STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CHIEF CONSOLIDATED MINING COMPANY
AND
DIMELING, SCHREIBER & PARK
2
TABLE OF CONTENTS
SECTION
PAGE(S)
- -------
-------
1.
DEFINITIONS.....................................................................
................3
2. TRANSACTIONS AND
CLOSING........................................................................7
2.1 SALE AND PURCHASE OF THE CONVERTIBLE COMMON
STOCK......................................7
2.2 DESCRIPTION OF
TRANCHES................................................................7
2.3 ASSIGNMENT OF RIGHT TO PURCHASE
SHARES.................................................8
2.4 REGISTRATION
RIGHTS....................................................................8
2.5
WARRANT.........................................................................
.......8
2.6
CERTIFICATES....................................................................
.......9
2.7 CONDITIONS OF
CLOSING..................................................................9
(a) Tranche A Closing
Conditions..................................................9
(b) Tranche B Closing
Conditions.................................................10
2.8 FAILURE TO MEET OR WAIVER OF CLOSING
CONDITIONS.......................................11
(a) Tranche B Closing
Conditions.................................................11
(b) Redemption of Tranche A
Stock................................................11
3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY..................................................12
3.1
CAPITALIZATION..................................................................
......12
3.2 CONSENTS, AUTHORIZATIONS AND BINDING
EFFECT...........................................12
3.3 ORGANIZATION AND
STANDING.............................................................13
3.4 EQUITY INVESTMENTS;
SUBSIDIARIES......................................................13
3.5 FINANCIAL
STATEMENTS..................................................................13
3.6 ACCOUNTS RECEIVABLE AND ACCOUNTS
PAYABLE..............................................14
3.7
ASSETS..........................................................................
......15
3.8 PATENTS, TRADEMARKS AND COPYRIGHTS,
ETC...............................................15
3.9
LITIGATION......................................................................
......15
3.10
TAXES...........................................................................
......16
3.11 CONTRACTS AND
COMMITMENTS.............................................................17
3.12 COMPLIANCE WITH LAW; PERMITS AND AUTHORIZATIONS; ENVIRONMENTAL
AND SAFETY MATTERS.....18
3.13 USE OF
PROCEEDS.......................................................................2
0
3.14 NO CONSENT OR APPROVAL
REQUIRED.......................................................20
3.15
BROKERS.........................................................................
......20
3.16 EMPLOYEE BENEFIT
PLANS................................................................20
3.17
DISCLOSURE......................................................................
......22
3.18 BOOKS AND
RECORDS.....................................................................23
3.19 INVESTMENT
COMPANY....................................................................23
3.20 REGISTRATION
RIGHTS...................................................................23
3.21
INSURANCE.......................................................................
......23
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3
3.22
EMPLOYEES.......................................................................
......23
3.23 REAL
ESTATE..........................................................................
.23
4. COVENANTS OF THE
COMPANY.......................................................................25
4.1 SHAREHOLDER
APPROVAL..................................................................25
4.2 DIVIDENDS AND
DIRECTORS...............................................................25
4.3 CONDUCT OF THE
BUSINESS...............................................................26
4.4 FULL
ACCESS..........................................................................
.26
4.5 PREEMPTIVE
RIGHTS.....................................................................26
5. REPRESENTATIONS AND WARRANTIES OF THE
INVESTOR.................................................27
5.1 ORGANIZATION, STANDING,
ETC...........................................................27
5.2 ACTS AND PROCEEDINGS; ENFORCEABILITY OF
AGREEMENTS....................................27
5.3 NO BROKERS OR
FINDERS.................................................................27
5.4 RESTRICTED
SECURITIES.................................................................27
5.5 INVESTMENT
INTENT.....................................................................28
5.6 SOPHISTICATED
INVESTOR................................................................28
6.
INDEMNIFICATION.................................................................
...............28
6.1
INDEMNIFICATION.................................................................
......28
6.2 CERTAIN
PROCEDURES....................................................................29
6.3 SURVIVAL OF REPRESENTATIONS AND
WARRANTIES............................................29
6.4 LIMITATIONS TO ASSERTION OF INDEMNITY CLAIMS FOR BREACH OF
REPRESENTATIONS AND
WARRANTIES......................................................................
......30
7.
MISCELLANEOUS...................................................................
...............30
7.1
EXPENSES........................................................................
......30
7.2 PUBLIC
ANNOUNCEMENTS..................................................................3
0
7.3 DESCRIPTIVE
HEADINGS..................................................................30
7.4
NOTICES.........................................................................
......30
7.5
COUNTERPARTS....................................................................
......31
7.6 GOVERNING
LAW.........................................................................31
7.7 WAIVERS AND
AMENDMENTS................................................................32
7.8 ENTIRE
AGREEMENT......................................................................3
2
7.9 SPECIFIC PERFORMANCE,
REMEDIES........................................................32
7.10
SEVERABILITY....................................................................
......32
7.11
INTERPRETATION..................................................................
