SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
AMAX GOLD INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
AMAX GOLD INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (check the appropriate box)
[_]$125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
[_]$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3)
[_]Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and O-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule O-11:*
4) Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing is calculated and state how it was
determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form of Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[LOGO OF AMAX GOLD APPEARS HERE]
JUNE 27, 1994
Dear Stockholder:
On behalf of the Board of Directors and Management of Amax Gold Inc., we urge
you to consider carefully and approve the Proposal described in the Notice of
Special meeting of Stockholders to be held on July 26, 1994 and the Proxy
Statement that accompany this letter. Approval of the Proposal is necessary to
proceed with certain transactions between your Company and Cyprus Amax Minerals
Company that are designed to significantly strengthen the financial condition
of your Company.
As you know 1993 was an extremely disappointing year for Amax Gold. As a
result of unacceptably high unit operating costs and lower than expected
production, the Company had negative operating cash flow of $23.2 million. In
order to make debt service payments and needed ongoing capital improvements at
existing operations, while continuing to advance the Company's next generation
of properties, the Company incurred $59.2 million of additional indebtedness.
At December 31, 1993 the Company had total outstanding debt obligations of
$151.6 million.
The good news is that, while 1993 was a year of challenges, it was also a
year of change for Amax Gold. As a result of the merger of Amax Inc. with
Cyprus Minerals Company on November 15, 1993, the Company has a new major
stockholder which is helping Amax Gold to realize its potential. A number of
key management changes have been made, cost reductions have been effected both
at the operations and in corporate staffing and the Company and its new 40%
stockholder are putting in place agreements, such as the Exploration Joint
Venture Agreement, to take advantage of synergies between the two companies.
Two of these agreements that are considered key to the financial well being
of the Company are described in the accompanying Proxy Statement. The DOCLOC
Agreement provides the basis for Cyprus Amax to extend a $100 million line of
credit to Amax Gold which will be used to support the Company's debt
amortization requirements and working capital needs. Amounts borrowed may be
repaid in cash or by the Company issuing up to 2,000,000 shares of its newly
created $2.25 Series A Convertible Preferred Stock. If repaid in Preferred
Stock, those shares may be redeemed by the Company for shares of its Common
Stock at a price per share equal to the greater of $5.854 or the average
closing price per share (up to $8.265) over a predetermined period prior to
redemption. Alternatively, the Preferred Stock may be converted by Cyprus Amax
into shares of the Company's Common Stock at a price of $8.265 per share. The
maximum number of shares of Common Stock that may be issued upon conversion or
redemption of the Preferred Stock is 12,099,213 shares. The conversion and
redemption prices for the Common Stock were set in relation to the average
price of the Company's Common Stock for the ten days preceding February 11,
1994, the date the commitment letter for this facility was signed. Cyprus Amax
has an option to replace all or a portion of the DOCLOC Agreement and any
outstanding indebtedness and/or Preferred Stock with the purchase of up to
12,099,213 shares of the Company's Common Stock at a purchase price of $8.265
per share.
The second agreement proposed for your consideration is the Stock Purchase
Agreement under which Cyprus Amax has agreed to purchase 3,000,000 shares of
the Company's Common Stock for approximately $20.7 million. This will enable
the Company to reduce its indebtedness to Cyprus Amax, as well as its total
indebtedness, by about $20.7 million. The effect of these transactions on the
Company's balance sheet as of March 31, 1994 is shown on a pro forma
capitalization table in the Proxy Statement.
The Company has positive cash flow from operations in the first quarter of
1994 and we expect continued improvement from operations in the second quarter
as well. However, we do not anticipate generating sufficient cash flow from
operations to assure payment of all scheduled debt amortization obligations as
well as the Company's working capital and development capital requirements
during the full year 1994 without the benefit of the DOCLOC Agreement or other
equivalent equity financing. Moreover, the additional
financing required for development of future operating properties such as
Refugio and Fort Knox is expected to require the type of financial
restructuring and flexibility that the DOCLOC Agreement and Stock Purchase
Agreement would provide.
Because the proposed transactions involve Cyprus Amax, which currently owns
approximately 40% of the Company's outstanding Common Stock (which would
increase to 49.7% if all 15,099,213 shares of Common Stock that may be issued
under the terms of the DOCLOC Agreement and the Stock Purchase Agreement are
issued), your approval of these agreements, and the transactions contemplated
under the terms of these agreements, is important. The affirmative vote of
stockholders holding 66 2/3% of the Company's Common Stock outstanding on June
24, 1994 (the record date) not owned by Cyprus Amax, as well as the affirmative
vote of a majority of all shares of Common Stock voting on the Proposal
(provided that the total vote cast on the Proposal represents over 50% of all
outstanding shares of Common Stock on the record date), is required for
approval of the Proposal.
We urge you to consider carefully the Proposal and related information in the
accompanying Proxy Statement. In order to ensure that your vote is represented,
please indicate your decision on the enclosed proxy form, date and sign it, and
return it in the enclosed envelope. A prompt response would be appreciated. If
you decide to attend the special meeting of stockholders you may revoke your
proxy and vote in person if you choose to do so.
Sincerely,
MARK A. LETTES MILTON H. WARD
Vice President and Chief Financial Chairman, President and Chief Executive
Officer Officer
[LOGO OF AMAX GOLD INC. APPEARS HERE]
9100 EAST MINERAL CIRCLE, ENGLEWOOD, COLORADO 80112
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 26, 1994
Dear Stockholder:
A Special Meeting of the Stockholders of Amax Gold Inc., a Delaware
corporation (the "Company" or "AGI"), has been called by the Board of Directors
of AGI and will be held at the offices of the Company located at 9100 East
Mineral Circle, Englewood, Colorado on Tuesday, July 26, 1994, at 9:00 a.m.
(Mountain Daylight Time) to consider and vote upon the following proposal:
To approve two agreements between the Company and Cyprus Amax Minerals
Company, a Delaware corporation ("Cyprus"), and the transactions
contemplated thereby: (i) a $100 million double convertible revolving
credit agreement, dated as of April 15, 1994 (the "DOCLOC Agreement"),
entered into by AGI and Cyprus, pursuant to which Cyprus will provide a
line of credit of $100 million, under which any indebtedness may be repaid
by AGI's issuance of up to 2,000,000 shares of the Company's newly created
$2.25 Series A Convertible Preferred Stock, par value $1.00 per share
("Preferred Stock"), and such shares of Preferred Stock may be converted by
Cyprus at any time into up to 12,099,213 shares of the Company's common
stock, par value $.01 per share (the "Common Stock"), at a conversion price
of $8.265 per share; and (ii) a stock purchase agreement, dated as of April
15, 1994 (the "Stock Purchase Agreement"), between AGI and Cyprus, that
provides for the purchase by Cyprus of 3,000,000 shares of Common Stock for
a purchase price of approximately $20.7 million which will be used to repay
that amount of indebtedness of AGI to Cyprus; such approval shall include
but not be limited to the authorization and issuance to Cyprus of up to
2,000,000 shares of Preferred Stock and up to 12,099,213 shares of Common
Stock under the DOCLOC Agreement and 3,000,000 shares of Common Stock under
the Stock Purchase Agreement; all as more fully described in the
accompanying Proxy Statement. (The proposal to approve the transactions
contemplated by the DOCLOC Agreement and the Stock Purchase Agreement,
including the authorization and issuance to Cyprus of shares of Common
Stock and Preferred Stock thereunder, is referred to herein as the
"Proposal".)
Outstanding indebtedness under the $100 million DOCLOC Agreement may be
repaid in whole or in part in cash or by AGI issuing up to 2,000,000 shares of
the Company's Preferred Stock. Shares of Preferred Stock can be converted at
any time by Cyprus into shares of Common Stock at a conversion price of $8.265
per share, which represents a 20% premium over the average closing price on the
ten days preceding February 11, 1994, the date of the signing of the commitment
letter providing for the line of credit and the stock purchase. AGI will have
the right to redeem shares of Preferred Stock at any time in whole or in part
by issuing shares of Common Stock at a price per share equal to the greater of
$5.854 or the average closing price per share (up to $8.265) over a
predetermined period prior to redemption. Cyprus will have the right to replace
from time to time all or a portion of the DOCLOC Agreement and any outstanding
indebtedness and/or Preferred Stock with the purchase of up to 12,099,213
shares of Common Stock at a purchase price of $8.265 per share (or $100 million
if all 12,099,213 shares of Common Stock are purchased).
The Stock Purchase Agreement provides for the purchase by Cyprus of 3,000,000
shares of Common Stock for a purchase price of approximately $20.7 million. The
entire amount of the proceeds received by AGI must be used to repay
approximately $20.7 million of the approximately $26.0 million of outstanding
indebtedness (as of June 24, 1994) owed by AGI to Cyprus under a demand
promissory note.
Cyprus currently is the indirect holder of 31,319,709 shares of Common Stock,
which represents approximately 40% of the outstanding shares of Common Stock.
Cyprus holds this share of Common Stock as a result of (i) the merger on
November 15, 1993 of AMAX Inc., a New York corporation ("Amax"), which owned
approximately 68% of the outstanding shares of Common Stock, with and into
Cyprus Minerals Company (renamed Cyprus Amax Minerals Company) (the "Cyprus
Amax Merger") and (ii) the distribution by Amax of 21.8 million shares or
approximately 28% of the shares of Common Stock to the stockholders of
Amax immediately prior to the Cyprus Amax Merger. The proposed acquisition by
Cyprus of 3,000,000 shares of Common Stock under the Stock Purchase Agreement,
combined with the potential issuance of up to 12,099,213 shares of Common Stock
under the DOCLOC Agreement, would increase Cyprus' ownership of AGI outstanding
shares to 49.7%.
Only stockholders of record at the close of business on June 24, 1994 (the
"Record Date") will be entitled to notice of and to vote at the Special Meeting
or any adjournments or postponements thereof. To be effective, proxies must be
signed, dated and delivered to Chemical Bank at or prior to the Special
Meeting. Approval of the Proposal requires (i) under Delaware law, the
affirmative vote of 66 2/3% of the outstanding shares of Common Stock on the
Record Date which are not owned by Cyprus or its affiliates and associates and
(ii) under the rules of the New York Stock Exchange, the affirmative vote of a
majority of all shares of Common Stock voting on the Proposal, provided that
the total vote cast on the Proposal represents over 50% in interest of all
outstanding shares of Common Stock.
If a proxy is signed and returned to Chemical Bank without indicating any
voting instructions, shares of AGI Common Stock represented by the proxy will
be voted FOR the Proposal. AGI proxy holders may in their discretion vote
shares voted for the Proposal to adjourn the Special Meeting to solicit
additional proxies in favor of the Proposal. Proxies voting against the
Proposal will not be voted for adjournment of the Special Meeting. Any proxy
given pursuant to this solicitation may be revoked by the filing of an
instrument revoking it or of a duly executed proxy bearing a later date with
Chemical Bank prior to or at the Special Meeting, or by voting in person at the
Special Meeting.
By Order of the Board of Directors
Paul J. Hemschoot, Jr.
Secretary
Englewood, Colorado
June , 1994
IMPORTANT NOTICES
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY FORM PROMPTLY IN THE
ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (SEVERAL OF WHOM ARE ALSO
DIRECTORS AND/OR EXECUTIVE OFFICERS OF CYPRUS), HOLDING IN THE AGGREGATE LESS
THAN 1% OF THE OUTSTANDING SHARES OF COMMON STOCK, HAVE ADVISED THE COMPANY
THAT THEY INTEND TO VOTE FOR THE PROPOSAL. CYPRUS HAS ADVISED THE COMPANY THAT
IT INTENDS TO VOTE FOR THE PROPOSAL. ALTHOUGH THE VOTE OF CYPRUS AND ITS
AFFILIATES AND ASSOCIATES WILL BE COUNTED FOR PURPOSES OF OBTAINING THE
APPROVAL OF STOCKHOLDERS REQUIRED BY THE NEW YORK STOCK EXCHANGE RULES, THE
VOTE OF CYPRUS AND ITS AFFILIATES AND ASSOCIATES WILL NOT BE COUNTED FOR
PURPOSES OF OBTAINING THE REQUISITE STOCKHOLDER APPROVAL UNDER DELAWARE LAW.
THE BOARD OF DIRECTORS OF AMAX GOLD INC. RECOMMENDS THAT STOCKHOLDERS VOTE TO
APPROVE THE PROPOSAL.
2
[LOGO OF AMAX GOLD INC. APPEARS HERE]
PROXY STATEMENT
SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THIS PROXY STATEMENT, THE
COMPANY WILL CONSIDER ALL PROXIES FROM HOLDERS OF RECORD ON JUNE 24, 1994 (THE
"RECORD DATE") RECEIVED AT OR PRIOR TO THE SPECIAL MEETING.
This Proxy Statement is being furnished to the stockholders of Amax Gold
Inc., a Delaware corporation (the "Company" or "AGI"), in connection with the
solicitation of proxies by the Company's Board of Directors (the "Board") from
holders of outstanding shares of the Company's common stock, par value $.01 per
share ("Common Stock"), on the Record Date, for use at a Special Meeting of
Stockholders of AGI to be held on July 26, 1994 and at any adjournments or
postponements thereof (the "Special Meeting").
This Proxy Statement and form of Proxy enclosed herewith are first being
mailed to the stockholders on or about June , 1994.
The holders of Common Stock of AGI on the Record Date (the "Stockholders")
are being asked to consider and approve two agreements with Cyprus Amax
Minerals Company, a Delaware corporation ("Cyprus"), and the transactions
contemplated thereby: (i) a $100 million double convertible revolving credit
agreement, dated as of April 15, 1994 (the "DOCLOC Agreement"), entered into by
AGI and Cyprus, pursuant to which Cyprus will provide a line of credit of $100
million, under which any indebtedness may be repaid by AGI's issuance of up to
2,000,000 shares of the Company's newly created $2.25 Series A Convertible
Preferred Stock, par value $1.00 per share ("Preferred Stock"), and such shares
of Preferred Stock may be converted by Cyprus at any time into up to 12,099,213
shares of Common Stock at a conversion price of $8.265 per share; and (ii) a
stock purchase agreement, dated as of April 15, 1994, between AGI and Cyprus
(the "Stock Purchase Agreement"), that provides for the purchase by Cyprus of
3,000,000 shares of Common Stock for a purchase price of approximately $20.7
million which will be used to repay that amount of indebtedness of AGI to
Cyprus; such approval shall include but not be limited to the authorization and
issuance to Cyprus of up to 2,000,000 shares of Preferred Stock and up to
12,099,213 shares of Common Stock under the DOCLOC Agreement and 3,000,000
shares of Common Stock under the Stock Purchase Agreement. (The proposal to
approve the transactions contemplated by the DOCLOC Agreement and the Stock
Purchase Agreement, including the authorization and issuance to Cyprus of
shares of Common Stock and Preferred Stock thereunder, is referred to herein as
the "Proposal.")
Outstanding indebtedness under the DOCLOC Agreement may be repaid in whole or
in part in cash or by AGI issuing up to 2,000,000 shares of the Company's
Preferred Stock. Shares of Preferred Stock can be converted at any time by
Cyprus into shares of Common Stock at a conversion price of $8.265 per share,
which represents a 20% premium over the average closing price on the ten days
preceding February 11, 1994, the date of the signing of the commitment letter
providing for the line of credit and the stock purchase (the "Commitment
Letter"). AGI will have the right to redeem shares of Preferred Stock at any
time in whole or in part by issuing shares of Common Stock at a price per share
equal to the greater of $5.854 or the average closing price per share (up to
$8.265) over a predetermined period prior to redemption. The terms of the
Preferred Stock limit the number of shares of Common Stock issuable upon
redemption, conversion and the payment of dividends to 12,099,213. The holder
of shares of Preferred Stock will receive cash in lieu of any shares in excess
of 12,099,213 shares of Common Stock that would otherwise have been issuable.
Such cash payment would be payable in 12 consecutive substantially equal
quarterly payments. Further, Cyprus will have the right to replace from time to
time all or a portion of the DOCLOC Agreement and any outstanding indebtedness
and/or Preferred Stock with the purchase of up to 12,099,213 shares of Common
Stock at a purchase price of $8.265 per share (or $100 million if all
12,099,213 shares of Common Stock are purchased).
The Stock Purchase Agreement provides for the purchase by Cyprus of 3,000,000
shares of Common Stock for a purchase price of approximately $20.7 million. The
entire amount of the proceeds received by AGI must be used to repay
approximately $20.7 million of the approximately $26.0 million of outstanding
indebtedness (as of June 24, 1994) owed by AGI to Cyprus under a demand
promissory note (the "AGI Note").
Cyprus currently is the indirect holder of 31,319,709 shares of Common Stock,
which represents approximately 40% of the outstanding shares of Common Stock.
Cyprus holds this share of the Common Stock as a result of (i) the merger on
November 15, 1993 of AMAX Inc., a New York corporation ("Amax"), which owned
approximately 68% of the outstanding shares of Common Stock, with and into
Cyprus Minerals Company (renamed Cyprus Amax Minerals Company) (the "Cyprus
Amax Merger") and (ii) the distribution by Amax of 21.8 million shares or
approximately 28% of the outstanding shares of Common Stock to the stockholders
of Amax immediately prior to the Cyprus Amax Merger. The acquisition by Cyprus
of 3,000,000 shares of Common Stock under the Stock Purchase Agreement,
combined with the potential issuance of up to 12,099,213 shares of Common Stock
under the DOCLOC Agreement, would increase Cyprus' ownership of outstanding
shares of Common Stock to 49.7%.
The Proposal is being submitted to Stockholders of the Company for their
approval to satisfy Section 203 of the Delaware General Corporation Law
("Delaware Law") and a New York Stock Exchange (the "Exchange") requirement.
Section 203 of Delaware Law states that the Company may not engage in any
business combination (defined to include any transaction which results in the
issuance by AGI of any stock of AGI) with Cyprus (an "interested stockholder"
because it owns more than 15% of the outstanding shares of Common Stock as a
result of the Cyprus Amax Merger) for a period of three years following the
date that Cyprus became an interested stockholder, unless on or subsequent to
such date the business combination is approved by the AGI Board and authorized
at an annual or special meeting of stockholders by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by Cyprus. In
addition, pursuant to an Exchange staff interpretation of a Rule of the
Exchange (Paragraph 312.03(b) of the Listed Company Manual), stockholder
approval is required as a prerequisite to the listing of the Common Stock to be
issued to Cyprus in the transactions described in the Proposal, on the basis
that the Proposal contemplates that "tangible or intangible assets" (in this
case, cash) are to be acquired directly or indirectly from a substantial
security holder of the Company (a holder of 5% or more of the Company's
outstanding Common Stock) and the number of shares of Common Stock to be issued
in such transactions will exceed 1% of the number of shares of Common Stock of
the Company outstanding before such issuance.
The affirmative vote of Stockholders holding 66 2/3% of the shares of Common
Stock outstanding as of the close of business on June 24, 1994 which are not
owned by Cyprus and the affirmative vote of Stockholders holding a majority of
all shares of Common Stock voting on the Proposal (provided that the total vote
cast on the Proposal represents over 50% in interest of all outstanding shares
of Common Stock) is required for the approval of the Proposal. The directors
and executive officers of the Company (some of whom are directors and/or
executive officers of Cyprus) holding in the aggregate less than 1% of the
shares of Common Stock, have advised the Company that they intend to vote for
the Proposal. Cyprus has advised the Company that it intends to vote for the
Proposal. Although the vote of Cyprus and its affiliates and associates will be
counted for purposes of obtaining the approval of stockholders required by the
Exchange rules, the vote of Cyprus and its affiliates and associates will not
be counted for purposes of obtaining the requisite stockholder approval under
Section 203 of the Delaware Law.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
ON BEHALF OF AGI, CONCERNING THE PROPOSAL IF NOT CONTAINED IN OR APPENDED TO
THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE
SECURITIES REFERRED TO IN THIS PROXY STATEMENT, OR THE SOLICITATION OF A PROXY,
BY ANY PERSON IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER, OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION. DELIVERY OF THIS
PROXY STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR THEREIN SINCE
THE DATE OF THIS PROXY STATEMENT.
THE DATE OF THIS PROXY STATEMENT IS JUNE , 1994.
2
AVAILABLE INFORMATION
AGI 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"). The reports, proxy statements and other
information filed by AGI with the Commission can be inspected and copied at the
Commission's public reference facilities in the Commission's regional offices
located at: 7 World Trade Center, 13th Floor, New York, New York 10048; and
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60601-2511. Copies of such material can be obtained at prescribed
rates by writing to the Securities and Exchange Commission, Public Reference
Section, Room 1024, 450 Fifth Street, N.W. Plaza, Washington, D.C. 20549. The
Company is also subject to the information and reporting requirements of the
securities regulatory authorities of certain provinces of Canada and files
similar reports, proxy statements and other information with such authorities.
The Common Stock is listed on the New York and Toronto Stock Exchanges and
certain warrants to purchase Common Stock are listed on the American Stock
Exchange. Such reports, proxy statements and other information can also be
inspected and copied at the respective offices of these exchanges at the New
York Stock Exchange, 20 Broad Street, New York, New York 10005, the Toronto
Stock Exchange, 2 First Canadian Place, Toronto, Ontario, Canada M5X 1J2, and
the American Stock Exchange, 86 Trinity Place, New York, NY 10006-1881.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS NOT PRESENTED HEREIN
OR DELIVERED HEREWITH. DOCUMENTS RELATING TO AGI, EXCLUDING EXHIBITS UNLESS
SPECIFICALLY INCORPORATED HEREIN, ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO
SECRETARY, AMAX GOLD INC., 9100 EAST MINERAL CIRCLE, ENGLEWOOD, COLORADO 80112.
TELEPHONE REQUESTS MAY BE DIRECTED TO INVESTOR RELATIONS AT (303) 643-5522. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
JULY 15, 1994.
The following documents filed with the Commission by AGI (File No. 1-9620)
are incorporated herein by reference: (a) Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, (b) Quarterly Report on Form 10Q for the
quarterly period ended March 31, 1994, and (c) Current Report on Form 8-K dated
March 7, 1994.
All documents filed by AGI pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date hereof and prior to the Special Meeting
shall be deemed to be incorporated herein by reference and to be a part hereof
from the date of such filing. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed
to be modified or superseded for purposes hereof to the extent that a statement
contained herein or in any other subsequently filed document which also is, or
is deemed to be, incorporated herein by reference modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
3
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION...................................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................... 3
SUMMARY.................................................................... 5
Solicitation............................................................. 5
The Proposal............................................................. 5
The Parties.............................................................. 5
Votes.................................................................... 6
Recommendation of the Board ............................................. 6
Opinion of Financial Advisor Regarding the DOCLOC Agreement.............. 6
Effects of the Proposal on the Rights of AGI Stockholders................ 7
Summary of Material Terms of the DOCLOC Agreement........................ 7
Summary of Material Terms of the Stock Purchase Agreement................ 9
SPECIAL MEETING............................................................ 10
Recommendation of Board.................................................. 10
Record Date.............................................................. 10
Votes Required........................................................... 10
Votes.................................................................... 10
Solicitation of Proxies.................................................. 11
THE PROPOSAL............................................................... 11
General.................................................................. 11
Background............................................................... 12
Other Relationships With Cyprus.......................................... 14
Effects of the Proposal on the Rights of AGI Stockholders................ 16
Reasons for the Proposal; Recommendation of the Board.................... 16
Opinion of Financial Advisor Regarding the DOCLOC Agreement.............. 18
Material Terms of the DOCLOC Agreement................................... 22
Material Terms of the Stock Purchase Agreement........................... 25
Material Terms of the $2.25 Series A Convertible Preferred Stock......... 26
PRO FORMA FINANCIAL INFORMATION............................................ 28
CHANGE OF CONTROL OF THE COMPANY........................................... 28
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............................ 29
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS............................... 29
DESCRIPTION OF CAPITAL STOCK OF AGI........................................ 30
Common Stock............................................................. 30
Preferred Stock.......................................................... 30
Warrants................................................................. 31
PROPOSALS FOR 1995 ANNUAL MEETING.......................................... 32
APPENDIX A--DOCLOC Agreement
APPENDIX B--Stock Purchase Agreement
APPENDIX C--Opinion of Salomon Brothers Inc
APPENDIX D--Certificate of Designations--$2.25 Series A Convertible Preferred
Stock
4
SUMMARY
The following summary is not intended to be complete and is qualified in all
respects by the more detailed information included in this Proxy Statement, the
Appendices hereto and the documents incorporated herein by reference.
Stockholders are urged to read carefully this Proxy Statement, including the
Appendices hereto and the documents incorporated herein by reference in their
entirety.
SOLICITATION
This Proxy Statement is being furnished to the Stockholders of the Company in
connection with the solicitation of proxies by the Company's Board from holders
of outstanding shares of the Company's Common Stock for use at the Special
Meeting. June 24, 1994 is the Record Date for determining the Stockholders of
record who are entitled to receive this Proxy Statement and to vote for the
Proposal.
This Proxy Statement and form of Proxy enclosed herewith are first being
mailed to the Stockholders on or about June , 1994.
THE PROPOSAL
The Stockholders are being asked to consider and approve two agreements with
Cyprus and the transactions contemplated thereby: (i) the DOCLOC Agreement
pursuant to which Cyprus will provide a line of credit of $100 million, under
which any indebtedness may be repaid by AGI's issuance of up to 2,000,000
shares of the Company's Preferred Stock, and such shares of Preferred Stock may
be converted by Cyprus at any time into up to 12,099,213 shares of Common Stock
at a conversion price of $8.265 per share; and (ii) the Stock Purchase
Agreement that provides for the purchase by Cyprus of 3,000,000 shares of
Common Stock for a purchase price of approximately $20.7 million which will be
used to repay that amount of indebtedness of AGI to Cyprus; such approval shall
include but not be limited to the authorization and issuance to Cyprus of up to
2,000,000 shares of Preferred Stock and up to 12,099,213 shares of Common Stock
under the DOCLOC Agreement and 3,000,000 shares of Common Stock under the Stock
Purchase Agreement.
For a discussion of the terms of the DOCLOC Agreement, the Stock Purchase
Agreement and related matters, see "THE PROPOSAL."
THE PARTIES
AGI
AGI is engaged in the mining and processing of gold and silver ore and in the
exploration for and acquisition and development of gold-bearing properties
principally in North and South America. AGI was incorporated in Delaware. AGI's
principal offices are located at 9100 East Mineral Circle, Englewood, Colorado
80112, and its telephone number is (303) 643-5500.
For additional information regarding the business of AGI, see "AVAILABLE
INFORMATION" and "INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
Change of Control of AGI
On November 15, 1993, Amax, a New York corporation which owned approximately
68% of the Company's outstanding Common Stock, was merged with and into Cyprus
Minerals Company, a Delaware corporation. The merged company was renamed Cyprus
Amax Minerals Company. Immediately prior to the Cyprus Amax Merger, Amax
distributed 21.8 million shares (approximately 28%) of Common Stock (together
with all of the outstanding shares of common stock of Alumax Inc., a Delaware
corporation that controlled Amax's aluminum business) in a distribution to its
stockholders. As a result of the Cyprus Amax Merger, and after giving effect to
the prior stock distribution by Amax, Cyprus indirectly holds 31,319,709 shares
of Common Stock, which constitutes approximately 40% of the outstanding shares
of Common Stock. In addition, following the Cyprus Amax Merger, Milton H. Ward,
Co-Chairman of the Board, President and Chief Executive Officer of Cyprus,
became Chairman of the Board, President and Chief Executive Officer of AGI; Mr.
Gerald J. Malys, Senior Vice President and Chief Financial Officer of Cyprus,
became a director of AGI; and subsequently, Rockwell A. Schnabel, a director of
Cyprus, became a director of AGI.
5
The acquisition by Cyprus of 3,000,000 shares of Common Stock under the Stock
Purchase Agreement, combined with the potential issuance of up to 12,099,213
shares of Common Stock under the DOCLOC Agreement, would increase Cyprus'
ownership of AGI outstanding shares of Common Stock to 49.7%.
Cyprus
Cyprus is a diversified mining company engaged in the exploration for and the
extraction, processing and marketing of mineral resources. Cyprus operates in
three principal industry segments: copper, coal and other minerals (including
lithium, gold and iron ore). Cyprus was incorporated in Delaware in 1969 and
operates primarily in the United States. Cyprus' principal executive offices
are located at 9100 East Mineral Circle, Englewood, Colorado 80112, and its
telephone number is (303) 643-5000.
VOTES
On the Record Date there were 78,214,627 shares of Common Stock outstanding,
of which Cyprus indirectly owned 31,319,709 shares of Common Stock. Approval of
the Proposal requires (i) under Delaware Law, the affirmative vote of the
holders of 66 2/3% of the outstanding shares on the Record Date which are not
owned by Cyprus or its affiliates and associates and (ii) under the rules of
the Exchange, the affirmative vote of the holders of a majority of the shares
of Common Stock voting on the Proposal, provided that the total vote cast on
the Proposal represents over 50% in interest of all outstanding shares of
Common Stock.
Shares of AGI Common Stock represented by a proxy properly signed and
received at or prior to the Special Meeting, unless subsequently revoked, will
be voted in accordance with the instructions thereon. If a proxy is signed and
returned to Chemical Bank without indicating any voting instructions, shares of
AGI Common Stock represented by the proxy will be voted FOR the Proposal. AGI
proxy holders may in their discretion vote shares voted for the Proposal to
adjourn the Special Meeting to solicit additional proxies in favor of the
Proposal. Proxies voting against the Proposal will not be voted for adjournment
of the Special Meeting. Any proxy given pursuant to this solicitation may be
revoked by the filing of an instrument revoking it or of a duly executed proxy
bearing a later date with Chemical Bank prior to or at the Special Meeting, or
by voting in person at the Special Meeting. All written revocations and other
communications with respect to revocation of proxies should be addressed as
follows: Chemical Bank, Proxy Tally Department, Church Street Station, P.O. Box
24555, New York, New York 10242-0018. Attendance at the Special Meeting will
not in and of itself constitute a revocation.
As of June 24, 1994 the directors and executive officers of AGI (several of
whom are also directors and/or executive officers of Cyprus) held in the
aggregate less than 1% of the outstanding shares of Common Stock entitled to
notice of and to vote at the Special Meeting. The directors and executive
officers of AGI have indicated their intention to vote for the Proposal. Cyprus
has advised the Company that it intends to vote for the Proposal. Although the
vote of Cyprus and its affiliates and associates will be counted for purposes
of obtaining the approval of stockholders required by the Exchange rules, the
vote of Cyprus and its affiliates and associates will not be counted for
purposes of obtaining the requisite stockholder approval under Section 203 of
Delaware Law.
See "SPECIAL MEETING--Votes Required."
RECOMMENDATION OF THE BOARD
Following the unanimous approval of the Audit Committee of the Board (the
"Audit Committee"), which is comprised entirely of directors who are neither
associates, officers or employees of AGI or Cyprus, the AGI Board, with
directors affiliated with Cyprus abstaining, approved the DOCLOC Agreement and
the Stock Purchase Agreement and the issuance of the shares of Preferred Stock
and Common Stock contemplated thereby. THE MEMBERS OF THE BOARD BELIEVE THAT
THE PROPOSAL IS FAIR TO AND IN THE BEST INTERESTS OF ALL THE STOCKHOLDERS AND
RECOMMEND THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL.
The conclusion of the Company's Audit Committee and the Board with respect to
the DOCLOC Agreement and the Stock Purchase Agreement is based upon a number of
factors. See "THE PROPOSAL--Reasons for the Proposal; Recommendation of the
Board."
OPINION OF FINANCIAL ADVISOR REGARDING THE DOCLOC AGREEMENT
Salomon Brothers Inc ("Salomon Brothers") has rendered its opinion dated
February 15, 1994 and confirmed such opinion by delivering an opinion dated
June 27, 1994 to the Audit Committee to the effect
6
that the transaction contemplated by the DOCLOC Agreement is fair, from a
financial point of view, to the Stockholders of AGI (solely in their capacity
as such), exclusive of Cyprus and its affiliates. See "THE PROPOSAL--Opinion of
Financial Advisor Regarding the DOCLOC Agreement."
