaneously with such issue; and
(b) during the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved, and keep
available free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant.
3.2 The Company represents and warrants that the Toronto Stock
Exchange ("TSE") has either approved or waived the approval process for the
issuance of the Warrants and the listing of the Warrant Shares issuable upon the
exercise of the Warrants, subject to the delivery to the TSE of a notice of
issuance of the American Stock Exchange with respect to the Warrant Shares (the
"Notice") and the payment of listing fees as required by the TSE. The Company
covenants and agrees to fulfill all the requirements of the TSE with respect to
the Warrants and the Warrant Shares, including, without limitation, the prompt
delivery to the TSE of the Notice, except to the extent waived by the TSE.
4. Loss or Destruction of Warrant.
------------------------------
Subject to the terms and conditions hereof, upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, of such bond or indemnification as the Company may reasonably
require, and, in the case of such mutilation, upon surrender and cancellation of
this Warrant, the Company promptly (but not later than in two days) will execute
and deliver a new Warrant of like tenor.
5. Ownership of Warrant.
--------------------
The Company may deem and treat the person in whose name this Warrant
is registered as the holder and owner hereof (notwithstanding any notations of
ownership or writing hereon made by anyone other than the Company) for all
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer.
6. Certain Adjustments.
-------------------
6.1 The number of Warrant Shares purchasable upon the exercise
of this Warrant and the Exercise Price shall be subject to adjustment from time
to time as follows:
(a) Stock Dividends. If at any time after the date of the
---------------
issuance of this Warrant (i) the Company shall fix a record date for the
issuance of any stock dividend or distribution payable in shares of Common Stock
or securities or rights convertible or exchangeable into Common Stock or (ii)
the number of shares of Common Stock shall have been increased by a subdivision
or split-up of shares of Common Stock, then, on the record date fixed for the
determination of holders of Common Stock entitled to receive such dividend or
distribution (or on the dividend distribution date if no record date is set) or
immediately after the effective date of subdivision or split-up, as the case may
be, the
<PAGE>
6
number of shares to be delivered upon exercise of this Warrant will be increased
so that the Warrantholder will be entitled to receive the number of shares of
Common Stock that such Warrantholder would have owned (or been entitled to
receive in the case of convertible or exchangeable securities) immediately
following such action had this Warrant been exercised immediately prior thereto,
and the Exercise Price will be adjusted as provided below in paragraph (h).
(b) Combination of Stock. If the number of shares of
--------------------
Common Stock outstanding at any time after the date of the issuance of this
Warrant shall have been decreased by a combination of the outstanding shares of
Common Stock, then, immediately after the effective date of such combination,
the number of shares of Common Stock to be delivered upon exercise of this
Warrant will be decreased so that the Warrantholder thereafter will be entitled
to receive the number of shares of Common Stock that such Warrantholder would
have owned immediately following such action had this Warrant been exercised
immediately prior thereto, and the Exercise Price will be adjusted as provided
below in paragraph (h).
(c) Reorganization, etc. If any capital reorganization of
--------------------
the Company, any reclassification of the Common Stock, any consolidation of the
Company with or merger of the Company with or into any other person, or any sale
or lease or other transfer of all or substantially all of the assets of the
Company to any other person, shall be effected in such a way that the holders of
Common Stock shall be entitled to receive stock, other securities or assets
(whether such stock, other securities or assets are issued or distributed by the
Company or another person) with respect to or in exchange for Common Stock,
then, upon exercise of this Warrant, the Warrantholder shall have the right to
receive the kind and amount of stock, other securities or assets receivable upon
such reorganization, reclassification, consolidation, merger or sale, lease or
other transfer by a holder of the number of shares of Common Stock that such
Warrantholder would have been entitled to receive upon exercise of this Warrant
had this Warrant been exercised immediately before such reorganization,
reclassification, consolidation, merger or sale, lease or other transfer.
(d) Distributions to All Holders of Common Stock. If the
--------------------------------------------
Company shall, at any time after the date of issuance of this Warrant, fix a
record date to distribute (or distribute without a record date) to all holders
of its Common Stock, any shares of capital stock of the Company (other than
Common Stock) or evidences of its indebtedness or assets (not including cash
dividends paid from retained earnings of the Company after the Credit Facility
has been paid off) or rights or warrants to subscribe for or purchase any of its
securities or securities issued in connection with a spin-off, then the
Warrantholder shall be entitled to receive, upon exercise of the Warrant, on a
pro rata basis, that portion of such distribution to which it would have been
entitled had the Warrantholder exercised its Warrant immediately prior to the
date of such distribution. At the time it fixes the record date for such
distribution (or prior to any distribution if no record date is fixed), the
Company shall allocate sufficient reserves to ensure the timely and full
performance of the provisions of this Section 6.1(d). The Company shall promptly
(but in any case no later than five Business Days prior to the record date of
such distribution) mail by first class, postage prepaid, to the Warrantholder,
notice that such distribution will take place.
(e) Stock and Rights Offering at Less than Exercise Price.
-----------------------------------------------------
If (i) within six months of the date of issuance of this Warrant or (ii) at any
time more than US$1 million is outstanding under the Credit Facility referred to
in the Credit Facility Letter, the Company shall issue any of its Common Stock
and/or securities, rights and/or warrants entitling the holders thereof to
subscribe for
<PAGE>
7
or purchase Common Stock (or securities convertible or exercisable for Common
Stock), individually or as a unit, in any such case, at a discrete or implied
(in the case of a unit) price per share of Common Stock (or having a conversion
or exercise price per share of Common Stock) that is less than 95% of the
Exercise Price on the date of such issuance then, at the Warrantholder's option,
immediately after the date of such issuance, the Exercise Price will be reset to
a price equal to the discrete or implied (in the case of a unit) issuance price
per share of such Common Stock; provided, however, if regulatory conditions
-------- -------
imposed upon any such reset, including upon any reduction in the reset or a
shortening of the exercise period, renders the reset unsatisfactory to the
Warrantholder, the Warrantholder may instead elect to receive in lieu thereof
(i) cash in an amount equal to the number of Warrant Shares covered hereby
multiplied by the excess of the actual Exercise Price over the intended reset
Exercise Price, or (ii) if regulatory approval of such cash payment is denied,
such other consideration as will afford the Warrantholder value which is
reasonably equivalent to such reset. Notwithstanding the foregoing, such reset
right shall not be triggered by any issuance or issuances of up to 1% in the
aggregate of the outstanding Common Stock pursuant to any director, officer and
employee stock option or stock bonus plans.
(f) Fractional Shares. No fractional shares of Common
-----------------
Stock or scrip shall be issued to any Warrantholder in connection with the
exercise of this Warrant. Instead of any fractional shares of Common Stock that
would otherwise be issuable to such Warrantholder, the Company will pay to such
Warrantholder a cash adjustment in respect of such fractional interest in an
amount equal to that fractional interest of the then current Fair Market Value
per share of Common Stock.
(g) Carryover. Notwithstanding any other provision of this
---------
Section 6, no adjustment shall be made to the number of shares of Common Stock
to be delivered to the Warrantholder (or to the Exercise Price) if such
adjustment represents less than 1% of the number of shares to be so delivered
hereunder, but any lesser adjustment shall be carried forward and shall be made
at the time and together with the next subsequent adjustment which together with
any adjustments so carried forward shall amount to 1% or more of the number of
shares to be so delivered.
(h) Exercise Price Adjustment. Whenever the number of
-------------------------
Warrant Shares purchasable upon the exercise of this Warrant is adjusted
pursuant to Sections 6.1(a) through (d) herein, the Exercise Price payable upon
the exercise of this Warrant shall be adjusted by multiplying such Exercise
Price immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Warrant Shares purchasable upon the exercise of the
Warrant immediately prior to such adjustment, and of which the denominator shall
be the number of Warrant Shares purchasable immediately thereafter.
6.2 Rights Offering. In the event the Company shall effect an
---------------
offering of Common Stock pro rata among its stockholders, the Warrantholder
shall be entitled to elect to participate in each and every such offering as if
this Warrant had been exercised immediately prior to each such offering. The
Company shall promptly (but in any case no later than seven Business Days prior
to such rights offering) mail by first class, postage prepaid, to the
Warrantholder, notice that such rights offering will take place together with
all documents and information relating to the terms of the offering. Except as
set forth in Section 6.1(e) hereof, the Company shall not be required to make
any adjustment with respect to the issuance of shares of Common Stock pursuant
to a rights offering in which the holder hereof has been entitled to elect to
participate under the provisions of this Section 6.2.
<PAGE>
8
6.3 Notice of Adjustments. Whenever the number of Warrant Shares
---------------------
or the Exercise Price of such Warrant Shares is to be adjusted, as herein
provided, the Company shall, at least 10 Business Days prior to such adjustment,
mail by first class, postage prepaid, to the Warrantholder, notice of such
adjustment or adjustments and a certificate of a firm of independent public
accountants of recognized national standing selected by the Board of Directors
of the Company (who shall be appointed at the Company's expense and who may be
the independent public accountants regularly employed by the Company) setting
forth the number of Warrant Shares and the Exercise Price of such Warrant Shares
after such adjustment, a detailed statement of the facts requiring such
adjustment, and the computation by which such adjustment was made.
6.4 Notice of Extraordinary Corporate Events.
----------------------------------------
In case the Company after the date hereof shall propose to (i)
distribute any dividend (whether stock or cash or otherwise) to the holders of
shares of Common Stock or to make any other distribution to the holders of
shares of Common Stock, (ii) offer to the holders of shares of Common Stock
rights to subscribe for or purchase any additional shares of any class of stock
or any other rights or options, or (iii) effect any reclassification of the
Common Stock (other than a reclassification involving merely the subdivision or
combination of outstanding shares of Common Stock), any capital reorganization,
any consolidation or merger, any sale, transfer or other disposition of all or
substantially all of its property, assets and business, or the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall mail to each Warrantholder notice of such proposed action, which notice
shall specify the date on which (a) the books of the Company shall close, or (b)
a record shall be taken for determining the holders of Common Stock entitled to
receive such stock dividends or other distribution or such rights or options, or
(c) such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution or winding up shall take
place or commence, as the case may be, and the date, if any, as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action. Such notice shall be
mailed in the case of any action covered by clause (i) or (ii) above at least
ten days prior to the record date for determining holders of Common Stock for
purposes of receiving such payment or offer, or in the case of any action
covered by clause (iii) above at least 30 days prior to the date upon which such
action takes place and at least 20 days prior to any record date to determine
holders of Common Stock entitled to receive such securities or other property.
6.5 Effect of Failure to Notify. Failure to file any
---------------------------
certificate or notice or to mail any notice, or any defect in any certificate or
notice, pursuant to Sections 6.3 and 6.4 shall not affect the necessity of the
adjustment to the Exercise Price, the calculation of the number of shares
purchasable upon exercise of this Warrant, or the legality or validity of any
transaction giving rise thereto, without prejudicing the Warrantholder's rights
to seek damages for such failure.
6.6 Other Dilutive Events. In case any event shall occur as to
---------------------
which the provisions of Section 6.1 are not strictly applicable, but the failure
to make any adjustment would not fairly protect the purchase rights represented
by this Warrant in accordance with the essential intent and principles of such
section, then, in each such case, the Company shall appoint a firm of
independent public accountants of recognized national standing (other than the
independent public accountants regularly employed by the Company) to issue a
report which shall determine the adjustment, if any, on a basis
<PAGE>
9
consistent with the essential intent and principles established in Section 6.1,
necessary to preserve without dilution the purchase rights represented by this
Warrant. Upon receipt of such report, the Company will promptly mail a copy
thereof to the Warrantholder and shall make the adjustments described therein.
7. Optional Redemption of Warrants by Company.
------------------------------------------
7.1 Optional Redemption; Trigger Price.
-----------------------------------
(a) If at any time on or after (i) the date which is the
later of the first anniversary of the date of issuance of this Warrant or one
year after the most recent Exercise Price reset as contemplated by Section
6.1(e) hereof, and (ii) the date which is the later of the second anniversary of
the date of issuance of this Warrant or two years after the most recent Exercise
Price reset, the last sales price of the Common Stock for 30 consecutive trading
days on the principal national securities exchange on which the Company's Common
Stock is then listed or admitted for trading is greater than the Trigger Price,
in each such case the Company shall be entitled, subject to the terms of this
Section 7, at its option to redeem, in whole or in part, this Warrant to the
extent of the right to subscribe for and purchase up to 50% of the Warrant
Shares issuable upon exercise of the Warrant originally issued, subject to
adjustment as provided herein, at no charge to the Company.
(b) For purposes of this Section 7.1, "Trigger Price" shall
mean (i) 200% of the Exercise Price, as adjusted, in the case of clause (a)(i)
of this Section 7.1, and (ii) 250% of the Exercise Price, as adjusted, in the
case of clause (a)(ii) of this Section 7.1.
