<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 16, 1998
REGISTRATION NO. 333-58251
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
Amendment No.1
to
FORM S-3
Registration Statement under the Securities Act of 1933
____________________
STILLWATER MINING COMPANY
(Exact name of registrant as specified in its charter)
____________________
DELAWARE 81-0480654
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
717 SEVENTEENTH STREET, SUITE 1480
Denver, Colorado 80202
(303) 978-2525
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
____________________
WILLIAM E. NETTLES
Chairman and Chief Executive Officer
Stillwater Mining Company
717 Seventeenth Street, Suite 1480
Denver, Colorado 80202
(303) 978-2525
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
PAUL HILTON, ESQ.
Davis, Graham & Stubbs LLP
370 Seventeenth Street
Denver, Colorado 80202
(303) 892-9400
____________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after the effective date of this Registration Statement as
determined by the Registrant.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering price per aggregate registration
securities to be registered registered /(1)/ unit /(2)/ offering price /(1)(3)/ fee /(1)(3)/
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities /(4)/
Preferred Stock, par value $.01 per share /(5)/
Depositary Shares /(6)/
Common Stock, par value $.01 per share /(7)/
Warrants /(8)/
Total $200,000,000 100% $200,000,000 $59,000/(9)/
===============================================================================================================================
</TABLE>
/(1)/ In U.S. dollars or the equivalent thereof in one or more foreign
currencies or currency units or composite currencies, including the
European Currency Unit.
/(2)/ The proposed maximum initial offering price per unit will be determined,
from time to time, by the Registrant.
/(3)/ Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o). In no event will the aggregate initial offering
price of all securities issued from time to time pursuant to this
Registration Statement exceed $200,000,000.
/(4)/ Subject to Footnote (3), there are being registered hereunder an
indeterminate principal amount of Debt Securities as may be sold from
time to time by the Registrant. If any such Debt Securities are issued at
an original issue discount, then the offering price shall be in such
greater principal amount as shall result in an aggregate initial offering
price of up to $200,000,000.
/(5)/ Subject to Footnote (3), there are being registered hereunder an
indeterminate number of shares of Preferred Stock as may be sold from
time to time by the Registrant.
/(6)/ Subject to Footnote (3), there are being registered hereunder an
indeterminate number of Depositary Shares as may be sold from time to
time by the Registrant.
/(7)/ Subject to Footnote (3), there are being registered hereunder an
indeterminate number of shares of Common Stock as may be sold from time
to time by the Registrant or by certain selling shareholders of the
Registrant. There are also being registered hereunder an indeterminate
number of shares of Common Stock as may be issued upon conversion of Debt
Securities or Preferred Stock.
/(8)/ Subject to Footnote (3), there are being registered hereunder an
indeterminate number of warrants to purchase Debt Securities, Common
Stock or Preferred Stock as may be sold from time to time by the
Registrant.
/(9)/ Previously paid.
____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
-2-
<PAGE>
PROSPECTUS
$200,000,000
STILLWATER MINING COMPANY
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
Stillwater Mining Company (the "Company" or "Stillwater") may offer from
time to time (i) debt securities ("Debt Securities"), consisting of debentures,
notes, bonds and/or other unsecured evidences of indebtedness in one or more
series, (ii) shares of preferred stock, par value $.01 per share ("Preferred
Stock"), in one or more series, (iii) depositary shares, (iv) shares of common
stock, par value $.01 per share ("Common Stock"), and (v) warrants ("Warrants")
to purchase Debt Securities, Preferred Stock or Common Stock. The Debt
Securities, Preferred Stock, Depositary Shares, Common Stock and Warrants
(collectively, the "Securities") may be offered either together or separately in
amounts, at prices and on terms to be determined at the time of offering.
Certain selling shareholders (the "Selling Shareholders") may offer from time to
time shares of Common Stock. The Securities offered pursuant to this Prospectus
will be limited to an aggregate initial offering price not to exceed
U.S.$200,000,000 (or the equivalent in foreign currency or currency units).
The accompanying Prospectus Supplement sets forth with regard to the
particular Securities in respect of which this Prospectus is being delivered (i)
in the case of Debt Securities, the title, aggregate principal amount,
denominations (which may be in United States dollars, in any other currency,
currencies or currency unit, including the European Currency Unit), maturity,
rate, if any (which may be fixed or variable) or method of calculation thereof,
and time of payment of any interest, any terms for redemption at the option of
the Company or the holder, any terms for sinking fund payments, any conversion
or exchange rights, any modification of the covenants, any listing of such Debt
Securities on a securities exchange and the initial public offering price and
any other terms in connection with the offering and sale of such Debt
Securities, (ii) in the case of Preferred Stock, the designation, aggregate
principal amount, and stated value and liquidation preference per share, initial
public offering price, dividend rate (or method of calculation), dates on which
dividends shall be payable, any redemption or sinking fund provisions, any
conversion or exchange rights, whether the Company has elected to offer the
Preferred Stock in the form of depositary shares, any listing of such Preferred
Stock on a securities exchange, and any other terms in connection with the
offering and sale of such Preferred Stock; (iii) in the case of Common Stock,
the number of shares of Common Stock and the terms of the offering and sale
thereof; and (iv) in the case of Warrants, the number and terms thereof, the
number of shares of Common Stock or Preferred Stock, or amount of Debt
Securities, issuable upon their exercise, the exercise price, the periods during
which the Warrants are exercisable, the terms of the Preferred Stock or Debt
Securities issuable upon exercise, any listing of such Warrants on a securities
exchange and any other terms in connection with the offering, sale and exercise
of such Warrants. If so specified in the applicable Prospectus Supplement,
Securities may be issued in whole or in part in the form of one or more
temporary or permanent global securities. The Prospectus Supplement will also
contain information, as applicable, about certain United States federal income
tax considerations relating to the Securities in respect of which this
Prospectus is being delivered.
<PAGE>
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE SECURITIES.
The Company's outstanding Common Stock is listed on the American Stock
Exchange (the "AMEX") under the symbol "SWC." Each Prospectus Supplement will
indicate if the Securities offered thereby will be listed on any securities
exchange.
The Company and the Selling Shareholders may sell Securities to or through
one or more underwriters, and also may sell Securities directly to other
purchasers or through agents. The Company will not receive any net proceeds from
the sale of any shares of Common Stock offered by the Selling Shareholders. The
accompanying Prospectus Supplement sets forth the names of any underwriters,
dealers or agents involved in the sale of the Securities in respect of which
this Prospectus is being delivered, the principal amounts, if any, to be
purchased by such underwriters and the compensation, if any, of such
underwriters or agents. See "Plan of Distribution" and "Selling Shareholders"
herein.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is July 16, 1998.
-2-
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR
IN THE PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY UNDERWRITER, AGENT, DEALER OR OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES IN RESPECT OF WHICH THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT ARE DELIVERED OR AN OFFER OF ANY SECURITIES
IN ANY JURISDICTION TO ANY PERSON WHERE SUCH AN OFFER WOULD BE UNLAWFUL.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its Regional Offices
located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511,
and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission, 450 Fifth Street, N.W. Plaza, Washington, D.C. 20549. The
Common Stock is listed on the AMEX. Such reports, proxy statements and other
information can also be inspected and copied at the office of this exchange at
the American Stock Exchange, 86 Trinity Place, New York, New York 10006. The
Commission maintains a web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's web site is
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations of
the Commission. Reference is hereby made to the Registration Statement and the
exhibits thereto for further information with respect to the Company and the
Securities. The Registration Statement and the exhibits thereto can be obtained
from or inspected and copied at the public reference facilities maintained by
the Commission as described in the prior paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company with the
Commission pursuant to the Exchange Act are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1997, filed
with the Commission on March 31, 1998.
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
filed with the Commission on April 29, 1998.
3. Current Report on Form 8-K dated April 8, 1998, filed with the
Commission on April 22, 1998.
-3-
<PAGE>
4. The description of the Common Stock and Preferred Stock contained in
the Registration Statements on Form 8-A, filed with the Commission on November
3, 1994 and October 30, 1995.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Securities shall
be deemed to be incorporated herein by reference and to be a part hereof from
the date of filing of such documents. Any statement contained herein, or in a
document all or a portion of which is incorporated or deemed to be incorporated
by reference herein, shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein or in the Prospectus Supplement modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner of Securities, to whom this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the documents
incorporated by reference herein, except for the exhibits to such documents
(unless such exhibits are specifically incorporated by reference into such
documents). Requests should be directed to Investor Relations, 717 Seventeenth
Street, Suite 1480, Denver, Colorado 80202. Telephone requests may be directed
to Investor Relations at (303) 978-2525.
FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION
Some statements contained in this Prospectus are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and, therefore,
involve uncertainties or risks that could cause actual results to differ
materially. Such statements include comments regarding expansion plans, costs,
reserves, grade, dilution, production and recovery rates, processing of
secondary materials, permitting, anticipated cash flows, hedging, financing
needs and capital expenditures, increases in processing capacity, cost reduction
measures, safety, timing for feasibility studies, environmental permitting and
exploration work, compliance with laws and regulations, and the palladium and
platinum market. Factors that could cause actual results to differ materially
include (i) economic and political events affecting supply and demand of
palladium and platinum, (ii) price volatility of platinum group metals ("PGMs"),
(iii) amounts and prices of the Company's forward metals sales, (iv)
fluctuations in ore grade, tons mined, crushed or milled, (v) variations in
concentrator, smelter or refinery operations, (vi) geological, technical,
permitting, mining or processing problems, (vii) availability of experienced
employees, (viii) financial market conditions and (ix) the other factors
discussed under "Risk Factors", in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 and the Company's filings with the Commission.
Many of such factors are beyond the Company's ability to control or predict.
Readers are cautioned not to put undue reliance on forward-looking statements.
The Company disclaims any intent or obligation to update publicly these forward-
looking statements, whether as a result of new information, future events or
otherwise.
-4-
<PAGE>
THE COMPANY
Stillwater Mining Company is engaged in the development, extraction,
processing and refining of palladium, platinum, and associated metals from the
J-M Reef, a geological formation located in Stillwater and Sweet Grass Counties,
Montana. Associated by-product metals include rhodium, gold, silver, nickel and
copper. The Company conducts its current mining operations at the Stillwater
Mine, in Nye, Montana. Future expansion is planned at the Stillwater Mine and
at the East Boulder site, located at the western end of the J-M Reef (the "East
Boulder Project").
The J-M Reef is the only significant primary source of PGMs outside the
Republic of South Africa and Russia. The J-M Reef is an extensive mineralized
zone containing PGMs, which has been traced over a strike length of
approximately 28 miles and which extends downward over one mile to an unknown
depth. The Company holds the rights to claims covering substantially all of the
presently identified PGM mineralized zone of the J-M Reef.
Palladium and platinum were discovered in the J-M Reef by Manville
Corporation ("Manville") geologists in the early 1970s. In 1979, a Manville
subsidiary entered into a joint venture agreement with Chevron U.S.A. Inc.
("Chevron") to develop PGMs discovered in the J-M Reef. Manville and Chevron
explored and developed the Stillwater property and commenced underground mining
in 1986. In 1992, the Company was incorporated in Delaware, and in 1993,
Chevron and Manville transferred substantially all assets, liabilities and
operations at Stillwater to the Company. In September 1994, the Company
redeemed Chevron's entire 50% ownership, and Manville also sold shares reducing
its ownership of record to approximately 27%. In August 1995, Manville sold its
remaining ownership interest in the Company to institutional investors.
At December 31, 1997, Stillwater had proven and probable reserves of
approximately 29.5 million tons of ore, with an average grade of 0.79 ounces per
ton containing approximately 23.4 million ounces of PGMs (approximately 19.4
million gold equivalent ounces). Based upon existing ore reserves and current
production levels, the J-M Reef has an estimated mine life in excess of fifty
years. Because of this long mine life, the Company has been implementing a
series of expansion programs since 1994 to increase its annual production. In
1997, PGM production increased to 355,000 ounces from 255,000 in 1996 and is
expected to increase further to between approximately 450,000 and 500,000 ounces
in 1998. The Company recently announced a long term goal to triple PGM
production over the next five years. The Company is proceeding with the
additional investment designed to increase production at the Stillwater Mine
from 2,000 tons per day to 3,000 tons per day and to develop the East Boulder
Project over the next five years (the "1998 Expansion Plan").
The following table sets forth the Company's PGM production, cash operating
costs, total cash costs and total production costs per ounce of metal produced,
ounces of palladium and platinum sold and average realized prices for the period
indicated.
-5-
<PAGE>
PGM PRODUCTION COST/(1)/ AND SALES DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Production (thousand ounces)
Palladium 271 196 169
Platinum 84 59 51
------------- ------------- -------------
Total production 355 255 220
Cash production costs per ounce/(1)/ $ 174 $ 184 $ 215
Depreciation and amortization 33 35 25
------------- ------------- -------------
Total production costs per ounce/(1)/ $ 207 $ 219 $ 240
Sales (thousand ounces)
Palladium 288 214 180
Platinum 91 62 54
------------- ------------- -------------
Combined 379 276 234
Average Realized Price Per Ounce
Palladium $ 144 $ 144 $ 157
Platinum $ 388 $ 410 $ 425
Combined/(2)/ $ 203 $ 204 $ 219
Average Market Price Per Ounce
Palladium $ 178 $ 128 $ 151
Platinum $ 395 $ 397 $ 424
Combined $ 230 $ 191 $ 216
</TABLE>
/(1)/ Cash costs of production include cash costs of mining, processing and
general and administrative expenses at the mine site (including overhead,
taxes other than on income, royalties and credits for metals produced
other than palladium and platinum). Total costs of production include
cash costs plus depreciation and amortization. Corporate expenses, income
taxes and interest income and expense are not included in either total or
cash costs per ounce produced. Cash costs per ounce are based upon
combined production of palladium and platinum at the same ratio as ounces
are produced from the Base Metals Refinery, i.e., 3.2:1.