EFFECTS OF THE PROPOSAL ON THE RIGHTS OF AGI STOCKHOLDERS
Assuming the issuance of the shares of Common Stock to Cyprus under the
DOCLOC Agreement and the Stock Purchase Agreement as proposed in this Proxy
Statement, the percentage of the Company's voting securities owned of record
and beneficially by existing holders of shares of Common Stock (other than
Cyprus) will be reduced significantly on a fully diluted basis. The Proposal,
if approved, would reduce to 50.3% the interest of existing holders of shares
of Common Stock other than Cyprus and increase Cyprus' ownership of shares of
Common Stock to 49.7% of the outstanding shares of Common Stock, in each case
assuming that all 12,099,213 shares of Common Stock that are potentially
issuable under the DOCLOC Agreement are in fact issued to Cyprus. Thus, public
stockholders will have a reduced ability to influence the election of directors
or any other action taken by the holders of the Common Stock.
Additionally, the DOCLOC Agreement requires the prior consent of Cyprus
before AGI may enter into any merger, consolidation or amalgamation,
transaction or liquidate, wind up or dissolve itself (or suffer any liquidation
of dissolution).
Finally, the shares of Preferred Stock issuable under the DOCLOC Agreement
may limit the Company's ability to pay cash dividends on shares of Common
Stock. The terms of the Preferred Stock state that no dividends may be paid on
shares of Common Stock unless and until all dividends payable on the Preferred
Stock have been paid.
SUMMARY OF MATERIAL TERMS OF THE DOCLOC AGREEMENT
Set forth below is a summary of the material terms of the DOCLOC Agreement,
which agreement is attached as Appendix A to this Proxy Statement and
incorporated herein by reference. See also "THE PROPOSAL--Material Terms of the
DOCLOC Agreement."
Revolving Loan
Under the DOCLOC Agreement Cyprus agrees to make loans evidenced by a note of
AGI (the "Note") to the Company from time to time until the earlier of April
30, 1997 or the date on which the Commitment (defined below) is terminated
under the DOCLOC Agreement (the earlier of such dates being the "Revolver
Expiration Date") in an aggregate principal amount not to exceed at any time
outstanding $100 million (the "Commitment"). The Company may elect to repay the
outstanding indebtedness under this line of credit either by payment in cash or
payment in shares of Preferred Stock. Payment by the Company in shares of
Preferred Stock automatically reduces the Commitment amount by $50 per share of
Preferred Stock so issued.
Use of Proceeds
The proceeds of the DOCLOC Agreement will be used primarily to support AGI's
debt amortization requirements and other working capital needs for 1994 and
thereafter, prior to the Revolver Expiration Date, and will be allocated as
follows: (i) up to $36,000,000 to support AGI's guaranty given to NM Rothschild
& Sons Limited and Citibank, N.A. in connection with the borrowing of AGI Chile
Credit Corp., Inc., a wholly-owned subsidiary of AGI, with respect to the
Guanaco Project, under the Term Loan Agreement dated as of March 15, 1994; (ii)
up to $30,000,000 to support AGI's guaranty given to the Chase Manhattan Bank
(National Association) as Agent for the banks which are party to the Bullion
Loan Agreement dated as of March 21, 1991, in support of borrowings of Lassen
Gold Mining, Inc., a wholly-owned subsidiary of AGI operating the Hayden Hill
Project; and (iii) the remaining amount for working capital purposes.
Interest Rate
Each loan made by Cyprus to the Company bears interest at an annual rate
equal to the London Interbank Offered Rate ("LIBOR") for a period of either
one, two or six months, as selected by AGI, plus .30%.
Amortization of Principal and Payment
On the Revolver Expiration Date, all accrued interest must be paid and the
aggregate principal balance of all loans outstanding will become due and
payable in 20 equal quarterly installments on June 30, September
7
30, December 31 and March 31 of each of the following five years, with the
first installment due on June 30, 1997. The last installment, due March 31,
2002, will be in an amount necessary to repay in full the unpaid principal
amount of the loans. The outstanding principal balance of the Note will bear
interest as set forth above.
Prepayments in Cash
The Company may make cash prepayments of principal in amounts equal to an
integral multiple of $1,000,000 without premium or penalty.
Payment with Preferred Stock
The Company may elect to repay or prepay the entire principal balance due
under the Note, any required amortization payment due, any required interest
payment due under the Note and/or increments of at least $5,000,000 of
principal of loans outstanding under the Note by issuing shares of Preferred
Stock to Cyprus. The number of shares of Preferred Stock to be issued can be
determined by dividing the amount of indebtedness under the DOCLOC Agreement to
be repaid with shares of Preferred Stock by $50.00. Cash will be issued in lieu
of any fractional shares.
Payment of Dividends on Preferred Stock
Each share of Preferred Stock shall be entitled to receive dividends at an
annual rate of $2.25 per share, payable semi-annually on January 1 and July 1
of each year. The Company may pay Preferred Stock dividends in shares of Common
Stock in lieu of cash unless the holder of such shares of Preferred Stock
elects to receive cash.
Restrictions on Transfer of Preferred Stock
If Cyprus desires to transfer any shares of Preferred Stock held by it, such
proposed sale must be for cash only, and AGI has a right of first refusal with
respect to all such offered shares.
Conversion and Redemption of Preferred Stock
The holder of any shares of Preferred Stock will have the right, at the
holder's option, to convert any or all shares of Preferred Stock held by such
holder into Common Stock at any time. Each share of Preferred Stock is
convertible into that number of shares of Common Stock obtained by dividing $50
by the Conversion Price in effect at the time. The Conversion Price is $8.265
and is subject to adjustment upon the occurrence of certain dilutive events.
The Company, at its option, may at any time redeem the Preferred Stock, in
whole or from time to time in part, by issuing shares of Common Stock at a
price per share equal to the greater of $5.854 or the average closing price per
share (up to $8.265) over a pre-determined period prior to redemption.
The maximum number of shares of Common Stock that AGI may issue upon
redemption or conversion of the Preferred Stock, together with any shares of
Common Stock issued as dividends on the Preferred Stock, is 12,099,213 shares,
subject to adjustment due to any adjustment in the Conversion Price upon the
occurrence of certain dilutive events.
Covenants
The DOCLOC Agreement requires the prior consent of Cyprus before AGI may
enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution).
Events of Default
Events of Default are limited to non-payment of principal or interest,
material misrepresentations, bankruptcy and failure to comply with the
covenants set forth in the DOCLOC Agreement after a 30-day grace period.
8
Stock Purchase Option
Cyprus will have the right to replace the DOCLOC Agreement and any
outstanding indebtedness and/or shares of Preferred Stock with the purchase of
up to 12,099,213 shares of Common Stock at a Purchase Price of $8.265 per
share. The Purchase Price for the shares of Common Stock will be paid and
applied (i) to cancel any interest and principal outstanding, (ii) to convert
any shares of Preferred Stock previously issued to Cyprus and (iii) to
terminate the Commitment.
Demand Registration Rights
Cyprus may demand registration under the Securities Act of 1933 of all or
part (but not less than 1,000,000 shares per demand) of the shares of Common
Stock issued to Cyprus pursuant to the DOCLOC Agreement. The Company is
obligated to pay all expenses in connection with the first such demand
registration. All expenses incurred in connection with each additional
registration, if any, shall be paid by Cyprus.
Representations and Warranties
AGI made certain representations and warranties to Cyprus concerning
corporate existence, corporate power and authority, government approvals,
enforceability, financial statements provided, litigation matters and the
validity of the shares of Preferred Stock and Common Stock issuable under the
DOCLOC Agreement.
SUMMARY OF MATERIAL TERMS OF THE STOCK PURCHASE AGREEMENT
Set forth below is a summary of the material terms of the Stock Purchase
Agreement which agreement is attached as Appendix B to this Proxy Statement and
incorporated herein by reference. See also "THE PROPOSAL--Material Terms of the
Stock Purchase Agreement."
The Stock Purchase Agreement provides for the purchase by Cyprus of 3,000,000
shares of Common Stock at a purchase price of $6.888 per share (the ten-day
average closing price reported on the Exchange prior to the date the Commitment
Letter was signed) or approximately $20.7 million. The total purchase price
will be immediately applied by AGI to reduce the approximately $26.0 million of
indebtedness (as of June 24, 1994) of AGI to Cyprus under the AGI Note.
Representations and Warranties
AGI made certain representations and warranties to Cyprus concerning
corporate existence, corporate power and authority and the validity of the
3,000,000 shares of Common Stock issuable under the Stock Purchase Agreement.
Cyprus made certain representations and warranties to AGI concerning its
accredited investor status.
Use of Proceeds
AGI must use the entire amount of the net proceeds of the sale of 3,000,000
shares of Common Stock to repay approximately $20.7 million of the
approximately $26.0 million of outstanding indebtedness (as of June 24, 1994)
owed by AGI to Cyprus. Cyprus has deferred payment on the approximately $5.3
million of remaining intercompany indebtedness until December 31, 1995.
Demand Registration Rights
Cyprus may demand registration under the Securities Act of 1933 of all or
part (but not less than 1,000,000 shares per demand) of the shares of Common
Stock issued pursuant to the Stock Purchase Agreement. The Company is obligated
to pay all expenses in connection with the first such demand registration. All
expenses incurred in connection with each additional registration, if any,
shall be paid by Cyprus.
9
SPECIAL MEETING
RECOMMENDATION OF BOARD
The Audit Committee of the Board (which consists entirely of directors who
are neither associates, officers or employees of AGI or Cyprus) and the entire
Board approved the DOCLOC Agreement that may result in the issuance to Cyprus
of up to 2,000,000 shares of Preferred Stock and, upon conversion or redemption
of the Preferred Stock, up to 12,099,213 shares of Common Stock, and the Stock
Purchase Agreement that will result in the issuance of 3,000,000 shares of
Common Stock to Cyprus. THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
PROPOSAL. The AGI Board consists of six directors, of whom two are senior
executive officers of Cyprus, another is the Co-Chairman of the Board of
Directors of Cyprus and a fourth is also a director of Cyprus. See "THE
PROPOSAL--Background" and "CHANGE OF CONTROL."
RECORD DATE
The close of business on June 24, 1994 shall be the Record Date for the
determination of the holders of Common Stock entitled to receive this Proxy
Statement and to vote for the Proposal.
VOTES REQUIRED
Section 203 of the Delaware Law states that the Company may not engage in any
business combination (defined to include any transaction which results in the
issuance by AGI of any stock of AGI) with Cyprus (an "interested stockholder"
because it owns more than 15% of the outstanding shares of Common Stock as a
result of the Cyprus Amax Merger) for a period of three years following the
date that Cyprus became an interested stockholder, unless on or subsequent to
such date the business combination is approved by the AGI Board and authorized
at an annual or special meeting of stockholders by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by Cyprus.
In addition, pursuant to an Exchange staff interpretation of a Rule of the
Exchange (Paragraph 312.03(b) of the Listed Company Manual), the approval of
the stockholders holding a majority of all shares of Common Stock of the
Company voting on the Proposal (provided that the total vote cast on the
Proposal represents over 50% in interest of all outstanding shares of Common
Stock) is required as a prerequisite to the listing of the Common Stock to be
issued to Cyprus in the transactions described in the Proposal, on the basis
that the Proposal contemplates that "tangible or intangible assets" (in this
case, cash) are to be acquired directly or indirectly from a substantial
security holder of the Company (a holder of 5% or more of the Company's
outstanding Common Stock) and the number of shares of Common Stock to be issued
in such transactions will exceed 1% of the number of shares of Common Stock of
the Company outstanding before such issuance.
As of June 24, 1994, there were 78,214,627 shares of Common Stock outstanding
(exclusive of 1,991 shares held by the Company in treasury) of which Cyprus
indirectly owned 31,319,709 shares. Common Stock is the only outstanding class
of voting securities of the Company. Each share of Common Stock outstanding on
the Record Date is entitled to one vote on the Proposal.
As of June 24, 1994, directors and executive officers of AGI (several of whom
are also directors and/or executive officers of Cyprus) owned beneficially less
than 1% of the shares of Common Stock outstanding on such date. Such directors
and executive officers of the Company have advised the Company that they intend
to vote for the Proposal. Cyprus has advised the Company that it intends to
vote for the Proposal. Although the vote of Cyprus and its affiliates and
associates will be counted for purposes of obtaining the approval of
stockholders required by the Exchange rules, the vote of Cyprus and its
affiliates and associates will not be counted for purposes of obtaining the
requisite stockholder approval under Section 203 of Delaware Law.
VOTES
Shares of AGI Common Stock represented by proxy properly signed and received
at or prior to the Special Meeting, unless subsequently revoked, will be voted
in accordance with the instructions thereon. If a proxy is signed and returned
to Chemical Bank without indicating any voting instructions, shares of AGI
Common Stock represented by the proxy will be voted FOR the Proposal. AGI proxy
holders may in their
10
discretion vote shares voted for the Proposal to adjourn the Special Meeting to
solicit additional proxies in favor of the Proposal. Proxies voting against the
Proposal will not be voted for adjournment of the Special Meeting. Any proxy
given pursuant to this solicitation may be revoked by the filing of an
instrument revoking it or of a duly executed proxy bearing a later date with
Chemical Bank prior to or at the Special Meeting, or by voting in person at the
Special Meeting. All written revocations and other communications with respect
to revocation of proxies should be addressed as follows: Chemical Bank, Proxy
Tally Department, Church Street Station, P.O. Box 24555, New York, New York
10242-0018. Attendance at the Special Meeting will not in and of itself
constitute a revocation.
SOLICITATION OF PROXIES
The Company will bear the cost of solicitation of proxies. In addition to the
use of mails, proxies may be solicited by officers and regular employees of the
Company, personally or by telephone or telegraph, and the Company may reimburse
persons holding shares in their names or those of their nominees for their
expenses in sending soliciting material to their principals.
In addition, AGI has retained Georgeson & Company Inc. ("Georgeson") to
assist in the solicitation of proxies from its Stockholders. Georgeson will
solicit proxies from those Stockholders of the Company that are banks, brokers
and other institutional investors and from non-objecting beneficial owners and
individual holders of record, for a fee of $15,000, plus expenses. Georgeson
will directly solicit non-objecting beneficial owners and unvoted registered
Stockholders by telephone for an additional fee.
THE PROPOSAL
GENERAL
The holders of Common Stock are being asked to approve two agreements with
Cyprus and the transactions contemplated thereby: (i) the DOCLOC Agreement
pursuant to which Cyprus will provide AGI a line of credit of $100 million,
under which any indebtedness may be repaid by AGI's issuance of up to 2,000,000
shares of the Company's Preferred Stock, and such shares of Preferred Stock may
be converted by Cyprus at any time into up to 12,099,213 shares of Common
Stock, at a conversion price of $8.265 per share; and (ii) the Stock Purchase
Agreement that provides for the purchase by Cyprus of 3,000,000 shares of
Common Stock for a purchase price of approximately $20.7 million which will be
used to repay that amount of indebtedness of AGI to Cyprus; such approval shall
include but not be limited to the authorization and issuance to Cyprus of up to
2,000,000 shares of Preferred Stock and up to 12,099,213 shares of Common Stock
under the DOCLOC Agreement and 3,000,000 shares of Common Stock under the Stock
Purchase Agreement.
Outstanding indebtedness under the $100 million DOCLOC Agreement may be
repaid in whole or in part in cash or by AGI issuing up to 2,000,000 shares of
the Company's Preferred Stock. Shares of Preferred Stock can be converted at
any time by Cyprus into shares of Common Stock at a conversion price of $8.265
per share, which represents a 20% premium over the average closing price on the
ten days preceding February 11, 1994, the date of the signing of the Commitment
Letter. AGI will have the right to redeem shares of Preferred Stock at any time
in whole or in part by issuing shares of Common Stock at a price per share
equal to the greater of $5.854 or the average closing price per share (up to
$8.265) over a predetermined period prior to redemption. The terms of the
shares of the Preferred Stock limit the number of shares of Common Stock
issuable upon redemption, conversion and the payment of dividends to
12,099,213. The holder of shares of Preferred Stock will receive cash in lieu
of any shares in excess of 12,099,213 shares of Common Stock that would have
otherwise been issuable. Such cash payment would be payable in 12 consecutive
substantially equal quarterly payments. Cyprus will have the right to replace
from time to time all or a portion of the DOCLOC Agreement and any outstanding
indebtedness and/or Preferred Stock with the purchase of up to 12,099,213
shares of Common Stock at a purchase price of $8.265 per share (or $100 million
if all 12,099,213 shares of Common Stock are purchased). For a discussion of
the terms of the DOCLOC Agreement, see "--Terms of the DOCLOC Agreement."
The Stock Purchase Agreement provides for the purchase by Cyprus of 3,000,000
shares of Common Stock for a purchase price of approximately $20.7 million. The
entire amount of the proceeds received by
11
AGI must be used to repay approximately $20.7 million of the approximately
$26.0 million of outstanding indebtedness (as of June 24, 1994) owed by AGI to
Cyprus under the AGI Note. For a discussion of the terms of the Stock Purchase
Agreement, see "--Terms of the Stock Purchase Agreement."
The Proposal is being submitted to the Stockholders of the Company for their
approval to satisfy Section 203 of Delaware Law and an Exchange requirement.
Section 203 of Delaware Law states that the Company may not engage in any
business combination (defined to include any transaction which results in the
issuance by AGI of any stock of AGI) with Cyprus (an "interested stockholder"
because it owns more than 15% of the outstanding shares of Common Stock as a
result of the Cyprus Amax Merger) for a period of three years following the
date that Cyprus became an interested stockholder, unless on or subsequent to
such date the business combination is approved by the AGI Board and authorized
at an annual or special meeting of stockholders by the affirmative vote of at
least 66 2/3% of the outstanding voting stock which is not owned by Cyprus. In
addition, pursuant to an Exchange staff interpretation of a Rule of the
Exchange (Paragraph 312.03(b) of the Listed Company Manual), the approval of
stockholders holding a majority of the shares of Common Stock voting on the
Proposal (provided that the total vote cast on the Proposal represents over
50% in interest of all outstanding shares of Common Stock) is required as a
prerequisite to the listing of the Common Stock to be issued to Cyprus in the
transactions described in the Proposal, on the basis that the Proposal
contemplates that "tangible or intangible assets" (in this case, cash) are to
be acquired directly or indirectly from a substantial securityholder of the
Company (a holder of 5% or more of the Company's outstanding Common Stock) and
the number of shares of Common Stock to be issued in such transactions will
exceed 1% of the number of shares of Common Stock of the Company outstanding
before such issuance.
BACKGROUND
In 1992 AGI identified a need for additional financing in order to refinance
the acquisition and development of its Guanaco mine and achieve its
development and exploration objectives. After considering a variety of
financing alternatives, AGI actively pursued a substantial institutional
placement of convertible preferred stock in the second and third quarters of
1993. In September of 1993, AGI decided not to pursue the proposed placement
of convertible preferred stock due to the pending merger of Amax with Cyprus,
which closed in mid-November 1993. Upon terminating these efforts, AGI
management reevaluated the Company's financial position and reconsidered its
financing alternatives. In the fall of 1993, AGI was not only operating at a
loss but was not generating positive cash flow from its mining operations
after sustaining capital expenditures. The financial position of the Company
at year end 1993 highlights the Company's liquidity needs. The Company had
negative operating cash flow of $23.2 million for 1993 primarily due to lower
mill head grades at its Sleeper and Hayden Hill gold mines, high start-up
costs for the heap leach production from its Guanaco mine and higher interest
expenditures resulting from increased debt levels. The negative operating cash
flow for 1993, together with $24.6 million of capital, cash acquisition and
investment expenditures and $31.6 million debt principal repayments, were
funded with existing cash balances of $23.7 million, additional borrowings of
$59.2 million and net cash proceeds of $7.8 million from a transaction
involving the Company's 33.53% joint venture interest in the Waihi mine in New
Zealand. The $24.6 million of capital expenditures and cash acquisition and
investment costs excludes $21.1 million of acquisition costs that were funded
through the issuance of 3.15 million shares of Common Stock by the Company in
January 1993.
As noted above, during 1993 AGI incurred additional indebtedness of $59.2
million to finance the capital needs of the Company. AGI borrowed funds from
Amax periodically throughout 1993 pursuant to the AGI Note. At year end, such
loans totalled $24.7 million and were, as a result of the Cyprus Amax Merger,
payable to Cyprus. Additionally, AGI borrowed $30 million in working capital
gold loans (referred to as "the Gold Loans") and $4.5 million to refinance a
portion of the Chilean short-term bridge loans. AGI made repayments of
outstanding indebtedness in 1993 totalling $31.6 million.
As a result of the additional borrowings made during 1993, at December 31,
1993 AGI had total outstanding debt obligations of $151.6 million,
representing $51.9 million under the Hayden Hill loan facility, $34.2 million
under Chilean short-term bridge loans, $9.2 million under Chilean assumed
debt, $30 million under the Gold Loans, $1.6 million under the Sleeper gold
bullion loan agreement and $24.7 million under the AGI Note. Principal
repayment obligations for 1994 aggregate $15.1 million, which includes $11.1
million of scheduled amortization payments under the Hayden Hill financing,
$3.0 million of scheduled amortization
12
payments under the outstanding Chilean assumed debt and $1.0 million of
scheduled amortization payments under a new $36 million Guanaco U.S. term loan
completed in March 1994, which refinanced $34.2 million of Chilean short term
bridge loans.
In addition, the Company currently estimates capital expenditures at the
Company's Sleeper, Hayden Hill and Guanaco mines during 1994 will be
approximately $12.5 million. Fort Knox and Refugio construction and development
expenditures for 1994 are estimated to be approximately $12 million and $12.5
million, respectively, subject to securing the necessary financing, and Haile
development expenditures are estimated to be approximately $2.5 million.
Although the Company forecasts positive cash flows from its mining operations
for 1994 based on certain assumptions regarding operations, AGI recognized that
it would be unable to service its existing debt obligations and continue
development work on its new projects without raising external capital funds.
Prior to the Cyprus Amax Merger, Amax had provided AGI with an informal
assurance of financial support. With approximately $125 million of debt owed to
commercial banks and $24.7 million of debt owed to Cyprus, following the Cyprus
Amax Merger AGI's commercial lenders had requested financial guarantees from
Cyprus, a loan paydown with the proceeds of an equity or a debt offering or a
fundamental change in the operational performance of AGI. AGI has substantial
capital needs in 1994 and 1995 for the development of its Fort Knox and Refugio
Projects and considered the public and private capital markets and the
commercial lending market as the most likely sources for such capital. AGI
needed to quickly improve its creditworthiness in order to access the
commercial debt market and the public debt and equity market on acceptable
terms in the foreseeable future.
The Proposal is the result of discussions with Cyprus regarding financial
support following the Cyprus Amax Merger that would provide AGI with a lower
cost of capital and greater financial flexibility. The proposed terms were
first presented by AGI management to the AGI Board at the December 8, 1993
meeting of the Board. Although no formal action was taken by the AGI Board at
that meeting, the Board directed AGI management to proceed with negotiations
concerning the terms of a convertible line of credit with Cyprus. The principal
financial terms of the convertible line of credit were proposed by AGI, and
negotiations centered on interest and conversion rates. Interest was set at
slightly (.03%) above Cyprus's cost of funds. The conversion rate was set at a
20% premium above the average closing price of the Common Stock on the ten days
preceding the signing of the Commitment Letter. On January 7, 1994 the AGI
Board engaged Salomon Brothers to advise the Audit Committee with respect to
the fairness from a financial point of view of the proposed line of credit. The
initial terms of the Commitment Letter to be signed by AGI and Cyprus
containing the Proposal were presented to the Board again at its meeting on
January 10, 1994. At that meeting, the Board directed the Audit Committee
(composed entirely of directors who are not associates, officers or employees
of AGI or Cyprus) to determine the fairness of the proposed transaction.
Salomon Brothers reported its views to the Audit Committee of the Board at a
meeting of the Audit Committee held on January 21, 1994. Subsequently, the
Audit Committee unanimously determined that the convertible line of credit was
fair to the AGI Stockholders and recommended that the Board approve the
convertible line of credit. On February 11, 1994, AGI and Cyprus executed the
Commitment Letter containing the final principal terms of the DOCLOC Agreement.
The Commitment Letter also provided for the issuance of 3,000,000 shares of
Common Stock to Cyprus as repayment for approximately $20.7 million of
approximately $26.0 million (as of June 24, 1994) owed to Cyprus under the AGI
Note. At the meeting of the Board on May 5, 1994, after consideration of the
fairness opinion received on February 15, 1994 from Salomon Brothers, the Board
(with directors of the Company that are also officers or directors of Cyprus
abstaining) ratified the execution and delivery of the DOCLOC Agreement and the
Stock Purchase Agreement.
In reaching its decision to propose to Cyprus that Cyprus provide AGI with
the $100 million double convertible line of credit on the terms of the DOCLOC
Agreement, AGI considered a number of factors and evaluated a number of options
for raising capital. AGI determined that seeking convertible financing from
Cyprus was its best alternative because financing from Cyprus would provide a
lower cost of capital, greater flexibility, since AGI would only pay for the
funds that it borrowed, and substantial cost savings because there would be no
underwriting fees. See "--Reasons for the Proposal; Recommendation of the
Board."
13
In addition to signing the Commitment Letter with Cyprus to provide AGI with
the $100 million under the DOCLOC Agreement and to provide for repayment of
approximately $20.7 million of the outstanding indebtedness under the AGI Note
pursuant to the Stock Purchase Agreement, various financing activities were
undertaken to provide AGI with more financial strength and flexibility to meet
its outstanding debt obligations. In February 1994, Cyprus provided a guarantee
for a letter of credit which secures $9.2 million of Chilean assumed debt. With
respect to the Gold Loans, Cyprus provided a guarantee in February 1994 for $10
million of the $30 million of outstanding Gold Loans which were scheduled to be
repaid in 1994. The $10 million Cyprus guarantee allowed AGI to refinance to
February 1995 $10 million of the $30 million of outstanding Gold Loans. It is
expected that the remaining $20 million of outstanding Gold Loans that are
scheduled to be repaid in 1994 will also be extended into 1995 in the event the
Proposal is approved. In March 1994, AGI refinanced $34.2 million of Chilean
bridge loans with a $36 million U.S. term loan agreement with two financial
institutions, with scheduled amortization payments over a three-year term,
commencing in October 1994. This loan is collateralized by guarantees from AGI
and from Cyprus.
During June 1994 it became necessary for AGI to seek funding from Cyprus to
meet its debt amortization and working capital needs. To permit AGI to borrow
under the DOCLOC Agreement prior to obtaining the approval of its stockholders,
AGI and Cyprus executed a letter agreement dated June 1, 1994 (the "Letter
Agreement"). Subject to AGI's commitment to use all reasonable efforts to
obtain stockholder approval, Amax and Cyprus agreed, among other things, that
until the requisite stockholder vote is obtained under the rules of the
Exchange and Section 203 of Delaware Law, AGI may borrow under the DOCLOC
Agreement subject to the following conditions: (i) AGI will not make any
payment in Preferred Stock; (ii) Cyprus will not exercise its stock purchase
option whereby it may convert shares of Preferred Stock or outstanding
indebtedness under the line of credit into shares of Common Stock; and (iii)
any and all other provisions of the DOCLOC Agreement providing for or relating
to the issuance of equity securities of AGI will be suspended. On June 22,
1994, AGI borrowed $8 million from Cyprus under the DOCLOC Agreement pursuant
to the conditions set forth in the Letter Agreement.
The support of Cyprus through the DOCLOC Agreement and debt guarantees has
enabled AGI to sustain its current operations, its operating mine capital
requirements and its current debt service requirements. In the event that the
Proposal is not approved, there can be no assurance that Cyprus would be
willing to continue to provide such financial support to AGI. In any event,
additional financings will be required to fund the total capital required to
bring the Company's Fort Knox, Refugio and other development projects into
production. On June 3, 1994 the Company filed a shelf registration statement
with the Securities and Exchange Commission (which has not yet been declared
effective) whereby the Company may offer from time to time subordinated debt
securities, shares of preferred stock, shares of Common Stock or warrants to
purchase Common Stock at an aggregate initial offering price not to exceed
$200,000,000, at prices and on terms determined at the time of sale. The
Company does not anticipate offering any of such securities until after
stockholder approval of the DOCLOC Agreement has been obtained, and, in the
event that stockholder approval is not obtained, there is no assurance that the
Company would offer securities under the shelf. In addition, the Company is
engaged in negotiations with lenders for the financing of the Refugio project.
The lenders have indicated that stockholder approval of the DOCLOC Agreement
will be a condition to such financing.
OTHER RELATIONSHIPS WITH CYPRUS
Cyprus currently is the indirect holder of 31,319,709 shares of Common Stock
of AGI, which represents approximately 40% of the outstanding shares of Common
Stock. Cyprus holds this share of the Common Stock as a result of the Cyprus
Amax Merger on November 15, 1993 and the distribution by Amax of 21.8 million
shares or approximately 28% of the shares of Common Stock to the stockholders
of Amax immediately prior to the Cyprus Amax Merger. The proposed acquisition
by Cyprus of 3,000,000 shares of Common Stock under the Stock Purchase
Agreement, combined with the potential issuance to Cyprus of up to 12,099,213
shares of Common Stock under the DOCLOC Agreement, would increase Cyprus'
ownership of AGI Common Stock to 49.7%.
Cyprus, as successor to Amax, is party to a number of contracts with the
Company and is in the process of negotiating new agreements with AGI. These
contracts and proposed new agreements are discussed below.
Guarantees. As of March 31, 1994, Cyprus had provided guarantees for
approximately $54 million of the Company's outstanding indebtedness and letters
of credit.
14
Management Services Agreement. Pursuant to the terms of a management services
agreement (the "Management Services Agreement") entered into at the time of the
Company's formation, Amax agreed to provide a variety of managerial and other
services to the Company on a full cost-reimbursement basis. The agreement is
terminable by the Company or by Cyprus (as successor to Amax) as of the end of
any month on 180 days' prior written notice. For fiscal year 1993, amounts
charged to the Company by Amax pursuant to the Management Services Agreement
were approximately $5.2 million, including the costs of insurance coverage for
the Company and employee benefits provided to the Company's officers and
employees under benefit and pension plans maintained by Amax through the date
of the Cyprus Amax Merger.
Exploration Services Agreement. Pursuant to an exploration services agreement
(the "Exploration Services Agreement") entered into at the time of the
Company's formation, Amax Exploration, Inc., a wholly owned subsidiary of Amax,
agreed to provide exploration services for the Company. The agreement is
effective until terminated by either party with at least 180 days' prior
notice. During 1993, the Company conducted its exploration programs through
wholly-owned subsidiaries of the Company using its own personnel. Effective
January 1, 1994, in order to reduce costs and realize some of the synergies
from its new affiliation with Cyprus, the Company transferred most of its
exploration personnel to Cyprus but retained its Vice President in charge of
exploration. In the future, Cyprus geologists will conduct the Company's
exploration for gold, either under the exploration joint venture agreement
described below under "Agreements with Cyprus" or otherwise.
Put and Call Agreement. The Company and Amax entered into a put and call
agreement (the "Put and Call Agreement") under which Cyprus (as successor to
Amax) may sell shares of Common Stock of AGI to the Company upon exercise of
certain common stock purchase warrants (the "Warrants") issued in connection
with the acquisition of the Fort Knox Project in 1992. The Put and Call
Agreement has been approved by the Company's Board at a meeting on December 4,
1991 with the directors of the Company that were also directors of Amax
abstaining. A summary of the terms of the Put and Call Agreement is set forth
below:
(i) Put Option. Under the Put and Call Agreement, Cyprus has a put option
(the "Put Option") whereby, upon exercise of any Warrants, Cyprus may
require the Company to purchase a number of shares of Common Stock of AGI
from Cyprus at the exercise price (the "Warrant Exercise Price"), as
determined pursuant to the provisions of the Warrant Agreement dated
January 6, 1992, entered into between the Company and Manufacturers Hanover
Trust Company as Warrant Agent, such number to be equal to the number of
shares of Common Stock of AGI which the Company is required to issue upon
exercise of such Warrants. Pursuant to the Warrant Agreement, the initial
Warrant Exercise Price is $21.00 per share and is subject to customary
anti-dilution adjustments upon the occurrence of, among other things, stock
dividends, stock splits, reclassifications, mergers and similar events.
(ii) Call Option. In the event Cyprus fails to exercise the Put Option,
the Company will have a call option (the "Call Option") whereby it may
require Cyprus to sell shares of AGI Common Stock (to the extent then owned
by Cyprus) to the Company equal to the number of shares of Common Stock of
AGI which the Company is required to issue upon exercise of such Warrants
at a price equal to the Warrant Exercise Price plus two-thirds of the
excess of (x) the market price per share of Common Stock of AGI over (y)
the Warrant Exercise Price.