......32
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of November 19, 1999 (this
"AGREEMENT"), is by and between CHIEF CONSOLIDATED MINING COMPANY, an Arizona
corporation, the common stock of which is publicly traded (the "Company"), and
DIMELING, SCHREIBER & PARK, a Pennsylvania general partnership (the "INVESTOR").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of owning, developing
and managing precious metal mining properties;
WHEREAS, the Company desires to raise capital for use in the funding of
operations of the Company's Trixie Property and the initial exploration and
development of the Homansville Property, and the Investor desires to provide
such funding subject to the conditions set forth herein;
WHEREAS, the Company desires to offer and sell to the Investor up to a
total of 8,500,000 shares ("SHARES") of the Company's Convertible Common Stock,
par value $0.50 per share ("CONVERTIBLE COMMON STOCK"), and the Investor wishes
to acquire all or part of such Shares in accordance with the terms and subject
to the conditions set forth in this Agreement; provided, however, that the
Investor's purchase of such Shares of the Convertible Common Stock shall be made
in two (2) installments, with the first installment of 3,500,000 shares (the
"TRANCHE A STOCK") being purchased for Seven Million Dollars ($7,000,000), and
the second installment of 5,000,000 shares (the "TRANCHE B STOCK") being
purchased for a total of Ten Million Dollars ($10,000,000);
WHEREAS, the Tranche A Stock will be purchased and sold at the Tranche
A Closing upon the satisfaction of the Tranche A Closing Conditions, and the
Tranche B Stock will be purchased and sold at the Tranche B Closing upon the
satisfaction of the Tranche B Closing Conditions;
WHEREAS, the Company desires to issue and the Investor desires to
accept the Warrant to purchase additional Convertible Common Stock upon the
terms and conditions set forth herein; and
WHEREAS, certain capitalized terms used herein have the meanings set
forth in Section 1 hereof.
NOW, THEREFORE, in consideration of the mutual promises and subject to
the terms and conditions set forth herein, the Company and the Investor,
intending to be legally bound, hereby agree as follows:
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DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Article I:
"AFFILIATE" of any particular Person means any other Person
which directly or indirectly controls, is controlled by, or is under common
control with such other Person, where "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person whether through the ownership of voting securities, by
contract or otherwise. Notwithstanding the foregoing, and except as otherwise
provided by the Securities act or other applicable law, in no event shall the
Company or any of its Affiliates be deemed an Affiliate of the Investor or any
of the Investor's Affiliates, nor shall the Investor or any of its Affiliates be
deemed an Affiliate of the Company or any of its Affiliates.
"AMENDMENT" - as defined in Section 2.7
"ASSIGNEES" - as defined in Section 2.3.
"BENEFIT PLANS" - as defined in Section 3.16.
"BUSINESS DAY" - any day other than a Saturday, Sunday, public
holiday under the laws of Arizona.
"CONVERTIBLE COMMON STOCK" - as defined in the Recitals.
"CLOSING" - as defined in Section 6.3.
"CLOSING DATE" - the date and time of which the Closing
actually takes place.
"COMMON STOCK" - as defined in Section 3.1.
"COMPANY" - as defined in the Recitals of this Agreement.
"DEFINED BENEFIT PLAN - as defined in Section 3.16.
"DESIGNATIONS" - as defined in Section 2.7.
"ENVIRONMENTAL LIEN" - any lien, whether recorded or
unrecorded, in favor of any governmental entity, relating to the
liability of the Company arising under any Environmental Law.
"ENVIRONMENTAL LAW" - any legal requirement, whether now
existing or subsequently enacted or amended, relating to (a)
pollution or protection of the environment, including natural
resources, (b) exposure of Persons, including but not limited to
employees, to Hazardous Materials, (c) protection of the public
health or welfare from the effects of products, by-products, wastes,
emissions, discharges, migration, or releases of Hazardous Materials
or (d) regulation of the manufacture,
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formulation, packaging, labeling, distribution, generation,
transportation, handling, treatment, storage or disposal. Without
limitation, "Environmental Law" shall also include (a) any Governmental
Authorization issued pursuant to any Environmental Law and the terms
and conditions thereof and (b) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C.
Sections 9601 et seq., the Resource Conservation and Recovery Act
of 1976, as amended, 42 U.S.C. Sections 6901 et seq., the Clean
Water Act, 33 U.S.C. 1251 et seq., Clean Air Act, as amended, 42 U.S.C.
Sections 7401 et seq., Toxic Substances Control Act, 15 U.S.C.
Sections 2601 et seq., Hazardous Materials Transportation Act, 49
U.S.C. Section 5101, et seq., Occupational Safety and Health Act of
1970, as amended, 29 U.S.C. Sections 651 et seq., Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. Sections
11001 et seq., Safe Drinking Water Act, as amended, 42 U.S.C.
Sections 300(f) et seq., and any similar or implementing state
law, and all amendments, rules, regulations and guidance documents
promulgated thereunder.
"ERISA" - the Employee Retirement Income Security Act of 1974
or any successor law, as amended, and regulations and rules issued
pursuant to that Act or any successor law.
"HAZARDOUS ACTIVITY" - the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or
use (including any withdrawal or other use of groundwater) of
Hazardous Materials in, on, under, about, or from the Properties or
any part thereof into the environment, and any other act, business,
operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off
the Properties, or that may affect the value of the Properties.