/(2)/ Stillwater Mining reports a combined realized price of palladium and
platinum at the same ratio as ounces are produced from the Base Metals
Refinery, i.e., 3.2:1. The same ratio is applicable to the market price.
-6-
<PAGE>
RISK FACTORS
Prospective purchasers of Securities should carefully read this Prospectus,
any Prospectus Supplement delivered herewith, and the documents incorporated by
reference herein and therein. Ownership of Securities involves certain risks.
In determining whether to purchase Securities, prospective investors should
consider carefully the following risk factors and the other information
contained in this Prospectus, in addition to the other risk factors and
information set forth in any Prospectus Supplement delivered herewith.
METAL PRICE VOLATILITY, BACKWARDATION AND HEDGING
Since the Company's sole source of revenue is the sale of PGMs, the
profitability of the Company's operations can be significantly affected by
changes in the market prices of PGMs. PGM prices fluctuate widely and are
influenced by numerous factors beyond the Company's control, including such
factors as expectations for inflation, global demand, consumption patterns,
speculative activities, international political and economic conditions and
production amounts and costs in the other PGM producing countries, including the
Republic of South Africa and Russia. This volatility was evident during 1997,
when apparent tightness in PGM markets led to multi-year highs for current
delivery contracts and "backwardation," a condition in which delivery prices for
metals in the near term are higher than delivery prices for metals to be
delivered in the future. Since some of the world supply of palladium and
platinum is a by-product of the mining of nickel and copper, a portion of the
worldwide production of palladium and platinum is unrelated to the demand for
such metals. As a result, ordinary market balancing mechanisms may be less
effective. The market prices of PGMs could fall below the Company's production
costs and remain at such levels for a sustained period, causing the Company to
experience operating losses and to curtail or suspend some or all of its mining
activities.
The following table shows the annual high, low and average per ounce prices
of palladium and platinum for the periods indicated:
<TABLE>
<CAPTION>
PLATINUM PALLADIUM
----------------------------- -----------------------------
Year High Low Average High Low Average
- -------------------------------- ------ ------- --------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1993......................... $414 $345 $376 $142 $100 $123
1994......................... 431 380 406 163 124 144
1995......................... 459 403 424 178 128 151
1996......................... 433 368 398 146 116 130
1997......................... 525 340 395 245 115 178
</TABLE>
Source: Johnson Matthey (1993-1996 closing prices) and Rothschild Denver Inc.
(1997 bid prices).
The Company enters into hedging contracts from time to time to manage the
effect of price changes in palladium and platinum on the Company's cash flow.
Hedging activities typically have consisted of spot deferred contracts for
future deliveries of specific quantities of PGMs at specific prices, the sale of
call options and the purchase of put options. During the first quarter of 1997,
the Company entered into significant hedging positions, particularly in
palladium, for both 1997 and 1998 sales. The Company delivered against these
hedge contracts throughout 1997, incurring substantial palladium hedging losses
of
-7-
<PAGE>
approximately $10.1 million in 1997 and $5.1 million in the first quarter of
1998, due to the sharp rise in palladium spot prices and backwardation of future
delivery prices that started in mid-1997. Thus, while hedging transactions are
intended to reduce the negative effects of volatility of prices, hedging can
limit potential gains from increases in prices and could again expose the
Company to material losses in certain events. These below market hedge
contracts will mature and be closed out during the remainder of 1998. The
Company's hedging policy in the future will have the objective of capturing
upward price movements while providing floor prices to reduce the Company's
exposure to downside price movements.
EXPANSION PLAN RISKS
The Company's achievement of its long term expansion goal depends upon its
ability to increase production substantially at the Stillwater Mine and related
facilities and to complete exploration and development successfully and to meet
its production targets at the East Boulder Project. Although the Company
believes its goals and its preliminary estimates are based upon reasonable
assumptions, at this time there can be no assurance that these goals can be
realized. See "Business--1998 Expansion Plans."
Based upon engineering studies, the Company intends to increase production
at the Stillwater Mine from 2,000 tons per day to 3,000 tons per day. Actual
results may differ materially from preliminary production and cost analyses
conducted by the Company. To increase production at the Stillwater Mine, the
Company must receive permit approval to increase tons processed, which is
subject to the completion of environmental impact analyses and public review
processes. Although the environmental impact analyses and public comment period
have been completed and a record of decision is expected in the fourth quarter
of 1998, there can be no assurance that such decision will not be appealed.
Other facilities, including the concentrator, smelter and base metals refinery
("BMR"), will also have to be expanded or modified. In addition, design,
construction and operation at full capacity of new and expanded facilities must
be achieved, each of which can be expected to be time-consuming and complex and
to involve important elements that are beyond the Company's control.
The Company has also not yet completed a final engineering study or cost
estimate for the East Boulder Project. When an 18,500 foot tunnel has been
completed, geologic and process analyses, capital expenditures, cash operating
costs and recovery rates will be used to confirm the feasibility of proceeding
with the East Boulder Project. The project's capital costs, operating costs and
economic returns may differ materially from the Company's current analysis. The
Company will proceed with further development of the East Boulder Project as the
engineering studies are completed and the grade and continuity of the reef are
confirmed.
Based on the complexity and uncertainty involved in these projects,
estimates of time and funding required at this early stage are extremely
difficult to provide with certainty. No assurance can be given that either
project will be completed on time or at all, that the expanded operations will
achieve the anticipated production capacity, that the construction costs
associated with the 1998 Expansion Plan will not be higher than anticipated,
that the expected operating cost reductions will be achieved or that funding
will be available from internal and external sources in necessary amounts or on
acceptable terms. The anticipated timing and production results of the 1998
Expansion Plan assume, among other things, (i) the identification and
development of sufficient proven reserves and (ii) the recruitment of sufficient
numbers of individuals skilled in underground mining. Finally, the Company's
pursuit of its expansion goals and its ability to finance them could be
adversely affected by changes in PGM prices.
-8-
<PAGE>
The construction of expanded mining operations involves a number of
uncertainties, including factors beyond the Company's control. Failure to
complete the 1998 Expansion Plan on a timely basis or unexpected cost increases
could have a material adverse effect on the Company's future results of
operations and financial condition. If the capital expenditures required to
complete the 1998 Expansion Plan or to achieve the anticipated production
capacity are significantly higher than expected, there is no assurance that the
Company's capital resources would be sufficient to cover such costs or that the
Company would be able to obtain alternative sources of financing to cover such
costs.
COMPETITION; SUPPLY AND DEMAND
The Company competes with other suppliers of PGMs, some of which are
significantly larger than the Company and have access to greater mineral
reserves and financial and commercial resources. These suppliers include Anglo
American Platinum Corporation, Ltd., Western Platinum, Ltd. and Impala Platinum
Holdings, Ltd., which mine the Bushveld Complex in the Republic of South Africa,
the world's principal source of PGMs. The vast majority of the world's 1997
supply of PGMs came from the Republic of South Africa and Russia. Palladium and
platinum are also produced in Canada principally as a by-product of nickel and
copper mining.
In the past, Russia, the primary producer of palladium, has been estimated
to have supplied over 60% of what is now a seven and one-half million ounce
world market. Russia is believed to produce roughly 2.0 million ounces a year
as a by-product of a nickel mine, and the remaining supply has come from
stockpiles accumulated over the years. The general consensus in the western
markets is that the Russian stockpiles of both palladium and platinum have
declined significantly and will be exhausted within the next few years.
However, if Russian stockpiles of palladium and platinum were more extensive
than believed and if Russian producers dispose of their stockpiles in the
market, the supply scenario would improve drastically, with the likely effect of
lowering prices substantially. Additional mines may open in the Republic of
South Africa or elsewhere over the next several years, including the Hartley
Platinum and Mimosa projects on the Great Dyke in Zimbabwe, resulting in
increased global production.
Furthermore, in certain industrialized countries, an industry has developed
for the recovery of PGMs from scrap sources, mostly from spent automotive and
industrial catalysts. There can be no assurance that the Company will be
successful in competing with these existing and emerging PGM producers.
Moreover, there can be no assurance that a less expensive alternative alloy or
synthetic material which has the same characteristics as PGMs will not be
developed to replace PGMs in a number of key technological or industrial
applications. Development of alternative alloys or materials could have an
adverse effect on the Company.
DEVELOPMENT RISKS
The Company's operations will be affected by the costs and results of its
continued exploration and development programs. The Company is seeking to
expand its reserves only through exploration and development within its
controlled claims which are located along the 28-mile J-M Reef. There can be no
assurance that the Company's mineral exploration efforts will be successful.
Even where mineralization has been discovered, it usually takes a number of
years from the initial phases of exploration until production is possible,
during which time the economic feasibility of production may change.
Substantial expenditures are required to establish ore reserves through
drilling, to confirm metallurgical processes to extract the metal from the ore
and, in the case of new mines, to construct mining and processing facilities.
As a result of these uncertainties, no assurance can be given that the Company's
exploration programs will result in the replacement of existing reserves, some
of which are being depleted by current production.
-9-
<PAGE>
The Company has restarted its development of the East Boulder Project. New
development projects have no operating history upon which to base estimates of
future cash operating costs. Particularly for development projects, estimates
of reserves and cash operating costs are, to a large extent, based upon the
interpretation of geologic data obtained from drill holes and other sampling
techniques, and engineering studies which derive estimates of cash operating
costs based upon anticipated tonnage and grades of ore to be mined and
processed, the configuration of the ore body, expected recovery rates of the
PGMs from the ore, facility and equipment operating costs and other factors. As
a result, it is possible that actual cash operating costs and economic returns
may differ significantly from those currently estimated or those established in
future studies and estimates. It is not unusual in new mining operations to
experience unexpected problems during the development and start-up phases, which
can result in substantial delay in reaching commercial production.
There are a number of uncertainties inherent to any PGM development
program, including the location of the PGM vein in the reef, receipt of
necessary governmental permits and the construction of mining and processing
facilities. In addition, substantial expenditures may be required to pursue
such development activities.
MINING RISKS AND LIMITS OF INSURANCE COVERAGE
Underground mining and the Company's milling, smelting and refining
operations involve a number of risks and hazards, including environmental
hazards, industrial accidents, labor disputes, unusual and unexpected rock
formations, ground or slope failures, cave-ins, flooding and periodic
interruptions due to inclement or hazardous weather conditions or other acts of
God. Such risks could result in damage to, or destruction of, mineral
properties or production facilities, personal injury or death, environmental
damage, delays in mining, monetary losses and possible legal liability.
Fatalities have occurred at the Company's mine since operations began in 1986.
There can be no assurance that industrial accidents will not have a material
adverse effect on the Company's business and operations. Although the Company
believes that it maintains insurance within ranges of coverage consistent with
industry practice, there can be no assurance that this insurance will cover the
risks associated with mining or that the Company will be able to maintain
insurance to cover these risks at economically feasible premiums. The Company
might also become subject to liability for pollution or other hazards which it
cannot insure against or which it may elect not to insure against because of
premium costs or other reasons. Losses from such events could have a material
adverse effect on the Company.
GOVERNMENTAL REGULATIONS
The Company's business is subject to extensive Federal, state and local
environmental controls and regulations, including the regulation of discharge of
materials into the environment, disturbance of lands, threatened or endangered
species and other environmental matters. These laws are continually changing
and, as a general matter, are becoming more restrictive. Generally, compliance
with these regulations requires the Company to obtain permits issued by Federal,
state and local regulatory agencies. Certain permits require periodic renewal
or review of their conditions. The Company cannot predict whether it will be
able to renew such permits or whether material changes in permit conditions will
be imposed. Nonrenewal of permits or the imposition of additional conditions
could have a material adverse effect on the Company's financial condition or
results of operations.
Compliance with existing and future environmental laws and regulations may
require additional control measures and expenditures which cannot be estimated
at this time. Environmental compliance requirements for new mines may require
substantial additional control measures that could materially affect
-10-
<PAGE>
permitting and proposed construction schedules for such facilities. Under
certain circumstances, facility construction may be delayed pending regulatory
approval. Expansion will require new environmental permitting at the Stillwater
Mine and mining and processing facilities at the East Boulder Project. See "--
Expansion Plan Risks."
The Company's activities are also subject to extensive Federal, state and
local laws and regulations governing matters relating to mine safety,
occupational health, labor standards, prospecting, exploration, production,
exports and taxes. The Company has not experienced any material difficulty
emanating from these extensive laws and regulations in the past, nor does it
have any basis to expect any material difficulty relating to existing laws and
regulations in the future. The Company believes that it has successfully
complied in all material respects with all Federal, state and local requirements
for the current operations and planned expansion of its mining activities at the
Stillwater Mine. Compliance with these and other laws and regulations could
require significant capital outlays.
New laws and regulations, amendments to existing laws and regulations, or
more stringent enforcement of existing laws and regulations could have a
material adverse impact on the Company's results of operations and financial
condition and, in the worst case, could render the Company's mining operations
uneconomic. During the 1997 legislative session, legislation was introduced
into the United States Congress which proposed a number of modifications to the
General Mining Law, which governs the location and maintenance of unpatented
mining claims and related activities on federal lands. Among those
modifications were proposals which would have (i) imposed a royalty on
production from unpatented mining claims, (ii) increased the cost of holding
such claims, and (iii) imposed more specific federal reclamation requirements on
operations on such claims. None of those proposed modifications were enacted
into law. The same or similar proposals may be considered by Congress in 1998
as well. The potential impact on the Company as a result of congressional
action is difficult to predict, but legislation amending the General Mining Law
could adversely affect the Company's ability to economically develop the J-M
Reef, virtually all of which is comprised of unpatented mining claims on federal
lands.