Agreements with Cyprus. In connection with the change of ownership of the
Company resulting from the Cyprus Amax Merger, the Company is in the process of
completing various agreements with Cyprus. These include a new services
agreement, a gold exploration joint venture agreement, a non-competition
agreement, the DOCLOC Agreement and the Stock Purchase Agreement. Cyprus may
also sell to the Company certain of its gold exploration and development
properties, subject to the approval of each company's board of directors and
compliance with applicable state law, stock exchange and possibly other
regulatory requirements regarding related party transactions. The new services
agreement would provide the Company with certain Cyprus general and
administrative services in order to take advantage of the synergies between the
two companies and is expected to provide both companies with cost savings. The
new services agreement would replace the Management Services Agreement
described above. The new exploration joint
15
venture agreement would result in the two companies pooling their efforts to
discover and develop gold properties, with Cyprus providing 75% and AGI
providing 25% of initial funding for newly identified gold exploration
targets. This joint venture arrangement is expected to have the benefits of
potentially broadening the Company's geographic reach, sharing key personnel,
reducing costs, increasing available funds and sharing the high risks
associated with exploration. Exploration projects that the Company held prior
to the Cyprus Amax Merger will continue to be evaluated entirely by the
Company. The non-compete agreement would define the terms under which either
company would develop and ultimately produce minerals that would be in
competition with the other party.
Until the new services agreement is concluded, the existing Management
Services Agreement and Exploration Services Agreement described above will
remain in effect with Cyprus succeeding to the rights and obligations of Amax
under such agreements. The Put and Call Agreement described above will also
remain in place, with Cyprus succeeding to the rights and obligations of Amax
under such agreement.
Additionally, the Company and Cyprus have entered into an agreement which
gives the Company the option to purchase an interest in the Cerro Quema gold
development project in Panama based on reserves to be established in a
feasibility study.
Upon the purchase by Cyprus of 3,000,000 shares of AGI Common Stock pursuant
to the Stock Purchase Agreement, Cyprus' ownership of Common Stock of AGI
would increase to approximately 42%. This percentage ownership would increase
to 49.7% upon conversion of the DOCLOC Agreement to 12,099,213 shares of
Common Stock. Cyprus' 49.7% ownership share would be reduced to approximately
48% if all of the Warrants issued in connection with the Fort Knox acquisition
are exercised. This percentage would be further reduced to 45% of the
outstanding shares of Common Stock if the Put and Call Agreement between
Cyprus and the Company is fully exercised by either party.
EFFECTS OF THE PROPOSAL ON THE RIGHTS OF AGI STOCKHOLDERS
Assuming the issuance of the shares of Common Stock to Cyprus under the
DOCLOC Agreement and the Stock Purchase Agreement as proposed in this Proxy
Statement, the percentage of the Company's voting securities owned of record
and beneficially by existing holders of Common Stock (other than Cyprus) will
be reduced significantly on a fully diluted basis. If the Proposal is
approved, the 3,000,000 shares of Common Stock issued to Cyprus pursuant to
the Stock Purchase Agreement, combined with the 12,099,213 shares of Common
Stock potentially issuable under the DOCLOC Agreement (assuming that all
12,099,213 shares of Common Stock are in fact issued to Cyprus), would reduce
to 50.3% the interest of existing holders of Common Stock other than Cyprus
and increase Cyprus' ownership of Common Stock to 49.7% of the outstanding
shares of Common Stock. Thus, public stockholders will have a reduced ability
to influence the election of directors or any other action taken by the
holders of the Common Stock.
Additionally, the DOCLOC Agreement requires the prior consent of Cyprus
before AGI may enter into any merger, consolidation or amalgamation
transaction or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution).
Finally, the Preferred Stock issuable under the DOCLOC Agreement may limit
the Company's ability to pay cash dividends on Common Stock. The terms of the
Preferred Stock state that no dividends may be paid on shares of Common Stock
unless and until all dividends payable on the Preferred Stock have been paid.
REASONS FOR THE PROPOSAL; RECOMMENDATION OF THE BOARD
Given the Company's need for financing to maintain its current operations,
service debt requirements and continue development work on its new projects,
the Audit Committee, comprised entirely of directors who are neither
associates of Cyprus nor officers or directors of AGI, and the entire Board
(with those directors who are also officers or directors of Cyprus abstaining)
determined the transactions with Cyprus as contemplated in the DOCLOC
Agreement and the Stock Purchase Agreement to be desirable and in the best
interest of the Company and its Stockholders for the following material
reasons:
(i) The Company faces an immediate need for cash. After negative
operating cash flow of $23.2 million in 1993 and with modest projected
operating cash flows for 1994 and 1995, the availability of a $100 million
line of credit provides AGI with the financial support it needs to meet its
working capital requirements and debt repayment obligations for 1994 and
beyond.
16
(ii) Without the DOCLOC Agreement and reduction of intercompany debt
through the Stock Purchase Agreement, additional third party debt financing
is believed to be unavailable in adequate amounts and without very
restrictive covenants and expensive terms. The Board also deemed additional
third party debt unattractive because it would make relationships with
existing lenders more difficult. Following the Cyprus Amax Merger, existing
lenders of AGI had requested financial guarantees from Cyprus, a loan
paydown with the proceeds of an equity or a debt offering or a fundamental
change in the operational performance of the Company and made it known that
they would oppose any additional third party senior debt financing given
AGI's current financial position.
(iii) Equity financing without the DOCLOC Agreement is thought to be
limited in the amount available and potentially more dilutive due to the
Company's recent financial losses and current level of debt. The Board also
noted that such financing appears to be available only with substantial
transaction costs.
(iv) Convertible preferred or convertible subordinated debt financing is
or was thought to be available in adequate amounts, but the Board concluded
such financing would likely bear higher dividend or interest rates, be less
flexible in terms of redemption and conversion rights in favor of the
Company and be accompanied by substantial transaction costs.
(v) The DOCLOC Agreement provides the Company with a flexible type of
financing, with useful aspects of both debt and equity: (a) the DOCLOC
Agreement provides the Company with the ability to borrow what it needs
from time to time under a low interest loan, with interest charged only on
amounts borrowed, and does not impose requirements for security,
restrictive covenants, substantial fees or other costs; (b) the amounts
borrowed can be repaid with cash or shares of Preferred Stock; (c) the
Preferred Stock is non-voting and calls for only a 4.5% cumulative dividend
and includes a Common Stock conversion feature at a 20% premium to the
market price of the Common Stock at the time of the Commitment Letter; (d)
the transfer of the Preferred Stock is restricted; (e) the Preferred Stock
includes a right for the Company to redeem it with Common Stock as well as
a conversion right for Cyprus; and (f) in consideration for this
flexibility the DOCLOC Agreement provides an option for Cyprus to convert
the entire arrangement into a right to purchase $100 million of Common
Stock for $8.265 per share, a 20% premium to market at the time of the
Commitment Letter.
(vi) The Company's right to repay outstanding borrowings under the DOCLOC
Agreement with Preferred Stock and its right to redeem the Preferred Stock
with Common Stock at any time are advantageous to the Company and its
Stockholders in that such rights will permit the Company to conserve its
cash resources.
(vii) The less-than-market interest and dividend rates under the DOCLOC
Agreement are very favorable to the Company. Whereas, at the time of the
Commitment Letter, straight convertible preferred stock would have cost AGI
approximately a 6 1/2% dividend yield, the DOCLOC Agreement provides for an
interest rate of LIBOR plus 0.3%, a rate of approximately 4% at the time of
the Commitment Letter. The repayment of the outstanding indebtedness under
the DOCLOC Agreement with Preferred Stock would result in AGI paying only a
4 1/2% dividend yield on the Preferred Stock. Additionally, with
conventional convertible preferred stock, AGI would be paying dividends on
the entire amount of the preferred stock before all of this amount was
needed by AGI. Under the DOCLOC Agreement, AGI only pays for the cash that
it borrows, and there is no commitment fee on undrawn balances. Further,
the DOCLOC Agreement provides a substantial cost savings as there are no
underwriting or placement fees associated with the DOCLOC Agreement.
(viii) With respect to the convertible line of credit, the Audit
Committee of the Board received the opinion of Salomon Brothers that the
DOCLOC Agreement which provides Cyprus with the option to convert the
outstanding indebtedness into shares of Common Stock at a price that
represents a 20% premium over market at the time of the Commitment Letter
is fair from a financial point of view to the stockholders of the Company
(in their capacity as such) without consideration of Cyprus and its
affiliates.
(ix) The DOCLOC Agreement does not have restrictive covenants that reduce
AGI's operational flexibility. In addition, because no commitment fee is
assessed on undrawn balances, the DOCLOC Agreement provides greater
flexibility than the other financing arrangements considered.
17
(x) The purchase price under the Stock Purchase Agreement, $6.888 per
share of Common Stock on the 3,000,000 shares to be purchased by Cyprus,
represents the average closing price on the ten days preceding the signing
of the Commitment Letter. The Board determined that a fairness opinion
relating to the Stock Purchase Agreement was not necessary because: (A) the
purchase price for the 3,000,000 shares of Common Stock to be issued to
Cyprus was determined on the basis of the ten-day average closing price for
shares of the Common Stock at the time the Commitment Letter was signed;
(B) the stock purchase allowed the Company to convert debt to equity and
thereby reduce debt and improve the financial condition of AGI; and (C) the
transaction would increase Cyprus' ownership interest in the Company by
only two percent (from 40% to approximately 42% of the outstanding shares
of Common Stock).
(xi) Although the transactions described in the Proposal may result in
dilution to existing holders of Common Stock and provide Cyprus with
valuable rights to acquire Common Stock, in the absence of the financing
arrangement provided by the DOCLOC Agreement and the Stock Purchase
Agreement, the Company could be forced into less attractive financing
alternatives and, in such event, the holders of Common Stock could
experience greater dilution.
(xii) It is believed that Cyprus' willingness to provide financial
support to AGI in exchange for a larger stake in the Company will be viewed
favorably by the public equity market and commercial lenders as a vote of
confidence in the future performance of AGI by its largest stockholder.
THE COMPANY'S AUDIT COMMITTEE AND THE ENTIRE BOARD HAVE DETERMINED THAT THE
TRANSACTIONS CONTEMPLATED BY THE DOCLOC AGREEMENT AND THE STOCK PURCHASE
AGREEMENT ARE ADVISABLE AND IN THE BEST INTEREST OF ALL THE STOCKHOLDERS AND
RECOMMENDS THAT THE HOLDERS OF COMMON STOCK VOTE FOR THE PROPOSAL.
OPINION OF FINANCIAL ADVISOR REGARDING THE DOCLOC AGREEMENT
The Board retained Salomon Brothers to render an opinion to its Audit
Committee in connection with the DOCLOC Agreement. At a meeting of the Audit
Committee held on January 21, 1994, Salomon Brothers delivered its oral
opinion to the Audit Committee that, as of that date, the "Transaction"
(defined by Salomon Brothers to be the availability of the $100 million double
convertible line of credit to the Company pursuant to the terms and conditions
of the DOCLOC Agreement) is fair, from a financial point of view, to the
stockholders generally (solely in their capacity as such), exclusive of Cyprus
and its affiliates. Subsequently, Salomon Brothers delivered its written
opinion, dated February 15, 1994, to the Audit Committee that the Transaction
is fair, from a financial point of view, to the stockholders generally (solely
in their capacity as such), exclusive of Cyprus and its affiliates. Salomon
Brothers has confirmed its opinion by delivery of a written opinion, dated
June 27, 1994, to the Audit Committee of the Board that the Transaction is
fair, from a financial point of view, to the stockholders generally (solely in
their capacity as such), exclusive of Cyprus and its affiliates. A copy of
Salomon Brothers' opinion, dated June 27, 1994, is attached as Appendix C to
this Proxy Statement and sets forth the assumptions made, matters considered
and limits on the review undertaken. STOCKHOLDERS ARE URGED TO READ THE
OPINION IN ITS ENTIRETY. Salomon Brothers' opinion is directed only to the
fairness, from a financial point of view, of the Transaction to the
stockholders generally (solely in their capacity as such), exclusive of Cyprus
and its affiliates, and does not constitute a recommendation as to whether or
not any stockholder of the Company should vote to approve the DOCLOC Agreement
or the Transaction or as to any other matter. The Company, its Board, the
Audit Committee, and the stockholders of the Company have the responsibility
to decide whether it is appropriate and reasonable to approve the Transaction.
Salomon Brothers is a nationally recognized investment banking firm which
provides financial services in connection with a wide range of business
transactions. As part of its business, Salomon Brothers provides investment
banking and financial advisory services in various connections, including
valuation of companies and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuation for estate, corporate and other purposes. Salomon Brothers was
retained by the Board based on its expertise in the valuation of companies as
well as its familiarity with the Company's business.
Salomon Brothers is not affiliated with the Company or Cyprus. Salomon
Brothers has previously rendered certain financial advisory and investment
banking services to the Company, for which Salomon
18
Brothers received customary compensation. Salomon Brothers is a full service
securities firm and, in the course of its normal trading activities, Salomon
Brothers may from time to time effect transactions and hold positions in the
securities of the Company and Cyprus for its own account and accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Salomon Brothers had no role in the determination of the terms of the DOCLOC
Agreement or any of the related agreements or in the negotiation thereof. The
terms of the DOCLOC Agreement and related agreements were determined solely
through negotiations between the Company and Cyprus.
Salomon Brothers was not asked to, and did not, address the fairness, from a
financial point of view, of the Stock Purchase Agreement to the stockholders.
The sale of 3,000,000 shares of Common Stock to Cyprus pursuant to the Stock
Purchase Agreement is for a purchase price of $6.888 per share, which price
represented the ten-day average closing price per share immediately prior to
the date the Commitment Letter was signed.
Salomon Brothers' opinion to the Audit Committee of the Company's Board
concludes, based upon and subject to each of the items discussed therein, that
the Transaction is fair, from a financial point of view, to the stockholders
generally (solely in their capacity as such), exclusive of Cyprus and its
affiliates. In connection with its opinion, Salomon Brothers reviewed and
analyzed, among other things, (i) the DOCLOC Agreement; (ii) this Proxy
Statement; (iii) certain publicly available business and financial information
concerning the Company and Cyprus; (iv) certain internal information, primarily
financial in nature (including projections, forecasts, estimates and analyses
prepared by or on behalf of the Company's management), concerning the business,
assets, liabilities, operations and prospects of the Company and the
anticipated effects on the Company of the consummation or the non-consummation
of the Transaction, including alternatives to implementing the Transaction,
furnished to Salomon Brothers by or on behalf of the Company; (v) certain
publicly available and other information concerning the trading of, and the
trading market for, the publicly traded securities of the Company; (vi) certain
publicly available information with respect to other companies that Salomon
Brothers believed to be comparable in certain respects to the Company; (vii)
the resolution of certain existing financial and other relationships between
the Company and its banks with respect to certain project financings; (viii)
the flexibility provided by the DOCLOC Agreement to further the continued
development of certain existing mining projects; (ix) the Company's public
filings, including statements pursuant to the Schedule 13D filed by Cyprus with
respect to the DOCLOC Agreement; and (x) such other information that Salomon
Brothers considered relevant to its inquiry. Salomon Brothers discussed with
certain members of the Company's management and its representatives the
Company's views as to: (i) the anticipated substantial adverse effects on the
Company's business, financial position, assets, liabilities, operations and
prospects which the Company believed would occur if the Company were not to
enter into the Transaction; (ii) the benefits which the Company believes will
arise from entering into the Transaction, including the substantial lessening
of existing liquidity concerns; and (iii) the lack of viable alternatives to
the Transaction. Salomon Brothers also discussed with certain members of the
Company's management and its representatives the Company's views as to the
financial and other information described above and other matters Salomon
Brothers believed relevant to its inquiry.
In its review and analysis and in arriving at its opinion, Salomon Brothers
assumed and relied upon the accuracy and completeness of all financial and
other information provided to or reviewed for Salomon Brothers or publicly
available and did not attempt independently to verify any of such information,
including, without limitation, the Company's views discussed above. Salmon
Brothers also relied upon the reasonableness and accuracy of the financial
projections, forecasts, estimates and analyses, including, without limitation,
forecasts, estimates and analyses related to the cash flows and value of assets
and current and contingent liabilities of the Company without giving effect to
the Transaction and on a pro forma basis, assuming the Transaction is
consummated, provided to or reviewed for Salomon Brothers, and Salomon Brothers
assumed that they were all reasonably prepared in accordance with accepted
industry practice on bases reflecting the best currently available estimate and
judgment of the Company's management.
19
For the purposes of rendering its opinion, Salomon Brothers assumed, with the
consent of the Company (and did not independently verify), that after giving
effect to the Transaction the Company and its subsidiaries will be solvent,
able to pay their respective obligations as they become due and adequately
capitalized to engage in their anticipated businesses. To the extent that
evaluation of the Transaction required analysis of legal, as opposed to
financial, matters, including, without limitation, all matters related to
identifying and quantifying current and pro forma off balance sheet
liabilities, Salomon Brothers relied, with the Company's consent, on the views
of the Company and its counsel with respect to these matters.
Salomon Brothers did not make or obtain any independent evaluations or
appraisals of any of the Company's assets, properties, liabilities or
securities, nor was Salomon Brothers furnished with any such evaluations or
appraisals other than certain evaluations and market studies provided to it by
the Company. Salomon Brothers assumed that the terms of the DOCLOC Agreement
are the most beneficial terms from the Company's perspective that could, under
the circumstances, be negotiated among the parties to the Transaction. Salomon
Brothers did not participate in such negotiations and was not authorized to,
and Salomon Brothers did not, solicit or investigate alternative transactions
which might be available to the Company. Salomon Brothers was not requested to,
and did not, solicit third party indications of interest in entering into a
transaction of the nature comprising the Transaction; although it should be
noted that Salomon Brothers was involved at an earlier date, unrelated to the
Transaction, in an attempt to raise capital in the public markets for the
Company and, unrelated to the Transaction, has been named as a potential
underwriter in connection with a Registration Statement for a universal shelf
covering the offering from time to time of subordinated debt, preferred stock,
Common Stock and/or warrants to acquire Common Stock which the Company filed
with the Securities and Exchange Commission on June 3, 1994.
In conducting its analysis and arriving at its opinion, Salomon Brothers
considered such financial and other information, including the financial and
non-financial judgments and views of the Company's management and
representatives, along with other factors, including, without limitation, the
information (including the financial projections, forecasts, estimates and
analyses) discussed above, as Salomon Brothers deemed appropriate under the
circumstances. In addition, Salomon Brothers took into account its discussions
with third parties referred to above. Salomon Brothers also took into account
its assessment of general economic, market and financial conditions generally
and the particular circumstances applicable to the Company. Salomon Brothers'
opinion necessarily is based upon conditions and circumstances as they existed
and could be evaluated as of the date thereof.
Salomon Brothers made various analyses in assessing the fairness, from a
financial point of view, of the Transaction to the stockholders (solely in
their capacity as such), exclusive of Cyprus and its affiliates. The material
analyses are summarized below. Among the analyses which Salomon Brothers
evaluated were: the Company's anticipated liquidity needs based upon its
current operating and financial performance and its projections for the future;
the Company's existing bank and other financing agreements and the need for
credit support in connection with such agreements; financing alternatives
available to the Company; and the current and pro forma shareholdings of Cyprus
in the Company.
As part of its liquidity analysis, Salomon Brothers estimated that the
Company would have a liquidity shortfall absent accessing the financial
markets.
In assessing financing alternatives available to the Company, Salomon
Brothers evaluated the possibility of obtaining financing from the public and
private markets, including bank debt, publicly offered and Rule 144A placed
convertible preferred stock, publicly offered common equity, publicly offered
high-yield debt and privately placed high-yield debt. Salomon Brothers'
assessment included an analysis of the availability of such financing and the
likely terms of any such financing. In addition, Salomon Brothers' assessment
included an analysis of the theoretical valuation, which is described below,
and relative benefit of the Transaction, as compared with financing
alternatives.
As a part of its evaluation and analysis, Salomon Brothers undertook a
theoretical valuation of the financial terms of the Transaction. In doing so,
Salomon Brothers analyzed the terms of the DOCLOC
20
Agreement pursuant to which Cyprus agrees to loan the Company up to $100
million, as previously described. The Company may elect to repay outstanding
indebtedness under this line of credit either by payment in cash or in shares
of Preferred Stock. See "Material Terms of the DOCLOC Agreement."
The Company's option to repay the convertible revolving line of credit in
cash or Preferred Stock indicates that the value to the Company of the
Preferred Stock should provide a minimum value for the convertible revolving
line of credit structure. Salomon Brothers analyzed the Preferred Stock using a
modified binomial option pricing model.
Salomon Brothers valued both the fixed income component of the Preferred
Stock as well as its option value (i.e., the holders' right to convert
Preferred Stock into Common Stock). In addition, Salomon Brothers used the
binomial model to value the Company's right to redeem the Preferred Stock. By
combining these values, Salomon Brothers estimated the value of the Preferred
Stock. Salomon Brothers made a number of assumptions in conducting this
analysis, including that the Company could successfully issue a straight
preferred security with a yield of between 11% and 12%.
On the basis of these assumptions and employing this methodology, Salomon
Brothers calculated a range of values for the Preferred Stock. The entire range
of such values was under par as of January 21, 1994, the date when Salomon
Brothers made its presentation to the Audit Committee of the Board, and as of
February 15, 1994 and June 27, 1994, the dates when Salomon Brothers delivered
its written opinions, and therefore, implied positive value at each of such
times from the Company's perspective. As of June 27, 1994, such values ranged
from 90% of par to 94% of par, and, therefore, implied a positive value,
ranging from 6% to 10%, from the Company's perspective. Because the value of
the Preferred Stock to the Company should provide a minimum value for the
Transaction from the Company's perspective, this implies that the minimum value
of the Transaction is positive from the Company's perspective.
The preparation of a fairness opinion is not susceptible to partial analysis
or summary descriptions. Salomon Brothers believes that its evaluations and
analyses must be considered as a whole and that selecting portions of its
evaluations and analyses and the factors considered by it, without considering
all evaluations, analyses and factors, would create an incomplete view of the
processes underlying the preparation of its opinion. Salomon Brothers did not
indicate that any of the evaluations or analyses which it performed, or factors
which it considered, had a greater significance than any other.
In performing its evaluations and analyses, and in considering such factors,
Salomon Brothers made numerous assumptions with respect to industry
performance, available financing, the Company's existing and future prospects,
the Company's working capital needs, general business and economic conditions
and other matters, many of which are beyond the control of the Company. The
evaluations were undertaken and the analyses were prepared solely as a part of
Salomon Brothers' analysis of the fairness, from a financial point of view, of
the Transaction to the stockholders generally (solely in their capacity as
such), exclusive of Cyprus and its affiliates.
As previously described, Salomon Brothers' opinion was one of many factors
taken into consideration by the Board of Directors of the Company and its Audit
Committee in making their determination to approve the Transaction. The opinion
of Salomon Brothers does not address the effect of any other transaction in
which the Company might engage.
The Company agreed to pay Salomon Brothers $150,000 for its investment
banking services in connection with rendering the opinion. The Company agreed
to reimburse Salomon Brothers for the reasonable fees and disbursements of
Salomon Brothers' counsel and Salomon Brothers' reasonable travel and other
out-of-pocket expenses incurred in connection with the Transaction or otherwise
arising out of Salomon Brothers' engagement. The Company also agreed to
indemnify Salomon Brothers and its officers, employees and agents for any
losses incurred in connection with its engagement. The Company paid Salomon
Brothers $150,000 in March 1994 and $10,000 in May 1994. The Company has not
paid any other fees or commissions to Salomon Brothers within the past two
years.
The Company has agreed with Salomon Brothers that, if prior to the
Transaction or within two years following its consummation, the Company or any
of its affiliates determines to sell in a public offering or a private
placement, any debt securities (other than senior bank debt) or equity
securities, the Company or
21
such affiliates would afford Salomon Brothers a reasonable opportunity to
compete to be retained as an underwriter (in the case of a public offering) or
as a placement agent (in the case of a private placement where a placement
agent is used) of such debt or equity securities. Any such sale of securities
would be pursuant to an underwriting agreement or placement agent agreement, as
the case may be, containing customary representations, warranties, covenants,
conditions and indemnities and providing for customary underwriting discounts
or placement fees, the exact amounts to be mutually agreed upon.
MATERIAL TERMS OF THE DOCLOC AGREEMENT
The following is a description of material terms of the DOCLOC Agreement,
which is attached as Appendix A to this Proxy Statement and incorporated herein
by reference. All Stockholders are urged to read the DOCLOC Agreement in its
entirety.
Revolving Loan
Under the DOCLOC Agreement, Cyprus will agree to make loans evidenced by the
Note to the Company from time to time until the Revolver Expiration Date in an
aggregate principal amount not to exceed $100 million at any time outstanding.
The Company may elect to repay the outstanding indebtedness under this line of
credit either by payment in cash or payment in shares of the Company's
Preferred Stock. Should the Company pay or prepay any principal amount in
Preferred Stock prior to the Revolver Expiration Date, the amount of the
Commitment will automatically be reduced by the amount of any Preferred Stock
so issued, based on the value of such Preferred Stock at the time of issuance.
Interest Rate
Each loan made by Cyprus to the Company bears interest at an annual rate
equal to the LIBOR Rate for the interest period selected by the Company at its
option (a period of one, three or six months or such other period as Cyprus and
the Company agree to) plus .30%, unless the Company fails to make any payment
to Cyprus of the principal of or interest on any loan when due, in which case
such loan shall accrue interest at a rate that is 1.0% per annum higher than
the above rate.
Security
Loans made by Cyprus to the Company under the DOCLOC Agreement are unsecured
and subordinated to the present and future senior indebtedness of the Company
and are effectively subordinated to all indebtedness and other liabilities of
subsidiaries of the Company.
Amortization of Principal and Payment
On the Revolver Expiration Date, all accrued interest must be paid and the
aggregate principal balance of all loans outstanding will become due and
payable in 20 equal quarterly installments on June 30, September 30, December
31 and March 31 of each of the following five years, with the first installment
due on June 30, 1997. The last installment, due March 31, 2002, will be in an
amount necessary to repay in full the unpaid principal amount of the loans. The
outstanding principal balance of the Note will bear interest as set forth
above.
Prepayments in Cash
The Company may make cash prepayments of principal in amounts equal to an
integral multiple of $1,000,000 without premium or penalty.
Payment with Preferred Stock
The Company may elect to repay or prepay the entire principal balance due
under the Note, plus any required amortization payment due and any required
interest due under the Note and/or increments of at least $5,000,000 of
principal of loans outstanding under the Note by issuing shares of Preferred
Stock to Cyprus. The amount of such Preferred Stock issued to Cyprus will be as
follows: (i) if payment is made to
22
repay the entire principal balance of the Note, such amount will be equal in
value to the outstanding principal amount of all loans outstanding at the time
of such payment, plus accrued interest thereon to the date of such payment;
(ii) if payment is for the required amortization payment due under the Note,
such amount will be equal in value to the amount of such required amortization
payment to be made plus accrued interest thereon to the date of such payment;
(iii) if payment is for the required interest payment, such amount will be
equal in value to the amount of such required interest payment; or (iv) if the
payment is prepayment of an increment of at least $5,000,000 of principal of
loans outstanding under the Note, such amount will be equal in value to the
incremental amount of such loans that AGI elects to repay, plus accrued
interest thereon to the date of such payment except that cash will be paid in
lieu of fractional shares of Preferred Stock. The number of shares of Preferred
Stock to be issued can be determined by dividing the amount of indebtedness
under the DOCLOC Agreement to be repaid with shares of Preferred Stock by
$50.00.
Payment of Dividends on Preferred Stock
Each share of Preferred Stock shall be entitled to receive dividends at a
rate of $2.25 per year, payable semi-annually on January 1 and July 1 of each
year. The Company may pay Preferred Stock dividends in shares of Common Stock
in lieu of cash with the consent of the holder of such shares of Preferred
Stock.
Restrictions on Transfer of Preferred Stock
The transfer of shares of Preferred Stock is subject to restrictions. If
Cyprus desires to sell, assign, transfer, pledge, encumber or otherwise dispose
of any shares of Preferred Stock held by it, Cyprus must deliver written notice
to AGI setting forth the identity of the prospective purchaser, the number of
shares of Preferred Stock proposed to be sold (the "Offered Shares"), the price
(the "Offer Price"), and other material terms of disposition. Such proposed
sale must be for cash only. AGI, upon receipt of such notice, has the right to
purchase all, but not less than all, of the Offered Shares at the Offer Price.
If AGI does not exercise this first refusal option, Cyprus may sell to the
prospective purchaser the Offered Shares at the Offer Price and on the terms
and provisions set forth in the notice to AGI.
Covenants
The DOCLOC Agreement requires the prior consent of Cyprus, which consent
cannot be unreasonably withheld, before AGI may enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution). The consent of Cyprus is not
required for a merger or consolidation of a subsidiary of AGI into AGI or a
merger or consolidation of AGI with another entity if AGI is the surviving
entity, and, after giving effect to the merger or consolidation, there is no
Event of Default. In addition, the DOCLOC Agreement prohibits AGI from
conveying, selling, leasing, transferring or otherwise disposing of all or
substantially all of its business or assets. Notwithstanding the foregoing, (i)
any subsidiary of AGI may be merged or consolidated with or into (A) AGI if AGI
shall be the continuing or surviving corporation or (B) any other AGI
subsidiary, (ii) any subsidiary of AGI may sell, lease, transfer or otherwise
dispose of any or all of its assets to AGI or to an AGI subsidiary, and (iii)
AGI, or any of its subsidiaries, may merge or consolidate with any other person
if (A) in the case of a merger or consolidation of AGI, AGI is the surviving
corporation and, in any other case, the surviving corporation is a subsidiary
of AGI, and (B) after giving effect thereto, no event of default would exist
under the DOCLOC Agreement, and there will be no material adverse impact on the
ability of AGI to perform any of its obligations under the DOCLOC Agreement or
the Note.
Events of Default
Events of Default occur under the DOCLOC Agreement in the event (i) of a
default for five days in the payment of principal or interest when due after
discovery by a senior officer of AGI, (ii) of a default for 30 days in the
performance or observance of any other term, covenant or condition in the
DOCLOC Agreement after discovery by a senior officer of AGI, (iii) any
representation or warranty made by AGI pursuant to the DOCLOC Agreement proves
to have been incorrect in any material respect when made and such incorrect
23
representation or warranty is not corrected within ten days after discovery by
a senior officer of AGI, or (iv) AGI admits in writing its inability to pay its
debt or makes a general assignment for the benefit of creditors, or any
proceeding is instituted by or against AGI or seeking to adjudicate AGI a
bankrupt or insolvent or seeking reorganization, adjustment, or composition of
it or its debts or seeking appointment of a receiver, trustee or other similar
official for it or for any substantial part of its property and, with respect
to any involuntary proceeding instituted against AGI, such proceeding is not
dismissed within 60 days. If an Event of Default occurs, Cyprus may, at its
option, terminate the Commitment or declare the principal and interest and any
other sums due under the DOCLOC Agreement immediately due and payable. Upon the
occurrence of an Event of Default pursuant to subparagraph (iv) above, the
Commitment will automatically be terminated and the Note, all principal and
interest and any other sums due under the DOCLOC Agreement will automatically
become due and payable.
Stock Purchase Option
Prior to the latter of the Revolver Expiration Date or the payment in full of
the Note and all other amounts due to Cyprus under the DOCLOC Agreement, Cyprus
has the option from time to time to purchase an amount not to exceed 12,099,213
shares of AGI's Common Stock at a purchase price per share of $8.265 (the
"Purchase Price"), subject to adjustment as described below. In connection with
the consummation of such purchase, a portion of the Commitment equal to the
product of the number of shares of Common Stock so purchased multiplied by the
Purchase Price will be terminated. The Purchase Price for the shares of AGI's
Common Stock to be purchased by Cyprus will be applied by Cyprus in the
following order:
(i) To all accrued interest and to such portion of the principal amount
of the outstanding balance under the Note. Amounts of principal paid
pursuant to this provision may not be reborrowed by AGI.
(ii) If the aggregate amount of the Purchase Price exceeds the amount in
(i) above, Cyprus will deliver to AGI the number of shares of Preferred
Stock previously issued to Cyprus pursuant to the DOCLOC Agreement, to the
extent such shares have not been converted into or redeemed for shares of
Common Stock. To the extent such shares have been converted into or
redeemed for shares of Common Stock and to the extent that any shares of
Common Stock have been issued in lieu of cash dividend payments on the
Preferred Stock, the amount of Common Stock to be purchased by Cyprus will
be reduced.
(iii) The amount of any excess of the aggregate Purchase Price over the
amounts applied in (i) and (ii) above will next be applied by Cyprus paying
to AGI by wire transfer an amount up to the remainder of the Commitment
less the amount of the outstanding principal balance of the Note.