7.2 Notice.
------
(a) Notice of any redemption hereunder shall be given by
the Company to the Warrantholder not less than 30 days prior to the date
scheduled for such redemption (the "Call Date") but no more than 60 days prior
to the Call Date. The Warrantholder shall continue to have the right to exercise
any Warrant called for redemption until 5 P.M. Eastern Time on the Business Day
immediately preceding the Call Date and the Warrant shall continue to be subject
to adjustment until such exercise or redemption. If and to the extent that
Warrants so called for redemption are not exercised prior to the Call Date, the
Company shall pay to the Warrantholder the applicable redemption price for the
Warrant called for redemption hereunder, subject to adjustment as provided
herein, upon surrender by such Warrantholder of the applicable Warrant
certificates.
(b) Notice of any redemption shall set forth (i) the Call
Date, (ii) the Warrant or portion thereof to which such redemption applies and
(iii) the applicable redemption price.
8. Amendments. Any provision of this Warrant may be amended and the
----------
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and the Warrantholder. Any amendment or waiver effected in accordance
with this Section 8 shall be binding upon such Warrantholder and the Company.
<PAGE>
10
9. Definitions.
-----------
As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:
Assignment Form: an Assignment Form in the form annexed hereto as
---------------
Exhibit B.
Business Day: any day other than a Saturday, Sunday or a day on which
------------
national banks are authorized by law to close in the City of New York, State of
New York.
Common Stock: the meaning specified on the cover of this Warrant.
------------
Company: the meaning specified on the cover of this Warrant.
-------
Exercise Form: an Exercise Form in the form annexed hereto as Exhibit
-------------
A.
Exercise Price: the meaning specified on the cover of this Warrant.
--------------
Expiration Date: the meaning specified on the cover of this Warrant.
---------------
Fair Market Value: Fair Market Value of a share of Common Stock
-----------------
(including any Warrant Share) as of a particular date (the "Determination Date")
shall mean:
(i) If the Common Stock is listed on any U.S. national securities
exchange or the TSE, then the Fair Market Value shall be the average of the last
ten "daily sales prices" of the Common Stock on the principal U.S. national
securities exchange on which the Common Stock is listed or admitted for trading
(or, if not, the TSE) on the last ten Business Days prior to the Determination
Date, or if not listed or traded on any such exchanges, then the Fair Market
Value shall be the average of the last ten "daily sales prices" of the Common
Stock on the National Market (the "National Market") of the National Association
of Securities Dealers Automated Quotations System ("Nasdaq") on the last ten
Business Days prior to the Determination Date. The "daily sales price" shall be
the closing price of the Common Stock at the end of each day; or
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges or if no such sale is made on at least nine of such days,
then the Fair Market Value shall be the fair value as reasonably determined in
good faith by an independent, nationally-recognized (U.S.) investment banking
firm reasonably acceptable to the Warrantholder.
Securities Act: the meaning specified on the cover of this Warrant,
--------------
or any similar U.S. Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Act, shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
Warrantholder: the meaning specified on the cover of this Warrant.
-------------
Warrant Shares: the meaning specified on the cover of this Warrant.
--------------
<PAGE>
11
10. Miscellaneous.
-------------
10.1 Entire Agreement. This Warrant constitutes the entire
----------------
agreement between the Company and the Warrantholder with respect to the
Warrants.
10.2 Binding Effects; Benefits. This Warrant shall inure to the
-------------------------
benefit of and shall be binding upon the Company and the Warrantholder and their
respective heirs, legal representatives, successors and assigns. Nothing in
this Warrant, expressed or implied, is intended to or shall confer on any person
other than the Company and the Warrantholder, or their respective heirs, legal
representatives, successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Warrant.
10.3 Section and Other Headings. The section and other headings
--------------------------
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or interpretation
of this Warrant.
<PAGE>
12
10.4 Pronouns. All pronouns and any variations thereof refer to
--------
the masculine, feminine or neuter, singular or plural, as the context may
require.
10.5 Notices. All notices and other communications required or
-------
permitted to be given under this Warrant shall be in writing and shall be deemed
to have been duly given if delivered personally or sent by facsimile (with a
copy also sent by regular mail or overnight courier) or by recognized overnight
courier or by United States certified mail, postage prepaid, return receipt
requested, to the parties hereto at the following addresses or to such other
address as any party hereto shall hereafter specify by notice to the other party
hereto:
(a) if to the Company, addressed to:
Golden Star Resources Ltd.
1660 Lincoln Street, Suite 3000
Denver, Colorado 80264-3001
Facsimile: (303) 830-9094
Attention: General Counsel
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 757-3990
Attention: Edwin S. Maynard
(b) if to the Warrantholder, addressed to:
Elliott Associates, L.P.
712 Fifth Avenue, 36th Floor
New York, New York 10019
Facsimile: (212) 974-2092
Attention: Sam Perlman
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Facsimile: (212) 986-8866
Attention: Martin D. Sklar
Except as otherwise provided herein, all such notices and communications shall
be deemed to have been received on the date of delivery thereof, if delivered
personally, or on the third Business Day after the mailing thereof.
<PAGE>
13
10.6 Separability. Any term or provision of this Warrant which
------------
is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.
10.7 Governing Law. This Warrant shall be deemed to be a
-------------
contract made under the laws of New York and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to such
agreements made and to be performed entirely within such State.
10.8 No Rights or Liabilities as Stockholder. Nothing contained
---------------------------------------
in this Warrant shall be determined as conferring upon the Warrantholder any
rights as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
GOLDEN STAR RESOURCES LTD.
By: /s/ James E. Askew
------------------
President and C.E.O.
Dated: June 9, 1999
<PAGE>
Exhibit A
---------
EXERCISE FORM
-------------
(To be executed upon exercise of this Warrant)
The undersigned hereby irrevocably (provided that the Warrant Shares
are timely delivered) elects to exercise the right, represented by this Warrant,
to purchase __________ of the Warrant Shares and (check one):
herewith tenders payment for such Warrant Shares to the order of
Golden Star Resources Ltd. ("GSR") in the amount of $__________; or
hereby directs and authorizes a reduction of the outstanding amount
of indebtedness due the undersigned under the Note issued in connection with the
Credit Facility in the amount of $___________, in order to exercise the
Conversion Right (as defined in Section 1.2 of the Warrant).
In either case, the undersigned will deliver the Warrant covering the
Warrant Shares being exercised hereunder to GSR in accordance with the terms of
this Warrant. The undersigned requests that a certificate for such Warrant
Shares be registered in the name of ________________ and that such certificates
be delivered to _____________ ________________ whose address is
________________________________________
__________________________________________________________.
Dated:_____________
Signature________________________________________
________________________________________
(Print Name)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Signed in the Presence of:
<PAGE>
Exhibit B
---------
FORM OF ASSIGNMENT
------------------
(To be executed only upon transfer of this Warrant)
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto ______________________ the
right represented by such Warrant to purchase ________________ common shares of
Golden Star Resources Ltd. to which such Warrant relates and all other rights of
the Warrantholder under the within Warrant (to the extent of such shares), and
appoints ______________________ Attorney to make such transfer on the books of
Golden Star Resources Ltd. maintained for such purpose, with full power of
substitution in the premises.
Dated:______________
Signature________________________________________
________________________________________
(Print Name)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Signed in the Presence of:
<PAGE>
<TABLE>
<CAPTION>
Exhibit 10-4
<S> <C>
THE COMPANIES HEREIN SPECIFIED
AND
ANVIL MINING NL
AND
GOLDEN STAR RESOURCES LTD.
---------------------------------------------
AGREEMENT FOR THE SALE AND PURCHASE OF
debt And 90% of the shares of BOGOSO GOLD
LIMITED
---------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
Clause Page
<S> <C> <C>
1. Interpretation.......................................................1
2. Sale And Purchase And Assignment.....................................4
3. Conditions And Pre-Completion Matters................................5
4. Completion...........................................................7
5. Payments.............................................................9
6. Warranties..........................................................10
7. Limitations On The Sellers' Liability...............................11
8. Covenants...........................................................12
9. Confidential Information............................................13
10. Announcements.......................................................14
11. Costs...............................................................14
12. General.............................................................14
13. Assignment..........................................................15
14. The Representative..................................................15
15. Notices.............................................................15
16. Governing Law And Jurisdiction......................................15
17. Counterparts........................................................16
18. Several Liability...................................................16
19. Further Assurance...................................................16
20. Limitation Period...................................................16
Schedule 1 Items For Delivery By The Sellers At Completion.........17
Schedule 2 Warranties..............................................18
Schedule 3 Action Pending Completion...............................20
Schedule 4 List Of Shareholders And Number Of Shares To Be Sold....22
Schedule 5 Form Of Letter Of Resignation...........................27
Schedule 6 Bank Security...........................................28
Schedule 7 Loan Documentation......................................30
Schedule 8 Prospecting Licences And Mining Leases..................32
</TABLE>
<PAGE>
Schedule 9 Form Of Assignment Of Debt..........................33
Schedule 10 Form Of Letter Of Credit............................36
Schedule 11 Approved Capital Expenditure Plan...................39
<PAGE>
THIS AGREEMENT is made as of June 1, 1999
BETWEEN:
EACH OF THE COMPANIES whose names are set out in schedule 4 (together the
"Sellers" and each of them a "Seller"); and
ANVIL MINING NL ("ANVIL"), a company organised and existing under the laws of
Australia having its registered office at Ground Floor, 278 Stirling
Highway, Claremont, Western Australia, 6010, Australia with company number
A. C. N. 060478962 and GOLDEN STAR RESOURCES LTD ("GSR"), a company
amalgamated under the laws of Canada and having its registered office in
Vancouver, Canada and its principal place of business at 1660 Lincoln
Street, Denver, Colorado 80264, U.S.A. (together the "Buyers" and each of
them a "Buyer").
WHEREAS
1. The Sellers are a group of financial institutions who are secured creditors
of the Company. The Sellers acquired the Shares with the intention of
selling them shortly thereafter.
2. The Sellers have agreed to sell the Shares to the Buyers as a means of
compensating the Sellers for the outstanding indebtedness owed to the
Sellers by the Company. The Sellers are selling the Shares and are assigning
the debts owed to the Sellers by the Company, to the Buyers.