DEPENDENCE ON A SINGLE MINE
All of the Company's revenues are currently derived from its mining and
operations at the Stillwater Mine. Although the Company has not experienced any
serious production interruption since production began in 1987, if the
operations at the Stillwater Mine or at any of the Company's processing
facilities were to be reduced, interrupted or curtailed, the Company's ability
to generate revenues and profits in the future would be materially adversely
affected.
TITLE TO PROPERTIES
The validity of unpatented mining claims on public lands, which constitute
most of the property holdings of the Company, is often uncertain and may be
contested and subject to title defects. Unpatented mining claims may be located
on U.S. federal public lands open to appropriation, and are generally considered
to be subject to greater title risk than other real property interests because
the validity of unpatented mining claims is often uncertain and is always
subject to challenges of third parties or contests by the federal government.
The validity of an unpatented mining claim, in terms of its location and its
maintenance, is dependent on strict compliance with a complex body of federal
and state statutory and decisional law. In addition, there are few public
records that definitively control the issues of validity and ownership of
unpatented mining claims. While the Company has obtained various reports,
opinions and certificates of title with respect to certain of the claims it owns
or to which it has the rights in accordance with
-11-
<PAGE>
what the Company believes is industry practice, there can be no assurance that
the title to any of its claims may not be defective.
RESERVE ESTIMATES
While the Company's 1997 ore reserves have been affirmed and verified by
independent consultants, the ore reserve estimates incorporated by reference in
this Prospectus are necessarily imprecise and depend to some extent on
statistical inferences drawn from limited drilling, which may, on occasion,
prove unreliable. Reserve estimates are expressions of judgment based on
knowledge, experience and industry practice. Although the Company believes its
estimated ore reserves are well established, there can be no assurance that its
estimated ore reserves are accurate, and future production experience could
differ materially from such estimates. Should the Company encounter
mineralization or formations at any of its mines or projects different from
those predicted by drilling, sampling and similar examinations, reserve
estimates may have to be adjusted and mining plans may have to be altered in a
way that might adversely affect the Company's operations. Declines in the
market prices of PGMs may render the mining of some or all of the Company's ore
reserves uneconomic. No assurance can be given that any particular level of
PGMs may be recovered from the ore reserves and the grade of ore may vary
significantly from time to time. Moreover, short-term factors relating to the
ore reserves, such as the need for additional development of the ore body or the
processing of new or different grades, may impair the profitability of the
Company in any particular accounting period.
LABOR AVAILABILITY AND RELATIONS
The operations of the Company are significantly dependent on the
availability of qualified miners. Historically, the Company has experienced
high turnover with respect to its miners. In addition, the Company must compete
for individuals skilled in the operation and development of PGM mining
properties. The number of such persons is limited, and significant competition
exists to obtain their skills. There can be no assurance that the Company will
be able to maintain an adequate supply of miners and other personnel or the that
the Company's labor expenses will not increase as a result of a shortage in
supply of such workers. Failure to maintain an adequate supply of miners could
adversely effect the Company's expansion plans and results of operations. The
Company currently has approximately 735 employees, approximately 600 of whom are
covered by a collective bargaining agreement with the Oil, Chemical and Atomic
Workers Union (the "OCAW"), expiring June 30, 1999. The Company's inability to
negotiate an acceptable contract with the OCAW or with a new union could result
in work stoppages by the affected employees and increased operating costs as a
result of higher wages or benefits paid. In the event the Company's employees
were to engage in a strike or other work stoppage, the Company could experience
a significant disruption of its operations and higher ongoing labor costs, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
COMPLEXITY OF PROCESSING
Compared to gold and silver producers, as a PGM producer Stillwater is
required to conduct additional processing procedures and construct and operate
additional facilities. In addition to concentration facilities at the mine
site, the Company also operates its own smelting and base metals refining
facilities in Columbus, Montana to produce a PGM filter cake shipped for final
refining by a third party refiner. The operations of a smelter and refinery by
the Company require environmental steps and operational expertise not required
of most other precious metals producers. Though no material adverse effects
have been experienced to date, this additional complexity of operations poses
additional operational and environmental risks.
-12-
<PAGE>
LIMITED NUMBER OF REFINERS
The Company has generally shipped its filter cake to two third party
refiners. The Company has no control over the refining operations of these third
party refiners. If the refining capacity available to the Company was
significantly reduced, due to the unavailability of third party refiners,
changes in environmental requirements or otherwise, the Company's operations
would be adversely affected.
CERTAIN ANTI-TAKEOVER EFFECTS
In October 1995, the Board of Directors adopted a stockholder rights plan
and, pursuant thereto, issued preferred stock purchase rights to holders of its
common stock. The Rights have certain anti-takeover effects. If triggered, the
Rights would cause substantial dilution to a person or group of persons who
acquires more than 15% of the Common Stock on terms not approved by the Board of
Directors. See "Description of Capital Stock--Rights Agreement."
-13-
<PAGE>
USE OF PROCEEDS
Unless a Prospectus Supplement indicates otherwise, the Company intends to
use the net proceeds to be received from the sale of the Securities to finance
the Company's operations, for continued expansion and development activities and
for other general corporate purposes. The Company will not receive any net
proceeds from the sale of any shares of Common Stock offered by the Selling
Shareholders.
RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preferred stock dividends for the Company were as
follows for the years ended December 31, 1997, 1996, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges............... (a) (b) 1.2 4.7 11.8
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends.................... (a) (b) 1.2 4.7 11.8
</TABLE>
_______________
(a) Earnings for the year ended December 31, 1997 were inadequate to cover
fixed charges by $10,196.
(b) Earnings for the year ended December 31, 1996 were inadequate to cover
fixed charges by $6,796.
For purposes of calculating the ratio of earnings to fixed charges and the
ratio of earnings to combined fixed charges and preferred stock dividends,
earnings consist of income before income taxes and fixed charges (exclusive of
preferred stock dividends). For the purpose of calculating both ratios, fixed
charges include interest expense and capitalized interest. Because the Company
did not pay any preferred stock dividends during the years indicated, the ratios
are identical.
SELLING SHAREHOLDERS
Some or all of the shares of Common Stock being offered pursuant to this
Prospectus may be offered by certain Selling Shareholders. Identification of any
such Selling Shareholders will be made in the applicable Prospectus
Supplement.
-14-
<PAGE>
BUSINESS AND PROPERTIES
GENERAL
Stillwater Mining Company ("Stillwater" or the "Company") is engaged in the
exploration, development, extraction, processing and refining of palladium,
platinum and associated metals from the J-M Reef located in Stillwater and Sweet
Grass Counties, Montana. Associated by-product metals include rhodium, gold,
silver, nickel and copper. The Company conducts its current operations at the
Stillwater Mine in Nye, Montana. Future expansion is planned at the Stillwater
Mine and at the East Boulder site located at the western end of the J-M Reef.
The J-M Reef is the only significant primary source of platinum group
metals ("PGMs") outside the Republic of South Africa and Russia. The J-M Reef
is an extensive mineralized zone containing PGMs, which has been traced over a
strike length of approximately 28 miles and which extends downward over one mile
to unknown depths. The Company holds the rights to claims covering
substantially all of the property identified as PGM mineralized zone or the J-M
Reef.
GEOLOGY AND RESERVES
The J-M Reef is located in the Beartooth Mountains in southern Montana. It
is situated along the northern edge of the Beartooth Plateau, which rises to
elevations of over 10,000 feet in places. This plateau is deeply dissected by
several rivers and their tributaries including the Stillwater River, towards the
eastern end and the Boulder River, near the western end of the known reef
horizon. Both of these rivers have eroded their valley floors resulting in deep
valleys cut into the gently undulating elevated plateau.
Geologically, the J-M Reef is composed of an assemblage of basic and
ultrabasic rocks derived from a single, large, buried magma body emplaced an
estimated 2.7 billion years ago. The molten rock was sufficiently fluid at the
time of emplacement to allow individual minerals to crystallize sequentially,
the heavier, more basic, darker minerals crystallizing first, sinking towards
the bottom, and leaving the lighter, more siliceous light-colored minerals to
crystallize out later to produce bands of norite, gabbro and anorthosite which
can be traced across most of the strike length of the complex. Over time the
original horizontal orientation of the reef was changed as the reef was tilted
at an angle of 50 to 90 degrees to the north. The upper portion of the reef was
eroded away to produce the essentially lenticular-shaped exposure of the reef
evident today, which has been identified for 28 miles in an east-southeasterly
direction and has a maximum width of nearly 4.5 miles near the East Boulder
valley.
The PGMs, consisting of palladium, platinum and rhodium, and a small amount
of nickel, copper, silver and gold, are concentrated in one principal layer.
The J-M Reef appears to form a continuous layer which is exposed from the
highest ridges over 9,500 feet above sea level to the deepest valleys almost a
mile below the surface of the plateau. Geological and geophysical evidence
suggests that the J-M Reef extends downward beyond the limits of currently
available mining practice. Geological mapping and gravity surveys also suggest
that the dip of the J-M Reef flattens gently and may extend 30 miles or more to
the north.
The following table sets forth the Company's proven and probable palladium
and platinum ore reserves and platinum and gold equivalent reserves as of
December 31, 1997. The reserves reflected below are based on a cut-off grade of
0.40 ounces of palladium plus platinum per ton, and assume the following prices
for economic production: $155 and $375 per ounce for palladium and platinum,
respectively. Proven and probable reserves are after average mining dilution of
10% at zero grade based on actual mining experience.
-15-
<PAGE>
The ore reserves were affirmed and verified by Behre Dolbear & Company,
Inc. ("Behre Dolbear"), independent consultants, who are experts in mining,
geology and ore reserve determination. The Company primarily has utilized Behre
Dolbear to carry out independent reviews and inventories of the Company's ore
reserves since 1990. The ore reserves have been affirmed and verified by Behre
Dolbear in alternating years.
PROVEN AND PROBABLE RESERVES*
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------
Average Contained
Tons/(1)/ Grade/(2)/ Ounces/(2)/
(000's) (Ounces/Ton) (000's)
----------- -------------- -----------
<S> <C> <C> <C>
Proven Reserves 1,379 0.86 1,184
Probable Reserves 28,130 0.79 22,183
----------- -------------- -----------
Total Proven and Probable Reserves 29,509 0.79 23,367
----------- -------------- -----------
Total Platinum Equivalent Proven and
Probable Reserves/(2)/ 15,462
-----------
Total Gold Equivalent Proven and
Reserves/(3)/ 19,354
-----------
</TABLE>
* Reserves are defined as that part of a mineral deposit that can be
economically and legally extracted or produced at the time of
determination and is customarily stated in terms of "ore" when dealing
with metals. The probable reserves are computed from information similar
to that used for proven reserves, but the sites for inspection, sampling
and measurement are between 50 and 1,000 feet apart. The degree of
assurance, although lower than that for proven reserves, is sufficient to
predict the geological regularity of the reef between points of
observation. See "Risk Factors."
/(1)/ Total proven and probable reserves include 11,510,000 tons in the area of
East Boulder. Significant capital investments will be required to access
the East Boulder reserves. See "-- 1998 Expansion Plan."
/(2)/ Expressed as palladium plus platinum ounces per ton at a ratio of 3.3
parts palladium to one part platinum, before processing losses of
approximately ten percent (10%).
/(3)/ Platinum and gold equivalent ounces of proven and probable reserves at
December 31, 1997 are presented solely for purposes of illustration and
are calculated using the London P.M. Fix of $363 per ounce of platinum,
$290 per ounce of gold and $203 per ounce of palladium on December 30,
1997.
Reserves are consumed during mining operations and the Company generally
replaces reserves by drilling mineralized material on a close-spaced pattern.
Prior to establishment as reserves, this mineralized material has been confirmed
to contain PGMs but has not yet been established as proven and probable
reserves. Because of the expense of the close-spaced drilling necessary to
generate proven reserves estimates, the Company generally attempts to establish
sufficient reserves to support its mine development objective of approximately
18 months of production.
MINING
The Stillwater Mine accesses only a small segment of the J-M Reef,
approximately five miles long, between the elevations of 6,700 and 3,100 feet
above sea level. Deep exploration drill holes have confirmed the structure and
mineralization of the J-M Reef down to the 2,000-foot elevation, but currently
is open at depth to be further verified by additional drilling. Access to the
ore at the Stillwater Mine is by means of horizontal adits and drifts driven
parallel to the strike of the J-M Reef. Prior to 1994, almost all of the
Company's mining activities utilized "cut-and-fill" stoping methods. This
method extracts the ore in ten-foot high horizontal cuts. The open space
created by the extraction of each cut is filled with waste rock and coarse
concentrator tailings and becomes the floor for the next level of mining as the
process moves upward.
-16-
<PAGE>
Since 1994, the Company has introduced two mechanized mining methods:
"ramp-and-fill" and "sub-level" stoping. Ramp-and-fill is a mining method in
which a succession of horizontal cuts are extracted from the ore body using
mobile equipment. Access to the ore body is from ramps driven in or adjacent to
the ore body allowing the use of hydraulic drills and load haul dump (LHD)
equipment. Sublevel stoping is a mining method in which horizontal slices of
the reef are extracted in 30-foot vertical intervals utilizing mobile electric
hydraulic long-hole drills and remote control rubber tired LHD's. The reef is
mined in a retreat sequence along strike and up dip and mined out areas are
filled with development waste. The Company believes that mechanized mining
methods are safer, less expensive and more productive than traditional "cut and
fill" stoping. Mechanized mining increased from 60% in 1996 to 80% in 1997.
Currently, direct costs per ton mined for ramp-and-fill stoping is 40% less than
cut-and-fill stoping and is more productive by one ton per man-hour. However,
not all areas of the reef are amenable to ramp-and-fill mining, and the Company
will continue to select the appropriate mining method on a stope-by-stope basis.