"HAZARDOUS MATERIALS" - any waste or other substance that is
listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or
a contaminant under or pursuant to any Environmental Law, including
any admixture or solution thereof, and specifically including
petroleum and all derivatives thereof or synthetic substitutes
therefor, asbestos or asbestos-containing materials, radon and
urea-formaldehyde.
"HOMANSVILLE PROPERTY" - 2,800 acres in East Tintic Mining
District of Utah: 2,500 of such acres are owned by Tintic Utah Metals
LLC, in which the Company holds 75% limited liability company
interest. 300 of such acres are owned by Central Standard
Consolidated Mining Company, in which the Company owns 23% of the
outstanding shares.
"INDEMNIFIED PERSONS"--as defined in Section 10.2.
"IRC"--the Internal Revenue Code of 1986 or any successor law,
as amended, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
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"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States
Department of the Treasury.
"KNOWLEDGE" - A Person shall be deemed to have "KNOWLEDGE" of
a particular fact or other matter if such Person or, if such Person is
not an individual, any individual who is serving, or who has at any
time served, as a director, officer, partner, executor, or trustee of
such Person or an employee with primary responsibility in connection
with a particular subject matter (or in any similar capacity) (I) has,
or at any time had, knowledge of such fact or other matter or (II)
could be expected to discover or otherwise become aware of such fact or
other matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other matter.
"LATEST BALANCE SHEET" - The Balance Sheet set forth in the
Company's Form 10-QSB as filed for the period ended September 30, 1999.
"LIENS" - mortgages, liens, security interests, pledges,
charges or other encumbrances of any kind.
"MATERIAL ADVERSE EFFECT" - the occurrence or existence of a
material adverse effect on the business, results of operations,
financial condition, assets, liabilities or prospects of the Company
taken as a whole.
"MULTI-EMPLOYER PLAN" - has the meaning given in Section 3.16.
"OCCUPATIONAL SAFETY AND HEALTH LAW" - any legal requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by
industry associations and insurance companies), designed to provide
safe and healthful working conditions.
"OTHER AGREEMENTS" - has the meaning given in Section 3.2.
"PBGC" -the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PERSON" - any individual, corporation (including any
non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.
"PERMITTED LIENS" - tax materialmen's or like liens for
obligations not yet due and payable or which are being contested by the
Company in good faith.
"PLAN" - has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" - has the meaning given in ERISA Section
3(16)(B).
"PREFERRED STOCK" - as defined in Section 3.1.
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"PROPERTY" - the Trixie Mine Property and the Homansville
Property and any other property in which the Company has an interest as
disclosed in its SEC filings.
"PURCHASE PRICE" - $2.00 per share of Convertible Common
Stock.
"REGISTRATION RIGHTS AGREEMENT" - as defined in Section 2.4.
"RELEASE" - any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
environment, whether intentional or unintentional.
"REPRESENTATIVE" - with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants,
and financial advisors.
"SECURITIES ACT" - the Securities Act of 1933 or any successor
law, as amended, and regulations and rules issued pursuant to that Act
or any successor law.
"SECURITIES EXCHANGE ACT" - the Securities Exchange Act of
1934 or any successor law, as amended, and regulations and rules issued
pursuant to that Act or any successor law.
"SEC" - Securities and Exchange Commission.
"TAX" or "TAXES" - federal, state, county, local, foreign or
other income, gross receipts, ad valorem, franchise, profits, sales or
use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license,
payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TAX RETURN" - returns, declarations, reports, claims for
refund, information returns or other documents (including any related
or supporting schedules, statements or information) filed or required
to be filed in connection with the determination, assessment or
collection of Taxes of any party or the administration of any laws,
regulations or administrative requirements related to any Taxes.
"THREATENED" - a claim, proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or
statement has been made (orally or in writing) or any notice has been
given (orally or in writing), or if any other event has occurred or any
other circumstances exist, that would lead a prudent Person to conclude
that such a claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken, or otherwise pursued in the
future.
"TRANCHE A STOCK" - as defined in the Recitals.
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"TRANCHE B STOCK" - as defined in Recitals.
"TRANCHE A CLOSING CONDITIONS" - as defined in Section 2.7.
"TRANCHE B CLOSING CONDITIONS" - as defined in Section 2.7.
"TRANCHE A CLOSING " - as defined in Section 2.2.
"TRANCHE B CLOSING " - as defined in Section 2.2.
"TRANCHE A PURCHASE PRICE" - as defined in Section 2.2.
"TRANCHE B PURCHASE PRICE" - as defined in Section 2.2.
"TRIXIE PROPERTY" - the gold and silver mine located in the
East Tintic Mining District of Utah. The Property is owned by Chief
Gold Mines, Inc., a wholly owned subsidiary of the Company.
"WARRANT" - as defined in Section 2.5.