THE PARTIES AGREE as follows:
1. INTERPRETATION
1.1 In this Agreement:
"Adjustment Period" means the meaning given to it in clause 5.1.7;
"Bank Security" means the security created in favour of the Secured Lenders
(as that term is defined in the relevant Security Documents) by the Security
Documents;
"Business Day" means a day other than a Saturday or Sunday or public holiday
in England, Ghana and New York City;
"Company" means Bogoso Gold Limited, a company organised and existing under
the laws of the Republic of Ghana, whose registered office is at Accra,
Ghana (registered in Ghana with company number 262794);
"Company's Bank Accounts" means all accounts of whatever nature held by the
Company with banks or other financial institutions whether or not held in
Ghana;
"Completion" means completion of the sale and purchase of the Shares, the
IFC Debt and the DEG Debt in accordance with this Agreement;
"Confidential Information" means all information existing at the date of
Completion not publicly known used in or otherwise relating to the Company's
business or financial or other affairs, including, without limitation,
information relating to:
-1-
<PAGE>
(a) the marketing of goods or services including, without
limitation, forecast production, production statistics, market
share statistics, geological data, prices, market research
reports and surveys, and advertising or other promotional
materials; or
(b) future projects, business development or planning, commercial
relationships and negotiations;
"Concessions" means the concessions granted by or pursuant to the Mining
Leases;
"DEG" means DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbH, a
development finance institution organised and existing under the laws of the
Federal Republic of Germany;
"DEG Debt" means the indebtedness of the Company to DEG pursuant to the
agreements listed in Part 1 of schedule 7 together with all accrued
interest, expenses and other monies owed by the Company to DEG pursuant to
such agreements which, as of close of business on April 28, 1999, in
aggregate amounted to DEM12,367,609.76;
"Encumbrance" means a mortgage, charge, pledge, lien, option, restriction,
claim, equity, right of first refusal, right of pre-emption, third-party
right or interest, other encumbrance or security interest of any kind, or
another type of preferential arrangement (including, without limitation, a
title transfer or retention arrangement) having similar effect;
"Environmental Consultant" means such firm of internationally recognised
environmental consultants from time to time appointed by the Company and
approved by the Representative, such approval not to be unreasonably
withheld;
"Force Majeure Event" means an act of God, epidemic, landslide, lightning,
earthquake, flood, storm, fire, adverse weather conditions, war or civil war
or any event similar to the foregoing which is not within the control of the
Company or the Buyers and which effectively prevents the operation of the
Mine by the Company;
"Government Consents" means the consents and approvals more particularly set
out in clause 3.1;
"IFC" means the International Finance Corporation, an international
organisation established by articles of agreement among its member
countries;
"IFC Debt" means the indebtedness of the Company to IFC pursuant to those
agreements listed in Part 2 of schedule 7 together with all accrued
interest, expenses and other monies owed by the Company to IFC pursuant to
such agreements and the IFC Shareholder Advances which, as of close of
business on April 28, 1999, in aggregate amounted to US$27,057,831.78;
"IFC Shareholders Advances" means the advances made to the Company by IFC
pursuant to the Shareholder Advances Documentation together with all
interest,
-2-
<PAGE>
expenses and other monies owed by the Company to IFC pursuant to
such agreements which, as of close of business on April 28, 1999, in
aggregate amounted to US$5,354,603.00;
"Initial Purchase Price" has the meaning given to it in clause 2.4;
"Letter of Credit Bank" means the bank issuing the US$2m L/C;
-
"LIBOR" means, in relation to the amount of US$5,000,000 payable under
clause 5.1.7 on which interest for the Adjustment Period is to accrue, the
percentage rate per annum equal to the offered quotation which appears on
the page of the Telerate Screen which displays an average British Bankers
Association Interest Settlement Rate for United States Dollars (being
currently "3740" or, as the case may be, "3750") for such period at or about
11.00 a.m. (London time) on the relevant interest determination date (as
selected by the Representative) or, if such page or such service shall cease
to be available, such other page or such other service for the purpose of
displaying an average British Bankers Association Interest Settlement Rate
for United States Dollars as the Representative may select;
"Long Stop Date" means the date falling 90 days after the date of this
Agreement or, as the context requires, such date to which it is deferred in
accordance with the provisions of clause 3.8;
"Mine" means the concession area which is the subject of the Concessions and
the related mine workings, processing facilities and plants located thereon
as currently operated by the Company;
"Mining Leases" means the prospecting licences and mining leases as more
particularly set out in schedule 8;
"Redundancy Payment" means the aggregate payment to be made by the Company
pursuant to the Redundancy Programme;
"Redundancy Programme" means the programme pursuant to which the Sellers
shall procure that the Company terminates the contracts of employment of all
of its employees and makes such redundancy payments and other payments
consequent thereon as shall be required (including payments in respect of
accrued holiday entitlements);
"Rehabilitation Amount" means the sum of US$6,000,000;
"Rehabilitation Reserve Account" means the Company's account to be opened
with Barclays Bank plc, or another first class international bank with a
long term debt rating accorded by Standard & Poor's of not less than AA,
which at Completion will have standing to its credit an amount at least
equal to the Rehabilitation Amount;
"Relevant Claim" means a claim by the Buyers involving or relating to breach
of clause 6.1;
-3-
<PAGE>
"Relevant Shares" has the meaning given to it in paragraph 2 of schedule 2;
"Representative" means IFC in its capacity as representative of the Sellers
pursuant to the terms hereunder for the purposes specified herein;
"Security Documents" means those agreements listed in schedule 6;
"Shareholders Advances Documentation" means those agreements listed in Part
3 of schedule 7;
"Shares" means all those issued shares of the Company owned by the Sellers,
being the 704,639"A" shares of no par value of the Company comprising 90% of
the issued share capital of the Company;
"Sulphide Ore" means ore other than (i) oxide ore and/or (ii) transition ore
that can be processed through the processing plant at the Mine as currently
designed and configured and subject to minor changes thereto made in the
ordinary course of business of processing oxide ores and transition ores;
"US$2m L/C" means, the US$2,000,000 letter of credit furnished or to be
furnished by the Buyers under clause 5.1.1; and
"Warranty" means a statement contained in schedule 2 and "Warranties" means
all those statements.
1.2 In this Agreement, a reference to:
<TABLE>
<S> <C>
1.2.1 a statutory provision includes a reference to the statutory provision
as modified or re-enacted or both from time to time before the date
of this Agreement and any subordinate legislation made under the
statutory provision before the date of this Agreement;
1.2.2 a person includes a reference to a body corporate, association or
partnership;
1.2.3 a person includes a reference to that person's legal personal
representatives and successors; and
1.2.4 a clause, paragraph or schedule, unless the context otherwise
requires, is a reference to a clause or paragraph of or schedule to
this Agreement.
</TABLE>
1.3 The headings in this Agreement do not affect its interpretation.
2. SALE AND PURCHASE and assignment
2.1 Each Seller agrees to sell and the Buyers agree to buy those number of
Shares appearing against the respective names of the Sellers in schedule 4
and each right attaching to such Shares at or after the date of this
Agreement, free and clear of any Encumbrance other than the Government of
Ghana's right to its carried interest. The purchase of the Shares shall be
together with the right to all dividends and other
-4-
<PAGE>
distributions declared, made and/or paid in respect
of the Shares on or after April 1, 1999.
2.2 IFC agrees to sell and the Buyers agree to buy by way of an assignment by
IFC in favour of the Buyers all rights, title and interest in and to the IFC
Debt free and clear of any Encumbrance. The purchase of the IFC Debt shall
be together with the right to all interest and other payments payable and/or
accruing in respect of the IFC Debt on or after 1 April 1999 (excluding, for
the avoidance of doubt, any principal paid on 1 April 1999 and any interest
accrued for the interest period ending on 31 March 1999 and paid on 1 April
1999).
2.3 DEG agrees to sell and the Buyers agree to buy by way of an assignment by
DEG in favour of the Buyers all rights, title and interest in and to the DEG
Debt free and clear of any Encumbrance. The purchase of the DEG Debt shall
be together with the right to all interest and other payments payable and/or
accruing in respect of the DEG Debt on or after 1 April 1999 (excluding, for
the avoidance of doubt, any principal paid on 1 April 1999 and any interest
accrued for the interest period ending on 31 March 1999 and paid on 1 April
1999).
2.4 The aggregate purchase price (the "Initial Purchase Price") of the Shares,
the IFC Debt and the DEG Debt is US$12,000,001, of which the first tranche
is US$2,000,000, the second tranche is US$10,000,000 and the third tranche
is US$1. The Initial Purchase Price, together with any subsequent payments
of consideration which may become due in accordance with clause 5, shall be
paid by the Buyers in accordance with clause 5 and allocated by the
Representative amongst the Sellers in the proportions set out against each
Seller's name in schedule 4. The first and second tranches of the Initial
Purchase Price of US$12,000,000 shall be allocated to and apportioned as the
purchase price for the IFC Debt and the DEG Debt and the third tranche of
US$1 shall be allocated to and apportioned as the purchase price for the
Shares. Any subsequent payments of consideration which may become due in
accordance with clause 5 shall be allocated to and apportioned as the
purchase price for the IFC Debt and the DEG Debt.
3. CONDITIONS and pre-completion matters
3.1 Completion is conditional on the Buyers having obtained, to the extent
required, the following approvals as soon as possible and in any event no
later than the Long Stop Date:
3.1.1 approval from the Minister of Mines and Energy of the Government of
Ghana pursuant to the Minerals and Mining Law 1986 (PNDCL 153) as
amended by Act 475 for the acquisition by the Buyers of the Shares
which constitute more than 50% of the Company's shares and the
consequential change in control of the Company;
3.1.2 approval from the Bank of Ghana pursuant to the Exchange Control Act
1961 (Act 71) for the transfer of the Shares to the Buyers;
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3.1.3 approval from the Ghanaian Government of the sale of the IFC Debt
and the DEG Debt to the Buyers; and
3.1.4 each and all other Ghanaian governmental approvals required in
relation to the transaction hereby contemplated.
3.2 The Buyers shall use all reasonable endeavours to obtain the Government
Consents as soon as possible and in any event before the Long Stop Date.
3.3 If at any time any of the Sellers or the Buyers becomes aware of a fact or
circumstance that might prevent any of the conditions set out in clause 3.1
from being satisfied or permit the Buyers to terminate this Agreement in
accordance with clause 3.7, it shall promptly inform the other parties.
3.4 If a Government Consent has not been obtained by 6.00 p.m. (London time) on
the Long Stop Date, this Agreement shall terminate with immediate effect.
3.5 If this Agreement is terminated pursuant to clause 3.4 or 3.7, each party's
further rights and obligations cease immediately on termination, but
termination does not affect a party's accrued rights and obligations at the
date of termination, including any right to damages arising as a
consequence of any breach of this Agreement.
3.6 The Buyers shall give to the Sellers in a form reasonably satisfactory to
the Sellers (by way of certificate of the Buyers' Ghanaian legal advisors
or otherwise) evidence of receipt of the Government Consents as soon as
possible after such receipt.
3.7 If at any time between the date hereof and Completion:
3.7.1 any of the Warranties contained in this Agreement is not, or ceases
to be, true or accurate in any respect or becomes misleading in any
respect; or
3.7.2 there has been a material breach of any of the provisions of schedule
3 (which, if capable of remedy, has not been remedied within 30 days
of notice thereof to the Representative and the Sellers from the
Buyers); or
3.7.3 a Force Majeure Event occurs and continues up to the Long Stop Date,
then the Buyers may terminate this Agreement forthwith and shall have no
further obligations hereunder whatsoever and, upon receiving notice of such
termination, the Representative shall take such action as the Buyers may
reasonably request to facilitate the cancellation of the US$2m L/C.
3.8 Without prejudice to the rights of the Buyers pursuant to clause 3.7.3, if
at any time between the date hereof and Completion a Force Majeure Event
occurs and is continuing, the Buyers may, by notice in writing to the
Representative, elect that the original Long Stop Date be deferred to a
date (the "Deferred Long Stop Date") falling no later than 90 days after
the Long Stop Date and that this Agreement should thereafter be construed
as if references to the Long Stop Date were references to the Deferred Long
Stop Date, mutatis mutandis, provided that any such notice shall be
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accompanied by confirmation of the Letter of Credit Bank of the extension of
the expiry date of the US$2m L/C to a date falling at least ten Business
Days after the Deferred Long Stop Date. In the event the Force Majeure Event
is continuing as at the Deferred Long Stop Date, the Representative shall,
at the request of the Buyers, exchange views and consult in good faith with
the Buyers with a view to further deferring the Deferred Long Stop Date.
4. COMPLETION
4.1 Completion shall take place in accordance with this clause 4 at the offices
of Clifford Chance, London on the tenth Business Day following the
satisfaction of all the conditions set out in clause 3.1 (or such other day
as the parties may agree) provided that such conditions are satisfied prior
to the Long Stop Date.
4.2 At Completion the Sellers shall give to the Buyers each item specified in
schedule 1.
4.3 The Sellers shall procure that at Completion:
4.3.1 the Company's directors hold a meeting of the board of directors of
the Company at which the directors:
(a) vote in favour of the registration of the Buyers or their
respective nominee(s) as member(s) of the Company in respect of
the Shares (subject to the production of properly stamped
transfers);
(b) do all such acts and things, if any, as may be necessary to give
effect to the transfer of the IFC Debt and the DEG Debt on
behalf of the Company;
(c) if required by the Buyers (such requirement to be notified by
the Buyers to the Representative at least 21 days before
Completion), change the Company's registered office to a place
nominated by the Buyers;
(d) change the Company's accounting reference date to December 31;
(e) if required by the Buyers (such requirement to be notified by
the Buyers to the Representative at least 21 days before
Completion), accept the resignation of the Company's existing
directors, auditors and secretary with effect from the end of
the meeting;
(f) appoint persons nominated by the Buyers as directors, secretary
and auditors of the Company with effect from the end of the
meeting;
(g) with effect from the end of the meeting, authorise the secretary
to notify the specimen signatures of the new officers of the
Company in connection with each existing mandate given by the
Company for the operation of the Company's Bank Accounts; and
(h) terminate with effect from the date of Completion the contracts
of employment of all the Company's employees (except those of
the
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Company's expatriate staff agreed between the Sellers and the
Buyers prior to the execution of this Agreement), give effect
to the Redundancy Programme and the making of the Redundancy
Payment.
4.3.2 the Rehabilitation Amount is standing to the credit of the
Rehabilitation Reserve Account; and
4.3.3 all Redundancy Payments will be made to the employees terminated
(as referred to in clause 4.3.2(h)).
4.4 At Completion the Sellers shall be paid:
4.4.1 the first tranche of the Initial Purchase Price for the IFC Debt
and the DEG Debt of US$2,000,000 by drawing on the US$2m L/C in
accordance with clause 5.1.2 below;
4.4.2 the second tranche of the Initial Purchase Price for the IFC Debt
and the DEG Debt of US$10,000,000 in accordance with clause 5.1.5
below; and
4.4.3 the third tranche of the Initial Purchase Price for the Shares of
US$1 in accordance with clause 5.1.6 below.