Upon payment of the Purchase Price in the manner described above, AGI will
deliver to Cyprus a certificate for the number of shares of Common Stock
purchased and such portion of the Commitment as is equal to the product of the
number of shares of Common Stock so purchased multiplied by the Purchase Price
will be terminated.
Adjustment of Purchase Price and Number of Shares Purchasable
The Purchase Price and the number of shares of Common Stock purchasable upon
the exercise of Cyprus' Purchase Option will be subject to adjustment from time
to time for the payment of a dividend or distribution on Common Stock in shares
of Common Stock, the subdivision, combination or issuance by reclassification
of Common Stock or the issuance of rights, options or warrants to all holders
of outstanding shares of Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the current
market price per share.
Use of Proceeds
The proceeds of the DOCLOC Agreement will be used primarily to support AGI's
debt amortization requirements and other working capital needs for 1994 and
thereafter, prior to the Revolver Expiration Date, and will be allocated as
follows: (i) up to $36,000,000 to support AGI's guaranty given to NM Rothschild
&
24
Sons Limited and Citibank, N.A. in connection with the borrowing of AGI Chile
Credit Corp., Inc., a wholly-owned subsidiary of AGI, with respect to the
Guanaco Project, under the Term Loan Agreement, dated as of March 15, 1994;
(ii) up to $30,000,000 to support AGI's guaranty given to the Chase Manhattan
Bank (National Association) as Agent for the banks which are party to the
Bullion Loan Agreement, dated as of March 21, 1991, in support of borrowings
made by Lassen Gold Mining, Inc., a wholly-owned subsidiary of AGI operating
the Hayden Hill Project; and (iii) the remaining amount for working capital
purposes. If, on the date of any loan the average spot price of gold traded on
the Commodity Exchange Inc. in New York City for the 30 trading days
immediately preceding the date of such loan is less than $300 per ounce, the
purpose for such borrowing may not be for development of the Fort Knox Project
near Fairbanks, Alaska, and the Refugio Project in northern Chile and other
advanced stage projects or for the development or acquisition of any other
properties or the acquisition of securities or assets of any other company
unless a resolution duly adopted by at least two-thirds of the Board of AGI
authorizes the specific amount to be borrowed from Cyprus for such purpose as
in the best interest of the Stockholders. AGI Board approval is also required
for any loans in an aggregate principal amount outstanding in excess of
$5,000,000 borrowed for purposes other than as described in (i) and (ii) above.
Demand Registration Rights
Cyprus may make one or more written requests (a "Demand") for registration
under the Securities Act of 1933 of all or part (but not less than 1,000,000
shares per demand) of the shares of Common Stock issued to Cyprus pursuant to
the DOCLOC Agreement. If, at the time such Demand for registration is made,
Cyprus directly or indirectly owns less than 5% of the number of shares of
Common Stock outstanding, AGI may, if the Audit Committee of the Board
determines that it would be inadvisable to effect a demand registration, defer
such demand registration until the earliest practicable time at which such
demand registration can be reasonably effected. This period may not exceed
three months. All expenses of registration incurred in connection with the
first registration statement to be filed pursuant to Cyprus' demand
registration rights will be paid by AGI. All expenses of registration
associated with each additional registration statement to be filed, if any,
pursuant to Cyprus' demand registration rights will be paid by Cyprus.
Representations and Warranties
Under the DOCLOC Agreement, only AGI made representations and warranties. AGI
made representations and warranties to Cyprus concerning corporate existence,
corporate power and authority concerning the DOCLOC Agreement, government
approvals, enforceability, financial statements provided and litigation
matters. In addition, AGI warranted to Cyprus that the shares of Preferred
Stock and Common Stock, when issued pursuant to the DOCLOC Agreement, will be
validly issued, fully paid and nonassessable.
MATERIAL TERMS OF THE STOCK PURCHASE AGREEMENT
The following is a description of the material terms of the Stock Purchase
Agreement, which is attached as Appendix B to this Proxy Statement and
incorporated herein by reference. All Stockholders are urged to read the Stock
Purchase Agreement in its entirety.
The Stock Purchase Agreement provides for the purchase by Cyprus of 3,000,000
shares of Common Stock at a purchase price of $6.888 per share or $20,664,000.
The total purchase price will be immediately applied by AGI to reduce the
indebtedness of AGI to Cyprus under the AGI Note.
Representations and Warranties
Both AGI and Cyprus made representations and warranties to one another. AGI
made representations and warranties to Cyprus concerning corporate existence
and corporate power and authority. AGI also represented and warranted that the
3,000,000 shares of Common Stock, when delivered to Cyprus, will be validly
issued, fully paid and nonassessable. Cyprus made representations and
warranties to AGI that it is an accredited investor, is aware of the merits and
risks of the investment in Common Stock, and has had the opportunity to obtain
any information necessary for its evaluation of the merits and risks of the
investment.
25
Use of Proceeds
Pursuant to the Stock Purchase Agreement, AGI agrees to use the entire amount
of the net proceeds of the sale of 3,000,000 shares of Common Stock to repay
approximately $20.7 million of the approximately $26.0 million of outstanding
indebtedness (as of June 24, 1994) owed by AGI to Cyprus under the AGI Note.
Conditions
The obligations of the parties under the Stock Purchase Agreement are
conditioned on the execution and delivery of the DOCLOC Agreement, the truth
and correctness of the representations and warranties made by AGI and Cyprus
and the acceptance by the Exchange of a listing application for the 3,000,000
shares to be issued under the Stock Purchase Agreement.
Demand Registration Rights
Cyprus may make one or more written requests (a "Demand") for registration
under the Securities Act of 1933 of all or part (but not less than 1,000,000
shares per demand) of the shares of Common Stock issued to Cyprus. If, at the
time such Demand for registration is made, Cyprus directly or indirectly owns
less than 5% of the number of shares of Common Stock outstanding, AGI may, if
the Audit Committee of the Board determines that it would be inadvisable to
effect a demand registration, defer such demand registration until the earliest
practicable time at which such demand registration can be reasonably effected.
This period may not exceed three months. All expenses of registration incurred
in connection with the first registration statement to be filed pursuant to
Cyprus' demand registration rights will be paid by AGI. All expenses of
registration associated with each additional registration statement to be
filed, if any, pursuant to Cyprus' demand registration rights will be paid by
Cyprus.
MATERIAL TERMS OF THE $2.25 SERIES A CONVERTIBLE PREFERRED STOCK
The "$2.25 Series A Convertible Preferred Stock" will be designated as a new
series of preferred stock, consisting of 2,000,000 shares, which number may be
increased or decreased from time to time by the Board. The material terms and
provisions of the Preferred Stock are as set forth below.
Dividends
The holders of shares of Preferred Stock are entitled to receive dividends at
the annual rate of $2.25 per share, which is cumulative, accrues without
interest and is payable in cash in equal semi-annual installments. AGI may
elect to pay any dividend due and payable in shares of Common Stock in lieu of
a dividend in payment in cash, unless the holder of Preferred Stock delivers
written notice stating that such holder elects to receive cash.
Liquidation Preference
Upon the liquidation, dissolution or winding up of the Company, the holders
of shares of Preferred Stock are entitled to receive from the assets of the
Company an amount equal to the dividends accrued and unpaid thereon to the date
of final distribution to such holders, whether or not declared, without
interest, and a sum equal to $50.00 per share, and no more. Payment to the
holders of shares of Preferred Stock will be made before any payment is made or
any assets distributed to holders of Common Stock or any other class or series
of AGI's capital stock ranking junior as to liquidation rights to the Preferred
Stock.
Redemption at the Option of AGI
The Company, at its option, may at any time redeem the Preferred Stock, in
whole or from time to time in part, for that number of shares of Common Stock
obtained by dividing $50.00 by the lesser of (i) the Call Price (defined below)
and (ii) the Conversion Price (defined below), plus accrued and unpaid
dividends, whether or not declared or due, to the date fixed for redemption.
The maximum number of shares of Common
26
Stock that AGI may issue upon redemption and conversion of and the payment of
dividends on the Preferred Stock is 12,099,213 shares, subject to adjustment
due to any adjustment in the Conversion Price. In the case of the redemption of
Preferred Stock that would result in the issuance of more than 12,099,213
shares of Common Stock, the Company would pay an amount in cash in lieu of such
shares of Common Stock in excess of 12,099,213 shares equal to the lesser of
the Call Price or the Conversion Price multiplied by the number of shares in
excess of 12,099,213. Such cash payment will be made in 12 consecutive
substantially equal quarterly payments.
The "Call Price" with respect to a redemption of Preferred Stock is equal to
the greater of (i) $5.854 (subject to adjustment in connection with any
adjustment in the Conversion Price) and (ii) the average closing price per
share of Common Stock as calculated for the trading period ending on the fifth
trading day prior to the date the notice of redemption is mailed.
Conversion
The holder of any shares of Preferred Stock will have the right, at the
holder's option, to convert any or all shares of Preferred Stock held by such
holder into Common Stock at any time. Each share of Preferred Stock is
convertible into that number of shares of Common Stock obtained by dividing
$50.00 by the Conversion Price in effect at the time. The "Conversion Price" is
$8.265 and is subject to adjustment upon payment by the Company of a dividend
or the making by the Company of a distribution on Common Stock in shares of
Common Stock, upon the subdivision, combination or issuance by reclassification
of Common Stock, or upon the issuance of rights, options or warrants to
purchase shares of Common Stock at a price per share less than the current
price per share. The maximum number of shares of Common Stock that AGI may
issue upon redemption and conversion of and the payment of dividends on the
Preferred Stock is 12,099,213 shares, subject to adjustment due to any
adjustment in the Conversion Price. No fractional shares of Common Stock will
be issued upon conversion but, in lieu thereof, an appropriate amount will be
paid in cash. No adjustment will be made to the Conversion Price unless such
adjustment would require an increase or decrease of at least 1% of such price.
Voting Rights
The shares of Preferred Stock are not entitled to vote except as described
below or as required by law. Shares of Preferred Stock held by the Company or
any entity controlled by AGI do not have voting rights and are not counted in
determining the presence of a quorum. If dividends on the Preferred Stock are
in arrears in an amount equal to at least three semi-annual dividend payments,
the number of members of the Board will be increased by two and the holders of
Preferred Stock (voting separately as a class) will have the exclusive right to
vote for and elect the two additional directors of AGI during the period that
such dividends remain in arrears.
The affirmative vote or consent of the holders of at least 66 2/3 percent of
all outstanding shares of Preferred Stock is required for the Company to (i)
amend, alter or repeal any provision of the Restated Certificate of
Incorporation, as amended, or the Bylaws of the Company, as amended, so as to
affect adversely the relative rights, preferences, qualifications, limitations
or restrictions of the Preferred Stock, (ii) authorize or issue, or increase
the authorized amount of, any additional class or series of stock, or any
security convertible into stock of such class or series ranking prior to the
Preferred Stock in respect of the payment of dividends or upon liquidation,
dissolution or winding up of AGI or (iii) effect any reclassification of the
Preferred Stock.
No Preemptive Rights
The Preferred Stock does not have any preemptive or subscription rights in
respect of any securities of the Company.
27
PRO FORMA FINANCIAL INFORMATION
The following table sets forth the capitalization of AGI and its consolidated
subsidiaries at March 31, 1994, and as adjusted on a pro forma basis assuming:
(i) the DOCLOC Agreement is converted into 12,099,213 shares of Common Stock at
a purchase price of $8.265 per share, (ii) the proceeds from such conversion
are utilized to reduce $1 million of short-term borrowings and $65 million of
long-term borrowings, with the remaining proceeds providing additional working
capital, and (iii) the 3,000,000 shares of Common Stock are issued and the
proceeds used to repay approximately $20.7 million of the outstanding
indebtedness owed by AGI to Cyprus under a demand promissory note.
AT MARCH 31, 1994
------------------------------------------
ACTUAL AS ADJUSTED
------------------ --------------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Current maturities of long-term debt
and unearned revenue................. $ 16,700(1) $ 15,700
================== ==================
Long-term debt........................ $ 110,900(2) $ 45,900
------------------ ------------------
Note payable to Cyprus................ 25,400(3) 4,700
------------------ ------------------
Shareholder's equity:
Preferred stock, par value $1.00 per
share, authorized 10,000,000
shares, no shares issued and out-
standing........................... -- --
Common stock, par value $.01 per
share, authorized 200,000,000
shares, issued and outstanding
78,198,638 shares and, as adjusted
on a pro forma basis, 93,297,851
outstanding shares................. 800 1,000
Paid-in capital....................... 150,900 271,400
Retained earnings..................... 16,000 16,000
Common stock in treasury (1,991
shares).............................. -- --
------------------ ------------------
Total shareholder's equity............ 167,700 288,400
------------------ ------------------
Total capitalization.................. $304,000 $ 339,000
================== ==================
- --------
(1) Includes $11.1 million of currently scheduled amortization payments on the
Hayden Hill loan, $3.0 million of currently scheduled amortization on
Chilean debt for the Guanaco Mine, $1 million of currently scheduled
amortization payments on an AGI loan for the Guanaco Mine and $1.6 million
of currently scheduled amortization payments under the Sleeper gold loan
(representing 4,000 gold ounces).
(2) Includes $40.8 million under the Hayden Hill loan, $35.0 million under an
AGI loan for the Guanaco Mine, $4.7 million of Chilean debt, $30.4 million
of working capital gold loans (representing 86,863 gold ounces).
(3) On May 27, 1994 Cyprus extended the maturity of the AGI Note to December
31, 1995 and provided that any remaining intercompany indebtedness
(approximately $5.3 million as of June 24, 1997) would not be due and
payable any earlier than one year plus one day from the date any demand for
repayment is made, although AGI has the right to prepay all or part of the
AGI Note at any time without penalty or premium.
On a pro forma basis, assuming the outstanding borrowings had been reduced by
approximately $66.0 million through the application of proceeds from the
issuance of 12,099,213 shares of Common Stock and the issuance of 3,000,000
shares of Common Stock to repay approximately $20.7 million of outstanding
indebtedness owed by AGI to Cyprus as of January 1, 1994 and 1993, AGI's
interest expense, net loss and net loss per common share for the three months
ended March 31, 1994 and the year ended December 31, 1993 would have been $1.3
million and $4.7 million, respectively, ($4.9) million and ($100.9) million,
respectively, and ($.05) per share and ($1.30) per share, respectively,
compared to the actual results of $2.4 million and $8.5 million, respectively,
($5.8) million and ($104.2) million, respectively, and ($.07) and ($1.34) per
share, respectively.
28
CHANGE OF CONTROL OF THE COMPANY
On November 15, 1993, Amax, a New York corporation which owned approximately
68% of the outstanding Common Stock, was merged with and into Cyprus Minerals
Company, a Delaware corporation. The merged company was renamed Cyprus Amax
Minerals Company. Immediately prior to the Cyprus Amax Merger, Amax distributed
21.8 million shares (approximately 28%) of Common Stock (together with all of
the outstanding shares of common stock of Alumax Inc., a Delaware corporation
that controlled Amax's aluminum business) in a distribution to its
stockholders. As a result of the Cyprus Amax Merger, and after giving effect to
the prior stock distribution by Amax, Cyprus indirectly holds 31,319,709 shares
of Common Stock, which constitutes approximately 40.0% of the outstanding
shares Common Stock. In addition, following the Cyprus Amax Merger, Milton H.
Ward, Co-Chairman of the Board, President and Chief Executive Officer of
Cyprus, became Chairman of the Board, President and Chief Executive Officer of
AGI; Gerald J. Malys, Senior Vice President and Chief Financial Officer of
Cyprus, became a director of AGI; and, subsequently, Rockwell A. Schnabel, a
director of Cyprus, became a director of AGI. Allen Born, who became Co-
Chairman of the Board of Cyprus, remains a director of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of June 24, 1994, the following is, to the knowledge of the Company, the
only person (including any "group" as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934) who is the beneficial owner of more than
5% of the Company's Common Stock. The share and percentage ownership amounts
set forth below are before giving effect to the shares issuable under the
Proposal.
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------------------ -------------------- ----------------
Cyprus Amax Minerals Company
9100 East Mineral Circle 31,313,709 shares(1)
Englewood, Colorado 80112.............. Indirect 40.0%(1)
- --------
(1) After giving effect to the issuance of up to 15,099,213 shares of Common
Stock issuable to Cyprus pursuant to the Proposal, Cyprus will own
beneficially 46,412,922 shares or 49.7% of Common Stock.
29
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
As of June 24, 1994, the following table sets forth the amount of Common
Stock that are beneficially owned by each Director of the Company, each of the
executive officers, and all Directors and executive officers of the Company as
a group. The table does not segregate shares held from those beneficially owned
through ownership of options to purchase shares. A person is considered to
"beneficially own" any shares (i) over which such person exercises sole or
shared voting or investment power or (ii) of which such person has the right to
acquire beneficial ownership at any time within 60 days (e.g., through the
exercise of employee stock options). Unless otherwise indicated, each person
has sole voting and investment power with respect to the shares set opposite
his name.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ------------------------ ----------------------- ----------------
Allen Born........................... 10,138 *
Gerald J. Malys...................... 2,000 *
Rockwell A. Schnabel................. 10,000 *
Vernon F. Taylor, Jr................. 750 *
Milton H. Ward....................... 10,000 *
Russell L. Wood...................... 4,656(2) *
Richard B. Esser..................... 13,719(3) *
Paul J. Hemschoot, Jr................ 8,432(3) *
Roger A. Kauffman.................... 30 *
Mark A. Lettes....................... 18,750(3) *
Neil K. Muncaster.................... 19,020(3) *
All Directors and Executive Officers
as a group (13 persons)............. 153,890(1)(2)(3) *
- --------
* Less than 1%
(1) The total shares beneficially owned includes the following number of shares
purchasable upon the exercise of options on Common Stock exercisable in 60
days of May , 1994: Mr. Esser, 6,000 shares; Mr. Hemschoot, 6,000 shares;
Mr. Lettes, 18,000 shares; Mr. Muncaster, 15,000 shares; and all directors
and offices as a group, 101,000 shares.
(2) Includes shares held under the Directors Deferred Compensation Plan.
(3) The total shares shown include the following number of shares held
indirectly through the Company's Thrift Plan as of June 24, 1994; Mr.
Esser, 5,264 shares; Mr. Hemschoot, 2,269 shares; Mr. Lettes, 450 shares;
Mr. Muncaster, 3,020 shares; and all directors and executive officers as a
group, 11,428 shares.
DESCRIPTION OF CAPITAL STOCK OF AGI
The following description of the material terms of the capital stock of AGI
does not purport to be complete and is qualified in its entirety by reference
to the Company's Restated Certificate of Incorporation incorporated herein by
reference and to the Certificate of Designations--$2.25 Series A Convertible
Preferred Stock which is attached as Appendix D to this Proxy Statement and
incorporated herein by reference. All Stockholders are urged to read the
Certificate of Designations--$2.25 Series A Convertible Preferred Stock in its
entirety. See "AVAILABLE INFORMATION" and "THE PROPOSAL--Terms of $2.25 Series
A Convertible Preferred Stock."
The Company's Restated Certificate of Incorporation currently authorizes the
issuance of 200,000,000 shares of Common Stock, par value $.01 per share, and
10,000,000 shares of preferred stock, par value $1 per share, issuable in
series. The Board is authorized to approve the issuance of one or more series
of preferred stock without further authorization of the Stockholders of AGI and
to fix the number of shares, the designations, the relative rights and the
limitations of any such series.
30
No shares of preferred stock are currently outstanding, but AGI has reserved
for issuance 2,000,000 shares of $2.25 Series A Convertible Preferred Stock,
liquidation preference $50 and par value $1.00 per share, issuable by AGI in
repayment of outstanding indebtedness under the DOCLOC Agreement.
COMMON STOCK
The holders of Common Stock 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 AGI do not have
voting rights and are not counted in determining the presence of a quorum. The
holders of Common Stock do not have any conversion, redemption or preemptive
rights. In the event of the dissolution, liquidation or winding up of AGI,
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 AGI's indebtedness, and the aggregate liquidation preference of any
preferred stock (including any Preferred Stock) then outstanding.
The holders of Common Stock are entitled to receive dividends when and as
declared by the Board out of funds legally available therefor, provided that if
any shares of Preferred Stock are at the time outstanding, the payment of
dividends on Common Stock or other distributions (including purchases of Common
Stock) may be subject to the declaration and payment of full cumulative
dividends on outstanding shares of Preferred Stock.
All outstanding shares of Common Stock are, and the shares of Preferred Stock
and shares of Common Stock offered upon conversion of the Preferred Stock upon
issuance will be, fully paid and nonassessable.
The transfer agent for the Common Stock is Chemical Bank, 450 West 33rd
Street, New York, New York 10001.
PREFERRED STOCK
The shares of Preferred Stock are not entitled to vote except as described
below or as required by law. Shares of Preferred Stock held by the Company or
any entity controlled by AGI do not have voting rights and are not counted in
determining the presence of a quorum. If dividends on the Preferred Stock are
in arrears in an amount equal to at least six quarterly dividends, the number
of members of the Board will be increased by two and the holders of Preferred
Stock (voting separately as a class) will have the exclusive right to vote for
and elect the two additional directors of AGI during the period that such
dividends remain in arrears.
The holder of any shares of Preferred Stock will have the right, at the
holder's option, to convert any or all shares of Preferred Stock into Common
Stock at any time. Each share of Preferred Stock is convertible into that
number of shares of Common Stock obtained by dividing $50 by the Conversion
Price in effect at the time. The "Conversion Price" is $8.265 and is subject to
adjustment. The Preferred Stock does not have any preemptive or subscription
rights in respect of any securities of the Company. The Company, at its option,
may at any time redeem the Preferred Stock, in whole or from time to time in
part. The maximum number of shares of Common Stock that AGI may issue upon
redemption of the Preferred Stock is 12,099,213 shares, subject to adjustment
due to any adjustment in the Conversion Price. In the case of the redemption of
Preferred Stock that would result in the issuance of more than 12,099,213
shares of Common Stock, the Company will pay an amount in cash in lieu of such
shares of Common Stock in excess of 12,099,213 shares equal to the lesser of
the Call Price or the Conversion Price multiplied by the number of shares in
excess of 12,099,213. Such cash payment will be made in 12 consecutive
substantially equal quarterly payments.
The holders of shares of Preferred Stock are entitled to receive dividends at
the annual rate of $2.25 per share, which is cumulative, accrues without
interest and is payable in cash in equal semi-annual installments. Upon the
liquidation, dissolution or winding up of the Company, the holders of shares of
Preferred Stock are
31
entitled to receive from the assets of the Company an amount equal to the
dividends accrued and unpaid thereon to the date of final distribution to such
holders, whether or not declared, without interest, and a sum equal to $50.00
per share, and no more.
Warrants
The Company issued warrants to purchase 4,066,649 shares of Common Stock in
connection with the acquisition of its Fort Knox property (the "Warrants").
Each of the Warrants permits the holder to purchase one share of Common Stock
at a price of $21.00 per share, subject to adjustment upon the occurrence of
certain events described below. The Warrants are currently exercisable and will
expire at 5:00 p.m., New York City time, on January 8, 1996. The Warrant
holders are not protected against dilution of their interests in AGI if AGI
should issue additional shares of Common Stock (other than by way of stock
dividends, stock splits, reclassifications, mergers and other similar events
described in the Warrant Agreement) or preferred stock in the future. No
preemptive rights exist in respect of the Warrants. No commissions are to be
paid to broker-dealers upon the exercise of the Warrants, although AGI may
agree in the future to pay such commissions. Shares of Common Stock will be
issued upon surrender of the Warrants and payment of the exercise price in
accordance with the terms of the Warrant Agreement.
The Warrants are transferable, subject, in the case of certain stockholders
who formerly held securities of the joint venturers which owned the Fort Knox
property, to certain agreements entered into between AGI and such stockholders.
The Warrants are currently listed on the Toronto Stock Exchange and the
American Stock Exchange. The shares of Common Stock issuable upon exercise of
the Warrants have been listed on the New York Stock Exchange, subject to
notification of issuance. Unless exercised within the time provided for
exercise, the Warrants will automatically expire. There is no minimum number of
shares of Common Stock which must be purchased upon exercise of the Warrants.
The maximum number of shares of Common Stock which can be purchased upon
exercise of the Warrants is 4,066,649 shares.
The holders of the Warrants in certain instances are protected against
dilution of their interests represented by the underlying shares of Common
Stock upon the issuance to holders of Common Stock of stock dividends or other
distributions of capital stock of the Company without payment of consideration,
upon the issuance of rights or warrants exercisable for Common Stock at a price
per share which is less than the current fair market value per share, or upon
the occurrence of stock splits, reclassifications, mergers and other similar
events described in the Warrant Agreement. If such events were to occur, the
exercise price and number of shares of Common Stock issuable upon exercise of
each Warrant would be adjusted in accordance with the provisions of the Warrant
Agreement.
The holders of the Warrants have no voting power and are not entitled to
dividends. In the event of a liquidation, dissolution, or winding up of the
Company, the Warrant holders will not be entitled to participate in the
distribution of the Company's assets.
PROPOSALS FOR 1995 ANNUAL MEETING
The Company anticipates that the 1995 Annual Meeting of Stockholders will be
held on or about May 4, 1995. The exact date, time and place for such meeting
has yet to be determined. A stockholder who intends to present a proposal at
that Annual Meeting must submit the written text of the proposal so that it is
received by the Company at its principal executive offices no later than
December 14, 1994, in order for the proposal to be considered for inclusion in
the Company's Proxy Statement for that meeting.
32
APPENDIX-A
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement, dated as of April 15, 1994 ("Agreement"), by
and between Amax Gold Inc., a Delaware corporation (the "Borrower"), and Cyprus
Amax Minerals Company, a Delaware corporation (the "Lender");
WITNESSETH:
WHEREAS, the parties previously have entered into that certain letter
agreement dated February 11, 1994 as extended by a letter agreement dated March
7, 1994 (the "Commitment Letter") providing for, among other things, agreed
upon share purchase prices and the preparation of definitive documents to
implement the terms thereof;
WHEREAS, this Revolving Credit Agreement is one of the definitive documents
contemplated in the Commitment Letter;
WHEREAS, on the date of this Agreement the Lender indirectly owns 31,313,709
shares of the Borrower's common stock, par value $0.01 per share ("Common
Stock"), which constitutes approximately 40% of the Borrower's outstanding
Common Stock;
WHEREAS, the Borrower needs financial support from the Lender to refinance
certain of the Borrower's short term debt, to make required amortization
payments on its Guanaco and Hayden Hill financings and to provide working
capital, and the Lender is willing to provide to the Borrower up to
$100,000,000 of financing for such needs, on the terms of this Agreement;
WHEREAS, the Borrower owns interests in several promising gold prospects,
including 100% of the Fort Knox Project near Fairbanks, Alaska, and 50% of the
Refugio Project in northern Chile, as well as certain other advanced stage
projects (collectively the "Projects"), each of which is expected to require
substantial additional development capital;
WHEREAS, the Borrower is developing one or more of its Projects and is
otherwise taking steps to increase its cash flow from operations to enable the
Borrower to fund its ongoing working capital requirements and required
development capital from operating cash flow or establish third party sources
of financing without reliance on guarantees or other financial support from the
Lender;
WHEREAS, each party has determined (in the Borrower's case, after consulting
with an independent investment banking firm) that it is in the best interest of
such party's stockholders (in the case of the Borrower, including but not
limited to, the Lender) that such financing from the Lender be provided on the
terms and conditions set forth in this Agreement;
WHEREAS, the Borrower and the Lender each have had the transactions
contemplated by this Agreement approved by its Board of Directors (and the
Borrower having had such transactions approved separately by the Audit
Committee of the Borrower's Board of Directors, which consists solely of those
Directors who are unaffiliated with the Lender), and having received a fairness
opinion from an independent investment bank, establishing that the transactions
contemplated herein are, on the whole, in the best interest of the Borrower and
the Lender respectively;
NOW THEREFORE, the parties hereby agree to the following terms and
conditions:
A-1
ARTICLE I
AMOUNTS AND TERMS OF THE LOAN
SECTION 1.01 Revolving Credit Commitment. Subject to the terms and conditions
hereof, the Lender agrees to make one or more loans (individually a "Loan" and
collectively the "Loans") to the Borrower from time to time during the period
that commences on the date hereof and ends on the earlier of (i) April 30, 1997
or (ii) the date on which the Commitment is terminated pursuant to this
Agreement inclusive (the expiration date determined by (i) or (ii) is herein
called the "Revolver Expiration Date"), in an aggregate principal amount up to
but not exceeding at any one time outstanding the sum of $100,000,000 (the
"Commitment"). During such period the Borrower may use the Commitment by
borrowing, paying and prepaying in whole or in any part and reborrowing, on a
revolving basis, all in accordance with the terms and conditions hereof. To the
extent that the Borrower pays (including any prepayment) any principal amount
of Loans in Preferred Stock pursuant to and as defined in Section 1.08 hereof
prior to the Revolver Expiration Date, the amount of the Commitment shall
automatically be reduced by the amount of any Preferred Stock so issued, based
upon the value of such Preferred Stock at the time of issuance as determined in
accordance with Section 1.08. Each borrowing and cash prepayment of principal,
if any, shall be in an amount equal to an integral multiple of $1,000,000.00.
Notwithstanding the foregoing, the Commitment shall terminate if the conditions
for making the initial Loan under Section 2.01 shall not have been satisfied on
or prior to January 4, 1995, unless extended by the parties.
SECTION 1.02 Making the Loans. The Borrower shall give the Lender notice of
each borrowing hereunder not later than 11:00 a.m. Denver, Colorado, time at
least two (2) Business Days prior to the date a Loan is requested to be made,
specifying the inception date, the amount thereof and the initial Interest
Period for such Loan. The Lender will arrange the loan and confirm the details
in writing to the Borrower. On the inception date of the borrowing, the Lender
will make the proceeds of the Loan available to the Borrower in immediately
available funds at the Borrower's account with Chemical Bank, New York, or as
the Borrower may otherwise direct in such notice.
The Loans to the Borrower shall be evidenced by a grid Note of the Borrower
substantially in the form of Exhibit A hereto (the "Note"). The Note will
evidence the obligation of the Borrower to pay the aggregate unpaid principal
amount of all Loans made by the Lender pursuant to Section 1.01 of this
Agreement, together with all accrued interest on such Loans. Entries made on
the grid schedules of the Note by the Lender reflecting borrowings, payments
and interest rate calculations under this Agreement shall constitute, absent
proven error, prima facie evidence of the transactions represented by such
entries. The Note shall (i) be dated the date of the initial Loan hereunder,
(ii) be payable in accordance with its terms and the terms of this Agreement
and (iii) evidence the obligation of the Borrower to pay interest on each Loan
made hereunder from the date of such Loan on the unpaid principal amount
thereof outstanding from time to time, calculated in accordance with the
provisions of Section 1.03 and the outstanding principal amount of such Loan in
accordance with Section 1.06 or Section 1.08 of this Agreement pursuant to the
repayment notice given by the Borrower under the applicable section of this
Agreement. Except for the payment referenced in Section 1.08 hereof, the
Borrower shall make each payment (including any cash prepayment) hereunder and
under the Note, not later than the close of business of the day when due by
wire transfer, in lawful money of the United States of America to the Lender,
at its address referred to in Section 7.02 or as otherwise directed by the
Lender, in immediately available funds.
SECTION 1.03 Payment of Interest. Each Loan made by the Lender pursuant to
this Agreement shall bear interest on the principal balance thereof from time
to time unpaid at an annual rate equal to the LIBOR Rate (as defined herein)
for the interest period selected by the Borrower at its option for a period of
one, three or six months, or such other periods as are agreed between the
Borrower and the Lender (each, an "Interest Period"), and as set forth in the
notice of borrowing referred to in Section 1.02 hereof or the notice of
Interest Period selection referred to in Section 1.05 hereof, as the case may
be, plus 0.30% except as otherwise provided in this Section. Interest on each
Loan shall be due and payable in full on the last day of
A-2
the Interest Period applicable to such Loan and, in the case of any Interest
Period in excess of three months, at the end of each calendar quarter occurring
during the term thereof. The term "LIBOR Rate" shall mean the rate of interest
per annum at which U.S. dollar deposits, in an amount equal to the aggregate
principal balance of the Loan are offered (as reasonably determined by the
Lender) at or about 11:00 a.m. Denver time on the date that is two Business
Days immediately prior to the beginning of such Interest Period in the London
Interbank Eurodollar Market for delivery on the first day of such Interest
Period for approximately the number of days contained therein (as appearing on
page "LIBOR" on the Reuters Monitor Money Rates Service or such other page as
may replace the LIBOR page on that service for the purpose of displaying London
Interbank Offered Rates for dollar deposits of major banks); provided, however,
that if at least two such offered rates appear on the LIBOR page in respect of
such Interest Period, the arithmetic mean of all such rates (as determined by
the Lender and rounded upwards to the nearest 1/16th of 1%) will be the rate
used; and provided further that if Reuters Monitor Money Rates Service ceases
to provide LIBOR quotations, such rate shall be the average rate of interest
(as determined by the Lender) and rounded upwards to the nearest 1/16th of 1%)
at which U.S. dollar deposits are offered for the relevant Interest Period by
three of the leading banks selected by the Lender in the London interbank
market as of 11:00 a.m. Denver time on the date which is two (2) Business Days
prior to the first day of such Interest Period, or as reasonably determined by
the Lender by reference to the LIBOR rate for an equivalent interest period in
the most recent edition of the Wall Street Journal under the section headed
"Money Rates", or otherwise as the Lender and the Borrower may mutually agree.