The 1,950-foot vertical shaft, which was commissioned in 1997 as part of
the Company's prior expansion program, commenced in 1994, to double output from
1,000 TPD to 2,000 TPD (the "1994 Expansion Plan"), was sunk adjacent to the
concentrator. Development is continuing on two levels at 3,200 and 3,800 feet
above sea level, both of which are only accessible for the shaft. The crushing
station was commissioned during 1997 and is located on the 3,100-foot level.
All ore hoisted up the shaft is crushed. The commissioning of the production
shaft and underground crushing station has reduced haulage time and costs,
improved the material handling of ore and waste and improved the grinding
capabilities of the concentrator. During the fourth quarter of 1997,
approximately 56% of ore production was crushed and hoisted up the shaft. The
Company expects this percentage to increase as more stopes are developed off the
shaft. The portion of waste that cannot be used for backfill in underground
excavations is hauled to the surface or hoisted up the shaft, depending on its
location, and used in the rock embankment of the tailings dam or is placed in
the permitted waste disposal site.
PRODUCTION
During 1997, the Company produced 355,000 ounces of palladium and platinum,
up from 255,000 ounces in 1996. In the fourth quarter of 1997, the Company
attained its 1994 Expansion Plan production goals: by increasing production by
46% from approximately 1,370 TPD in the fourth quarter of 1996 to approximately
2,000 TPD in the fourth quarter of 1997. Variations in production above and
below 2,000 TPD can be expected in future periods. In conjunction with the 1994
Expansion Plan, the Company invested in new mobile mining equipment, reduced the
number of sizes and types of equipment used in the mine, formed an additional
maintenance crew to permit maintenance activities to be carried out on a 24-
hour, seven day per week basis and constructed additional surface facilities.
The 1994 Expansion Plan began to impact positively the Company's cash costs
of production in 1996. Cash costs of production were $215 per ounce in 1995,
$184 per ounce in 1996 and $174 per ounce in 1997. During 1994 through 1997,
the Company's total capital expenditures for the expansion of the Stillwater
Mine and facilities were approximately $70 million, excluding capital costs for
sustaining and rehabilitating the existing mine.
The Company has announced plans to triple production over five years. See
"--1998 Expansion Plan."
-17-
<PAGE>
CONCENTRATION
The Company maintains a concentrator plant adjacent to the Stillwater Mine.
Ore is defined as material with a PGM content above a 0.40 cut-off grade. Ore
is fed into the concentrator, mixed with water and ground to a slurry in a mill
circuit to liberate the PGM-bearing sulfide minerals from the rock matrix.
Various reagents are added to the slurry to separate the valuable sulfides from
the waste rock in a flotation circuit. In the flotation circuit, the sulfide
minerals are floated, recycled, reground and refloated to produce a concentrate
suitable for further processing. The flotation concentrate, which represents
approximately 1% of the original ore weight, is filtered, dried and transported
in trailers approximately 46 miles to the Company's metallurgical complex in
Columbus, Montana. Approximately 60% of the material discarded from this
process is used for backfill in the mine, with the balance stored in an onsite
tailings containment area.
As part of the 1994 Expansion Plan, the capacity of the concentrator was
expanded with the addition of a large ball mill grinding unit, additional
flotation capacity and ancillary equipment.
During 1997, the Company continued to improve the recovery performance from
the new flotation circuit. Recovery improved to 90% at December 31, 1997 from
86% at December 31, 1996. During the first half of 1998, the Company installed
twenty additional 300 cubic foot flotation cells, which helped to increase the
concentrator's recovery to approximately 92%. These cells also increased the
concentrate grade, which should result in potential cost reductions in
downstream processing.
Currently, the concentrator has a capacity of 2,000 TPD. In the first half
of 1998, the Company modified the concentrator by installing metal lifters and
grates in the semi-autogenous (SAG) grinding mill and installing a particle size
monitor (PSM), to control the particle size in the grinding circuit. The PSM
provides a more uniform sized product for the flotation circuit and reduces
labor requirements. The Company expects that the modification of the SAG mill
and the installation of the PSM should provide the concentrator with increased
capacity.
In 1996, the Company submitted an application to the Montana Department of
Environmental Quality requesting an amendment to its Operating Permit. The
Company's proposal contemplates the construction of a lined tailings impoundment
that would serve the Stillwater Mine for the next thirty years.
SMELTING
The Company's metallurgical complex is located in Columbus, Montana, and
consists of the precious metals smelter and base metals refinery (BMR).
Concentrate from the mine site is fed to a 1.5 megawatt electric furnace, where
it is melted and separated into a silica oxide rich slag and a PGM rich furnace
matte. The slag is drained through the side of the furnace, cooled and provided
to outside parties for use as road base. PGM matte is tapped from the furnace
and granulated.
The furnace matte is remelted in one of two top blown rotary converters
(TBRC), which separate iron from the matte. The converter matte is poured from
the TBRC, granulated and transferred to the BMR in two ton bags. The matte,
approximately 10% of the original smelter feed weight, is primarily copper and
nickel sulfides containing about 2% PGMs.
The gases released from the smelting operations are routed through a
gas/liquid scrubbing system, which removes approximately 99.8% of the sulfur
dioxide. Spent scrubbing solution is treated in a process
-18-
<PAGE>
that converts the sulfur dioxide to gypsum, or calcium sulfate, and regenerates
clean scrubbing solution. The gypsum is used by local farmers as a soil
amendment.
The smelter's expansion was completed in 1997, increasing the daily
smelting capacity from 22 TPD to 32 TPD. Feed and power control systems for the
existing furnace were modified, a second TBRC was added and the gas handling and
solution regeneration systems were upgraded. Additionally during 1997, the
furnace was rebricked, a process that occurs every two to three years. The
furnace modifications resulted in significant power savings due to increased
efficiency. At 2,000 TPD of mine production, the smelter processes
approximately 25-30 TPD of concentrate.
REFINING
In 1996, the Company constructed and commissioned the BMR, which utilizes
the patented Sherritt Process, whereby sulfuric acid is used to dissolve the
nickel, copper, cobalt and iron from the smelter matte. This process upgrades
the smelter product over 25-30 times (from 2% Pd+Pt to 55-60% Pd+Pt). The BMR
has a capacity equivalent to more than 4,000 tons per day of mine production.
The present plant now operates two shifts per day, five days per week.
The iron is precipitated out of the solution and returned to the smelter to
be processed and removed in the slag. The dissolved nickel, copper and cobalt
is shipped via truck, as a sulfate solution, to an outside refiner located in
Canada. The Company is paid for a portion of the nickel and cobalt content of
the solution. During the first half of 1998, the Company began construction of
a copper/nickel refinery to process the sulfate solution.
The resulting PGM rich filter cake is shipped to third party refiners and
is returned to the account of the Company after approximately 30 days as 99.95%
PGM sponge. The Company pays the third party refiners a refining charge in
United States dollars per ounce for the toll processing of the BMR filter cake.
SECONDARY MATERIALS PROCESSING
A sampling facility for secondary materials was completed in late 1997.
The facility was designed to accept spent catalysts that can be crushed and
added to the electric furnace. Several test lots were processed during 1997,
and it was determined that spent auto catalysts are suitable for processing at
the Company's facilities. Processing of secondary materials was suspended in
mid-1997 to assess the results of the test lots and to improve the performance
of the system. The Company expects to process shipments of spent auto catalysts
during 1998.
EXPLORATION ACTIVITIES
Major portions of the J-M Reef have yet to be exposed to drilling and
development sufficient to allow for the delineation of additional reserves.
However, given the magnitude of its current proven and probable reserves, the
Company's exploration activities are limited. The Company's current plans are
to continue to focus on its current PGM reserves at the Stillwater Mine and East
Boulder Project rather than exploring for or attempting to acquire additional
developed or undeveloped ore reserves. Consequently, exploration does not
represent a significant expenditure for the Company.
-19-
<PAGE>
1998 EXPANSION PLAN
The Company has adopted a long-term goal to triple production in five years
and is currently establishing the steps necessary to achieve this goal. The two
key components include increasing output at the Stillwater Mine from 2,000 to
3,000 TPD and moving the East Boulder Project through development and into
production. Detailed engineering is underway and a comprehensive plan for the
expansion, including a timetable for construction and a cost estimate, is
expected in the second half of 1998. The Company continues to refine its
preliminary cost estimate of $325 million for the 1998 Expansion Plan, including
$75 million for expansion of the Stillwater Mine and $250 million for
development of the East Boulder Project.
EXPANSION AT STILLWATER MINE. An engineering study on the expansion of the
Stillwater Mine was completed by MRDI Canada in the second quarter of 1998. The
MRDI study, in addition to the Company's internal analysis, indicates the most
economically attractive alternative is to expand the current mill throughput at
the Stillwater Mine from 2,000 to 3,000 tons per day and to develop
simultaneously the East Boulder project. Detailed engineering is underway, and
a comprehensive plan for the expansion including a timetable for construction
and a cost estimate is expected in the second half of 1998. When completed,
incremental production from the Stillwater expansion is expected to be in the
range of 250,000 ounces of palladium and platinum.
DEVELOPMENT OF THE EAST BOULDER PROJECT. The East Boulder Project provides
western access to the J-M Reef, from Sweet Grass County, Montana, and is the
second fully permitted access to the J-M Reef. In 1996, the Company began work
on the initial exploration phase of the East Boulder Project, including site
preparation, construction of a power line and procurement of a tunnel boring
machine ("TBM"). During 1996, the Company invested $7.8 million in the East
Boulder Project. These capital investments were primarily for construction of
the TBM and providing electrical power supply to the mine portal site. In
October 1996, the project was deferred, primarily due to a downturn in palladium
and platinum prices. However, permitting and environmental activities continued
at the East Boulder Project with approximately $1.1 million expended during
1997. In November 1997, with the achievement of the 1994 Expansion Plan's
production goals and higher prices for palladium and platinum, the Company
restarted the East Boulder Project. The TBM, which will provide access to the
western section of the J-M Reef, was completed in the second quarter of 1998 and
development work began in the second quarter of 1998. Independent contractors
have been engaged to work with the Company to drive the 18,500-foot long, 15-
foot diameter tunnel. This is expected to take approximately 18 months and cost
approximately $20 million. During this period, the Company will complete its
engineering and cost estimate for the East Boulder Project. The Company will
proceed with further development of the East Boulder Project as engineering is
completed and the grade and continuity of the reef have been confirmed. A
preliminary feasibility study, completed in 1992, estimated the total cost of
the project to be $250 million, including $50 million for contingencies.
-20-
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Convertible Debt Securities may be issued from time to time in one or
more series under an indenture between the Company, as issuer, and the trustee
specified in the applicable Prospectus Supplement. The following statements
with respect to the Convertible Debt Securities are subject to the detailed
provisions of the indenture, the form of which is filed as an exhibit to the
Registration Statement. Parenthetical references below are to the indenture (or
the form of security contained therein if so specified) and, whenever any
particular provision of the indenture or any term used therein is referred to,
such provision or term is incorporated by reference as a part of the statement
in connection with which such reference is made, and the statement in connection
with which such reference is made is qualified in its entirety by such
reference.
The Convertible Debt Securities will constitute either indebtedness
designated as Senior Indebtedness ("Senior Debt Securities"), indebtedness
designated as Senior Subordinated Indebtedness ("Senior Subordinated Debt
Securities") or indebtedness designated as Subordinated Indebtedness
("Subordinated Debt Securities"). Senior Debt Securities, Senior Subordinated
Debt Securities and Subordinated Debt Securities will each be issued under a
separate indenture (individually an "Indenture" and collectively the
"Indentures") to be entered into prior to the issuance of such Convertible Debt
Securities. The Indentures will be substantially identical, except for
provisions relating to subordination. See "Subordination of Senior Subordinated
Debt Securities and Subordinated Debt Securities." There will be a separate
trustee (individually a "Trustee" and collectively the "Trustees") under each
Indenture. Information regarding the Trustee under an Indenture will be
included in any Prospectus Supplement relating to the Convertible Debt
Securities issued thereunder.
The particular terms of each series of Convertible Debt Securities, as well
as any modification or addition to the general terms of the Convertible Debt
Securities as herein described, which may be applicable to a particular series
of Convertible Debt Securities, will be described in the Prospectus Supplement
relating to such series of Convertible Debt Securities and set forth in a filing
with the Commission. Accordingly, for a description of the terms of a
particular series of Convertible Debt Securities, reference must be made to both
the Prospectus Supplement relating to such series and to the description of
Convertible Debt Securities set forth in this Prospectus.
GENERAL
The Convertible Debt Securities offered pursuant to this Prospectus will be
limited to $200,000,000 aggregate principal amount (or (i) its equivalent (based
on the applicable exchange rate at the time of sale), if Convertible Debt
Securities are issued with principal amounts denominated in one or more foreign
currencies, composite currencies or currency units as shall be designated by the
Company, or (ii) such greater amount, if Convertible Debt Securities are issued
at an original issue discount, as shall result in aggregate proceeds of
$200,000,000 to the Company). The Indenture provides that additional
convertible debt securities may be issued thereunder up to the aggregate
principal amount, which is not limited by the Indenture, authorized from time to
time by the Company's Board of Directors or any duly authorized committee
thereof. So long as a single Trustee is acting for the benefit of the holders
of all the Convertible Debt Securities offered hereby and any such additional
convertible debt securities issued under the Indenture, the Convertible Debt
Securities and any such additional convertible debt securities are herein
collectively referred to as the "Indenture Securities." The Indenture also
provides that there may be more than one Trustee under the Indenture, each with
respect to one or more different series of Indenture Securities. At any time
when two or more Trustees are acting, each with respect to only certain series,
the term "Indenture Securities" as used herein shall mean the one or more series
with respect to which each respective Trustee is acting and the powers and the
trust obligations of each such Trustee as described herein shall extend only to
the one or
-21-
<PAGE>
more series of Indenture Securities for which it is acting as trustee. If there
is more than one Trustee acting for different series of Indenture Securities,
then those Indenture Securities (whether of one or more than one series) for
which each Trustee is acting would be treated as if issued under a separate
Indenture.