4.5 If the Sellers shall fail or be unable to comply with any of their
obligations under the preceding provisions of clause 4.3 on the date of
Completion, the Buyers may:
(a) by notice in writing to the Representative, defer Completion to a
date not more than 28 days after that date (in which case the
provisions of this clause 4.5 shall apply to Completion as so
deferred) provided that any such notice shall be accompanied by
confirmation of the Letter of Credit Bank of the extension of the
expiry date of the US$2m L/C to a date falling at least ten
Business Days after the date to which Completion is deferred; or
(b) proceed to Completion so far as practicable but without prejudice
to the Buyers' rights (whether under this Agreement generally or
under this clause, in damages or otherwise) to the extent that
the Sellers shall not have complied with their obligations
thereunder; or
(c) treat such failure or inability to comply as a repudiatory breach
of this Agreement, acceptance of which shall discharge the Buyers
from their undischarged obligations under this Agreement (without
prejudice to any other remedy which the Buyers may have, whether
in damages or otherwise).
4.6 Each of the Sellers hereby waives any and all rights of pre-emption,
rights of first refusal, options and other similar rights to which each
of them respectively may be entitled with respect to the transfers to the
Buyers or their respective order of the Shares, the IFC Debt and the DEG
Debt provided for in this Agreement, and for all purposes enabling each
of them respectively in that behalf, hereby consents to such transfers.
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4.7 Each of the Sellers hereby agrees to release, with effect from Completion,
the Company from all claims, liabilities demands and rights of action
whatsoever which they have had, have or may have against the Company
arising from their dealings with the Company. Provided that such release
shall not apply in respect of the IFC Debt and the DEG Debt and the
security interests relating thereto to the extent that the same are
assigned to the Buyers in accordance with this Agreement.
5. PAYMENTS
5.1 The Buyers shall pay or procure the payment to the Sellers or as the
Sellers direct in writing the purchase price of the Shares, the IFC Debt
and the DEG Debt in the following instalments on the occurrence of the
specified dates or events:
5.1.1 1st tranche of the Initial Purchase Price
if they have not already done so, the Buyers shall forthwith upon
signing this Agreement deliver to the Representative by courier (i)
the Agreement signed by them and (ii) an irrevocable letter of
credit in the form set out in schedule 10 and issued by the Letter
of Credit Bank, for the sum of US$2,000,000 (the "US$2m L/C").
5.1.2 The Sellers may draw on the US$2m L/C if:
(a) Completion occurs whereupon such drawing shall be applied
towards payment of the first tranche of the Initial Purchase
Price.
(b) Completion fails to occur for any reason other than:
(i) failure by the Buyers to obtain the Government Consents
by the Long Stop Date; or
(ii) failure by the Sellers to comply with any of their
obligations under this Agreement by the Long Stop Date;
or
(iii) the occurrence of any event giving rise to a right on the
part of the Buyers not to effect Completion.
5.1.3 Any amount rightfully drawn on the US$2m L/C hereunder shall not be
refundable to the Buyers.
5.1.4 If any of the events contemplated by clause 5.1.2 (b) (i), (ii) or
(iii) occurs the Representative will promptly give notice to the
Letter of Credit Bank confirming the termination of the Sellers
rights pursuant to the US$2m L/C.
5.1.5 2nd tranche of the Initial Purchase Price at Completion, payment of
the sum of US$10,000,000.
5.1.6 3rd tranche of Initial Purchase Price
at Completion, the cash sum of US$1.
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5.1.7 Additional Purchase Price
subject to the provisions of clause 5.1.8, Buyers shall pay to
the Sellers the additional sum of US$5,000,000 on the first
anniversary of the commencement of commercial mining of Sulphide
Ore from the Concessions. Such additional payment will be
adjusted by an amount equal to interest at 6-month LIBOR over the
period commencing from Completion to the date such additional
payment is made (the "Adjustment Period").
5.1.8 The obligations of the Buyers pursuant to clause 5.1.7 shall
terminate upon the surrender by the Company of its right title
and interest in the Mining Leases to the Government of Ghana.
5.2 All payments to be made by the Buyers to the Sellers under this Agreement
(other than pursuant to clauses 5.1.1 and 5.1.2) shall be made to the
Representative on behalf of the Sellers and in immediately available United
States dollar funds, by electronic funds transfer to such accounts as shall
have been notified, by no later than 3.30 p.m. London time on the second
Business Day before the relevant due date, to the Buyers by the
Representative, and in default of such notification, shall be by bankers'
drafts (drawn on a first class international bank with a long term debt
rating accorded by Standard & Poor's of not less than AA in favour of the
Representative) which shall be handed to the Representative on the relevant
due date. The transfer of funds or, as the case may be, the handing over of
the bankers' drafts shall be effected by no later than noon (London time)
on the relevant due date. The Buyers shall obtain a good discharge for any
payment due under this Agreement by making unconditional payment to the
Representative without any set-off or counterclaim and the Representative
shall distribute such payment to the Sellers in accordance with
arrangements made or to be made amongst them and the Buyers shall have no
obligation as to such allocation among the Sellers.
5.3 The provisions of clause 5.2 shall apply mutatis mutandis to all payments
to be made by the Representative, on behalf of the Sellers, to the Buyers
under this Agreement.
6. WARRANTIES
6.1 Each Seller severally, for itself (but not in relation to any other of the
Sellers) and, as regards the Shares, in respect only of those Shares
attributed to it in schedule 4 and, as regards the IFC Debt and the DEG
Debt, only to the extent of its interest in the IFC Debt and/or the DEG
Debt, warrants to the Buyers that, each Warranty is true and not misleading
at the date of this Agreement. Immediately before the time of Completion,
each Seller severally, for itself (but not in relation to any other of the
Sellers) and, as regards the Shares, in respect only of those Shares
attributed to it in schedule 4 and, as regards the IFC Debt and the DEG
Debt, only to the extent of its interest in the IFC Debt and/or the DEG
Debt, is deemed to warrant to the Buyers that each Warranty is true and not
misleading at the date of Completion. For this purpose only, where in a
Warranty there is an express or implied reference to the "date of this
Agreement", that
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reference is to be construed as a reference to the "date of Completion".
The Warranties shall not in any respect be extinguished or affected by
Completion.
6.2 The Buyers acknowledge that the Sellers have specifically told the Buyers
that the Buyers must rely absolutely on the Buyers' own opinion and/or
professional advice concerning the assets of the Company, including, without
limitation, all rights, title and interest in real and moveable property
owned by the Company, including the rights to receive payments connected to
any of the foregoing. The Buyers acknowledge that each of them has itself
been, and will continue to be, solely responsible for making its own
independent appraisal of and investigations into the condition, affairs,
financial position, prospects, business and operations of the Company.
6.3 Each Warranty is to be construed independently and (except where this
Agreement provides otherwise) is not limited by a provision of this
Agreement or another Warranty. For the avoidance of doubt, save for the
Warranties expressly provided in schedule 2, no other warranty, express or
implied, statutory or otherwise, is or will be given by any of the Sellers
in respect of the Shares, or the IFC Debt or the DEG Debt.
6.4 Between the execution of this Agreement and Completion, each Seller shall:
6.4.1 procure that the Company complies with schedule 3; and
6.4.2 notify the Buyers immediately if it becomes aware of a fact or
circumstance which constitutes a breach of clause 6.1 or has caused,
or will or might cause, a Warranty to become untrue or misleading in
any respect at any time before Completion or might permit the Buyers
to terminate this Agreement in accordance with clause 3.7.
7. LIMITATIONS ON THE SELLERS' LIABILITY
7.1 The Sellers are not liable in respect of a Relevant Claim unless and until
the amount that would otherwise be recoverable from all the Sellers (but for
this clause 7.1) in respect of that Relevant Claim, when aggregated with any
other amount or amounts recoverable in respect of other Relevant Claims,
exceeds US$100,000 Provided That each Seller's liability in respect of a
Relevant Claim shall be several and limited to:
7.1.1 where such Relevant Claim relates to the Shares, the percentage of
such Relevant Claim that appears against its name under the column
titled "Percentage of Price allocated to Shares" in schedule 4; and
7.1.2 where such Relevant Claim relates to the IFC Debt and/or the DEG
Debt, the percentage of such Relevant Claim that appears against its
name under the column titled "Percentage of Price allocated to Debt"
in schedule 4.
7.2 The Sellers' total liability in respect of all Relevant Claims is limited to
the aggregate purchase price paid by the Buyers pursuant to clause 5 and
severally received or receivable by the Sellers pursuant to this Agreement.
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7.3 The Buyers shall have no claim whatsoever against any director, shadow
director, officer, employee, or agent of the Sellers (or any of them) in
respect of any claim for a breach of the Warranties.
8. Covenants
8.1 The Sellers agree that, between the date of this Agreement up to
Completion:
8.1.1 the Buyers may monitor the operations of the Company (at the Buyers'
expense) by having up to six of their representatives on the
premises of the Company at any time provided that such
representatives shall not interfere with the Company's operations;
and
8.1.2 the Buyers may negotiate with any of the Company's existing
employees with a view to determining which employees they wish to
re-employ on or after Completion and the terms and conditions of
such re-employment and/or liaise as appropriate with the Company's
directors on the termination of the Company's employees on
Completion.
8.2 Each of the Buyers undertakes with each Seller for its own benefit:
8.2.1 after Completion, to procure that the Company carries out the
continuous rehabilitation (including physical reclamation, socio-
economic community development and closure) of (a) the Mine and (b)
the existing oxide mining operations thereat ("environmental
rehabilitation work"), as an integral part of the normal mining
operation subject to the sterilisation drilling of any old mining
areas and it being operationally prudent in accordance with
applicable Ghanaian legislation and regulatory requirements and
World Bank Policies and Guidelines; and
8.2.2 to procure that the Company establishes within three months of
Completion a bond for US$5,000,000 from a first class international
bank with a long term debt rating accorded by Standard & Poor's of
not less than AA, pursuant to which the Company may, after the
Environmental Consultant has certified that the Company has, after
Completion, incurred expenditure in respect of environmental
rehabilitation work on the Mine of not less than US$1,000,000, draw
down from time to time amounts in reimbursement of expenditure in
respect of environmental rehabilitation work in excess of the first
US$1,000,000 expended to the extent certified by the Environmental
Consultant as having been incurred by the Company in respect
thereof, provided that the minimum amount of each drawdown shall be
US$100,000 and the maximum amount of each drawdown shall be
US$1,000,000. Upon the certifiable completion of all environmental
rehabilitation work, the remaining Rehabilitation Amount, if any,
will be allocated for the purposes contemplated by clause 8.2.3;
8.2.3 to procure that the Company:
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(a) transfers not less than US$1,000,000 into an appropriate
vehicle (which would facilitate the mobilisation of bilateral
funding for the local community as a whole); or, if
notwithstanding the reasonable efforts of the Company, to which
the Representative shall endeavour to render such assistance as
the Company may reasonably request in this regard, no
appropriat e vehicle is available,
(b) otherwise expends not less than US$1,000,000,
for, or as the case may be, in, carrying out socio-economic
community development of the community affected by the Mine and
adjacent areas; for the avoidance of doubt such US$1,000,000 shall
not be funded out of the monies standing to the credit of the
Rehabilitation Reserve Account;
8.2.4 within 28 days of Completion, to register with the Ghanaian
Registrar of Companies a duly completed notification in the
prescribed form of the change of the Company's directors and
secretary and specifying the date of the change. The Buyers shall
indemnify the outgoing directors and secretary for any loss or
damage caused by their failure to so notify the Ghanaian Registrar
of Companies;
8.2.5 from time to time, up to the commencement of commercial mining of
Sulphide Ore on the Concessions, on the request of any Seller
through the Representative, to permit representatives of the
Representative or any Seller (at their expense) to have reasonable
access to the Mine site, on not less than 48 hours notice and during
normal business hours, for the purpose of determining the status of
sulphide mining operations carried on by the Company and quarterly
reports on mining activities of the Company and to furnish the
Representative or such Seller with a copy of any such report
inspected;
8.2.6 promptly to give notice to the Representative and each Seller of the
occurrence of any event which will trigger an obligation upon the
Buyers to make any payment pursuant to clause 5; and
8.2.7 promptly to notify the Representative upon commencement of
commercial mining of Sulphide Ore from the Concessions.
9. CONFIDENTIAL INFORMATION
9.1 Before Completion the Buyers shall:
9.1.1 not use or disclose to a person Confidential Information they have
or acquire; and
9.1.2 make every effort to prevent the use or disclosure of Confidential
Information.
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9.2 After Completion, none of the Buyers or the Sellers shall disclose to any
person the detailed terms of the transactions effected pursuant to this
Agreement.