If the Borrower fails to make any payment to the Lender of the principal of or
interest on any Loan when such payment becomes due, such Loan shall accrue
interest at a rate that is 1.0% per annum higher than the rate otherwise
payable with respect to such Loan and such higher rate shall continue until
such default in payment by the Borrower is cured. All computations of interest
under the Note shall be made by the Lender on the basis of a year of 360 days,
consisting of twelve 30-day months, for the actual number of days (including
the first day but excluding the last day) elapsed.
SECTION 1.04 Prepayments in Cash. On any interest payment date, or as
otherwise agreed by the Lender, the Borrower may make cash prepayments of
principal (which, unless the commitment is earlier terminated pursuant to
Section 6.02, may be reborrowed on or prior to the Revolver Expiration Date but
not thereafter) of one or more Loans (which Loans shall be designated by the
Borrower) in an amount equal to an integral multiple of $1,000,000, and shall
be made without premium or penalty, but together with interest accrued, if any,
on the amount of each prepaid Loan (at the interest rate applicable to such
Loan) to the date of prepayment and shall be applied to the Loans in the
inverse order of maturity. The Borrower shall give Lender at least two Business
Days notice of any such prepayment. All such cash payments shall be made by
wire transfer in immediately available funds to an account designated by the
Lender.
SECTION 1.05 Interest Period Selection. The Borrower shall have the option to
select a new Interest Period for each Loan, which period shall take effect at
the end of the then current Interest Period with respect to such Loan. The
Borrower shall give the Lender notice of such Interest Period selection
pursuant to this Section 1.05 not later than 11:00 a.m. Denver, Colorado, time
at least two (2) Business Days prior to the last day of the applicable Interest
Period, specifying the new Interest Period for such Loan. If the Borrower does
not deliver such notice of Interest Period selection to the Lender as set forth
herein, the Interest Period for such Loan shall be the same number of months as
the immediately preceding Interest Period for such Loan. The selection of a
subsequent Interest Period shall not be deemed to constitute a reborrowing or a
new Loan for purposes of this Agreement.
SECTION 1.06 Amortization of Principal. On the Revolver Expiration Date all
accrued interest shall be paid and the aggregate principal balance of all Loans
outstanding shall become due and payable in twenty equal quarterly installments
on March 31, June 30, September 30, and December 31 of each of the following
five years with the first installment due on June 30, 1997; provided, however,
that the last such installment shall be in the amount necessary to repay in
full the unpaid principal amount thereof. The outstanding principal balance of
the Note shall bear interest in accordance with Section 1.03 until the Note is
paid in full. Accrued interest on the Note shall be added to and paid with each
such quarterly amortization payment.
A-3
SECTION 1.07 Payment on Non-Business Days. Whenever any payment to be made
hereunder or under the Note shall be stated to be due on a date which is a
Saturday, Sunday or a public holiday or the equivalent for Lender or for banks
generally under the laws of the State of Colorado (any other day being a
"Business Day"), such payment may be made on the next succeeding Business Day
and such extension of time shall in such case be included in the computation of
interest due.
SECTION 1.08 Payment in Preferred Stock. At the Borrower's election, which
may be exercised by its giving written notice to the Lender at least 20
Business Days prior to the date such repayment or prepayment of the Note or a
required amortization payment due under the Note is to be made, the Borrower
may (i) repay the entire principal balance of the Note, (ii) pay the required
amortization payment due under the Note, (iii) upon the Lender's prior consent
given not later than two Business Days prior to the payment date, pay the
required interest payment due under the Note, and/or (iv) prepay increments of
at least $5,000,000 of principal of Loans outstanding under the Note (which
Loans shall be designated by the Borrower), in each case by issuing to the
Lender the Borrower's $2.25 Series A Convertible Preferred Stock, par value
$1.00 per share (the "Preferred Stock"), which shall have the powers,
preferences and relative participating, optional or other special rights and
qualifications, limitations or restrictions thereof as are set forth in Exhibit
B to this Agreement and otherwise as the Board of Directors of the Borrower may
determine (consistent with the provisions of such Exhibit B) by resolution or
resolutions adopted by the Board of Directors of the Borrower providing for the
issue of such Preferred Stock. The amount of such Preferred Stock issued to the
Lender shall (w) in the event the payment is to be made pursuant to clause (i)
above, be equal in value to the outstanding principal amount of all Loans
outstanding at the time of such payment, plus accrued interest thereon to the
date of such payment; (x) in the event the payment is to be made pursuant to
clause (ii) above, be equal in value to the amount of such required
amortization payment to be made plus accrued interest thereon to the date of
such payment; (y) in the event the payment is to be made pursuant to clause
(iii) above, be equal in value to the amount of such required interest payment
to be made on the date of such payment; or (z) in the event the payment is to
be made pursuant to clause (iv) above, be equal in value to the incremental
amount of such Loans that the Borrower elects to prepay, plus accrued interest
thereon to the date of such payment, in each case as specified in the notice
given to the Lender pursuant to this Section 1.08, except that no fractional
shares of Preferred Stock shall be issued. In lieu of a fraction of a share of
Preferred Stock, the Borrower shall pay the Lender in cash an amount equivalent
to such fraction of a share. The value of the Preferred Stock shall be
determined by multiplying the number of shares of Preferred Stock to be issued
to the Lender by $50.00 per share. The number of shares of Preferred Stock to
be issued to the Lender pursuant to this Section 1.08 (which shall not exceed
the number authorized in the Borrower's Restated Certificate of Incorporation,
as amended) will be determined by the Borrower based on the amount of the Loans
to be repaid or prepaid with such Preferred Stock, subject to adjustment for
arithmetic errors.
SECTION 1.09 Regulatory Approvals. As a condition precedent to issuing any
Preferred Stock to the Lender pursuant to Section 1.08 hereof, the Borrower
shall have obtained all authorizations and approvals of, and all other actions
required to be taken by, any applicable governmental authority or regulatory
body or stock exchange and shall have given all notices to, and made all
filings with, any such governmental authority or regulatory body or stock
exchange, that may be required in connection with such issuance of such
Preferred Stock.
SECTION 1.10 Failure to Obtain Regulatory Approvals. In the event the
Borrower is unable to obtain all authorizations and approvals required for the
issuance of any Preferred Stock pursuant to Section 1.09 hereof, such failure
shall not constitute a default but the written notice given by the Borrower to
the Lender with respect to making such repayment or prepayment by issuing
Preferred Stock shall be null and void, without prejudice to the rights of the
Borrower to exercise its option under Section 1.08 on any other occasion. If
the Preferred Stock was to be issued to pay an interest payment or required
amortization due under the Note, such payment shall be made by the Borrower in
immediately available funds on the date such payment is due in accordance with
Section 1.03 or 1.06 of this Agreement, as the case may be, and the Note.
A-4
SECTION 1.11 Restrictions on Transfer of Preferred Stock.
(i) Notice of Intended Dispositions. Except for dispositions pursuant to
this Section 1.11, if at any time the Lender desires to sell, assign,
transfer, pledge, encumber or otherwise dispose of any shares of Preferred
Stock held by it, then the Lender shall deliver written notice (a
"Disposition Notice") to the Borrower under Section 7.02, of its intention
to sell, setting forth the Lender's desire to make such sale, the identity
of the prospective purchaser, the number of shares of Preferred Stock
proposed to be sold (the "Offered Shares") the price ("Offer Price") at
which the Lender proposes to dispose of the Offered Shares and the other
material terms of such disposition. Such proposed sale, transfer, etc.,
shall be for cash only.
(ii) Borrower's First Refusal Option. Upon the receipt of the Disposition
Notice, the Borrower shall then have the right to purchase at the Offer
Price all, but not less than all, of the Offered Shares. In order to
exercise its first refusal option, the Borrower must give written notice (a
"First Refusal Exercise Notice") under Section 7.02, of such exercise to
the Lender, not more than 45 calendar days from the date of its receipt of
the Disposition Notice. In the event that the Borrower exercises its first
refusal option with respect to the Offered Shares, then the Lender shall
sell to the Borrower and the Borrower shall purchase the Offered Shares
within 30 calendar days after the date of receipt by the Lender of the
First Refusal Exercise Notice. Upon the consummation of any purchase by the
Borrower of Offered Shares, the Lender shall deliver certificates
evidencing the Offered Shares sold duly endorsed, or accompanied by written
instruments of transfer, free and clear of any liens and encumbrances,
against delivery of the Offer Price. From and after the time at which cash
necessary to pay the Offer Price for shares of Preferred Stock pursuant to
the exercise of the first refusal option irrevocably shall have been
deposited or set aside, then, notwithstanding that the certificates
representing the Offered Shares shall not have been surrendered, all rights
(other than the right to receive payment of the Offer Price with respect to
such shares of Preferred Stock) of the Lender with respect to the shares of
Preferred Stock for which tender has been made, including without
limitation all conversion, voting and dividend rights, permanently shall
cease and terminate, except only the right to receive payment for such
shares of Preferred Stock, and the Lender shall no longer be considered the
owner of such shares of Preferred Stock.
(iii) Permitted Dispositions. If the Disposition Notice has been duly
given and the Borrower shall not have timely given the First Refusal Notice
to exercise its first refusal option, then the Lender shall have the right,
for a period of 30 calendar days after expiration of the 45 day period
referred to in the second sentence of subsection (ii) of this Section 1.11,
to sell to the prospective purchaser referred to in such notice the Offered
Shares at no less than the Offer Price and on the other terms and
provisions set forth in the Disposition Notice.
ARTICLE II
CONDITIONS OF LENDING
SECTION 2.01 Conditions Precedent to Making the Initial Loan. The obligation
of the Lender to make the initial Loan is subject to the following conditions
precedent:
(a) The Lender shall have received on or before the day the initial Loan
is made all of the following, in form and substance reasonably satisfactory
to the Lender:
(i) The Note duly executed by the Borrower;
(ii) Copies of the borrowing resolutions of the Board of Directors of
the Borrower authorizing the execution and delivery of this Agreement
and the Note as well as the Borrower's performance of all of the
covenants, obligations and other undertakings of the Borrower
contemplated by this Agreement and the Note, (including the specific
authorization of the Preferred Stock to be issued pursuant to Section
1.08 of this Agreement on the terms of Exhibit B to this Agreement) and
of all documents evidencing other necessary corporate action and
governmental approvals, if any, with
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respect to this Agreement and the Note, certified by the Secretary or
an Assistant Secretary of the Borrower;
(iii) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of
the Borrower authorized to sign this Agreement and the Note and any
other documents to be delivered hereunder;
(iv) A favorable opinion of counsel of the Borrower, as to matters
referred to in Section 3.01 (except subsection (e) thereof) of this
Agreement;
(v) A Notice of Borrowing under Section 1.02; and
(vi) Evidence reasonably satisfactory to the Lender that the New York
Stock Exchange shall have accepted a listing application for the Common
Stock to be issued pursuant to this Agreement or upon conversion of the
Preferred Stock and if so required as a condition to listing, that the
majority of the shareholders of the Borrower have approved the issuance
of such Common Stock.
(b) On the date of such Loan the following statements shall be true:
(i) The representations and warranties of the Borrower contained in
Section 3.01 are true and correct in all material respects and the
covenants of the Borrower made in Article IV hereof shall be deemed to
have been made on and as of the date of such Loan (or of a subsequent
Loan for the purposes of Section 2.02);
(ii) No event has occurred and is continuing, or would result from
such Loan (or from a subsequent Loan for the purposes of Section 2.02),
which constitutes an Event of Default (as defined in Article V) or
would constitute an Event of Default but for the requirement that
notice be given or time elapse or both; and
(c) The Borrower shall deliver to the Lender a certificate of the
Borrower's Chief Financial Officer stating the purpose of the borrowing,
which shall be consistent with Section 7.05 and the other terms and
conditions of this Agreement and, if required by Section 7.05, resolutions
of the Borrower's Board of Directors, which resolutions shall be certified
to Lender by the Secretary or an Assistant Secretary of the Borrower.
SECTION 2.02 Conditions Precedent to Subsequent Loans. The obligation of the
Lender to make each subsequent Loan is subject to the conditions precedent that
(i) on the date of any such subsequent Loan the statements made in Section
2.01(b)(i) and (ii) shall be true; and (ii) the condition set forth in Section
2.01(c), shall be satisfied with respect to such subsequent Loan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite corporate power to execute, deliver and perform its obligations
under this Agreement and the Note.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Note have been, or in the case of the issuance of Common
Stock will be on or prior to the date of issuance, duly authorized by all
necessary corporate action (including authorization of the Board of
Directors of the Borrower to issue the Preferred Stock in the event the
Borrower elects to pay or prepay in Preferred Stock pursuant to Section
1.08 of this Agreement and to issue the Common Stock required to be issued
upon conversion of the Preferred Stock or pursuant to Articles of this
Agreement) and do not (and the issuance of such Preferred Stock on the
terms of Exhibit B or, in the case of the Common Stock, such Common Stock
will not at the time the same is to be issued):
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(i) violate any provision of the Restated Certificate of
Incorporation, as amended, or By-Laws of the Borrower or any law,
order, writ, judgment, decree, determination or award, in each case as
presently in effect and having applicability to the Borrower; or
(ii) result in a breach of or constitute a default under any material
indenture, bank loan agreement, credit agreement, bullion loan or other
material agreement to which the Borrower is a party or by which any of
its properties or the properties of any of its Subsidiaries, are
presently bound. As used in this Agreement, the term "Subsidiary" shall
mean, as to the Borrower, any corporation of which at least a majority
of the outstanding shares of stock, having by the terms thereof
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether or not at the time stock of
any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), is at the
time directly or indirectly owned or controlled by the Borrower or one
of more of its Subsidiaries.
(c) No authorization or approval of, or other action by, and no notice to
or filing with, any governmental authority or regulatory body, other than
the Securities and Exchange Commission ("SEC"), is required for the due
execution, delivery and performance by the Borrower of this Agreement
(except for such notices, any necessary shareholder approvals,
registrations, stock exchange listings or filings as may be required in
connection with issuing the Preferred Stock and the Common Stock) or the
Note.
(d) This Agreement is, and the Note when executed and delivered will be,
legal, valid and binding obligations of the Borrower enforceable against it
in accordance with their respective terms (subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles).
(e) The consolidated statements of financial position of the Borrower and
its consolidated Subsidiaries as at December 31, 1993, and the related
consolidated statements of operations, cash flows and changes in Common
Stock, paid-in capital and retained earnings of the Borrower and such
Subsidiaries for the period then ended (copies of which have been furnished
to the Lender) fairly present the financial condition of the Borrower and
such Subsidiaries as at such date and the results of the operations of the
Borrower and its Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles.
(f) Except as disclosed in the Borrower's most recent Annual Report on
Form 10-K filed with the SEC for the fiscal year then ended, the most
recent Quarterly Reports on Form 10-Q, or as otherwise disclosed in writing
to the Lender, there is not to the actual knowledge of the executive
officers of the Borrower any pending or threatened action or proceeding
against or affecting the Borrower before any court, governmental agency or
arbitrator that reasonably could be expected to materially and adversely
affect the ability of the Borrower to perform its obligations under the
Agreement or the Note.
(g) The Preferred Stock and the Common Stock, when issued in accordance
with the terms of this Agreement (and any Common Stock when issued on
conversion of or pursuant to the terms of the Preferred Stock), will be
validly issued, fully paid and nonassessable.
ARTICLE IV
COVENANTS OF THE BORROWER
SECTION 4.01 Payment of Principal, Premium and Interest. The Borrower duly
and punctually will pay or cause to be paid the principal of and interest on
the Loans evidenced by the Note according to the terms thereof.
SECTION 4.02 Reports, etc. The Borrower will furnish to the Lender the
following reports, information and documents:
(i) within 15 days after the Borrower is required to file the same with
the SEC, copies of the annual reports on Form 10-K, proxy statements,
quarterly reports on Form 10-Q, and of such reports, notices,
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documents and other information (or copies of such portions of any of the
foregoing as the SEC may from time to time by rules and regulations
prescribe) that the Borrower may be required to file with the SEC pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended, or with the principal securities exchange (or successor thereto)
in the United States on which securities of the Borrower are listed and,
upon distribution thereof, a copy of each report, proxy statement, notice,
document or other information sent by the Borrower to all of its
stockholders; and
(ii) promptly upon demand, such other information respecting the
financial condition, operations and properties of the Borrower and its
consolidated Subsidiaries as the Lender reasonably may request; provided
that the Lender shall maintain the confidentiality thereof in the same
manner as the Lender maintains the confidentiality of its own information
of like nature.
SECTION 4.03 Inspection. So long as the Lender is obligated to make Loans
under this Agreement or so long as the Note is outstanding, the Borrower will
permit the Lender or any of its authorized representatives, at the Lender's
expense, to inspect at all reasonable times all properties, books and records
of the Borrower or any of its consolidated Subsidiaries reasonably related to
the overall financial and business condition of the Borrower and its
consolidated Subsidiaries or to the observance and performance by the Borrower
of its obligations hereunder and under the Note, and to discuss the business
and affairs of the Borrower and its consolidated Subsidiaries with its officers
and independent accountants (and by this provision the Borrower authorizes said
accountants to discuss with the Lender or such authorized representatives, the
finances and affairs of the Borrower and its consolidated Subsidiaries), all as
often as reasonably may be requested, subject to appropriate obligations of
confidentiality.
SECTION 4.04 Payment of Taxes. The Borrower will pay and discharge, or cause
to be paid and discharged, all taxes, assessments and governmental charges
levied on it or against any of its properties or assets prior to the date on
which penalties are attached thereto, unless and to the extent only that the
same shall be contested in good faith and by appropriate proceedings by the
Borrower, or except to the extent that the failure to so pay or to so discharge
would not have a material adverse effect on the ability of the Borrower to
perform its obligations under this Agreement or the Note.
SECTION 4.05 Officers' Certificate. The Borrower will deliver a certificate
to the Lender on or before April 30 in each year (beginning with 1995), signed
by the Chairman of the Board or the President, the Chief Financial Officer, any
Senior Vice President or any Vice President (the foregoing being hereafter
referred to as "Senior Officers") and by the Secretary or any Assistant
Secretary of the Borrower, stating that in the course of the performance by the
signers of their duties as officers of the Borrower they normally would have
knowledge of any condition or event that constitutes or which, after the giving
of notice or lapse of time or both, would constitute, an Event of Default under
this Agreement or under the Note, stating whether or not they have knowledge of
any such condition or event and, if so, specifying each such condition or event
of which the signers have knowledge and the nature thereof, and the steps taken
by the Borrower to correct the same.
SECTION 4.06 Compliance With Laws. The Borrower shall comply, in all material
respects, with all applicable laws, rules, regulations and orders, except where
the failure would not have a material adverse effect on the Borrower's ability
to perform under this Agreement and the Note.
SECTION 4.07 Mergers and Consolidations. Without the Lender's prior consent
which will not be unreasonably withheld, the Borrower will not enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution). The Borrower
will not convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or substantially all of its
business or assets. Notwithstanding the foregoing provisions of this Section
4.07:
(a) Any Subsidiary of the Borrower may be merged or consolidated with or
into (x) the Borrower if the Borrower shall be the continuing or surviving
corporation, or (y) any such other Subsidiary;
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(b) Any Subsidiary of the Borrower may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or to a Subsidiary of the Borrower; and
(c) The Borrower or any of its Subsidiaries may merge or consolidate with
any other Person if (x) in the case of a merger or consolidation of the
Borrower, the Borrower is the surviving corporation and, in any other case,
the surviving corporation is a Subsidiary of the Borrower, and (y) after
giving effect thereto, no Event of Default would exist hereunder, and there
will be no material adverse impact on the ability of the Borrower to
perform any of its obligations hereunder or under the Note in accordance
with the respective terms thereof.
SECTION 4.08 Listing Approval. The Borrower promptly shall use all reasonable
efforts to obtain the acceptance of the New York Stock Exchange of a listing
application for the Common Stock to be issued pursuant to the terms of this
Agreement and, if so required as a condition to such listing, to obtain the
approval of a majority of its shareholders for the issuance for such Common
Stock.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01 Events of Default. If any of the following events (each, an
"Event of Default") shall occur and be continuing:
(a) The Borrower shall (i) fail to pay the principal of or any interest
on the Note when due, or (ii) fail to perform or observe any other term,
covenant or condition contained in this Agreement or in the Note on its
part to be performed or observed and any such failure shall remain
unremedied for five (5) Business Days in the case of clause (i) and thirty
(30) days in the case of clause (ii) after the same is discovered by any
Senior Officer of the Borrower; or
(b) Any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) in any certificate or other document
delivered pursuant to this Agreement shall prove to have been incorrect in
any material respect when made and such incorrect representation or
warranty shall not have been corrected within ten (10) days after the same
is discovered by any Senior Officer of the Borrower; or
(c) The Borrower shall admit in writing its inability to pay its debts,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Borrower or seeking to
adjudicate it a bankrupt or insolvent or seeking reorganization,
arrangement, adjustment, or composition of it or its debts under the law of
any jurisdiction relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property and,
with respect to any involuntary proceeding instituted against the Borrower,
such proceeding shall not be dismissed within sixty (60) days;
then, and in any such event, the Lender, by notice to the Borrower, may take
either or both of the following actions: (i) terminate the Commitment,
whereupon the same shall terminate forthwith; or (ii) declare the principal
balance outstanding under the Note and all interest accrued and unpaid thereon,
and all other sums due hereunder, to be due and payable without presentment,
demand, protest, or further notice of any kind, all of which are hereby
expressly waived by the Borrower; provided, however, that upon the occurrence
of an Event of Default specified in subparagraph (c) above, (x) the Commitment
automatically shall be terminated and (y) the Note, all such principal and
interest and all such other sums due hereunder automatically shall become and
be due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Borrower.
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ARTICLE VI
LENDER'S STOCK PURCHASE OPTION
SECTION 6.01 Description of Lender's Option. At any time after the acceptance
by the New York Stock Exchange of a listing application for the issuance of the
shares of Common Stock described herein, and prior to the later of (i) the
Revolver Expiration Date or (ii) payment in full of the Note and all other
amounts, if any, due to the Lender under this Agreement, the Lender shall have
the option from time to time (the "Lender's Purchase Option") to purchase an
amount not to exceed 12,099,213 shares of the Borrower's Common Stock at a
purchase price per share (the "Purchase Price") of $8.265, subject to
adjustment in accordance with Section 6.03 hereof, and, in connection with the
consummation of such purchase (the "Closing"), to terminate such portion of the
Commitment as is equal to the product of (i) the number of shares so purchased
multiplied by (ii) the Purchase Price (as adjusted under Section 6.03);
provided if less than 12,099,213 shares are purchased (taking into account all
shares previously purchased under this provision), the number of shares shall
be an integral multiple of one million shares. The Lender may exercise any
Lender's Purchase Option under this Article VI by giving written notice to the
Borrower, if at all, at least 20 Business Days prior to the date stated in such
notice for the Closing of such stock purchase. If there are no amounts
outstanding under the Note at the time such notice is given, the Lender shall
give such notice to the Borrower at least 20 Business Days prior to the
Revolver Expiration Date. Such notice shall state the Lender's decision to
exercise its option hereunder and the date for Closing of such stock purchase.
Upon receipt of such notice, the Borrower and the Lender shall select a time
and place for the Closing and if the Borrower and the Lender are unable to
agree, the Closing shall take place at the Borrower's offices at 9:00 a.m.,
local time, on the date specified for Closing in the Lender's notice.
SECTION 6.02 Transactions at Closing. At the Closing, the Purchase Price for
the shares of the Borrower's Common Stock to be purchased by the Lender shall
be paid and applied by the Lender in the following order:
(i) First, to all accrued interest to the date of Closing and then to
such portion of and such portion of the principal amount of the outstanding
balance under the Note in stated order of maturity, as is determined by (y)
the product of (i) the number of shares so purchased multiplied by (ii) the
Purchase Price (as adjusted under Section 6.03); less (z) the amount of
accrued interest to the date of Closing; (which amount shall be deemed
repaid by the Borrower, irrespective of whether such amounts are then due
and payable, by the issuance of a credit against the Purchase Price payable
by the Lender for such Common Stock and the Lender shall deliver a receipt
to the Borrower for the amount of such payment). Amounts of principal paid
pursuant hereto may not be reborrowed.
(ii) Secondly, in the event the aggregate amount of the Purchase Price
shall exceed the amount in Section 6.02(i), the Lender shall deliver to the
Borrower the number of shares of Preferred Stock previously issued to the
Lender pursuant to Section 1.08, to the extent that such shares have not
been converted into or redeemed for shares of the Borrower's Common Stock
pursuant to the terms of such Preferred Stock as are equal in value to the
aggregate Purchase Price in excess of the amount applied in clause 6.02 (i)
above. To the extent that shares of Preferred Stock have been converted
into or redeemed for shares of the Borrower's Common Stock and to the
extent that any shares of Common Stock have been issued in lieu of cash
dividend payments on the Preferred Stock, the amount of Common Stock to be
purchased by the Lender pursuant to this Article VI first shall be reduced
by an amount equal to the number of such shares of Common Stock which have
been issued by the Borrower (x) on conversion or redemption of such shares
of Preferred Stock, or (y) in lieu of cash dividend payments on Preferred
Stock.
(iii) Thirdly, the amount of the excess of the aggregate Purchase Price
over the amounts applied in Section 6.02 (i) and (ii) above, if any, shall
next be applied by the Lender paying to the Borrower by wire transfer,
certified or official bank check payable in United States currency in
immediately available funds, to the account of the Borrower, or as the
Borrower shall direct by written notice given at least
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two Business Days prior to Closing, an amount up to the remainder of the
Commitment less the amount of the outstanding principal balance of the
Note.
Upon payment of the Purchase Price in the manner described above, the
Borrower shall deliver to the Lender a Certificate for the number of shares of
the Borrower's Common Stock purchased at Closing, together with a legal opinion
from the Borrower's General Counsel, or such other counsel as the Borrower may
choose, which other counsel shall be reasonably acceptable to the Lender, to
the effect that such shares of Common Stock purchased by the Lender have been
duly authorized, validly issued, and are fully paid and non-assessable. Upon
delivery of the certificate for the Common Stock and the legal opinion
described herein, such portion of the Commitment as is equal to the product
described in Section 6.01 above, shall terminate.
SECTION 6.03 Adjustment of Purchase Price and Number of Shares
Purchasable. The Purchase Price and the number of shares of Common Stock
purchasable upon the exercise of any Lender's Purchase Option shall be subject
to adjustment from time to time by the Borrower as follows:
(i) In case the Borrower shall (A) pay a dividend or make a distribution
on its Common Stock in shares of Common Stock (other than pursuant to a
dividend reinvestment or similar plan), (B) subdivide its outstanding
shares of Common Stock into a greater number of shares, (C) combine its
outstanding shares of Common Stock into a smaller number of shares, or (D)
issue by reclassification of its Common Stock any shares of capital stock
of the Borrower, then in each such case the number of shares of Common
Stock purchasable upon the exercise of the Lender's Purchase Option
immediately prior thereto shall be adjusted so that the Lender shall be
entitled to receive the kind and number of shares of Common Stock or other
securities of the Borrower which the Lender would have owned or have been
entitled to receive immediately following such action had such shares of
Common Stock been purchased immediately prior to the occurrence of such
event. An adjustment made pursuant to this subsection (i) shall become
effective immediately after the record date, in the case of a dividend or
distribution, or immediately after the effective date, in the case of a
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this subsection (i), the Lender shall become
entitled to receive shares of two or more classes of capital stock or
shares of Common Stock and other capital stock of the Borrower, the Audit
Committee of the Board of Directors of the Borrower (whose reasonable
determination shall be conclusive except for arithmetic errors and shall be
described in a statement filed by the Borrower with the Lender) shall
determine the equitable allocation of the adjusted Purchase Price between
or among shares of such classes of capital stock or shares of Common Stock
and other capital stock.
(ii) In case the Borrower shall issue rights, options or warrants to all
holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less
than the current market price per share (as determined pursuant to
subsection (iv) of this Section 6.03) of the Common Stock (other than
pursuant to any stock option, restricted stock or other incentive or
benefit plan or stock ownership or purchase plan for the benefit of
employees, directors or officers or any dividend reinvestment plan of the
Borrower in effect at the time hereof or any other similar plan adopted or
implemented hereafter), to the extent that the same have not expired by
their terms prior to the exercise of the Lender's Purchase Option, then the
number of shares of Common Stock thereafter purchasable upon the exercise
of the Lender's Purchase Option shall be determined by multiplying the
number of shares of Common Stock theretofore purchasable upon exercise of
the Lender's Purchase Option immediately prior to the date of issuance of
such rights, options or warrants by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding on the date of issuance
of such rights, options or warrants (immediately prior to such issuance)
plus the number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall be the number
of shares of Common Stock outstanding on the date of issuance of such
rights, options or warrants (immediately prior to such issuance) plus the
number of shares which the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at such current market
price. Such adjustment successively shall be made whenever any such rights,
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options or warrants are issued, and immediately shall become effective on
the date of issuance retroactive to the record date for the determination
of stockholders entitled to receive such rights, options or warrants;
provided, however, in the event that all the shares of Common Stock offered
for subscription or purchase are not delivered upon the exercise of such
rights, options or warrants, upon the expiration of such rights, options or
warrants the Purchase Price shall be readjusted to the Purchase Price that
would have been in effect had the numerator and the denominator of the
foregoing fraction and the resulting adjustment been made based upon the
number of shares of Common Stock actually delivered upon the exercise of
such rights, options or warrants rather than upon the number of shares of
Common Stock offered for subscription or purchase. In no event, however,
shall there be any adjustment made with respect any shares previously
issued pursuant to the exercise of the Lender's Purchase Option. In
determining whether any rights, options or warrants entitle the holders to
subscribe for or purchase shares of Common Stock at less than such current
market price and in determining the aggregate offering price of such shares
of Common Stock, there shall be taken into account any consideration
received by the Borrower for such rights, options or warrants. The value of
such consideration, if other than cash, shall be determined by the Audit
Committee of the Borrower's Board of Directors (whose reasonable
determination shall be conclusive, except for arithmetic errors, and shall
be described in a statement filed by the Borrower with the Lender).