The applicable Prospectus Supplement will set forth a description of the
particular series of Convertible Debt Securities being offered thereby,
including but not limited to: (1) the designation or title of such Convertible
Debt Securities; (2) the aggregate principal amount of such Convertible Debt
Securities; (3) the percentage of their principal amount at which such
Convertible Debt Securities will be offered; (4) the date or dates on which the
principal of such Convertible Debt Securities will be payable and on which such
Convertible Debt Securities will mature; (5) the rate or rates (which may be
fixed or variable) at which such Convertible Debt Securities shall bear
interest, or the method of determination of such rate or rates at which such
Convertible Debt Securities shall bear interest, if any; (6) the date or dates
from which interest will accrue or the method of determination of such date or
dates, and the date or dates on which any such interest shall be payable; (7)
the currencies or currency units in which such Convertible Debt Securities are
issued or payable; (8) the terms for redemption, extension or early repayment of
such Convertible Debt Securities, if any; (9) if other than denominations of
$1,000 and any integral multiple thereof, the denominations in which such
Convertible Debt Securities are authorized to be issued; (10) the terms and
conditions upon which conversion will be effected, including the conversion
price, the conversion period and other conversion provisions; (11) the
provisions for a sinking fund, if any; (12) whether such Convertible Debt
Securities are issuable as a Global Security or Securities; (13) any index or
formula to be used to determine the amount of payments of principal, premium, if
any, and interest on such Convertible Debt Securities, and any commodities,
currencies, currency units or indices, or value, rate or price, relevant to such
determination; (14) if the principal of, premium, if any, or interest on such
Convertible Debt Securities is to be payable, at the election of the Company or
a Holder thereof, in one or more currencies or currency units other than that or
those in which such Convertible Debt Securities are stated to be payable, the
currencies or currency units in which payment of the principal of, premium, if
any, and interest on such Convertible Debt Securities as to which election is
made shall be payable, and the periods within which and the terms and conditions
upon which such election is to be made; (15) if other than the principal amount
thereof, the portion of the principal amount of such Convertible Debt Securities
of the series which will be payable upon acceleration of the Maturity thereof;
(16) whether such Convertible Debt Securities are subordinate in right of
payment to any Senior Indebtedness of the Company and, if so, the terms and
conditions of such subordination and the aggregate principal amount of such
Senior Indebtedness outstanding as of a recent date; (17) any covenants to which
the Company may be subject with respect to such Convertible Debt Securities;
(18) the applicability of the provisions described under "Defeasance" below;
(19) United States income tax consequences, if any; (20) the provisions for the
payment of additional amounts with respect to any withholding taxes in certain
cases; (21) any term or provision relating to such Convertible Debt Securities
which is not inconsistent with the provisions of the Indenture; (22) the
Trustee; and (23) any other special terms pertaining to such Convertible Debt
Securities. Unless otherwise specified in the applicable Prospectus Supplement,
the Convertible Debt Securities will not be listed on any securities exchange.
One or more series of Convertible Debt Securities may be sold at a
substantial discount below their stated principal amount, bearing no interest or
interest at a rate which at the time of issuance is below market rates. Any
material federal income tax consequences and other special considerations with
respect to any series of Convertible Debt Securities will be described in the
Prospectus Supplement relating to any such series of Convertible Debt
Securities.
If the purchase price of any series of Convertible Debt Securities is
denominated in a foreign currency or currencies or a foreign currency unit or
units or if the principal of, premium, if any, and interest on any series of
Convertible Debt Securities are payable in a foreign currency or currencies or a
foreign currency unit
-22-
<PAGE>
or units, the restrictions, elections, general tax considerations, specific
terms and other information with respect to such series of Convertible Debt
Securities will be set forth in the applicable Prospectus Supplement.
Convertible Debt Securities may be issued from time to time with payment
terms which are calculated by reference to the value, rate or price of one or
more commodities, currencies, currency units or indices. Holders of such
Convertible Debt Securities may receive a principal amount (including premium,
if any) on any principal payment date, or a payment of interest on any interest
payment date, that is greater than or less than the amount of principal
(including premium, if any) or interest otherwise payable on such dates,
depending upon the value, rate or price on the applicable dates of the
applicable currency, currency unit, commodity or index. Information as to the
methods for determining the amount of principal, premium, if any, or interest
payable on any date, the currencies, currency units, commodities or indices to
which the amount payable on such date is linked and any additional tax
considerations will be set forth in the applicable Prospectus Supplement.
Except as may be set forth in the applicable Prospectus Supplement, Holders
of Convertible Debt Securities will not have the benefit of any specific
covenants or provisions in the applicable Indenture or such Convertible Debt
Securities in the event that the Company engages in or becomes the subject of a
highly leveraged transaction, other than the limitations on mergers,
consolidations and transfers of substantially all of the Company's properties
and assets as an entirety to any person as described below under "Consolidation,
Merger and Sale of Assets."
The Convertible Debt Securities will be general unsecured obligations of
the Company.
Except as otherwise provided in the applicable Prospectus Supplement,
principal, premium, if any, and interest, if any, will be payable at an office
or agency to be maintained by the Company in New York, New York, except that at
the option of the Company interest may be paid by check mailed to the person
entitled thereto.
The Convertible Debt Securities will be issued only in fully registered
form without coupons and may be presented for the registration of transfer or
exchange at the corporate trust office of the Trustee. Not all Convertible Debt
Securities of any one series need be issued at the same time, and, unless
otherwise provided, a series may be reopened for issuances of additional
Convertible Debt Securities of such series.
SENIOR DEBT SECURITIES
The Senior Debt Securities will rank pari passu with all other unsecured
and unsubordinated debt of the Company and senior to the Senior Subordinated
Debt Securities and Subordinated Debt Securities.
SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES AND SUBORDINATED DEBT
SECURITIES
The payment of the principal of, premium, if any, and interest on the
Senior Subordinated Debt Securities and the Subordinated Debt Securities will,
to the extent set forth in the respective Indentures and Indenture Supplements
governing such Senior Subordinated Debt Securities and Subordinated Debt
Securities, be subordinated in right of payment to the prior payment in full of
all Senior Indebtedness. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshalling of assets or any
bankruptcy, insolvency or similar proceedings of the Company, the holders of all
Senior Indebtedness will be entitled to receive payment in full of all amounts
due or to become due thereon before the Holders of the Senior Subordinated Debt
Securities or the Subordinated Debt Securities will be entitled to receive any
payment in respect of the
-23-
<PAGE>
principal of, premium, if any, or interest on such Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be. In the event of
the acceleration of the maturity of any Senior Subordinated Debt Securities or
Subordinated Debt Securities, the holders of all Senior Indebtedness will be
entitled to receive payment in full of all amounts due or to become due thereon
before the Holders of the Senior Subordinated Debt Securities or Subordinated
Debt Securities, as the case may be, will be entitled to receive any payment
upon the principal of, premium, if any, or interest on such Senior Subordinated
Debt Securities or Subordinated Debt Securities, as the case may be. No payments
on account of principal, premium, if any, or interest in respect of the Senior
Subordinated Debt Securities or Subordinated Debt Securities may be made if
there shall have occurred and be continuing in a default in the payment of
principal of (or premium, if any) or interest on any Senior Indebtedness beyond
any applicable grace period, or a default with respect to any Senior
Indebtedness permitting the holders thereof to accelerate the maturity thereof,
or if any judicial proceedings shall be pending with respect to any such
default. For purposes of the subordination provisions, the payment, issuance or
delivery of cash, property or securities (other than stock, and certain
subordinated securities, of the Company) upon conversion or exchange or a Senior
Subordinated Debt Security or Subordinated Debt Security will be deemed to
constitute payment on account of the principal of such Senior Subordinated Debt
Security or Subordinated Debt Security, as the case may be.
By reason of such provisions, in the event of insolvency, holders of Senior
Subordinated Debt Securities and Subordinated Debt Securities may recover less,
ratably, than holders of Senior Indebtedness with respect thereto.
The term "Senior Indebtedness," when used with respect to any series of
Senior Subordinated Debt Securities or Subordinated Debt Securities, is defined
to include all amounts due on and obligations in connection with any of the
following, whether outstanding at the date of execution of the Indenture or
thereafter incurred, assumed, guaranteed or otherwise created (including,
without limitation, interest accruing on or after a bankruptcy or other similar
event, whether or not an allowed claim therein):
(a) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Company for money borrowed or evidenced by bonds, debentures,
notes or similar instruments;
(b) reimbursement obligations and other liabilities (contingent or
otherwise) of the Company with respect to letters of credit or bankers'
acceptances issued for the account of the Company and interest rate protection
agreements and currency exchange or purchase agreements;
(c) obligations and liabilities (contingent or otherwise) of the Company
related to capitalized lease obligations;
(d) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Company related to agreements or arrangements designed to
protect the Company against fluctuations in commodity prices, including without
limitation, commodity futures contracts or similar hedging instruments;
(e) indebtedness of others of the kinds described in the preceding clauses
(a) through (d) that the Company has assumed, guaranteed or otherwise assured
the payment of, directly or indirectly;
(f) indebtedness of another Person of the type described in the preceding
clauses (a) through (e) secured by any mortgage, pledge, lien or other
encumbrance on property owned or held by the Company; and
(g) deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or liability
described in the preceding clauses (a) through (f)
-24-
<PAGE>
whether or not there is any notice to or consent of the Holders of such series
of Senior Subordinated Debt Securities or Subordinated Debt Securities, as the
case may be; except that, with respect to the Senior Subordinated Debt
Securities, any particular indebtedness, obligation, liability, guaranty,
assumption, deferral, renewal, extension or refunding shall not constitute
"Senior Indebtedness" if it is expressly stated in the governing terms, or in
the assumption or guarantee, thereof that the indebtedness involved is not
senior in right of payment to the Senior Subordinated Debt Securities or that
such indebtedness is pari passu with or junior to the Senior Subordinated Debt
Securities and, with respect to Subordinated Debt Securities, any particular
indebtedness, obligation, liability, guaranty, assumption, deferral, renewal,
extension or refunding shall not constitute "Senior Indebtedness" if it is
expressly stated in the governing terms, or in the assumption or guarantee,
thereof that the indebtedness involved is not senior in right of payment to the
Subordinated Debt Securities or that such indebtedness is pari passu with or
junior to the Subordinated Debt Securities.
In certain circumstances, such as the bankruptcy or insolvency of the
Company, bankruptcy or insolvency legislation may be applicable and the
application of such legislation may lead to different results with respect to,
for example, payments to be made to Holders of Convertible Debt Securities, or
priorities between Holders of the Convertible Debt Securities and holders of
Senior Indebtedness, than those provided for in the applicable Indenture.
If this Prospectus is being delivered in connection with a series of Senior
Subordinated Debt Securities or Subordinated Debt Securities, the accompanying
Prospectus Supplement or the information incorporated herein by reference will
set forth the approximate amount of Senior Indebtedness outstanding as of the
end of the Company's most recent fiscal quarter.
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, the
Convertible Debt Securities will be issued only in fully registered form in
denominations of U.S.$1,000 or integral multiples thereof. Unless otherwise
indicated in the applicable Prospectus Supplement, payment of principal,
premium, if any, and interest on the Convertible Debt Securities will be
payable, and the exchange, conversion and transfer of Convertible Debt
Securities will be registerable, at the office or agency of the Company
maintained for such purposes. No service charge will be made for any
registration of a transfer or exchange of the Convertible Debt Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
All monies paid by the Company to a Paying Agent for the payment of
principal of, premium, if any, or interest on any Convertible Debt Security
which remain unclaimed for two years after such principal, premium or interest
has become due and payable may be repaid to the Company and thereafter the
holder of such Convertible Debt Security may look only to the Company for
payment thereof.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
Convertible Debt Securities of any series: (a) failure to pay principal (or
premium, if any) on any Convertible Debt Security of that series at its
maturity, whether or not such failure is a result of the subordination
provisions of the Indenture with respect to such series; (b) failure to pay any
interest on any Convertible Debt Security of that series when due, continued for
30 days, whether or not such failure is a result of the subordination provisions
of the Indenture with respect to such series; (c) failure to make any sinking
fund payment, when due, in respect of any Convertible Debt Security of that
series; (d) failure to perform any other covenant of the Company in the
applicable Indenture or any other covenant to which the Company may be subject
with
-25-
<PAGE>
respect to Convertible Debt Securities of that series (other than a covenant
solely for the benefit of a series of Convertible Debt Securities other than
that series), continued for 90 days after written notice as provided in the
applicable Indenture; (e) failure to pay when due on final maturity (after the
expiration of any applicable grace period), or upon acceleration, any
indebtedness for money borrowed by the Company in excess of U.S. $10 million;
(f) certain events of bankruptcy, insolvency or reorganization; and (g) any
other Event of Default provided with respect to Convertible Debt Securities of
that series.
If an Event of Default with respect to outstanding Convertible Debt
Securities of any series shall occur and be continuing, either the Trustee or
the Holders of at least 25% in principal amount of the outstanding Convertible
Debt Securities of that series, by notice as provided in the applicable
Indenture, may declare the principal amount (or, if the Convertible Debt
Securities of that series are original issue discount securities, such portion
of the principal amount as may be specified in the terms of that series) of all
Convertible Debt Securities of that series to be due and payable immediately,
except that upon the occurrence of an Event of Default specified in (f) above,
the principal amount (or in the case of original issue discount securities, such
portion) of all Convertible Debt Securities shall be immediately due and payable
without notice. However, at any time after a declaration of acceleration with
respect to Convertible Debt Securities of any series has been made, but before
judgment or decree based on such acceleration has been obtained, the Holders of
a majority in principal amount of the outstanding Convertible Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration. For information as to waiver of defaults, see "Modification and
Waiver" below.