9.3 Clause 9.1 and clause 9.2 do not apply to:
9.3.1 disclosure of information to a director, officer or employee or any
other agent or representative of the Buyers whose function requires
him to have such information or disclosure by him in accordance
with his function;
9.3.2 use or disclosure of information required to be used or disclosed
by law or which is customarily provided to any third parties;
9.3.3 disclosure to an adviser for the purpose of advising the relevant
party but only on terms that clause 9.1 or, as the case may be,
clause 9.2 applies to use or disclosure by the adviser; or
9.3.4 information which becomes publicly known otherwise than by a breach
of clause 9.1 or, as the case may be, clause 9.2.
10. ANNOUNCEMENTS
10.1 Subject to clause 10.2, none of the parties may, before or for the period
of one year after Completion, make or send a public announcement,
communication or circular concerning the transactions referred to in this
Agreement unless it has first obtained the other parties' written consent,
which may not be unreasonably withheld or delayed.
10.2 Clause 10.1 does not apply to a public announcement, communication or
circular required by law or the rules and regulations of a stock exchange.
11. COSTS
Except where this Agreement provides otherwise, each party shall pay its
own costs relating to the negotiation, preparation, execution and
performance by it of this Agreement and of each document referred to in
it. The Buyers shall be responsible for all stamp and other similar taxes,
duties and imposts payable by reference to the transfers of the Shares
hereby contemplated.
12. GENERAL
12.1 A variation of this Agreement is valid only if it is in writing and signed
by or on behalf of each party.
12.2 The failure to exercise or delay in exercising a right or remedy provided
by this Agreement or by law does not constitute a waiver of the right or
remedy or a waiver of other rights or remedies. No single or partial
exercise of a right or remedy provided by this Agreement or by law
prevents further exercise of the right or remedy or the exercise of
another right or remedy.
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12.3 Except to the extent that they have been performed and except where this
Agreement provides otherwise, the obligations contained in this Agreement
remain in force after Completion.
12.4 Each of the parties to this Agreement agree that their obligations shall
enjoy the benefit of specific performance.
12.5 If at any time any of the provisions of this Agreement becomes illegal or
unenforceable in any respect such provision shall be ineffective to the
extent necessary without affecting or impairing the legality and
enforceablity of the remaining provisions of this Agreement.
13. ASSIGNMENT
A party may not assign or transfer or purport to assign or transfer any of
its rights or obligations under this Agreement (or any interest in any
thereof), provided that each Seller may assign, without any consent, (in
whole or in part) its rights hereunder to its affiliate which holds the
interest hereby agreed to be sold in the related Shares or, IFC Debt or
DEG Debt, as the case may be.
14. THE REPRESENTATIVE
The Representative has only those duties which are expressly specified in
this Agreement, and those duties are solely of a mechanical and
administrative nature in connection with the co-ordination of the sale of
the Shares, the IFC Debt and the DEG Debt by the Sellers to the Buyers.
Nothing in this Agreement constitutes the Representative as agent, trustee
or fiduciary for any other Seller or any other person. Without limitation
to the generality of the foregoing, the Representative shall not be liable
to account for interest on any moneys paid to it for the account of any
Seller.
15. NOTICES
15.1 A notice or other communication under or in connection with this Agreement
shall be in writing and shall be delivered personally or sent by courier
or by fax to the party due to receive the notice or communication, at its
address set out in this Agreement or another address specified by that
party by written notice to the other.
15.2 In the absence of evidence of earlier receipt, a notice or other
communication is deemed given:
15.2.1 if delivered personally, when left at the address referred to in
clause 15.1;
15.2.2 if sent by courier, when left at the address referred to in clause
15.1; and
15.2.3 if sent by fax, on completion of its transmission.
16. GOVERNING LAW AND JURISDICTION
16.1 This Agreement is governed by and shall be construed in accordance with,
English law. The courts of England shall have jurisdiction to hear and
decide any suit, action
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or proceedings, and to settle any dispute, which may arise out of or in
connection with this Agreement (respectively, "Proceedings" and
"Disputes") and, for these purposes, each party irrevocably submits to the
jurisdiction of the courts of England.
16.2 Each party irrevocably waives any objection which it might at any time
have to the courts of England being nominated as the forum to hear and
decide any Proceedings and to settle any Disputes and agrees not to claim
that the courts of England are not a convenient or appropriate forum.
16.3 Each of the parties hereto acknowledge and agree that that the submission
by IFC to the jurisdiction of the courts of England does not constitute a
waiver by IFC of the immunities and privileges granted to it by English
law or the law.
16.4 Process by which any Proceedings are begun in England may be served on:
16.4.1 the Sellers by being delivered to Clifford Chance Secretaries
Limited, 200 Aldersgate Street, London EC1A 4JJ; and
16.4.2 the Buyers by being delivered to [ ].
Nothing contained in clause 16.4 affects the right to serve process in
another manner permitted by law.
17. COUNTERPARTS
This Agreement may be executed in any number of counterparts each of which
when executed and delivered is an original, but all the counterparts
together constitute the same document.
18. SEVERAL LIABILITY
18.1 The obligations of the Sellers hereunder shall be several, and not joint
or joint and several.
18.2 The obligations of the Buyers to pay the second tranche of the Initial
Purchase Price shall be joint and several.
18.3 Save as provided pursuant to clause 18.2, the obligations of the Buyers
hereunder to pay the purchase price of the Shares, the IFC Debt and the
DEG Debt shall be several, and not joint or joint and several and shall be
apportioned as between Anvil and GSR in the proportions of 22.2% and 77.8%
respectively.
19. FURTHER ASSURANCE
Each party shall do and execute, or arrange for the doing and executing
of, each necessary act, document and thing reasonably within its power to
implement this Agreement and the transactions hereby contemplated.
20. LIMITATION PERIOD
The limitation period for the purposes of this Agreement will be 80 years.
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SCHEDULE 1
Items For Delivery By The Sellers At Completion
1. Executed transfer(s) in respect of the Shares to the Buyers or their
respective nominee(s) and the share certificate(s) for the Shares.
2. The common seal (if any) of the Company and each register, minute book and
other book required to be kept by the Company made up to the date of
Completion and each certificate of incorporation and certificate of
incorporation on change of name for the Company.
3. A copy of a letter to the Company from its auditors resigning their office
with effect from Completion, the original of the letter having been
deposited at the registered office of the Company.
4. A copy of each bank mandate to the Company, including in relation to the
Rehabilitation Reserve Account, and copies of statements of each Company's
Bank Account including, without limitation, the Rehabilitation Reserve
Account (with credit balance equal to US$6,000,000), made up to a date not
earlier that two Business Days before the date of Completion.
5. A signed letter in the form attached as schedule 5 from each present
director (other than the director who is the representative of the
Government of Ghana) and secretary of the Company in each case resigning
their respective office (with effect from the end of the meeting held
pursuant to clause 4.3.1) and acknowledging that the writer has no claim
against the Company for compensation for loss of office or otherwise.
6. Executed releases in respect of the Bank Security if required by the Buyers
(such requirement to be notified to the Representative no later than 21 days
before Completion).
7. Deed of assignment in respect of the assignment of the IFC Debt to the
Buyers or the Buyers' nominee(s) substantially in the form set out in
schedule 8 executed by IFC.
8. Deed of assignment in respect of the assignment of the DEG Debt to the
Buyers or the Buyers' nominee substantially in the form set out in schedule
8 executed by DEG.
9. Such documentation as the Buyers may reasonably require (such requirement to
be notified to the Representative no later than 14 days before Completion)
to assign the Sellers' interest in the Bank Security to the Buyers.
-17-
<PAGE>
SCHEDULE 2
Warranties
1 CAPACITY AND AUTHORITY
1.1 Right, power, authority and action
The Seller has the right, power and authority and has taken all action
necessary to execute and deliver, and to exercise its rights and perform
its obligations under, this Agreement and the transactions contemplated
hereby and each document to be executed at or before Completion.
2 SHARES
2.1 Immediately prior to Completion the Seller will be the only legal and
beneficial owner of that number of Shares appearing against its name in
schedule 4 (the "Relevant Shares").
2.2 The Relevant Shares comprise such percentage of the Company's allotted and
issued share capital appearing against its name under the column titled
"Percentage Shareholding" in schedule 4.
2.3 The authorised, issued and outstanding Shares consist of [ ] Class A
Shares and [ ] Class B Shares, 704,639 and 78,293 respectively of which
are issued and outstanding. The Relevant Shares are duly authorised,
validly issued and fully paid. There is no Encumbrance, and there is no
agreement, arrangement or obligation to create or give an Encumbrance, in
relation to any of the Relevant Shares or unissued shares in the capital of
the Company. No person has claimed to be entitled to an Encumbrance in
relation to any of the Relevant Shares.
2.4 Except with respect to the rights of the Republic of Ghana to its carried
interest, no options or warrants or other rights to acquire any of the
Shares are outstanding which are not released or waived by clause 4.6 of
this Agreement.
3 DEBT
3.1 Immediately prior to Completion, IFC and DEG will be the only legal owner
of the IFC Debt and the DEG Debt, respectively.
3.2 Immediately prior to Completion:
(a) DEG will be the only legal and beneficial owner of the DEG Debt; and
(b) IFC and the other Sellers (apart from DEG) will together be the only
persons legally and/or beneficially interested in the IFC Debt and/or
the rights (whether arising in contract or otherwise) relating
thereto,
in each case free from Encumbrances.
-18-
<PAGE>
3.3 Immediately prior to Completion, the Sellers will together be all of the
persons together entitled to transfer the full legal and beneficial
ownership of the IFC Debt and the DEG Debt to the Buyers.
3.4 Immediately prior to Completion, except for the IFC Debt and the DEG Debt,
the Company owes no other amounts to the Sellers on any account
whatsoever.
-19-
<PAGE>
SCHEDULE 3
Action Pending Completion
The Sellers shall ensure that the Company will:
1. not create, allot, issue, acquire, repay or redeem any share or loan capital
or agree, arrange or undertake to do any of those things or acquire or agree
to acquire, an interest in a corporate body;
2. operate its business in the usual way with the objective of maintaining the
business as a going concern;
3. not formally approve the acquisition or disposal of, or agree to acquire or
dispose of, any major asset except in the usual course of its business or
assume or incur, or agree to assume or incur, a liability, obligation or
expense (actual or contingent) except in the usual course of its business
and (where such liability is greater than US$50,000), except with the
approval of the Buyers;
4. adopt the capital expenditure plan already approved by the board of the
Company and set out in schedule 11 and not make, or agree to make, capital
expenditure outside schedule 11 without the written approval of the Buyers;
5. not declare, pay or make a dividend or distribution or make any other
disbursements of any kind (including debt and interest repayment) to the
Sellers or their representatives in any capacity;
6. not create, or agree to create, an Encumbrance over the Shares or another
asset or redeem, or agree to redeem, an existing Encumbrance over the Shares
or another asset, including the Mining Leases;
7. not enter into a material long-term, onerous or unusual agreement,
arrangement or obligation;
8. except in the usual course of its business, not compromise, settle, release,
discharge or compound litigation or arbitration proceedings or a liability,
claim, action, demand or dispute, or waive a right in relation to litigation
or arbitration proceedings;
9. conduct its business in all material respects in accordance with all
applicable legal and administrative requirements in any relevant
jurisdiction;
10. not enter into an agreement, arrangement or obligation (legally enforceable
or not) in which the Sellers, a director or former director of the Company
or a person connected with any of them is interested;
11. not make a payment out of a Company's Bank Account except where the payment
is in the usual course of its business;
12. not without prior agreement of the Buyers renew any contract for employment
of the Company's expatriate staff;
-20-
<PAGE>
13. not make any payment (whether of principal, interest, penalty or on any
other account whatsoever) with respect to the IFC Debt or the DEG Debt;
14. maintains in good standing its rights and interest in the Concessions;
15. not take any action which could result in a material change in the
business, operations, earnings, assets or financial condition of the
Company; and
16. maintains in full force material insurances against risks normally insured
against by a company operating the types of business operated by the
Company.
-21-
<PAGE>
SCHEDULE 4
List Of Shareholders And Number Of Shares To Be Sold
<TABLE>
<CAPTION>
Name and Address of Shareholders Shares to Percentage of Percentage of Percentage of IFC
be Sold Price Price allocated Loan
allocated to to Debt/1/ /2/
Shares
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Finance Corporation 216,270 25.007 24.23 32.51
2121 Pennsylvania Avenue
NW Washington DC
USA 20433
Attention: Manager, Special Operations
Unit
Fax: 001 202 974 4305
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
CLIFAP 6,897 11.808 0 0
1 rue des Italiens
75009 Paris, France
Attention: Mrs Barbara Levi
Fax: 00 331 4295 0177
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
CREDIT LYONNAIS 0 0 11.71 15.71
1 rue des Italiens
75009 Paris, France
Attention: Mrs Barbara Levi
Fax: 00 331 4295 0177
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ "Debt" comprises IFC Debt less IFC Shareholders Advances plus DEG Debt.