(iii) In case the Borrower shall, by dividend or otherwise, distribute to
all holders of its outstanding Common Stock, evidences of its indebtedness
or assets (including securities and cash, but excluding any cash dividend
of the Borrower paid out of retained earnings and dividends or
distributions payable in stock pursuant to a dividend reinvestment or
similar plan or for which adjustment is made pursuant to subsection (i) of
this Section 6.03) or rights, options or warrants to subscribe for or
purchase securities of the Borrower (excluding those referred to in
subsection (ii) of this Section 6.03), then in each such case the number of
shares of Common Stock thereafter purchasable upon the exercise of the
Lender's Purchase Option shall be determined by multiplying the number of
shares of Common Stock theretofore purchasable upon the exercise of the
Lender's Purchase Option by a fraction of which the numerator shall be the
current market price per share of the Common Stock as determined pursuant
to subsection (iv) of this Section 6.03, and of which the denominator shall
be such current market price per share of Common Stock less the fair market
value on such record date (as determined by the Audit Committee of its
Board of Directors of the Borrower, whose reasonable determination shall be
conclusive except for arithmetic errors and shall be described in a
statement filed by the Borrower with the Lender) of the portion of the
capital stock or assets or the evidences of indebtedness or assets so
distributed to the holder of one share of Common Stock or of such
subscription rights, options or warrants applicable to one share of Common
Stock. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(iv) For the purpose of any computation under subsections (ii) and (iii)
of this Section 6.03, the current market price per share of Common Stock on
any date shall be deemed to be the average of the "Closing Price", as
defined below, for the shorter of (A) 30 consecutive trading days ending on
the last full trading day prior to the Time of Determination or (B) the
period commencing on the date next succeeding the first public announcement
of the issuance of such rights, options or warrants or such distribution
through such last full trading day prior to the Time of Determination. The
term "Closing Price" for any day in question shall be the last reported
sale price regular way or, in case no such reported sales take place on
such day, the average of the closing bid and asked prices regular way for
such day, in each case on the New York Stock Exchange Composite Tape or, if
not listed on the New York Stock Exchange, on the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if not listed or admitted to trading on a national
securities exchange, the last sale price regular way for the Common Stock
as published by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), or if such last sale price is not so published
by NASDAQ or if no such sale takes place on such day, the average between
the closing bid and asked prices for the Common Stock as published by
NASDAQ. The term "trading day" shall mean a day on which the market used
for calculating the Closing Price is open for the transaction of business
or, if the
A-12
shares of such securities are not so listed or admitted to trading, a
business day. The term "Time of Determination" shall mean the time and date
of the earlier of (I) the record date for determining stockholders entitled
to receive the rights, options, warrants or distributions referred to in
Section 6.03 (ii) and (iii) or (II) the commencement of "ex-dividend"
trading on the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading or, if not listed or
admitted to trading on a national securities exchange, the NASDAQ.
(v) In any case in which this Section 6.03 shall require that an
adjustment be made immediately following a record date or an effective
date, the Borrower may elect to defer (but only until the delivery by the
Borrower of the notice required by subsection (viii) of this Section 6.03)
issuing to the Lender the shares of Common Stock issuable upon exercise of
the Lender's Purchase Option over and above the shares of Common Stock
issuable upon exercise of the Lender's Purchase Option on the basis of the
number of shares of Common Stock purchasable upon exercise of the Lender's
Purchase Option prior to adjustment, and paying to the Lender any amount of
cash in lieu of a fractional share.
(vi) Whenever the number of shares of Common Stock purchasable upon the
exercise of the Lender's Purchase Option is adjusted as herein provided,
the Purchase Price payable upon exercise of the Lender's Purchase Option
shall be adjusted by multiplying such Purchase Price immediately prior to
such adjustment by a fraction, of which the numerator shall be the number
of shares of Common Stock purchasable upon the exercise of the Lender's
Purchase Option immediately prior to such adjustment, and of which the
denominator shall be the number of shares of Common Stock so purchasable
immediately thereafter.
(vii) No adjustment in the number of shares of Common Stock purchasable
upon exercise of the Lender's Purchase Option shall be required to be made
unless such adjustment would require an increase or decrease of at least
1.0% of the number of shares of Common Stock purchasable upon exercise of
the Lender's Purchase Option; provided, however, that any adjustments which
by reason of this subsection (vii) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 6.03 shall be made to the nearest cent or
to the nearest 1/100th of a share, as the case may be. Anything in this
Section 6.03 to the contrary notwithstanding, the Borrower shall be
entitled to make such reduction in the Purchase Price, in addition to the
adjustments required by this Section 6.03, as it in its discretion shall
determine to be advisable in order that any stock dividend, subdivision of
shares, distribution of rights to purchase stock or securities, or
distribution of securities convertible into or exchangeable for stock
hereafter made by the Borrower to its stockholders shall not be taxable to
the recipients. Except as set forth in subsections (i), (ii) and (iii)
above, the Purchase Price shall not be adjusted for any such event
including, without limitation, the issuance of Common Stock, or any
securities convertible into or exchangeable for Common Stock or carrying
the right to purchase any of the foregoing, in exchange for cash, property
or services.
(viii) Whenever the Purchase Price is adjusted as herein provided, the
Borrower shall promptly deliver or mail, or cause to be delivered or mailed
by first class mail, postage prepaid, as soon as practicable to the Lender
a notice under Section 7.02 setting forth the Purchase Price and number of
shares of Common Stock purchasable upon the exercise of the Lender's
Purchase Option after such adjustment and a brief statement of the facts
requiring such adjustment and the manner of computing the same, which
certificate shall be conclusive evidence of the correctness of such
adjustment.
(ix) In the event that at any time, as a result of an adjustment made
pursuant to subsection (i) of this Section 6.03, the Lender shall become
entitled to receive any shares of the Borrower other than shares of Common
Stock, thereafter the Purchase Price of such other shares that the Lender
shall be entitled to purchase shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to Common Stock contained in this Section.
(x) The Borrower from time to time may decrease the Purchase Price by any
amount for any period of time if the period is at least 20 days and if the
decrease is irrevocable during the period. Whenever the Purchase Price is
so decreased, the Borrower shall deliver or mail to the Lender a notice of
the decrease
A-13
at least 15 days before the date the decreased Purchase Price takes effect,
and such notice shall state the decreased Purchase Price and the period it
will be in effect.
Notwithstanding the foregoing provisions of this Section 6.03, no such
adjustments shall be made if the adjustment effectively duplicates the effect
of an adjustment made in connection with Section (5)(d) of the Certificate of
Designation relating to the Convertible Preferred Stock.
SECTION 6.04 Reservation of Shares of Common Stock. The Borrower covenants
that it will, at all times prior to the expiration of the Lender's Purchase
Option, reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued shares of Common Stock for the purpose
of enabling it to satisfy any obligation to issue shares of Common Stock upon
the exercise of the Lender's Purchase Option, the full number of shares of
Common Stock deliverable upon the exercise of the Lender's Purchase Option not
theretofore purchased and on or before (and as a condition of) taking any
action that would cause an adjustment of the Purchase Price resulting in an
increase in the number of shares of Common Stock deliverable upon the exercise
of the Lender's Purchase Option above the number thereof previously reserved
and available therefor, the Borrower shall take all such action so required.
Before taking any action that would cause an adjustment reducing the Purchase
Price below the then par value (if any) of the shares of Common Stock
deliverable upon exercise of the Lender's Purchase Option, the Borrower shall
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Borrower may validly and legally issue fully paid
and non-assessable shares of Common Stock at such adjusted Purchase Price.
SECTION 6.05 Transfer Taxes, Etc. The Borrower shall pay any and all
documentary stamp, issue or transfer taxes, and any other similar taxes payable
in respect of the issue or delivery of shares of Common Stock upon exercise of
the Lender's Purchase Option; provided, however, that the Borrower shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of shares of Common Stock in a name other than that of
the Lender and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Borrower the amount of
any such tax or has established, to the satisfaction of the Borrower, that such
tax has been paid.
SECTION 6.06 Consolidation or Merger or Sale of Assets. Notwithstanding any
other provision herein to the contrary, in case of any consolidation or merger,
sale or transfer to which the Borrower is a party and which is permitted under
Section 4.07 above or otherwise upon the Lender's prior written consent (which
shall not be unreasonably withheld) and pursuant to which there is a change in
the Common Stock of the Borrower, then lawful provision, in a manner and on
terms reasonably satisfactory to counsel for the Lender, shall be made by the
corporation formed by such consolidation or the corporation whose securities,
cash or other property will immediately after the merger or consolidation be
owned, by virtue of the merger or consolidation, by the holders of Common Stock
immediately prior to the merger or consolidation, or the corporation which
shall have acquired such assets or securities of the Borrower (collectively the
"Formed, Surviving or Acquiring Corporation"), as the case may be, providing
that the Lender shall have the right thereafter upon payment of the Purchase
Price in effect immediately prior to such action to purchase upon exercise of
the Lender's Purchase Option the kind and amount of securities, cash or other
property that the Lender would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale, lease or transfer had
the Lender's Purchase Option been exercised immediately prior to such action
(provided that, if the kind or amount of securities, cash or other property
that the Lender would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, lease or transfer is not the
same for each share of Common Stock in respect of which such rights of election
shall not have been exercised ("non-electing share"), then for the purposes of
this Section 6.06 the kind and amount of securities, cash or other property
which the Lender would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, lease or transfer for each
nonelecting share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). The Formed,
A-14
Surviving or Acquiring Corporation, as the case may be, shall make provision in
a manner and on terms reasonably satisfactory to counsel for the Lender, in its
certificate or articles of incorporation or other constituent documents to the
end that the provisions set forth in this Section 6.06 shall thereafter
correspondingly be made applicable, as nearly as may reasonably be, in relation
to any shares of stock or other securities or property thereafter deliverable
upon exercise of the Lender's Purchase Option.
The above provisions of this Section 6.06 shall similarly apply to successive
consolidations, mergers, sales, leases or transfers.
SECTION 6.07 Transfer Restrictions.
(a) Legends on Common Stock.
(i) Until the third anniversary of the date of original issuance of the
shares of Common Stock, certificates representing the shares of Common
Stock purchased by the Lender upon exercise of the Lender's Purchase Option
and not otherwise registered pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Securities
Act") shall bear a legend substantially to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY SIMILAR
STATE SECURITIES LAWS AND THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION, UNDER SAID ACT AND LAWS.
The shares of Common Stock purchased by the Lender upon exercise of the
Lender's Purchase Option and not otherwise registered pursuant to an effective
registration statement under the Securities Act shall be subject to the
restrictions on transfer set forth in the legends referred to above until the
third anniversary of the date of original issuance of such shares of Common
Stock; provided, however, and notwithstanding the foregoing, such shares of
Common Stock may be resold under and pursuant to the terms and conditions of
Regulation S of the Securities Act, prior to the end of the third anniversary
date of the issuance of such shares.
(ii) The certificates evidencing shares of Common Stock purchased by the
Lender upon exercise of the Lender's Purchase Option and not otherwise
registered pursuant to an effective registration statement under the
Securities Act shall bear, until such time as the Borrower and the transfer
agent for the Common Stock shall have received evidence satisfactory to
each of them that the transfer of such shares of Common Stock has been
effected in accordance with the limitations on transfer set forth in
paragraph (a)(i) above, the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES, OPINIONS OF COUNSEL AND
OTHER INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
(b) Transfer Agent Requirements. The transfer agent and registrar for the
Common Stock shall not be required to accept for registration of transfer any
Common Stock bearing the legend contained in paragraph (a)(ii) above, except
upon presentation of satisfactory evidence that the restrictions on transfer of
the Common Stock referred to in the legend in paragraph (a)(i) have been
complied with, all in accordance with such reasonable regulations and
procedures as the Borrower may from time to time agree with the transfer agent
and registrar for the Common Stock.
A-15
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Amendments, Etc. No amendment or waiver of any provision of this
Agreement or the Note, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender and the Borrower, in the case of an amendment, or by the party to
be charged, in the case of a waiver or a consent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 7.02 Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and delivered to an officer of the other party or
mailed or transmitted by facsimile; if to the Lender to its address at 9100
East Mineral Circle, Englewood, Colorado 80112-3299, Attention: Chief Financial
Officer (Fax No. 303-643-5269); if to the Borrower, to its address at 9100 East
Mineral Circle, Englewood, Colorado 80112-3299, Attention: Chief Financial
Officer (Fax No. 303-643-5505) or, as to each party, to such other address as
shall be designated by such party in a written notice to the other party. All
such notices and communications shall, when delivered to an officer of the
other party, be effective upon such delivery and, when mailed or transmitted by
facsimile, be effective when deposited in the mails or when transmitted
respectively, addressed as aforesaid; except that notices by the Borrower to
the Lender or by the Lender to the Borrower pursuant to the provisions of
Section 1.05 shall not be effective until received by the Lender or the
Borrower, as the case may be, but such notices may be given by telephone and
confirmed in writing or by facsimile on the same day and shall be effective
upon such telephonic notice.
SECTION 7.03 No Waiver; Remedies. No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder or under the Note,
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder or under the Note preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 7.04 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the Borrower and the Lender and their respective successors
and assigns, except that (i) the Borrower shall not have the right, to assign
its rights hereunder or any interest herein except to a successor by merger,
consolidation or sale of all or substantially all of the Borrower's assets, in
each case if permitted under Section 4.07 above, without the prior written
consent of the Lender, and (ii) the Lender shall not assign any of its rights
or obligations hereunder or under the Note, except to a successor by merger,
consolidation or sale of substantially all of the Lender's assets without the
prior written consent of the Borrower.
SECTION 7.05 Use of Proceeds. The proceeds of the Loans shall be used by the
Borrower primarily for support of existing borrowings and working capital
needs. Specifically, (i) an amount equal to the aggregate amount of the
obligations outstanding under the credit facility referred to in this clause
(i) is designated solely for the repayment of obligations of the Borrower under
that certain Continuing Corporate Guarantee of the Borrower given to NM
Rothschild & Sons Limited and Citibank N.A. in support of borrowing by the
wholly owned subsidiary of the Borrower, AGI Chile Credit Corp., Inc., under
that certain Term Loan Agreement dated as of March 15, 1994; provided, however,
that such amount shall not exceed $36,000,000; (ii) an amount equal to the
aggregate amount of the obligations outstanding under the credit facility
referred to in this clause (ii) is designated solely for the repayment of
obligations of the Borrower under that certain Guarantee and Pledge Agreement
dated as of March 21, 1991 given to The Chase Manhattan Bank (National
Association) as Agent for the Banks which are party to that certain Bullion
Loan Agreement dated as of March 21, 1991, as amended (the "Loan Agreement") in
support of borrowings by the wholly owned subsidiary of the Borrower, Lassen
Gold Mining Inc. under the Loan Agreement; provided, however, that such amount
shall not exceed $30,000,000; and (iii) all proceeds of the Loans, if any,
remaining after giving effect to clauses (i) and (ii) of this Section 7.05
shall be used for the Borrower's general working capital requirements and for
any other purposes approved by the Borrower's Board of Directors or, within the
limits prescribed by the
A-16
Board of Directors, by management of the Borrower, including but not limited to
general corporate purposes, working capital, capital expenditures for
development of the Projects or for the development or acquisition of other
properties and the acquisition of all or part of the capital stock or assets of
other companies; provided, however, that if on the date of any Loan the average
spot price of gold traded on the Commodity Exchange Inc. (COMEX) in New York
City for the thirty trading days immediately preceding the date of such Loan is
less than $300.00 per ounce, the purpose of such borrowing shall not be for
development of any of the Projects or for the development or acquisition of any
other properties or the acquisition of securities or assets of any other
company unless a resolution duly adopted by at lease two-thirds of the
Borrower's Board of Directors authorizes the specific amount to be borrowed
from the Lender for such purpose as in the best interest of the Borrower's
stockholders. If any Loans in an aggregate principal amount outstanding in
excess of $5,000,000.00, or such higher amount as may be approved from time to
time by its Board of Directors and certified to the Lender, are borrowed for
purposes other than as described in clause (i) or (ii), the Borrower shall, as
an additional condition precedent to the Lender's making of such Loans, be
required to obtain approval of its Board of Directors for such Loans and to
certify such resolutions to the Lender pursuant to Section 2.01 (c) of this
Agreement.
SECTION 7.06 Demand Registration Rights. (i) At any time after the earlier to
occur of (i) the conversion of the Preferred Stock into shares of Common Stock
or (ii) the exercise of the Lender's Purchase Option, the Lender may make one
or more written requests to the Borrower (a "Demand") for registration under
and in accordance with the provisions of the Securities Act of all or part (but
not less than 1,000,000 shares per Demand) of the shares of Common Stock issued
to the Lender pursuant to Section 1.08 or Section 6.01 of this Agreement
("Registrable Shares"). Each such request shall specify the aggregate number of
Registrable Shares proposed to be registered and the intended method of
disposition thereof.
(ii) Upon receipt of a Demand, the Borrower shall use its best efforts to
effect such registration to permit the sale of Registrable Shares in accordance
with the intended method of disposition thereof and pursuant thereto, the
Borrower shall as expeditiously as possible:
(a) execute and deliver all such instruments and documents and do or
cause to be done all such other acts and things as may be necessary or, in
the opinion of the Lender, advisable to register such Registrable Shares
under the provisions of the Securities Act, and to cause the registration
statement relating thereto to become effective and to remain effective for
such period as prospectuses are required by law to be furnished, and to
make all amendments and supplements thereto and to the related prospectus
which, in the opinion of the Lender, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the SEC applicable thereto;
(b) use its best efforts to qualify the Registrable Shares under the
applicable state securities or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Registrable Shares, as requested
by the Lender;
(c) make available to the Lender, as soon as practicable, an earnings
statement that will satisfy the provisions of Section 11(a) of the
Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Registrable Shares or any part thereof
valid and binding and in compliance with applicable law.
(iii) If any such Demand is made at a time when the Lender directly or
indirectly owns less than five percent 5% of the number of shares of Common
Stock outstanding, the Borrower may, if its Audit Committee of its Board of
Directors determines in the good faith exercise of its reasonable judgment that
it would be inadvisable to effect a demand registration, defer such demand
registration until the earliest practicable time at which such demand
registration can be reasonably effected, which period shall not exceed three
(3) months.
(iv) All Registration Expenses incurred in connection with the first
registration statement to be filed hereunder or under that certain Stock
Purchase Agreement between the Lender and the Borrower of even date herewith
(the "Stock Agreement") shall be paid by the Borrower. All Registration
Expenses incurred in
A-17
connection with each additional registration statement to be filed hereunder or
under the Stock Agreement shall be paid by the Lender. For purposes of this
Agreement, "Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with this Section 7.06, including, without
limitation, (i) all SEC and stock exchange registration and filing fees, (ii)
all fees and expenses of complying with state securities or "Blue Sky" laws
(including fees and disbursements of counsel in connection with Blue Sky
qualifications of the Registrable Shares and determination of the eligibility
of the Registrable Shares for investment under the laws of such jurisdiction as
the Lender may indicate), (iii) all printing, messenger and delivery expenses,
(iv) all fees and expenses incurred in connection with the listing of
Registrable Shares on any exchange, and (v) the fees and disbursements of
counsel for the Borrower and of its independent public accountants, but
excluding underwriting discounts and commissions, brokerage fees, transfer
taxes, if any, fees and disbursements of counsel, accountants or other experts
or advisors to the Lender, and National Association of Securities Dealers Inc.
registration and filing fees.
SECTION 7.07 Expenses. The Borrower shall pay (i) all out-of-pocket expenses
of the Lender, including fees and disbursements of special counsel for the
Lender, in connection with the preparation of this Agreement, any waiver or
consent hereunder or any amendment hereof or any default or alleged default
hereunder and (ii) if an Event of Default occurs, or upon the occurrence of an
event that with notice or the lapse of time or both would constitute an Event
of Default, all out-of-pocket expenses incurred by the Lender, including fees
and disbursements of counsel, in connection with such actual or potential Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings, actions or negotiations resulting therefrom. The Borrower shall
indemnify the Lender against any transfer taxes, documentary taxes, assessments
or charges made by any governmental authority by reason of the execution and
delivery to the Lender of this Agreement, or any Note.
SECTION 7.08 Prior Agreement. This Agreement and the Note issued hereunder
shall supersede in their entirety any prior negotiations, discussions,
understandings or arrangements between the Lender and the Borrower pertaining
to the subject matter of this Agreement.
SECTION 7.9 Governing Law. This Agreement and the Note shall be governed by,
and construed in accordance with, the laws of the State of Colorado.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
AMAX GOLD INC.
By /s/ Mark A. Lettes
----------------------------------
Title: Vice President & Chief
Financial Officer
ATTEST:
/s/ R. Craig Johnson
- -------------------------------------
CYPRUS AMAX MINERALS COMPANY
By /s/ Francis J. Kane
----------------------------------
Title: Vice President Investor
Relations & Treasurer
ATTEST:
/s/ Philip C. Wolf
- -------------------------------------
A-18
EXHIBIT A
REVOLVING CREDIT NOTE
$100,000,000.00 Date: April , 1994
FOR VALUE RECEIVED, Amax Gold Inc., a Delaware corporation (the "Borrower"),
promises to pay to the order of Cyprus Amax Minerals Company, a Delaware
corporation (the "Lender") at the office of the Lender located at 9100 East
Mineral Circle, Englewood, Colorado 80112, or at such other place as the Lender
may direct in writing, in lawful money of the United States of America and in
immediately available funds, the principal amount of One Hundred Million
Dollars or, if less than such principal amount, the aggregate unpaid principal
amount of all Loans made by the Lender to the Borrower pursuant to Article I of
the Agreement referred to below in accordance with the respective Schedules
applicable to such Loans attached to and made part of this Note. All principal
amounts outstanding under this Note on April 30, 1997 shall be paid in twenty
equal quarterly installments in accordance with Section 1.06 of such Agreement;
provided, however, that the last such installment shall be in the amount
necessary to repay in full the unpaid principal amount hereof; and, provided,
further, that the Lender, upon exercise of its Stock Purchase Option under
Article VI of such Agreement, may terminate or reduce the "Commitment", as
defined therein, whereupon such installments shall be due as of the date set
for closing such stock purchase pursuant to Section 6.01 of such Agreement.
The Borrower further promises to pay interest at said office in like money,
from the date hereof on the unpaid principal amount hereof outstanding from
time to time, at the rates and at the times set forth in Article I of such
Agreement. Notwithstanding anything contained herein to the contrary, at the
election of the Borrower the principal of this Note may be paid by the Borrower
in Preferred Stock of the Borrower in accordance with the provisions of Section
1.08 of the Agreement, subject to satisfaction of the conditions set forth in
Section 1.09 of such Agreement.
This Note is the Note referred to in Section 1.02 of the Revolving Credit
Agreement between the Borrower and the Lender dated as of April 15, 1994, as
the same may hereafter from time to time be amended or supplemented in
accordance with the terms thereof ("Agreement"), is entitled to the benefits
thereof and subject to the terms and conditions set forth therein (including,
without limitation, the Lender's rights to accelerate the due date hereof) and
may be paid and prepaid as provided therein.
Upon the occurrence of any of the Events of Default specified in the
Agreement, all amounts then remaining unpaid on this Note may be declared to be
or shall automatically become immediately due and payable as provided therein.
Amax Gold Inc.
By
-----------------------------------
ATTEST:
-------------------------------------
Secretary
A-19
SCHEDULE OF LOANS AND PAYMENTS
MADE UNDER NOTE DATED APRIL , 1994,
FROM AMAX GOLD INC.*
TO CYPRUS AMAX MINERALS COMPANY
Principal Amount of the Initial Loan: $
-------
Date of the Initial Loan:
-------
Interest Rate for the Initial Loan:
-------
PRINCIPAL BORROWINGS
AND PAYMENTS OF THIS NOTE
AMOUNT INTEREST PRINCIPAL UNPAID
DATE BORROWED RATE PAID PAID BALANCE
- ---- -------- ---- -------- --------- -------
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
% $ $ $
- --------
* All terms used in this Schedule shall have the meanings given them in the
Agreement.
A-20
APPENDIX B
STOCK PURCHASE AGREEMENT
Stock Purchase Agreement dated as of April 15, 1994 among Amax Gold Inc., a
Delaware corporation ("AGI") and Cyprus Amax Minerals Company, a Delaware
corporation (the "Investor").
Whereas, the parties have previously entered into that certain letter
agreement dated February 11, 1994 as extended by a letter agreement dated March
7, 1994 (the "Commitment Letter") providing for, among other things, agreed
upon share purchase prices and the preparation of definitive documents to
implement the terms thereof;
Whereas, this Stock Purchase Agreement is one of the definitive documents
contemplated in the Commitment Letter that implements the agreement of the
parties therein;
Whereas, as of the date hereof, AGI is authorized by its Certificate of
Incorporation to issue capital stock consisting of 210,000,000 shares, of which
200,000,000 shares are shares of its Common Stock, par value $0.01 per share
(the "Common Stock"); and
Whereas, the Investor desires to purchase from AGI, and AGI desires to sell
to the Investor, 3,000,000 shares of Common Stock at a purchase price of $6.888
per share, as such price was established in the Commitment Letter;
Now Therefore, in consideration of the premises and of the mutual covenants
and agreements hereinafter set forth, the parties hereto agree, intending to be
legally bound, as follows:
1. Purchase of Subscription Shares. Subject to the terms and conditions
herein set forth, the Investor hereby subscribes for, and agrees to purchase,
and AGI agrees to issue and sell, 3,000,000 shares of Common Stock (the shares
of Common Stock subscribed for pursuant to this Agreement being collectively
referred to herein as the "Subscription Shares") at a purchase price of $6.888
per share.
2. Closing.
(a) The closing (the "Closing") of the purchase provided for in Section 1
shall take place at 10:00 a.m., Denver time, on the fifteenth (15th)
business day after the date upon which the Subscription Shares have been
accepted for listing by the New York Stock Exchange, or at such other date
and time as the parties may agree. The Closing shall occur at the offices
of the Investor, 9100 East Mineral Drive, Englewood, Colorado 80112. The
date and time of the Closing are referred to herein as the "Closing Date".
Should the Closing not occur on or before January 4, 1995, this Agreement
shall expire unless extended by mutual agreement.
(b) At the Closing, AGI will deliver to the Investor a certificate or
certificates evidencing the Subscription Shares purchased by the Investor,
registered in the Investor's name and bearing appropriate restrictive
legends, against delivery by the Investor to AGI of the total purchase
price of $20,664,000, which price shall be applied immediately by AGI to
reduce the indebtedness of AGI to the Investor under that certain demand
promissory note dated July 21, 1993 (the "AGI Note") with the payments
first to be applied against interest, if any, and then against principal.
At the Closing, the Investor will mark the AGI Note to evidence payment in
the amount of $20,664,000 against delivery by AGI to the Investor of
certificates evidencing the Subscription Shares.
(c) Each party shall bear its own expenses incurred in connection with
the transactions contemplated by this Agreement or otherwise associated
with the Closing.
3. Representations and Warranties of AGI. AGI represents and warrants that:
(a) AGI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. This Agreement has been
duly authorized, executed and delivered by AGI and is
B-1
a valid and binding obligation of AGI, enforceable against AGI in
accordance with its terms subject only to the approvals that may be
required by the applicable stock exchange for the listing of the
Subscription Shares including, without limitation, the approval of a
majority of AGI's shareholders for the issuance of such Subscription
Shares, if so required as a consideration to such listing.
(b) When certificates evidencing the Subscription Shares have been
delivered against payment therefor as provided herein, such Subscription
Shares will be duly authorized, validly issued, fully paid and
nonassessable.
4. Purchase for Investment; Other Representations and Warranties of
Investor. The Investor represents and warrants that:
(a) This Agreement has been duly authorized, executed and delivered by
the Investor and is a valid and binding obligation of the Investor,
enforceable against the Investor in accordance with its terms.
(b) The Investor acknowledges that the offering and sale of the
Subscription Shares are intended to be exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"). In furtherance
thereof, the Investor represents and warrants to AGI that:
(i) The Investor is an accredited investor within the meaning of
Regulation D promulgated under the Securities Act ("Regulation D") and,
if there should be any change in such status prior to the Closing Date,
the Investor will immediately inform AGI of such change;
(ii) The Investor is aware of the merits and risks of an investment
in the Subscription Shares to be purchased pursuant hereto by the
Investor and, due to its knowledge and experience in financial and
business matters, is capable of evaluating, and has evaluated, the
merits and risks of such investment; and
(iii) The Investor has been given the opportunity to ask questions
of, and receive answers from, AGI concerning the terms and conditions
of the offering of the Subscription Shares to be purchased by the
Investor and other matters pertaining to an investment in the
Subscription Shares, and has been given the opportunity to obtain such
additional information necessary to evaluate the merits and risks of an
investment in the Subscription Shares to be purchased by the Investor
to the extent AGI possesses such information or can acquire it without
unreasonable effort or expense, and has not been furnished any offering
material in connection with the offering and purchase of the
Subscription Shares.
(c) The Investor has been advised that the Subscription Shares have not
been registered under the Securities Act, or any state securities or blue
sky laws and, therefore, cannot be resold unless they are registered under
such laws or unless an exemption from registration thereunder is available.
The Investor is purchasing the Subscription Shares for its own account for
investment, and not with a view to, or for resale in connection with, the
distribution thereof, and has no present intention of distributing or
reselling any of the Subscription Shares. In making the foregoing
representation, the Investor is aware that it must bear, and the Investor
is able to bear, the economic risk of such investment for an indefinite
period of time.
(d) The Investor acknowledges that AGI is entering into this Agreement in
reliance upon the Investor's representations and warranties in this
Agreement, including, without limitation, those set forth in this Section
4.
5. Demand Registration Rights. After issuance of the Subscription Shares, the
Investor may make one or more written requests to AGI (a "Demand") for
registration under and in accordance with the provisions of the Securities Act
of all or part (but not less than 1,000,000 shares per Demand) of the shares of
Common Stock issued to the Investor pursuant to this Agreement ("Registrable
Shares"). Each such request shall specify the aggregate number of Registrable
Shares proposed to be registered and the intended method of disposition
thereof.
B-2
(ii) Upon receipt of a Demand, AGI shall use its best efforts to effect
such registration to permit the sale of Registrable Shares in accordance
with the intended method of disposition thereof and pursuant thereto, AGI
shall as expeditiously as possible:
(a) execute and deliver all such instruments and documents and do or
cause to be done all such other acts and things as may be necessary or,
in the opinion of the Investor, advisable to register such Registrable
Shares under the provisions of the Securities Act, and to cause the
registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to
be furnished, and to make all amendments and supplements thereto and to
the related prospectus which, in the opinion of the Investor, are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the SEC applicable
thereto;
(b) use its best efforts to qualify the Registrable Shares under the
applicable state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of the Registrable
Shares, as requested by the Investor;
(c) make available to the Investor, as soon as practicable, an
earnings statement that will satisfy the provisions of Section 11(a) of
the Securities Act; and
(d) do or cause to be done all such other acts and things as may be
necessary to make such sale of the Registrable Shares or any part
thereof valid and binding and in compliance with applicable law.
(iii) If any such Demand is made at a time when the Investor directly or
indirectly owns less than five percent (5%) of the number of shares of
Common Stock outstanding, AGI may, if its Audit Committee of its Board of
Directors determines in the good faith exercise of its reasonable judgment
that it would be inadvisable to effect a demand registration, defer such
demand registration until the earliest practicable time at which such
demand registration can be reasonably effected, which period shall not
exceed three (3) months.
(iv) All Registration Expenses incurred in connection with the first
registration statement to be filed hereunder or under that certain
Revolving Credit Agreement between AGI and the Investor of even date
herewith (the "Credit Agreement") shall be paid by AGI. All Registration
Expenses incurred in connection with each additional registration statement
to be filed hereunder or under the Credit Agreement shall be paid by the
Investor. For purposes of this Agreement, "Registration Expenses" shall
mean any and all expenses incident to performance of or compliance with
this Section 5, including, without limitation, (i) all SEC and stock
exchange registration and filing fees, (ii) all fees and expenses of
complying with state securities or "Blue Sky" laws (including fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Shares and determination of the eligibility of the Registrable
Shares for investment under the laws of such jurisdiction as the Investor
may indicate), (iii) all printing, messenger and delivery expenses, (iv)
all fees and expenses incurred in connection with the listing of
Registrable Shares on any exchange, and (v) the fees and disbursements of
counsel for AGI and of its independent public accountants, but excluding
underwriting discounts and commissions, brokerage fees, transfer taxes, if
any, fees and disbursements of counsel, accountants or other experts or
advisors to the Investor, and National Association of Securities Dealers
Inc. registration and filing fees.
6. No Prior Offering of Common Stock. AGI agrees that neither it nor any
agent on its behalf will sell or offer, or attempt or offer to dispose of, any
shares of Common Stock to, or solicit any offers to buy any thereof from, or
otherwise approach or negotiate in respect thereof with, any person or persons
whomsoever (other than the Investor) so as to make it necessary in connection
with the sale and delivery hereunder of the Subscription Shares to the Investor
on the Closing Date to register such Subscription Shares under the Securities
Act.
7. Use of Proceeds. AGI covenants and agrees that it will use the net
proceeds received by it from the sale of the Subscription Shares to repay a
portion of the outstanding indebtedness owed by AGI to the Investor as set
forth in Section 2(b) hereof.
B-3
8. Conditions to Obligations of the Investor. The Investor's obligations
hereunder are subject to the condition that, unless waived in writing by the
Investor the representations and warranties made by AGI in Section 3 shall be
true and correct at and as of the Closing Date as if made at such time.
9. Conditions to Obligations of AGI. AGI's obligations hereunder are subject
to the fulfillment, prior to or at the Closing Date, unless waived in writing
by AGI, of each of the following conditions:
(a) The representations and warranties made by the Investor in Section 4
shall be true and correct at and as of the Closing Date as if made at such
time.