The Indentures will provide that, subject to the duty of the respective
Trustees thereunder during an Event of Default to act with the required standard
of care, each such Trustee will be under no obligation to exercise any of its
rights or powers under the respective Indentures at the request or direction of
any of the Holders, unless such Holders shall have offered to such Trustee
reasonable security or indemnity. Subject to certain provisions, including
those requiring security or indemnification of the applicable Trustee, the
Holders of a majority in principal amount of the outstanding Convertible Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to such Trustee, or
to exercise any trust or power conferred on such Trustee, with respect to the
Convertible Debt Securities of that series.
No Holder of a Convertible Debt Security of any series will have any right
to institute any proceeding with respect to the applicable Indenture or for any
remedy thereunder, unless such Holder shall have previously given to the
applicable Trustee written notice of a continuing Event of Default and unless
also the Holders of at least 25% in aggregate principal amount of the
outstanding Convertible Debt Securities of the same series shall have made
written requests, and offered reasonable indemnity, to such Trustee to institute
such proceeding as trustee, and the Trustee shall not have received from the
Holders of a majority in aggregate principal amount of the outstanding
Convertible Debt Securities of the same series a direction inconsistent with
such request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder of a
Convertible Debt Security for enforcement of payment of the principal of and
interest on such Convertible Debt Security on or after the respective due dates
expressed in such Convertible Debt Security.
The Company will be required to furnish to the Trustees annually a
statement as to the performance by the Company of its obligations under the
respective Indentures and as to any default in such performance.
-26-
<PAGE>
MODIFICATION AND WAIVER
Without the consent of any Holder of outstanding Convertible Debt
Securities, the Company and the Trustees may amend or supplement the Indentures
or the Convertible Debt Securities to cure any ambiguity, defect or
inconsistency, or to make any change that does not adversely affect the rights
of any Holder of Convertible Debt Securities. Other modifications and
amendments of the respective Indentures may be made by the Company and the
applicable Trustee with the consent of the Holders of not less than a majority
in aggregate principal amount of the outstanding Convertible Debt Securities of
each series affected thereby; provided, however, that no such modification or
amendment may, without the consent of the Holder of each outstanding Convertible
Debt Security affected thereby: (a) change the stated maturity of the principal
of, or any installment of principal of, or premium, if any, or interest on any
Convertible Debt Security; (b) reduce the principal amount of, the rate of
interest on, or the premium, if any, payable upon the redemption of, any
Convertible Debt Security; (c) reduce the amount of principal of an original
issue discount security payable upon acceleration of the maturity thereof; (d)
change the place or currency of payment of principal of, premium, if any, or
interest on any Convertible Debt Security; (e) impair the right to institute
suit for the enforcement of any payment on or with respect to any Convertible
Debt Security on or after the stated maturity or redemption date thereof; (f)
modify the conversion provisions in a manner adverse to the Holders thereof; (g)
modify the subordination provisions applicable to Senior Subordinated Debt
Securities or Subordinated Debt Securities in a manner adverse to the Holders
thereof; (h) reduce the percentage in principal amount of outstanding
Convertible Debt Securities of any series, the consent of the Holders of which
is required for modification or amendment of the applicable Indenture or for
waiver of compliance with certain provisions of the applicable Indenture or for
waiver of certain defaults or (i) modify any of the provisions of certain
sections as specified in the Indenture including the provisions summarized in
this paragraph, except to increase any such percentage or to designate
additional provisions of the Indenture, which, with respect to such series,
cannot be modified or waived without the consent of the Holder of each
outstanding Convertible Debt Security affected thereby.
The Holders of at least a majority in principal amount of the outstanding
Convertible Debt Securities of any series may, on behalf of the Holders of all
Convertible Debt Securities of that series, waive, insofar as that series is
concerned, compliance by the Company with certain covenants of the applicable
Indenture. The Holders of not less than a majority in principal amount of the
outstanding Convertible Debt Securities of any series may, on behalf of the
Holders of all Convertible Debt Securities of that series, waive any past
default under the applicable Indenture with respect to that series, except a
default in the payment of the principal of, premium, if any, or interest on, any
Convertible Debt Security of that series or in respect of a provision which
under the applicable Indenture cannot be modified or amended without the consent
of the Holder of each outstanding Convertible Debt Security of that series
affected.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of any series of
outstanding Convertible Debt Securities, may consolidate with or merge into, or
transfer or lease its assets substantially as an entirety (treating the Company
and each of its Subsidiaries as a single consolidated entity) to, any
corporation, and any other corporation may consolidate with or merge into, or
transfer or lease its assets substantially as an entirety to, the Company,
provided that (a) the corporation (if other than the Company) formed by such
consolidation or into which the Company is merged or which acquires or leases
the assets of the Company substantially as an entirety is organized and existing
under the laws of the United States of America, a state thereof or the District
of Columbia, and assumes the Company's obligations under each series of
outstanding Convertible Debt Securities and the Indentures applicable thereto;
(b) the Trustee is satisfied that the transaction will not result in the
successor being required to make any deduction or withholding on account
-27-
<PAGE>
of certain taxes from any payments in respect of the Securities; (c) after
giving effect to such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have occurred and be continuing; and (d) the Trustee shall have received an
officer's certificate and an opinion of counsel with respect to compliance with
the foregoing requirements.
DEFEASANCE
If so indicated in the applicable Prospectus Supplement with respect to the
Convertible Debt Securities of a series, the Company at its option will be
released from its obligations to comply with certain covenants specified in the
applicable Prospectus Supplement with respect to the Convertible Debt Securities
of such series, and the occurrence of an event described in clause (d) under
"Events of Default" above with respect to any defeased covenants, and clauses
(e) and (g) under "Events of Default" above shall no longer be an Event of
Default, if the Company irrevocably deposits with the applicable Trustee, in
trust, money, government obligations of the government issuing the currency in
which the Convertible Debt Securities of the relevant series are denominated, or
a combination thereof that through the payment of interest thereon and principal
thereof in accordance with the terms will provide money in an amount sufficient
to pay all the principal of and premium, if any, and interest on the Securities
of such series on the dates such payments are due (up to the stated maturity
date, or the redemption date, as the case may be) in accordance with the terms
of such Convertible Debt Securities. Such a trust may only be established if,
among other things, (a) no Event of Default described under "Events of Default"
above or event that, after notice or lapse of time, or both, would become an
Event of Default under the applicable Indenture, shall have occurred and be
continuing on the date of such deposit, or, with regard to an Event of Default
described under clause (f) under "Events of Default" above or an event that,
after notice or lapse of time, or both, would become an Event of Default
described under such clause (f), shall have occurred and be continuing at any
time during the period ending on the 123rd day following such date of deposit,
(b) the Company shall have delivered an opinion of counsel to the effect that
the Holders of the Convertible Debt Securities will not recognize gain or loss
for United States Federal income tax purposes as a result of such deposit or
defeasance and will be subject to United States Federal income tax in the same
manner as if such defeasance had not occurred, and (c) such covenant defeasance
will not result in the trust being in violation of the Investment Company Act of
1940. In the event the Company omits to comply with its remaining obligations
under the applicable Indenture after a defeasance of such Indenture with respect
to the Convertible Debt Securities of any series as described above and the
Convertible Debt Securities of such series are declared due and payable because
of the occurrence of any undefeased Event of Default, the amount of money and
government obligations on deposit with the applicable Trustee may be
insufficient to pay amounts due on the Convertible Debt Securities of such
series at the time of the acceleration resulting from such Event of Default.
However, the Company will remain liable in respect to such payments.
Notwithstanding the description set forth under "Subordination of Senior
Subordinated Debt Securities and Subordinated Debt Securities" above, in the
event that the Company deposits money or government obligations in compliance
with the Indenture that governs any Senior Subordinated Debt Securities or
Subordinated Debt Securities, as the case may be, in order to defease all or
certain of its obligations with respect to the applicable series of Convertible
Debt Securities, the money or government obligations so deposited will not be
subject to the subordination provisions of the applicable Indenture and the
indebtedness evidenced by such series of Convertible Debt Securities will not be
subordinated in right of payment to the holders of applicable Senior
Indebtedness to the extent of the money or government obligations so deposited.
-28-
<PAGE>
GOVERNING LAW
The Indentures and the Convertible Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York.
REGARDING THE TRUSTEES
The Indenture contains certain limitations on the right of each Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. Each Trustee will be
permitted to engage in certain other transactions with the Company; however, if
the Trustee acquires any conflicting interest and there is a default under the
Convertible Debt Securities issued under the applicable Indenture, the Trustee
must eliminate such conflict or resign.
BOOK-ENTRY SYSTEM
The Convertible Debt Securities of a Series may be issued in the form of
one or more global certificates representing the Convertible Debt Securities
(the "Global Securities") that will be deposited with a depository (the
"Depository") or with a nominee for the Depository identified in the applicable
Prospectus Supplement and will be registered in the name of the Depository or a
nominee thereof. In such a case one or more Global Securities will be issued in
a denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Convertible Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Convertible Debt Securities in definitive
certificated form, a Global Security may be transferred, in whole but not in
part, only to another nominee of the Depository for such series, or to a
successor Depository for such series selected or approved by the Company, or to
a nominee of such successor Depository.
The specific depository arrangement with respect to any series of
Convertible Debt Securities to be represented by a Global Security will be
described in the applicable Prospectus Supplement. The Company expects that the
following provisions will apply to depository arrangements.
Upon the issuance of any Global Security, and the deposit of such Global
Security with or on behalf of the Depository for such Global Security, the
Depository will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Convertible Debt Securities represented by
such Global Security to the accounts of institutions ("participants") that have
accounts with the Depository or its nominee. The accounts to be credited will
be designated by the underwriters or agents engaging in the distribution of such
Convertible Debt Securities or by the Company, if such Convertible Debt
Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests by participants in such Global Security will be shown on, and the
transfer of such beneficial interests will be effected only through, records
maintained by the Depository for such Global Security or by its nominee.
Ownership of beneficial interests in such Global Security by persons that hold
through participants will be shown on, and the transfer of such beneficial
interests within such participants will be effected only through, records
maintained by such participants. The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities
in certificated form. The foregoing limitations and such laws may impair the
ability to own, pledge or transfer beneficial interests in such Global
Securities.
-29-
<PAGE>
So long as the Depository for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Convertible
Debt Securities represented by such Global Security for all purposes under the
Indenture. Unless otherwise specified in the applicable Prospectus Supplement
and except as specified below, owners of beneficial interests in such Global
Security will not be entitled to have Convertible Debt Securities of the series
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Convertible Debt Securities of
such series in certificated form and will not be considered the holders thereof
for any purposes under the Indenture. Accordingly, each person owning a
beneficial interest in such Global Security must rely on the procedures of the
Depository and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a Holder under the Indenture. The Company understands that, under existing
industry practices, if the Company requests any action of Holders or an owner of
a beneficial interest in such Global Security desires to give any notice or take
any action a Holder is entitled to give or take under the Indenture, the
Depository would authorize the participants to give such notice or take such
action, and participants would authorize beneficial owners owning through such
participants to give such notice or take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Unless otherwise specified in the applicable Prospectus Supplement,
payments with respect to principal, premium, if any, and interest, if any, on
Convertible Debt Securities represented by a Global Security registered in the
name of a Depository or its nominee will be made to such Depository or its
nominee, as the case may be, as the registered owner of such Global Security.
The Company expects that the Depository for any Convertible Debt Securities
represented by a Global Security, upon receipt of any payment of principal,
premium or interest in respect of such Global Security, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Security
as shown on the records of such Depository. The Company also expects that
payments by participants to owners of beneficial interests in such Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street names," and will be the
responsibility of such participants. None of the Company, the Trustee or any
agent of the Company or the Trustee shall have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests of a Global Security, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests. If the Depository for any Convertible Debt Securities represented by
a Global Security is at any time unwilling or unable to continue as Depository
or ceases to be registered or in good standing under the Securities Exchange Act
of 1934, as amended, and a successor Depository is not appointed by the Company
within 90 days after the Company receives notice or becomes aware of such
condition, the Company will issue such Convertible Debt Securities in definitive
certificated form in exchange for such Global Security. In addition, the
Company may at any time and in its sole discretion determine not to have any of
the Convertible Debt Securities of a series represented by one or more Global
Securities and, in such event, will issue Convertible Debt Securities of such
series in definitive certificated form in exchange for all of the Global
Security or Securities representing such Convertible Debt Securities.
7% CONVERTIBLE SUBORDINATED NOTES DUE 2003
In 1996, the Company sold $51.5 million of 7% Convertible Subordinated
Notes Due 2003 (the "Notes"), maturing on May 1, 2003. The Notes are unsecured,
subordinated obligations and will be redeemable, in whole or in part, at the
option of the Company beginning on May 1, 1999. The Notes are convertible,
subject to prior redemption or repurchase, at the option of holders prior to
maturity, into shares of the Company's common stock at a conversion price of
$26.80 per share.
-30-
<PAGE>
DESCRIPTION OF PREFERRED STOCK
The following is a description of certain general terms and provisions of
the Preferred Stock. The particular terms of any series of Preferred Stock will
be described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below.
The summary of the terms of the Company's Preferred Stock contained in this
Prospectus does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Company's articles of Incorporation
relating to each series of Preferred Stock, which will be filed as an exhibit to
or incorporated by reference in this Prospectus at or prior to the time of
issuance of any such series of Preferred Stock.
The board of Directors of the company is authorized to approve the issuance
of one or more series of Preferred Stock without further authorization of the
stockholders of the company and to fix the number of shares, the designations,
rights, privileges, restrictions and conditions of any such series.
The applicable Prospectus Supplement will set forth the number of shares,
particular designation, relative rights and preferences and the limitations of
any series of Preferred Stock in respect of which this Prospectus is deliverer.