/2/ This figure is based on the DM:US$ exchange rate as at 28.4.99. It
will have to be adjusted at completion to reflect DM:US$ exchange rate
prevailing at the time of completion.
-22-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Name and Address of Shares to Percentage of Percentage of Percentage of IFC to
Shareholders be Sold Price Price allocated Loan
allocated to to Debt
Shares
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Name and Address of Shareholders Shares to Percentage Percentage of Percentage of IFC
be Sold of Price Price allocated to Loan
allocated to Debt
Shares
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Sumitomo Bank, Limited 31,331 4.811 4.77 6.40
Temple Court
11 Queen Victoria Street
London EC4N 4TA
Attention: Mr Paul Leatherdale
Fax: 0171 786 1131
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Ecobank Transnational Incorporated 11,388 1.749 1.73 2.33
19 Seventh Avenue Ridge West
PMB, GPO
Accra, Ghana
Attention: Mr William Taylor
Fax: 00 233 212 320 96
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Societe Generale 91,140 13.995 13.88 18.61
17 Cours Valmy
92987 Paris La Defense
Cedex France
Attention: Mr Nick Farr-Jones
Fax: 00 331 4295 0177331 421 346 97
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-24-
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Shareholders Shares to Percentage Percentage of Percentage of IFC
be Sold of Price Price allocated to Loan
allocated to Shares Debt
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank Austria Cayman Islands Ltd. 45,566 6.997 0 0
P.O. Box 513
George Town
Cayman Islands
Grand Cayman
Attention: J. E. O'Neill
Fax: [ ]
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Bank Austria AG 0 0 6.94 9.31
Am Hof 13, A-1010
Vienna, Austria
Attention: Udo Szekulics
Fax: 0043 1 531 31 44135
- ------------------------------------------------------------------------------------------------------------------------------
Banque Internationale a Luxembourg 28,477 4.373 4.34 5.82
69 Route d'Esch
L-2953
Luxembourg
Attention: Mr Simon Hauxwell
Fax: 00 352 4590 3855
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Shareholders Shares to Percentage Percentage of Percentage of IFC
be Sold of Price Price allocated to Loan
allocated to Debt
Shares
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DEG-Deutsche Investitions und 158,004 24.263 25.46 0
Entwicklungsgesellschaft mbH
Belvederestrasse 40
50933 Koln (Mungersdorft)
Germany
Attention: Mr Roger Peltzer
Fax: 00 49 221 498 6106
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
DB (Belgium) Finance N.V./S.A. 45,566 6.997 6.94 9.31
C/o Deutsche Bank AG London
6 Bishopsgate
London EC2N 4DA
Attention: Mr George Rogers
Fax: 44 171 545 7130
- ------------------------------------------------------------------------------------------------------------------------------
Total 704,639 100 100 100
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-26-
<PAGE>
SCHEDULE 5
Form of Letter of resignation
TO: Bogoso Gold Limited (the "Company")
DATE:
Dear Sirs
I, [ ] of [insert usual residential address]:
1. resign my office as [director/secretary/director and secretary] of the
Company with immediate effect and resign from my employment with the
Company with immediate effect;
2. acknowledge that:
2.1 I have no claims or rights of action whatsoever whether under
common law, statute or otherwise against the Company in connection
with or arising out of my holding or resigning office or out of my
employment or its termination; and
2.2 [there is no agreement or arrangement outstanding under which the
Company has or could have an obligation to me whether now or in
the future whether for the payment of money or otherwise, except
for payment in the usual course of my salary and expenses incurred
on behalf of the Company in each case up to and including [insert
date of letter or effective date of resignation] [amounting in
total to not more than US$[ ]]]; and]
3. waive, release and forever discharge the Company against all actions,
proceedings, claims, demands and costs which I may now have or would have
had but for the execution of this deed.
Signed as a deed by )
[insert name of individual]) ) _________________________________
in the presence of: )
________________________ Signature of the Witness
________________________ Name of the Witness
________________________ Address of the Witness
________________________
________________________
________________________ Occupation of the Witness
[TO BE FILED WITHIN 28 DAYS WITH GHANIAN REGISTER OF COMPANIES]
-27-
<PAGE>
SCHEDULE 6
BANK SECURITY
1. The English Charge
A deed of charge dated 18 January, 1990 and made by the Company in favour
of The Law Debenture Trust Corporation p.l.c., IFC and DEG, pursuant to
which the Company created fixed and floating security on the Company's
assets for all moneys and liabilities owing by the Company to the Secured
Lenders (as defined therein) from time to time on the terms and subject to
the conditions stated therein as amended by the Supplemental English
charge dated 22 March 1994.
2. The Ghanaian Debenture
A debenture dated 18 January, 1990 registered at the Lands Title Registry
Accra as No. 1495/1990 and made by the Company in favour of The Law
Debenture Trust Corporation, IFC and DEG, whereby the Company gave fixed
and floating security over its assets in favour of the Trustee for all
moneys and liabilities owing by the Company to the Secured Lenders (as
defined therein) from time to time on the terms and subject to the
conditions stated therein as amended by the Supplemental Ghanaian
Debenture dated 22 March 1994.
3. The Assignment of Insurances
A deed of assignment dated 26 February, 1990 and made between the Company,
The Law Debenture Trust Corporation p.l.c., DEG and IFC, inter alia,
pursuant to which the Company assigned to The Law Debenture Trust
Corporation p.l.c. by way of mortgage all its right, title and interest in
and to all insurances required to be effected by the Company under which a
claim is to be payable in any freely convertible and transferable currency
other than Cedis and by way of floating charge to The Law Debenture Trust
Corporation p.l.c. all other insurances required to be effected by the
Company on the terms and subject to the conditions stated therein.
4. Foreign Exchange Retention Account Agreement
An agreement dated 18 January, 1990 made between the Company, Barclays
Bank PLC, The Law Debenture Trust Corporation p.l.c., the Republic of
Ghana, the Bank of Ghana, Ghana Commercial Bank, IFC and DEG whereby,
inter alia, there was established a mechanism for the collection,
investment and administration of the Company's funds in one or more
accounts maintained with Barclays Bank PLC and Ghana Commercial Bank as
amended by the Supplemental Foreign Exchange Retention Account Agreement
dated 22 March, 1994.
5. The Mining Lease Agreement
An agreement dated 18 January, 1990 entered into between the Republic of
Ghana, IFC, DEG and The Law Debenture Trust Corporation p.l.c., providing,
inter alia, for certain consents and assurances from the Republic of Ghana
in relation to the Mining Leases (as defined therein) and the transactions
-28-
<PAGE>
contemplated by the Financing Documents and the Security Documents [(both as
defined therein)].
6. The Trust Deed
An agreement dated 18 January, 1990 entered into between the Company, The
Law Debenture Trust Corporation plc, the Republic of Ghana, Bank of Ghana,
DEG, IFC and the Representatives (as defined therein).
-29-
<PAGE>
SCHEDULE 7
Loan Documentation
Part 1
DEG Loan Documentation
1. A loan agreement dated 8 January 1990 made between DEG and the Company (the
"DEG Loan Agreement") pursuant to which DEG agreed, on the terms and subject
to the conditions stated therein, to make available to the Company a loan of
up to DM 25,000,000 ("DEG Loan") to finance the Project (as defined therein).
2. A rescheduling agreement dated 4 March 1994 made between the Company and DEG
(the "Rescheduling Agreement"), pursuant to which DEG agreed, on the terms
and subject to the conditions therein, to amend the terms and conditions of
the DEG Loan under the DEG Loan Agreement.
Part 2
IFC Loan Documentation
1. A loan agreement dated 19 December 1989 made between the Company and IFC
("IFC Investment Agreement") pursuant to which IFC agreed, on the terms and
subject to the conditions stated therein, to lend to the Company the sum of
US$43,000,000 (the "IFC Loan") to finance the Project (as defined therein).
2. A rescheduling agreement dated 4 March 1994 (herein called the "IFC
Rescheduling and Amendatory Agreement") made between IFC and the Company
pursuant to which IFC agreed, on the terms and subject to the conditions
therein, to amend the terms and conditions of the IFC Loan and the IFC
Investment Agreement.
Part 3
Shareholder Advances Documentation
1. An agreement (the "Shareholders Financing Agreement") dated 27 November 1989
made between the Company, the Republic of Ghana, IFC, the Central Bank,
Billiton B.V. and Sikaman Gold Resources Limited as amended and supplemented
by a certain supplemental agreement (the "Supplemental Agreement") dated 18
January 1990 between the same parties, pursuant to which, inter alia, IFC
agreed to make available to the Company, and the Company agreed to borrow,
additional loans comprising Shareholder Advances (as defined therein) and,
if necessary, Shareholder Deficiency Advances (as defined therein).
2. An amendment agreement (the "Revised Shareholders Financing Agreement")
dated 22 March 1994 made between the Company, IFC, DEG, the Republic of
Ghana, the Bank of Ghana and Billiton B.V. pursuant to which Shareholders
(as defined therein) agreed on the terms and subject to the conditions
therein, to amend the terms and conditions applicable to the Shareholder
Advances and
-30-
<PAGE>
Shareholder Deficiency Advances under the Shareholders Financing Agreement
(as amended and supplemented by the Supplemental Agreement).
-31-
<PAGE>
SCHEDULE 8
Prospecting licences and mining leases
1. Gold Prospecting Licence No. PL 2/12 Commencing 12 May 1986. Comprising
57.69 square miles or 149.41 square kilometres.
2. Gold Mining Lease No. WR348A/87 Commencing 21 August 1987. Comprising 50
square kilometres.
3. Gold Mining Lease No. WR368/88 Commencing 16 August 1988. Comprising 45
square kilometres.
-32-
<PAGE>
SCHEDULE 9
FORM OF ASSIGNMENT OF DEBT
THIS DEED OF ASSIGNMENT is made the [ ] day of [ ],1999
BETWEEN
[INTERNATIONAL FINANCE CORPORATION, an international organisation established by
articles of agreement among its member countries / DEG-DEUTSCHE INVESTITIONS
UND ENTWICKLUNGSGESELLSCHAFT mbH, a development finance institution
organised and existing under the laws of the Federal Republic of Germany]
(the "Assignor"); and
ANVIL MINING NL , a company organised and existing under the laws of Australia
and having its registered office at Ground Floor, 278 Stirling Highway,
Claremont, Western Australia, 6010, Australia with company number A.C.N.
060478962 and GOLDEN STAR RESOURCES LTD, a company amalgamated under the
laws of Canada and having its registered office at Vancouver and its
principal place of business at 1660 Lincoln Street, Denver, Colorado 80264,
U.S.A. (together the "Assignees" and each of them an "Assignee").
WHEREAS
The parties hereto have agreed that the Assignor will assign to the Assignees
its rights, title and interest in and to the [IFC Debt / DEG Debt] pursuant to
the sale and purchase agreement dated [ ] made between the Assignor and
the other companies specified therein as sellers and the Assignees as buyers
(the "Sale and Purchase Agreement").
NOW THIS DEED WITNESSETH as follows:
10. Terms defined in the Sale and Purchase Agreement shall, unless otherwise
defined herein, have the same meaning herein and the principles of
construction set out in the Sale and Purchase Agreement shall have effect as
if set out in this Deed.
11. On and from the date thereof, the Assignor hereby assigns and transfers to
the Assignees all the Assignor's (i) rights, title and interests in, to and
under the [IFC Debt / DEG Debt], (ii) rights, title and interest in, to and
under the [IFC Loan Documentation and the Shareholder Advances Documentation
/ DEG Loan Documentation] in respect of the [IFC Debt / DEG Debt] and (iii)
rights arising under or in connection with the Bank Security relating to the
[IFC Debt / DEG Debt] and (in each case) the full benefit and advantage
thereof TO HOLD the same unto the Assignees absolutely.
12. The Assignor hereby covenants with the Assignees that the [IFC Debt / DEG
Debt] is still owing in full to the Assignor from the Company and that there
are
-33-
<PAGE>
no other debts due or owing from the Company to the Assignor on any account
whatsoever.
13. The Company hereby acknowledges (i) the amount of the [IFC Debt / DEG Debt]
as set out in the Sale and Purchase Agreement and (ii) receipt of notice in
writing from the Assignees of the Assignment of the [IFC Debt / DEG Debt]
from the Assignor to the Assignees.
14. The Assignees acknowledge that the Assignor has given no warranty or
assurance to the Assignees with regard to the recovery of the [IFC Debt /
DEG Debt] in whole or in part from the Company.
15. Clause 16 (Governing Law and Jurisdiction) of the Sale and Purchase
Agreement shall be incorporated in this Deed, mutatis mutandis.