(b) AGI and the Investor shall have executed and delivered that certain
Revolving Credit Agreement dated as of April 15, 1994, by and between AGI
and the Investor.
(c) A listing application for the shares to be issued hereunder shall be
accepted by the New York Stock Exchange and any other applicable exchange,
if necessary, and if so required as a condition to such listing, the
majority of the shareholders of AGI shall have approved the issuance of
such Subscription Shares, as to which acceptance and approvals AGI agrees
promptly to make all reasonable efforts to obtain.
10. Survival; Successors and Assigns. All agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto shall
survive the execution and delivery of this Agreement, the delivery to the
Investor of the Subscription Shares to be purchased pursuant hereto and the
payment therefor and, notwithstanding any investigation heretofore or hereafter
made by or on behalf of a party hereto, shall continue in full force and
effect. The rights and obligations of the Investor under this Agreement shall
not be assignable by the Investor without the prior written consent of AGI.
Nothing herein expressed or implied is intended to confer upon any person,
other than the parties hereto or their respective permitted assignees,
successors, heirs and legal representatives, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
11. Amendment and Modification. Subject to applicable law, this Agreement may
be amended, modified or supplemented only by written agreement of AGI and the
Investor.
12. Waiver of Compliance; Consents. The failure of any of the parties to
comply with any obligation, covenant, agreement or condition herein may be
waived by the party entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver. Any such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
13. Notices. Any notice, request or other document to be given hereunder to
any party shall be effective upon receipt and shall be in writing and delivered
personally or sent by telecopy or certified mail, addressed to such address as
shall from time to time be designated in writing to the other by AGI or the
Investor, or until an address is so furnished, addressed to the address for
notices set forth on the signature pages hereof.
14. Entire Agreement. This Agreement, and the other agreements referred to
herein or expressly contemplated hereby, embody the entire agreement and
understanding between the Investor and AGI with respect to the purchase of
Subscription Shares by Investor contemplated hereby and supersede all prior
oral or written agreements, memoranda, understandings and undertakings among
the parties hereto relating to the subject matter hereof.
15. Construction. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado. The section headings
contained in this Agreement are for reference purposes and shall not affect in
any way the meaning or interpretation of this Agreement.
16. Execution in Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
B-4
In Witness Whereof, the parties hereto have executed this Agreement or caused
it to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
Amax Gold Inc.
9100 East Mineral Drive
Englewood, Colorado 80112
By /s/ Mark A. Lettes
----------------------------------
Name:Mark A. Lettes
Title:Vice President & Chief
Financial Officer
Cyprus Amax Minerals Company
9100 East Mineral Drive
Englewood, Colorado 80112
By /s/ Frank J. Kane
----------------------------------
Name:Frank J. Kane
Title:Vice President Investor
Relations &
Treasurer
B-5
APPENDIX-C
June 27, 1994
Amax Gold Inc. 9100 East Mineral Circle Englewood, Colorado 80112
Attention: Audit Committee of the Board of Directors
Gentlemen:
Reference is made to the engagement, confirmed in the letter dated January 7,
1994, between Amax Gold Inc., a Delaware corporation (the "Company"), and
Salomon Brothers Inc. This opinion is delivered to you pursuant to such
engagement letter.
You have advised us that the Company and Cyprus Amax Minerals Company, a
Delaware corporation ("Cyprus Amax"), have entered into a financing arrangement
to be effected pursuant to the Revolving Credit Agreement, dated as of April
15, 1994 (the "Agreement"), between the Company and Cyprus Amax. The Agreement
provides for the contemplated availability by Cyprus Amax of a $100 million
double convertible line of credit ("DOCLOC") to the Company. The availability
of the DOCLOC to the Company is referred to herein as the "Transaction". You
have asked us to advise you with respect to the fairness, from a financial
point of view, of the Transaction to the Company's shareholders generally
(solely in their capacity as such), exclusive of Cyprus Amax and its
affiliates.
As you are aware, Salomon Brothers Inc has acted as financial advisor to the
Company in connection with the Transaction and will receive a fee for our
services. Additionally, Salomon Brothers has previously rendered financial
advisory and investment banking services to the Company for which we have
received customary compensation. In the ordinary course of our securities
business we trade the debt or equity securities of the Company and Cyprus Amax
for our own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
In connection with rendering our opinion, we have reviewed and analyzed,
among other things, the following: (i) the Agreement; (ii) the preliminary
Proxy Statement of the Company filed with the Securities and Exchange
Commission on June 27, 1994; (iii) certain publicly-available business and
financial information concerning the Company and Cyprus Amax; (iv) certain
internal information primarily financial in nature (including projections,
forecasts, estimates and analyses prepared by or on behalf of the Company's
management), concerning the business, assets, liabilities, operations and
prospects of the Company and the anticipated effects on the Company of the
consummation or the non-consummation of the Transaction, including alternatives
to implementing the Transaction, furnished to us by or on behalf of the
Company; (v) certain publicly-available and other information concerning the
trading of, and the trading market for, the publicly traded securities of the
Company; (vi) certain publicly-available information with respect to other
companies that we believe to be comparable in certain respects to the Company;
(vii) the resolution of certain existing financial and other relationships
between the Company and its banks with respect to certain project financings;
(viii) the flexibility provided by the DOCLOC to further the continued
development of certain existing mining projects; (ix) the Company's public
filings, including statements pursuant to the 13d filed by Cyprus Amax with
respect to the Agreement; and (x) such other information that we have
considered relevant to our inquiry. We have discussed with certain members of
the Company's management and its representatives the Company's views as to: (i)
the anticipated substantial adverse effects on the Company's business,
financial position, assets, liabilities, operations and prospects which the
Company believes will occur if the Company were not to enter into the
Transaction; (ii) the benefits which the Company believes will arise from
entering into the Transaction, including the substantial lessening of existing
liquidity concerns; and (iii) the lack of viable alternatives to the
Transaction. We have also discussed with certain members of the Company's
management and its representatives the Company's views as to the financial and
other information described above and other matters we believe relevant to our
inquiry.
C-1
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all financial and other
information provided to or reviewed for us or publicly available and have not
attempted independently to verify any of such information, including, without
limitation, the Company's views discussed above. We have also relied upon the
reasonableness and accuracy of the financial projections, forecasts, estimates
and analyses, including, without limitation, those forecasts, estimates and
analyses relating to the cash flows and value of assets and current and
contingent liabilities of the Company at present and on a pro forma basis,
assuming the Transaction is consummated, provided to or reviewed for us and we
have assumed that they were all reasonably prepared in accordance with accepted
industry practice on bases reflecting the best currently available estimate and
judgment of the Company's management.
For the purposes of rendering our opinion we are assuming, with your consent
(and did not independently verify), that after giving effect to the Transaction
the Company and its subsidiaries will be solvent, able to pay their respective
obligations as they become due and adequately capitalized to engage in their
anticipated businesses. To the extent that evaluation of the Transaction
requires analysis of legal, as opposed to the financial matters, including,
without limitation, all matters related to identifying and quantifying current
and pro forma off balance sheet liabilities, we have relied, with your consent,
on the views of the Company and its counsel with respect to these matters.
We have not made or obtained any independent evaluations or appraisals of any
of the Company's assets, properties, liabilities or securities, nor have we
been furnished with any such evaluations or appraisals other than certain
evaluations and market studies provided to us by the Company. We have assumed
that the terms of the Agreement are the most beneficial terms from the
Company's perspective that could, under the circumstances, be negotiated among
the parties to the Transaction. We did not participate in such negotiations and
have not been authorized to, and we have not, solicited or investigated
alternative transactions which might be available to the Company. We were not
requested to, and did not, solicit third party indications of interest in
entering into a transaction of the nature comprising the Transaction; although
it should be noted that we were previously involved, at an earlier date,
unrelated to the Transaction, in an attempt to raise capital in the public
markets for the Company and, unrelated to the Transaction, have been named as a
potential underwriter in connection with a Registration Statement for a
universal shelf covering the offering from time to time of subordinated debt,
preferred stock, common stock and warrants to acquire common stock, which the
Company filed with the Securities and Exchange Commission on June 3, 1994.
In conducting our analysis and arriving at our opinion as expressed herein,
we have considered such financial and other information, including the
financial and non-financial judgments and views of the Company's management and
representatives, along with other factors, including, without limitation, the
information (including the financial projections, forecasts, estimates and
analyses) discussed above, as we have deemed appropriate under the
circumstances. In addition, we have taken into account our discussions with
third parties referred to above. We have also taken into account our assessment
of general economic, market and financial conditions generally and the
particular circumstances currently applicable to the Company. Our opinion
necessarily is based upon conditions and circumstances as they exist and could
be evaluated as of the date hereof.
Based upon and subject to the foregoing and in light of the particular
circumstances currently applicable to the Company, it is our opinion as
investment bankers that, as of the date hereof, the Transaction is fair, from a
financial point of view, to the Company's shareholders generally (solely in
their capacity as such), exclusive of Cyprus Amax and its affiliates.
Very truly yours,
SALOMON BROTHERS INC
C-2
APPENDIX-D
CERTIFICATE OF DESIGNATIONS
$2.25 SERIES A CONVERTIBLE PREFERRED STOCK
OF
AMAX GOLD INC.
PAR VALUE $1.00 PER SHARE
LIQUIDATION VALUE $50 PER SHARE
PURSUANT TO SECTION 151 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
The undersigned duly authorized officer of Amax Gold Inc., a corporation
organized and existing under the laws of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 of the General
Corporation Law of the State of Delaware (the "DGCL"), and pursuant to Section
151 thereof, hereby certifies as follows:
FIRST: The Restated Certificate of Incorporation, as amended, of the
Corporation authorizes the issuance of up to 210,000,000 shares of capital
stock, of which 200,000,000 shares shall be shares of common stock, par value
$.01 per share ("Common Stock"); and 10,000,000 shares shall be shares of
preferred stock, par value $1.00 per share ("Preferred Stock").
SECOND: The Restated Certificate of Incorporation, as amended, of the
Corporation, authorizes the Board of Directors of the Corporation to provide
for the issuance of Preferred Stock in one or more series, with such
designation, powers, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions providing for
the issue of such series adopted by the Board of Directors of the Corporation,
subject to the limitations prescribed by law and except as otherwise provided
in the Restated Certificate of Incorporation or any amendment thereto.
THIRD: Pursuant to authority conferred upon the Board of Directors of the
Corporation by the Restated Certificate of Incorporation, as amended, of the
Corporation under the provisions of Section 151 of the DGCL, the Board of
Directors of the Corporation, at a meeting duly held on May 5, 1994, adopted
the following resolutions providing for an issue of a series of the
Corporation's Preferred Stock, which resolutions are still in full force and
effect and are not in conflict with any provision of the Restated Certificate
of Incorporation, as amended, or the By-Laws of the Corporation:
"RESOLVED, that pursuant to the authority vested in the Board of Directors of
the Corporation by Section 151 of the DGCL and the provisions of its Restated
Certificate of Incorporation, as amended, an issue of a series of the Preferred
Stock, par value $1.00 per share, of the Corporation is hereby created,
consisting of 2,000,000 shares, with the designations, powers, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of such series as follows:
(1) Designation, Number of Shares and Rank. The designation of such series
shall be "$2.25 Series A Convertible Preferred Stock" (hereinafter referred to
as the "Convertible Preferred Stock"). Each share of Convertible Preferred
Stock shall be identical in all respects with the other shares of Convertible
Preferred Stock.
All shares of Convertible Preferred Stock shall rank prior, both as to
payment of dividends and as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
to all of the Corporation's now or hereafter issued Common Stock.
D-1
The number of shares of Convertible Preferred Stock shall initially be
2,000,000, which number may from time to time be increased or decreased (but
not below the number then outstanding) by further resolution of the Board of
Directors of the Corporation or any duly authorized committee thereof and by
the filing of a certificate pursuant to the provisions of Section 151 of the
DGCL stating that such increase or reduction has been so authorized. Shares of
Convertible Preferred Stock redeemed, purchased by the Corporation or converted
into Common Stock shall be cancelled and shall revert to authorized but
unissued shares of Preferred Stock undesignated as to series.
(2) Dividends. The holders of shares of Convertible Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors of the
Corporation, but only out of funds legally available therefor, dividends at the
annual rate of $2.25 per share, and no more, which shall be fully cumulative,
shall accrue without interest from the date of first issuance and shall be
payable in cash in equal semi-annual installments on the 1st day of January and
July of each year, commencing on July 1, 1994 (except that if any such date is
not a business day, then such dividend shall be payable on the next succeeding
business day) (each, a "Dividend Payment Date"), to stockholders of record as
they appear on the stock transfer books of the Corporation on such record
dates, not more than 60 nor less than 10 days preceding such Dividend Payment
Date, as are fixed by the Board of Directors of the Corporation. For the
purposes hereof, the term "business day" shall mean each Monday, Tuesday,
Wednesday, Thursday or Friday which is not a day on which banking institutions
are authorized or obligated by law or executive order to close in New York, New
York or in Denver, Colorado. Subject to the next paragraph of this Section 2,
dividends on account of arrears for any past dividend periods may be declared
and paid at any time, without reference to any Dividend Payment Date, to
holders of record on such date, not exceeding 45 days preceding the payment
date thereof, as may be fixed by the Board of Directors of the Corporation. The
amount of dividends payable per share of Convertible Preferred Stock for each
semi-annual dividend period shall be computed by dividing the annual amount by
two. The amount of dividends payable on the Convertible Preferred Stock for the
initial dividend period and for any period less than a full semi-annual
dividend period shall be computed on the basis of a 360 day year consisting of
twelve 30-day months. Holders of shares of Convertible Preferred Stock shall
not be entitled to any dividend whether payable in cash, property or stock, in
excess of the full cumulative dividends on such shares of Convertible Preferred
Stock.
On each Dividend Payment Date all dividends which shall have accrued on each
share of Convertible Preferred Stock outstanding on such Dividend Payment Date
shall accumulate and be deemed to become "due" whether or not declared and
whether or not there shall be funds legally available for the payment thereof.
Any dividend which shall not be paid on the Dividend Payment Date on which it
shall become due shall be deemed to be "past due" until such dividend shall be
paid or until the share of Convertible Preferred Stock with respect to which
such dividend became due shall no longer be outstanding, whichever is the
earlier to occur. No interest or sum of money or other property or securities
in lieu of interest shall be payable in respect of any dividend payment or
payments which are past due. Dividends paid on shares of Convertible Preferred
Stock in an amount less than the total amount of such dividends at the time
accumulated and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding.
The Corporation may, at its option exercised by written notice by first class
mail, postage prepaid, to each holder of record of the Convertible Preferred
Stock given at least 10 business days prior to the applicable Dividend Payment
Date, elect to pay any dividend due and payable hereunder in shares of Common
Stock in lieu of a dividend payment in cash; provided, however, that the
Corporation may not pay any such dividend in shares of Common Stock in lieu of
cash to any holder of record of the Convertible Preferred Stock that delivers
written notice to the Corporation no more than 5 business days prior to the
applicable Dividend Payment Date stating that such holder elects to receive
such dividend payment in cash. The number of shares of Common Stock issuable to
each holder of Convertible Preferred Stock pursuant to this paragraph on each
such Dividend Payment Date shall equal the amount of dividends payable per
share of Convertible Preferred Stock on such Dividend Payment Date divided by
the average Closing Price per share of the Common Stock
D-2
as calculated for the last 10 trading days (the "Trading Period") ending on the
fifth trading day prior to the date that such dividend is declared multiplied
by the total number of shares of Convertible Preferred Stock registered in the
name of each such holder of the Convertible Preferred Stock on the record date
for the payment of the dividend. As used herein, the term "Closing Price" for
any day in question shall be the last reported sale price regular way or, in
case no such reported sales take place on such day, the average of the closing
bid and asked prices regular way for such day, in each case on the New York
Stock Exchange Composite Tape or, if not listed on the New York Stock Exchange,
on the principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if not listed or admitted to
trading on a national securities exchange, the last sale price regular way for
the Common Stock as published by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), or if such last sale price is not so
published by NASDAQ or if no such sale takes place on such day, the average
between the closing bid and asked prices for the Common Stock as published by
NASDAQ. The term "trading day" shall mean a day on which the market used for
calculating the Closing Price is open for the transaction of business or, if
the shares of such security are not so listed or admitted to trading, a
business day. No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued in respect of the payment of any dividend in
shares of Common Stock. In lieu of any fractional interest in a share of Common
Stock which otherwise would be deliverable in respect of the payment of any
dividend in shares of Common Stock, the Corporation shall pay to the holder of
such shares an amount in cash (computed to the nearest cent) equal to the
average Closing Price per share of the Common Stock as calculated for the
Trading Period ending on the fifth trading day prior to the date that such
dividend is declared multiplied by the fractional interest that otherwise would
have been deliverable in respect of the payment of such dividend in shares of
Common Stock.
No dividends or other distributions, other than dividends payable solely in
shares of Common Stock, shall be paid, or declared and set apart for payment in
respect of, and no purchase, redemption or other acquisition for any
consideration shall be made by the Corporation of and no sinking fund or other
analogous fund payments shall be made in respect of any shares of Common Stock
or other capital stock of the Corporation ranking junior as to dividends or as
to liquidation rights to the Convertible Preferred Stock (the "Junior Dividend
Stock") unless and until all accrued and unpaid dividends on the Convertible
Preferred Stock, including the full dividend for the then current dividend
period, shall have been paid or declared and set apart for payment and the
Corporation is not in default in respect of the optional redemption of any
shares of Convertible Preferred Stock.
No dividends or other distributions shall be paid or declared and set apart
for payment and no purchase, redemption or other acquisition for any
consideration shall be made by the Corporation of, and no sinking fund or other
analogous fund payments shall be made in respect of, any class or series of the
Corporation's capital stock ranking, as to dividends, on a parity with the
Convertible Preferred Stock (the "Parity Dividend Stock") for any period unless
full cumulative dividends have been, or contemporaneously are, paid or declared
and set apart for such payment on the Convertible Preferred Stock for all
dividend payment periods terminating on or prior to the date of payment of such
full cumulative dividends. No dividends shall be paid or declared and set apart
for payment on the Convertible Preferred Stock for any period unless full
cumulative dividends have been, or contemporaneously are, paid or declared and
set apart for payment on the Parity Dividend Stock for all dividend periods
terminating on or prior to the date of payment of such full cumulative
dividends. When dividends are not paid in full upon the Convertible Preferred
Stock and the Parity Dividend Stock, all dividends paid or declared and set
apart for payment upon shares of Convertible Preferred Stock and the Parity
Dividend Stock shall be paid or declared and set apart for payment pro rata so
that the amount of dividends paid or declared and set apart for payment per
share on the Convertible Preferred Stock and the Parity Dividend Stock shall in
all cases bear to each other the same ratio that accrued and unpaid dividends
per share on the shares of Convertible Preferred Stock and the Parity Dividend
Stock bear to each other.
The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation or any Parity Dividend Stock unless the Corporation could, under
this Section 2, purchase or otherwise acquire such shares at such time and in
such manner.
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Any reference to "distribution" contained in this Section 2 shall not be
deemed to include any distribution made in connection with any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
(3) Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
shares of Convertible Preferred Stock shall be entitled to receive out of the
assets of the Corporation, whether such assets are stated capital or surplus of
any nature, an amount equal to the dividends accrued and unpaid thereon to the
date of final distribution to such holders, whether or not declared, without
interest, and a sum equal to $50.00 per share, and no more, before any payment
shall be made or any assets distributed to the holders of Common Stock or any
other class or series of the Corporation's capital stock ranking junior as to
liquidation rights to the Convertible Preferred Stock (the "Junior Liquidation
Stock"). In the event the assets of the Corporation available for distribution
to stockholders upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, shall be insufficient to pay in
full the amounts payable with respect to the Convertible Preferred Stock and
any other class or series of the Corporation's capital stock which may
hereafter be created ranking on a parity as to liquidation rights with the
Convertible Preferred Stock (the "Parity Liquidation Stock"), the holders of
the Convertible Preferred Stock and the holders of the Parity Liquidation Stock
shall share ratably in any distribution of assets of the Corporation in
proportion to the full respective preferential amounts to which they are
entitled (but only to the extent of such preferential amounts). After payment
in full of the liquidation preferences of the shares of Convertible Preferred
Stock, the holders of such shares shall not be entitled to any further
participation in any distribution of assets by the Corporation. Neither a
consolidation, merger or other business combination of the Corporation with or
into another corporation or other entity nor a sale or transfer of all or part
of the Corporation's assets for cash, securities or other property shall be
considered a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 3 (unless in connection therewith the liquidation of
the Corporation is specifically approved).
The holder of any shares of Convertible Preferred Stock shall not be entitled
to receive any payment owed for such shares under this Section 3 until such
holder shall cause to be delivered to the Corporation (i) the certificate(s)
representing such shares of Convertible Preferred Stock and (ii) transfer
instrument(s) satisfactory to the Corporation and sufficient to transfer such
shares of Convertible Preferred Stock to the Corporation free of any liens or
encumbrances thereon or rights of third parties thereto. As in the case of the
Redemption Price referred to below, no interest shall accrue on any payment
upon liquidation after the due date thereof.
(4) Redemption at the Option of the Corporation.
(a) Right of Redemption. Subject to and upon compliance with the provisions
of this Section 4, the Corporation, at its option, may at any time redeem the
Convertible Preferred Stock, in whole or from time to time in part, on any date
set by the Board of Directors of the Corporation, for that number of fully paid
and non-assessable shares of Common Stock (calculated as to each redemption to
the nearest 1/100th of a share) obtained by dividing $50.00 by the lesser of
the Call Price (as defined in paragraph (e)) and the Conversion Price (as
defined in Section 5(d)), as the same may be in effect at such time, plus
accrued and unpaid dividends, whether or not declared or due, to the date fixed
for redemption (such shares of Common Stock and dividends, together with any
cash in lieu of Common Stock pursuant to paragraph (d), being hereinafter
referred to herein as the "Redemption Price"), subject to the right of the
holder of record of shares of Convertible Preferred Stock on a record date for
the payment of a dividend on the Convertible Preferred Stock to receive the
dividend due on such shares of Convertible Preferred Stock on the corresponding
Dividend Payment Date.
In case of the redemption of less than all of the then outstanding
Convertible Preferred Stock, the shares of Convertible Preferred Stock to be
redeemed shall be redeemed pro rata or by lot or in such other equitable manner
as the Board of Directors of the Corporation reasonably may determine.
Notwithstanding the
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foregoing, the Corporation shall not redeem less than all of the Convertible
Preferred Stock at any time outstanding until all dividends accrued and in
arrears upon all Convertible Preferred Stock and Parity Dividend Stock then
outstanding shall have been paid for all past dividend periods.
(b) Manner of Exercise of Redemption Option. In order to exercise its
redemption option, the Corporation must give written notice in person or by
first class mail, postage prepaid, of such redemption to each holder of record
of the shares of Convertible Preferred Stock to be redeemed, at such holder's
address as it shall appear upon the stock transfer books of the Corporation not
more than 60 days nor less than 30 days prior to the redemption date. Each such
notice of redemption shall state, as appropriate: (1) the date fixed for
redemption; (2) the number of shares of Convertible Preferred Stock to be
redeemed and, if fewer than all of the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (3) the
Redemption Price per share of Convertible Preferred Stock; (4) the place or
places of payment that payment of the Redemption Price will be made upon
presentation and surrender of the certificate or certificates evidencing the
shares of Convertible Preferred Stock to be redeemed; (6) that on and after the
redemption date, dividends will cease to accrue on such shares; and (7) the
then effective Conversion Price pursuant to Section 5 and that the right of
holders to convert shall terminate at the close of business on the redemption
date (unless the Corporation defaults in the payment of the Redemption Price).
Any notice that is delivered or mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not the holder of the
Convertible Preferred Stock receives such notice; and failure to give such
notice, or any defect in such notice, to the holders of any shares designated
for redemption shall not affect the validity of the proceedings for the
redemption of any other shares of Convertible Preferred Stock. On or after the
date fixed for redemption as stated in such notice, each holder of the shares
of Convertible Preferred Stock called for redemption shall surrender the
certificate or certificates evidencing such shares to the Corporation at the
place designated in such notice and shall thereupon be entitled to receive
payment of the Redemption Price as herein provided. If less than all the shares
represented by any such surrendered certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares. If, on the date fixed for
redemption, shares of Common Stock and cash necessary for the redemption shall
be available for such purpose and irrecoverably shall have been deposited or
set apart, then, notwithstanding that the certificates evidencing any shares so
called for redemption shall not have been surrendered, the dividends with
respect to the shares so called shall cease to accrue after the date fixed for
redemption, the shares no longer shall be deemed outstanding, the holders
thereof shall cease to be holders of Convertible Preferred Stock, and all
rights whatsoever with respect to the shares so called for redemption (except
the right of the holders to receive payment of the Redemption Price as herein
provided, without interest, upon surrender of their certificates therefor)
shall terminate. Shares of Common Stock and any cash necessary for the
redemption of shares of Convertible Preferred Stock shall be deemed to be
available therefor for purposes of the preceding sentence and for purposes of
Section 7, on or before the date fixed for redemption, the Company shall
deposit with a bank or trust company that has an office in the Borough of
Manhattan, City of New York, and that has, or is an affiliate of a bank that
has, a capital surplus of at least $50,000,000, shares of Common Stock and any
cash necessary for such redemption, in trust, with irrevocable instructions
that such shares of Common Stock and cash be applied to the redemption of the
shares of the Convertible Preferred Stock and any Parity Dividend Stock so
called for redemption. At the close of business on the redemption date, each
holder of shares of Convertible Preferred Stock to be redeemed (unless the
Corporation defaults in the delivery of the shares of Common Stock or cash
payable on such redemption date) shall be deemed to be the record holder of the
number of shares of Common Stock into which such shares of Convertible
Preferred Stock are to be redeemed, regardless of whether such holder has
surrendered the certificates representing such shares of Convertible Preferred
Stock. No interest shall accrue for the benefit of the holders of shares of
Convertible Preferred Stock to be redeemed on any cash so set apart by the
Corporation. Subject to applicable escheat laws, any such cash unclaimed at the
end of six years from the redemption date shall revert to the general funds of
the Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for the
payment of such cash.
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The holder of any shares of Convertible Preferred Stock redeemed upon any
exercise of the Corporation's redemption right shall not be entitled to receive
payment of the Redemption Price for such shares until such holder shall cause
to be delivered to the place specified in the notice given with respect to such
redemption (i) the certificate or certificates representing such shares of
Convertible Preferred Stock redeemed and (ii) transfer instruments satisfactory
to the Corporation and sufficient to transfer such shares of Convertible
Preferred Stock to the Corporation free of any adverse interest. No interest
shall accrue on the Redemption Price of any share of Convertible Preferred
Stock after its redemption date.
In the event that any shares of Convertible Preferred Stock shall be
converted into Common Stock pursuant to Section 5, then (i) the Corporation
shall not have the right to redeem such shares and (ii) any funds which shall
have been deposited for the payment of the Redemption Price for such shares of
Convertible Preferred Stock shall be returned to the Corporation immediately
after such conversion (subject to declared dividends payable to holders of
shares of Convertible Preferred Stock on the record date for such dividends, to
the extent set forth in Section 5 hereof, regardless whether such shares are
converted subsequent to such record date and prior to the related Dividend
Payment Date).
(c) Cash Payments in Lieu of Fractional Shares. No fractional shares or scrip
representing fractions of shares of Common Stock shall be issued upon
redemption of Convertible Preferred Stock. If more than one share of
Convertible Preferred Stock shall be surrendered for redemption at one time by
the same holder, the number of full shares of Common Stock issuable upon
redemption thereof shall be computed on the basis of the aggregate of $50.00
for each such share so surrendered. In lieu of any fractional interest in a
share of Common Stock which otherwise would be deliverable upon the redemption
of any share of Convertible Preferred Stock, the Corporation shall pay to the
holder of such shares an amount in cash (computed to the nearest cent) equal to
the lesser of the Call Price and the Conversion Price, as the same may be in
effect at such time, multiplied by the fractional interest in a share of Common
Stock that otherwise would have been deliverable upon conversion of such share.
(d) Limitation on Number of Shares Issuable Upon Redemption. The maximum
number of shares of Common Stock that the Corporation may issue upon redemption
of the Convertible Preferred Stock shall be 12,099,213 shares, as such amount
shall be increased or decreased from time to time by the Board of Directors of
the Corporation in connection with any adjustment to the Conversion Price
pursuant to Section 5(d) and as such amount further may be reduced in
accordance with this paragraph. In the case of the redemption of shares of
Convertible Preferred Stock that would result in the issuance of shares of
Common Stock that, when added to the number of shares of Common Stock issued
(i) in connection with the redemption of any shares of Convertible Preferred
Stock previously redeemed in accordance with this Section 4, (ii) in connection
with the conversion of any shares Convertible Preferred Stock previously
converted in accordance with Section 5, and (iii) as a dividend on the shares
of Convertible Preferred Stock previously paid pursuant to Section 2, would be
greater than 12,099,213 shares, the Corporation shall pay an amount of cash in
lieu of such shares of Common Stock in excess of 12,099,213 shares equal to the
lesser of the Call Price and the Conversion Price, as the same may be in effect
at such time, multiplied by the number of shares of Common Stock in excess of
12,099,213 shares that otherwise would have been issuable but for this
paragraph. The shares of Convertible Preferred Stock that shall be redeemed for
cash in lieu of Common Stock pursuant to this paragraph shall be selected pro
rata or by lot or in such other equitable manner as the Board of Directors of
the Corporation reasonably may determine. Each such cash payment shall be made
in twelve consecutive substantially equal quarterly payments, commencing on the
last business day of the calendar quarter immediately subsequent to the
applicable redemption date.
(e) Call Price. The "Call Price" with respect to a redemption of Convertible
Preferred Stock pursuant to this Section 4 shall be equal to the greater of (i)
$5.854, as such amount shall be adjusted from time to time by the Board of
Directors of the Corporation in connection with any adjustment to the
Conversion Price pursuant to Section 5(d) by applying the Conversion Price
adjustment formula set forth in such Section 5(d) to the Call Price, and (ii)
the average Closing Price per share of the Common Stock as calculated for the
Trading Period ending on the fifth trading day prior to the date that the
notice of redemption with respect to such redemption is mailed pursuant to
paragraph (b).
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(f) Covenant as to Common Stock. The Corporation covenants that all shares of
Common Stock which may be delivered upon redemption of shares of Convertible
Preferred Stock will upon delivery be duly and validly issued and fully paid
and nonassessable, free of all liens and charges and not subject to any
preemptive rights.
If permitted by the rules of the New York Stock Exchange, the Corporation
will list and keep listed so long as the Common Stock shall be so listed on
such exchange, all shares of Common Stock issuable upon redemption of the
shares of Convertible Preferred Stock.
(5) Conversion.
(a) Right of Conversion. Subject to and upon compliance with the provisions
of this Section 5, each share of Convertible Preferred Stock shall, at the
option of the holder thereof, be convertible at any time (unless such share is
called for redemption, then to and including but not after 5:00 p.m. (New York
City time) on the business day immediately prior to the date fixed for such
redemption, unless the Corporation shall default in payment due upon redemption
thereof), into that number of fully paid and non-assessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share)
obtained by dividing $50.00 by the Conversion Price (as defined in Section
5(d)) in effect at such time and by surrender of such share so to be converted
in the manner provided in Section 5(b).
(b) Manner of Exercise of Conversion Privilege. In order to exercise the
conversion privilege, the holder of one or more shares of Convertible Preferred
Stock to be converted shall surrender such shares at any of the offices or
agencies to be maintained for such purpose by the Corporation accompanied by
the funds, if any, required by the last paragraph of this Section 5(b) and
shall give written notice of conversion in the form provided on such shares of
Convertible Preferred Stock (or such other notice as is reasonably acceptable
to the Corporation) to the Corporation at such office or agency that the holder
elects to convert the shares of Convertible Preferred Stock specified in said
notice. Such notice shall also state the name or names, together with address
or addresses, in which the certificate or certificates for shares of Common
Stock which shall be issuable on such conversion shall be issued. Each share of
Convertible Preferred Stock surrendered for conversion, unless the shares
issuable on conversion are to be issued in the same name as the name in which
such share of Convertible Preferred Stock is registered, shall be accompanied
by instruments of transfer, in form satisfactory to the Corporation, duly
executed by the holder or such holder's duly authorized attorney and an amount
sufficient to pay any transfer or similar tax. As promptly as practicable after
the surrender of such shares of Convertible Preferred Stock and the receipt of
such notice, instruments of transfer and funds, if any, as aforesaid, the
Corporation shall issue and shall deliver at such office or agency to such
holder, or on his written order, a certificate or certificates for the number
of full shares of Common Stock issuable upon the conversion of such shares of
Convertible Preferred Stock in accordance with the provisions of this Section 5
and a check or cash in respect of any fractional interest in a share of Common
Stock arising upon such conversion, as provided in Section 5(c).