The particular terms of any such series will include the following:
(i) the maximum number of shares to constitute the series and the
designation thereof;
(ii) the annual dividend rate, if any, on shares of the series, whether
such rate is fixed or variable or both, the date or dates from which dividends
will begin to accrue or accumulate, whether dividends will be cumulative and
whether such dividends shall be paid in cash, Common Stock or otherwise;
(iii) whether the shares of the series will be redeemable and, if so, the
price at and the terms and conditions on which the shares of the series may be
redeemed, including the time during which shares of the series may be redeemed
and any accumulated dividends thereon that the holders of shares of the series
shall be entitled to receive upon the redemption thereof;
(iv) the liquidation preference, if any, applicable to shares of the
series;
(v) whether the shares of the series will be subject to operation of a
retirement or sinking fund and, if so, the extent and manner in which any such
fund shall be applied to the purchase or redemption of the shares of the series
for retirement or for other corporate purposes, and the terms and provisions
relating to the operation of such fund;
(vi) the terms and conditions, if any, on which the shares of the series
shall be convertible into, or exchangeable for, shares of any other class or
classes of capital stock of the Company or any series of any other class or
classes, or of any other series of the same class, including the price or prices
or the rate or rates of conversion or exchange and the method, if any, of
adjusting the same;
(vii) the voting rights, if any, of the shares of the series;
(viii) the currency or units based on or relating to currencies in which
such series is denominated and/or in which payments will or may be payable;
-31-
<PAGE>
(ix) the methods by which amounts payable in respect of such series may be
calculated and any commodities, currencies or indices, or price, rate or value,
relevant to such calculation;
(x) any other preferences and relative, participating, optional or other
rights or qualifications, limitations or restrictions thereof.
Any material United States or Canadian federal income tax consequences and
other special considerations with respect to any offered shares of Preferred
Stock will be described in the Prospectus Supplement relating to the offering
and sale of such shares of Preferred Stock.
-32-
<PAGE>
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts does not purport to be complete and is subject to
and qualified in its entirety by reference to the forms of Deposit Agreement and
Depositary Receipts relating to each series of the Preferred Stock which have
been or will be filed with the Commission at or prior to the time of the
offering of such series of the Preferred Stock.
GENERAL
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Stock, rather than shares of Preferred Stock. In the event
such option is exercised, the Company will provide for the issuance by a
Depositary to the public of receipts for Depositary Shares, each of which will
represent a fractional interest (to be set forth in the Prospectus Supplement
relating to a particular series of the Preferred Stock which will be filed with
the Commission at or prior to the time of the offering of such series of the
Preferred Stock as described below).
The shares of any series of the Preferred Stock underlying the Depositary
Shares will be deposited under a separate Deposit Agreement (the "Deposit
Agreement") between the Company and a bank or trust Company selected by the
Company having its principal office in the United States and having a combined
capital and surplus of at least $50,000 (the "Depositary"). The Prospectus
Supplement relating to a series of Depositary Shares will set forth the name and
address of the Depositary. Subject to the terms of the Deposit Agreement, each
owner of a Depositary Share will be entitled, in proportion to the applicable
fractional interest in a share of Preferred Stock underlying such Depositary
Shares, to all the rights and preferences of the Preferred Stock underlying such
Depositary Share (including dividend, voting, redemption, conversion and
liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the Deposit Agreement.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to al the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the Deposit Agreement and subject to the
terms thereof, a holder of Depositary Shares is entitled to have the Depositary
deliver to such holder the whole shares of Preferred Stock underlying the
Depositary Shares evidenced by the surrendered Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in proportion to the
numbers of such Depositary Shares owned by such holders on the relevant record
date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any holder of Depositary Shares a fraction of
one cent, and any balance not so distributed shall be added to and treated as
part of the next sum received by the Depositary for distribution to record
holders of Depositary Shares.
-33-
<PAGE>
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
The Deposit Agreement will also contain provisions relating to the manner
in which any subscription or similar rights offered by the Company to holders of
the Preferred Stock shall be made available to holders of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Stock held by the Depositary. The Depositary
shall mail notice of redemption not less than 30 and not more than 60 days prior
to the date fixed for redemption to the record holders of the Depositary Shares
to be so redeemed at their respective addresses appearing in the Depositary's
books. The redemption price per Depositary Share will be equal to the
applicable fraction of the redemption price per share payable with respect to
such series of the Preferred Stock. Whenever the Company redeems shares of
Preferred Stock held by the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares relating to shares of
Preferred Stock so redeemed. If less than all of the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata as may be determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will not longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys payable upon such redemption and any money or other property to which the
holders of such Depositary Shares were entitled upon such redemption upon
surrender to the Depositary of the Depositary Receipts evidencing such
Depositary Shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Shares
relating to such Preferred Stock. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the number of shares of Preferred Stock
underlying such holder's Depositary Shares. The Depositary will endeavor,
insofar as practicable, to vote the number of shares of Preferred Stock
underlying such Depositary Shares in accordance with such instructions, and the
Company will agree to take all action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of Preferred Stock to the extent it does not receive
specific instructions from the holders of Depositary Shares relating to such
Preferred Stock.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and the
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which materially
and aversely alters the rights of the existing holders of Depositary Shares will
not be effective unless such amendment has been approved by the record holders
of at least a majority
-34-
<PAGE>
of the Depositary Shares then outstanding. A Deposit Agreement may be terminated
by the Company or the Depositary only if (i) all outstanding Depositary Shares
relating thereto have been redeemed or (ii) there has been a final distribution
in respect of the Preferred Stock of the relevant series in connection with any
liquidation, dissolution or winding up of the Company and such distribution has
bene distributed to the holders of the related Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and any redemption of the Preferred Stock. Holders of
Depositary Shares will pay other transfer and other taxes and governmental
charges and such other charges as are expressly provided in the Deposit
Agreement to be for their accounts.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Shares all reports
and communications from the Company which are delivered to the Depositary and
which the Company is required to furnish to the holders of the Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or Preferred
Stock unless satisfactory indemnity is furnished. They may rely upon written
advice of counsel or accountants, or information provided by persons presenting
Preferred Stock for deposit, holders of Depositary Shares or other persons
believed to be competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice
of its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
-35-
<PAGE>
DESCRIPTION OF WARRANTS
The Company may issue Warrants to purchase shares of Common Stock, shares
of Preferred Stock or Debt Securities. Warrants may be issued, subject to
regulatory approvals, independently or together with any Common Stock, Preferred
Stock or Debt Securities, as the case may be, and may be attached to or separate
from such Common Stock, Preferred Stock or Debt Securities. Each series of
Warrants will be issued under a separate warrant Agreement (each a "Warrant
Agreement") to be entered into between the Company and a warrant agent (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume any
obligation or relationship of agency or trust for or with any holders or
beneficial owners of Warrants. The following sets forth certain general terms
and provisions of the Warrants offered hereby. Further terms of the Warrants
and the applicable Warrant Agreement will be set forth in the applicable
Prospectus Supplement.
The applicable Prospectus Supplement will describe the following terms of
any Warrants in respect of which this Prospectus is delivered: (i) the title of
such Warrants; (ii) a description of the securities (which may include shares of
Common Stock, shares of Preferred Stock or Debt Securities) for which such
Warrants are exercisable; (iii) the price or prices at which such Warrants will
be issued; (iv) the periods during which the Warrants are exercisable; (v) the
number of shares of Common Stock or Preferred Stock or the amount of Debt
Securities for which each Warrant is exercisable; (vi) the exercise price for
such Warrants, including any changes to or adjustments in the exercise price;
(vii) the currency or currencies, including composite currencies, in which the
exercise price of such Warrants may be payable; (viii) if applicable, the
designation and terms of the shares of Preferred Stock with which such Warrants
are issued; (ix) if applicable, the terms of the Debt Securities with which such
Warrants are issued; (x) if applicable, the number of Warrants issued with each
share of Common Stock or Preferred Stock or Debt Security; (xi) if applicable,
the date on and after which such Warrants and the related shares of Common Stock
or Preferred Stock or Debt Securities will be separately transferable; (xii) if
applicable, a discussion of certain United States federal income tax
considerations; (xiii) any listing of the Warrants on a securities exchange; and
(xiv) any other terms of such Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Warrants.
-36-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized by its Certificate of Incorporation to issue 50.0
million shares of Common Stock and 1.0 million shares of Preferred Stock. As of
April 21, 1998 there were 20,485,050 shares of Common Stock issued and
outstanding and no shares of the Preferred Stock issued and outstanding.
COMMON STOCK
A summary of the terms and provisions of the Common Stock is set forth
below.
Dividends. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board out of funds legally available therefor,
provided that if any shares of Preferred Stock, issued under this Prospectus and
any accompanying Prospectus Supplement, or any other shares of preferred stock
are at the time outstanding, the payment of dividends on Common Stock or other
distributions (including Company repurchases of Common Stock) will be subject to
the declaration and payment of all cumulative dividends on outstanding shares of
the Preferred Stock, and any Preferred Stock issued under this Prospectus and
any accompanying Prospectus Supplement and any other shares of preferred stock
which are then outstanding.
Liquidation. In the event of the dissolution, liquidation or winding up of
the Company, holders of Common Stock are entitled to share ratably in any assets
remaining after the satisfaction in full of the prior rights of creditors,
including holders of the Company's indebtedness, and the payment of the
aggregate liquidation preference of the Preferred Stock, and any Preferred Stock
issued under this Prospectus and any accompanying Prospectus Supplement and any
other shares of preferred stock then outstanding.
Voting. The Company's stockholders are entitled to one vote for each share
on all matters voted on by stockholders, including election of directors.
Shares of Common Stock held by the Company or any entity controlled by the
Company do not have voting rights and are not counted in determining the
presence of a quorum. Directors are elected annually. Holders of Common Stock
have no cumulative voting rights.
No Other Rights. The holders of Common Stock do not have any conversion,
redemption or preemptive rights.
Transfer Agent. The transfer agents for the Common Stock are Harris Trust
and Savings Bank, 1601 Elm Street, Thanksgiving Tower, Suite 2320, Dallas, Texas
75201.
Listing. Shares of the Company's outstanding Common Stock are listed on
the AMEX.
PREFERRED STOCK
The Company's Certificate of Incorporation currently authorizes the
issuance of 1,000,000 shares of Preferred Stock, par value $.01 per share,
issuable in series, the designations, the relative rights and preferences and
the limitations of any such series. No shares of Preferred Stock have been
issued prior to the filing of this Prospectus.
-37-
<PAGE>
RIGHTS AGREEMENT
In October 1995, the Board of Directors of the Company adopted a Rights
Agreement under which Stillwater shareholders of record as of November 15, 1995
received a dividend in the form of Preferred Stock Purchase Rights (the
"Rights"). The Rights permit the holder to purchase one one-thousandth of a
share (a unit) of Series A Preferred Stock at an initial exercise price of $80
per share under certain circumstances. The purchase price, the number of units
of Preferred Stock and the type of securities issuable upon exercise of the
Rights are subject to adjustment. The Rights expire on October 26, 2005 unless
earlier redeemed or exchanged. Until a Right is exercised, the holder thereof
has no rights as a shareholder of the Company, including the right to vote or
receive dividends. Subject to certain conditions, the Rights become exercisable
ten business days after a person or group acquires or commences a tender or
exchange offer to acquire a beneficial ownership of 15% or more of the Company's
outstanding common stock.
-38-
<PAGE>
PLAN OF DISTRIBUTION
The Company and the Selling Shareholders may offer Securities to or through
underwriters, through agents or directly to other purchasers.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. Each Prospectus
Supplement will describe the method of distribution of the Securities offered
therein.
The Company and the Selling Shareholders may sell Securities directly,
through agents designated from time to time, through underwriting syndicates led
by one or more managing underwriters or through one or more underwriters acting
alone. Each Prospectus Supplement will set forth the terms of the Securities to
which such Prospectus Supplement relates, including the name or names of any
underwriters or agents with whom the Company or the Selling Shareholders have
entered into arrangements with respect to the sale of such Securities, the
public offering or purchase price of such Securities and the net proceeds to the
Company or the Selling Shareholders from such sale, any underwriting discounts
and other items constituting underwriters' compensation, any discounts and
commissions allowed or paid to dealers, if any, any commissions allowed or paid
to agents, and the securities exchange or exchanges, if any, on which such
Securities will be listed. Dealer trading may take place in certain of the
Securities, including Securities not listed on any securities exchange.
Securities may be purchased to be reoffered to the public through
underwriting syndicates led by one or more managing underwriters, or through one
or more underwriters acting alone. The underwriter or underwriters with respect
to each underwritten offering of Securities will be named in the Prospectus
Supplement relating to such offering and, if an underwriting syndicate is used,
the managing underwriter or underwriters will be set forth on the cover page of
such Prospectus Supplement. Unless otherwise set forth in the applicable
Prospectus Supplement, the obligations of the underwriters to purchase the
Securities will be subject to certain conditions precedent and each of the
underwriters with respect to a sale of Securities will be obligated to purchase
all of its Securities if any are purchased. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Securities may be offered and sold by the Company and the Selling
Shareholders through agents designated by the Company or the Selling
Shareholders, as applicable, from time to time. Any agent involved in the offer
and sale of any Securities will be named, and any commissions payable by the
Company or the Selling Shareholders, as applicable, to such agent will be set
forth, in the Prospectus Supplement relating to such offering. Unless otherwise
indicated in such Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
Offers to purchase Securities may be solicited directly by the Company or
the Selling Shareholders and sales thereof may be made by the Company or the
Selling Shareholders, as applicable, directly to institutional investors or
others who may be deemed to be underwriters within the meaning of the Securities
Act with respect to any resale thereof. The terms of any such sales will be
described in the Prospectus Supplement relating thereto.
The Company and the Selling Shareholders may also issue contracts under
which the counterparty may be required to purchase Securities. Such contracts
would be issued for Securities in amounts, at prices and on terms to be set
forth in a Prospectus Supplement.