16. This Deed is delivered on the date written at the start of this Deed.
EXECUTED by the parties as a deed.
THE ASSIGNOR
- ------------
Executed as a deed by )
[insert name of attorney] )
as attorney for )
INTERNATIONAL FINANCE )
CORPORATION )
in the presence of: __________________________________
Signature of witness __________________________________
Name of witness __________________________________
Occupation of witness __________________________________
THE ASSIGNEES
- -------------
Executed as a deed by )
ANVIL MINING NL )
acting by [insert name(s) of )
duly authorised signatory(ies)] )
__________________________________
__________________________________ [if second signatory required]
-34-
<PAGE>
Executed as a deed by )
GOLDEN STAR RESOURCES LTD )
acting by [insert name(s) of )
duly authorised signatory(ies)] )
__________________________________
__________________________________ [if second signatory required]
THE COMPANY
- -----------
Executed as a deed by )
BOGOSO GOLD LIMITED )
acting by [insert name(s) of )
duly authorised signatory(ies)] )
__________________________________
__________________________________ [if second signatory required]
-35-
<PAGE>
SCHEDULE 10
FORM OF LETTER OF CREDIT
Beneficiary: International Finance Corporation
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433, U.S.A.
Applicant: Golden Star Resources Ltd. and Anvil Mining NL
(together, the Obligors)
1660 Lincoln Street, Suite 3000
Denver, Colorado 80264
Amount: USD2,000,000.00
"We hereby issue our irrevocable Standby Letter of Credit number [ ] in your
favor for the benefit of yourself and the sellers set out in Annex 1 for an
aggregate amount not to exceed the amount indicated above, expiring at our
counters in New York with our close of business on September 30, 1999.
This Letter of Credit is available with the Chase Manhattan Bank, New York
against presentation of your draft at sight drawn on the Chase Manhattan Bank,
New York when accompanied by the documents indicated herein:
A letter of certification and demand signed by a purported authorized signatory
of the beneficiary reading as follows:
"The amount of this drawing USD ______________ under the Chase Manhattan Bank
Letter of Credit number _____ represents part of the price for the sale and
purchase due and payable by the Obligors under an agreement to be made between
the Obligor and the Sellers in respect of the purchase by the Obligor of shares
in Bogoso Gold Limited ("BGL") and senior debt and shareholders advances owing
by BGL to the Sellers which has become due and payable by the Obligor to the
Beneficiary and the Sellers under said Sale and Purchase Agreement but has not
been paid and that payment of such claimed amount is demanded herein."
Partial drawings are permitted provided that the aggregate of the sums paid does
not exceed USD2,000,000.00.
We hereby agree that payment to the Beneficiary will be made by us to the
Beneficiary under this credit (free and clear of and without deduction for or on
account of any set-off or counterclaim and without deduction for or on account
of any taxes) on the third business day from and inclusive of the date of our
receipt of the above mentioned document. For the purposes of this credit, a
"Business Day" means a day upon which banks are open for domestic and foreign
exchange business in New York City.
Without prejudice to our obligations in respect of any drawing delivered to us
in accordance with the terms of this credit and prior to the termination hereof,
this credit shall terminate upon receipt of a certificate ing to be signed by an
authorized signatory of the Beneficiary reading as follows:
-36-
<PAGE>
"All the required government consents have not been obtained in accordance with
the Sale and Purchase Agreement referred to in the Chase Manhattan Bank Letter
of Credit No. ____________________." or
"The Sellers have failed to comply with the obligations at completion as set out
in the Sale and Purchase Agreement referred to in the Chase Manhattan Bank
Letter of Credit No. ____________________." or
"The Sellers have entered into a contract to sell the sales shares, the IFC debt
and the DEG debt to a third party." or
"The Sale and Purchase Agreement referred to in the Chase Manhattan Bank Letter
of Credit No. ______________ has not been signed by the Sellers by June 1, 1999.
" or
"An event has occurred which has prevented the Obligor from effecting completion
of the Sale and Purchase Agreement referred to in the Chase Manhattan Bank
Letter of Credit No. ______________________in circumstances in which the Sellers
are not entitled to draw under the Letter of Credit."
All correspondence and any drawings presented in connection with this Letter of
Credit must only be presented to us at the Chase Manhattan Bank, 4 Chase
Metrotech Center, 8th Floor, Brooklyn, New York 11245, Attention: Standby
Letter of Credit Department, Customer Inquiry Numbers are (718) 242-3884 and
(718) 242-4898.
We hereby issue this Standby Letter of Credit in your favor. It is subject to
the uniform customs and practice for documentary credits (1993 revision
International Chamber of Commerce, Paris, France Publication No. 500) and
engages us in accordance with the terms thereof. The number and the date of our
credit and the name of our bank must be quoted on all drafts required under this
Letter of Credit.
-37-
<PAGE>
Annex 1
List of Sellers
Bank Austria AG
Bank Austria Cayman Islands Ltd.
Banque Internationale a Luxembourg
CLIFAP
Credit Lyonnais
DEG-Deutsche Investitions und Entwicklungsgesellschaft mbH
DB (Belgium) Finance N.V.
Ecobank Transnational Incorporated
International Finance Corporation
Societe Generale
The Sumitomo Bank, Limited
-38-
<PAGE>
SCHEDULE 11
APPROVED CAPITAL EXPENDITURE PLAN
<TABLE>
<CAPTION>
BGL Approved/Committed (@ 1 April 1999)
Project Description Budget Unspent Unspent
US$'000 US$'000 %
- --------------------------------------------------------------------------------------------------------
Strategic
<S> <C> <C> <C>
Water Resource Evaluation 35 34 97%
Oxide Exploration Program 3 1,650 295 18%
Transition Ore Investigation Phase 3 289 109 38%
Sulphide Ore Treatment Options 136 134 98%
Mining
R984B Excavator 363 8 2%
773B Klein Water Tank 62 10 16%
Field Mess/Office 20 14 72%
Water Filling Stations 40 10 25%
Maintenance
773B Dump Truck Overhaul (DT7) 110 10 9%
773B Dump Truck Overhaul (DT8) 110 60 55%
DHA600S Tamrock Overhaul 90 (9) 0%
Component Bay Extension 20 10 50%
Used Service Truck 100 20 20%
Plant Workshop Equipment 25 3 12%
Processing
Tailings System Upgrade 231 158 68%
Acid Mixing Facility 61 39 64%
Oxygen Plant 205 65 32%
Administration and Infrastructure
Radio VHF and Relay Station 50 19 38%
Data Room & Finance Modifications 15 5 33%
Security Fence Upgrade 45 40 89%
Emergency Generators 1,280 11 1%
V-SAT Communications 79 4 5%
Kubota Lawn Mower 12 (4) 0%
Replacement Ambulance 25 (2) 0%
Replacement Nissan Patrol 38 38 100%
- --------------------------------------------------------------------------------------------------------
Total 5,091 1,081
- --------------------------------------------------------------------------------------------------------
NOTES:
1. "BGL Approved/Committed" are projects in progress with BGL Board approval
as at 1 April 1999.
</TABLE>
-39-
<PAGE>
EXECUTED by the parties:
The Sellers
INTERNATIONAL FINANCE CORPORATION
By: /s/ Assaad Jabre
----------------
Authorised Representative
CLIFAP
By: /s/ Oliver Mas
--------------
Authorised Representative
CREDIT LYONNAIS
By: /s/ Oliver Mas
--------------
Authorised Representative
THE SUMITOMO BANK, LIMITED
By: /s/ Paul Leatherdale
--------------------
Authorised Representative
ECOBANK TRANSNATIONAL INCORPORATED
By: /s/ Albert Essien
-----------------
Authorised Representative
SOCIETE GENERALE
By: /s/ Jean-Roche Dubourdieu
-------------------------
Authorised Representative
BANK AUSTRIA CAYMAN ISLANDS LTD.
By: /s/ J. E. O'Neill
-----------------
Authorised Representative
-40-
<PAGE>
BANK AUSTRIA AG
By: /s/ Udo Szekulics /s/ Maj. De Arnoldi
----------------- -------------------
Authorised Representative
BANQUE INTERNATIONALE A LUXEMBOURG
By: /s/ Simon Hauxwell /s/ Benoit Deborse
------------------ ------------------
Authorised Representative
DEG-DEUTSCHE INVESTITIONS UND
ENTWICKLUNGSGESELLSCHAFT mbH
By: /s/ Roger Peltzer
-----------------
Authorised Representative
DB (BELGIUM) FINANCE N.V.
By: /s/ Geoffrey Spence /s/ George Rogers
------------------- -----------------
Authorised Representative
THE BUYERS
By: /s/ Peter Bradford
------------------
ANVIL MINING NL
Authorised Representative
By: /s/ James E. Askew
------------------
GOLDEN STAR RESOURCES LTD.
Authorised Representative
-41-
<PAGE>
Exhibit 10-5
ELLIOTT ASSOCIATES, L.P.
712 Fifth Avenue - 36/th/ Floor
New York, New York 10019
May 5, 1999
Golden Star Resources Ltd.
1660 Lincoln Street
Denver, Colorado 80264
Attention: Mr. James E. Askew
- -----------------------------
Credit Facility Letter
----------------------
Dear Sirs:
You have advised that you intend to acquire (the "Acquisition") together with
Anvil Mining NL ("Anvil") of Australia a 90% interest in Bogoso Gold Mine Ltd.,
a Ghanaian company ("BGL"), which operates the Bogoso gold mine in Ghana, in a
transaction pursuant to which you would acquire for a total consideration of
approximately US$12 million and certain other conditional payments (i) 90% of
the capital stock of BGL, with the State of Ghana retaining a 10% interest, and
(ii) 100% of the approximately US$34 million in debt owed by BGL to a consortium
of banks represented by the International Finance Corporation ("IFC").
We understand it is currently your intention to raise the funds required to
effect the Acquisition and to pay the costs and expenses related thereto through
(i) the issuance and sale to the public and/or private investors of your common
shares or special warrants and/or (ii) borrowings under newly arranged senior
credit facilities.
In connection with the foregoing, we are pleased to advise you that subject to
the approval by the Government of Ghana of the Acquisition, the closing of the
Acquisition and the completion of all loan documentation with respect to the
credit facility contemplated hereby in form and substance reasonably
satisfactory to us, we hereby grant you the option to have us (directly or
through one or more of our designees) establish on the closing date a credit
facility (the "Credit Facility") in a principal amount not to exceed US$12
million having the terms set forth in Exhibit A attached hereto. You hereby
agree that the Credit Facility shall be used solely to complete the Acquisition.
You have advised us that our commitment hereunder (the "Commitment") is a
condition precedent to the signing of a definitive purchase agreement in
connection with the Acquisition (the "Acquisition Agreement"). You have also
advised us that , subject to the other provisions of this letter, a copy of this
letter (the "Credit Facility Letter") will be provided to IFC as representative
of the consortium of banks involved in the Acquisition and that IFC and the
banks will rely on the Credit Facility Letter as comfort that there will be
funds available to close the Acquisition if the approval of the Government of
Ghana of the Acquisition is obtained.
You hereby agree to compensate us for the Commitment in accordance with the
provisions of that certain Premium Letter Agreement, dated as of the date
hereof, between us, a copy of which is attached as Exhibit B hereto.
<PAGE>
In connection with the services and transactions contemplated hereby, you agree
that we will be permitted access, or use of, any information concerning the
Acquisition and BGL which may come into your possession. We hereby acknowledge
that you are bound by the terms of a confidentiality agreement with respect to
such information (a copy of which has been delivered to us) and agree to abide
by such terms. We will treat any and all confidential information relating to
the Acquisition and BGL transmitted to us with the same degree of care you are
held to under the confidentiality agreement mentioned above, provided that we
shall not be bound by any confidentiality, noncompetition or noncircumvention
covenant following either the termination of our obligation to establish the
Credit Facility or the closing of the Acquisition (with Anvil Mining's
participation).
The Commitment may not be assigned by you and nothing in this Credit Facility
Letter, express or implied, shall give any person other than you any benefit or
any legal or equitable right, remedy or claim under this Credit Facility Letter.
We hereby acknowledge that you make no representation or warranty as to the
accuracy or completeness of any information or materials provided to us in
connection with our evaluation of the credit risk associated with the matters
contemplated hereby.
This Credit Facility Letter (including the exhibits hereto) sets forth the
entire agreement of the parties as to the scope of the Credit Facility Letter
and our respective obligations hereunder. The Commitment will expire upon the
earliest of (i) the closing of the Acquisition without the use of the Credit
Facility, (ii) the termination of the Acquisition Agreement, (iii) the failure
of any party to the Acquisition Agreement to sign and deliver it on or prior to
June 1, 1999, or (iv) on the 130th day after execution of the Acquisition
Agreement.