2. TRANSACTIONS AND CLOSING.
2.1. SALE AND PURCHASE OF THE CONVERTIBLE COMMON STOCK.
(a) Subject to the terms hereof and the satisfaction of the
Tranche A Closing Conditions, the Company shall sell to the
Investor, and the Investor shall purchase from the Company, at
the Tranche A Closing, the Tranche A Stock.
(b) Subject to the terms hereof and the satisfaction of the
Tranche B Closing Conditions, the Company shall sell to the
Investor, and the Investor shall purchase from the Company, at
the Tranche B Closing, the Tranche B Stock.
2.2. DESCRIPTION OF TRANCHES.
(a) Subject to satisfaction of the Tranche A Closing Conditions,
the closing of the purchase and sale of the Tranche A Stock
(the "TRANCHE A CLOSING") will take place at the offices of
the Investor's counsel, Reed Smith Shaw & McClay LLP, 2500 One
Liberty Place, Philadelphia, PA 19103 at 10:00 A.M. (local
time), on December 30, 1999. At the Tranche A Closing, the
Company will sell, issue and deliver to the Investor, and the
Investor will purchase and accept from the Company, the
Tranche A Stock at a purchase price of $2.00 per share for a
total Purchase Price of Seven Million Dollars ($7,000,000)
(the "TRANCHE A PURCHASE PRICE").
(b) Subject to satisfaction of the Tranche B Closing Conditions,
the closing of the purchase and sale of the Tranche B Stock
(the "TRANCHE B CLOSING") will take place at the offices of
the Investor's counsel, Reed Smith Shaw & McClay LLP, 2500 One
Liberty Place, Philadelphia, PA 19103 at 10:00 A.M. (local
time), on a
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date designated by the Investor as otherwise mutually agreed
upon by the parties. At the Tranche B Closing, the Company
will sell, issue and deliver to the Investor, and the Investor
will purchase and accept from the Company, the Tranche B Stock
at a purchase price of $2.00 per share for a total Purchase
Price of Ten Million Dollars ($10,000,000) (the "TRANCHE B
PURCHASE PRICE").
All funds paid hereunder shall be paid by wire transfer of immediately
available funds to a bank account to be specified by the Company.
2.3. ASSIGNMENT OF RIGHT TO PURCHASE SHARES. The Investor may assign its
rights to purchase Shares hereunder, in whole or in part, to one or
more other Persons designated by the Investor ("ASSIGNEES"); provided
that if such Assignee is not an Affiliate of Investor or any partner of
Investor or its Affiliates, no such assignment shall be made without
the consent of the Company, which consent shall not be unreasonably
withheld and which shall be deemed granted if the Company has not
refused in writing to consent within fifteen (15) days of receipt of
Investor's notice to Company of a proposed assignment; and provided
further that (I) no such assignment shall affect the obligations of the
Investor to the Company under this Agreement, and (II) each Assignee
shall have executed and delivered to the Company a certificate making
the representations and warranties made by the Investor in Sections 4.3
through 4.6 of this Agreement, and representations and warranties
comparable to those set forth in Sections 4.1 and 4.2 of this Agreement
(as appropriate for each Assignee's form of organization or individual
status). In the event that the Investor makes any such assignment to an
Assignee, all references contained herein to the "Investor" shall
include such Assignees (subject to clause (i) of the foregoing
proviso), the Investor shall be entitled to act on behalf of such
Assignees for all purposes of this Agreement, and any notice given by
the Company to the Investor shall be deemed given to such Assignees.
2.4. REGISTRATION RIGHTS. The Company shall grant to the Investor
registration rights appurtenant to the Convertible Common Stock upon
conversion thereof. Such rights shall be exercisable by the Investor
three (3) times upon demand and an unlimited number of times as
piggyback rights upon the public offering of other securities of the
Company. Such rights are more fully described in and are subject to the
provisions of the Registration Rights Agreement in the form of EXHIBIT
A hereto ("REGISTRATION RIGHTS AGREEMENT").
2.5. WARRANT. Simultaneously with the Tranche A Closing and as additional
consideration for the purchase of Shares hereunder, the Company shall
issue to the Investor a warrant, in the form of EXHIBIT B hereto, to
purchase that number of shares of Convertible Common Stock, which would
cause, after taking into account the conversion of such purchased
shares plus the conversion of the Convertible Common Stock held by the
Investor immediately prior to the exercise of such Warrant, the
Investor to hold 68% of the then issued and outstanding common stock of
the Company ("WARRANT"). Such Warrant shall be exercisable after the
Tranche B Closing at a price of $2.25 per share by the Investor upon
the sale, merger,
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consolidation, or other business combination of the Company, or upon
the effective date of a registration statement of the Company's Common
Stock in a public offering under the Securities Act.
2.6. CERTIFICATES. At each of the Tranche A and Tranche B closings, the
Company shall deliver one or more certificates evidencing the
appropriate number of shares of Convertible Common Stock being
purchased at such Closing and bearing the following legend:
The shares evidenced by this certificate are not registered
under the Securities Act of 1933, as amended, including the
rules and regulations promulgated thereunder ("Securities
Act"), and these shares may not be transferred, sold, assigned
or otherwise conveyed unless they are registered under the
Securities Act or, in the opinion of counsel for the Company,
an exemption from such registration is available.