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the business day following the date on which such
shares of Convertible Preferred Stock shall have been surrendered and such
notice (and any applicable instruments of transfer and any required taxes)
received by the Corporation as aforesaid, and the person or persons in whose
name or names any certificate or certificates for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date,
and such conversion shall be at the Conversion Price in effect at such time on
such date, unless the stock transfer books of the Corporation shall be closed
on that date, in which event such person or persons shall be deemed to have
become such holder or holders of record at the close of business on the next
succeeding day on which such stock transfer books are open, but such conversion
shall be at the Conversion Price in effect on the twentieth business day
following the date upon which such shares of Convertible Preferred Stock shall
have been surrendered and such notice received by the Corporation.
Any shares of Convertible Preferred Stock surrendered for conversion during
the period from the close of business on the record date for any dividend
payment to the opening of business on the related Dividend
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Payment Date (unless such shares of Convertible Preferred Stock shall have been
called for redemption on a date in such period) shall be accompanied by
payment, in funds acceptable to the Corporation, of an amount equal to the
dividend otherwise payable on such Dividend Payment Date; provided, however,
that no such payment need be made if there shall exist at the time of
conversion a default in the payment of dividends on the shares of Convertible
Preferred Stock. An amount of cash equal to such payment shall be paid by the
Corporation on such Dividend Payment Date to the holder of such shares of
Convertible Preferred Stock at the close of business on such record date,
notwithstanding any election by the Corporation to pay such dividend in Common
Stock in lieu of cash and notwithstanding the conversion of such shares of
Convertible Preferred Stock; provided, however, that if the Corporation shall
default in the payment of dividends on such Dividend Payment Date, such amount
shall be paid to the person who made such required payment. Except as provided
for above in this Section, no adjustment shall be made for dividends accrued on
any shares of Convertible Preferred Stock converted or for dividends on any
shares issued upon the conversion of such shares as provided in this Section.
(c) Cash Payments in Lieu of Fractional Shares. No fractional shares or scrip
representing fractions of shares of Common Stock shall be issued upon
conversion of Convertible Preferred Stock. If more than one share of
Convertible Preferred Stock shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate of $50.00
for each such share so surrendered. In lieu of any fractional interest in a
share of Common Stock which would otherwise be deliverable upon the conversion
of any share of Convertible Preferred Stock, the Corporation shall pay to the
holder of such shares an amount in cash (computed to the nearest cent) equal to
the average Closing Price per share of Common Stock as calculated for the
Trading Period ending on the fifth trading day prior to the day of conversion
multiplied by the fractional interest in a share of Common Stock that otherwise
would have been deliverable upon conversion of such share.
(d) Adjustment of Conversion Price. The "Conversion Price" shall mean and be
$8.265, subject to adjustment from time to time by the Corporation as follows:
(i) In case the Corporation shall (A) pay a dividend or make a
distribution on its Common Stock in shares of Common Stock (other than
pursuant to a dividend reinvestment or similar plan), (B) subdivide its
outstanding shares of Common Stock into a greater number of shares, (C)
combine its outstanding shares of Common Stock into a smaller number of
shares, or (D) issue by reclassification of its Common Stock any shares of
capital stock of the Corporation, then in each such case the Conversion
Price in effect immediately prior to such action shall be adjusted so that
the holder of any share of Convertible Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other capital stock of the Corporation which he
would have owned or been entitled to receive immediately following such
action had such share been converted immediately prior to the occurrence of
such event. An adjustment made pursuant to this subsection (i) shall become
effective immediately after the record date, in the case of a dividend or
distribution, or immediately after the effective date, in the case of a
subdivision, combination or reclassification. If, as a result of an
adjustment made pursuant to this subsection (i), the holder of any share of
Convertible Preferred Stock thereafter surrendered for conversion shall
become entitled to receive shares of two or more classes of capital stock
or shares of Common Stock and other capital stock of the Corporation, the
Audit Committee of the Board of Directors of the Corporation (whose
reasonable determination shall be conclusive, except for arithmetic errors,
and shall be described in a statement filed by the Corporation with the
stock transfer or conversion agent, as appropriate) shall determine the
equitable allocation of the adjusted Conversion Price between or among
shares of such classes of capital stock or shares of Common Stock and other
capital stock.
(ii) In case the Corporation shall issue rights, options or warrants to
all holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less
than the current market price per share (as determined pursuant to
subsection (iv) of this Section 5(d)) of the Common Stock (other than
pursuant to any stock option, restricted stock or other
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incentive or benefit plan or stock ownership or purchase plan for the
benefit of employees, directors or officers or any dividend reinvestment
plan of the Corporation in effect at the time hereof or any other similar
plan adopted or implemented hereafter), then with respect to any conversion
prior to the expiration of such rights, options or warrants, the Conversion
Price in effect immediately prior thereto shall be adjusted so that it
shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of issuance of such rights, options or
warrants by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights, options
or warrants (immediately prior to such issuance) plus the number of shares
which the aggregate offering price of the total number of shares so offered
would purchase at such current market price, and of which the denominator
shall be the number of shares of Common Stock outstanding on the date of
issuance of such rights, options or warrants (immediately prior to such
issuance) plus the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be made successively
whenever any rights, options or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants;
provided, however, in the event that all the shares of Common Stock offered
for subscription or purchase are not delivered upon the exercise of such
rights, options or warrants, upon the expiration of such rights, options or
warrants the Conversion Price shall be readjusted to the Conversion Price
which would have been in effect had the numerator and the denominator of
the foregoing fraction and the resulting adjustment been made based upon
the number of shares of Common Stock actually delivered upon the exercise
of such rights, options or warrants rather than upon the number of shares
of Common Stock offered for subscription or purchase. In determining
whether any rights, options or warrants entitle the holders to subscribe
for or purchase shares of Common Stock at less than such current market
price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received
by the Corporation for such rights, options or warrants, the value of such
consideration, if other than cash, to be determined by the Audit Committee
of the Board of Directors of the Corporation (whose reasonable
determination shall be conclusive, except for arithmetic errors, and shall
be described in a statement filed by the Corporation with the stock
transfer or conversion agent, as appropriate).
(iii) In case the Corporation shall, by dividend or otherwise, distribute
to all holders of its outstanding Common Stock, evidences of its
indebtedness or assets (including securities and cash, but excluding any
cash dividend of the Corporation paid out of retained earnings and
dividends or distributions payable in stock pursuant to a dividend
reinvestment or similar plan or for which adjustment is made pursuant to
subsection (i) of this Section 5(d)) or rights, options or warrants to
subscribe for or purchase securities of the Corporation (excluding those
referred to in subsection (ii) of this Section 5(d)), then in each such
case the Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Conversion Price in effect
immediately prior to the record date of such distribution by a fraction of
which the numerator shall be the current market price per share of the
Common Stock as determined pursuant to subsection (iv) of this Section 5(d)
less the fair market value on such record date (as determined by the Audit
Committee of the Board of Directors of the Corporation, whose reasonable
determination shall be conclusive, except for arithmetic errors, and shall
be described in a statement filed by the Corporation with the stock
transfer or conversion agent, as appropriate) of the portion of the capital
stock or assets or the evidences of indebtedness or assets so distributed
to the holder of one share of Common Stock or of such subscription rights,
options or warrants applicable to one share of Common Stock, and of which
the denominator shall be such current market price per share of Common
Stock. Such adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(iv) For the purpose of any computation under subsections (ii) and (iii)
of this Section 5(d), the current market price per share of Common Stock on
any date shall be deemed to be the average of the Closing Price for the
shorter of (A) 30 consecutive trading days ending on the last full trading
day prior to the Time of Determination or (B) the period commencing on the
date next succeeding the first public announcement of the issuance of such
rights, options or warrants or such distribution through such last
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full trading day prior to the Time of Determination. For purposes of the
foregoing, the term "Time of Determination" shall mean the time and date of
the earlier of (I) the record date for determining stockholders entitled to
receive the rights, options, warrants or distributions referred to in
Section 5(d) (ii) and (iii) or (II) the commencement of "ex-dividend"
trading on the exchange or market referred to in the definition of "Closing
Price" in Section 3.
(v) In any case in which this Section 5(d) shall require that an
adjustment be made immediately following a record date or an effective
date, the Corporation may elect to defer (but only until the filing by the
Corporation with the stock transfer or conversion agent, as the case may
be, of the certificate required by subsection (vii) of this Section 5(d))
issuing to the holder of any share of Convertible Preferred Stock converted
after such record date or effective date the shares of Common Stock
issuable upon such conversion over and above the shares of Common Stock
issuable upon such conversion on the basis of the Conversion Price prior to
adjustment, and paying to such holder any amount of cash in lieu of a
fractional share.
(vi) No adjustment in the Conversion Price shall be required to be made
unless such adjustment would require an increase or decrease of at least 1%
of such price; provided, however, that any adjustments which by reason of
this subsection (vi) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under
this Section 5(d) shall be made to the nearest cent or to the nearest
1/100th of a share, as the case may be. Anything in this Section 5(d) to
the contrary notwithstanding, the Corporation shall be entitled to make
such reduction in the Conversion Price, in addition to those required by
this Section 5(d), as it in its discretion shall determine to be advisable
in order that any stock dividend, subdivision of shares, distribution of
rights to purchase stock or securities, or distribution of securities
convertible into or exchangeable for stock hereafter made by the
Corporation to its stockholders shall not be taxable to the recipients.
Except as set forth in subsections (i), (ii) and (iii) above, the
Conversion Price shall not be adjusted for any such event including,
without limitation, the issuance of Common Stock, or any securities
convertible into or exchangeable for Common Stock or carrying the right to
purchase any of the foregoing, in exchange for cash, property or services.
(vii) Whenever the Conversion Price is adjusted as herein provided, (A)
the Corporation promptly shall file with the stock transfer or conversion
agent, as appropriate, a certificate setting forth the Conversion Price
after such adjustment and a brief statement of the facts requiring such
adjustment and the manner of computing the same, which certificate shall be
conclusive evidence of the correctness of such adjustment, except for
arithmetic errors, and (B) the Corporation also shall deliver or mail, or
cause to be delivered or mailed by first class mail, postage prepaid, as
soon as practicable to each holder of record of shares of Convertible
Preferred Stock a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price. The stock
transfer or conversion agent, as the case may be, shall not be under any
duty or responsibility with respect to the certificate required by this
subsection (vii) except to exhibit the same to any holder of shares of
Convertible Preferred Stock who requests to inspect it.
(viii) In the event that at any time, as a result of an adjustment made
pursuant to subsection (i) of this Section 5(d), the holder of any share of
Convertible Preferred Stock thereafter surrendered for conversion shall
become entitled to receive any shares of the Corporation other than shares
of Common Stock, thereafter the Conversion Price of such other shares so
receivable upon conversion of any share of Convertible Preferred Stock
shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to
Common Stock contained in this Section.
(ix) The Corporation from time to time may decrease the Conversion Price
by any amount for any period of time if the period is at least 20 days and
if the decrease is irrevocable during the period. Whenever the Conversion
Price is so decreased, the Corporation shall deliver or mail to holders of
record of shares of Convertible Preferred Stock a notice of the decrease at
least 15 days before the date the
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decreased Conversion Price takes effect, and such notice shall state the
decreased Conversion Price and the period it will be in effect.
(e) Notice to Holders Prior to Certain Corporate Actions. In case:
(i) the Corporation shall take any action which would require an
adjustment in the Conversion Price pursuant to Section 5(d)(iii); or
(ii) the Corporation shall authorize the granting to the holders of
its Common Stock generally of rights, options or warrants to subscribe
for or purchase any shares of stock of any class or of any other
rights; or
(iii) there shall be any reorganization or reclassification of the
Common Stock (other than a subdivision or combination of the
outstanding Common Stock and other than a change in the par value of
the Common Stock), or any consolidation or merger to which the
Corporation is a party or any statutory exchange of securities with
another corporation and for which approval of any stockholders of the
Corporation is required, or any sale, lease or transfer of all or
substantially all of the assets of the Corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
then in each such case the Corporation shall cause to be delivered or mailed by
first class mail, postage prepaid, to the holders of shares of Convertible
Preferred Stock and the stock transfer or conversion agent, as appropriate, as
promptly as possible, but in any event at least 20 days prior to the applicable
date hereinafter specified, a written notice stating (i) the date on which a
record is to be taken for the purpose of such action or granting of rights,
options or warrants, or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such distribution,
rights, options or warrants are to be determined, or (ii) the date on which
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale, lease, transfer, dissolution, liquidation or winding-up is
expected to become effective or occur, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable upon
such reorganization, reclassification, consolidation, merger, statutory
exchange, sale, lease, transfer, dissolution, liquidation or winding-up.
Failure to give such notice or any defect therein shall not affect the legality
or validity or the proceedings described in subsection (i), (ii), (iii) or (iv)
of this Section 5 (e).
(f) Reservation of Shares of Common Stock. The Corporation covenants that it
will, at all times, reserve and keep available, free from preemptive rights,
out of the aggregate of its authorized but unissued shares of Common Stock for
the purpose of effecting conversions of shares of Convertible Preferred Stock,
the full number of shares of Common Stock deliverable upon the conversion of
all outstanding shares of Convertible Preferred Stock not theretofore converted
and on or before (and as a condition of) taking any action that would cause an
adjustment of the Conversion Price resulting in an increase in the number of
shares of Common Stock deliverable upon conversion above the number thereof
previously reserved and available therefor, the Corporation shall take all such
action so required. For purposes of this Section 5(f), the number of shares of
Common Stock which shall be deliverable upon the conversion of all outstanding
shares of Convertible Preferred Stock shall be computed as if at the time of
computation all outstanding shares of Convertible Preferred Stock were held by
a single holder.
Before taking any action that would cause an adjustment reducing the
Conversion Price below the then par value (if any) of the shares of Common
Stock deliverable upon conversion of the shares of Convertible Preferred Stock,
the Corporation shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of Common Stock at such adjusted
Conversion Price.
(g) Transfer Taxes, Etc. The Corporation shall pay any and all documentary
stamp, issue or transfer taxes, and any other similar taxes payable in respect
of the issue or delivery of shares of Common Stock upon
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conversion of shares of Convertible Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issue or delivery of shares
of Common Stock in a name other than that of the holder of the shares of
Convertible Preferred Stock to be converted and no such issue or delivery shall
be made unless and until the person requesting such issue or delivery has paid
to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(h) Consolidation or Merger or Sale of Assets. Notwithstanding any other
provision herein to the contrary, in case of any consolidation or merger to
which the Corporation is a party (other than a merger or consolidation in which
the Corporation is the continuing corporation and in which the Common Stock
outstanding immediately prior to the merger or consolidation is not exchanged
for cash, or the securities or other property of another corporation), or in
case of any sale, lease or transfer to another corporation of the property of
the Corporation as an entirety or substantially as an entirety, then lawful
provision shall be made by the corporation formed by such consolidation or the
corporation whose securities, cash or other property immediately after the
merger or consolidation will be owned, by virtue of the merger or
consolidation, by the holders of Common Stock immediately prior to the merger
or consolidation, or the corporation which shall have acquired such assets or
securities of the Corporation (collectively the "Formed, Surviving or Acquiring
Corporation"), as the case may be, providing that the holder of each share of
Convertible Preferred Stock then outstanding shall have the right thereafter to
convert such share into the kind and amount of securities, cash or other
property receivable upon such consolidation, merger, sale, lease or transfer by
a holder of the number of shares of Common Stock into which such share of
Convertible Preferred Stock might have been converted immediately prior to such
consolidation, merger, sale, lease or transfer assuming such holder of Common
Stock did not exercise his rights of election, if any, as to the kind or amount
of securities, cash or other property receivable upon such consolidation,
merger, sale, lease or transfer (provided that, if the kind or amount of
securities, cash or other property receivable upon such consolidation, merger,
sale, lease or transfer is not the same for each share of Common Stock in
respect of which such rights of election shall not have been exercised ("non-
electing share"), then for the purposes of this Section 5(h) the kind and
amount of securities, cash or other property receivable upon such
consolidation, merger, sale, lease or transfer for each nonelecting share shall
be deemed to be the kind and amount so receivable per share by a plurality of
the non-electing shares). The Formed, Surviving or Acquiring Corporation, as
the case may be, shall make provision in its certificate or articles of
incorporation or other constituent documents to the end that the provisions set
forth in this Section 5(h) shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the conversion of the
Convertible Preferred Stock.
The above provisions of this Section 5(h) shall similarly apply to successive
consolidations, mergers, sales, leases or transfers.
(i) Covenant as to Common Stock. The Corporation covenants that all shares of
Common Stock which may be delivered upon conversions of shares of Convertible
Preferred Stock will upon delivery be duly and validly issued and fully paid
and nonassessable, free of all liens and charges and not subject to any
preemptive rights.
If permitted by the rules of the New York Stock Exchange, the Corporation
will list and keep listed so long as the Common Stock shall be so listed on
such exchange, all Common Stock issuable upon conversion of the shares of
Convertible Preferred Stock.
(j) Limitation on Number of Shares Issuable Upon Conversion. Notwithstanding
any other provision of this Section 5 to the contrary, the maximum number of
shares of Common Stock that the Corporation may issue upon conversion of the
Convertible Preferred Stock shall be 12,099,213 shares, as such amount shall be
increased or decreased from time to time by the Audit Committee of the Board of
Directors of the Corporation in connection with any adjustment to the
Conversion Price pursuant to Section 5(d) and as such amount further may be
reduced in accordance with this paragraph. In the case of the conversion of
shares of
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Convertible Preferred Stock that would result in the issuance of shares of
Common Stock that, when added to the number of shares of Common Stock issued
(i) in connection with the redemption of any shares of Convertible Preferred
Stock previously redeemed in accordance with Section 4, (ii) in connection with
the conversion of any shares Convertible Preferred Stock previously converted
in accordance with this Section 5, and (iii) as a dividend on the shares of
Convertible Preferred Stock previously paid pursuant to Section 2, would be
greater than 12,099,213 shares, the Corporation shall pay an amount of cash in
lieu of such shares of Common Stock in excess of 12,099,213 shares equal to the
Conversion Price, as the same may be in effect at such time, multiplied by the
number of shares of Common Stock in excess of 12,099,213 shares that would
otherwise have been issuable but for this paragraph. Each such cash payment
shall be made in twelve consecutive substantially equal quarterly payments,
commencing on the last business day of the calendar quarter immediately
subsequent to the date such shares of Convertible Preferred Stock have been
surrendered for conversion.
(6) Voting Rights.
(a) General. The holders of Convertible Preferred Stock shall not have any
voting rights except as set forth below or as otherwise from time to time
required by law. In connection with any right to vote, each holder of
Convertible Preferred Stock will have one vote for each share held. Any shares
of Convertible Preferred Stock held by the Corporation or any entity controlled
by the Corporation shall not have voting rights hereunder and shall not be
counted in determining the presence of a quorum.
(b) Default Voting Rights. Whenever dividends on the Convertible Preferred
Stock shall be in arrears in an amount equal to at least three semi-annual
dividend payments (whether or not consecutive), (i) the number of members of
the Board of Directors of the Corporation shall be increased by two, effective
as of the time of election of such directors as hereinafter provided, and (ii)
the holders of the Convertible Preferred Stock (voting separately as a class)
will have the exclusive right to vote for and elect such two additional
directors of the Corporation at any meeting of stockholders of the Corporation
at which directors are to be elected held during the period such dividends
remain in arrears. The right of the holders of the Convertible Preferred Stock
to vote for such two additional directors shall terminate when all accrued and
unpaid dividends on the Convertible Preferred Stock have been declared and paid
or set apart for payment. The term of office of all directors so elected shall
terminate immediately upon the termination of the right of the holders of the
Convertible Preferred Stock and such Parity Dividend Stock to vote for such two
additional directors.
The foregoing right of the holders of the Convertible Preferred Stock with
respect to the election of two directors may be exercised at any annual meeting
of stockholders or at any special meeting of stockholders held for such
purpose. If the right to elect directors shall have accrued to the holders of
the Convertible Preferred Stock more than 90 days preceding the date
established for the next annual meeting of stockholders, the President of the
Corporation shall, within 20 days after the delivery to the Corporation at its
principal office of a written request for a special meeting signed by the
holders of at least ten percent (10%) of the Convertible Preferred Stock then
outstanding, call a special meeting of the holders of the Convertible Preferred
Stock to be held within 60 days after the delivery of such request for the
purpose of electing such additional directors.
The holders of the Convertible Preferred Stock and any Parity Dividend Stock
referred to above voting as a class shall have the right to remove without
cause at any time and replace any directors such holders have elected pursuant
to this Section 6.
(c) Class Voting Rights. So long as the Convertible Preferred Stock is
outstanding, the Corporation shall not, without the affirmative vote or consent
of the holders of at least 66 2/3 percent of all outstanding shares of
Convertible Preferred Stock (unless the vote or consent of a greater percentage
is required by applicable law or the Restated Certificate of Incorporation, as
amended, of the Corporation), voting separately as a class, (i) amend, alter or
repeal (by merger, consolidation or otherwise) any provision of the
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Restated Certificate of Incorporation, as amended, or the Bylaws of the
Corporation, as amended, so as to affect adversely the relative rights,
preferences, qualifications, limitations or restrictions of the Convertible
Preferred Stock, (ii) authorize or issue, or increase the authorized amount of,
any additional class or series of stock, or any security convertible into stock
of such class or series, ranking prior to the Convertible Preferred Stock in
respect of the payment of dividends or upon liquidation, dissolution or winding
up of the Corporation or (iii) effect any reclassification of the Convertible
Preferred Stock. A class vote on the part of the Convertible Preferred Stock,
without limitation, specifically shall not be deemed to be required (except as
otherwise required by law or resolution of the Board of Directors of the
Corporation) in connection with: (a) the authorization, issuance or increase in
the authorized amount of any shares of any other class or series of stock that
ranks junior to, or on a parity with, the Convertible Preferred Stock in
respect of the payment of dividends and upon liquidation, dissolution or
winding up of the Corporation; or (b) the authorization, issuance or increase
in the amount of any notes, bonds, mortgages, debentures or other obligations
of the Corporation not convertible into or exchangeable, directly or
indirectly, for stock ranking prior to the Convertible Preferred Stock in
respect of the payment of dividends or upon liquidation, dissolution or winding
up of the Corporation.
(7) Outstanding Shares. For purposes of this Certificate of Designations, all
shares of Convertible Preferred Stock shall be deemed outstanding except (i)
from the date fixed for redemption pursuant to Section 4, all shares of
Convertible Preferred Stock that have been so called for redemption under
Section 4 if shares of Common Stock or cash necessary for payment of the
Redemption Price irrevocably have been set aside; (ii) from the date of
surrender of certificates representing shares of Convertible Preferred Stock,
all shares of Convertible Preferred Stock converted into Common Stock; and
(iii) from the date of registration of transfer, all shares of Convertible
Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.
(8) No Other Rights and Powers. The shares of Convertible Preferred Stock
shall not have any relative, participating, optional or other special rights
and powers other than as set forth herein.
(9) Preemptive Rights. The Convertible Preferred Stock is not entitled to any
preemptive or subscription rights in respect of any securities of the
Corporation.
(10) Transfer Restrictions.
(a) Legends on Convertible Preferred Stock.
(i) The certificates evidencing shares of Convertible Preferred Stock
shall, until the third anniversary of the date of original issuance of
such shares, unless otherwise agreed by the Corporation and the holders
of any such certificates, bear a legend substantially to the following
effect:
"This Security (or its predecessor) is subject to, and is
transferable only upon compliance with, the provisions of a
Revolving Credit Agreement, dated as of April 15, 1994 among Amax
Gold Inc. and Cyprus Amax Minerals Company. A copy of the above
referenced Revolving Credit Agreement is on file at the offices of
Amax Gold Inc. This Security (or its predecessor) has not been
registered under the Securities Act of 1933, as amended, or any
similar state securities laws, and this Security and any shares of
common stock issued upon conversion or redemption hereof may not be
transferred except pursuant to an effective registration statement,
or an exemption from registration, under said act and laws. Amax
Gold Inc. will furnish without charge to the holder hereof, upon
request, the powers, designations, preferences and relative
participating, optional or other special rights of the class of
capital stock represented hereby, and the qualifications limitations
or restrictions of such preferences and/or rights."
Until the third anniversary of the date of original issuance of the
shares of Convertible Preferred Stock, certificates representing the
shares of Common Stock issued upon conversion or redemption of
Convertible Preferred Stock and not otherwise registered pursuant to an
effective
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registration statement under the Securities Act shall bear a comparable
legend. The shares of Convertible Preferred Stock and the shares of
Common Stock issued upon conversion or redemption thereof and not
otherwise registered pursuant to an effective registration statement
under the Securities Act shall be subject to the restrictions on
transfer set forth in the legends referred to above until the third
anniversary of the date of original issuance of such shares of
Convertible Preferred Stock; provided, however, and notwithstanding the
foregoing, such shares of Convertible Preferred Stock and such shares
of Common Stock may be resold under and pursuant to the terms and
conditions of Regulation S of the Securities Act, prior to the end of
the third anniversary date of the issuance of such shares.
(ii) The certificates evidencing shares of Convertible Preferred
Stock (and shares of Common Stock issued upon conversion thereof and
not otherwise registered pursuant to an effective registration
statement under the Securities Act) issued to any "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is not a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act shall bear, until such
time as the Corporation and the transfer agent for the Convertible
Preferred Stock or Common Stock shall have received evidence
satisfactory to each of them that the transfer of such shares of
Convertible Preferred Stock or Common Stock has been effected in
accordance with the limitations on transfer set forth in paragraph
(a)(1) above, the following additional legend:
"In connection with any transfer, the holder will deliver to the
registrar and transfer agent such certificates, opinions of counsel
and other information as it may reasonably require to confirm that
the transfer complies with the foregoing restrictions."
(b) Transfer Agent Requirements. The transfer agent and registrar for the
Convertible Preferred Stock and the transfer agent and registrar for the
Common Stock shall not be required to accept for registration of transfer
any Convertible Preferred Stock or Common Stock bearing the legend
contained in paragraph (a)(ii) above, except upon presentation of
satisfactory evidence that the restrictions on transfer of the Convertible
Preferred Stock or Common Stock referred to in the legend in paragraph
(a)(i) have been complied with, all in accordance with such reasonable
regulations and procedures as the Corporation may from time to time agree
with the transfer agent and registrar for the Convertible Preferred Stock
and the transfer agent and registrar for the Common Stock.
(11) Severability of Provisions. Whenever possible, each provision hereof
shall be interpreted in a manner as to be effective and valid under applicable
law, but if any provision hereof is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise adversely
affecting the remaining provisions hereof. If a court of competent jurisdiction
should determine that a provision hereof would be valid or enforceable if a
period of time were extended or shortened or a particular percentage were
increased or decreased, then such court may make such change as shall be
necessary to render the provision in question effective and valid under
applicable law.
"FURTHER RESOLVED, that each officer of the Corporation hereby is authorized,
in the name and on behalf of the Corporation, to prepare, execute, seal and
file, or cause to be prepared, executed, sealed and filed, the Certificate of
Designations relating to the Convertible Preferred Stock in accordance with the
Delaware General Corporation Law and to take any and all such action with
respect thereto that such officer of the Corporation shall deem necessary or
advisable;
"FURTHER RESOLVED, that each officer of the Corporation hereby is authorized,
in the name and on behalf of the Corporation, to execute and deliver, or cause
to be made, executed and delivered, all such officers' certificates and such
other agreements, undertakings, documents or instruments and to perform such
other acts as such officer may deem necessary or appropriate in order to
effectuate the purpose and intent of these resolutions; and
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed in its name by Mark A. Lettes, its Senior Vice President or Vice
President and Chief Financial Officer, and attested by its Secretary, this 10th
day of May, 1994.
Amax Gold Inc.
By /s/ Mark A. Lettes
----------------------------------
[Name:] Mark A. Lettes
--------------------------
[Title:] Vice President and
-------------------------
Chief Financial Officer
--------------------------------
Attest:
By /s/Paul J. Hemschoot, Jr.
--------------------------
Paul J. Hemschoot, Jr.
Secretary
D-16
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Amax Gold Inc.:
We have audited the accompanying consolidated statements of financial
position of Amax Gold Inc. and Subsidiaries (the Company) as of December 31,
1993 and 1992, and the related consolidated statements of operations, changes
in capital stock, paid-in capital and retained earnings and cash flows for each
of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Amax Gold Inc. and Subsidiaries as of December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, during 1993
the Company changed its method of accounting for exploration expenditures and
postemployment benefits. As also discussed in Note 1 to the consolidated
financial statements, during 1992 the Company changed its method of accounting
for precious metals inventory, postretirement benefits and income taxes.
Coopers & Lybrand
Denver, Colorado
February 4, 1994 except for
Note 8 for which the date is
March 18, 1994.
AMAX GOLD INC.
SOLICITED BY THE BOARD OF DIRECTORS OF AMAX GOLD INC.
STOCKHOLDER'S PROXY
The undersigned hereby appoints Roger A. Kauffman, Mark A. Lettes and Paul J.
Hemschoot, Jr., or any one or more of them, each with full power of
substitution, the proxy or proxies of the undersigned to vote the shares of
Common Stock of Amax Gold Inc. which the undersigned would be entitled to vote
if personally present at the Special Meeting of Stockholders of Amax Gold Inc.
to be held on Tuesday, July 26, 1994, at 9:00 a.m., at the offices of the
Company, 9100 East Mineral Circle, Englewood, Colorado, and at any and all
adjournments or postponements thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
The shares represented by this proxy, which Please mark
revokes all prior proxies, will be voted as [ X ] your votes
directed by the stockholder. If no direction like this
is given, such shares will be voted "FOR"
the Proposal.
-------------- ---------------------------
COMMON Dividend Reinvestment
The undersigned, as the record holder of shares of common stock, par value
$.01 per share (the "Common Stock"), of Amax Gold Inc., a Delaware corporation
(the "Company"), hereby votes all of the shares of the Company's Common Stock
of which the undersigned is the record holder on June 24, 1994 as follows:
PROPOSAL [ ] FOR [ ] AGAINST
Two agreements between the Company and Cyprus Amax Minerals Company, a
Delaware corporation ("Cyprus"), and the transactions contemplated thereby:
(i) a $100 million double convertible revolving credit agreement, dated as of
April 15, 1994, entered into by AGI and Cyprus, pursuant to which Cyprus will
provide a line of credit of $100 million, under which any indebtedness may be
repaid by AGI's issuance of up to 2,000,000 shares of the Company's $2.25
Series A Convertible Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), and such shares of Preferred Stock may be converted by
Cyprus at any time into up to 12,099,213 shares of the Common Stock at a
conversion price of $8.265 per share; and (ii) a stock purchase agreement,
dated as of April 15, 1994, between AGI and Cyprus, which provides for the
purchase by Cyprus of 3,000,000 shares of Common Stock for a purchase price of
approximately $20.7 million which will be used to repay that amount of
indebtedness of AGI to Cyprus; such approval shall include but not be limited
to the authorization and issuance to Cyprus up to 2,000,000 shares of
Preferred Stock and up to 12,099,213 shares of Common Stock under the DOC LOC
Agreement and of 3,000,000 shares of Common Stock under the Stock Purchase
Agreement; all as more fully disclosed in the Proxy Statement dated June ,
1994.
The undersigned acknowledges receipt of the Proxy Statement.
If the undersigned has failed to check a box marked "FOR" or "AGAINST" for
the Proposal, the undersigned agrees that he, she or it shall be deemed to
have VOTED FOR the actions described in the Proposal.
X ___________________________________________
(Signature of Stockholder)
X ___________________________________________
(Signature of Stockholders if held jointly)
Date ________________________________________
(Please date this Proxy)
NOTE: Your signature should appear as your
name appears hereon. In signing as
attorney, executor, administrator, trustee
or guardian, indicate such capacity. All
joint tenants should sign. When the proxy
is given by a corporation, it should be
signed by an authorized officer. The
Company requests that you sign and date
the proxy and return it in the enclosed
postpaid envelope.
THIS PROXY IS BEING SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS.
IMPORTANT--YOUR PROXY WILL NOT BE VALID IF IT IS NOT SIGNED, DATED
AND RECEIVED BY CHEMICAL BANK AT OR PRIOR TO THE SPECIAL MEETING.