This Credit Facility Letter shall be governed by, and construed in accordance
with, the laws of the State of New York as applied to agreements made and
performed within such state without giving effect to principles of conflict of
laws thereof. Any action arising hereunder or under the Premium Letter may be
brought in the Federal and State courts located in New York County, New York,
and each party hereby consents to the non-exclusive jurisdiction and venue of
such courts and to service of process by certified mail, return receipt
requested (which shall constitute "personal service").
Please indicate your acceptance of our Commitment and your agreement to the
matters contained in this Credit Facility Letter (including the exhibits
thereto) by executing a copy of this letter and returning it to us prior to 5:00
PM, Eastern daylight time, on May 5, 1999.
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul Singer
---------------
General Partner
ACCEPTED AND AGREED TO:
GOLDEN STAR RESOURCES LTD.
By: /s/ James E. Askew
------------------
CEO and President
<PAGE>
EXHIBIT A
May 5, 1999
Standby Credit Facility for the Purchase of Bogoso Gold Limited by
Golden Star Resources Ltd.
Borrower A special purpose subsidiary of Golden Star
Resources Ltd., a Canadian corporation (the
"Borrower"). Golden Star Resources will provide
a corporate guarantee for any borrowing under
the Credit Facility and the Credit Facility
loan will have full recourse back to Golden
Star Resources.
Lender Elliott Associates, L.P., Westgate
International, L.P. and/or related parties
(collectively the "Lender")
Facility Lender agrees to provide a U.S. dollar standby
credit facility (the "Credit Facility") to the
Borrower for the purchase of certain debt and
shares of BGL, a Ghanaian company which owns
and operates the Bogoso gold mine in Ghana (the
"Acquisition")
Acquisition The Acquisition of BGL shall be effected
through the purchase of at least 90% of the
common shares and 100% of the IFC and DEG debt
of BGL. Upon closing of the Credit Facility,
Golden Star shall directly or indirectly own a
majority of the outstanding equity of BGL. The
final contract for the Acquisition will include
a provision whereby operating profit after
April 1 will be for the account of Golden Star.
Facility Limit US$12 million. Only one drawdown will be
permitted.
Conditions Precedent to The Borrower shall have the right to draw down
Drawdown all or any portion of the facility upon the
closing of the Acquisition, but not earlier
than May 21, subject to the following: Material
Adverse Change clause and Force Majeure clause
consistent with proposed purchase agreement
between Golden Star and the bank syndicate
group. Borrower must deliver favorable legal
opinions of U.S., Canadian, Ghanaian (and other
jurisdiction, if needed) counsel as to
customary matters including with respect to
validity of first priority liens, regulatory
approvals, Regulation U compliance, usury
issues and currency controls. All applicable
governmental and regulatory approvals must be
obtained prior to each of warrant issuance and
funding. Anvil Mining's written consent to all
aspects of the Credit Facility must be
obtained.
Estimated Closing Date of the July 31, 1999
Acquisition
Security First ranking charge over the assets of BGL
(including, without limitation, the mine lease
and accounts receivable) and pledge of the
common stock and debt of BGL held directly or
indirectly by Golden Star and Anvil Mining.
Repayment The Borrower or Golden Star may repay all or
any portion of the principal (with all accrued
interest thereon) at any time without penalty.
Mandatory repayment of the facility will begin
60 days after closing and will be made in 12
equal monthly installments, based on the
principal amount outstanding 59 days after
drawdown, thereafter, subject to a maximum of
US$750,000 per month of principal (excluding
accrued interest). Any principal balance still
outstanding after this time will be paid in
full, with accrued interest, within 7 days
following the final monthly repayment.
Beginning 60 days after drawdown, any early
repayments made will be credited against the
latest dated scheduled repayments.
Interest Rate 15% per annum compounded monthly on the
outstanding principal and interest thereon,
paid monthly in arrears. In the event of a
default, interest will accrue on the
outstanding balance at a rate of 25% per annum
until such default is cured.
Equity Golden Star will issue common stock purchase
warrants ("Warrants") per separate
<PAGE>
agreement.
Exercise of Warrants Golden Star will permit cashless exercise of
Warrant Expiry Date the Warrants through loan reduction.
Callability of Warrants Three years from the date of issuance.
If at any time beginning 12 months after
issuance or most recent price reset, the
closing price for GSR on Amex for 30
consecutive trading days is greater than 200%
of the exercise price of the Warrants, then 50%
of the Warrants will be callable by the Company
on 30 days notice. If at any time beginning 24
months after issuance or most recent price
reset, the closing price for GSR on Amex for 30
consecutive trading days is greater than 250%
of the exercise price of the Warrants, then 50%
of the Warrants will be callable by the Company
on 30 days notice. This call provision shall
not restrict the Lender from exercising the
Warrants at any time including during the call
notice period. The 50% shall refer to a
percentage of the number of Warrants originally
issued.
Warrant Terms The Warrants will contain customary anti-
dilution adjustments for reorganization, stock
dividends, stock splits, etc. If within 6
months of the date of issuance of the Warrants
or at any time that more than US$1 is
outstanding under this Credit Facility, in the
event of an issuance of common shares and/or
rights and/or warrants (either individually or
as a unit) by Golden Star at a discrete or
implied (in the case of a unit) price below 95%
of the strike price of the Warrants (excluding
an aggregate issuance(s) of up to 1% of the
outstanding Golden Star common shares pursuant
to director, officer and employee stock option
or stock bonus plans ("Plans")), then the
strike price of the Warrants will, at Lender's
option, be reset to a price equal to the
discrete or implied (in the case of a unit)
issuance price of such common shares, rights or
warrants. If, however, regulatory conditions
imposed upon any such reset (e.g., reduction in
the reset or a shortening of the exercise
period) renders the reset unsatisfactory to
Lender, Lender may instead elect to receive in
lieu thereof (i) cash in an amount equal to the
number of Warrants held multiplied by the
excess of the actual strike price over the
intended reset strike price, or (ii) if
regulatory approval is again denied, such other
consideration as will afford the Lender
reasonably equivalent value to such reset.
Golden Star shall be required to register (or
establish free tradeability) and list the
underlying common shares in the US and Canada
by the earlier of (a) the registration of any
other common shares (excluding any registration
of Plan shares on Form S-8), or (b) 180 days
following the closing or abandonment of the
Acquisition. The penalty with respect to any
registration failure will be cash per month of
3% of the aggregate value of the common stock
to be registered. However, provided the shares
have been properly registered or are freely
tradeable on the American Stock Exchange but
not the Toronto Stock Exchange, then the
penalty will be cash per month of 1% of the
aggregate value of the common stock to be
registered.
Production Bonus Payment Whether or not the Credit Facility is
established or used, for every continuous 12
month period (the "Production Interval") during
the first 72 months following the Acquisition
that total production from the Bogoso mine
concession is greater than 75,000 ounces, the
Lender will receive a cash payment of
US$250,000 with maximum payments over time
totaling not more than US$1,250,000. Production
Intervals will not represent fixed date time
but rather non-overlapping continuous 12 month
periods constructed to be most favorable to the
Lender in determining amounts due to the Lender
under this provision. Such cash payments will
be payable by the Borrower within 12 months
following the end of the Production Interval.
For example, if during the Production Interval
of July 1, 1999 to June 30, 2000, mine
production is greater than 75,000 ounces, the
Borrower would be required to pay to the Lender
US$250,000 before June 30, 2001. In the event
that the direct or indirect ownership of the
mine by GSR drops below
<PAGE>
50%, then any remaining maximum payments,
including any unearned amounts, due under the
Production Bonus will become immediately due
and payable. Provided, however, if Golden Star,
in a single transaction, sells 100% of its
interest in the Bogoso mine concession, either
through a sale of stock or the asset, then any
unearned amounts due under the previous
sentence will be capped at 50% of the proceeds
of such transaction. For example, if Golden
Star sells its entire stake in the mine for
$300,000 and $500,000 of potential payments
remain to be earned under the Production Bonus,
then the Lender's payments will be capped at
$150,000. This cap does not refer, in any way,
to any amounts previously earned, but not yet
paid, under the Production Bonus. Such earned
payments will still be due in full and will
have no effect on calculations with regard to
the payments cap.
Gold Price Protection Program The Borrower or Golden Star will use its
reasonable best efforts to put in place a gold
price protection program, in a form reasonably
acceptable to the Lender, sufficient to cover
75% of mine production for the anticipated 13
month life of the loan, to be in place within
15 days of the closing under the Credit
Facility. The Borrower or Golden Star will
communicate with the Lender as to the status of
such program.
Representations and Warranties Customary for this type of transaction.
Affirmative Covenants Customary for this type of transaction.
Negative Covenants No senior or pari passu indebtedness or liens
at any level. The only permitted distributions
or existing debt repayments, at any level, will
be (a) to make payments, both principal and
interest, in connection with the Credit
Facility, (b) to make payments, both principal
and interest, with respect to outstanding debt
in connection with the Omai Mine (but not to
make distributions for such purpose), and (c)
provided the Borrower places and keeps in
escrow, monies sufficient to make principal and
interest payments for 2 payment periods, then
the Borrower will be allowed to make
distributions to Golden Star to fund expenses
in the ordinary course of business. For as long
as the principal amount outstanding under the
Credit Facility is greater than $6 million, for
any non-ordinary course asset sales by Golden
Star, 75% of the proceeds from such sales will
be used to repay principal outstanding under
the Credit Facility.
Other customary for this type of transaction.
Events of Default Customary for this type of transaction,
including any failure of first priority
security.
<PAGE>
EXHIBIT B
GOLDEN STAR RESOURCES LTD.
1660 Lincoln Street, Suite 3000
Denver, Colorado 80264
May 5 1999
Elliott Associates, L. P.
712 Fifth Avenue
New York, New York 10019
Attention: Mr. Jon Pollock
Dear Sirs:
We refer to the Credit Facility Letter, dated the date hereof (the "Credit
Facility Letter"), regarding a proposed loan to be made by you to us in a
principal amount not to exceed US$12 million. Capitalized terms used herein,
unless otherwise defined, have the meanings ascribed to them in the Credit
Facility Letter.
We hereby agree to pay you in immediately available funds (i) upon execution of
the Credit Facility Letter, a non-refundable option premium (the "Premium") of
US$250,000 and (ii) upon closing of the Acquisition (or any transaction whereby
we directly or indirectly acquire an ownership position in the Bogoso Mine), a
non-refundable additional interest payment (the "Funding Payment") of
US$250,000. Upon execution of an agreement for such an acquisition (the
"Acquisition Agreement"), we shall deposit with you the sum of US$50,000 to be
credited against any fees and expenses incurred by you with respect to entering
into the Credit Facility Letter.
Within 10 days of the execution of the Acquisition Agreement by all of the
parties, you will also have the right to receive 1,500,000 common share purchase
warrants (the "Warrants"). Upon closing of the Credit Facility, you will also
have the right to receive that number of common share purchase warrants (the
"Additional Warrants") which is equal to 3,000,000 multiplied by the ratio of
(a) the amount of the Credit Facility drawn down divided by (b) US$12 million,
less 1,500,000. Each Warrant and Additional Warrant will entitle you to
subscribe for and purchase from Golden Star Resources Ltd. ("Golden Star") one
common share of Golden Star at an exercise price which is equal to the weighted
average of the closing prices of Golden Star shares on the American Stock
Exchange for the ten trading days immediately preceding their issuance and will
have the terms and conditions set forth in Exhibit A to the Credit Facility.
(If any regulatory body does not permit the issuance of any such Warrants or
Additional Warrants, it shall constitute a breach.)
Upon closing of the Acquisition, you will also become entitled to be paid at
certain times certain amounts as production bonus payments in accordance with
the terms and conditions set forth in Exhibit A to the Credit Facility Letter.
We hereby agree to reimburse you promptly upon demand for all reasonable out-of-
pocket costs and expenses incurred by you in connection with the negotiation and
entry into, and the transactions
<PAGE>
contemplated by the Credit Facility Letter (including, without limitation,
consultant's fees and US, Canadian, Ghanaian and other counsel fees), whether or
not the Acquisition is consummated.
This Letter Agreement and the terms and conditions contained herein shall not be
disclosed by any party to any person or entity (except such of our agents and
representatives on a need to know basis if they agree to be bound by the
provisions of this paragraph).
We may not assign any of our rights or be relieved of our obligations hereunder
without your prior written consent.
This Letter Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of laws thereof.
If you are in agreement with the foregoing, kindly sign and return to us the
enclosed copy of this Letter Agreement.
GOLDEN STAR RESOURCES LTD.
By: /s/ James E. Askew
------------------
AGREED TO AND ACCEPTED
this 5/th/ day of May, 1999
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul Singer
---------------
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