Upon the request of the Investor and upon delivery to the Company of
the legended certificates accompanied by an opinion of counsel to the
Company that such legend is no longer required, the Company will issue
to the Investor unlegended share certificates in exchange for those
delivered by the Investor.
2.7. CONDITIONS OF CLOSING.
(a) Tranche A Closing Conditions. The obligations of the Investor
to consummate the Tranche A Closing shall be subject to the
satisfaction (or waiver by the Investor) of each of the
following conditions (the "TRANCHE A CLOSING CONDITIONS"):
(i) Articles of Amendment and Restatement of Articles of
Incorporation. The Company shall have caused the
amendment and restatement of its Articles of
Incorporation, including, among other things,
provision for the authorization and issuance of the
Convertible Common Stock ("Designations") in the form
set forth as EXHIBIT C hereto (the "AMENDMENT"), to
have been duly authorized, adopted, executed,
acknowledged by all necessary corporate action,
including, without limitation, the requisite vote of
its stockholders at a meeting duly called for such
purpose, and such amendment shall have been filed
with the Arizona Corporation Commission.
(ii) Registration Rights Agreement. The Company and the
Investor shall have executed and delivered the
Registration Rights Agreement.
(iii) Representations, Warranties and Covenants. All
representations and warranties of the Company and the
Investor contained in this Agreement, the
Registration Rights Agreement, the Warrant and all
other agreements between the Company and the Investor
and any certificates, schedules and exhibits
delivered in connection therewith shall be true in
all material
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respects as of the Tranche A Closing and the Company
and the Investor shall have performed in all material
respects each its covenants contained herein or
therein to be performed prior to such date.
(iv) Opinion of Counsel. The Company shall have delivered
to the Investor the opinions of Mariscal, Weeks,
McIntyre & Friedlander, P.A., Arizona counsel to the
Company, and Howard Weitz, P.C. to the Company, each
dated as of the Tranche A Closing, in the form to be
reasonably agreed upon by the parties.
(v) Secretary's Certificate. The Company shall have
delivered to the Investor a certificate of the
Secretary or an Assistant Secretary of the Company
substantially in the form of EXHIBIT D.
(vi) No Legal Prohibitions. Neither the Company nor the
Investor shall be subject, as of the Tranche A
Closing, to any injunction or other legal prohibition
against consummation of the transactions contemplated
by this Agreement.
(vii) No Pending Litigation. There shall be no suit,
action, proceeding or investigation pending by or
before any court or governmental authority which
either (1) seeks to prohibit or restrain, or seeks
material damages or penalties in respect of, the
transactions contemplated herein, or (2) is
reasonably likely, if determined adversely to the
Company or the Investor, to impose or result in
liabilities, costs, damages or losses to the Company
or the Investor of more than $25,000.
(b) Tranche B Closing Conditions. The obligations of the Investor
to consummate the Tranche B Closing shall be subject to the
satisfaction (or waiver by the Investor) of each of the
following conditions (the "TRANCHE B CLOSING CONDITIONS"):
(i) Satisfaction of Tranche A Closing Conditions. Each of
Tranche A's Closing Conditions shall have been
satisfied, and the Tranche A Closing shall have been
consummated.
(ii) Determination Regarding Homansville Property. The
Investor shall have determined, in its sole
discretion, based upon documentation provided by the
Company, that the Homansville Property is a
commercially viable mining project.
(iii) Representations, Warranties and Covenants. All
representations and warranties of the Company and the
Investor contained in this Agreement, the
Registration Rights Agreement, the Warrant and all
other agreements between the Company and the Investor
and any certificates, schedules and exhibits
delivered in connection therewith shall be true in
all material respects as of the Tranche B Closing
(except for changes therein (x) in the
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ordinary course of business which do not have a
Material Adverse Effect or (y) as approved by the
Investor and the Board of Directors of the Company
after the date of the Tranche A Closing), and the
Company and the Investor shall have performed in all
material respects each of its covenants contained
herein or therein to be performed prior to such date.
(iv) Closing Certificate. The Company shall have delivered
to the Investor a certificate, executed by the
President of the Company, certifying that all
representations and warranties of the Company
contained in this Agreement, the Registration Rights
Agreement, the Warrants and all other agreements
between the Company and the Investor and any
certificates, schedules and exhibits delivered in
connection are true in all material respects as of
the Tranche B Closing (except for changes therein (x)
permitted or contemplated by this Agreement, or (y)
as approved by the Investor and the Board of
Directors of the Company after the date of the
Tranche B Closing) and that the Company has performed
in all material respects each of its covenants
contained herein or therein to be performed prior to
such date.
(v) No Legal Prohibitions. Neither the Company nor the
Investor shall be subject, as of the Tranche B
Closing, to any injunction or other legal prohibition
against consummation of the transactions contemplated
by this Agreement.
(vi) No Pending Litigation. There shall be no suit,
action, proceeding or investigation pending by or
before any court or governmental authority which
either (1) seeks to prohibit or restrain, or seeks
material damages or penalties in respect of, the
transactions contemplated herein, or (2) is
reasonably likely, if determined adversely to the
Company or the Investor, to impose or result in
liabilities, costs, damages or losses to the Company
or the Investor of more than $25,000.