The anticipated place and time of delivery of Securities will be set forth
in the applicable Prospectus Supplement.
-39-
<PAGE>
If so indicated in the applicable Prospectus Supplement, the Company or the
Selling Shareholders will authorize underwriters or agents to solicit offers by
certain institutions to purchase Securities from the Company or the Selling
Shareholders, as applicable, pursuant to delayed delivery contracts providing
for payment and delivery at a future date. Institutions with which such
contracts may be made include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others, but in all cases such institutions must be approved by the Company or
the Selling Shareholders, as applicable. Unless otherwise set forth in the
applicable Prospectus Supplement, the obligations of any purchaser under any
such contract will not be subject to any conditions except that (i) the purchase
of the Securities shall not at the time of delivery be prohibited under the laws
of the jurisdiction to which such purchaser is subject, and (ii) if the
Securities are also being sold to underwriters acting as principals for their
own account, the underwriters shall have purchased such Securities not sold for
delayed delivery. The underwriters and such other persons will not have any
responsibility in respect of the validity or performance of such contracts.
Any underwriter or agent participating in the distribution of the
Securities may be deemed to be an underwriter, as that term is defined in the
Securities Act, of the Securities so offered and sold and any discounts or
commissions received by them from the Company or the Selling Shareholders and
any profit realized by them on the sale or resale of the Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters and agents may be entitled, under agreements entered into with
the Company or the Selling Shareholders, to indemnification by the Company or
the Selling Shareholders, as applicable, against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such underwriters or agents may be required to make in respect
thereof. Certain of such underwriters and agents, including their associates,
may be customers of, engage in transactions with and perform services for, the
Company and its subsidiaries or the Selling Shareholders in the ordinary course
of business.
LEGAL MATTERS
The validity of the Securities offered will be passed upon for the Company
by Davis, Graham & Stubbs LLP, Denver, Colorado.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The Company's ore reserves set forth in the table under the heading "Ore
Reserves" have been verified by Behre Dolbart & Company, Inc., and such
information has been included herein in reliance upon the authority of such firm
as experts in mining, geology and ore reserve determination.
-40-
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations, other than those contained in or
incorporated by reference in this Prospectus or the accompanying Prospectus
Supplement, in connection with the offer made by this Prospectus and the
accompanying Prospectus Supplement and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company, the Selling Shareholders, or any underwriter or dealer. Neither the
delivery of this Prospectus or the accompanying Prospectus Supplement nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the facts set forth in this Prospectus and the
accompanying Prospectus Supplement, or in the affairs of the Company since the
dates hereof. This Prospectus and the accompanying Prospectus Supplement do not
constitute an offer or solicitation by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
---------------------
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION ................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 3
THE COMPANY.............................................................. 5
RISK FACTORS............................................................. 7
USE OF PROCEEDS.......................................................... 14
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS............................. 14
SELLING SHAREHOLDERS..................................................... 14
BUSINESS AND PROPERTIES.................................................. 15
DESCRIPTION OF DEBT SECURITIES .......................................... 21
DESCRIPTION OF PREFERRED STOCK........................................... 31
DESCRIPTION OF DEPOSITARY SHARES......................................... 33
DESCRIPTION OF WARRANTS.................................................. 36
DESCRIPTION OF CAPITAL STOCK ............................................ 37
PLAN OF DISTRIBUTION..................................................... 39
LEGAL MATTERS ........................................................... 40
EXPERTS ................................................................. 40
</TABLE>
STILLWATER
MINING COMPANY
Dated: July 16, 1998
-41-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth expenses, other than underwriting fees and commissions,
expected to be borne by the Registration, in connection with the distribution of
the Securities being registered:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission registration fee... $ 59,000
NASD filing fee....................................... 16,000
Blue Sky fees and expenses............................ 25,000
Stock exchange listing fees........................... 35,000
Rating agency fees.................................... 60,000
Transfer agent fees................................... 40,000
Trustee's and warrant agent's fees.................... 30,000
Legal................................................. 250,000
Printing.............................................. 300,000
Accounting............................................ 100,000
Miscellaneous......................................... 35,000
--------
TOTAL............................................ $950,000
</TABLE>
All amounts listed above, except for the registration fee, are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102 of the Delaware General Corporation Law (the "DGCL") allows a
corporation to eliminate the personal liability of a director of a corporation
to the corporation or to any of its stockholders for monetary damage for a
breach of his fiduciary duty as a director, except in the case where the
director breached his duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or knowingly violated a law, authorized the payment of a
dividend or approved a stock repurchase in violation of Delaware corporate law
or obtained an improper persona benefit. Article 9 of the Company's
Certificate of Incorporation eliminates directors' personal liability in
accordance with such Section 102 of the DGCL.
Section 145 of the Delaware Law authorizes corporations to indemnify
directors, officers and other employees against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement reasonably incurred in
connection with civil, criminal, administrative, or investigative actions, suits
or proceedings to which such persons are parties or threatened to be made a
party by reason of their corporate position (other than actions by or in the
right of the corporation to procure a judgment in its favor--so called
"derivative suits") if such persons acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. With respect to
derivative suits, Section 145 prescribes a similar standard of care but limits
the available indemnification to expenses (including attorneys' fees) reasonably
incurred in connection with the defense or settlement of such action or suit and
further provides that if the derivative suit results in a judgment that the
person seeking indemnification is liable to the corporation, no such
indemnification is to be made without court approval. Section 145(f) of the
DGCL also specifically permits corporations to provide their officers,
directors, employees and agents with indemnification and advancement of expenses
in addition to those specifically required and/or permitted to be provided
pursuant to other provisions of such Section 145.
II-1
<PAGE>
Article 6 of the Company's Bylaws provides indemnification in accordance
with Section 145 of the DGCL. Under the provisions of Article 6, each person
who was or is made a party to, or is threatened to be made a party to or is
involved in, any action, suit or other legal proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer of the Company, or is or was performing
services at the Company's request for another entity, including service with
respect to employee benefit plans, shall be indemnified to the full extent
permitted by the DGCL as in effect or as it may be amended, against all costs,
liabilities and losses (including attorney's fees) actually and reasonably
incurred by such person in connection with such proceeding. In addition,
Article 6 of the Bylaws authorizes the Company to provide other permissible
indemnification. Finally, Article 6 provides that the Company may (and it does)
maintain insurance to protect such persons against any expense or liability,
even if the Company would not have the power itself to indemnify such person
against such liability or expense under the DGCL.
ITEM 16. EXHIBITS
1.1 Form of Underwriting Agreement--Equity*
1.2 Form of Underwriting Agreement--Debt*
4.1 Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.4 to the 1994 S-1) dated
December 2, 1995.
4.2 Amended and Restated By-Laws of the Registrant (incorporated by
reference to Exhibit 3.4 to the 1994 S-1).
4.3 Form of Indenture for Debt Securities**
4.4 Form of Debt Security (included in Exhibit 4.3)
4.5 Form of Common Stock Warrant Agreement*
4.6 Form of Common Stock Warrant Certificate (included in Exhibit 4.5)
4.7 Form of Preferred Stock Warrant Agreement*
4.8 Form of Preferred Stock Warrant Certificate (included in Exhibit 4.7)
4.9 Form of Debt Securities Warrant Agreement*
4.10 Form of Debt Securities Warrant Certificate (included in Exhibit 4.9)
4.11 Form of Deposit Agreement, including form of Depositary Receipt for
Depositary Shares*
5.1 Opinion of Davis, Graham & Stubbs LLP+
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges**
23.1 Consent of Price Waterhouse LLP**
II-2
<PAGE>
23.2 Consent of Behre Dolbear & Company, Inc.**
23.3 Consent of Davis, Graham & Stubbs LLP (included in Exhibit 5.1)
24 Powers of Attorney (included on signature pages)**
25 Form T-1 -- Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939*
* To be filed by amendment or incorporated by reference herein
** Filed previously
+ Filed herewith
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes that, for the purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes:
a. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
i. to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
ii. to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
iii. to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, that are incorporated by reference in the
Registration Statement.
b. That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of a Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registration pursuant to Rule 424(b)(1) or
II-3
<PAGE>
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
c. That for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
d. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the Trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under Section 305(b)(2) of the Trust
Indenture Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Denver, Colorado on the 16th day of July, 1998.
STILLWATER MINING COMPANY
By: /s/ WILLIAM E. NETTLES*
------------------------------------------
William E. Nettles
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement on Form S-3 has been signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ William E. Nettles* Chairman of the Board, Chief July 16, 1998
- -------------------------- Executive Officer and Director
William E. Nettles (principal executive officer)
/s/ James A. Sabala Vice President and Chief Financial July 16, 1998
- -------------------------- Officer (principal financial and
James A. Sabala accounting officer)
/s/ Ray W. Ballmer* Director July 16, 1998
- --------------------------
Ray W. Ballmer
/s/ Douglas D. Donald* Director July 16, 1998
- --------------------------
Douglas D. Donald
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ John W. Eschenlohr* Director July 16, 1998
- --------------------------
John W. Eschenlohr
/s/ Lawrence M. Glaser* Director July 16, 1998
- --------------------------
Lawrence M. Glaser
/s/ Pete Ingersoll* Director July 16, 1998
- --------------------------
Pete Ingersoll
/s/ Ted Schwinden* Director July 16, 1998
- --------------------------
Ted Schwinden
/s/ Peter Steen* Director July 16, 1998
- --------------------------
Peter Steen
</TABLE>
* By: /s/ James A. Sabala
-------------------
James A. Sabala
Attorney-in-fact
II-6
<PAGE>
EXHIBIT INDEX
5.1 Opinion of Davis, Graham & Stubbs LLP
23.3 Consent of Davis, Graham & Stubbs (included in Exhibit 5.1)
II-7
<PAGE>
Exhibit 5.1
July 16, 1998
Stillwater Mining Company
717 17th Street
Suite 1480
Denver, CO 80202
Re: Registration Statement on Form S-3 Relating to $200,000,000
Aggregate Principal Amount of Debt and Equity Securities
Ladies and Gentlemen:
We have acted as a special counsel for Stillwater Mining Company, a
Delaware corporation (the "Company), in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement") filed by the
Company with the Securities and Exchange Commission. The Registration Statement
relates to the registration under the Securities Act of 1933, as amended (the
"1933 Act"), of an aggregate of $200,000,000 principal amount of debt securities
which may be issued by the Company (the "Debt Securities") and equity securities
which may be issued by the Company or offered for the account of certain selling
shareholders (the "Selling Shareholders") of the Company (the "Equity
Securities") (together the "Securities").
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the 1933 Act.
We have examined the form of the Indenture filed by the Company as an
exhibit to the Registration Statement (the "Indenture"). In addition we have
examined and relied on originals or copies certified or otherwise identified to
our satisfaction, of such documents, corporate records and other instruments,
have made such inquiries as to questions of fact of officers and representatives
of the Company and have made such examinations of law as we have deemed
necessary or appropriate for purposes of giving the opinion expressed below. In
such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
with the originals of all documents submitted to us as copies.
We have assumed for purposes of this opinion (i) that all necessary filings
with the Secretary of State of the State of Delaware with respect to the Equity
Securities have been made, (ii) that the Board of Directors of the Company has
authorized the issuance and sale of the particular security to be sold; (iii)
the corporate power, authority and legal right of the trustee under the
Indenture to execute, deliver and perform its obligations under the Indenture,
that the performance of such obligations by the trustee will not violate its
charter or by-laws and that the trustee has the legal ability to exercise its
trust powers in the State of Colorado, and (iv) that the Indenture will have
been duly authorized, executed and delivered by the trustee at the time of
issuance of Debt Securities.
The following opinions are limited solely to the applicable federal law of
the United States of America, the law of the State of Colorado and the General
Corporation Law of the State of Delaware. While we are not licensed to practice
in the State of Delaware, we have reviewed applicable provisions of the General
Corporation Law of Delaware as we have deemed appropriate in connection with the
opinions
<PAGE>
Stillwater Mining Company
July 16, 1998
Page 2
expressed herein. Except as described, we have neither examined nor do we
express any opinion with respect to Delaware law.
Based upon and subject to the foregoing, we are of the opinion that:
1. The issuance and sale by the Company of up to $200,000,000 of
Securities, as provided in the Registration Statement, have been duly and
validly authorized by all necessary corporate action of the Company.
2. With respect to the Equity Securities offered by the Company, when
such Equity Securities are issued and sold in conformity with the resolutions of
the Board of Directors of the Company and as provided in the Registration
Statement, the prospectus contained therein (the "Prospectus") and in the
applicable supplement to the Prospectus, they will be legally issued, fully paid
and non-assessable shares of the capital stock of the Company.
3. With respect to the Equity Securities offered by the Selling
Shareholders, such Equity Securities, when sold, will be legally issued, fully
paid and non-assessable shares of the capital stock of the Company.
4. When (i) the Registration Statement has become effective under the
1933 Act, (ii) the applicable Indenture has been qualified under the Trust
Indenture Act of 1939 and has been duly executed and delivered by the parties
thereto, (iii) the definitive terms of any Debt Securities and of their issue
and sale have been duly established in conformity with the resolutions of the
Board of Directors of the Company and the Indenture so as not to violate any
applicable law or agreement or instrument then binding on the Company, (iv) such
Debt Securities have been duly executed and authenticated in accordance with the
Indenture and (v) such Debt Securities have been issued and sold as contemplated
in the Registration Statement, the Prospectus and in the applicable supplement
to the Prospectus, such Debt Securities will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
Indenture, except (A) the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent transfer, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (B)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement. We also consent to the reference to
this firm under the heading "Legal Matters" in the Prospectus included in the
Registration Statement as the counsel who will pass upon the validity of the
securities. In giving this consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act or the rules of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ DAVIS, GRAHAM & STUBBS LLP