2.8. FAILURE TO MEET OR WAIVER OF CLOSING CONDITIONS.
(a) Tranche B Closing Conditions. If the closing conditions for
the Tranche B Closing are not satisfied by the Company or the
Investor prior to December 31, 2002, the Investor's right to
purchase the Tranche B Stock shall terminate.
(b) Redemption of Tranche A Stock. In the event the Tranche B
Closing has not occurred on or before December 31, 2002 and
the Investor's right to purchase the Tranche B Stock has
terminated, the Investor shall have the right to sell all or
part of the Tranche A Stock to the Company, and the Company
shall be required to purchase such shares at a purchase price
equal to $2.00 per share. Such Shares shall be purchased by
the Company in an amount not to exceed (except at the option
of the Company) the lesser of 50% of Excess Cash Flow or 20%
of the originally issued Tranche A Stock per year commencing
December 1, 2003 and continuing until all such Shares have
been repurchased at the earliest possible
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date; provided, however, the Company shall not be obligated to
purchase any Convertible Common Stock issued to the Investor
in the form of distributions or dividends on the originally
issued Tranche A Stock or any share of Common Stock into which
the Tranche A Stock was converted. For purposes of this
Section 2.8, "Excess Cash Flow" of the Company means earnings
before interest, taxes, depreciation, depletion, and
amortization, less capital expenditures, less principal
payments on outstanding indebtedness.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Investor as follows:
3.1. CAPITALIZATION. The authorized capital stock of the Company as
of the date hereof prior to the filing of the Amendment
authorizing the creation of the Convertible Common Stock to be
sold hereunder, consists of (a) 1,500,000 shares of preferred
stock, par value $.50 per share (the "PREFERRED STOCK"), and
(b) 20,000,000 shares of common stock, par value $.50 per
share (the "COMMON STOCK"). As of the date hereof (and prior
to the consummation of the transactions contemplated hereby),
there are 5,168 shares of Preferred Stock and 7,954,601 shares
of Common Stock outstanding. All outstanding shares of
Preferred Stock and Common Stock have been duly authorized and
are validly issued, fully paid and nonassessable, and no
liability attaches to the ownership thereof. As of the date
hereof, 16,441 shares of the Company's Common Stock are held
in Treasury. The Company has outstanding an offer to holders
of all shares of the Preferred Stock to exchange their shares
for Common Stock on a share for share basis. Other than as set
forth on SCHEDULE 3.1 hereto and as otherwise provided herein,
there are no subscription, warrant, option, convertible
security or other rights (contingent or otherwise) to purchase
or otherwise acquire any of the shares of the capital stock of
the Company, and there are no commitments by the Company to
issue shares, subscriptions, warrants, options, convertible
securities or other such rights. Except as set forth on
SCHEDULE 3.1 hereto and as otherwise provided herein, the
Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its capital stock
or any interest therein or to pay any dividend or make any
other distribution in respect thereof. Except as set forth in
such Schedule or the Amendment, there are no voting trusts or
agreements, preemptive rights or, to the knowledge of the
Company, any proxies relating to any securities of the Company
(whether or not the Company is a party thereto). All of the
outstanding shares of the capital stock of the Company were
issued in compliance with all applicable federal and state
securities laws.
3.2. CONSENTS, AUTHORIZATIONS AND BINDING EFFECT. Except as
required for the Amendment and as otherwise specifically set
forth herein, no consent, approval, authorization or waiver
of, and no notice to, any Person whatsoever is necessary or
required for the Company's execution, delivery and performance
of this Agreement, the Warrant, the Registration Rights
Agreement, and any other instrument delivered in connection
herewith or therewith ("OTHER AGREEMENTS"). This Agreement and
Other Agreements have been or will be duly executed and
delivered by the Company and,
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subject to the approval of its shareholders, will constitute
the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their
respective terms. The execution, delivery and performance of
this Agreement and Other Agreements will not (a) conflict
with, result in the breach of or constitute a default under
any agreement, restriction or other instrument to which the
Company is a party or by which the Company may be bound or
affected, or (b) constitute a violation of any statute,
ordinance, judgment, order, decree, regulation or rule of any
court, governmental authority or arbitrator relating to the
Company. The Shares and the Convertible Common Stock
underlying the Warrant, upon approval by the Company's
shareholders and the filing of the Amendment, will be duly
authorized and, when issued in accordance with this Agreement
or the Warrant, will be (1) validly issued, fully paid and
nonassessable, and (2) free and clear of all liens, charges,
restrictions, claims and encumbrances. Prior to the Tranche A
Closing, the shares of Common Stock issuable upon conversion
of the Convertible Common Stock will be duly and validly
reserved for issuance upon conversion of the Convertible
Common Stock purchased by the Investor, and the shares of
Convertible Common Stock to be issued upon exercise of the
Warrant will be duly and validly reserved for issuance upon
exercise of the Warrant, and such shares, when so issued, will
be duly authorized, validly issued, fully paid and
nonassessable and will be free and clear of all liens,
charges, restrictions, claims and encumbrances. The issuance,
sale and delivery of the Shares and the Convertible Common
Stock to be issued pursuant to the Warrant are not subject to
any preemptive right, right of first refusal or other right in
favor of any Person.
3.3. ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. The Company is duly
qualified and in good standing as a foreign corporation in all
states in which the nature of its business requires it to be
so qualified, except where the failure to be so qualified
would not result in a Material Adverse Effect. The Company has
heretofore delivered to the Investor complete and correct
copies of the Company's Articles of Incorporation, as amended,
and the By-Laws, as amended and in effect on the date hereof.
3.4. EQUITY INVESTMENTS; SUBSIDIARIES. Except as set forth on
SCHEDULE 3.4, the Company does not own, directly or
indirectly, any capital stock or other equity interest, in any
corporation, association, trust, partnership, joint venture or
other business entity. True, correct and complete copies of
all documents reflecting investments or ownership by the
Company in any subsidiaries have been made available to
Investor for inspection at the Company's offices in New York,
New York.
3.5. FINANCIAL STATEMENTS. True and complete copies of (i) the
Company's Annual Report on Form 10-K for the fiscal years
ended December 31, 1997 and December 31, 1998, (ii) Company's
Proxy Statements dated November 16, 1998 and, (iii) Company's
Quarterly Reports on Form 10-QSB for the fiscal quarters ended
March 31, 1999, June 30, 1999 and September 30, 1999, (items
(i) through (iii) collectively referred to herein as the
"Exchange Act Filings") have been delivered to Investor. The
Exchange
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Act Filings, as of their respective filing dates, did not
contain any untrue statements of a material fact or omit to
state any material fact necessary in order to make the
statements made therein, in the light of the circumstances
under which they were made, not misleading. Except as
disclosed to the Investor in writing, in materials filed by
the Company pursuant to the Securities Act or the Securities
Exchange Act, or set forth in press releases that have been
made public by the Company (including, but not limited to,
those from time to time posted at or available through
Nasdaq's website at http://www.nasdaq.com), there has been no
Material Adverse Effect since September 30, 1999. Except as
set forth on SCHEDULE 3.5, since the date of the Latest
Balance Sheet, the Company has conducted its business only in
the ordinary course of business consistent with past custom
and practice, and has incurred no liabilities or obligations
whatsoever other than in the ordinary course of business
consistent with past custom and practice. Without limitation
of the foregoing and except as set forth on SCHEDULE 3.5 since
the Latest Balance Sheet Date, the Company has not:
(a) voluntarily or involuntarily sold, transferred,
abandoned, surrendered, subjected to a Lien or
otherwise disposed of any assets or property rights
except in the ordinary course of business consistent
with past custom or practice;
(b) changed any accounting principles, methods or
practices utilized by it or changed any of its
depreciation rates or amortization policies or rates;
(c) made any capital expenditure in excess of $100,000
except in the ordinary course of business.
(d) made any loan or advance to any party other than a
wholly-owned subsidiary other than loans in the
aggregate amount of $482,500 to Tintic Utah Metals,
LLC, in which the Company owns a 75% interest;
(e) issued, redeemed or purchased any stock, bond or
corporate security or declared or made any payment or
distribution on or with respect to its capital stock;
(f) incurred debt, liabilities, or obligations of any
nature whether accrued, absolute, contingent, direct,
indirect, perfected or otherwise and whether due or
to become due except current liabilities incurred and
liabilities under contracts entered into in the
ordinary course of business consistent with past
custom and practice;
(g) increased the compensation payable to any of its
officers, employees or agents except in the ordinary
course consistent with past practice; or
(h) entered into any other material transaction, or
committed to any of the foregoing, not otherwise
disclosed herein.
3.6. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The accounts
payable, accrued expenses and accounts receivable of the
Company reflected on the Latest Balance Sheet, and all
accounts payable, accrued expenses and accounts receivable of
the Company arising since the date thereof, arose from bona
fide transactions in the
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ordinary course of business and are, to the best
knowledge of the Company, collectible in full, subject to the
allowance for uncollectible accounts set forth on the Latest
Balance Sheet.
3.7. ASSETS Except as set forth in SCHEDULE 3.7 hereto, the Company
has good and marketable title to, or a valid leasehold
interest in, the properties and assets used by it, located on
its Properties, free and clear of all Liens, except for
Permitted Liens, and except for properties and assets disposed
of in the ordinary course of business since the date of the
Latest Balance Sheet. The Company owns, or has a valid
leasehold interest in, all assets necessary for the conduct of
its business as presently conducted, including, without
limitation, the Trixie Property and the Homansville Property.
3.8. PATENTS, TRADEMARKS AND COPYRIGHTS, ETC. Except as set forth
on SCHEDULE 3.8 attached hereto, the Company owns, or is
licensed or otherwise authorized to use, all patents,
trademarks, trade names, copyrights, technology, know-how,
processes and other intellectual property used by the Company
in the conduct of its business as presently and as proposed to
be conducted. SCHEDULE 3.8 attached hereto contains a complete
list of (a) all patents owned and all trademarks, trade names,
service marks and copyrights owned or used by the Company, all
applications therefor and all licenses and other agreements
relating thereto, and (b) all agreements relating to
technology, know-how, processes and other intellectual
property which the Company is licensed or authorized to use by
others. To the best knowledge of the Company, no claims have
been asserted by any person (i) to the effect that any
activities of the Company infringe on any patents or (ii) that
oppose the use of any such trademarks, trade names,
copyrights, technology, know-how, processes or other
intellectual property or (iii) that challenge or question the
validity or effectiveness of any such license or agreement. To
the best knowledge of the Company, the Company's activities
and the Company's use of such patents, trademarks, trade
names, copyrights, technology, know-how, processes or other
intellectual property do not infringe on the rights of any
Person. All filings with governmental entities for the
maintenance of and enforcement of the Company's patents,
trademarks, trade names, service marks and copyrights have
been made on a timely basis, except as set forth in Schedule
3.8.
3.9. LITIGATION. Except as set forth on SCHEDULE 3.9 attached
hereto, there is no action, suit, claim, proceeding or
governmental investigation now pending or, to the Knowledge of
the Company, Threatened against or affecting the Company, nor,
to the Knowledge of the Company, does there exist any valid
basis therefor. None of the matters disclosed on SCHEDULE 3.9
is expected to have a Material Adverse Effect. Except as set
forth on SCHEDULE 3.9, neither the Company nor its business is
bound or materially affected by any judgment, order, writ,
injunction or decree of any court or governmental authority.
The Company is not in violation or default of any judgment,
order, writ, injunction or decree of any court or governmental
authority.
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3.10. TAXES.
(a) Except as set forth on SCHEDULE 3.10, the Company has
filed all Tax Returns which it is required to file
under applicable laws and regulations; all such filed
Tax Returns are complete and correct in all material
respects and have been prepared in compliance with
all applicable laws and regulations in all material
respects, and all Taxes shown thereon as being due
and owing have been paid; the Company has paid all
Taxes due and owing by it for which no Tax Return is
required, and has withheld and paid over to the
appropriate taxing authority all Taxes which it is
required to withhold from amounts paid or owing to
any employee, stockholder, creditor or other third
party; the Company has not waived any statute of
limitations with respect to any Taxes or agreed to
any extension of time with respect to any Tax
assessment or deficiency; the accrual for Taxes on
the Latest Balance Sheet is adequate to pay all
outstanding Tax liabilities of the Company for all
periods ending prior to and including such Latest
Balance Sheet date and the assessment of any
additional Taxes for periods for which Tax Returns
have been filed by the Company and does not exceed
the recorded liability therefor on the Latest Balance
Sheet (excluding any amount recorded which is
attributable solely to timing differences between
book and Tax income); since the date of the Latest
Balance Sheet, the Company has not incurred any
liability for Taxes other than in the ordinary course
of business; no foreign, Federal, state or local Tax
audits or administrative or judicial proceedings are
pending or being conducted with respect to the
Company; and no information related to Tax matters
has been requested by any foreign, Federal, state or
local taxing authority and no written notice
indicating an intent to open an audit or other review
has been received by the Company from any foreign,
Federal, state or local taxing authority; and there
are no material unresolved questions or claims
concerning the Company's Tax liability.
(b) The Company has not made an election under IRC
Section 341(f). The Company is not liable for any
Taxes of another Person (i) under Treas. Reg. Section
1.1502-6 (or comparable provisions of state, local or
foreign law), (ii) as a transferee or successor,
(iii) by contract or indemnity or (iv) otherwise. The
Company is not a party to any Tax sharing agreement.
The Company has disclosed on its Federal income Tax
Returns any position taken for which substantial
authority (within the meaning of IRC Section
6662(d)(2)(B)(i)) did not exist at the time the
return was filed. The Company has not made any
payments, is not obligated to make payments, and is
not party to any agreement that could obligate it to
make any payments, that would not be deductible under
IRC Section 280G.
(c) Except as set forth on SCHEDULE 3.10, the Company is
not, and has never been, a member of any Affiliated
Group as defined in IRC Section 1504 (or any similar
group under state, local or foreign law) that has
filed a consolidated return for Federal, state, local
or foreign income Tax purposes.
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3.11. CONTRACTS AND COMMITMENTS.
(a) Except as expressly contemplated by this Agreement or as set
forth in SCHEDULE 3.11 hereto, the Company is not a party to
or bound by any written or oral:
(i) management agreement or other contract relating to
the Company's management or operation of any
property, other than agreements involving the payment
of less than $50,000 per year which are not otherwise
material to the Company's business;
(ii) contract for the employment of any officer,
individual employee or other Person on a full-time,
part-time, consulting or other basis or contract
relating to loans to officers, directors or
Affiliates of the Company;
(iii) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for
deferred or other compensation to employees or any
other employee benefit plan or arrangement, or any
collective bargaining agreement or any other contract
with any labor union, or severance agreements,
programs, policies or arrangements;
(iv) contract under which the Company has advanced or
loaned to any ot
